Category: Mortgage (Page 50 of 63)

Fannie Mae Eases Qualification Requirements

June 12, 2017 / Tom Bonetto

The country’s largest source of mortgage money, Fannie Mae, soon plans to ease its debt-to-income (DTI) requirements, opening the door to home-purchase mortgages for large numbers of new buyers.

This move by the mortgage giant will dramatically increase the number of people who will now be able to qualify for a home loan.

Per The Washington Post, “Studies by the Federal Reserve and FICO, the credit scoring company, have documented that high DTIs doom more mortgage applications — and are viewed more critically by lenders — than any other factor.”

Using data over the last 15 years, Fannie Mae’s researchers analyzed borrowers with DTIs in the 45 percent to 50 percent range and found that a significant number of them actually have good credit and are not prone to default.

Simple Definition : Debt-To-Income (DTI)

Debt-to-Income (DTI) is a lending term which describes a person’s monthly debt load as compared to their monthly gross income.

Mortgage lenders use debt-to-Income to determine whether a mortgage applicant can maintain payments a given property.

DTI is used for all purchase mortgages and for most refinance transactions.

It can be used to answer the question “How Much Home Can I Afford?”

Debt-to-Income does not indicate the willingness of a person to make their monthly mortgage payment. It only measures a mortgage payment’s economic burden on a household.

Most mortgage guidelines enforce a maximum debt-to-Income limit – and Fannie Mae has essentially “upped” that ratio to help more borrowers qualify!

Housing Ratio or “Front-End Ratio”

Lenders add up your anticipated monthly mortgage payment plus other monthly costs of homeownership. These other costs of homeownership could include homeowner association (HOA) fees, property taxes, mortgage insurance, and homeowner’s insurance.

Normally, some of these expenses are included in your monthly mortgage payment. To calculate your housing ratio or front-end ratio, your lender will divide your anticipated mortgage payment and homeownership expenses by the amount of gross monthly income.

Total Debt Ratio or “Back-End Ratio”

In addition to calculating your housing ratio, lenders will also analyze your total debt ratio. At this time your other installment and revolving debts will be analyzed and added together. Installment and revolving debts will appear on your credit report.

These payments are expenses like minimum monthly credit card payments, student loan payments, alimony, child support, car payments, etc.

Your monthly installment and revolving debts are then added in addition to your estimated monthly mortgage payment and housing expenses and divide that number by your monthly gross income.

Because of these changes by Fannie Mae, many individuals that did not qualify for a home loan might now be eligible under these new regulations.

Please contact me to find out more!

New Fannie Program to Solve Student Loan Debt Qualification Issues

May 29, 2017 / Tom Bonetto

A truly groundbreaking mortgage solution is now being offered by Fannie Mae, as the country’s biggest mortgage agency is making getting approved for a mortgage much, much easier.

Fannie Mae announced three new features that will help those burdened with student loans to qualify to buy a house, or pay off their student loans via a refinance.

“We understand the significant role that a monthly student loan payment plays in a potential home buyer’s consideration to take on a mortgage, and we want to be a part of the solution,” said Jonathan Lawless, Vice President of Customer Solutions, Fannie Mae.

The new program is called Student Loan Solutions, and represents a huge shift by Fannie Mae.

Source: The Mortgage Reports and Tim Lucas

Change #1: Student Loan Payment Calculation

Fannie Mae has changed how lenders calculate student loan payments.

Lenders may use the student loan payment as it appears on the credit report for qualification. Period. That may seem like common sense, but it’s not how things have been done in the past.

Change #2: Student Debt Paid By Others

Just because a payment shows up on a mortgage applicant’s credit report does not mean he or she pays it.

Often, that obligation is taken care of by a parent or another party.

In these cases, Fannie Mae is disregarding the payment altogether. That applies not only to student loans, but payments for all debts.

Change #3: The New Student Loan Cash-Out Program: Pay Off Education Loans With A Refi

Perhaps the biggest shift of all is Fannie Mae’s rework of cash-out rules regarding student loans.

Typically, cash-out refinances come with higher rates. They are considered higher risk by lenders and Fannie Mae.

So, according to Fannie Mae’s loan level price adjustment matrix, a lender must charge an extra 1%-2% of the loan amount in fees or more, just because the loan is deemed “cash-out”.

Now, Fannie Mae does not consider the loan a cash-out transaction if loan proceeds completely pay off at least one student loan.

This loan classification has never been seen before — a kind of hybrid between no-cash-out and cash-out financing. Fannie Mae simply calls it the Student Loan Cash-Out Refinance.

Please do reach out to me to discuss these significant changes to see how I might be able to help you either purchase or refinance!

Zero Down Payment FHA Loan Option

May 15, 2017 / Tom Bonetto

There is a new option available for homebuyers looking for affordable housing – one with a zero down payment option! This is NOT a governmental down payment assistance program, but an investor that utilizes a first FHA mortgage in conjunction with a “soft second” mortgage.

The 2^nd mortgage, in this case, is 3.5% of the purchase price. Depending on the borrower’s income, the 2nd lien can be forgiven after 36 months of on time first mortgage payments!

Certain credit criteria, debt-to-income ratios, and income must be met (there are other specifics, as well) – but a good number of FHA qualifiers should fall within the guidelines.

A few specifics:

Available in AZ and CA
30, 25, and 20 year terms available
Minimum FICO is 640
Single Family Residence Only
Debt-to-Income restrictions apply

Please do reach out to me for more details, as it would be my pleasure to assist!

How Credit Scores Impact Loan Interest

May 8, 2017 / Tom Bonetto

It seems like those with good credit catch all the breaks when it comes to getting lines of credit. It’s easier for them to qualify, and they get lower interest rates.

Well, there’s a pretty good reason for it.

A person that has good credit has a low statistical probability of defaulting on a loan. Therefore, they are given a lower interest rate. A person with a lower credit score has a much higher probability of defaulting, therefore they are charged a much higher interest rate to cover the losses incurred by lenders by those who do default.

It’s all about mitigating risk.

One of my favorite finance bloggers, Cleverdude, has a great piece with specific examples of credit scores and interest rates that shows how much you can really save by working on that credit score.

Find out more here….

He concludes that “people with good credit also have an easier time keeping and improving their credit because they get lower interest rates, which lowers their monthly payments. This makes loans easier to pay back, and keeps more money in their pockets.”

Wise words from the Cleverdude, indeed.

Is A Jumbo Mortgage Better Than A Conforming Home Loan?

May 8, 2017 / Tom Bonetto

What Is A “Jumbo” Mortgage?

A “jumbo” mortgage is a loan that larger than the current conforming guidelines established by Fannie Mae or Freddie Mac. Today, a mortgage that exceeds $424,100 is considered “non-conforming.”

So, when you finance expensive property, you need a jumbo mortgage. Interestingly, the borrower has to play by different rules, because mortgages for high-priced homes are not necessarily standardized.

Jumbo Mortgages: They Are Back

During the mortgage crisis a number of years ago, jumbo loans all but vanished. The ones that remained came with guidelines that were nearly impossible for homeowners to meet.

Jumbo loans generally meant high down payments, higher interest rates, and high credit standards – which made these loans essentially obsolete.

But as the real estate market steadily recovered, jumbo loans have been re-entering the lending landscape.

In fact, homebuyers in the market for a larger loan may be pleasantly surprised to know that jumbo mortgage rates are nearly as low as conforming rates.

Source: The Mortgage Reports

Conforming Rates vs. Jumbo Mortgage Rates

Years ago, the difference between conforming mortgage rates and jumbo rates ranged between half a point to two full points.

These days, however, the spread between jumbo rates and conforming rates is minimal – sometimes as little as 1/10th of a percent, according to a number of surveys out in the marketplace.

Look At Jumbo ARMs

Adjustable rate mortgages can be over one percent lower than fixed-rate jumbo loans. For borrowers with larger loans, ARMs are popular alternatives.

That’s because with bigger balances, the effect of a lower interest rate on what you pay each month is more pronounced.

In addition, jumbo ARM rates can sometimes be lower than their conforming counterparts.

Many jumbo ARMS are not sold to investors, but are instead held by lenders on their own books. These “portfolio” mortgages can be made according to whatever guidelines and pricing the lenders establish.

The market is much less homogeneous, and the smart shopper can often find a bargain with a lender trying to expand its market share or build up its pipeline.

Jumbo ARMs come with introductory periods in which their rates are fixed. You can find loans fixed for three, five, seven, or ten years.

If you don’t keep your mortgage for more than the introductory period, you’ll never even have to deal with rate adjustments. And interestingly, most borrowers don’t hold on to those mortgages for more than 7 years.

Compare and Shop Jumbo Mortgage Rates

Unlike conforming mortgage rates, which typically differ by .25 to .5 percent between competitors, jumbo mortgage rates can vary largely from one lender to the next.

Jumbo lenders can serve different markets — alternative documentation, non-prime, unorthodox properties, or borrowers with big down payments and perfect credit — and that affects the rates charged.

This means that when conforming mortgage rates are higher, jumbo rates don’t necessarily follow that the same path.

It definitely pays to shop and compare.

Unlike smaller mortgage loans, a half percent difference in the interest rate on a $700,000 loan amount can add up over time.

$700,000 at 4.375% = $3,495
$700,000 at 4.875% = $3,704

The difference between these two scenarios adds up fast. Over five years, $209 per month saves over $12,500.

Let’s Talk

If you are interested, please do reach out to talk in further detail about jumbo mortgage products. It would be my pleasure to help!

The views expressed are my own and do not necessarily reflect those of American Financial Network, Inc.