Mortgage Underwriter Guidelines

What happened to my credit score??

2012-04-11T19:20:00.001-04:00

We all know how important it is to keep our credit history in good shape. You know, ... always pay on time and don't get too much credit. By doing this it almost always assures that your credit score will be higher too. But, sometimes we do seemingly logical things that drop our scores overnight.

People contact me all the time about this issue and they really have no idea what they did to make it drop 50 points. That is why I put together this short video. If you are aware of these things you will be able to manage your credit wisely and never again be surprised.

Remember, your score not only determines what you qualify for but it also determines how much interest you will pay.

I hope this video helped. If you have any questions you can find out more at mortgage underwriters, or just send us an email.

USDA Guaranteed Home Loan

2012-03-26T17:22:00.002-04:00

This USDA Loan is absolutely one of the best home loans available on the market today. No down payment required. Yes!! ... It's real. Home buyers love it and so do lenders. Lenders love it because the guidelines are very much like a conventional loan.

It's easy, unlike the FHA Guidelines that can be cumbersome and difficult to understand. But to be fair, FHA is a good loan too. They require 3.5% down and that can be a gift. It gets a little complicated and the documentation requirements are really tough. If you don't have the documentation chances are it will not be approved. That is pretty true with all home loans today. Every penny must be documented and traceable.

The VA home loan is also a great loan, but ... you have to be a veteran. The VA loan does not require a down payment and the guidelines are different and can be confusing. This loan does not qualify buyers based on Debt To Income ratios. The calculations are all about Residual Income. Personally I think this is better than the DTI stuff. It really gets down and dirty as to: "can you really afford the mortgage payment or not"?

USDA actually has another home loan called the Direct Loan. Not a lot of people know about this loan. I would say it is a sub-prime loan on the tax payer's dime. It's all Government money and people can qualify for this loan even if their income includes food stamps. The Government actually subsidizes the payment if their income is less than 50% of the median income for that county. That should warm your heart.

There are a lot of good home loans on the market today. Most people are so busy with their family and jobs that they really do know which loan is the best one to apply for. We put together the video below as an overview so buyers can start to understand their options. When you walk into a bank or a lenders office and talk about a home loan, they are going to point you to the loan they want you in. It is better that you have some in site before you sit in that chair. If you have questions just shoot us an email. We do not do loans and we do not share your information.

Here is a much shorter video just on the USDA Guaranteed loan.

Good luck and send us an email if you have questions.

Mortgage Processing Tips That Help Your Loan Close Faster

2012-03-21T14:56:00.001-04:00

Getting a home loan through processing, underwriting, and closing is possibly one of the most frustrating things you will do in your life. It is not uncommon for a loan to take two to four months to close. I remember the days when everyone thought 30 days was too long!

I am hoping the information here will help you get all your stuff in one bag before you even apply for a mortgage. After you have applied, a sharp loan office can also do many things that will help speed things along before your file actually goes to underwriting.

The first thing you should do as a home buyer is pull all three of your credit reports. You also need to know what your credit scores are. Do your research about credit guidelines and try to get your credit in order if it is not. Do your research, ... know what you are up against. A great place to start is here: mortgageunderwriters.com. They have other sites for more detailed guidelines focused at different loan types. Learn as much as you can and compare the information to your reports.

Then, based on everything you have learned try to decide which loan is best for your situation. Questions you should ask yourself are:

How much do I have for a down payment?
What is my DTI?
Should I pay off some bills first?
Is my credit score high enough?

When you feel pretty confident then apply for a mortgage and I would recommend that you use a mortgage broker in your local area. Banks are way too conservative and don't always offer all the products that are available today. If there are questions or things you don't understand you can always send us an email and we will try to find the answers for you. We are totally unbiased. We don't do mortgages or try to sell you anything at all.

You should also watch this short video so you can have documentation ready if you need it. Your loan officer should be looking out for this stuff but just in case, well, ... you will know what you need.

So, if you have done your research, pulled your credit, and have your documentation together your loan has a better chance of being underwritten smoothly. Of course these are not all the things that could delay underwriting or a closing. There is sooo much more, and much of which you have no control.

We wish you the best and remember if you have questions, just send it to us at info@mortgageunderwriters.com

Obama Administration Says Refinance USDA Mortgage - Think Twice!

2012-02-11T17:43:00.000-05:00

If you have a USDA Rural Development Guaranteed Mortgage on your home you may have heard about USDA's home loan pilot program that allows buyers to refinance those loans to a lower interest rate. USDA had a news release on Feb. 1, 2012 titled: "Obama Administration Announces Pilot Program to Help Rural Borrowers Refinance Mortgages, Get Lower Interest Rates".   My father would say: "If it sounds too good to be true, it probably is!" There are new fees USDA Rural Development is not telling you about. In the long run it will cost you much more, even if you do lower the interest rate.

I'm going to cover the good and the bad so you can make an informed decision. I'll try not to get political but I'll tell you up front that this really makes me cross eyed. They are pushing it like they are "trying to help the middle class home owner".   In reality the middle class home owner and the lenders are getting screwed while our Government collects more of your hard earned money in new fees that will run for the life of the loan.

OK. Let us start with the good things; no new credit report required, no new appraisal needed, no HUD Handbook minimum property determinations, and no addition property inspections required. You DO have to meet current income eligibility but no Debt to income ratio calculations are required.  You cannot have any late mortgage payments in the last 12 months.

This pilot program is only available in these 19 states: Alabama, Arizona, California, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Mississippi, Nevada, New Jersey, New Mexico, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, and Tennessee. The property does have to be in an eligible rural area.

Here are the not so good things. First of all let's consider that you have already closed this loan. You have already paid, or financed into the loan, the government Up Front fee which was between 2 - 3.5% of the principle balance, depending on when you closed your loan. Calculate that. On a $100k mortgage, that is $3500. You have also paid all your closing costs that probably ranged somewhere between $3000 to $5000. So, ... you have already paid around $8 - 10K for your mortgage (not including interest). Hey, and you are doing fine making your payments every month.

Now the Administration says they want to help you out so they are going to LET you refinance your mortgage. BOHICA! First of all you'll have to pay another government "Up Front fee" of 1.5% of the principle balance. You will also have to pay closing costs again for the new loan. You won't have the cost of an appraisal or a credit report but you will have to pay all other lender fees including a 1% origination fee. All of this will probably cost you an additional $4 - 6K depending on the size of your loan.

Here is the part they are not telling you. Effective Oct. 1, 2011 per AN 4551 all loans will now be charged an annual fee of .3% on the scheduled average unpaid principle balance, for the life of the loan. This new fee will be calculated by the lender and included in your escrow along with your taxes and home insurance. This new fee is then paid to the government, not the lender, at the end of each year.

You can't qualify for this refinance unless you are able to lower your fixed interest rate by at least 100 basis points. I think you need to apply your calculator to the numbers and think real hard before you decide to refinance. I wouldn't even consider it unless you are lowering your rate by at least 3%. I would even ask for a Truth and Lending Statement on the new rate and compare it to the one you received when you originally closed your loan. An amortization chart might also help you see the whole picture.

Ask yourself, how long you are going to live in the house? Your principle balance doesn't even begin to decrease until between twelve & fifteen years. On a $100k mortgage that is about $4500 or $300 a year, or $25 per month. The figures I have estimated in the article are all based on a mortgage of $100k. Add in your new Up Front fee and new closing costs. Not so good!

I am just saying, ... please, really do the numbers and think about it before you decide the Government is doing you a favor. I don't know your loan amount or your interest rate, or how long you have already been paying on your mortgage.

FYI, for all you Navy Vets: BOHICA is an American Indian word. Cherokee I think. Translation: Bend Over Here It Comes Again!

Mortgage Underwriting Process Tips

2012-01-16T15:49:00.001-05:00

Getting through the mortgage underwriting process today will probably be one of the most frustrating experiences of your life. No amount of empathy or understanding will make it better. However, there are a few details your loan originator should be monitoring in case there is a need for additional documentation. The originator should have the documentation in the file BEFORE it ever goes to the underwriter. This could really save a lot of time and confusion.

Your home address is such a simple thing and silly to think it could cause delays. IF ... the addresses on the credit report do not reflect what is on the 1003 there could be problems. Your loan officer/originator should look at this information and if there is a variance it should be document in the file with a letter of explanation. A mortgage underwriter would see this discrepancy as a red flag. The underwriter would ask for documentation and your file would be set aside.

The loan officer should also look on the credit report for any alias names that may have been used in the past. Anything unusual or out of the ordinary should also be documented or your file will be set aside.

The credit report offers so much information. The number of inquires should also be checked. If there are inquiries from other mortgage lenders a Red Flag will be noted. Or, ... if there are numerous other inquires for credit the underwriter will want to know what is up.

This is the tough one. Your loan officer should look at your bank statements to make sure they reflect your monthly income. Large unaccounted for deposits are a red flag. Also large debits that don't reflect current creditors could also be questioned.

Any of these red flags can cause delays with underwriting. This is just a few examples. Once an underwriter starts to see discrepancies in a file they become cautious and it seems to be a never ending story. Mortgage underwriting in today's market is "A Brave New World". So, try to document stuff before the file is ever sent to the underwriter. Good Luck.

Mortgage Underwriting and Common Sense

2011-01-24T18:05:00.001-05:00

When I started out in the mortgage business the interest rates were in the double digits. We did not have mortgage software like “desk top underwriting” (DU, Fannie Mae) or “Prospector” (FHA) so everything was handwritten or typed and with multiple copies.

A mortgage application file was a huge stack of papers. We could not e-mail the package/file to the lender. The file was mailed out with at least one original and two copies of the file. This was in the late 1980's and early 1990's. Not so long ago really.

Although I didn't like all the paperwork we did have the privilege of talking directly with the underwriter about the mortgage guidelines that were relevant to the homebuyers loan. We could work together on loans for the common good.

I would have denials at times but in general the underwriter was right because they were all well trained to know all the program guidelines backwards and forwards. Loans closed faster than they do now, ... even with all the additional paperwork. The serendipity of this is that loan originators learned from underwriters.

Modern technology came very quickly after that. The Internet and mortgage software (automated underwriting) changed everything. We could do loans in record time. I once originated and closed a FHA loan in 5 days.

During this time we had all the technology at our disposal. We had so many different loan programs, including sub-prime, that it was impossible to keep up with all of them.

Starting in 2000 we could no longer have a conversation with an underwriter. The best we could get was a conversation with their coordinator. That was sort of okay because we had an automated approval (computer print out) in hand, which clearly listed the items needed prior to closing. Loan packages/files went to the lender as quickly as you could download them. All was good. Or was it?

When the housing crisis surfaced in 2007 (earlier than that actually) the mortgage industry, as we knew it was gone. Lenders were losing millions daily so the first to go were expenses and thus went the good underwriters and processors. Most major lenders began out-sourcing the underwriting to other countries. Then Mortgage Brokers came under fire almost immediately, especially by the media.

The fire on mortgage brokers can only be understood if you know that you could almost always get a better interest rate and closing costs from an honest broker than a bank or large lender.

The reason is because the Broker knew which lenders had the best rates for you as well as which lenders would be more flexible when or if needed. Banks and large lenders provided no options. You could accept their rate and charges, …or walk. They don’t care and have never been concerned for your best interest. They knew that you didn’t know anything different. Their name was well branded and trusted and they did not need you. Yea, right!!

Underwriting came to a screeching halt. Foreign underwriters did not understand the guidelines and could not communicate with us so lenders/banks had maybe one or two US based people you could direct your questions to. They did not want to expose the fact that underwriting was being done outside the US.

Turn-around times went from 24-48 hours, … to several weeks. By the end of 2007, closing a loan in 30 days was nothing short of a miracle. Everyone Broker and Bank was scrambling to keep their doors open with the few closings they could get.

Automatic approvals didn't mean squat anymore. Even though the program guidelines stated something very specific we now had overlays or risk layers from the lender we had to live with. Basically it meant that whatever the underwriter decides, rules. The official guidelines lost precedence. The underwriter has total control based on their individual justification. Too bad and too sad for you!@!

Gone are the days of manual underwriting and even automated underwriting. Don't count on either when submitting a file. Keep in mind that the guidelines change often, so you must stay informed.

My suggestion is to find a lender you can communicate with and become familiar with their overlays/risk layers. Each lender’s guidelines will be different.

We have all been through the good times and the bad times. Just sit back, be patient and ride it out if you want to stay in the mortgage business. Keep this in mind: “those that hold the gold make the rules”.

Check out FHA Guidelines for the latest on FHA Underwriting.

USDA Guaranteed Mortgage Funding Update - 09/07/2010

2010-09-12T14:52:00.000-04:00

On September 7th. 2010, USDA Rural Housing sent the following release to Lenders about guaranteed funding availability. Keep in mind the funds that were redirected to this program are only available until Sept 30th., which is the end of Fiscal Year 2010. After that date new funds will have to be appropriated.

No one knows, ... or is telling how long that wait will be. It could be November, or even as late as January. I guess if we look at the glass as half-full, we have a three week window of funding.

News Release:

TO: Participating Lenders

FROM: Tammye Trevino, Administrator, Housing and Community Facilities Programs

SUBJECT: Single Family Housing Guaranteed Loan Program Funding Notice

Rural Development's interim systems enhancements will complete on September 8, 2010, at which time the Agency will begin obligating Section 502 Single Family Housing Guaranteed Loans. The systems enhancements will:

Phase out the old 2 percent fee structure for purchase loan guarantees;

Allow for a new up-front fee of 3.5 percent as authorized by Congress in Public Law 111-212, sec. 102(7/29/10);

Enable lenders with access to Rural Development's Guaranteed Underwriting System (GUS) to begin submitting new loan requests through GUS.

The first priority on September 8, 2010 will be for Rural Development to fund the backlog of approximately $1.6 billion in Conditional Commitments that were issued after May 26, 2010, with the proviso "subject to availability of funds" language. Beginning September 8, lenders may submit their final closing packages and guarantee fees. After those commitments have been processed, Rural Development will begin processing new Conditional Commitment requests. Sufficient funds will be available for all requests during the remainder of the fiscal year (FY).

Requests for refinance will remain at the present fee structure of .5 percent for the remainder of the FY. However, the system has been enhanced to accommodate the increased refinance fee of 2.25 percent which will be effective October 1, 2010.

We appreciate your continued support of the Single Family Housing Guaranteed Loan Program (SFHGLP). Questions regarding this notice may be directed to the SFHGLP division at 202.720.1452.

End of Release

You can research the guaranteed home mortgage guidelines or the rd direct home loan guidelines from these sites.

Good Luck.

USDA Update On Guaranteed Funding

2010-08-31T19:39:00.000-04:00

Yesterday, August 30th, 2010, USDA released an update on the Guaranteed funding, ... or lack there of. You can find out more details about this great mortgage here: Guaranteed Mortgage Guidelines Be sure to read the comments following the release.

This is the Release:

TO: Participating Lenders

FROM: Tammye Trevifio, Administrator, Housing and Community Facilities Programs

SUBJECT: Single Family Housing Guaranteed Loan Program Funding Notice

Many of you may be aware of recent legislation in which Congress provided USDA with authority to resume operating the Single Family Housing Guaranteed Loan Program (SFHGLP) at no cost to taxpayers. This was done through a combination of authority to: increase the upfront fee up to 3.5 percent of the principal obligation; charge a new annual fee of up to 0.5 percent of the outstanding principal balance; and waive payment of any fees for low and very low income borrowers up to a certain amount of loan guarantees.

Rural Development expects to complete an interim enhancement to its electronic systems by mid-September to accommodate the increase in the up-front fee to 3.5 percent. When this interim enhancement is complete, Rural Development will process all Conditional Commitments issued after May 26, 2010, that had the proviso "subject to the availability of funds." These Conditional Commitments will be processed in the date order by which they were received by the agency. Also, after the enhancements are completed, Rural Development will resume issuing standard commitments without the special "subject to" condition.

In the meantime, Rural Development will continue to accept complete loan applications and issue Conditional Commitments subject to the condition in italics below. Lenders may close loans upon receipt of these conditional commitments, but will assume all risk until the Loan Note guarantee is issued.

This Conditional Commitment is subject to the continuing availability of funds and the completion of Rural Development operation systems enhancements to implement guarantee fee changes made by Public Law 111-212, sec. 102 (7/29/10). When Rural Development operation systems enhancements are completed, the Agency will notify the lender, and the guarantee process will continue subject to all applicable Agency regulations and conditions set forth in this Conditional Commitment. Rural Development will not reserve loan funds for applications in process during this timeframe. Lenders may close the loan as scheduled.

The lender will assume all risk of loss for the loan until Rural Development obligates funds and the Loan Note Guarantee is subsequently issued. When the lender requests the Loan Note Guarantee, the lender must certify to the Agency, using the process provided in this commitment, that there have been no adverse changes to the borrower's financial condition since the date the Conditional Commitment was issued by the Agency. The lender will submit the appropriate guarantee fee at the time they request the Loan Note Guarantee. The Agency will not be able to issue the Loan Note Guarantee until these conditions are met and funding is obligated.

Rural Development also is working on a more complete system upgrade to accommodate all provisions of the new law. We expect this full enhancement to be completed as early as possible next fiscal year. While the 3.5 percent up-front fee is sufficient at the current subsidy rate, we must be prepared to make adjustments in later years using the new authority for an annual fee to maintain a zero cost program. We appreciate your role as a lender in responsibly servicing loans in the SFHGLP portfolio and helping us maintain a successful program.

All Conditional Commitments issued for purchase loans under the authority described in this memorandum are subject to a guarantee fee of 3.5 percent. A sample of the Conditional Commitment form, and its attachment, are both attached. The italicized language set out above will be added as an "other condition" on the attachment.

The waiver of fees for Low Income and Very Low Income borrowers that was authorized in Public Law 111-212, sec. 102, cannot be accommodated at this time. However, borrowers who meet the criteria may be eligible for USDA's Section 502 Direct Loan Program which currently has sufficient funding to meet the needs for the remainder of the 2010 Fiscal Year. Please consult with the closest Rural Development Office in your area for more information on the Direct lending process.

Based on current usage, sufficient funds should be available for the remainder of the FY to fund all guaranteed refinance loans at a 0.5 percent guarantee fee. Your support of the SFHGLP is appreciated. For questions regarding this notice, please contact Rural Development's Single Family Housing Guaranteed Loan Division at (202) 720-1452.

END OF RELEASE

Sound Good? Read the Italics carefully. Each office already has stacks of loans that have been manually underwritten and issued a Conditional Commitment. They are first in line. The software won't be ready until mid Sept. When it is ready, all those loans must be obligated by USDA. The lenders must certify to the Agency that no adverse changes have occurred in each loan. This is going to be a major mess.

Look at the timeline. GUS Software Ready in mid Sept, ... End of fiscal year 2010 is September 30th. There is a two week window. Then guess what. ... No more funds until FY2011 funds are allocated. And, more software changes.

Want to switch to a 502 Direct Loan. Think twice. On Average those loans take 4 to 5 months to close and they are very restrictive.

I understand one of Ms. Trevifio's goals is to have the American people "want" to come to USDA for their mortgage. Wow. I just don't know how to respond to that.

Many Lenders are discontinuing this product. Can you Blame them? The real impact is felt by the consumer. This is a great loan for the buyer and a needed boost to the housing market.

Don't you just wonder, ... what are they thinking??

Rural Development Direct Home Loan

2010-08-15T13:24:00.000-04:00

USDA’s Direct Home Loan or Guaranteed home loan can help Real Estate Agents and Builders sell their homes.

USDA Rural Development has TWO “no money down” home loan programs that can help any real estate agent or builder in this miserable housing market we have today. It is not quite as simple as putting “no down payment” in your advertising, but if you understand the two programs you can successfully target people that will qualify.

First, the home you are trying to sell must be in a rural eligible area. This does not mean the home must be in the middle of the woods. Roughly, their definition of “rural” is an area with a population less than 10,000. You can check your homes location to determine if it is eligible from USDA’s main website. Find the property eligibility page and type in the address of the home you are trying to sell.

Next, decide which of the two programs best fit your home. The Guaranteed Home Loan is for people with very good credit, scores above 620, and people with moderate to above moderate income (125%) based on the median income for that county. The maximum loan amount is determined by their debt to income ratio.

The Guaranteed Home Loan is a great mortgage that requires no money down. Sometimes Rural Development runs out of funds for this program so check funding availability before you recommend this to your perspective buyers. Rural Development gets new funding at the beginning of each fiscal year.

The Rural Development Direct Home Loan is like no other mortgage on the market and can really be an asset to selling your homes. This loan is funded directly by the government. It is a little complicated but even people on a fixed income can qualify for this mortgage. I would say that it might be the only true sub-prime loan left on the market today.

The income requirement is based on the adjusted median income for each county so to qualify; the buyer’s adjusted income must be Low to Very Low. Low is defined as 80% of the median income and Very Low is less than 50% of the median income! Yes, people on fixed income, social security, SSI, and food stamps may qualify. Most of these loans are subsidized by the Government.

This subsidy is when the government makes part of the monthly payment on the mortgage so these people can qualify. The subsidy does have to be paid back when the home is sold but how much of it is determined by the equity in the home at the time of sale. It is a very complicated formula.

The Direct home loan does not use a credit score to qualify but does have reasonable expectations about collections, judgments, and liens. This loan’s focus is on credit history, not score. It even has provisions for people that do not use typical credit. If the buyer has Alternate Credit such as a cell phone, utilities, cable, or insurance in their name that they “pay on time” it can be used as credit history.

If the buyer’s income is at the Very Low level the PITI cannot be more than 29%. If they are in the Low Income level it can go as high as 33%. Total debt for either income level is 41%. Because of the government subsidy people with incomes as low as $800 a month could qualify. Get this; … food Stamps are counted as part of repayment ability. How cool is that?

What about closing costs? It doesn’t get any better than this. If the appraisal is sufficient, closing costs and repairs may be added into the loan if the seller is not willing to help the buyer pay them.

These loans take a little longer to close so make sure your contracts reflect that. If I were an Agent I would learn all I could about both loans and start tageting this market. There are a lot of low income families wanting to get a home that could easily qualify.

Hello, ... did I say no down payment and all closing costs can be paid by the seller. Closing costs may be financed into the loan if the appraisal is high enough. WOW, it just doesn't get any better than that.

H.R.5745 Supplemental Appropriations Act, 2010

2010-07-25T13:12:00.000-04:00

New funding appropriations for the USDA Guaranteed Home loan have been put in another bill, H.R.5745, and is referred to as the Supplemental Appropriations Act, 2010. This new bill was introduced on July 15th and it has now been Referred to Committee.

The process is something like this; Introduced, Referred to Committee, Reported by Committee, House Vote, Senate Vote, Signed by President. This bill is in the first step of the legislative process. I'm not trying to be a Negative Nellie here but most bills don't make it out of committee. The following is a short quote from the bill:

GENERAL PROVISIONS--THIS CHAPTER

Sec. 101. None of the funds appropriated or made available by this or any other Act shall be used to pay the salaries and expenses of personnel to carry out a biomass crop assistance program as authorized by section 9011 of Public Law 107-171 in excess of $552,000,000 in fiscal year 2010 or $432,000,000 in fiscal year 2011: Provided, That section 3002 shall not apply to the amount under this section.

Sec. 102. (a) Section 502(h)(8) of the Housing Act of 1949 (42 U.S.C. 1472(h)(8)) is amended to read as follows:

`(8) FEES- Notwithstanding paragraph (14)(D), with respect to a guaranteed loan issued or modified under this subsection, the Secretary may collect from the lender--

`(A) at the time of issuance of the guarantee or modification, a fee not to exceed 3.5 percent of the principal obligation of the loan; and

`(B) an annual fee not to exceed 0.5 percent of the outstanding principal balance of the loan for the life of the loan.'.

(b) Section 739 of the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriation Act, 2001 (H.R. 5426 as enacted by Public Law 106-387, 115 Stat. 1549A-34) is repealed.

(c) For gross obligations for the principal amount of guaranteed loans as authorized by title V of the Housing Act of 1949, to be available from funds in the rural housing insurance fund, an additional amount shall be for section 502 unsubsidized guaranteed loans sufficient to meet the remaining fiscal year 2010 demand, provided that existing program underwriting standards are maintained, and provided further that the Secretary may waive fees described herein for very low- and low-income borrowers, not to exceed $697,000,000 in loan guarantees.

The above quote is from chapter one which is for the Department of Agriculture. The rest of the bill, pages and pages and pages, 11 chapters in all, covers additional funding for just about every branch of our government that you can imagine, ... some of which I have never heard of. This bill will never emerge from Committee. What a total waste. You can read the bill here: http://www.govtrack.us/

So what ever happened to H.R.4899? That was one of the first bills put together for supplemental appropriations. I read on a web site that the Senate had passed it on July 22nd. But I think this is deceiving. I think what they voted on was to proceed with debate or Not to proceed with debate. The Not to proceed with debate actually won. To proceed with debate needed 60 votes and it only got 46.

This is all kind of confusing isn't it. To debate or not to debate. What does that mean? On the web site I linked to above it said:

"Last Action: July 22, 2010: Senate disagreed to the House amendment to the Senate amendment by Unanimous Consent."

That is an exact quote. I found the exact same words on another site's status so I have to believe it is not a Typo!! What does that mean??? Someone, ... please enlighten me!!! These words are not congruent!

Let's look on the bright side. Only two more months till the end of FY 2010. Then the Guaranteed program will receive it's FY 2011 funding and all will be well until the next time.

USDA Direct Home Loan Funding - Recovery Act

2010-07-15T17:25:00.002-04:00

This is a news release just put out by USDA Rural Development about Direct Loan Funding availability from the Recovery Act. This release is from the State of Georgia but it is available in all states.

News Release

Georgia receives additional $30 million for home loans through Recovery Act

Georgia will be receiving an additional $30 million in Recovery Act funds for direct home loans through USDA Rural Development on July 19, 2010, when pooled funds from all states are redistributed from Washington, D.C. These loans are for qualifying families considered to have low and very low incomes to purchase or build a home in a rural area.

“These amounts are greater than the funds we had remaining,” said Ed Peace, director of single family housing for USDA Rural Development in Georgia. “This is a wonderful opportunity for rural families who want to become homeowners. These funds will disappear after September 30, 2010, so we encourage those interested to call us immediately.”

So far, Georgia has helped 288 rural families through the direct home loan program, obligating over $31.7 million to help families achieve the dream of homeownership. The Recovery Act has funded 220 home loans for almost $25.8 million.

“The time has never been better for rural Georgia families to consider buying a home,” said Shirley Sherrod, state director. “These funds can be used to purchase an existing home or to build a new one.”

USDA Rural Development’s direct loan program has many positive features including 100% financing and low-interest rates. House payments are based on household income. The program also has built in provisions, for example, so that down the line, if someone loses their job, mortgage payments can be deferred and rolled into the end of the loan.

This provision is only available to Rural Development borrowers after the loan has closed and isn’t available to families that have homes from other lenders.

To qualify, Georgians must have low or very low dependable income, have good credit and debt level to show repayment of the loan. The houses must be in eligible rural areas, generally with population less than 20,000.

The low and very low designation is based on Median Household Income for each county, as well as how many people are living in the house. To check income levels for a specific county or the house address, visit: http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do. Use the panel on the left to navigate.

For more information, visit http://www.rurdev.usda.gov/ga. Rural Development has offices around the state to assist with the application process.

End of Release

This Direct home loan is a great oppertunity for low to very low income people through out the United States. It even works for people on fixed income like social security, SSI, or a pension. It is true.

If you wuld like to know more about the qualification requirements visit:

USDA Rural Development Direct Mortgage Guidelines

Don't be afraid. Request a Pre-Qualification Premiliary Application from your nearest USDA office. It is free and they will counsel you if there are issues so that you can qualify in the future. Who knows, you may qualify now. Call them and get a Pre-qual application.

Good Luck.

USDA Direct Home Loan Program Funds

2010-07-06T16:16:00.000-04:00

The following News Release is from the Georgia USDA Rural Development State Office. It is about the Direct loan program and it's funding availability. It is a great program. Even though this is from Georgia, all states have this program and abundant funding.

News Release

Funds for direct home loan programs available through Sept. 30

Time is running out for Georgia families who want to take advantage of over $21 million in Recovery Act and regular funding to become homeowners in rural Georgia through USDA Rural Development’s direct loan program. Recovery act funds will no longer be available after September 30, 2010.

USDA Rural Development has two home loan programs, the direct and the guaranteed. Direct loans, are made directly by the agency to qualified home buyers. The guaranteed program – which allows the government to partner with local lenders - is so popular that all funds have been exhausted for FY2010. Funds for the guaranteed program should be available on or after Oct. 1 as part of FY2011 funding, but may be available sooner.

The good news about the direct program is not only that funding remains, but that the interest rates will drop to 4.625 percent on July 1, 2010 for a 33 year mortgage.

“This program has very good terms for low and very low families ready to become homeowners,” said Shirley Sherrod, state director of USDA Rural Development. “We want these funds spent in Georgia, so we need people to apply now.”

To qualify, Georgians must have low or very low dependable income; have good credit and debt level to show repayment of the loan. And the houses must be in eligible rural areas.

The low and very low designation is based on Median Household Income for each county, as well as how many people are living in the house. Loans are also for rural areas only, so urban areas are not eligible. To check your income or the house address, visit: http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do. Use the panel on the left to navigate.

“We would like to see more applications,” Sherrod said. “We know a lot of people are hurting and there is a lot of fear because of the economy. But this program is designed to protect the families and the mortgage payment is often less than rent. It doesn’t take long to find out if it’s a possibility.”

“We can run a pre-qualification and know pretty quickly whether or not the person will qualify,” said Ed Peace, director of single family housing programs. “We would like to use this money to help Georgia families. But all of these funds will go away on September 30, 2010.”

For Prequalification forms, visit this website http://www.rurdev.usda.gov/ga/SFH-prequal.htm and follow the instructions for faxing the information to our state office for processing.

Once a family becomes a Rural Development homeowner through this program, there are many built in features that can help them become successful, despite life’s ups and downs.

"This program can help with a payment subsidy," Peace said. “If someone loses their job, some payments may be deferred and rolled into the end of the loan. This program is structured to help low income families, who may experience more financial instability.”

Rural Development has offices around the state. To locate the one closest to you, visit http://www.rurdev.usda.gov/ga and go to the Other Information tab and select Office Locator. Offices are open weekdays between 8 a.m. – 4:30 p.m.

"Many people think it isn’t possible. They think they can’t afford it,” Peace said. “But our terms are very reasonable. We will do everything we can to help someone become a successful homeowner if they are really motivated. We can help people that otherwise couldn't get a loan and who would be trapped renting or living with relatives."

Families who have benefited from USDA Rural Development's housing programs include young couples, single parents, older citizens, people on disability, and minority families, among others. In some cases, families who didn’t qualify the first time can often come back and qualify the second or third time. Funds can be used to purchase an existing home or a new one.

“Sometimes people have a credit problem and we can tell them what they need to do to fix the problem,” said Peace. “We try very hard to work with people and if they’re determined and willing to do what it takes, we very often happily present the keys to their new home in the end.”

"The entire community benefits from increased numbers of homeowners," Sherrod said. "When people buy a home, they are making a commitment to the community, settling down, and paying property taxes. They live and work in the area and are paying for local goods and services. It's a win-win situation."

Although regular funding will be available, the Stimulus Funds are unprecedented, providing an opportunity for more families to become homeowners.

End News Release

If you want more information about the qualification requirements please visit: USDA Direct Home Loan Guidelines

HR 4899, S3266, and HR 5007- Guaranteed Funding Update

2010-05-24T17:50:00.000-04:00

This is just a short, quick update on USDA Rural Development Guaranteed Funding and the bills: HR4899, S3266, and HR 5007.

So many peoples lives are being held in limbo because of the lack of USDA funding. Entire families lives are on hold waiting on Congress and our Senate to pass a bill, ... any bill will do at this point so these people can get on with their lives.

If it doesn't happen in the next few days all of these families will not qualify for the Home Buyer Tax Credit. $8000 is a lot of money to these families. Their loan must close by 6/30/2010 to qualify. Some loans are actually structured based on that tax credit!

This is the saddest example of miss-management and lack of foresight I have ever seen. Who is going to suffer?? ... the very people our government is trying to help!

HR 5007 was approved in the House but not the Senate. HR 4899 and S3266 are back in the Senate and different than the House Bill. What does all this mean? I have no idea at this point.

Following is a post from Anonymous, who seems to have a better handle on it:

Anonymous said...

HR 4899 is the FY 2010 Emergency Supplemental appropriations (Disaster Relief and Summer Jobs) which is scheduled to be up for debate in the Senate when they reconvene on 5/24/2010. Details on this bill can be found at http://thomas.loc.gov -- with any luck, the Senate will approve some version of this bill with additional USDA funding by 5/28, after which they are in recess until 6/7. The House will have to vote on this legislation too. They will also be in recess after this week until 6/7.

Well, Anonymous seems to know a lot more than most of us. Follow his links and get back to us. We all need to know. The USDA offices know nothing and are being kept in the dark too. I guess that is not a fair statement. Who, I mean really, ... who can predict what our congress or Senate will do? The USDA people are just as upset about this as the rest of us are.

The only facts we know are: The Guaranteed funding has run out. They are not issuing Conditional Commitments. They have no idea if or when funding will be allocated.

Please leave your comments.

USDA Guaranteed Funding, 05/14/2010

2010-05-14T20:20:00.000-04:00

Everyone is holding their breath about USDA Rural Development Guaranteed Funding.

Ok, here is the word, the bill passed the house and now they say it only has to go back to the Senate for the final approval based on the changes.

The Guaranteed program ran out of funds this week. No big deal! They can now offer conditional commitments waiting on funds and the passing of the bill that requires a new 3.5% funding fee.

If I were a lender, I would be changing the docs and the loan amount to reflect that change. You will be in the front of the line!!

They only suspect a 1.5 week delay in the running out of funds and the new funds. Don't be left in the dust.

Think about it folks!

More to follow in our next blog when things are officially passed.

H.R. 5003, H. R. 5017 Rural Housing Funding for the Guaranteed Loan

2010-05-04T18:43:00.003-04:00

There is still no word on the H R 5017 Bill that has gone to the senate for approval. This has a major impact on our economy. They must take action. (approve or not) A decision is mandatory now.

I tried to track this bill through the process and this is what I found. It totally pissed me off because you and I cannot possibly find out where it is or what all this BS really means. There is no transparancy! Who could possibly figuar this stuff out? This is what I found:

Apr 28, 2010: Received in the Senate and Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.
See the Related Legislation page for other bills related to this one and a list of subject terms that have been applied to this bill. Sometimes the text of one bill or resolution is incorporated into another, and in those cases the original bill or resolution, as it would appear here, would seem to be abandoned.
htt://www.govtrack.us/congress/bill.xpd?bill=h111-5017&tab=related This is where that link went to;
Other Legislation with the Same Title
The list below shows legislation in this and previous sessions of Congress that had the same title as this bill. Often bills are incorporated into other omnibus bills, and you may be able to track the status of provisions of this bill by looking for an omnibus bill below. Note that bills may have multiple titles.
111th Congress: S. 3266 Introduced
H.R. 5003: Rural Housing Improvement Act of 2010
111th CongressThis is a bill in the U.S. Congress originating in the House of Representatives ("H.R."). A bill must be passed by both the House and Senate and then be signed by the President before it becomes law.
Bill numbers restart from 1 every two years. Each two-year cycle is called a session of Congress. This bill was created in the 111th Congress, in 2009-2010.
The titles of bills are written by the bill's sponsor and are a part of the legislation itself. GovTrack does not editorialize bill summaries.

2009-2010

To increase the loan guarantee fee for rural housing loans guaranteed under section 502(h) of the Housing Act of 1949.
Apr 13, 2010: Referred to the House Committee on Financial Services.
See the Related Legislation page for other bills related to this one and a list of subject terms that have been applied to this bill. Sometimes the text of one bill or resolution is incorporated into another, and in those cases the original bill or resolution, as it would appear here, would seem to be abandoned.

Well, this is my extent of tracking the Bill. Maybe you can understand this stuff and can track it better than I can. As American citizens, ... don't we have a right to to have access to theses legistrative actions in a form that uneducated people like myself can follow and understand??

I know I am stupid in the eyes of the people in Washington! But, I am paying their Salary and so are you!! I want to be able to understand and track all legislation. I care and I vote!

H R 5017 - USDA Guaranteed Mortgage Funding

2010-04-29T19:04:00.000-04:00

I get so many questions about USDA Rural Development's Guaranteed Mortgage funding running out. I pray that H. R. 5017 will pass the Senate to resolve the situation.

It is my understanding that USDA will run out of funds next week. (By May 7 th. ) Every office is working over to get as many loans obligated between now and then. It's like first come fist serve and the loans must be obligated in the order they come in. It is complicated.

Also, H.R. 5017 has passed the house and now only needs approval by the Senate. This Bill will provide 30 Billion dollars funding to the program. This is more than they can spend between now and the end of the fiscal year.

My gut opinion is that this will happen before they run out of funds. This program is a mayor boost to the housing market. Obama cannot allow the housing market to take another dive. Forclosures are still rising. This is not rocket science.

I would also like to provide my opinion on USDA staffing. Funding commitments take 3 to 4 weeks. This is insane! Most offices have only two underwriters to handle this high volume, and they need at least 4 to handle the work load! Even three underwriters would be an improvement. There is no fundng for more personel.

Even the Direct program does not have enough personel to handle the work load. Hello! Think about this. You can provide 30 Billion dollars of funding to a program but if your staff capacity can only process 10 Million, your have a problem. Is it by Design??? Think about it!

Sorry this is so short.

Rural Development Guaranteed Mortgage Funds Depleted in April

2010-03-13T12:15:00.001-05:00

USDA announced on March 10th that they expect to deplete their funding by the end of April. This tipically happens toward the end of each fiscal year while they wait for the next years funding. It is not a big deal in that situation because they issue "conditional commitments" subject to appropriation of funds. The only impact is a delay of the Loan Note Guarantee.

This depletion of funds in April is a big deal and will have a major impact on the mortgage industry. To put it simply, there are no more funds and USDA will not be issuing a "conditional commitment"!

Think about why this will have such a large impact. This is the only true 100% mortgage on the market excluding the VA loan. There are many excellent buyers in the market that want to purchase a home but have little savings which is a reflection of todays economy.

There is a domino effect here. Without this surge of qualified buyers the continuing surge of forclosures and declined sales in new construction will cause the housing market, which drives our economy, to take a nose dive fast.

What about the home buyer tax credit?? The buyer must be in a contract by April 30th and those loans must close by July 1st, 2010. That only allows 60 days to close the loan. I wonder how many people will lose out on this tax credit?

This is the Official Statement released by USDA SFH Loan Guarantee Division on March 10th, 2010:

Notice of Funding

This message is to notify you that program funding for the Single Family Housing Guaranteed Loan Program will likely be exhausted by the end of April, 2010.

Once funding is exhausted, the Agency will not issue Conditional Commitments “subject to receipt of appropriated funds.” This is because it is not certain when additional funding will be available.

Limited funding may become available for disaster areas declared in 2008, or in disaster areas declared for Hurricanes Katrina and Rita. Limited funding may also become available as prior Agency commitments are de-obligated, however, such funding will be very limited.

JP Morgan Chase formed a coaliton of lenders that have already met with the Under Secretary and folks on Capitol Hill. The Under Secretary and Capitol Hill people were "surprised" that this happened. Hey, I am SHOCKED that they were surprised! Or maybe not, ... it has long been my opinion based on their decisions that they don't have a clue about the mortgage industry, the banking industry, or the needs of the American people.

I have heard that some temporary funding may come by the reprogramming of some ARRA funds or from funding that was allocated to the USDA Direct Home Loan Program which is intended for people with low to very low incomes. The USDA National Office has a phone number for inquiries, (202) 720-1452, and they also recommend that you contact your Congressmen with your questions.

Please, contact your Congressmen!

USDA Rural Development Grant & Home Repair Loan

2010-03-09T17:40:00.000-05:00

USDA Rural Development has two programs that many people are not aware of. One is the USDA Grant for home repairs and the other is a USDA Home Repair loan at 1% interest. I'll cover the basic qualifying factors in this blog.

First understand that all USDA loans are focused toward rural development so the property must be located in a rural eligible area. This is mandatory and there is no way around it.

The Grant program is in the amount of $7500 Maximum. The amount of the grant you will receive is equal to the cost of the repairs on your home. You can't just apply for the loan and do what ever you want with the funds. The funds and repairs are suppervised by USDA staff.

You must also be 62 years old or older to qualify for the grant. Your income must be in the very low percentile. Very low income is defined as 50% or less of the median income for that specific county. This is hard over, no waviers.

Your budget and repayment ability are looked at along with your credit history. If your budget clearly shows that you have very little income left after paying your bills and expenses you will probably meet that requirement. Your credit does not have to be flawless but should not show blatant disreguard.

The USDA Home Repair loan is different in many areas. This loan is usually refered to as a 504 repair loan.

There is no age requirement but to qualify your income must still be "Very Low". Your repayment ability must be evident. By that I mean that after paying your bills and living expenses you must have enough residual income to pay back the loan.

The loan as I mentioned is fixed at 1% interest with a maximum term of 20 years. Your credit history must show that you do pay your debts. Medical collections are sometimes overlooked if you do not have repayment ability.

Both the loan and the grant usually work well for people on fixed income. These are great programs and help a lot of people. To apply for one you must contact your closest USDA Rural Development office.

If you are interested in the USDA Guaranteed program you can research the qualifications at USDA Rural Development Mortgage Guidelines

USDA Direct Mortgage Guidelines

2010-02-27T10:59:00.001-05:00

Many people are aware of USDA Rural Development's Guaranteed mortgage program that offers 100% financing. The Guaranteed loan focus is on buyers in the median income level which is derived from the income in a particular country.

On the other hand not many people are aware of the USDA Direct Loan program which is also 100% financing. The Direct mortgage program focuses on buyers with low to very low income.

Low income is defined as 50 to 80% of the median income for that county. Very low income is 50% or less of the median income. You can see that the direct program makes housing available to a group of people that don't have a chance of getting a mortgage in the traditional market. Even people on a fixed income can qualify for this program.

This program also lowers the bar on credit worthiness. Direct loans allow for alternative credit sources if the buyer does not have credit. The underwriters are also tolerant to some collections if there is justification. I should tell you though that they do not overlook collections for cell phone companies or cable companies and similar stuff so make sure these are paid off.

The homes that USDA will finance must be in an eligible rural area. That usually means areas with less than 10,000 population. You can check the eligibility of a property address from the following website: http://www.rurdev.usda.gov/

To find out if you qualify for the USDA Direct loan you should contact your closest USDA office and they will send you a pre-qualification application. It is short and easy to fill out. If for some reason you do not qualify they will counsel you so that you will qualify in the future. You can locate your office from the website I just gave you. It is a good deal. Check it out!

You can find out more about the Guaranteed loan program from the following website: Rural Development mortgage guidelines

If you have any questions about the loans just leave a comment and we will respond to your inquirey.
Good Luck.

FHA Mortgage Lenders

2010-02-15T15:46:00.001-05:00

FHA Mortgage? Be Careful About Your Lender.

Author: Connie Sanders

Jane is from California and had been approved for an FHA loan on a single family residence. Her lender had told her that she needed two months reserves in the bank before closing or the loan would not close. She was confused by this last minute requirement and came to me for clarification.

Well, I was confused too! FHA does not have a requirement for reserves (unlike conventional loans). The only reserve requirements with FHA are if a buyer is purchasing a 3-4 family unit. If purchasing a 3-4 unit, the reserves required are three months.

The answer here was a no-brain-er and is actually available on the HUD website. There is however, a really big issue here. Can you see it? Bear with me, here is another example.

Another couple was approved for an FHA loan in March of 08 and the company they were working with said the couple had to pay their 2007 taxes before the lender would close the loan. Hello, 2007 taxes aren't due until April 2008. These nice people asked if there was a law that required them to pay something that was not due. Well, NO! There is not even an underwriting guideline that calls for it.

What is going on here? Do you see the big issue yet?

I have a web site where I answer Mortgage questions from home buyers, sellers, real estate agents, loan officers, and yes, even underwriters. These underwriters and loan officers are from some well know companies. This isn't about my web site, ... I'm not even going to give you the URL. I only bring it up because that is why I see a big picture that others can not. I receive questions every day from all over our country,... and other countries in the middle east.

I have several major issues with this information so far but I'm only going to cover two.

First, Why don't Loan Officers and Underwriters know basic FHA underwriting guidelines? Simple, they have no experience or training on FHA! FHA loans are and always have been a terrific option for people that didn't quite fit into conventional guidelines. Best of all the interest rate is considerably lower compared to a sub-prime loan and as I write this today FHA rates are equal to par on a Fannie Mae. It doesn't get any better than that, right?

Well, FHA loans are fairly complicated to put together and they used to have stringent appraisal and inspection requirements. So, if a borrower didn't fit into Fannie or Freddie it was easier and quicker to slap them into a sub-prime instead of FHA. Sub-prime was a slam dunk, ... and so what if the rates were higher on a sub-prime, few consumers understood their options anyway. (That mentality is why I built my site in 2002.)

Another reason companies didn't do FHA loans was because they had to be HUD approved which meant they had to have a minimum net worth and pass a costly Audit every year. So again, why bother when sub-prime was so easy and available.

Now, of course the sub-prime days are almost a thing of the past or at least not as "sub" as they use to be. The savior? ... FHA Loans of course, except that very few, including underwriters have any experience with them or understand the differences between FHA and Fannie. Thus, in the two examples above, underwriters and LOs are just making stuff up or worse case, running scared because of all the flack in the industry right now.

In defense of the underwriter (as in example two) I will say that they have the authority to require what ever they deem necessary to improve a portfolio. Many of the questions I have received from underwriters seem to reveal that it is usually a case of inexperience and over caution.

The mortgage industry professionals are struggling to catch up/learn FHA guidelines. If you are a consumer you must be very careful to find someone that has been HUD approved for at least two years. And Do Check, seriously. Some companies are doing FHA loans and they are not HUD approved. They are under the dis-illusionment that HUD will allow a non-HUD approved broker, to broker, to another HUD approved broker! Sounds a little flaky, no?

How in the world did we ever get in this mess? We can throw most of the blame to the politicians and presidential candidates that are hyping it up for their own agenda. It is not as bad as they say but they are speaking so loudly that the rest of the world is now listening. Did you read what is going on in the UK's market today? Good grief.

I don't believe in bailing out our large lending companies and here is why. Back in this article I mentioned getting questions from India and other countries in the middle east. Now I ask myself, why would a mortgage underwriter in India, who I can hardly understand due to "no speaking good English", be calling me on the telephone at 3:00am about a loan in Texas??

Go Figure!

(Update: Jan. 2012) This article applies today but now we all know what really happened and why. It is still going on. Worse, the Government is still doing Sub-prime, subsidised loans on the tax payer's dollar. (USDA Rural Developments 502 Direct home loans) These loans are sooo sup-prime that up until a few months ago food stamps were actually used as repayment income in the DTI calculation.

I received a phone call from a gentleman last week that is opening up a mortgage company and is looking for staff to run it. The company wants to originate and close loans, ... and package them to sell to investors in the middle east. ????
------

Connie Sanders receives questions from consumers and mortgage professionals every day. Find out more about FHA Guidelines at: http://www.fha-mortgageunderwriters.com

Article Source: http://www.articlealley.com/article_522361_19.html

Occupation: Certified Mortgage Specialist

Connie Sanders is a strong advocate for educating the consumer about mortgage loans before they apply for a loan. Connie put together a mortgage information web site at: Mortgage Underwriters and can be contacted there with any questions you may have.

http://www.mortgageunderwriters.com/

H.R.3548 Home Buyer Tax Credit Extended and Revised

2010-02-13T12:51:00.000-05:00

The First Time Home buyer Tax Credit was Extended by the President in Novemver of 2009. This is not breaking news by any means. However, there is a lot of confusion by consumers and lenders. I guess the confusion is because H.R. 3548 was also revised or change to include current home owners.

I have the facts listed below along with points of confusion and creative thoughts you may want to avoid.

The bill extends the present $8,000 tax credit (up to 10% of purchase price) for first-time home buyers through April 30, 2010. A first time home buyer is one that has not owned a home in the last 3 years.
The bill has been revised to allow Current homeowners a $6,500 tax credit (up to 10% of purchase price) through April 30, provided they have lived in the home they are selling, or have sold, as principal residence for five consecutive years in the past eight years.
The April 30th deadline is very confusing for some. If the potential home buyers have a binding contract on or before April 30th, they will have until July 1st to close the transaction.
Income limits for eligible home buyers are expanded to $125,000 for single buyers and $225,000 for couples.
The purchase price of the home cannot exceed $800,000. To help guard against fraud, buyers are required to attach documentation of purchase to their tax return.
Home types include: single family home, condos, town homes, mobile homes, house boats and co-ops.
The tax credit is not a deduction. The refund is paid to you in excess of taxes owed.
There is no repayment required as long as you live in your new home for a minimum of 3 years.
The HUD-1 or settlement statement/statements must be submitted with your tax return. (form 5405)
This is important, ... you must by 18 years or older and NOT be claimed as a dependent by another tax payer.
Don't get bitten by this provision. Your purchase CANNOT BE from a fimily member such as parents, children, siblings, or spouse.

Sounds simple doesn't it? Maybe not so much.. I caution you not to wait till the last minute. Most lenders do take two to three months to close a loan right now.

Good Luck.

I don't have a clue

2010-02-07T18:45:00.000-05:00

This is scary. We have several sites on the net and we get a lot of questions from borrowers and from underwriters. What is going on in the mortgage industry?

The underwriters tell me that they are over cautious because of the Feds. That is the scary part. I mean that it is over the top! I'm not going to go there because I would never stop. I'm sure you have followed it in the news. If you haven't send me an email and I will send you some news links and Government mandates.

We get questions about appraisals and resale dates and credit and income. These questions would blow you away because they are all with in the guidelines but their loans are being turned down.

Even FHA is setting a minimum credit score. They did not have one in the past. What is so out of line about this new requirement is that it is so brain dead or out of touch with the real world.

Their new guideline is that applicants with a credit score below 580and below will be required to have a 10% down payment. What is so out of touch is that no lender will do an FHA loan if the score is lower than 620. It's like DUH?

I am very concerned about what is happening and so are the lenders and underwriters. I'll be getting some insider info in the future and will share it here. By insider I don't mean government stuff. I hear all that is behind closed doors anyway.

Future FHA Changes

2010-01-23T12:13:00.004-05:00

There are so many changes going on in the mortgage industry that it is no wonder we all seem a little confused, including underwriters.

FHA just recently relaxed the limits on origination fees and waived the 90 day property flipping rule for a period of one year. You can view the new property flipping guidelines here. Updates

What concerns me the most are the changes David Stevens, FHA Commissioner, is thinking about for the future.

Raising the minimum down payment,
establishing a minimum credit score,
increasing the cost of mortgage insurance, and
decreasing the amount the seller can kick in.

Read this article put out by the Wall Street Journal.
FHA Future Changes

I have some very real concerns about these changes. The average American, even with a job and good credit, doesn't have that kind of money set aside for a down payment and closing costs.

That only leaves them with two options: a VA mortgage, or a USDA Rural Development mortgage.

A VA Loan has always been a great 100% LTV loan for our veterans. Even though it does not require a down payment, the other guidelines are pretty strict. I'm sure the foreclosure rate is very low. I hope they don't start changing this program because our veterans have earned this exception.

The USDA Rural Development loans are also 100% LTV. They have a Guarantee program that is similar to a VA "Guaranteed" loan and they have a Direct Mortgage program with payments that can be subsidized by the Government. Both of these great programs are available but the property must be located in a rural area. There is more information here: Rural Development Guidelines

So, soon the average American will only have two options, unless they are a Veteran, and those are: buy a home in a rural area, or Rent!

Construction Loans

2010-01-18T09:13:00.003-05:00

We get questions about Construction Loans all the time. Unfortunately many of those questions are after they are in a bad situation.

This will be a short post but I want you to think about this information BEFORE you start. These are the major issues that you need to consider.

Construction loans are lender specific. Your best bet on this type of loan
is to work with a bank local to the property.

From our experience:

Most construction lenders will pay off the land loan at the initial closing.

Most lenders will not use equity in the land as down payment unless you have
owned or buying for at least one year.

Lenders do not like to make construction loans if you have already started
construction. This is totally real!

Good Luck

Authorized User Tradelines

2010-01-17T10:30:00.005-05:00

We get questions all the time about how lenders view Authorized User Tradelines when they determine repayment ability or Debt to Income. I hope this helps.

DU (desktop underwriter) takes credit report tradelines designated as authorized user tradelines into consideration as part of the DU credit risk assessment. However the lender must review credit report tradelines in which the applicant has been designated as an authorized user in order to ensure the tradelines are an accurate reflection of the borrower's credit history.

If the lender believes the authorized user tradelines are not an accurate reflection of the borrower's credit history, the lender should evaluate the borrower's credit history without the benefit of these tradelines and use prudent underwriting judgment when making its final underwriting decision.

In order to assist the lender in its review of authorized user tradelines, DU issues a message providing the name of the creditor and account number for each authorized user tradeline identified.

When ensuring tradelines are an accurate reflection of the borrower's credit history, as a general guide, if the borrower has several authorized user accounts but only has a few accounts of his/her own, the lender should establish:

the relationship of the borrower to the owner of the account,
if the borrower uses the account, and
if the borrower makes the payments on the account.

If the authorized user tradeline belongs to another borrower on the mortgage loan, no additional investigation is needed. On the other hand, if the borrower has several tradelines in good standing and only a minor number of authorized user accounts, the lender could make the determination that:

the authorized user accounts had minimal, if any, impact on the borrower's overall credit profile; and
the information reported on the credit report is an accurate reflection of the borrower's credit history.

The lender is not required to review an authorized user tradelines that belongs to the borrower's spouse when the spouse is not on the mortgage transaction.