How much of a down payment do I need?

By far the most common question I receive from borrowers. In Utah we have several answers to that question. You have No Down Payment options such as Utah Housing loans, USDA rural development loans and of course for our military personnel you have the VA loans, all of which require no down payment. Credit score requirement are a little different for each loan and there are some income limitations but for the most part with a 640-660 fico score you will be able to qualify for one of the no down payment options.

Then you have your FHA and Conventional (Fannie Mae & Freddie Mac) loan options as well. FHA currently is requiring 3.5% minimum down payment while conventional lenders are requiring a minimum of 5% down payment here in Utah and across the country. Mortgage insurance is the biggest difference with conventional and FHA loans. FHA at the time of this post is requiring a 1% upfront mortgage insurance premium and a 1.15% annual mortgage insurance premium billed monthly. Conventional mortgage insurance differs for every fico score range and loan to value but with a 720+ fico and 5% down payment a typical mortgage insurance premium is .67% annually which is billed monthly. FUN STUFF huh.

Now that the government has come together and agreed (hopefully) upon a resolution to the debt ceiling issue we have been facing this last month, it looks like we can all get back to focusing on the economy once again and getting this housing market back on track. Home prices in Utah have been stabilizing, in fact in a recent conversation I had with Kevon Inouye a local appraiser here in Orem, Utah he said depending on the city he is seeing stable home values and sometimes he is seeing increased values making it hard for him to support or justify a home purchase price. That was music to my ears when he made that comment about our market. We can all hope that will continue as we wade through the majority of the foreclosures and short sales.

Adam Weston of Rese Realty in Pleasant Grove, UT was telling me last week that it seems like every well priced home either bank owned, short sale or market sale has multiple offers on it within the first 2 weeks. He expressed the frustration of once again trying to educate buyers on the fact that if they don't put forth their best offer first they will probably miss out on the home. Buyers are now used to hearing story's about how their brother in law was able to haggle with the sellers or bank for weeks (being the only offer on the table), they were able to have the take it or leave it mentality with the sellers knowing that they were in the drivers seat.  "It is going to be a whole reeducating process all over again with buyers teaching them that the pendulum is swinging back to the sellers side with more offers coming in the buyers no longer hold all of the cards."  Says Weston

If there is 1 thing that I have learned in this business it is that the Real Estate Market in Utah is always changing. There is always going to be something new to educate borrowers and buyers on whether you are a real estate agent or mortgage loan officer, there is always a new rule, regulation, economic factor or market swing to take into account. If you are standing still in this business then you are getting left behind!!

Cheers to keeping you informed and in the drivers seat.

Stetson Lowe - Utah's Mortgage Expert - 801-318-4996

Wow...for the first time in a long time I just came across some potentially good news for a great piece of mortgage legislation. The "Helping Responsible Homeowners Act of 2011" has been on the table since January. As with most good ideas I figured this one would be shelfed as fast as it was printed. It was brought to my attention today by Rob Chrisman from www.mortgagenewsdaily.com that apparently this legislation may not be dead and in fact it may be gaining some traction.

Here is what he said: "Yesterday officials held a conference call promoting the "Helping Responsible Homeowners Act of 2011." Originally introduced in January, the bill aims to remove the barriers that keep non-delinquent, existing borrowers from refinancing. Those in the mortgage business should be interested to know that they are proposing to eliminate LLPAs and adverse delivery charges for loans - the GSEs could not charge any additional upfront fee beyond the standard guarantee for a qualified mortgage. (In effect, this would lead to only one standard guarantee fee for all borrowers.) It would remove LTV limits for underwater borrowers so mortgage refinancing would not be limited by the LTV of the borrower. (Currently, borrowers in the HARP program can have a maximum LTV of 125%. Removing this constraint could allow up to 10-15% of borrowers in the 2005-07 vintages to be eligible for GSE refinancing.) It would remove the second-lien barrier to refinancing so that servicers and creditors that refuse to have their second liens "resubordinated" in the refinanced mortgage would be prevented from originating new GSE loans. And it would ensure that higher LTV borrowers receive a fair mortgage rate, suggested at no more than 40 basis points higher than the GSEs' 60 day commitment rates."

It has never made sense to me why Fannie Mae and Freddie Mac (GSE's) would not allow borrowers who were making their payments on time to refinance these loans in some sort of streamline program where appraised value is not important. If your main goal is to keep home owners in their homes and to help them to continue to make their payments on time, why then would you not throw them a preverbial bone? Trip and fall all over yourselves to find a way to work with those that havent made a payment in 6 months but leave the ones who are busting their hump to makes ends meet high and dry??

Statistics have shown that more then 20% of the borrowers who recieve a loan modification are in default (more then 30 days behind) again within 1 year. Yet we are cutting loan balances and dropping rates to as low as 2% for these folks. Now I want to be very clear here, I am not saying that we should stop loan modifications for those who are at risk of losing their homes. I am saying that I think a bill like this allowing Fannie and Freddie to loosen their refinancing guidelines for those who have and are making their payments on time makes a lot of sense.

It would be a nice shot in the arm for the economy to have 10-15% of home owners who still have rates in the 6% range to drop more then 1% off of their interest rate which would save the average home owner here in Utah about $183.33 per month. That is a lot of potential cash that could find its way back into our local and national economies each month.

I am hopeful but still not holding my breath, I have learned over the last couple of years the hard way that Sanity and Mortgage Lending Guidelines and legislation don't often keep the same company.

Stetson Lowe -Security Home Mortgage-