New Changes to FHA Effective September 14, 2015

New Changes to FHA Effective September 14, 2015

 

FHA just released its new handbook and with it are several underwriting changes.  These changes became effective with all FHA Case Numbers issued on or after September 14, 2015. 

Below are a few of the changes that will affect borrowers applying for an FHA mortgage:

 

Please contact me with any questions regarding these FHA changes or any other questions you have at BarkerLoans@gmail.com or 708.473.7688.



Occupancy Fraud on the Rise

Occupancy fraud occurs when a buyer applies for a mortgage to purchase or refinance an investment property but states on the mortgage application that they will occupy the property as their primary residence or as a second home.  Fannie Mae estimates that about 19% of all mortgage fraud is now occupancy fraud, and increasing.

Borrowers commit occupancy fraud to receive more favorable terms on their mortgage.  Investment properties have higher default rates and, therefore, lenders require larger down payments, higher interest rates, and stricter underwriting guidelines.  Because of the greater risk of default and more favorable mortgage terms, lenders have a greater exposure to loss without sufficient return on their capital to cover this risk.

The FBI investigates all mortgage fraud.  Penalties for mortgage fraud include imprisonment for up to 30 years, fines up to $1,000,000, or both.

Please contact me with any questions regarding your mortgage or to apply for a mortgage at BarkerLoans@gmail.com or 708.473.7688.

HARP Extended Through 2016

FHFA Director, Mel Watt, announced that the Home Affordable Refinance Program (HARP) will get a final extension through the end of 2016.  It was previously set to expire at the end of 2015.

HARP allows borrowers who are current on their mortgage payments refinance to a better interest rate even if the equity in their property has declined or even if they are underwater.  Many borrowers found themselves unable to take advantage of the historically low mortgage rates because they no linger had sufficient equity, or none at all in their property.

Mel Watt states that an additional 800,000 nationwide can benefit from HARP refinance - and more than 30,000 in the Chicago area alone.

Please contact me to see if you are eligible for a HARP refinance.  I can be reached at BarkerLoans@gmail.com or 708.473.7688.

2015: The Year of the First-Time Homebuyer

For the past several years the first-time homebuyer has been all but absent from the housing market.  With high unemployment for younger workers and restrictive and ambiguous mortgage credit policies, many millennials have stayed out of the housing market.  But, that could all change in 2015.  It appears the landscape is perfect for the return of the first-time homebuyer.   Here are the key factors that will help the first-time homebuyers in 2015:

Low Interest Rates
Mortgage rates have fallen over the last several weeks to near-historic lows – helped by the plummeting price of oil.  While interest rates are still projected to rise through the end of 2015, for now they are extremely low, making housing affordable.

Improving Employment
More jobs were created in 2014 than in any other year since 2000.  And, employment for younger households had an even better year – the economy created the most civilian jobs for the 25-34 age range (an important group for first-time homebuyers) since 1987!  Now that more millennials are working, they can afford to get out of mom & dad’s basement.

New Fannie Mae/Freddie Mac Programs
Both Fannie Mae & Freddie Mac have introduced mortgage programs geared toward the first-time homebuyer that requires only a 3% down payment.  Down payments are often a barrier for would-be first-time homebuyers and this program will help out with that.  Fannie Mae’s program is already available with Freddie Mac’s program set to begin in March 2015.

FHA Lowers Mortgage Insurance Premium
FHA announced that effective January 26, 2015, the mortgage insurance premium on a 30 year fixed rate mortgage will be reduced by 0.50% - from 1.35% - 0.85%.  According to the National Association of Realtors, this will save the average homebuyer almost $1,000/year.

Down Payment Assistance Programs
Many states offer down payment assistance programs.  In Illinois, the Illinois Housing Development Agency offers several down payment assistance program for first-time homebuyers.
 
2015 will be a great year for all homebuyers, but especially the first-time homebuyer.  Give me a call today to make sure you are mortgage-ready.  I can pre-qualify you for your mortgage and even refer you to a great Realtor to find your dream home!  Contact me at BarkerLoans@gmail.com or 708.473.7688.
 
It’s also a great time to refinance – low rates, increasing property values and lower FHA mortgage insurance premiums make now an excellent time to save some money on your current mortgage!

FHA to Lower Annual Mortgage Insurance Premium from 1.35% to 0.85%

President Obama issued a Fact Sheet today outlining the changes to the FHA Annual Mortgage Insurance Premium (MIP) - from 1.35% to 0.85%.

This 1/2% reduction will make homeownership more affordable for many people.  A home buyer with a base mortgage of $150,000 would save $62.50/month on their monthly mortgage payment.

It is estimated that about 800,000 homeowners will take advantage of these lower MIP rates in the first year alone.  And, this decrease will create an opportunity for an additional 250,000 homeowners to purchase a home over the next three years.

These new rates are not yet in effect but will be soon.  As soon as they are I will update this blog.

Please contact me with any questions at 708.473.7688 or BarkerLoans@gmail.com.

Important Tax Breaks for Homeowners Extended by Congress

Congress recently extended two important tax break for homeowners:

1. Mortgage insurance (MI) paid with your mortgage can be claimed as a deduction on your Schedule A along with your mortgage interest and real estate taxes.  This extension is retroactive to January 1, 2014 so it covers MI paid all year.  Income restrictions apply.

2. Mortgage debt forgiven in a short sale in 2014 will NOT be taxable.  In a short sale, a house is sold for less than the balance of the mortgage.  Usually, the mortgage company will issue a 1099 to the borrower for the difference between the mortgage balance and the proceeds of the short sale and that amount is taxed as ordinary income.

Make sure you consult a tax professional for questions regarding these or any other tax breaks available to homeowners.

For questions regarding your mortgage, or to apply for a new mortgage, please contact me at BarkerLoans@gmail.com or 708.473.7688.

FHFA Announces Conforming Loan Limits

The Federal Housing Finance Agency (FHFA) has announced the maximum conforming loan limits for mortgages through Fannie Mae & Freddie Mac in 2015.

Most of the country will not see any changes to the loan limits from 2014.  The loan limits for most counties in the US are:

Units                   Loan Limit

1-unit:                 $417,000

2-units:               $533,850

3-units:               $645,300

4-units:               $801,950

There are 4 designated high-cost areas that have a maximum loan limit of $625,500 - 50% higher than the standard loan limits.  These areas are Hawaii, Alaska, Guam and the US Virgin Islands.

Other high-cost counties have higher loan limits which are based on a calculation established by the Housing and Economic Recovery Act of 2015 (HERA).

For a list of loan limits for all counties in the US, click here:

Conforming Loan Limits

Mortgages in excess of these loan limits are called jumbo mortgages and are not eligible for sale to Fannie Mae and Freddie Mac.

Please contact me with any real estate or mortgage related questions at BarkerLoans@gmail.com or 708.473.7688.

IHDA's Welcome Home Illinois Program Closing November 30th

IHDA's Welcome Home Illinois Program Closing November 30th

Since its inception, more than 10,000 first time home buyers in Illinois have taken advantage of the Illinois Housing Development Authority's (IHDA) Welcome Home Illinois Program's generous $7,500 down payment assistance and 5 year forgiveness period.  But, the funds for the program are nearly exhausted.

IHDA is confident they will be able to honor all funds reserved through November 30, 2014 but reserves the right to close the program earlier if fund reservations increase and exceed the funds available.  Act now to reserve your funds!

IHDA's other down payment assistance programs will continue to be available after November 30th.  Most programs are available only to 1st time homebuyers.  But, qualified veterans need not be 1st time homebuyers and there are programs in specific areas without this requirement.

Contact me for more information on IHDA or any other mortgage programs at barkerloans@gmail.com or 708.473.7688.
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The Federal Reserve Ends Quantitative Easing

The Federal Reserve Ends Quantitative Easing

The Federal Reserve (The Fed) in response to the Great Recession and housing market collapse, instituted several rounds of quantitative easing.  Quantitative easing (QE) is a monetary policy used by central banks to stimulate the economy when other policies have failed.  In QE, a central bank purchases certain financial assets such as government bonds and mortgage-backed securities, in order to increase their prices and drive down their yields.  Lower yields (interest rates) will help to stimulate the economy by making capital cheaper to borrow.

Recently, improvements in the overall economy have prompted the Fed to reduce, and now eliminate, these asset purchases.  In a statement issued by the central bank’s Federal Open Market Committee (FOMC), the Fed leadership stated that: “There has been a substantial improvement in the outlook for the labor market since the inception of its current asset purchase program. Moreover, the Committee continues to see sufficient underlying strength in the broader economy to support ongoing progress toward maximum employment in a context of price stability. Accordingly, the Committee decided to conclude its asset purchase program this month.”

While we have still not seen a full recovery in the housing market the Fed feels that there is enough progress in other parts of the economy to warrant the end of QE.  Nonetheless, the Fed cautioned that a full recovery has not taken root and that it would continue to act accordingly to prevent an economic reversal.

Many people feel the end of QE will signal the start of increasing interest rates.  To take advantage of today's low rates, contact me at barkerloans@gmail.com or 708.473.7688.

New Home Sales at 6 Year High

Even though the housing recovery remains fragile, the good news is that single family home sales have reached a six-year high. Sales of new homes rose slightly in September, making it the highest since 2008. The Commerce Department announced that sales increased 0.2%. One reason for the increase in sales may be that the median price of a new home fell four percent from the previous year. This is the lowest it’s been since August 2013. The median price for a new home is currently $259,000.

The sales of new homes has fluctuated throughout the country, with the highest jump in the Midwest. Sales rose 12.3% in this area. They rose two percent in the South, were stagnant in the Northeast, and actually fell in the West. The trend also seems to be toward smaller homes once the cooler seasons start. Homes under $199,999 increased while the sale of properties from $300,000 to $499,999 decreased. New home sales account for a small portion of the overall home sales, with approximately 8% of the total housing market. With sales rising, however, this in turn has been a boost to the stock market. Stock for new houses went up 1.5%, the highest level since July 2010.

Since new home sales tend to be volatile, it helps to look at the big picture to get an idea where the market is heading. In the third quarter of this year new home sales were up by 15% from the same time period in 2013. While we’re still a long way from the pre-recession peak of 1.3 million new home sales, there is reason for optimism. Builder confidence continues to rise and credit is beginning to flow again.

When you're ready to purchase a home, please contact me at barkerloans@gmail.com or 708.473.7688.

800,000 Homeowners Could Still Benefit from a HARP Refinance

In 2009, the Home Affordable Refinance Program (HARP) was introduced to help those homeowners who remained current with their mortgage payments but were unable to refinance due to the falling value of their homes.  For many homeowners, the value of their home was less than their mortgage balance and were unable to refinance.  For others, they would be required to have mortgage insurance, or the amount of mortgage insurance required was greater, because they now had less equity in the home.  The addition or increase in their mortgage insurance negated most, if not all, of the savings they would receive from refinancing.

In the beginning, HARP only helped a limited number of homeowners due to some of the restrictions in the program.  But, after some changes (HARP 2.0) over 3 million homeowners were able to refinance their mortgages and take advantage of the record-low mortgage rates.

Under HARP, if your mortgage was bought by Fannie Mae or Freddie Mac prior to July 1, 2009 you would be able to refinance your mortgage, provided your were current for the past 6 months and only one late payments in the last 23 months, even if you lost most or all of your equity.  And, your mortgage insurance requirements would be the same for the new mortgage as it was for the mortgage being refinanced.  So, if you did not have mortgage insurance, and you no longer had 20% equity in your property, you could still refinance without needing mortgage insurance.  And, if you had mortgage insurance on the mortgage being refinanced, you would have the same mortgage insurance coverage and payments on the new mortgage, regardless of equity position.

Why hasn’t everyone taken advantage of the HARP Program?

First, many people are still unaware that the program exists.  Despite a major marketing campaign by the federal government, and countless mortgage lenders, I still talk to a lot of people who have never heard of the HARP Program.

Second, there are many people who tried to refinance under the original HARP guidelines (HARP 1.0) and were turned down.  They do not know that the revisions that came around with HARP 2.0 made it a lot easier for the mortgage lenders to approve more borrowers.  If you know someone who tried to refinance under HARP and were rejected, have them contact me and I can help them refinance.

Third, according to Mel Watt, Director of the Federal Housing Finance Agency (FHFA), many homeowners got burned and do not trust their lenders.  Many people feel the HARP Program is a scam.  This is why Mr. Watt and the FHFA are reaching out to people to let them know they can benefit from the HARP Program.  "We know that there are hundreds of thousands of borrowers who can still benefit from Home Affordable Refinance Program and are essentially leaving money on the table by not taking advantage of the program," said Watt.

The FHFA has also created an interactive map to show the approximate number of people in a given county, city and even zip code that can benefit from HARP.

If you, or anyone you know, has a mortgage that was originated on or before June 30, 2009 please have them contact me to see how much money they can save.  And, as always, if you have any questions regarding real estate or mortgage, please contact me at BarkerLoans@gmail.com.

FHA to Stop Collecting Post-Payoff Interest

When you make a mortgage payment, you are paying interest that accrued during the previous month.  So, your September 1st mortgage payment paid the interest that accrues from August 1 - 31.

When you payoff a mortgage, whether through refinancing or sale of the property, the lender will calculate and charge you interest from the first of the month through the day they receive the funds to pay your mortgage in full.  So, if the funds arrive on September 9th, you will have to pay 9 days on interest.

However, for FHA loans, the borrower may be charged interest through the end of the month regardless of when the payoff funds actually get to the lender.  So, even if your funds get to the lender at the 9th, you may still be required to pay interest for the remaining 21 days in September.

FHA says that they have allowed lenders to collect the full month of interest because holders of mortgage-backed securities expect a full month of interest regardless of when the loan is satisfied.

The Consumer Financial Protection Bureau (CFPB) has asked the FHA to review this policy because it can end up costing consumers hundreds of dollars in extra interest.  FHA has agreed to change it's policy effective January 21, 2015.

For any housing or mortgage-related questions please contact me at BarkerLoans@gmail.com.

Don't Wait - Now is the Time to Buy

With interest rates still at historically low levels now is a great time to purchase a home.  But, with employment increasing, rising home prices, and projected interest rate increases in the near future, waiting could cost you.

The National Association of Realtors (NAR) and the National Association of Home Builders (NAHB) are two organization that measure and track home affordability over time.  Both the NAR's Home Affordability Index and NAHB's Housing Opportunity Index are showing the cost of purchasing a home is starting to rise, affecting affordability negatively.

According to NAHB’s Chief Economist David Crowe,  “The second quarter HOI reflects the slow but steady march toward the historic levels of price appreciation and interest rates that result in affordability levels we experienced before the mid-2000s boom.”

And, Michael Hyman, Research Assistant at NAR said,  “At the national level, housing affordability is down for the month of June due to higher prices and qualifying income levels despite the lowest mortgage rates of the year.”

So, even though you missed the very bottom of the real estate market, interest rates are still remarkably low and home prices in most areas are still below the levels they were seven years ago.  It is still a great time to purchase a home.

Contact me to find out how much home you can afford and what it will cost you at BarkerLoans@gmail.com or 708.473.7688.

Changes to FICO Credit Scores Will Help Many Consumers Obtain Credit

Fair Issac Corp. has announced it is making changes to the way it calculates a person's FICO Score - the most widely-used credit score in the U.S.  These changes should make it easier for many consumes to obtain credit at more favorable terms.

Two of the major changes are:

1. Collections that have been paid off completely will no longer included in the credit-score calculations.
2. Medical collections will be given less weight in the credit-score calculations.

These changes should have a significant impact on the number of people who will no be able to qualify for financing.  Since the recession and housing market mess, lenders have only approved the most credit-worthy borrowers, as measured by credit scores like the FICO Score.

According to credit bureau Experian, about 106.5 million consumers have collections on their credit reports (64.3 million with medical collections) and about 9.4 million have no balance.

While some critics are concerned that loosening credit standards will result in increasing losses for borrowers, banks and lenders, Fair Issac said it has analyzed the likelihood borrowers with excellent credit with the exception of these accounts before making the changes.

Fair Issac changes their credit score models every so often and lenders may use any model they choose.  It may take some time for these changes to affect the mortgage industry since the credit scoring model used by most mortgage lenders is not usually the most recent.

Have questions about your credit or mortgage?  Contact me at BarkerLoans@gmail.com or 708.473.7688.

Increase in Home Prices Continues to Slow

Home prices increased 9.3%, year-over-year, according to the S&P Case-Shiller Home Price Index.  This is down significantly from the previous month's increase of 10.6%.

In the month of May the 20-City Composite Index showed a monthly increase of 1.1% with all 20 cities showing gains.  The Chicago market posting an increase of 1.5%.

While home prices are still rising, the rate of increase in the slowest since February 2013.  The broader economy, especially employment, is showing larger improvement.

For questions, or to find out how these home price gains affects affordability, please contact me at BarkerLoans@gmail.com.

Happy Mother's Day!

Happy Mother's Day from BarkerBlog!

Warmer Weather Brings In The Buyers, Is There Inventory?

After three consecutive months of decline, the S&P Case-Shiller 20-City Composite Index

remained nearly unchanged in February. Year-over-year home prices rose by 12.90 percent in February as compared to 13.20 percent in January.

20 Percent Below Their 2006 Pre-recession Peak
Analysts note that in spite of recent slowdowns in home prices, the year-over-year rates of home price growth remain close to peak price growth attained in 2006. National home prices remain approximately 20 percent below their 2006 pre-recession peak. 13 cities posted lower rates of price gains in February. The Case-Shiller 10 and 20 city indices showed year-over-year price gains of 13.10 and 12.90 percent respectively. Only five cities posted year-over-year gains in price appreciation. Las Vegas, Nevada continues to lead home price growth but its year-over-year rate of home price growth slowed from January’s reading of 24.9 percent to February’s reading of 23.10 percent. Washington, D.C. posted its eighth consecutive month of home price gains with a year-over-year reading of 9.10 percent, its highest rate of price increases since May 2006. Dallas, Texas posted a year-over-year rate of 10.10 percent and a month-to-month increase of 0.20 percent, which continues the city’s record home price growth.

Home Price Gains Expected To Slow In Coming Months
Analysts said that more homes are expected to come on the market and also noted that the rapid increase in home prices for some areas likely sidelined some buyers. As inventories of homes increase, home prices are expected to rise at more modest rates. Job markets continue to experience ups and downs and incomes are relatively flat. These factors can cause would-be homeowners to take a “wait-and-see” stance. Price increases in other sectors can also impact home prices, as buyers adjust their home purchase plans to what they can afford to spend.

Pending Home Sales Rise In March
The NAR reported that its pending home sales index rose by 3.40 percent in March as compared to a decrease of -0.80 percent for February. The March reading showed the first increase in pending home sales in nine months, and was the highest reading since November. Warmer weather allowed more buyers shop for homes, but remains 7.90 percent lower than in March 2013. Higher home prices and low inventories of available homes were cited as reasons for the lower reading. Pending home sales by region showed mixed results, and suggested the impact of severe winter weather on potential home buyers.
Northeast: +1.40 percent
Midwest:    -0.80 percent
South:       +5.60 percent
West:        +5.70 percent
Based on a slow start during the first quarter of 2014, the NAR forecasts 2014 sales of existing homes at 4.9 million as compared to 5.1 million existing homes sold in 2013.

If you are thinking of buying or selling a home, please contact me at BarkerLoans@gmail.com or 708.473.7688.

4 Tips for Real Estate Investing

Invest In Real Estate Like A Pro With These Quick Tips

Real estate investments are still going strong and will probably continue to be a popular method of financial gain into the future.

Real estate is solid. It is a tangible product that is attractive to both beginning investors and experienced pros. The most important part of getting started in real estate investing is knowing what you’re getting into and what to watch out for.

Here are 4 top tips from real estate investment professionals:

Understand The Realities

Real estate investment, like any form of investment, is risky. Do not use money you cannot afford to lose. Careful study, understanding the market, and practice help alleviate a lot of the risks but things happen in the best of situations so don’t play with what you can’t afford to lose.

Research Is A Constant

Research in real estate investment isn’t something you do once. Research is constant. It is a daily part of your efforts and should always be at the forefront of your mind. From changing banking methods to market changes, researching and learning must be ongoing to be a successful real estate investor.

Know The Property

Research isn’t limited to financing and the real estate market. You need to thoroughly investigate each property before you buy. Fill out an investment worksheet to see if all the costs associated with the purchase will allow a satisfying profit.

Learn About Personal Protection

Taking risks with the money you have set aside for investment is one thing. Taking risks with your family’s savings, property, and other assets is another. Consider starting an LLC. You can choose from a single LLC to cover all of your real estate holdings, or having a separate LLC for each property purchased.

Please contact me at BarkerLoans@gmail.com or 708.473.7688 if you have any questions about investing in real estate. 

2014 FHA Loan Limits

HUD announced the FHA Loan Limits for all FHA Case Numbers assigned between January 1, 2014 and December 31, 2014.  The new limits will be lower for 650 counties across the country, including all counties in the Chicago area.

For the Chicago Metropolitan Area, the FHA limits are as follows:
               1-Unit  $365,700
               2-Unit  $468,150
               3-Unit  $565,900
               4-Unit  $703,250

Loan limits for FHA Home Equity Conversions Mortgages (reverse mortgages) remains at $625,500.  However, the maximum loan amounts are determined by the value of the property and the home owner's age.

To find out the FHA loan limits in other areas, go to: https://entp.hud.gov/idapp/html/hicostlook.cfm

Please contact me with any questions or when you are ready to purchase or refinance a home at BarkerLoans@gmail.com.

What is most important for a good credit score?

No matter how many articles I write on credit
and credit scores, I get this question over and over.

Make your payments on time!

This is the single most important thing you can do to keep your credit scores high.  There is no easy fix to late payments - it takes time for your credit scores to rebound after late payments.

What else can you do?

There are a few other things you can do to maximize your credit scores:

1) Keep your balances as low as possible in relation to your credit limits.  The closer you are to being "maxed out" in your credit cards, the more it negatively impacts your credit.

2) Pay attention to your credit limits - going over your limits has an adverse effect on your scores

3) Limit the number of creditors you allow to check your credit - a lot of credit inquiries can decrease your credit scores.

When you decide to purchase a home or refinance your mortgage, contact me early.  It is important to check your credit up front so we can correct any errors on your credit report or work on any credit issues early - it is better to deal with these issues sooner rather than later.

Please feel free to contact me at BarkerLoans@gmail.com with questions regarding your credit or when you are ready to apply for a mortgage.