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FHA Loan Limits to Drop in 2009

Published
by
Gina Pogol
on November 19, 2008
in Mortgage Refinance
. 0 Comments

If you’re thinking about refinancing from a subprime or ARM to an FHA loan you’d better think fast. FHA loan limits, raised temporarily by the 2008 economic stimulus package, will return to lower amounts in 2009. A HUD letter to lenders explains how the maximum limit of $729,750 in high-cost areas will drop to $625,500. And limits for other locales will drop to 115% of the median sales price but no lower than $271,050. Falling property values have decreased the maximum loan limit in many counties.

HUD has compiled this list of 2009 FHA loan limits but reading it is a challenge. Click to open the file, then use the “find on this page” function (in Internet Explorer) to find your area. The loan limit number starts on the 11th character of the widest column of numbers and codes. For example, Reno Sparks NV will have a loan limit of $325,450 for 2009. In 2008 it was $403,750, a drop of over $75,000!

So if your home is in the spendier part of town or if you live in a high-priced area like San Francisco, consider getting your your refinance done before the end of the year. And keep in mind that FHA will grant you the higher limit only if you lock your mortgage rate by December 10th and close it by year end.

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Loan Officers: The Bad and the Ugly

Published
by
Gina Pogol
on November 14, 2008
in New Home Loan
. 2 Comments

Because the success of your home loan depends so much on the skill and character of your loan officer, it’s critical to avoid bad ones. Bad loan agents are more than just an annoyance–they can cost you serious money, give you ulcers, and ruin your skin. So look for these red flags when shopping for a loan, and avoid the turkeys:

BAD Loan Officers

* Are invisible and unavailable. They’re playing racquetball whenever you call. But no one in their office knows where they are. And of course they don’t call you back.

* Push the same loan on every client. Probably the one that pays the highest commission. Or the only one they’ve bothered to learn about. If you tell your agent you have 20% down, want the lowest rate, and you’re selling your home in five years, she should have a very good explanation for trying to shove you into a 30 year fixed FHA loan.

* Don’t care about your comfort zone. They encourage you to take the highest loan amount you can qualify for, or push you into riskier loans than you want. If you get the feeling that your loan officer and your real estate agent are tag-teaming you, they probably are. Replace them BOTH and find someone you can trust.

* Are lazy. They hand you a stack of paperwork and expect you to be their secretaries. They make weird requests–for the details of your messy divorce, a letter from your CPA about your lingerie parties, or they order you to get your septic tank drained and inspected–all of these can be legitimate underwriting requirements–but don’t bother to explain why.

* Don’t communicate. They change your program or rate without consulting you. They don’t explain the disclosures, instead saying, “It’s all right there on the form.” Or they hide behind jargon, explaining, “Well your rate is higher because the loan is a NINA program and your LTV requires an underwriting exception and the doc draw was delayed so we blew the lock.” Right. Get out of there fast, clean the BS off your shoes and find a lender who will be straight with you.

* Don’t know. When the lending boom was in full swing, suddenly everyone wanted to be a loan officer. The guy on the other side of the table may have been selling used cars or timeshares the week before. And if they don’t know the intricacies of lending–the many products, underwriting guidelines, and required legal disclosures–they can’t do a good job for you, however motivated or nice they may be. Becoming a good loan officer takes time and effort.

Bad loan officers lack the work ethic, experience, or motivation needed to be good loan officers. And while some may learn from their mistakes, get more experience and knowledge, and eventually become good loan officers, you don’t want to be the mistake they learn from, do you?

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Loan Officers: Get the Best, Avoid the Rest

Published
by
Gina Pogol
on November 14, 2008
in Mortgage Refinance
. 2 Comments

Your mortgage loan experience depends largely on the competence of your loan officer. A good one can make the process so smooth you hardly know you’re in escrow. A bad one can wreck your marriage, make all of your hair drop out, and have you falling off bar stools in no time. Okay, maybe that’s a slight exaggeration. But a good loan officer can get you a good loan and make sure you aren’t miserable in the process. A good loan officer is someone you trust and someone whose recommendations you have faith in. Here’s how to find one:

GOOD Loan Officers

* Return your calls. Within an hour in most cases.

* Explain themselves. If they recommend a mortgage loan product, they can tell you why it’s the best one for you. And they know mortgages well enough to explain programs and lending terms in plain English.

* Offer choices. In most cases more than one kind of loan will work for you. A good loan professional offers alternatives, gives you the pros and cons, and helps you make the best choice for your situation.

* Ask questions. The right loan depends on many things. How long do you plan to keep the property? Do you expect increases or decreases in income, such as college graduation or retirement? Does your income fluctuate? Are you a risk-taker or do you want to feel safe even if it costs more? If your agent isn’t asking questions, find one who does.

* Consider your comfort. Would you feel better if you could get your loan documents early and review them at your convenience? Would you prefer your loan officer to attend your loan closing? Do you want detailed explanations? Or do you prefer to “cut to the chase” and limit your involvement? Your loan agent’s work style should reflect your preferences, not his or hers.

* Thinks on his or her feet. Your credit report came in with an unexpected booger. Your business income was less than you thought. The property appraisal came in at a lower value. The lender discontinued the program you wanted. An underwriter has a question about your employment. Most loans get at least one monkey wrench thrown into the process at some point. A good loan agent prepares for these possibilities and solves the problems.

So when you are shopping for your home loan, look at more than rates. Check with several lenders, find two or three with good rates, and speak to their loan agents. See who can explain programs and mortgage terms like APR, and tell you how rates are determined. See who asks you questions about your lifestyle and finances. See who returns calls promptly and makes your part as easy as possible. Once you find the agent with skills and integrity you want, start your application. And stay off those bar stools!

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When a Creditor Sues You

Published
by
Gina Pogol
on November 12, 2008
in Uncategorized
. 3 Comments

The process server just left your office, and now everyone you work with knows you’re getting sued by a creditor. Yikes. How you handle this can make or break your credit rating and your ability to refinance your mortgage or get a new home loan.

Don’t run, don’t hide. If you have the funds to pay the debt, call the creditor and try to negotiate a discounted settlement. Accompany your payment with a letter reiterating that you have an agreement to settle the debt for a reduced amount. The wording of this letter is crucial if you want to make the agreement stick. For larger amounts, paying for an attorney’s advice is a good idea. At minimum, find a sample letter online and use it to get the correct verbiage in there. Use a cashier’s check to pay the debt, and put a conditional or restrictive endorsement on the check, so that by accepting your check (in many states–check the law for yours) the creditor acknowledges that the amount constitutes payment in full.

Creditors don’t like to sue if they can avoid it; lawyers are expensive, and more importantly just being granted a judgment is no guarantee that they will be paid. If you don’t have the money to pay the debt in full, try to negotiate a low payment. Remind the creditor that if you end up in court the judge will probably let you make a lower payment anyway. And most importantly, get a written agreement that the creditor will report your account paid as agreed and not as a charge off or other derogatory category.

If you and your creditor can’t come to an agreement, go to court. By not showing up you throw your rights away. Document your tiny income and horrible debts (that’s why you haven’t paid what you owe in the first place, right?) and express your wish to pay what you owe if only the amount can be made manageable. The judge won’t cut you any breaks on the total amount but chances are you will get a lower payment.

Pay as agreed. A judgment against you is bad anough on your credit report. An unsatisfied judgment is worse. Pay it off and make sure that your report is updated to reflect this.

As with just about everything, the best way to handle credit problems is to hit them early and hit them head on. Contacting creditors as soon as you lose your job or become ill can minimize the effect on your credit rating. Conservative solutions like credit counseling and debt management work best when you haven’t yet totally screwed up. And you are far more likely to qualify for debt consolidation loans and other lifelines when you haven’t been blowing off your bills for months. Even bankruptcy can be filed without tanking your credit score if you do it right. File BEFORE you begin missing payments and you can be respectable again within a year.

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What’s My Home Worth? How Appraisers Value Your Property

Published
by
Gina Pogol
on November 6, 2008
in Home Equity Loan
. 3 Comments

It takes home equity to get a home equity loan, and the worse credit you have, the more equity you need. Your lender wants to know what your home is worth, and the appraiser is going to determine that.

There are three ways to determine what a house is worth.

Cost: This is what it would cost to replicate the home–its replacement cost. The cost method is generally only used when the home is brand new or nearly new and there are no comparable sales to use in determining its worth.

Sales Comparison: This is how your home stacks up compared to similar property recently sold in your neighborhood. Appraisers look at sales nearby, then make adjustments based on your home’s age, condition, quality of construction, lot size, quality of view, square footage, number of rooms, and extras like oversized garages, swimming pools, landscaping, etc. The appraiser quantifies the differences between yours and your neighbors’ property; for example, she may determine that your view is worth $30,0000 more than your neighbor’s, but your smaller yard  nets a $10,000 deduction. When all adjustments are complete, your home’s value is determined.

Income: This method determines the value of the property based on its rental income and expenses, as well as prevailing rents in the area. This method is used when the property is being purchased for use as a rental.

Your appraiser will include all three methods of valuing your property on the appraisal form. He concludes which method is most accurate and best serves the purpose of the appraisal, and states his reasons for drawing that conclusion. If it’s a Fannie Mae Uniform Appraisal Form 1004, the final valuation is presented on the bottom line of page 2.

An appraisal involves a human attempting to form an opinion of how valuable something is and then quantify it (turn subjective impressions into hard numbers). To be sure of getting a fair evaluation, you need to make a good impression.

* Clean it up It doesn’t have to be perfect, but a clean home that smells nice makes a good first impression.

* Fix it up Minor repairs undone hint at major neglect. Don’t open that can of worms whether selling or refinancing.

* Be there. You can answer any questions that come up.

* Brag. If you have made improvements, make sure the appraiser knows about them. Upgrades won’t increase the value by their full cost, but they do count.

* Keep pets and kids out of the way. Let the appraiser do her job without interference.

* Don’t be pushy. It’s the appraiser’s job to determine the home’s value, not yours. Saying that your place “oughtta be worth twice as much as the dump down the street” won’t win you any points.

* Be nice. The appraiser isn’t trying to be rude–measuring, checking out views, and evaluating the property condition is his job. But if you can help–by providing the plans from a recent remodel, for example, it is appreciated.

With a few thousand dollars in home value determining whether you can refinance or not, it makes sense to get the highest value from your appraisal that you can.

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Debt Consolidation: Be a Success, not a Sucker

Published
by
Gina Pogol
on November 3, 2008
in Debt Consolidation
. 1 Comment

A debt consolidation loan is heavy artillery–a serious solution for a serious problem. So you don’t want to waste it by getting silly with the money you save each month. Debt consolidation is like a diet–you can make it part of a healthy lifestyle change and go on to a better life, or you can use it as a quick fix. And as with dieting, a quick fix debt consolidation can make you look and feel good–for about a week. Then you go back to being broke. So here’s how to make your debt consolidation stick:

1. Fess up to your friends. You can’t keep being the generous, big-spending life of the party. Explain that you can’t afford expensive outings for awhile but continue to keep in touch. Join in on less expensive fun; opt for pot luck dinners and rented movies over Chez Expensif. Who knows? Some of your friends may be very happy to spend less–you’re probably not the only one under financial pressures.

2. Get your family on the same page. Kids need to learn financial responsibility too. While they don’t need to know the gory details, kids should understand the short-term need and the importance of pitching in. Enlist their help for money-saving ideas and fun things to do that won’t cost too much. And if they whine you’ll just have to be tough–that’s why you’re the grownup.

3. Track your progress. Your debt will go away if you make your debt consolidation loan payments as agreed and refrain from adding to your debt load. Putting some money into emergency savings can help you make sure that an unexpected repair bill or medical problem doesn’t derail your program. But if something knocks you temporarily off track, don’t give up. Adjust your expectations and then get back to your budget.

4. Look for improvements. As your credit gets better, you may find opportunities to improve on your debt consolidation program. If you can get a lower rate, you can make the same payment go further and pay your debt off faster. Like dieting, debt consolidation isn’t easy to stick to. But when it seems especially hard, imagine yourself out of debt. You are saving for a fabulous vacation. And you and your family will enjoy every minute.

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Fannie Is Getting Smart: Listen to Her

Published
by
Gina Pogol
on October 29, 2008
in New Home Loan
. 0 Comments

Fannie Mae will require homeownership counseling for first-time buyers without solid credit histories or strong loan applications. This is expected to lower the risk of borrowers getting into trouble and ending up in foreclosure. Now, while sub-prime borrowers don’t have to comply with Fannie Mae’s requirements, why wouldn’t you want to do something that could reduce your own risk of mortgage problems?

You can’t just use any old counselor to make it good with Fannie–they have to be accredited. But even if you just do this for yourself, wouldn’t you want a certified expert? You’ll learn things like credit, budgeting for and selecting a home, and getting a mortgage. You also get a personalized evaluation of your financial position and readiness for homeownership, and an analysis of your credit history and current financial situation.

Even if you can’t do it in person. you can get your counseling ove the phone or online.  Click here to use Fannie’s Find a Counselor” search tool, on its Web site. the information can help you make home ownership a success, whether you get a Fannie Mae, FHA, or subprime or alternative mortgage loan.

***

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2.5 Million Served - Foreclosure Prevention Is Working

Published
by
Gina Pogol
on October 28, 2008
in Foreclosure
. 0 Comments

HOPE NOW, the private sector coalition of ownership counselors, mortgage lenders and servicers, and investors has focused its efforts on preventing foreclosures and keeping homeowners in their residences. As of today, the organization reported that nearly 2.5 million homeowners have avoided foreclosure and been able to stay in their homes since July 2007. In addition, cooperative mortgage lenders helped 212,000 homeowners sidestep default or foreclosure in September.

In September, mortgage servicers helped homeowners avoid foreclosure by creating 212,000 loan workouts, which involve modification to the terms, lowering the balance, refinancing arrearages, a combination of all three. Barring an unforeseen life event such as a job loss, death, or illness, all workouts are designed to enable a homeowner to remain in his or her home as long as he or she wishes to do so.

Here’s an example of how a loan modification might make it possible to avoid foreclosure. Miss Jones bought her home for $250,000 with a zero down ARM loan starting at 4%. Her payment was $1,195. Next year, her rate increased to 6% and the payment to $1,491. By year three, she was paying 7.75% and the payment had increased to an unaffordable $1,767. While she paid her balance down about $11,000 in three years, home values dropped too. So Miss Jones had’t enough equity to refinance–yet she could’t afford her payments either. She missed two payments, added about $3,000 to her principal–now she owed more than her home was worth!

Miss Jones was capable of making her mortgage payment when it was $1,491. By getting the lender to cut her balance to $200,000, she could get her payment to 1,475 at her current rate. But very few banks or investors are willing to take a $45,000 hit to avert foreclosure. What else can a lender do to help?

  1. Finance arrearages. The loan can be officially brought to current status with a small second mortgage. At five years and 6% the payment is only $58. And the credit damage stops piling up.
  2. Change the interest rate and term. By granting a new loan with a 40 year term and fixing the ARM at 6% for the next 5 years, Miss Jones gets a more manageable payment of $1,348, whoch added to the $58 second lien means that Miss Jones has a guaranteed manageable payment of $1,406 for the next 5 years. In that time it is likely she will have equity and enjoy more solid financial footing.

Suggesting that your lender write off huge loan balances doesn’t go down well with investors, and it’s harder to get that kind of concession. However, there are many things you can tweak to get a manageable payment and keep your home.

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Foreclosures Create Problems for Tenants

Published
by
Gina Pogol
on October 22, 2008
in Foreclosure
. 2 Comments

The San Jose Mercury-News throws light on a problem in many housing markets. The surge in foreclosures not only hurts those trying to sell homes, it affects renters looking for homes too. Tenants may find themselves in a double bind–the landlords continue to collect their rents but do not make the mortgage payments on the properties. The landlords have the tenant’s security deposits as well. And while legally the deposits belong to the tenants, in foreclosure or bankruptcy proceedings the money may not be returned for a long time, if at all.

So the poor tenants find themselves evicted by the new owners, with no security deposits to give a new landlord. In addition, the explosion of foreclosed properties being rehabbed for sale has left a dearth of homes available for rent. So rents are higher and harder to get, adding insult to injury. In other words, it’s a great time to be a landlord and a lousy time to be a tenant.

How can you prevent this? First, check a property’s status before signing a rental agreement. The landlord checks your background, you should check his. Notices of Default are public filings and the county should make records pertaining to the property and the owner available to you. For example, in Washoe County in Nevada you could go to the County Assessor’s Web site, type in an address, and find out who owns the property. Then, you check the County Clerk’s Web site, type in the name of the owner, and any filings involving the company or individual will show up. Even if the property in question isn’t in default, a slew of filings on other properties should alert you that maybe this person isn’t a good risk. Finally, many court systems allow you to check for legal filings too. In Washoe County you can check District Court cases–enter the person’s name and up come any lawsuits in the system.

 Remember: Your landlords will check you out–you owe it to yourself to return the favor.

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HOPE for Homeowners: Finally, Real Foreclosure Help from HUD

Published
by
Gina Pogol
on October 17, 2008
in Foreclosure
. 4 Comments

List of Lenders Who Are Participating in the HOPE for Homeowners (H4H) Program

HUD officials estimate this program could help about 400,000 homeowners to keep their houses. Today the agency released a still-growing list of lenders voluntarily participating. HUD strongly urges homeowners in trouble to contact the servicing or loss mitigation departments of their lenders as soon as possible.

 If they are unable to reach someone who can help or are uncomfortable dealing with their lenders directly, there is help avaible through approved housing counseling services.

The list will be updated on Fridays. If your lender isn’t on it yet keep checking. And stay in contact with its workout department. If you truly want to keep your home and can afford it (with reasonable modifications) then don’t give up.

 And check out the recent NINJA post for ideas on retrenching and keeping that roof over your head.

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