Archive for the 'Mortgage Lending' Category
No Money Down Loans in Littleton???
I received a mail from local mortgage broker in Littleton the other day. She works for KeyBank as a loan officer. She was telling me about a loan program that allows borrowers to get up to 100% loan to value. This is an amazing loan program because most loans today require at least 3.5 percent down just to go FHA. On top of 3.5% down the FHA loan also requires PMI insurance and an up front funding fee of 2.25%. The loan from Read the rest of this entry »
Bank of America Short Sales in Denver Getting Easier???
Ask any agent who has had to deal with Bank of America on a short sale during the past few years and they will have war stories of hours, weeks and months spent in vain trying to get a short sale approved. There is nothing worse than investing hours, advertising dollars and more for months on end only to never make a dime when it goes to foreclosure. I can tell you that I would tell my home buyers to avoid them if I found out they were the lien holder. I am assuming that most of America now knows that a short sale is an attempted sale of a property where the loan is greater than the value of the house. The seller wants to / has to sell and the bank needs to take less than what is owed on the loan. This last week Bank of America took me by surprise and they seem to have finally gotten their act together.
Bank of America now using the equator.com platform for Short Sales
equator.com is a website where banks process thousands of foreclosed properties Read the rest of this entry »
Denver Home Sellers Restricted on Buyer Credits
Beginning this summer, new FHA regulations will reduce allowable seller concessions from 6% to 3% according to a recent announcement from US Department of Housing and Urban Development. Every new regulation that comes out is designed to protect consumers in some way. This new policy will be put in place to restrict inflating property values in order to pad the purchase price with lending fees, closing costs and repairs. The less desirable effect of this policy change will effect Denver home sellers as well as home buyers if there is a need to give a credit to the buyer for home repairs that the seller cannot complete prior to closing.
3% Seller Credit Used to Pay Buyer Closing Costs
FHA loans require that a buyer have 3.5% down payment ( rumored to be increasing to 5% some time this summer ) in order to get an FHA loan. Many home buyers have to save and scrape together just enough for that down payment. Since much of their money goes towards the down payment, they do not have and extra 3% to pay for closing costs, escrows, insurance, pre-paid interest, and appraisals so they ask the seller to contribute that money on their behalf. Many sellers agree to these terms because they understand that the buyer for their home doesn’t have the additional funds and if they did not make those contributions, the buyer would not be able to purchase the home.
And Then Comes the Dreaded Inspection
Imagine that the full 3% seller concession has to be used for closing costs etc. Now imagine that a few items show up on the home inspection that require repairs. On FHA loans, the FHA appraiser also inspects the home to make sure that the property is FHA insurable. Lets pretend that an independent inspector that is hired by the buyer finds repairs that should be made totaling $2,000. In the past, the seller could credit $2,000 to the buyer at closing for the repairs and the buyer did the work after closing. That type of credit will quickly become a thing of the past for many real estate transactions. The transaction would no longer be in compliance with the new policy because seller concessions exceed 3%.
There is Risk for Sellers Who Make Repairs
Many sellers prefer to give buyers a credit at closing for repairs instead of fixing the problem or perceived problem. They prefer that because there is risk in doing the repairs. Have you ever heard of a real estate closing that didn’t happen? In my 17 years of selling real estate I can assure you that financing can fall apart the day of the closing. The sellers may have spent money to complete repairs needed to close the deal only to end up empty handed at the closing. Just to complicate things even more, what if the transaction is a short sale and the seller doesn’t have any money to do the repairs? How would you comply with the policy and get the repairs done?
Creative Solutions Required to Navigate the New FHA Policy
This policy isn’t even in place yet, but the announcement will be made in February. I am looking for ideas from lenders, Realtors and others in the industry to address this issue that will effect real estate transactions in Denver this summer. One idea that I have is to have a check cut to the contractor at closing from the sellers proceeds. The credit to the contractor would be in compliance because it is on the HUD and disclosed to all parties. The buyer would hold on to the check until the work is complete. The only problem that I see is that a red flag will go up for the lender asking what that credit to the contractor is for. One thing to be sure of, expect delays during the next few months while everyone figures out what they can do and not do.
Many Denver Area Homes went under contract during the past month and they all want to close by the end of November to qualify for the First Time Homebuyer $8,000 tax credit. Now the pressure of getting the properties to close is on the Realtor, mortgage lenders, title companies and buyers. Add to the stress the fact that we lose two days at the end of the month for Thanksgiving and Black Friday.
Don’t Wait Until Thanksgiving
Only a turkey would delay in getting on top of the details. You may have 10 days to get your home inspection completed. Order it done asap and get past this hurdle first. That way the lender can order the home appraisal. The appraisers are going to be swamped this month. Watch those dates and deadlines on your real estate contract and get the items done well before the deadline.
Get Your Mortgage Broker What They ask for Right Away
Many closings that get delayed are blamed on banks and underwriters. While from time to time these human beings do mess up real estate deals in Denver, often the borrowers did not get them the information that was needed to complete the loan. So many times borrowers give their broker only part of what is asked for. This November you do not have the luxury of doing things half baked. If you are asked for your last two pay stubs, you need to get them exactly those items on the day they ask for them. Remember that you are the one getting $8,000 for closing in November.
There will be leftovers in December.
Will we see a bunch of Denver homes back on the market December 1st? Will the buyers back out because they aren’t getting the $8,000 credit? Maybe the government will step in and extend and expand the program. I think that most people will still close on the home they are buying even if they miss the end of November deadline. The tax incentive is only one of many reasons why now is a great time to buy a home. People need a place to live and low prices and interest rates are good enough reasons for most people to buy.