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Fannie Mae Tightens debt to income Rules for Home Loans in San Diego! Will You Still Qualify? Saturday, October 24th, 2009

Fannie Mae lowers debt to income ratios down to 45%

Fannie Mae has just announced it will be lowering its debt to income (DTI) ratio requirements for all home loans in San Diego from 50% down to 45%. As part of normal business operations, Fannie Mae regularly reviews DU ( Desktop Underwriter) to fine-tune its credit risk assessment based on new data and loan performance information to ensure that credit risk assessment will stay strong moving forward on all future business. These new rules will go into effect as of December 12th on all loan applicants. This is not really a surprise considering recent home loan performances in San Diego, from 2002 until fairly recently debt to income ratios were allowed on most loans up to 60%, this never factored in utility bills, food and insurance etc, so it is easy to see why people did not have too much cash left over at the end of each month to cover all their bills..and the rest they say is history.

Make sure you still qualify!

I feel this is a very important subject that needs to be addressed immediately with all potential homebuyers, as these new stricter qualifying guidelines will prevent a large percentage of outstanding offers in this market from getting approved for financing. If buyers have an offer out there with a 55% debt to income ratio and they are not accepted by December 12th , they will not get financing under these new qualifying guidelines.

A lot of buyers will not qualify!

I would venture to say that at least 30% of most approvals for buyers are in the 45-55% debt to income ratio range. I myself performed an analysis on 28 different clients of mine that have current offers out there, and found that over 30% of these have debt ratios over 45%. I immediately categorized these buyers as “safe” or ”unsafe” so all parties know what expectations need to be met over the next 4-5 weeks.

Why it will be very important to work with a Professional Mortgage Planner!

Fannie Mae did announce that they will allow flexibilities up to 50% debt to income ratios as long as a loan file has strong compensating factors, under current guidelines clients were able to get approvals up to 55% with strong compensating factors. Strong compensating factors to name but a few are, a steady job history, consistent income for the past few years, plenty of liquid assets, solid credit scores etc. Therefore it will be imperative that the proper documentation is  requested and underwritten upfront and accurate information is being verified for all applicants, so they have the best chance to get approved for the maximum loan approval possible.

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Helping buyers create a mortgage plan

Until recently many times you could just throw an applicant against the wall and the loan approval would stick, in fact if they had a pulse from 2002-2006 most people could get a loan. In current times, I think It will also be important to take a very proactive approach with loan applicants and help them restructure some debt and also advise them on ways to pay down their debt, so they can get in the best possible position to qualify for the maximum loan approval. If you need help getting  approved, or if you have any questions regarding these new guidelines, Please do not hesitate to contact me. I look forward to hearing from you soon.

Cheers

Michael

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Home loan San Diego-What are Trigger Leads? Protect your Personal Information Tuesday, August 18th, 2009

After you have applied for your new home loan in San Diego, did you know that the credit bureaus will sell your personal data? Believe it or not, this is actually true. Borrowers who have applied for a home loan in San Diego will be immedietely flagged and sold to the highest bidders, who are looking for “hot leads” or potential homebuyers to call on.

 

For about $35 to $75$ more, your name, address, mortgage or rental history, phone number and fico score range will be sold to to these highest bidders who will call you up blindy and solicit your business. What results is unwanted phone calls and mailings to your home, providing you with offers for a loan that you did not request.

 

At this current time, there is no legislation that exists to stop the credit bureaus from profiting from selling your information. You just have to be aware that you will be receiving quite a few too good to be true offers over the phone and in the mail, with many of them trying to discredit the already established relationship you have with your trusted mortgage advisor or real estate agent.

 Now there is a way that you can remove yourself from these unscrupulous sales tactics that may come your way, and this is what i recommend to all my clients once we have begun the application process. You can ”opt out” of the credit bureau solicitations by going to the website called www.optoutprescreen.com and inputting the required information. For all new homebuyers and exisiting homeowners, this is definitely the easiest way to sidestep this problem immedietely.

 

We understand that buying a home can be an arduous journey with many unknown hurdles along the way, that is why when you apply for your new home loan in San Diego with my company, you can feel safe and secure knowing that you have a professional mortgage planner who has your best interests at heart. For more information on the homebuying process and what other steps you need to take to obtain your new home loan, please visit www.michaeladeery.com or call me directly at 858-200-9602. 

 

Your mortgage planner

 

Michael Deery

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San Diego Home Loan- How Much Money Should you Borrow? Sunday, August 16th, 2009

How much money should I borrow for my new San Diego home loan? While it might be tempting to borrow the amount of money your mortgage lender is willing to give you, it is very important to decipher how much you will actually need to borrow  in order to purchase your new home. From the amount you will need for the down payment, the closing costs, for property taxes and the home owners insurance, there are many factors to consider when making probably the largest financial decision you will ever make for your new San Diego home loan.

 

What may surprise you, is that there is no exact formula for accurately calculating the dollar amount you should borrow when purchasing your new home. But many economists agree that you should only borrow more than 2 1/2 to 3 times your annual income, or that 28% to 40% of your income is the maximum amount of debt that you should ever take on for a mortgage.

Now while these calculation insights may help you in your thinking of the overall loan process, i believe meeting with a professional mortgage planner and getting properly pre-approved for your loan is really the only way to know exactly the amount of money you really can afford and can qualify for. By getting properly approved, you not only improve the odds of finding the perfect home, but you now also become a “cash buyer” that increases your bargaining position imensely.

 

As a professional mortgage planner, i see my role much differently than a typical loan officer. Not only is my job to match your profile with the best mortgage available, it is also my role to make sure that this is the most responsible loan product for you as well that suits your goals and needs. That is why we have our detailed mortgage concierge program, that will go over in detail your goals and plans for the next 10-20 years.

 

I hope you now are more aware of the amount of money you may need to borrow for your new San Diego home loan. Some lenders will offer you the maximum amount of money that you may qualify for, whether you actually need the whole amount or not. This is why it is very important that you sit down with a professional mortgage planner that you can trust, who will help you decipher the amount you can afford for your new purchase. For more information on how to purchase a home correctly and avoid the mistakes that a lot of first time buyers make, Please visit http://www.michaeladeery.com/index.php?option=com_user&task=links&id=39. My next posting will go over the process of “how purchase loans are made”.

 

Your mortgage planner

 

Michael deery

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Conventional loans Sunday, August 16th, 2009

 

A conventional loan is any mortgage which is not guaranteed or insured by the federal government. Conventional loans were the first traditional mortgage loans made by local lenders. The loans were held in the lender’s investment portfolio until they were either paid in full or foreclosed upon.

 

Although it enabled the borrower to build a business relationship with the lender, this practice was generally not in the lender’s best financial interest. When rates rose, lenders found themselves in the position of receiving below-market interest on their loans, in addition to not being able to recycle the funds to lend to other borrowers.  

 

Conventional loans are “conforming” if they are generally $417,000 or less for a single-family home. Conforming loan limits can be higher in pricier regions of the country. For example, in such states as Alaska and Hawaii, it’s $625,500.

 

There are also established guidelines for borrower credit scores, income requirements and minimum down payments. For example, most conventional loans require somewhere between 5 percent and 20 percent down.

 

Right now those guidelines are changing frequently but they should have at least a 620 credit score. Anything below a 740 credit score and they (lenders) are going to start adding fees which can be quite sizable, in the several-percent range, as borrowers’ credit scores drop compared to loan to value.

 

Conventional loans can be conforming or nonconforming. Loans above the lending limits set by Fannie Mae and Freddie Mac are called nonconforming or jumbo loans.

 

Most conventional mortgages have either fixed or adjustable interest rates. Typical fixed interest rate loans have a term of 15 or 30 years. A shorter-term loan usually results in a lower interest rate. Adjustable-rate mortgages, or ARMs, fluctuate in relation to the rate of a standard financial index, such as the LIBOR. Monthly payments can go up or down accordingly.

 

Cost: Origination fees, down payments, mortgage insurance, points and appraisal fees can mean the borrower has to show up at closing with a sizable sum of money out-of-pocket, or be prepared to roll over some of these costs into their mortgage amount, which may result in a higher loan rate.

 

Pros: Conventional mortgages generally pose fewer bureaucratic hurdles than FHA or VA mortgages, which may take longer to process because of the red tape. And because these mortgages generally require higher down payments than the others, home equity can build up faster.

 

Cons: You’ll need excellent credit to qualify for the best interest rates. Also, many lenders require higher down payments than for government-backed loans. In declining markets such as this one, borrowers may only qualify for 90 percent loan-to-value and have to come up with the rest out of pocket. Some lenders may require as much as 20 percent down, particularly for condominiums in markets where it’s difficult to get mortgage insurance.

 

Who they’re good for: Conventional loans are ideal for borrowers with excellent credit who can afford a down payment of 5 percent or more.

 

 

 

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