FHA mortgage basics – raleigh nc

September 2, 2009

FHAToday I will provide you with a fun FHA fact filled post.  I can’t cover everything in one post but I’ll get to the most important items.  You can obtain an FHA loan for a single family residence up to a four-plex (where four families would be able to live) but to simplify things, we’ll stick with the single family unit guidelines for they’re the most common.

Ready to explore a FHA purchase? Let’s go.

1. Required Down payment- The minimum down payment for FHA loans is 3.5% of the purchase price.  This isn’t too bad considering that most conventional loans require anywhere from 10-20% down.

2. Loan Limits- Like I just stated, FHA loans are available for 1-4 unit homes/buildings.  Loan limits are determined on a county by county basis – you can find your specific county here.  In Wake County, you’re looking at a $295k limit which is fairly high; this basically means that if you want to get an FHA loan, the amount must be under $295k.  Most buyers looking to take advantage of an FHA loan are shopping in the $200s.

3. MI or Mortgage Insurance – A quick note on MI – this is the insurance that the lender pays to protect themselves against your loan defaulting.  Most conventional loans require you to pay mortgage insurance until you reach the 78% LTV point which they then deem you to be less of a risk and are satisfied with the amount of equity in the home and the MI requirement is dropped.  For FHA loans, the same basic situation exists – you’re required to pay MI unless you’re putting down 20% or more.  There are two items you need to consider about FHA MI – you’re charged a 1.75% upfront fee (which is rolled into the loan amount) and a .55% fee per year for the total loan amount.  That second part is what determines the amount that you’ll be paying every month.  A quick example would be if you had a $200k loan, your MI fee would be (200k x .0055)/12months= $91.67/month.  Get it? Good, we’re moving on.

4. Closing Costs – For an FHA purchase you can expect to see the following costs: Origination Fee, Attorney’s Fees, Appraisal Fee, Title fees, Credit Report, and a Home Inspection Fee.

5. Credit Requirements – The credit requirement for FHA loans is usually 620 but each lender will have their own requirement overlays.  You must have at least two lines of credit, 2 revolving accounts, to be eligible for an FHA loan.  These accounts must have a pretty good history of on-time payments – your FHA loan will be inspected closely by underwriters and any questionable bill pay habits will be viewed quite negatively.  You can still obtain a FHA loan if you’ve gone through a chapter 7 bankruptcy in the past; you just have to wait a minimum of two years after the discharge date (not the filing date).  You do not have to wait, however, to apply if you’re currently paying off a chapter 13, as long as you’ve made on-time payments for the past year.  You will need a written letter of explanation and a letter from your appointed court trustee.  You’ll also have had to have rebuilt your credit to the required levels.

6.  Debt to Income Ratios – Every time you apply for a loan, there are debt ratio requirements.  For FHA, they’re a bit stricter; they want to make sure you’re getting yourself into a situation that you can afford.  Also, with regards to ratios, all lenders have their own requirement overlays that will affect these numbers.  You have two ratios that lenders are interested in:

1. your Mortgage Payment Ratio This is your monthly mortgage proposed payment over your overall monthly income.  So if your proposed mortgage payment is $700 and your overall gross income for the month is $2500 – you’re at $700/$2500=32%.   FHA requires a maximum ratio of 29% to qualify.

2. your Total Expenses Ratio This ratio is calculated by adding your monthly proposed mortgage payment to any monthly revolving debt (credit cards bills, car loan, etc) and dividing that by your total gross monthly income.  FHA requires a maximum ratio of 41% to qualify.

So that was a brief rundown on what to expect as far as requirements go – things change quite often so if you find conflicting information or you’re confused about a certain item, just give me a call.

DNJ Mortgage
1350 Sunday Drive
Raleigh, NC 27607
919.459.6560


what affects my available interest rate?

September 1, 2009

interest rate diceOften when I provide clients with rate quotes for refinances, they are astonished that my rates are completely different from what they see on the internet (lendingtree for example).  So I just want to take a few minutes/words to explain all the elements that affect the rate that you’re eligible for.  The one thing I want to clear up before I begin is that I work for a broker and my particular company has access to 20+ wholesale lenders (large moneylines).  Each lender has their own rules and guidelines and will require different scores, ratios, etc for different tiers of borrowers.  If you’re refinancing through a bank, it’s their money and they measure risk and determine loan variables differently.  So, with that said, let’s go through the pricing adjustors  for a regular 30yr fixed conventional loan (we’ll do an FHA/USDA some other day).  Lets start out with a 5% rate and adjust as we go for a $200k loan on a home valued at $300k.

1. Loan Amount – The bad news, the size of the loan you have or that you’re looking to get, will affect your rate.  The good news, you really only get hit for loans under $90k.  “Good you say?” Well yeah, even some of the lower priced townhomes in the greater Raleigh area are right at $99k.  A lender may have a negative pricing adjustment of .25 or .5 for loans less than $90k, but since our example for a $200k loan, we’re out of harm’s way – our rate is still at 5%. If we were under $90k, we’d be at 5.5% now.

2. FICO & LTV – Next, a duo of price adjustors working together to hedge risk for the lender.  Lenders adjust on a sliding scale, more adjustments for higher LTV and lower FICO, and vice-versa.  The LTV is simply your loan to value or your loan/value – which in our case is 200/300 or 66.7%.  Nowadays, any score under 720 gets a pricing hit – which stinks I know but banks are stricter these days.   LTV hits vary between lenders but you can expect to take a pricing adjustment if you’re at or over 69%.  Let’s say we only have a 700 FICO and with our LTV at 66.7%.  Considering the two previous statements, we’d most likely be looking at a .5% hit – moving our rate up to 5.5%.

3. Property Type – There are pricing adjustments for different property types, mainly condos and 2+ unit buildings.  These hits range from .5% to a whole 1%.  Since we’re refinancing a single family home, there wont likely be an adjustor (they’re the most common dwellings) so we’re still at 5.5%.104861

4. Cash-Out – Looking to take out a few thousand in cash at closing?  This will definitely affect your rate.  The cash-out pricing adjustments are also based on the LTV and FICO scores.  If you’re over 60% LTV with anything less than a 700 FICO, you can expect a .5 or greater hit for taking cash out.  In our example, we’re not looking to take any cash out and thus our rate remains the same.

5. Second Mortgages – If you’ve got a second mortgage that you want to leave be either because of the rate or just as a preference, there will be an adjustment on pricing (usually .25-.75%).  This is super dependent on the lender and it’s hard to make any general statements about this adjuster.  If we had a second, we may be looking at a 6% or 6.25% rate.  Banks do this because of 1. risk and 2. they want you to consolidate notes so they can have a bigger chunk of your debt – the more money you owe them, the more interest they earn. (overly simplified reasoning I realize but true nontheless).

These are the basic price adjustors that you’ll most likely run into; there are separate and additional rules for FHA and USDA loans as well as adjustable rate products.  So jeeze you say, that darn FICO score hurt my rate a .5% – I wish there was something I could do to get that 5% rate.  Well there most definitely is – have you ever heard of buying down a rate?  That’s exactly what you can do.  If you’ve got the extra cash and are looking to stay in your home for a long period of time, you can put some extra money into the transaction and your mortgage professional can move you into a lower rate.  I’ll post later on this week about buy-downs (or have I already posted about that?) – but considering a $200k loan at 5.5%- if you buy the rate down .5%, you’ll be saving close to $21k in interest over the life of the loan.  Feel that that’s worth the approx $1k that it would cost? – A lot of people would agree.

All these examples were general estimates that assume many elements of the transaction – like I said at the beginning of the post, every lender and bank have completely different rules and adjusters, all % examples were just basic guestimates to give you a general idea of how your specific rate estimate was calculated.

Want your own rate quote?  Just visit our website – no obligation or cost.  http://www.integritylender.com/raterequest

As with any of my blog posts, if you’ve got questions, I can help. (919)459.6533

DNJ Mortgage
1350 Sunday Drive
Raleigh, NC 27607
919.459.6560


Mortgage Assistance Raleigh NC

August 31, 2009

I’ve been fielding quite a few calls lately from people wanting to get their mortgage modified.  Although we don’t provide loan modification services, I quickly realized that the majority of the callers really didn’t need their loans completely altered by their servicer/provider – they just needed to refinance.  The one problem that was preventing them from doing so was their value.  Either they experienced a drop in the home values in their specific area, or they had a higher rate and hadn’t been in the home long enough to accrue any equity.  Either way would prevent most people from refinancing, but through some not so new programs, the value obstacle is eliminated.  The programs at hand: the Freddie Mac Relief Refinance & the Fannie Mae DU Refi Plus.  fanniemae_bldEach has slightly different eligibility requirements but both will help you move down to a lower rate effectively lowering your monthly payments.  These are not standard transactions; much of the usually considered information may be ignored while lots of additional non-standard requirements will be weighed.

1. The main item that needs to be looked at before even considering either of the programs is the owner of your loan.  To qualify for either of these programs, your loan must be owned by either Fannie or Freddie – not sure about your loan?  Not a problem; you can check both entities on these two websites.

2. The next most important item is your current payment status. You must be up to date with regards to your payments and cannot have any late payments over the last 12 months.  This item really represents a simple risk evaluation on their part – up to date?~~not much of a risk , a couple lates?~~more likely (in theory) to default.

3. The loan to value considerations are quite lenient.  Both programs allow up to 105% loan to value and if you’re slightly over that, you’ll have to pay the balance down to 105% with your own funds and provide documentation to show that you did.

4. Neither of these programs offer much relief for those with run-away seconds.  Both do not allow new subordinate financing or replacement financing.  What this basically means is you’re not going to be able to roll both loans together and if you’re having trouble paying your mortgage because of a high rate second, these programs won’t be much help.  There are other ways to deal with situations like this – give us a ring and we’ll help you find a solution.

5. Some other limitations and items to note:

  • Mortgage Insurance is not always required
  • Unlimited CLTV
  • Limited Cash-Out

There are plenty of other requirements and caveats, but if you’re good on these first four – you’re definitely on the right track.  We’ll need to gather a full loan application from you in order to qualify you, but total time needed for that is around 30min (20 filling out the loan application on-line and about 10-15 minutes on the phone speaking with one of our loan consultants.

As with any of my blog posts, if you’ve got questions, I can help. (919)459.6533

DNJ Mortgage
1350 Sunday Drive
Raleigh, NC 27607
919.459.6560


100% Financing Raleigh NC

August 28, 2009

USDA_Rural_Development-logo-D870D5C861-seeklogo.comThe United States Department of Agriculture: not just an organization for developing farming and agricultural policy.  The USDA’s Rural Development office has the goal of attempting to “improve the economy and the quality of life in rural America.”  Near the end of 2007, RD had provided over $80 billion in loans and grants which by now, the total amount is probably in the 90’s.  It all makes sense if you think about it – not many people want to live far away from the city and all of its amenities but if there’s 100% financing for the homes out there, why not?  Hey, I just personally bought a home in USDA territory with 100% financing, so I’m the perfect person to tell you what to expect and how to qualify.  First we’ll start with a useful link that you’ll need to orient yourself and because of the coding of the site, you’ll need it as a starting point to access all the points of eligibility. [ USDA Eligibility Page ] Go ahead and click on the link and take a quick look – you’ll see a navigation bar on the left, we’re going to be focusing on the property and income eligibility pages.

[Credit Scores] Like any loan program, a borrower must meet certain requirements to be eligible.  USDA loans require a good/fair credit score, much lower than traditional conforming loans, but still basically in check.  As of today, the majority of lenders that offer USDA loans require a 620 minimum credit score; not too bad – even with some dried up collections or lack of available credit, 620 is pretty achievable.  There are situations where your broker/loan representative can provide a written letter of credit explanation to the lender in case you’re close to the 620 cut-off.

[Income] There are income requirements or guidelines that you must fall in line with.  This program is primarily designed for those who have a median income.  A quick example: the income limit for two adults (no children or other residents) is $88,400.  If you’re unsure of your income eligibility – go to the USDA Eligibility Page, look for the first “Income Eligibility” section and click on the “Single Family Housing” link.  This will bring you to an income form that you’ll be able to perform an income calculation with.  Back to the example: just because you may be moving into a home with your significant other, doesn’t mean you have to both be on the loan- call us and we’ll get into the details a bit more.

[PMI] A great aspect of this program is the fact that you’re not going to have to pay PMI or private mortgage insurance.  When financing a home for more than 80% of its value, you have to pay mortgage insurance until you’ve accrued 20% equity in the home.  The PMI payment can range from $50 to $150 depending on the amount borrowed and the terms of the loan.  This is definitely a chunk of your monthly mortgage payment and when it’s gone you notice.  A definite plus to the USDA option.

[Interest Rates] The rates that are available for this program are fairly aggressive and very similar to what’s available for conventional rate products.  If you’re super curious to what an available USDA rate would be today, just ring us and we’ll let you know.

[Area Eligibility] You’ll be quite surprised how much of our lovely state is eligible for USDA programs – around 92% of North Carolina.  I recently helped a friend search for properties in and around Salisbury NC.  She had her eye on a bungalow in a small neighborhood on the west side of town.  After we consulted the eligibility map, we saw that theusda_maphome was just outside the eligibility zone, about 1 block away from being eligible.  She quickly spotted a similar home up the road and the rest is history.  The map is a bit tricky to use, but it should work in any browser and if you take a minute, you’ll be able to see what’s what.  There’s also an address finder application that you can use – do note however that it doesn’t find EVERY address on the map – you may want to contact us if you’re not completely sure.  Most Realtors will advertise USDA eligibility prominently on their listings, so you may not have to dig too much.

[$8,000 Credit] I mentioned the tax credit a few times previous, but it IS available to those who purchase a home with a USDA loan before November 30th.

So there you go, the basics on what’s required, what’s provided and what to expect.   The loan process runs parallel to that of conventional products – inspections, appraisals, etc.  This is definitely a solid way to buy smart and own in some really wonderful parts of NC.  I brushed the surface so if you’ve got any questions or have any comments, just contact us – we’re always available to talk in person or over the phone.

DNJ Mortgage
1350 Sunday Drive
Raleigh, NC 27607
919.459.6560


daily mortgage interest rates from DNJ Mortgage Raleigh NC –

August 27, 2009

twitter-iconI set up a twitter account awhile ago, mainly just to secure the DNJ mortgage name from would-be fakers.  I recently realized that it’s a perfect opportunity to help our clients and our prospective borrowers keep in touch with current interest rates, our current rates.  Because we have amazing relationships with a healthy portfolio of wholesale lenders, our rates are almost always lower than what you’d find at your local bank.  I’m definitely not doing this so I can be lazy and just point rate calls to the twitter page – not at all.  In reality, you can obtain any rate you’d like, as long as you have the $$.  The rates that will be updated daily are full cost – ie. they are the lowest rates that you can get without paying points, that is, as long as you qualify.  Loan to value, FICO scores, loan amounts, etc will still weigh in on the rate that is ultimately available for your certain situation, but regardless, we’re still keeping you informed with what is available.  I’m going to try and do a fixed 30yr rate and some arm products and whatever is amazingly low during that given day.  After some thought, it seems like rates would be the only thing that I’d personally want to see tweeted from my mortgage company, so I think people will find it quite useful.  So join up and follow us as we help keep you in the loop.

DNJ Mortgage
1350 Sunday Drive
Raleigh, NC 27607
919.459.6560
http://twitter.com/dnjmortgage


What is your home’s value?

August 26, 2009

The low down

Figuring out your home’s value is a bit more difficult than ever, and doing it for free is darn near impossible.  But to get a basic idea, you can approach the situation with some info from this post.  But to disclaim up front, no value from these methods should be relied upon when making a serious decision about your mortgage or financing situation.

Traditionally, like I explained in a previous entry about the HVCC, appraisers would stick to certain areas of town and would slowly develop their expertise with regards to the homes and neighborhoods in that area.  They could often provide some idea of a home’s value in a certain area just by considering its location relative to other homes they’ve appraised.  This guestimate would help the borrower determine if moving forward with the refinance was worth the cost involved.  Because of the HVCC, this practice isn’t an option anymore.  Recently, people have started to pay closer attention to their tax values when attempting to determine their value.  The tax value of most homes is a fair to good indicator of the value but I’ve noticed in the last two years that these values are farther and farther from realistic figures.  So I’m going to give you some alternate methods of exploring your home’s perceived value.  None of these will include any value increases that may be expected from remodeling or updates.  When major home renovations are done, only a full appraisal will provide an accurate value.  You should not make any decisions just based off of these methods – the market in Raleigh as well as everywhere else is quite turbulent and determining the true value of your home should be left to a professional appraisal.

Some Quick and Easy (& not so accurate) Methods-

1. Zillow

Zillow.com provides estimates of home values and real estate trends for most US cities.  Zillow accomplishes this by purchasing large quantities of real estate data, mapping lot sizes, and comparing recently sold comparable sized homes in that area.  Because its system is run primarily from purchased data that is not always 100% accurate, its estimates are sometimes completely off the mark.  I’ve used it and the majority of the time the estimate provided is plus or minus $8,000 from the tax value of the home.

2. eppraisal & Yahoo

Eppraisal and Yahoo just report an average of the values given on other websites (zillow and cyberhomes).  The values on these sites seem a bit on the high end and aren’t very reliable or realistic, in my opinion.  Comparing my home, there’s a $30k difference between the tax value and the eppraisal estimated value.  I’m not sure about you, but my financial planning doesn’t work with that kind of variance.  The only good aspect of these two services is that they provide recent sales data for you to compare.

3. Cyberhomes

This runs closer to what zillow has to offer but tends to estimate more conservatively.

-Determining the value via a per sqaure footage calculation-

If all the free home valuation websites have narrowed your value down to a $50k+ range and you’re ready to explore some more serious calculations, you may want to get out a sheet of graph paper and log into your County government tax & property website.  I’m going to use Wake County’s as an example.  The property search page where you enter your address can be found here.  After you’ve got the account summary for your home opened, you’ll see what value the city has determined your taxes be based from (image #1).  At the top in blue you’ll see a series of links.  What you’re wanting to consider is what you’ll find on the recent sales page (image #2).  This page will show you all the data on the most recent sales in the immediate area (image #3).  Now here’s where your work begins.  To find a semi-accurate value to work from, you’ll need to 1. calculate the per square foot price of your home (tax value/sqft) and 2. compare it to the per square foot price of homes that were recently sold, dates for these sales are in the very last column on the right.  Make sure you’re comparing the sqft price for homes that are close to your home’s size, location, and amenities (garage, pool, etc).  If you’re calculation brings you to a $180/sqft price and the identical home next-door just sold for $150/sqft, then you know that your tax value doesn’t represent your actual value.  And again, if you’ve updated all your fixtures to solid gold marble accented pieces, this method will not reflect those upgrades.  This process isn’t totally accurate and shouldn’t be used to base any of your decisions off of, but it will provide a much closer estimate of your value than just dialing up your address on zillow.

 

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DNJ Mortgage
1350 Sunday Drive
Raleigh, NC 27607
919.459.6560


first time home buyer tax credit raleigh nc

August 25, 2009
The $8,000 Tax Credit Breakdown For First Time Buyers
Available until December 1st 2009 with some speculation, although no rumors have been confirmed, that the credit will be extended through 2010.
The Basics –
This program provides a credit worth 10% of the purchase price with a maximum amount of $8,000.
This credit doesn’t have to be repaid.
Only first time home buyers are eligible for this credit. Technically, by IRS standards, a first time buyer hasn’t owned a primary residence for the last three years.
Any home qualifies, whether you’re building or even considering a houseboat!
Am I Eligible?
1. You must have purchased a home this year or plan on finalizing a purchase on a home before December 1st 2009.
2. Are you a first time home buyer? Technically, you’re not a first time buyer if you owned your primary residence in the last three years. If you file jointly with your spouse, neither of you could have owned a primary residence in the last 3 years. But, if it’s an unmarried or joint purchase, the credit is available for the eligible person. A great example of this would be if a home is being purchased jointly by a parent and their son or daughter. Owning a vacation or rental property wont disqualify an applicant.
What are the income limits?
The single taxpayer income limit is $75,000 and for married taxpayers who file jointly, the limit is $150,000. There are some provisions for people with modified adjusted gross income above these two points. We can provide you an estimate of the amount of tax credit you’re eligible if your income falls outside these ranges.
I swear I heard that this credit had to be paid back!
Nope; that tax credit was put forth by Congress in 2008 and because it had to be paid back was really just an interest free loan. This program provides a true tax credit as long as you keep the house for your primary property for no less than three years (if you dont, you’ll have to repay the credit). This credit isn’t a tax deduction; those are discounts subtracted from your income to calculate a decreased tax amount (not the same deal).
Do I have to wait until I file my taxes to get this tax credit?
No! Talk to your tax professional about amending your last tax return.
Can I get this tax credit with a FHA or USDA loan?
Yes – this credit is available for almost any loan product.
For non-US citizens
As long as you’re a non-resident alien and you’ve owned a principal residence in the last three years, then you should be able to claim the tax credit.Do make sure you meet all IRS requirements set forth in the IRS Publication 519.
Overview of the first-time homebuyer credit on the IRS’s website. http://www.irs.gov/newsroom/article/0,,id=204671,00.html
DNJ Mortgage
1350 Sunday Dr
Raleigh NC 27607
919.459.6560
integritylender.com

The $8,000 Tax Credit Breakdown For First Time Buyers

Available until December 1st 2009 with some speculation, although no rumors have been confirmed, that the credit will be extended through 2010.

-The Basics –

  • This program provides a credit worth 10% of the purchase price with a maximum amount of $8,000.Our property
  • This credit doesn’t have to be repaid.
  • Only first time home buyers are eligible for this credit. Technically, by IRS standards, a first time buyer hasn’t owned a primary residence for the last three years.
  • Any home qualifies, whether you’re building or even considering a houseboat!

Am I Eligible?
1. You must have purchased a home this year or plan on finalizing a purchase on a home before December 1st 2009.
2. Are you a first time home buyer? Technically, you’re not a first time buyer if you owned your primary residence in the last three years. If you file jointly with your spouse, neither of you could have owned a primary residence in the last 3 years. But, if it’s an unmarried or joint purchase, the credit is available for the eligible person. A great example of this would be if a home is being purchased jointly by a parent and their son or daughter. Owning a vacation or rental property won’t disqualify an applicant.

What are the income limits?
The single taxpayer income limit is $75,000 and for married taxpayers who file jointly, the limit is $150,000. There are some provisions for people with modified adjusted gross income above these two points. We can provide you an estimate of the amount of tax credit you’re eligible if your income falls outside these ranges.

I swear I heard that this credit had to be paid back!
Nope; that tax credit was put forth by Congress in 2008 and because it had to be paid back was really just an interest free loan. This program provides a true tax credit as long as you keep the house for your primary property for no less than three years (if you don’t, you’ll have to repay the credit). This credit isn’t a tax deduction; those are discounts subtracted from your income to calculate a decreased tax amount (not the same deal).

Do I have to wait until I file my taxes to get this tax credit?
No! Talk to your tax professional about amending your last tax return.

Can I get this tax credit with a FHA or USDA loan?
Yes – this credit is available for almost any loan product.

For non-US citizens
As long as you’re a non-resident alien and you’ve owned a principal residence in the last three years, then you should be able to claim the tax credit.  Do make sure you meet all IRS requirements set forth in the IRS Publication 519.

Overview of the first-time homebuyer credit on the IRS’s website. http://www.irs.gov/newsroom/article/0,,id=204671,00.html

DNJ Mortgage
1350 Sunday Dr
Raleigh NC 27607
919.459.6560