The Home Affordable Refinance Program Extended to Next Summer

May 29, 2010 by Leave a Comment

NOTE:  This program has been extended thru June 30, 2012 DECEMBER 2013.

Fannie Mae and Freddie Mac's Home Affordable Refinance that allows homeowners upside down with their home equity to refinance has been extended until next summer.  From Fannie Mae:

This program is for borrowers who have demonstrated an acceptable payment history on their mortgage but, due to decline in home prices or where mortgage insurance is not available, have been unable to refinance to obtain a lower payment or move to a more stable product.

…lenders may continue to apply for the HARP flexibilities to loans originated under Refi Plus and DU Refi Plus provided the note date is on or before June 30, 2011…

This program has been very helpful for Washington homeowners who are interested in reducing their mortgage payment or refinancing out of their adjustable rate mortgage.  This is not a loan modification–this is a refinance.

NOTE: the following guidelines are for mortgages that are securized by Fannie Mae.  I'll follow up with a post on those owned by Freddie Mac — which I can help you with too.

In order to qualify, the home owner's mortgage that is being refinance must be owned by Fannie Mae.  This isn't something that most home owners know since you don't write your mortgage payment to Fannie Mae, but you can check to see if Fannie is the investor on your mortgage by clicking here.  To be eligible, the existing mortgage must have been owned or guaranteed by Fannie Mae prior to March 1, 2009.

Fannie Mae has made some recent adjustments to the HARP program including allowing the removal of borrowers as long as the remaining borrower(s) can demonstrate they have been making the mortgage payments from the own funds for the prior 12 months (except for in cases of a borrower passing away).  If a borrower is removed from the mortgage via a HARP refinance, Fannie will also require that the borrower is no longer on the title to the home.

Here are some other key points about the Home Affordable Refi (DU Refi Plus):

  • Maximum loan to value is 125%.  There is no "combined loan to value" limit.
  • Existing second mortgages must be subordinated (second mortgage lien holders review and decide IF they are going to allow the mortgage to be subordinated).  No new subordinate financing (second mortgages) are allowed.
  • Second mortgages or HELOCs are not allowed to be paid off with a HARP refinance. (I WISH they were).
  • If your original mortgage was at 80% loan to value, your HARP mortgage will not have private mortgage insurance if your current LTV is over 80%.
  • Fannie Mae High Balance/Jumbo mortgages are eligible.Loan limits in the King, Pierce and Snohomish County area are up to $567,500 for a single family dwelling (however the mortgage being paid off must be owned by Fannie Mae–see above). 
  • Available for primary, second homes and investment properties.
  • Appraisals may not be required depending on the response from the automated underwriting findings.  With that said, I recommend planning on having an appraisal…I've seen very few come through with an appraisal waiver option.
  • DU Refi Plus (HARP) has price hits (aka LLPA) based on your credit score and loan to value.
  • Borrowers are only permitted a maximum of $250 cash back on a Fannie Mae HARP refi

Borrowers must still qualify for the mortgage.  Documentation may be reduced to one paystub and a verbal verification of employment for salaried employees or one year tax returns for commissioned or self-employed borrowers.

Various lenders or banks may have their own underwriting guidelines or "overlays" with regards to credit scores or debt-to-income ratios. 

With a HARP refinance, the home owner does NOT have to go back to the mortgage servicer (the bank the borrower makes their mortgage payment to).  

If I can help you with a refinance for your home located in Washington State, please contact me.   I'm happy to review your options, including HARP or possibly FHA (which will allow including a second mortgage with a refinance) at no obligation to you. 

Filed Under: Fannie, Freddie and FHFA, HARP - Home Affordable Refi, Refinance

Why It Pays to Get Preapproved Early: You May Think You Know Your Credit Score

April 7, 2010 by Leave a Comment

I recently met with a couple who had relocated to the Seattle area and were ready to make an offer on a home.  They’re very qualified with their income stability and enough savings to put a twenty percent down payment on their next home.  What surprised them was the credit report.  [Read more…]

Filed Under: Credit Scores and Reporting, Refinance, Residential Purchase Tagged With: ,

Only 5 Days Left for FHA Streamline Refi’s Without Appraisals

November 10, 2009 by Leave a Comment

EDITORS NOTE 6/28/2010:  Since writing this post, many FHA home owners have opted to reduce their mortgage rate via the streamline refi without an apprasial when they have the funds available.

If I wanted a super long title to this article–it should actually read:  "5 Days Left for FHA Streamline Refi's Without Appraisals with Closing Costs Rolled Into the Loan Amount"… but that's just too long.

Back in late September I warned that FHA guidelines are dramatically changing effective on FHA case numbers issued after November 17, 2009.

Considering our current home values, if you currently have an FHA mortgage, this could be your last chance to reduce your rate without having to shell out your hard earned money on an appraisal!

If you have a home located in the State of Washington, I'm happy to provide you with a good faith estimate at no obligation to you.   In order to provide an accurate estimate for you, it would be ideal to have the following information (which you can find on your HUD-1 Settlement Statement):

  • Original base loan amount
  • Amount of your FHA upfront mortgage insurance premium (or portion of your upfront MIP may be credited towards your new FHA loan)
  • Estimated credit score (we currently require a minimum credit score of 620 or higher)
  • Home address (so we can obtain accurate property taxes).

Our company does require that you are employed and will verify your income and credit with an FHA streamline.   We have our own in-house FHA underwriting and are a HUD approved Direct Endorsed lender.   You can apply on line (only for homes located in the State of Washington) by clicking my "apply on line" link on the top of this web site.

You will be able to do FHA streamlines after November 17, 2009…they just won't seem so "streamlined" anymore.

Attention Real Estate Agents: if you have buyers who used FHA financing to purchase their home with mortgage rates around high-5's or higher, you can be a real hero by sharing this article with your clients.

Filed Under: Appraisals, FHA, Refinance

Don’t Delay Your FHA Streamline Refi

September 29, 2009 by Leave a Comment

HUD has announced revised guidelines for FHA streamline refinances that will go into

Piggybankbelt

effect with case numbers issued on or after November 18, 2009 (60 days following September 18, 2009 the date of the Mortgagee Letter).   FHA streamline refinances take place when an existing mortgage is insured by FHA and is refinanced to a new FHA insured loan. 

Here are a few of the changes:

  • Employment and income will now be verified.
  • Credit scores will be disclosed.
  • Funds for closing must be verified.
  • The borrower must have made at least six payments on the FHA insured mortgage.
  • There must be a "net tangible benefit".  This can be:
    • a reduction in total mortgage payment of at least 5%;  
    • refinancing from an adjustable rate mortgage to a fixed rate; or
    • reducing the term of the mortgage (from a 30 to a 15 year amortization, for example).
  • Streamline refi's without an appraisal loan amounts will be limited to the outstanding principal balance minus the UFMIP (upfront mortgage insurance premium) refund plus the new UFMIP.  In order to have closing costs rolled into the mortgage, you will need an appraisal.
  • Streamline refi's with an appraisalare still up to a 97.75% loan to value and closing costs can be rolled into the new mortgage except for discount points.  Discount points must be paid for by the borrower's assets (which must be verified) as any closing costs that exceed the 97.75% LTV limit.
  • If there is subordinate financing (second mortgage) the total allowed combined loan to value is 125%.

The underwriting belt keeps getting tighter which is one reason why if you are considering refinancing, you may want to do so sooner rather than later. 

Mortgage Master is a Direct Endorsed HUD lender and I have been helping Washington State home owners with FHA mortgages for over nine years.  PS…rates are also very attractive right now!

Filed Under: FHA, Refinance, Underwriting and Qualifying

A Quick Question: Should I Refi?

July 22, 2009 by 2 Comments

This comment was left on a post I did a while back about how you don't really skip two payments when you're refinancing since mortgage interest is accruing.  I thought this comment was worthy of a post of it's own.

Hi Rhonda!
I found your website on a Google search and I have a quick question for you. I need some advice. Here are the specifics.

Current MTG Loan balance is $161,927.28 with 28.5 years left at 5.5%
My TOTAL payment a month including taxes, etc. is $1278.

Proposed FHA Streamline Refi is for $167,779 for 25 years @ 5.0%
My TOTAL payment a month including taxes, etc. would be around $1290.

Out of pocket Expense $0.

Positives?
Negatives?

We plan on being there another 7-10 years.

If we do this, there is talkof the double Mtg skip, and a refund of MIP.

I know they aren't really skipping, nor the refund an actual refund, because the total loan amount is more than my current balance, kind of a wash. But there is still about a $1700 difference.

I could really use the $ to payoff a few things, even though I'm really rolling it into the new loan.

Is this really that bad of a deal?
Any advice or counsel is much appreciated!

Thanks!

RC

First of all, it's great RC is weighing out the long term value before proceeding with the refinance.  Often, home owners may refinance blinded by what seems to be an attractive rate or payment without considering if they'll break even.  Other factors besides the cost or savings is the effort it takes to accommodate a refinance.  Even an "easy" transaction is going to require some work on the home owners part with providing documentation, completing forms and signing final loan documents (an FHA streamline does have reduced documentation).

I'm always a bit concerned when a loan originator sells "skip two payments"…this shouldn't be a sales point by anyone who considers themselves a "mortgage professional".   You can check out my original post to see why.

There is no monthly out of pocket savings with this scenario.  In fact the payment would increase by $12 per month.  I'm assuming the savings of $1700 has to do with the illusion of skipping mortgage payments.

RC states there is no out of pocket expense but I'm unsure if this means it's a "zero cost loan" or if the closing costs are rolled into the new loan.

There is no refund of the upfront MIP.  A portion is credited towards the new loan with an FHA Streamline refinance.

The principal mortgage balance will be increasing by about $5,852 however the term is being reduced by 3.5 years.  With regards to the 25 year term, I'm not finding any lenders that we work with (and we are an approved FHA/HUD lender) who offers a rate improvement with a 25 year amortized amortization over the 30 year.

It sounds like you're focusing on the potential $1700 savings and if this is what's important to you, I probably would not increase my mortgage payment by $12 a month even though it would be reducing the term. 

So there are my pros and cons to consider with this proposed transaction based on the information that you've provided, RC.   Without having all of your actual details, you need to take my advice with a grain of salt.

PS: I rarely ever really get a "quick question" that has a "quick answer". LOL 😉

 

 

Filed Under: FHA, Refinance

Breaking Up is Hard to Do…Especially When You Own a Home Together

July 20, 2009 by Leave a Comment

I’ve written articles before about issues to consider if you’re going through a divorce and have a mortgage…what if you were never married?  Couples (or single people) often buy homes together…what if worse case scenario, it doesn’t work out and one party wants to keep the home?

A divorce decree allows you to refinance to cash out the other spouse and still have the mortgage treated as a “rate term” refinance.  There are significant differences between a cash-out and rate-term refinance.  A cash out refinance is limited to an 85% loan-to-value and the rate is higher (approx. 0.5% in fee at an 80% loan to value with credit scores of 740 and higher).  If there is a court order, it’s possible that FHA might allow a cash-out refi with a non-married co-owner.

There’s also the issue of excise tax.  An excise tax affidavit is filed whenever a deed is recorded (in the State of Washington).  Excise tax may not be due when the person being removed from vesting is pursuant to a divorce decree.  However, when there is no decree or court order involved and the person is being removed, excise tax may be due as they consider the transfer of that person’s interest to the other person “a sale“.  I’m told the county may charge excise tax on half of the underlying mortgage.  As of the date this post was published, King County charges 1.78% for excise tax.   Possible exceptions to this would be if the co-owners were registered as domestic partners, or the transfer of the property to one co-owner is by court order. 

Just like a divorce, simply deeding the property over to the party who’s remaining in the home does not remove the other person from responsibility or liability of the mortgage.  And it probably makes good sense to contact an attorney who specializes in divorce to assist with the separation of the real estate property.

EDITORS NOTE: This post was written in 2009 and may not be as accurate with regards to excise tax with laws regarding recognizing partners since the writing of this post.

Filed Under: Debt Restructuring, Refinance Tagged With:

Documentation for Self Employed or Commission Paid Borrowers

April 27, 2009 by 2 Comments

Sonia asks via commenting on a post at The Mortgage Porter:

“I’m a first time home buyer, but I am self employed I would like to be preapproved for a mortgage loan and want to know what paper work will be required by the bank…”

Self employed borrowers will most likely need to provide the following documentation:

  • Last two years complete (all schedules) tax returns for both business and personal including W2s or 1099s.
  • Year to day profit and loss statement.
  • Bank statements, asset accounts (all pages).  Be prepared to document you have enough funds to cover your down payment and closing costs at minimum.  You may have to show proof of having reserves (additional savings remaining after closing).

Self employed borrowers need to show at least two years of income for their business.  The borrowers often income is averaged over the past two years.  If the borrowers income shows a decline from the previous year, the lower income may be used and the self employed borrower should be prepared to explain why they are showing less income to the underwriter. 

These guidelines may also apply to:

  • People who are receive commission income that accounts for 25% or more of their annual income.
  • People who own 25% or more of the company they work for.
  • Independent contractors.

If you’re a commission paid sales person, you’ll need to provide your last two years tax returns as well and those un-reimbursed business expenses are factored against you. 

When a borrower has income that has the possibility of fluctuating, they need to be able to review a period of time (two years).   Underwriters are looking for trends with any borrower’s income. 

I recently met with a newly self-employed person who wanted to take advantage of the First Time Home Buyer Tax Credit.  She’s bought her business just shy of a year ago.  Even though it’s showing great profit right now; her first year tax returns report a loss (as many new businesses do).  She does not currently qualify for a mortgage.  After she has two years tax returns (track record) her income will still be averaged with the first year loss factored in. 

The days of “stated income” or “no income verified” are gone (so are many of the lenders who offered those products).  Be prepared to fully document your income and down payment.  You’re showing the lender you have the ability to pay the mortgage with your successful two year track record as a self employed person or commission paid sales person.

I’m happy to work with self-employed or commissioned paid borrowers. Click here if you would like a rate quote for a home located anywhere in Washington.

Filed Under: Refinance, Residential Purchase, Self-Employed, Underwriting and Qualifying

An Awkward Time of Year for Closing Refinances: 1st Half Taxes Due

April 11, 2009 by 3 Comments

On April 30th, first half of real estate taxes are due for properties located in Washington State.   For those homeowners who are refinancing with a closing in April to mid-May, this can cause an inconvenience.   Lenders, the title insurance company and the escrow company need evidence from the County that the taxes for the first half of the year have indeed been paid. 

Unless your reserve account is waived, taxes are collected on a monthly basis in your mortgage payment and then paid when they are due: first half is due by April 30th and the second half is due by October 31st.  

The County typically has a lag time before the processed payments appear once they receive the payment from the mortgage servicer.  King County’s website states:

“It may take up to two weeks for your property tax payment to be reflected in our records after receiving your payment”.

For refinances closing before it is reflected in County records that taxes have been paid; they have a few options:

  • Pay six months of taxes at closing towards your payoff.  The mortgage servicer will refund the balance (overage) a few weeks after closing with their existing reserve account balance.
  • Pay six months taxes at closing; the escrow company might hold funds for the 6 months taxes as an escrow hold-back and refund them to you once County records show the taxes are paid.
  • Delay the closing until the taxes show as being paid per County records (this could cause an extension fee).

Folks closing their refi’s in October to mid-November will be in the same boat with their property taxes. 

Filed Under: Refinance Tagged With: , ,
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