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WASHINGTON – Aug. 1, 2017 – Fannie Mae, the large quasi-government agency that sets the guidelines for lenders selling their home loans on the secondary mortgage market, is adopting some new procedures that should make it easier for many borrowers with student debt, and those who cosigned for them, qualify for a home loan. Large student debt is one of the barriers for many young people trying to qualify for a mortgage.

Beginning immediately, Fannie Mae is expanding cash-out refinances that let borrowers use the lower interest rate equity in their home to pay off higher interest rate student debt. The refi program should help not just students who borrowed money for themselves, but also parents who cosigned for them. (Private student loans made by banks and other lenders typically require cosigners.)

While the cash-out refi program will enable many borrowers to trade low interest mortgage debt for higher interest student loans, the program does carry some risk. Student loans are unsecured while mortgages are secured by the home. If the borrower runs into financial difficulty, the home could be at risk.

Also, federal student loans come with protections like flexible repayment options and payment deferment if the borrower runs into financial trouble. Those protections end if the debt is refinanced into a mortgage. Private student loans, however, do not usually have those protections.

Another change allows borrowers applying for a mortgage to exclude debt being paid by others, such as credit cards and student loans being paid by parents or employers, from their application. That change will help give these borrowers a better debt-to-income ratio, some important criteria in a mortgage application, improving their chances of qualifying for a mortgage.

A third change will help borrowers with student loans on a flexible payment plan, which tie monthly payments to income. Previously, Fannie Mae required lenders to use higher monthly loan payments rather than borrowers’ lower flexible payments in determining debt-to-income. Now, lenders can use the lower payments which should help more borrowers qualify for a mortgage.

Many millions of student borrowers are on flexible payment plans. Hopefully, all of these changes will make it easier for young people to get into the housing market.

Copyright © 2017 The Enterprise, Linda Goodspeed. Goodspeed is a long-time real estate writer and author of In and Out of Darkness.

http://www.floridarealtors.org/NewsAndEvents/

Many first-time home buyers receive down payment assistance from a family member or close friend, but they may not realize there are specific guidelines they must follow when they take money from others for a home purchase.

Read more: Help Clients Get Smarter About Ownership

First off, the down payment must be considered a gift. If it’s considered a loan, the lender must then factor that into the mortgage approval amount, and your buyers may then qualify for less than they may have needed to.

Your buyers will need a gift letter from the person or persons who gave them the money. The person who gifted your buyer the money will need to state on paper that he or she does not plan on asking for the money back in return and that it is, indeed, a gift.

“The gift letter is very serious,” says Casey Fleming, mortgage adviser and author of “The Loan Guide: How to Get the Best Possible Mortgage.” “While it is doubtful that a lender would ever audit a file after the fact to see if the recipient is paying the donor back, if the transaction goes bad, you might very well find yourself with a subpoena in your hand.” Remember, you cannot lie on a mortgage application. It’s a felony.

The gifter may also be required to provide bank statements, possibly even up to two months of statements from their account.

Your buyers also likely will want to get the down payment in advance during the early planning stages of their house hunt. That could also help save them from possible delays later on.

“If the funds are ‘seasoned’ — meaning that they’ve been in the account long enough so that the last two bank statements don’t show the deposit — the gift does not have to be addressed,” Fleming says.

Also, there is a limit to how much your buyer can be gifted tax-free. Any gift of $14,000 and up will face a tax bill, under current rules.

That said, “it is $14,000 per year per donor, so a couple could give $28,000 ($14,000 from each) to their child,” Fleming says.

Source: “Getting a Down Payment as a Gift? Avoid the Mistakes That Could Mess You Up,” realtor.com® (Nov. 28, 2016)

 

With inventory below historic numbers and demand still strong, you could be missing out on a great opportunity for your family.

1. Demand Is Strong

The latest Realtors’ Confidence Index from the National Association of Realtors (NAR) shows that buyer demand remains very strong throughout the vast majority of the country. These buyers are ready, willing and able to purchase… and are in the market right now!
Take advantage of the buyer activity currently in the market.

2. There Is Less Competition Now

According to NAR’s latest Existing Home Sales Report, the supply of homes for sale is still under the 6-month supply that is needed for a normal housing market at 4.7-months.
This means, in most areas, there are not enough homes for sale to satisfy the number of buyers in that market. This is good news for home prices. However, additional inventory is about to come to market.
There is a pent-up desire for many homeowners to move, as they were unable to sell over the last few years because of a negative equity situation. Homeowners are now seeing a return to positive equity as real estate values have increased over the last two years. Many of these homes will be coming to the market this fall.
Also, as builders regain confidence in the market, new construction of single-family homes is projected to continue to increase over the next two years, reaching historic levels by 2017. Last month’s new home sales numbers show that many buyers who have not been able to find their dream home within the existing inventory have turned to new construction to fulfill their needs.
The choices buyers have will continue to increase. Don’t wait until all this other inventory of homes comes to market before you sell.

3. The Process Will Be Quicker

Fannie Mae announced that they anticipate an acceleration in home sales that will surpass 2007’s pace. As the market heats up, banks will be inundated with loan inquiries causing closing-time lines to lengthen. Selling now will make the process quicker & simpler.

4. There Will Never Be a Better Time to Move Up

If you are moving up to a larger, more expensive home, consider doing it now. Prices are projected to appreciate by 5.3% over the next year, according to CoreLogic. If you are moving to a higher-priced home, it will wind up costing you more (both in down payment and mortgage payment) if you wait.
According to Freddie Mac’s latest report, you can also lock-in your 30-year housing expense with an interest rate around 3.46% right now. Interest rates are projected to increase moderately over the next 12 months. Even a small increase in rate will have a big impact on your housing cost.

for more info:   http://www.realtor.org/reports/realtors-confidence-index

President Obama Takes Steps to Increase Homeownership

 

Today President Obama announced plans to help increase homeownership in America, and target first time home buyers by lowing the annual cost of the FHA mortgage insurance premiums by 50 basis points.

Residential News » United States Edition | By Miho Favela | January 8, 2015 – See more at: http://www.worldpropertyjournal.com

This announcement is now getting praise by many real estate professionals and organizations.

David H. Stevens, President and CEO of the Mortgage Bankers Association says, “The MBA applauds President Obama and his administration for continuing to look for ways to help first time home buyers, grow the housing market and strengthen the economy. Specifically, MBA is pleased about the decision to make a 50 basis point reduction on the annual FHA MIP, something MBA has called for in the past.  This is a win-win.  It’s good for borrowers and good for FHA, helping the agency stabilize its market share and continue to rebuild the MMI fund.

“Additionally, we were encouraged that President Obama called for GSE reform, which hopefully will spur action on Capitol Hill.  And the coming changes to Fannie and Freddie’s rep and warrant framework that he mentioned should help lessen the high level of uncertainty lenders face and allow them to use the full extent of the GSE credit box to serve more qualified borrowers.”

The Mortgage Bankers Association Chairman Bill Cosgrove further added, “As an independent mortgage banker whose business includes a significant amount of FHA lending, I can attest that the 50 basis point reduction in FHA’s annual premium will have a significantly positive impact for my borrowers and the housing market. Specifically, this will help first time homebuyers by making FHA loans more affordable.  Given the timing, just as we begin the spring home buying season, I think today’s announcement is just what the market needs.

“MBA looks forward to working with the President, as well other policymakers in Washington, to ensure the real estate finance market continues to strengthen so that all consumers have the opportunity to enjoy the dream of homeownership.”

The California Association of Realtors also chimed in on today’s announcement.

“Reducing FHA mortgage insurance premiums will make it easier for hundreds of thousands of home buyers to get a mortgage and provide greater access to homeownership for historically underserved groups and credit worthy families,” said C.A.R. President Chris Kutzkey. “Moreover, this shift in policy will also increase the volume of borrowers using FHA-backed loans, while continuing to contribute to the solvency of FHA’s Mutual Mortgage Insurance (MMI) Fund and making the dream of homeownership a reality for millions more Americans.” – See more at: http://www.worldpropertyjournal.com

When you pay your mortgage, do you know exactly what you’re paying for? As a homeowner, you should,so here is your mortgage decoded and explained: http://bit.ly/1q3lvfZ

PITI: Your Mortgage Payment Explained – realtor.com
As a renter you are used to sending your landlord a monthly payment, which sometimes even includes your utility payments.Once you become a homeowner, your monthly mortgage payment becomes more complicated.Unless you are paying cash for your home, you will have a mortgage payment. There are typically four parts to this monthly mortgage payment, often referred to as PITI:

  • Principal: This is the portion of your payment that goes to pay down the balance that you borrowed. If you opt for a fixed-rate loan, your monthly payment will not change over the loan term, but the makeup of your payment will change. In the early years of your loan, you mostly pay interest, but gradually you will begin to pay more of the principal. For example, in the first month of a 30-year fixed-rate loan of $200,000 at 4.5%, your payment will be $1,014 with $264 toward principal and $750 toward interest. In 20 years, the payment will still be $1,014 each month—but the payment will be shifted to $647 toward principal and $367 toward interest.
  • Interest: The interest you pay is the cost of borrowing money.
  • Taxes: Your lender usually requires an escrow account and will collect one-twelfth of your annual property tax bill in this account with each mortgage payment.
  • Insurance: You will pay one year of homeowners’ insurance premiums at your home settlement as part of your closing costs, and then your lender will collect one-twelfth of your annual insurance premium in this account with each mortgage payment.

If you make a down payment of less than 20%, your mortgage payment may also include mortgage insurance, a fee you pay that protects your lender in case you default on the loan.

While there are sometimes exceptions to the rule, lenders generally require your house payment to be 31% or less than your gross monthly income. So when you are calculating how much you can afford to spend on a home, you should keep that figure in mind.

Other Housing Expenses

If you buy a condominium or a home within a homeowners association (HOA), you will also need to pay association dues. These dues are not part of your mortgage payment but will be considered as part of your debt-to-income ratio. Condo fees are usually collected monthly, and HOA fees can be collected monthly, quarterly or annually.

When you are making up a housing budget, you also need to estimate your utility costs—which you will pay separately from your mortgage. You can ask the sellers of a home you’re interested in for their average utility bills. Don’t forget you may need to pay not only gas and electric bills but also a water bill and possibly a trash removal fee.

As a renter, you’ve been able to call your landlord when an appliance breaks or you have a plumbing leak, but as a homeowner these problems will become yours. You need to budget for maintenance and repairs, but it can be difficult to predict what issues will arise in any particular year.

It also depends on the age and condition of your home. A home inspector can give you an idea of when you might need to replace particular appliances, but you can also keep about 1% of your home value available for emergency home repairs.

Budgeting for homeownership is a key element to maintaining your ability to keep your home and to help it hold onto its value. Making your monthly house payment is the biggest part of the financial commitment—but certainly not the only one.

August 26, 2014  http://www.inman.com   Insights from Real Estate Connect 
Hear what title insurers and settlement services providers are doing to streamline the closing process for homebuyers and sellers from Matt Morris, CEO of Stewart Information Services Corp., and Patrick Stone, president and CEO, Williston Financial Group.
http://bit.ly/VPUulj

How to streamline the closing process for your buyers and sellers | Inman News
Matt Morris, CEO of Stewart Information Services Corp., and Patrick Stone, president and CEO, Williston Financial Group, talk about how to streamline the closing process for homebuyers and sellers.

Residential News » North America Edition | By WPC Staff | May 29, 2014

According to the National Association of Realtors (NAR), pending home sales in the U.S. improved for the second straight month in April. Gains in the Midwest and Northeast offset declines in the West and South.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, increased 0.4 percent to 97.8 in April from 97.4 in March, but is 9.2 percent below April 2013 when it was 107.7.

Thumbnail image for lawrence-yun.jpg
Lawrence Yun, NAR chief economist, expects a gradual uptrend in home sales. “Higher inventory levels are giving buyers more choices, and a slight decline in mortgage interest rates this spring is raising prospective home buyers’ confidence,” he said. “An uptrend in closed sales is expected, although some months will encounter a modest setback.”

Yun projects the 30-year fixed-rate mortgage to trend up and average 5.5 percent next year. “The extent to which higher mortgage interest rates will impact housing affordability and sales depends on income growth, ongoing improvement in the labor market and any change to mortgage underwriting conditions.”

The PHSI in the Northeast increased 0.6 percent to 79.3 in April, but is 12.0 percent below a year ago. In the Midwest the index rose 5.0 percent to 99.2 in April, but is 6.9 percent below April 2013. Pending home sales in the South slipped 0.6 percent to an index of 111.9 in April, and are 6.4 percent below a year ago. The index in the West declined 2.9 percent in April to 88.4, and is 15.0 percent below April 2013.

With sub-par activity in the first quarter, annual existing-home sales are expected to be modestly below the nearly 5.1 million in 2013, but should be close to 5.3 million in 2015. The national median existing-home price is projected to grow between 5 and 6 percent this year, and in the range of 4 to 5 percent in 2015. – See more at: http://www.worldpropertychannel.com/north-america-residential-news/pending-home-sales-april-2014-pending-home-sales-index-phsi-lawrence-yun-median-home-sales-price-real-estate-news

Daily Real Estate News |      Tuesday, November 01, 2011

Rising utility bills can greatly affect a home buyer’s ability to afford a house, sometimes even more so than property taxes or home owner’s insurance. As such, a new bill introduced in the Senate is calling on lenders to start taking into account a home’s energy costs in standard mortgage underwriting—right along with principal, interest, taxes, and home owner’s insurance.The bipartisan bill, SAVE Act (Sensible Accounting to Value Energy) would require the three major mortgage agencies—Fannie Mae, Freddie Mac, and the Federal Housing Administration—to factor energy costs into every loan they insure, guarantee, or buy. To gather estimated costs of energy bills on a home, lenders would gather data from previous utility bills or from an Energy Department survey database.

The bill also calls on the mortgage agencies to instruct appraisers to raise their property valuations when energy efficiency savings on a home can be shown. The higher value could thenbe used by a buyer to justify a higher loan amount if needed.

Source: “Mortgage Lenders Could Soon Take Homes’ Energy Costs into Account,” BostonHerald.com (Oct. 30, 2011)

Interesting. What do you think?

Annalisa Weller, Realtor®, Certified International Property Specialist

(727) 804-6566
AnnalisaWeller1@gmail.com

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