Fairfax, VA – FHA lenders had reason for cheer and mirth at the end of last week. “In an effort to continue stabilizing home values and improve conditions in communities experiencing high foreclosure activity, Acting FHA Commissioner Carol Galante will extend FHA’s temporary waiver of the anti-flipping regulations.” With certain exceptions, FHA regulations prohibit insuring a mortgage on a home owned by the seller for less than 90 days, but this rule is waived through December 31, 2012, unless otherwise extended or withdrawn by FHA.  “All other terms of the existing Waiver will remain the same.  The Waiver contains strict conditions and guidelines to prevent the predatory practice of property flipping, in which properties are quickly resold at inflated prices to unsuspecting borrowers.  The Waiver continues to be limited to sales meeting the following conditions: All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction. In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the Waiver will only apply if the lender meets specific conditions and documents the justification for the increase in value. The Waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

Fairfax, VA – When was the last government shutdown? 1995 was the year. What happened? It was very painful to get through, but no one panicked. And we shouldn’t panic this time. I can assure you 1st Commonwealth Bank of Virginia has prepared all of the loans in our pipeline and we preparing for a worst case scenario, so the disruption will be minimal. If a shutdown would occur, these would be the top six areas that can affect us during a government shutdown:  

FHA Case Numbers: For each FHA loan, we are required to order a FHA case number.
This number is generated before an appraisal can even be ordered. With a shutdown, we may not be able to order case numbers. Because of this, it is critical to let us know if there is a contract executed on any loan, so that our office can go ahead and order a case number without risking the loan being on hold during a shutdown. Note: with the new FHA guidelines, a contract must be executed before a case number can be ordered.

(The ability to close FHA loans is questionable, depending if HUD keeps its website running to obtain FHA case numbers and CAIVRS (During the November 1995 shutdown, case numbers could not be obtained, but this was prior to the internet and was a manual process). The shutdown in 1995 mainly caused a delay rather than a drop in FHA loan origination, but if lenders decide to stop accepting FHA applications, it could be a problem. I think we will see delays but not a complete shutdown of the FHA.)
 
4506 IRS Transcripts: Each loan requires the verification of at least one Federal tax return by the IRS to verify the financial numbers that each customer presents us on their tax returns. During a shutdown, this process would be delayed as the IRS wouldn’t be at work to verify the transcripts. (This might be a minimal delay, since the internet / phone fax is used to order tax transcripts.)

Verifying Employment (VOE) of a Government Employee: We are required to verify the employment of each customer. If the customer is a federal government employee, we might not be unable to verify his or her employment during a shutdown. (Again some VOE’s are ordered via the internet, we are not sure if there would be a delay in receiving VOE’s)

FEMA: Homes in a Flood Zone: Homes that are determined to be in a flood zone would not be able to close as flood insurance could not be obtained.

USDA: During a shutdown, the USDA office would be closed because they have government underwriters that insure behind the lender.  With a shutdown, we would see delays with all USDA loans.

VA: Like the FHA, the disruption is possible — but not absolute — during a shutdown. This would all depend on if they continued to allow their website to function. A disruption would cause delays in VA appraisals and the issuing of certificates of eligibility.  If the website was closed during a shutdown, we would see delays in all VA loans.

Now May Be the Perfect Time to Buy

Fairfax, Virginia: There’s no place like home for creating memories. And no place like home for the holidays. While it may sound a bit crazy to add this to your shopping list…this holiday season could be the very best time in history to give yourself the gift of a new home.

While there are a number of advantages to purchasing a home Fairfax or Vienna Virginia there is a confluence of factors that make this year’s season a bit more special than past years.

Rates at Historic Lows
Interest rates have been dancing around the all-time-low mark for some time. But did you know that rates hit the lowest ever in October?  This season, FHA, VA and conventional interest rates in Fairfax and Vienna, Virginia are about 0.5 percent lower over this time last year – which translates to a payment savings of approximately $60 per month on a $200,000 mortgage for qualified borrowers.

Today’s lower rates give you an increase in buying power. Rates have already begun to move higher since November 4th, following the announcement of Quantitative Easing 2 by Fed Chairman, Ben Bernanke. As rates increase, your buying power will diminish.

Home Prices at All-Time-Lows In Fairfax and Vienna Virginia
Once school begins, the real estate market tends to slow down and by the holidays, it is at a snail’s pace. The lack of buyer demand is reflected in home prices as sellers become anxious. Homes are more affordable now than at any other point in time since 1970 according to the National Association of Realtors’ housing affordability index. And as the holidays approach sellers may reduce prices further or offer additional incentives.

Lawrence Yun, chief economist for the National Association of Realtors, said home sales still remain subpar. He explained, “The housing market is trying to recover on its own power without the home buyer tax credit. Despite very attractive affordability conditions, a housing market recovery will likely be slow and gradual because of lingering economic uncertainty.”

Sellers In Fairfax and Vienna Virginia Are Motivated
With the current economic slowdown many sellers are willing to negotiate – not just on price, but also may be more open to entertain requests for other concessions such as appliances, or paying closing costs. In addition, they may be eager to get the home sold prior to the holidays to avoid scheduling their holiday plans around viewings by prospective buyers. This may give you extra bargaining power.

Once home prices stabilize and begin to improve, these same sellers will be less willing to bargain. As Warren Buffet has said, “Be fearful when others are greedy and greedy when others are fearful.” Once the market begins to improve, sellers may become greedy as buyers panic to secure home purchases as prices start to climb.

Plenty to Choose From In Fairfax and Vienna Virginia
While real estate is local, most markets remain saturated with inventory. Being in the buyers’ shoes right now is akin to being a kid at Christmas – all the choices make it a bit overwhelming.

If you’re serious about buying a home, the first step is to define what you are looking for in a home and at what price…and then get qualified! Once you find a house you love, be willing to negotiate a fair deal and grab it. Waiting around for things to improve from here could cause you to lose the opportunity on that “perfect home.” It’s important to remember you are not looking solely for the best deal…but the best home.

Tax Advantages Of Buying A Home In Fairfax and Vienna Virginia
Buying a home can give you a tax break. Here’s how: Mortgage interest (including points) and real estate taxes are tax deductible. That doesn’t sound very sexy, but it adds up. Since most of what you pay for your mortgage in the first year is interest, on a $200,000 mortgage at 4.25%, you get to deduct about $700 a monthin interest. That reduces your taxable income by about $8,400 a year. If you’re in the 25% tax bracket, that deduction is worthabout $175 a month.

To see the benefit, you can either wait for a big payout after you file your income-tax return, or adjust your withholdingsand keep your hard earned money. Your employer’s benefits department can help you with this.

Closing on a home purchase in Fairfax and Vienna Virginia before the end of the year may provide you some additional tax deductions for the current year. You may be able to deduct any money you pay for points to reduce the interest rate on your loan. Consult your tax advisor to see how the mortgage interest deduction applies in your situation.

Getting Started
Buying a home during the holidays could benefit your wallet for years to come, and there may not be a better time than now. If you are thinking of purchasing a home during this holiday season, get started now and call me to discuss your options.

Fairfax-VA.  The ML 2010-24 is guidance for Combined Loan To Value (CLTV) refinance transactions – only. The new policy and guidelines are more restrictive than the old FHA policies guidelines.  In the past FHA policies did not have a restriction on minimum equity limits (LTV and CLTV in loan talk), but Wall Street and the big banks added their own restrictions that allowed an FHA loan to be underwater by only 25% of the appraised value.  Essentially in the past,  FHA didn’t care how far underwater a borrower was, the loan request was able to be approved if the loan circumstances met FHA guidelines. But the companies that funded FHA loans do care how much equity a homeowner has. In the end,  investors (Wall Street and the big banks) did and do care how far a homeowner is underwater so they set the max at 125% of the home’s value as the limit.  Just as in the past, he who has the gold sets the rules. Wall Street and the big banks have the money and clout, so they set the rules to try and limit their exposure to potentially bad loans which could result in large losses.

An explanation of three different FHA programs is below:

Homeowners are now restricted to a 97.75% LTV (2.25% remaining equity) on rate and term refinance, 85% LTV (15% remaining equity) on cash out refinance and 125% CLTV (underwater by 25%, so ZERO equity) for an FHA streamline refinance.  The refinance for borrowers in negative equity positions (underwater) is only available if the current servicer is willing to give up 10% of the current loan balance and that loan must not be a FHA insured plus many other restrictions.  The LTV limit is 97.75% and the CLTV limit is 115%, you should not get excited about this product since it will be more difficult than getting a short sale approved.  This is based on the ML2010-24: Combined Loan-to-Value Requirements for Refinance Transactions (8/6/10).

Fairfax, VA – The House of Representatives approved the Federal Housing Administration Reform Act.   The purpose of FHAR is to bring stability to the FHA lending program. Currently, FHA loans make up about 30 percent of the loans originated in the US. This is a far cry from early to mid 2000’s when real estate agents frowned on any government loan of any type.
 
The FHAR Act is a two-step process which was designed to shore up the crumbling foundation of FHA’s capital reserve account.  The first step to increasing the reserve account occurred in April of 2010 as the up-front MIP (mortgage insurance premium) premiums collected from the borrower was increased from 1.75 percent to 2.25 percent of the loan amount.  But the bigger plan was for FHA to increase the monthly mortgage insurance premium which is currently .55 percent for purchase loans with less than 5 percent down payment or refinance loans with at least 5 percent equity to .50% for homes or loans with at least 5 percent or more equity.  Under the law passed today, the agency will be allowed to increase its annual premium to 1.55 percent of the unpaid balance of the loan. The change or increase is expected to be a two part process. The first change is expected to increase annual MIP to from .55 percent to between .85 percent and .90 percent, then increase the annual MIP to the full 1.55 percent later in the year.  The thought from FHA and Capital Hill is that the increase in the annual MIP will allow for FHA’s capital reserves to increase, but with less impact to the consumer since the annual MIP is paid over the life of the loan instead of a lump sum addition to the loan amount at the time of closing. But this is incorrect.

The FHA reserves were getting hammered by homes going into foreclosure or just plain scammers at work with straw buyers or however mortgage fraud is perpetrated.  This is fact. What I am not sure is taken into account is the effect of the higher monthly mortgage insurance will have on the home buying public. How can tripling the monthly mortgage insurance have no impact to the consumer or to the nation’s housing market?  I read a Freddie Mac article in the early 1990’s that stated for every .25 percent increase in interest rates 250,000 home buyers are priced out of the market. To show this is not true see the example below. Using a $300,000 loan amount as the example, the numbers don’t look good for home buyers after September 7^th.   This date can change, call me if you have any questions. 

You’ve heard about the Credit Crunch and its tightening effect on lending guidelines in the mortgage industry, but what does it mean to millions of Americans who need student loans to help pay their college tuition?

The student loan market looked pretty bleak during the first quarter of 2008. Not only did the reduced benefits created by the College Cost Reduction and Access Act in 2007 kick in, but for the first time in 40 years, no bonds backed by student loans were purchased during this time. The new bill, which was good news for students, was funded by cutting subsidies to student lenders already feeling the effects of the credit crunch. According to Forbes, this loss of liquidity spooked a lot of investors of the student loan asset-backed securities market, destabilized Sallie Mae, the largest federal student loan provider and servicer, and sent student lenders into turmoil, as at least 50 federal student loan providers scaled back or ended participation in this type of lending.

Since then, Congress has passed legislation and taken other measures to ensure that student loan companies continue to issue federally subsidized student loans. Now, according to the National Association of Student Financial Aid Administrators (NASFAA), most “traditional” students should have no problem getting federal student loans from the remaining 2,000-plus lenders participating in this market.

For those students forced to seek private or alternate education loans, however, this is a much different story. NASFAA says many students could have trouble getting these types of student loans. Because of this, NASFAA added that private student loans should only be used as a last resort when it comes to paying for college.

Which students are affected?

• Students attending smaller schools and for-profit career or trade colleges, or other institutions that rely heavily on private lenders, will find it more difficult and expensive to gain access to private student loans than they have in the past – especially if they have credit issues.
• Older students, students with poor credit, or those students without a creditworthy co-signer (e.g., mom and dad), are likely to pay higher rates for whatever private student loans they are able to find.
• Students whose college tuition is more than their federal loans provide could also be affected if a) a private loan is necessary to make up the difference or b) the student does not qualify for Federal Perkins or PLUS loans or other types of financial aid programs.
• It’s important to note that financial aid, including Pell Grants, Federal Work Study, and education tax benefits are not affected by the Credit Crunch.

The biggest mistake students and parents can make in these situations is loading up credit cards and taking on expensive private loans to pay for college. Over the course of four or five years, this could really add up and put you or your children in debt for years to come. If you’re a homeowner, however, you may be able to avoid this credit trap by consolidating credit card balances and other debt through a home refinance.

Before you make any major credit decision regarding college tuition, give us a call. We’ll gladly review your finances and help you make the best decision for your specific goals and needs.

Fairfax, Virginia: Although USDA loans are not a big deal in the northern Virginia area, but they are HUGH deal in the outlying counties of Fauquier, Prince William and Loudoun. It was recently been announced that the USDA 100% (zero down) loan program will be out of money by the end of April 2010.  Typically the USDA program has sufficient funds to cover the needs of potential borrowers. But as with many home financing programs, money is in short supply.  As lending guidelines have tightened over the past two years, the ability of a borrower finding a zero down home loan out side of the Veteran Department VA loan has disappeared almost completely.  This is has caused homebuyers that wouldn’t typically consider a USDA loan for financing to not only consider it, but actually apply for and be approved for the USDA zero down home loan. The program has no mortgage insurance, great rates and flexible credit guidelines. So over the last few years, USDA has stepped up to fill the void and provide affordable zero down loans for qualified first time homebuyers across the nation.

Although Fairfax, Virginia doesn’t have many areas that work for the USDA program, the increased demand across the country for USDA loans has led to a shortfall of funds. Last year the stimulus money was used to bridge the funding gap and business went along as usual. The stimulus money helped fill the void the past couple of years, but without additional it is projected that funds for the program will dry up sometime in late April.  When this happens the USDA will stop issuing loan commitments until their normal refunding takes place sometime next fall.  Most economist suspect any slow down in the housing market could have drastic affects on the economy pulling out of the recession.  Many first-time homebuyers could miss the $8,000 tax credit.  The best idea would be to fund the USDA program now so as to try and prevent the economy from slipping back in to a recession.

Below is a list of the members of the committees that can help steer passage of the appropriation request:
United States Senate Committee on Appropriations
Subcommittee on Agriculture
Rural Development
Food and Drug Administration

Democratic Members

• Senator Herb Kohl (Chairman) (WI)
• Senator Mark Pryor (AR)
• Senator Dianne Feinstein (CA)
• Senator Tom Harkin (IA)
• Senator Richard Durbin (IL)
• Senator Byron Dorgan (ND)
• Senator Ben Nelson (NE)
• Senator Jack Reed (RI)
• Senator Arlen Specter (PA)
• Senator Tim Johnson (SD)

Republican Members

• Senator Sam Brownback (Ranking Member) (KS)
• Senator Mitch McConnell (KY)
• Senator Susan Collins (ME)
• Senator Christopher Bond (MO)
• Senator Thad Cochran (MS)
• Senator Robert Bennett (UT)

I always advise my clients to lock in their interest rate at the earliest opportunity. Gambling with a client’s interest rate is never advisable. In my business, I have a standardized system in place that we adhere to for all of our clientele.

A mortgage loan cannot be closed without locking in a rate, and there are three main elements to take into consideration:

• Interest Rate
• Points
• Length of the lock

Locking in on a rate does not obligate the client to commit to the loan until the loan is actually closed. The lock simply eliminates any risk of the borrower being exposed to market volatility. It provides the security of having time to complete the mortgage and real estate transactions with some sense of order. The lender must disburse funds to complete the transaction within the rate-lock period, or else the original commitment to provide a loan at a certain interest rate will expire.

When a lender permits an extended lock-in period, the borrower will usually see either a higher interest rate or more points associated with the loan. The lender does this to minimize their own exposure to market volatility; hence the borrower pays for the lender to take on this risk.

For example, a 30-day rate lock commitment may cost the consumer one-half point, while a 60-day rate lock commitment could cost 1 full point. If the borrower needed an extended lock period, but did not want to pay points, the lender could make up the difference in the interest rate. In this case, typically, a 60-day lock would have a higher interest rate than a 30-day lock.

In my business, our standard procedure is to lock in a rate as quickly as possible once we have received the loan application. My team and I let our clients know that while interest rates fluctuate daily, most lenders do not want to lose any business. We know that in many cases, if there is a significant rally in the market that causes interest rates to drop .25% or more, we can ask the lender to renegotiate the rate. or understand that we will take the loan to another lender. Often the lender allows for a renegotiation of the rate to avoid losing the loan to another lender.

If we allow our clients to sit on the fence and not lock in a rate quickly, we would leave them exposed to market volatility. Then, if rates do increase, the borrower may be unable to qualify for the loan they want, which is a situation we try to avoid at all costs.

By knowing our clients’ needs and working intimately with them to make the right decisions, my team and I are proud to say that we have many clients who are raving fans.

Vienna, Virginia: Fannie Mae has updated its automated underwriting software recently. The changes are major and could affect how many potential home seekers actually become homeowners. Having a loan underwritten by an actual person are almost non-existent these days. Both Fannie Mae and Freddie Mac feel they are better served using their proprietary software programs.  Desktop Underwriter^® (DU) Version 8.0 has changes to credit score requirements and mortgage insurance coverage will include:

Maximum Debt To Income Ratios (DTI). This is the ratio of how much of your monthly income is being consumed by your monthly debt.

• Maximum DTI lowered to 45%, with flexibilities offered up to 50% (as approved by the software)

Minimum credit score requirement for home buyers in Fairfax, Virginia and Alexandria, Virginia

• Minimum credit score increased from 580 to 620 (excludes Fannie Mae^® DU Refi Plus^TM
• The REfi Plus loan is for homeowners that loans are owned by Fannie Mae (this is different than who you make your payment too) Click below to find out more. Find out if Fannie Mae or Freddie Mac owns your mortgage

High Balance Mortgage Loans over $417,000 to $729,650

• 2009 Temporary high-cost area loan limits will be supported by the new software.
• Eligibility guidelines and Appraisal Field Review requirements have changed

Mortgage Insurance (MI) – Coverage Changes

• Reduced MI and lower cost MI options will be retired for loans underwritten using new software
• With this change, Fannie Mae has introduced a new minimum MI coverage option with associated Loan Level Pricing Adjustments (LLPA’s). These are add-ons Fannie Mae charges for different loan scenarios.

Mortgage Insurance (MI) - Changes to Financed Mortgage Insurance Requirements

• Desktop Underwriter (DU) will be updated to allow financed MI using either a single premium plan that is paid at one time upfront, or a split premium plan that has both an upfront and monthly component

2-Unit owner-occupied interest-only LTV/CLTV changes. Loan To Value and Combined Loan To Value – Essentially state how much equity is in the home. 80% LTV is the same as stating a home has 20% equity for real estate in Fairfax, Virginia and Alexandria, Virginia.  

• Maximum LTV/CLTV reduced from 80/80% to 75/75%

Expanded Approval (EA) are gone!! A paper borrowers are the only ones that will be able to get a loan in the future.

• EA II and III recommendations will no longer be offered by DU 8.0