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How to Refinance your Home to 95% and Not Pay Any Mortgage Insurance

September 1st, 2011

Most homeowners today assume they cannot refinance up to say 95% of their property value because they think they do not have enough equity to do so, or if they finance over 80% of their property value the loan will automatically carry mortgage insurance. That is not the case anymore as Fannie Mae is now offering refinancing options up to 95% with No mortgage insurance or No “PMI” for homeowners.  Because of the tremendous opportunity offered by this new program, homeowners can now refinance their mortgage and obtain a interest rate below 4.5%.

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A good sign for the market

A good sign for the housing market is that the lenders and the mortgage insurance companies are offering this program to help homeowners. I think we can look at these new refinancing options as a positive sign for our market place, as banks  and mortgage insurance companies are now willing to offer these loan programs that have been unavailable for the past few years. Let’s hope for more of these positive changes.

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How does this No PMI work?

So how does this NO MI loan work? It is quite simple. A borrower now has two choices with conventional financing up to 95%. They can either take a loan with MI at say 4.375%, or they can take a slightly higher interest rate at 4.5% and “buy out” the MI, the additional yield on the higher rate pays off the MI so now the buyer has a mortgage payment without any MI. Apples to apples, the loan with the slightly higher interest rate will carry a much lower payment than the loan with monthly mortgage insurance.

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I think this is one of the better loan programs out there today, as this program now allows a borrower to either #1, refinance and put additional savings back into their pocket each month, or #2 it works really well on purchase loans too, because it now allows the buyer to purchase extra home with the additional monthly savings. For example, because of the expensive MI payments that come with a FHA loan, a buyer is now able to purchase a $400k home with conventional financing with the same monthly payment as a $350k FHA purchase.


If you are just looking to do a regular refinance and you do NOT need to take advantage of this No PMI loan program, you may be able to qualify for a 3.99% refinance with no points. Check out the savings below. Even if you have a rate at 4.75% you will save $220 a month on a $410k loan, or you can even take a 25 year fixed and still save $13 a month over your current 30 year loan at 4.75%, both of these options will save you over $125k in interest and mortgage payments.


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Let homeowners and buyers know about this program

From the majority of people I talk to, many do not know this new program exists, so make sure to let everyone you know who is interested in refinancing or buying a home know about this program. Most homeowners automatically assume you need 20% equity to be able to refinance to get today’s record low rates, or if they don’t have 20% equity the loan will come with monthly mortgage insurance. This is not the case anymore.

I hope you found this information useful. Feel free to contact me directly at 858-200-9602 if you want to chat about the best way to use this program to meet your refinancing goals. I Look forward to chatting soon.

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How to Purchase a Condo With 95% Conventional Financing and NO PMI

August 25th, 2011

There is good news for buyers. Did you know that buyers can now purchase a condo with 95% conventional financing with NO mortgage insurance “MI”. Instead of just thinking about FHA financing when only a low down payment is available, buyers now have a great opportunity to save additional money each month. In fact, when comparing the monthly payments on a 5% down $350k conventional purchase vs a FHA purchase, a buyer can save an additional $300 a month with the conventional No MI option.


How does this No PMI work?

So how does this NO MI loan work? It is quite simple. A buyer has two choices nowwith conventional financing at 95%, they can take a loan with MI at say 4.375%, or they can take a slightly higher interest rate at 4.625% and “buy out” the MI, the additional yield on the higher rate pays off the MI so now the buyer has a mortgage payment without any MI.


Compare a $350k Conventional NO MI purchase vs $350k FHA

Let’s look at a purchase scenario so you can see the savings that come with this new program. On the example below we have a $350k purchase. On the left side the buyer takes a FHA loan at 4.25% with only a 3.5% down payment, on the right side the buyer takes the 5% down NO MI conventional loan option at 4.5%. The monthly PITI payment for the FHA buyer is $2326, whereas the monthly payment for the buyer who takes the conventional NO MI loan is $2026.

Check out the monthly savings

As you can see below, that is monthly savings of $300 by taking this NO MI option. That is a car payment for many people these days. Or the buyer can turn around and use these savings to purchase a larger home, an extra $300 a month will help the buyer purchase an extra $50k in home.


Check out the savings over the next 10 years

Over the next 10 years the savings really add up. See below in ten years time the buyer with the conventional NO MI loan will save an additional $32,829 over the FHA buyer. If the buyer invests this correctly in some other form of interest bearing account, this amount can grow even larger.

I think this is one of the better loan programs out there today, as this program allows a buyer to either #1, purchase extra home with the additional monthly savings, or #2, puts additional savings back into a buyers pocket. For example, the $300 a month savings from this loan scenario above can go along way to help improve a buyers lifestyle after they purchase a home.

Let buyers know

From the majority of real estate agents and buyers I talk to, many did not know this program exists, so make sure to let everyone you know who is interested in buying a home know about this program. Also for example, if you know someone who wants to purchase in a complex that is not FHA approved, this is now a great option for them to get conventional financing instead. There are of course a few details that a buyer will need to know to qualify for this 95% financing on condos, so feel free to contact me directly for information.

Also, this program is available on refinances too, so if you know someone who thought they had to be at or under 80% loan to value to qualify for a conventional loan and get the best rates, they can now get excellent rates up to 95% with NO MI. Feel free to contact me for details on this program works on refinances too.

I hope you found this information useful. Feel free to contact me directly at 858-200-9602 if you want to chat about the best way to use this program to meet your buying goals. I Look forward to chatting soon.

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Introducing the New 95% Conventional NO PMI Loan for Buyers

August 12th, 2011

Most buyers today assume they have to choose FHA financing to qualify for a low down payment loan option to purchase a home. That is not the case anymore as Fannie Mae is now offering financing up to 95%. Also, there is now an option where you can choose to NOT pay monthly mortgage insurance “MI” on this 95% financing, as you can pay for “Lender Paid MI” instead, which allows you to buy out the mortgage insurance by taking a slightly higher interest rate. Because of the additional monthly savings offered by this No MI program, you can now purchase a $400k home with a 95% conventional loan for the same payment on a $350k FHA purchase.

National Mortgage Professional Magazines Top 25 “Most Connected Mortgage Professionals”

First of all,  I wanted to share some good news, as I was named in the “National Mortgage Professional Magazines top 25 “Most Connected Mortgage Professionals”. It’s always nice to be recognized for your hard work:). You can check out the article here on page 40 of 52 in the July Edition


A good sign for the market

A good sign for the real estate market is that the lenders and the mortgage insurance companies have reintroduced this 95% conventional loan product. I think we can look at these new financing options as a positive sign for our market place, as investors and mortgage insurance companies are now willing to offer these loan programs that have been unavailable for the past few years. Let’s hope for more of these positive changes.

A $400k Conventional Purchase has the same payment as a $350k FHA Purchase

Let’s look at some figures so you can see how you can purchase a $400k home for the same payment as a $350k FHA purchase. For example, here is a scenario I had with a first time buyer last week. This particular buyer wanted to purchase a single family home but they started at $400k in her area. She was told by another lender that she would have to take FHA financing to purchase at this price because she only had a minimum down payment available of 3.5%. She said she was only able to afford a $350k loan payment with FHA, which unfortunately meant she could not look at single family homes.

The buyers agent called me and asked me if there was anything we could do to help the buyer. After looking at her profile, I advised her instead of trying to qualify for 3.5% down FHA financing, she only needs to come in with a little extra down payment (by taking a small loan from her 401k) to be able to qualify for a 5% down conventional loan, and that we could also set her up with the loan option that does not pay monthly mortgage insurance either.

Here is a quick summary of the 2 loan scenarios side by side so you can see that it is the same monthly payment on a FHA $350k purchase as a $400k Conventional purchase with NO MI.

So instead of paying the expensive MI each month with FHA (loan payment on left), instead she would “buy out” the MI by taking a slightly higher interest rate at 4.75% with the 95% conventional loan (loan payment on right) & put the monthly savings towards an extra $50k in purchase price. My buyer was ecstatic because now she was able to afford the payment on a $400k purchase with this loan option!

Also, see above, because she was able to buy the larger $400k home, in 30 years with a 2% annual appreciation rate, she will have accumulated an additional $121,363 in equity or “Net Worth” from the value of this property compared to the $350k home.

A great alternative for buyers who want to purchase single family homes

I have been coming across several buyers recently who have been able to switch their search from condos to single family homes because of this loan option where they can now “buy more home” with conventional financing. We all know buyers who have had to settle to purchase condos because they assume that is all they can afford.

It sure is easier to purchase a single family home instead of a condo these days, as you do not have to deal with HUD’s minimal standards to get FHA condo financing approved (owner occupied ratios, & HOA delinquencies etc).  So it is very important to ensure that a buyer has explored all their financing options available.

Feel free to contact me directly at 858-200-9602 so we can chat about the best way to use this program to meet your specific buying goals. I look forward to chatting soon.

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Buyers Have Down Payment Assistance Programs Available Again

July 28th, 2011

There is now an incredible opportunity for first time home buyers in California who need help coming up with enough funds for a down payment to qualify for a FHA loan to purchase a home. We can now offer a FHA loan with a CHDAP 2nd (California Home buyer’s Down payment Assistance Program) which gives a buyer 3% towards their down payment and closing costs. This program only requires that a buyer has to come up with 1% of their own funds towards the minimum down payment due of 3.5%.

Down payment assistance

CHDAP (California Home buyer’s Down payment Assistance Program) is a down payment and closing cost assistance program offered by CalHFA the State of California Housing Finance Agency. CHDAP gives buyers assistance of up to 3% of the purchase price with no payments for the life of the loan unless you sell or refinance. One of the greatest benefits of this assistance program is that it can be used with almost any other home loan financing, FHA or Fannie Mae conventional.

  • Assistance is 3% of purchase price available to be used for down payment or closing costs.
  • Program limited to first time home buyers (have not owned a primary residence in past 3 years).
  • Home price must not exceed CalHFA sales price limits. (ask for details)
  • Home buyer income must not exceed CalHFA income limits. (ask for details)
  • Payments deferred until the sale or refinance of the first mortgage.
  • LOW interest rates – loan balance accrues simple interest at an incredibly low rate (as of 7/27/11 interest rate is only 3.25%).
  • Only 1% of personal funds required towards the FHA minimum down payment of 3.5%.


Creative Ways to Use CHDAP

Buyer A

Let’s look at a FHA purchase scenario where Buyer A did not have access to a gift, and has taken almost 2 years to save the required 3.5% down payment funds to purchase a home with FHA financing. For this scenario, we are going to assume that all closing costs come out to 3% of the sales price and we have a 3% seller concession.  The “closing costs” are a wash.

  • Purchase price $300k
  • 3.5% down payment needed
  • Personal funds of $10,500 are needed

Also, with an FHA loan, there is an upfront Mortgage Insurance Premium (MIP) of 1% of the loan amount.

  • Loan Amount with 3.5% Down:  $289,500
  • FHA Upfront MIP 1% of loan: $2,895

If you don’t have an extra $2,895 lying around to pay the MIP, you must finance it into your loan amount.  Your monthly payments are now based on this new “total financed” loan amount of $292,395.

For example purposes only – we’re going to have a interest rate 4.5% on a 30 year fixed rate mortgage. Also, for the purposes of this example, we are only going to look at the Principle & Interest payment (PI) – Taxes and insurance will vary depending on your county and do not affect the actual loan payment because you do not finance either of these expenses.

Buyer A’s mortgage payment based on the New Loan is $1492, total personal funds of $10,500 are needed for the down payment, and they have to finance the MIP of 1% which is $2,894.

Buyer B

Here’s where the CHDAP assistance program really triumphs as a money saving tool. In this scenario Buyer B does NOT have the required 3.5% minimum funds needed to purchase a home with FHA financing and only has $4k in the bank. But Buyer B qualifies for the CHDAP deferred payment junior loan of 3% and can get $9k to help them with the down payment and closing costs. * Remember, they do not make payments on this loan unless you sell or refinance the first mortgage. We will use the same $300k purchase scenario as above on a FHA loan, where a minimum 3.5% down payment is needed.

  • Purchase price $300k
  • 3.5% minimum down payment needed ($10,500)
  • Buyer must put 1% ($3k) towards the down payment

The buyer is getting 3% assistance from CHDAP which totals $9k. Here is how the buyer will use the 3% in down payment assistance.

  • Buyer will use 2.5%/$7500 of CHDAP towards the required down payment of $10,500
  • Now only 1% of personal funds are needed ($3k)
  • Buyer will use the remainder of the CHDAP loan of 1% and apply it towards the FHA 1% MIP

Buyer B’s new principle and interest mortgage payment is $1466 (which is $26 less a month) because they did not have to finance the MIP, and total personal funds of only $3,000 were needed for the down payment.

* FYI Buyer can also use part of the CHDAP funds to buy down the interest rate, so this is another creative option to save even more money.

In summary

Because of the down payment assistance program of 3%, buyer B did not have to wait to save enough funds (full 3.5%) to purchase as they only had to bring in $3k (or 1%) to close, they also ended up with a lower monthly payment, and they did not have to finance the FHA upfront fee MIP fee of 1%. Unlike Buyer A who had to save for a few years to bring in $10,500 to meet the minimum FHA down payment requirement of 3.5%, and had to finance the 1% MIP fee into the loan and also had a higher monthly payment.



A great opportunity to buy

This program presents a great opportunity for first time buyers, who until now assumed they need to have their full down payment of 3.5% (for FHA financing) saved up to be able to purchase their first home. Let your friends, family members and co workers know that this program is now available. Also, this example above is just one way to use CHDAP to help buyers purchase their first home. Feel free to contact me directly at 858-200-9602 so we can verify if you qualify for this program, and to chat about the best way to use this program to meet your specific buying goals. I look forward to chatting soon.


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Buyers Have Down Payment Assistance Programs Available Again

July 27th, 2011

There is now an incredible opportunity for first time home buyers in California. If you work with first time buyers and they need help coming up with enough funds for a down payment to qualify for a FHA loan, the good news is that there are now down payment assistance programs available. For example, we can now offer a FHA loan with a CHDAP 2nd (California Home buyer’s Down payment Assistance Program) which gives a buyer 3% towards their down payment and closing costs. This program only requires a buyer to come up with 1% of their own funds towards the minimum down payment due of 3.5%.

Down payment assistance

CHDAP (California Home buyer’s Down payment Assistance Program) is a down payment and closing cost assistance program offered by CalHFA the State of California Housing Finance Agency. CHDAP gives buyers assistance of up to 3% of the purchase price with no payments for the life of the loan unless you sell or refinance. One of the greatest benefits of this assistance program is that it can be used with almost any other home loan financing, FHA or Fannie Mae conventional.

  • Assistance is 3% of purchase price available to be used for down payment or closing costs.
  • Program limited to first time home buyers (have not owned a primary residence in past 3 years).
  • Home price must not exceed CalHFA sales price limits. (ask for details)
  • Home buyer income must not exceed CalHFA income limits. (ask for details)
  • Payments deferred until the sale or refinance of the first mortgage.
  • LOW interest rates – loan balance accrues simple interest at an incredibly low rate (as of 7/27/11 interest rate is only 3.25%).
  • Only 1% of personal funds required towards the FHA minimum down payment of 3.5%.


Creative Ways to Use CHDAP

Buyer A

Let’s look at a FHA purchase scenario where Buyer A did not have access to a gift, and has taken almost 2 years to save the required 3.5% down payment funds to purchase a home with FHA financing. For this scenario, we are going to assume that all closing costs come out to 3% of the sales price and we have a 3% seller concession.  The “closing costs” are a wash.

  • Purchase price $300k
  • 3.5% down payment needed
  • Personal funds of $10,500 are needed

Also, with an FHA loan, there is an upfront Mortgage Insurance Premium (MIP) of 1% of the loan amount.

  • Loan Amount with 3.5% Down:  $289,500
  • FHA Upfront MIP 1% of loan: $2,895

If you don’t have an extra $2,895 lying around to pay the MIP, you must finance it into your loan amount.  Your monthly payments are now based on this new “total financed” loan amount of $292,395.

For example purposes only – we’re going to have a interest rate 4.5% on a 30 year fixed rate mortgage. Also, for the purposes of this example, we are only going to look at the Principle & Interest payment (PI) – Taxes and insurance will vary depending on your county and do not affect the actual loan payment because you do not finance either of these expenses.

Buyer A’s mortgage payment based on the New Loan is $1492, total personal funds of $10,500 are needed for the down payment, and they have to finance the MIP of 1% which is $2,894.

Buyer B

Here’s where the CHDAP assistance program really triumphs as a money saving tool. In this scenario Buyer B does NOT have the required 3.5% minimum funds needed to purchase a home with FHA financing and only has $4k in the bank. But Buyer B qualifies for the CHDAP deferred payment junior loan of 3% and can get $9k to help them with the down payment and closing costs. * Remember, they do not make payments on this loan unless you sell or refinance the first mortgage. We will use the same $300k purchase scenario as above on a FHA loan, where a minimum 3.5% down payment is needed.

  • Purchase price $300k
  • 3.5% minimum down payment needed ($10,500)
  • Buyer must put 1% ($3k) towards the down payment

The buyer is getting 3% assistance from CHDAP which totals $9k. Here is how the buyer will use the 3% in down payment assistance.

  • Buyer will use 2.5%/$7500 of CHDAP towards the required down payment of $10,500
  • Now only 1% of personal funds are needed ($3k)
  • Buyer will use the remainder of the CHDAP loan of 1% and apply it towards the FHA 1% MIP

Buyer B’s new principle and interest mortgage payment is $1466 (which is $26 less a month) because they did not have to finance the MIP, and total personal funds of only $3,000 were needed for the down payment.

* FYI Buyer can also use part of the CHDAP funds to buy down the interest rate, so this is another creative option to save even more money.

In summary

Because of the down payment assistance program of 3%, buyer B did not have to wait to save enough funds to purchase as he only had to bring in $3k to close, he also ended up with a lower monthly payment, and he did not have to finance the FHA upfront fee MIP fee of 1%. Unlike Buyer A who had to save for a few years to bring in $10,500 to meet the minimum FHA down payment requirement of 3.5%, and had to finance the 1% MIP fee into the loan and also had a higher monthly payment.



A great marketing opportunity

This program presents a great opportunity to do a marketing campaign to get some new buyers in the door. I would go through your past list of clients and see who did not have enough funds to purchase a home and let them know this program is now available. Also send out a marketing campaign on this program to your database of clients, friends and family via email and facebook, and let them know this program is available.

This example above is just one way to use CHDAP to help your clients buy their first home. Feel free to contact me directly at 858-200-9602 so we can chat about the best way to use this program to meet a clients specific buying goals.  I look forward to chatting soon.


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Buyers Lose 10% in Purchasing Power When Rates Increase by Just 1%

July 15th, 2011

Did you know that buyers lose 10% in purchasing power when interest rates increase by just 1%? With rates jumping from between 4.375% and 5% in just over the past few months, it might be fair to say that we may have hit bottom in the housing market when factoring in what the overall cost is to buy a home. As rising interest rates will eat away any savings buyers could get from waiting for prices to dip again, eventually a buyer needs to make a decision about what is most important to them, either it is their monthly payment or “finding the bottom of the market in terms of price”.

The Impact of rising rates on affordability

Here is a great chart below to share with buyers that shows as rates go up a buyer loses purchasing power.  As you can see, with every 1% increase in rates, the buyer loses 10% in affordability. Let’s say someone was shopping in the $400k range but rates increased suddenly by 1%, unfortunately that same buyer will now only afford a $360k price range to keep the same monthly mortgage payment.

The impact of rising rates on buyers approvals

Unfortunately when rates start rising again, this is going to affect a buyer’s purchasing power and monthly mortgage budget. So it is going to be very important that buyers know if they can still qualify and can afford higher rates in their budget. For example, a pre approval that the buyer has had for 3-6 months putting in offers at 4.5% that stretched their budget, might be unaffordable now because rates are at 5%. For example, on a $400k loan the payment increases $121 a month when the rate jumps from 4.5% to 5%, this is a lot for a family of 4.

Higher rates will also affect any current purchase offers or loan approvals that buyers may have. So for someone that was shopping in the $400k range a month ago and the rate was 4.5%, that same monthly payment will only get a home for $380k now with rates at 5%. Remember also, lenders have been tightening their qualifying ratios recently and are constantly changing their rules too, so double check to make sure any increase in rates/payments do not disqualify a buyer from a certain price range either.

Cost vs price. What is the difference?

Buyers have a tendency to look at just the PRICE of the house instead of the overall COST to buy the home. The cost is actually more important. So what is the difference between cost vs price and why is this so important for a buyer to understand? Cost is what a buyer will pay for a home overall, including financing costs. Price is just the actual price tag the buyer will pay the seller for the home not including any financing costs.

This is why it is so important for buyers to understand that rising rates have a tremendous impact on a buyer’s overall cost and monthly payment. We all know there are some home buyers still standing on the sidelines waiting for the prices of real estate to hit rock bottom. These are the buyers that need to understand cost vs price, once they understand this dynamic, then perhaps they will realize that now is a great time to buy a home and may make the decision to buy a home a lot sooner.

Charting mortgage rates over the past 40 years

Here is a great chart below to share with buyers that will give them a little history lesson on interest rates. The average interest rate over the past 40 years has been 9%! Considering the heightened volatility that exists in the financial markets today, as we have the debt ceiling fiasco in Washington, the continued debt crisis in Europe and now talk of more Federal Stimulus aka Quantitative Easing part 3 from the Feds, buyers are taking a huge gamble in assuming that interest rates will remain this low. Because honestly no one really knows where they will be in 6 months due to the unprecedented circumstances we have in today’s financial markets.


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But for anyone still looking at buying a home, you can let them know they can still qualify for the lowest rates in 40 years.

Why now is the best time to buy

Everyone wants the best possible value whenever they purchase anything. When buying real estate, the best value is not determined by price alone. Value is determined by price and overall financing costs. Buyers most take both into consideration when making the decision to purchase a home.

If you know anyone that is considering the purchase of a home but believes that waiting is the prudent thing to do because prices may continue to soften, make sure you keep an eye on interest rates for them and have conversations regarding increasing payments and if these rising payments still fit into their mortgage budget.

Because of low interest rates and low home prices, I believe that there has never been a better time to buy a home than today, because rising interest rates will only continue to eat away any savings they could get from waiting for prices to dip again. If you have any questions about any of the information above or you need help getting any buyers pre approved, please feel free to contact me directly at 858-200-9602. I look forward to chatting soon.


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Why Fannie Mae’s HomePath Purchase is a Great Option For Buyers

June 29th, 2011

There are many reasons for buyers to look at a Fannie Mae HomePath purchase in this market. For example, on a HomePath purchase there is only a 3% down payment requirement for first time buyers, only 15% for investors, there is no appraisal required and there is no mortgage insurance on any of their loans. As Fannie Mae just acquired over 53k foreclosed properties in the first quarter, up from 46k in the previous quarter, it’s no surprise that they just announced that they are extending their incentives for buyers and agents to purchase HomePath properties through October 31st, 2011, as a way to get these properties sold as quickly as possible (see details below).

What is HomePath and what are the benefits to buyers

Fannie Mae at the end of last month had over 153k foreclosed properties on its books, these are all listed under HomePath, Fannie Mae’s REO division. HomePath allows a borrower to purchase these properties with a low down payment, flexible mortgage terms, no lender-requested appraisal and no mortgage insurance. Here are the main benefits for a HomePath buyer.

  • Low down payment and flexible mortgage terms (fixed–rate, adjustable rate).
  • Down payment (at least 3%) can be funded by the borrower’s own savings; a gift; a grant; or a loan from a nonprofit organization, state or local government, or employer.
  • No lender-requested appraisal.
  • No mortgage insurance.
  • Only 15% down payment for investment properties.
  • Only 660 credit scores required.
  • Many condo project requirements are waived.

New HomePath Incentives for buyers and agents

Fannie Mae just announced last week that they are extending their special offer of up to 3.5% in closing cost assistance for buyers and a $1,200 bonus for agents on HomePath properties sold through Oct 31st, 2011. Here are the eligibility details to qualify for these incentives.

  • Buyers must use home as their primary residence.
  • Initial offers must be submitted on/after June 14.
  • Buyers must use home as their primary residence.
  • Buyers are required to sign an Owner Occupant Certification Rider to the Purchase Addendum with all initial offer submissions.
  • Sale must close on/before October 31.
  • Other restrictions apply. For more information about the offer, including the terms and conditions, visit the Special Offers tab on www.HomePath.com

Search www.HomePath.com for the most updated list of properties. And remember, all owner occupant buyers enjoy a 15-day “first look” preview of all HomePath properties — without competition from investors — through Fannie Mae’s “FirstLook” period.

Comparing a HomePath Purchase vs FHA for buyers

Check out this Homepath vs FHA $300k purchase scenario below that shows the benefits for the HomePath buyer over the FHA buyer. On the left column we have the FHA buyer who has to put down a minimum down payment of 3.5%, vs the HomePath buyer on the right who only has to put down 3%.



As you can see above, even though the FHA buyer has a lower interest rate, the HomePath buyer has an overall lower monthly payment and will save an extra $257 a month because there is NO mortgage insurance (MI) on their loan. Also, as the HomePath buyer is getting their closing costs paid for by Fannie Mae (see incentive above) their total cash to close is just $9k, vs the cash to close of $20,895 due from the FHA buyer if they don’t get their closing costs paid for.

Also, the longer term savings are also significant for the HomePath buyer. See below, over the next 10 years on this particular scenario, the HomePath buyer will save $33,544 vs the FHA buyer.

Getting signed up with HomePath

Here is a link to the HomePath site for additional information on how to sign up for HomePath alerts and available property info etc. For information on applying to become a Fannie Mae listing broker visit the Doing Business with Fannie Mae page.

We are an approved HomePath Lender

We are an approved Homepath lender and we have been helping many buyers qualify for the HomePath loan program recently, so if you ever have any HomePath questions or scenarios, please feel free to contact me directly at 858-200-9602. I look forward to chatting soon.

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Posted in Why Fannie Mae's HomePath Purchase is a Great Option For Buyers | No Comments »

The New 25 Year Mortgage is Now Available

June 14th, 2011

The 25 year fixed mortgage is a new loan product that is now being offered by some lenders, but not a lot of people know it exists. With rates now back at record lows again, the 25 year mortgage is helping provide buyers and homeowners with an opportunity to payoff their home 5 years earlier and become mortgage free faster just by using the same payment they already have on a 30 year mortgage! This is also a great option for new buyers in this market too, as an alternative to a typical 30 year mortgage.

Why a 25 Year Loan is a great option

Check out this scenario below. We have a homeowner on the left column who currently has a 30 year loan at 5% and his monthly payment is $1610, but he is able to refinance into 4.375% on a “25 year loan”" and his new monthly payment is only $1646, only $36 more a month!

Check out the “Total Cost Analysis” below that compares how much the borrower will pay back in interest and mortgage payments on each loan scenario. The 25 year loan will save the homeowner over $85,882 in interest & mortgage payments compared to the 30 year mortgage, and of course will now allow them to be mortgage free 5 years earlier, all for having almost the same monthly payment they have right now.

Building equity faster

Now check out  this section below which shows just how much faster the 25 year loan builds equity. On year 10 the loan balance on the 30 year loan (to the left) is $244,026, whereas the loan balance on the 25 year loan is at $217,010. Now check out the balance on the loan at year 25 on the 30 year mortgage, it still has a remaining balance of $85,340, whereas the 25 year loan has a zero balance and is now paid off!

People now want to become debt free faster

If there is one thing this great recession has taught, it is that people now look at debt and especially mortgage debt in a much different light compared to earlier in the last decade, when leveraging debt was more popular. These record low rates we are getting again are a gift, because most people thought the days of rates dropping below 4.5% were gone forever once they started spiking up over 5% in February this year.

This new 25 year loan is presenting homeowners and buyers with another opportunity to reassess their mortgage and retirement goals and align a mortgage plan that fits with these goals. As ultimately everyone wants to get rid of their mortgage as fast as possible in the most affordable manner.

50% of US Households have a rate over 5.75%

Here is an interesting fact, a recent Wall St Journal article noted that 50% of US households have an interest rate over 5.75% on a 30 year fixed loan. By converting their loan to a 25 year fixed at today’s record rates, homeowners will not only lower their monthly payment but they will immediately take off 5 years off their loan too. This may also put some people on the path to an earlier retirement too if they know they can become mortgage free faster.

If you or anyone else you know is interested in looking at this 25 year loan option, please feel free to contact me directly at 858-200-9602.  I look forward to chatting soon.

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5 Tips That Will Ensure a Buyers Purchase Offer is Accepted

June 1st, 2011

It sure seems likes the lenders are changing their rules now almost every week and making the loan process even more difficult for buyers. Because of all these new changes, many sellers are being very skeptical that a buyer will be able to get their financing approved and close escrow on their transaction, thus they are being very picky about whose offer they will accept into contract. Here are 5 great tips to help a buyer stand out from the crowd and ensure their purchase offer will get accepted.

1. Make sure the pre-approval letter advises what type of financing buyer is getting

It is a good idea to provide a pre approval letter that acknowledges what type of financing the buyer is getting and how much of a down payment they are using. If the buyer is using conventional financing and is putting down 20% or 30% as a down payment, make sure to write this into the pre-approval letter, as this will always place ahead of a VA purchase offer that has no down payment requirements, or a FHA buyer that has a 3.5% down payment. If the buyer is submitting a FHA or a VA offer, make sure to follow steps 2 through 5 to strengthen the offer.

2. Always Provide a DU Underwriting approval with the offer

It is important that all buyers have an offer that is accompanied by a “DU” underwriting approval. A DU approval is when the buyers application has been ran through Fannie Mae’s, FHA’s or VA’s automated DU (Desktop Underwriter) and will be issued with either an approval or a denial.

An offer letter accompanied by a DU underwriting approval will always place ahead of an offer just accompanied by a basic pre-approval letter, as a DU underwriting approval shows the most important information needed on a buyers profile to give the seller a good idea of the strength of the buyer. For example it lists the credit scores, debt ratios, down payment and the type of loan they are approved for.

Also it is important to note that the DU underwriting approval must match up with the loan program the offer is submitted for (see # 1 above), it is not uncommon for example, to have a buyer who has a FHA DU approval but is submitting an offer for conventional financing.

3. Provide proof of down payment funds

Always provide proof of where the down payment funds are coming from for the buyer. Make sure to send over recent bank statements or statements from any account they are using for the down payment. Make sure there are enough funds in the statements you are providing to match the % of down payment the offer is for. As many times statements are provided but there are not enough funds to cover a 20% down payment and 2 months reserves for example. Or if the buyers are going FHA and are getting a gift from the parents, provide a copy of the gift letter from the parents.

4. Provide a copy of the buyers credit report (first page only)

Very few offers come across with proof of the buyers credit scores, so this is a good way to stand out. If the buyers credit scores are very good, list them on the pre approval letter and point this out on the offer. Also provide a copy of the first page of the buyers credit report that lists the 3 credit bureaus and the 3 fico scores, make sure to black out social security numbers for privacy issues. This is a great way to provide full transparency on your buyers offer, so the seller can see the credit strength of the buyers profile.

5. Make sure everything on the buyers offer is current

Because lenders have been making a lot of changes to their underwriting guidelines recently, the buyer may not qualify for the particular loan program that they got approved for a few months ago. So a good tip for a buyer that has been putting in offers for a few months now on various properties, is to make sure all the dates on the buyers approval letter, DU approval and all funds provided are current and within the last 30 days at least.

It is not uncommon these days for a buyer to be submitting offers for up to 3-4 months, so sometimes the pre approval letter or the DU underwriting approval has a date that is a few months old. Because the buyers credit scores might have dropped and they may not qualify for a particular loan program anymore, it is best to make sure that all the dates on any approvals are all very current.

In Summary

There is no doubt that the overly stringent lenders are making everyone and especially sellers a little more skeptical these days about who will be able to close escrow, so using these tips above will only strengthen a buyers offer and give them every opportunity of getting into the home they want, which will ultimately help everyone involved in the transaction meet their goals. Transparency is the key to a successful purchase offer these days, so the more work that is done upfront to ensure a buyers financial profile is solid, the better the chances of getting the seller to say yes to your offer.

If you have any questions about any of these scenarios above, please do not hesitate to contact me directly at 858-200-9602.

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5 FHA Rules That Buyers & Sellers Need to Know About Flipped Properties

May 18th, 2011

Buying and selling flipped properties can be a real pain in this market. For example, did you know that lenders require a 2nd appraisal on flipped properties where the seller is making more than 20% within 90 days and is selling to a FHA buyer, and the buyer is not allowed to pay for this 2nd appraisal? Last month over 26% of all homes purchased in California came from investors, 31% were all cash buyers, and the median price paid by these investors was $198k. These are the homes that are being flipped and sold to first time buyers usually within a 90 period. As most first time buyers are using FHA financing, understanding the rules that are in place to get FHA financing on flipped properties is essential for success in today’s market place. Here are 5 important rules to follow that will ensure these transactions will close.



FHA Flip Rule Update

First of all here is an update about flipped financing from the FHA. Just recently the FHA announced that they do allow financing on flipped properties within 90 days of resale as long as certain requirements are met. But NOT all FHA lenders are offering financing on flipped properties within 90 days, as some of them are choosing not to fund this type of transaction. As there are only a few lenders that allow financing when the seller has both a net profit of OVER 20% and the property is being resold within 90 days, very strict rules are in place.

We have been funding quite a few of these flipped transactions over the past few months, so here are 5 of the most important rules you need to know to ensure the transaction will close.



5 Important Flip Rules to Follow to Ensure closings

* These rules apply to a property that is being resold within 90 days and there is more than a 20% profit to the seller. *Not all of these rules apply to a flipped property that is being resold that is more than 90 days old.

1. A 2nd Appraisal is required if more than 20% profit

Almost all the lenders I know that are offering FHA financing on flipped properties are requiring a 2nd appraisal if there is more than 20% profit to the seller within 90 days of purchasing the property. The appraisal must clearly address the completed repairs and/or renovation to substantiate the increased value. Also very important, the FHA does not allow the buyer to pay for the 2nd appraisal, yes someone else must pay for the 2nd appraisal fee! So make sure to get this addressed upfront who will pay for this 2nd appraisal fee.

2. A home inspection is required on all flips

A home inspection is required on all flips by the lenders. The inspector must have no interest in the property or relationship with the seller, and must not receive compensation for the inspection for any party other than the borrower. Usually any and all repairs that are listed on the inspection report will be called out by the underwriter to be fixed by the seller. Remember on FHA financing the buyer is not allowed to pay for any repairs, so if there are going to be repairs needed, make sure these are addressed with the seller ahead of time so there are no last minute surprises at funding.

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3. Health & Safety repairs

Any health and safety repairs noted on the inspection reportt, not already called for by the appraisers, will be required to be repaired as a “concurrent with funding” condition, documented with a CIR to include photos.

4. All transactions must be arms-length

All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction. For example, some lenders do not allow the escrow company to be affiliated with the buyer or the seller as this is an identity of interest, otherwise a new escrow will have to be opened up during the transaction. Many times the investor who is selling the property will have an escrow company too, this is not allowed by some lenders, so make sure this is checked up front if there is an affiliation with any two parties on the transaction.

5. A minimum 12-month chain of title is required

A minimum 12-month chain of title will be required on the preliminary title report to determine no pattern of previous flipping activity exists for the subject. If the property has been flipped twice in the past 12 months, it will not qualify for FHA financing.


I hope you found some of these tips above helpful. If you have any questions about a FHA flipped property scenario, please do not hesitate to contact me directly at 858-200-9602 and I would be happy to help,  I look forward to chatting soon.

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