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Real Estate Agents: How the government shut down will affect your business

With: John Meussner, Loan Officer & Mortgage Coach @ Mason-McDuffie Mortgage

So it’s been a day and the government is still shut down.  What exactly does that mean?  I’ll spare the humor and all the things I’d like to say – basically it means that some services are available, and others aren’t.

     While many vital services are still in action and exempt from shutdown, many others have been frozen, and could inadvertently have a pretty poor effect on the housing market, especially if this shutdown lasts for more than a couple days.

Please note: Not all lenders will have the same processes during a shutdown, just like in 2013. Your experience may vary. For example we are good to proceed on USDA Loans as-is during the shutdown.

USDA loans – the USDA loan program is frozen.  Since files are approved by USDA offices directly, there will be no more guarantees or housing loans issued by the USDA offices until the shutdown is over.  This could have a pretty terrible effect for those who live in rural areas or need 100% financing.

VA loans – VA loans should be in full swing, as the program is run based mostly on fees.  Where there might be an issue is when someone needs a VA certificate.  When the government shut down in the 90’s, there was a delay in obtaining certificates, and this will likely be the case again.  New applications will be taken, and files will be underwritten and funded, though.

FHA loans – FHA loans aren’t expected to feel a real impact from the government shutdown so long as the shutdown doesn’t last for a long period of time.  HUD is running at a significantly reduced staff, though, so getting information and paperwork to & from HUD could take a lot longer than usual.  The good news is, loans will still be insured & they will still have staff delegated to underwriting.

Conventional loans – while many are stating the shutdown is ‘no big deal’ for conventional financing, this is simply not the case.  Yes, conventional loans will be applied for, underwritten, approved, and funded.  BUT, over the past few years, as we all know, lenders have taken extra steps to fight fraud, and 2 of these steps are social security verifications and IRS 4506-t transcripts.  These services will be unavailable, and therefore loan files may be put on hold until the shutdown is over.

     Some borrowers will be in more trouble than others – for self-employed borrowers, they may be at the mercy of the shutdown as a work around for 4506 transcripts isn’t currently available.  Also, for any government employees that are in the midst of the loan process it will be extremely difficult to get any verifications of employment done.

   I’d strongly recommend being proactive in making sure none of your clients are surprised by any potential delays – sellers should understand that the shutdown can cause delays at no fault of buyers.  Anyone buying or refinancing should be aware of what type of loan they are getting, and if the potential is there for delays, they should plan accordingly.

     Hopefully in a day or 2 this blog post won’t matter & things will be running smoothly once again between our elected officials, but as a preemptive stragegy, it would be a good idea to know this information.  And for an added benefit you’ll already know what to be ready for if this happens in the future.

–  John Meussner

Phone
(949) 247-7530
Email
jmeussner@masonmac.com

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Mason Mac Supports Veterans in LA County

Mortgage Lender in Southern CA

This past weekend, Wendy Walker, branch manager of Mason Mac’s Newport Beach/Balboa Island branch and her team represented Mason Mac at the Los Angeles VAREP Veterans Housing summit.  VAREP is the Veterans Association of Real Estate Professionals, a HUD-approved non-profit dedicated to increasing sustainable home ownership, financial literacy, VA loan awareness, and economic opportunity for the active-military and veteran communities.

The LA Veterans Housing Summit event focused on education for veterans with a specific focus on the VA loan program and the home buying process.  Included in the summit was

Veterans Mortgage Loans
Mason Mac is here to serve our veterans and guide them through the VA loan process

information on the importance of good credit, available down payment assistance products, and a summary of the local housing market.

Mason Mac proudly offers the VA loan program throughout the greater LA area (and in all of the markets we serve), with a 2017 VA loan limit up to $636,150 (loan limit varies based on county/area) – Veterans may borrow more than the available market loan limit, however the loan limit caps the amount of money that can be borrower with no down payment for most veterans.

At the VAREP Veterans Housing Summit, Wendy’s team spoke with veterans from all branches of the military, and they were the only non-bank lender in attendance.  Being a non-bank lender, Mason Mac specializes in VA loans with no overlays – that means VA guidelines are our guidelines, and our VA loans are underwritten by our in-house staff of underwriters.

Also on site at the VAREP Summit were local real estate agents focused on helping veterans view inventory of homes in the area that were for sale and of interest to the attending veterans.

The VA loan product is one of the most beneficial loan products available in today’s mortgage market.  For many veterans, here is no down payment requirement, and no monthly mortgage insurance.  Perhaps best of all, rates on VA loans are some of the most competitive across the entire spectrum of mortgage products.  Low rates, no monthly PMI, and a streamlined process make the VA loan a premium product for eligible veterans and their families.

 

Mason Mac offers the VA loan product in every state in which we’re licensed, and the Mason Mac team consists of many VA loan experts that know the product inside and out.  Like Wendy and her team at the LA Veterans Housing Summit, your Mason Mac loan officers are there to educate you and guide you through the process of exploring loan programs, finding the best one for you, and using it to get into your dream home – and if you’re a veteran, the whole process can be very easy and not involve a lot of money.

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Should You Use a Local Lender?

If your local lender is our team at Mason Mac, then yes, you should always use the local lender.  We kid, we kid…ok, maybe we’re serious.  There is a perception when shopping for a mortgage that’s often shared by real estate agents, and that is that the local lender is always a better option than a non-local or national lender.  Sometimes, that’s an accurate assumption, but there are many reasons why working with someone other than the lender next door may be your best bet when getting home financing.

 

Is it better to use a local mortgage company? It’s best to use a GOOD mortgage company

The Mortgage Process is Automated

Document storage and transfer within a lender?  All done via computer.  Locking a loan, setting up a loan, and processing the loan from start to finish?  All done on a computer and over the phone.  Everything in the mortgage process is automated, so whether your loan officer and their loan team are next door or several states away, if they’re good, your experience getting the loan will be good, and vice versa.

 

Your local is someone else’s far away

A common refrain amongst people with bad experiences with non-local lenders is “I used someone that wasn’t local and had a terrible experience, so I’ll never do that again!”.  The problem is, whoever that lender was that provided the terrible experience is likely right around the corner from lots of home buyers, home owners, and real estate offices, so that terrible experience is likely the same for them as a “local lender” as it is from afar.

Lenders that provide a less than stellar experience may be far from you, but they’re also someone’s local lender.  Since everything is automated, the experience of getting a loan should be largely the same whether you can walk to your local mortgage office or if they’re 3000 miles away.

 

Exceptions?

The exception when dealing with local VS non-local lenders is face time.  Of course, you can technically “facetime” via iphone, but if you’d like to meet your loan officer face to face and not online, then a local lender would be the better option.  Or if you prefer to handle documentation by physically dropping it off, the local office may be convenient.  That said, if the local lender offers a higher rate or higher fees, are you willing to pay a lot more for that face time?

When going to a local office, chances are you’ll only meet your loan officer, too – probably not your processor, underwriter, or any of the other people that work on your loan file, as they typically work from operations offices.

 

The Verdict

Some people prefer to keep things local, but in today’s mortgage market, it’s largely unnecessary.  With the entire process being automated, phone and internet have brought us to a point where you can expect the same level of service and the same product offerings whether your lender is a block away or located on the other side of the country.  If you know how to shop for a mortgage loan properly, you’ll be able to speak with people near and far to determine who to use to get the right mortgage for you.

 

With offices in several states, on both coasts, and scattered across time zones from east coast to Hawaii, chances are Mason McDuffie has you covered, and in being one of the most tech savvy lenders in today’s market, you’ll notice the same great level of service and receive the same easy mortgage process whether you’re a neighbor to one of our offices or looking for a loan from several states away.

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Buying a Home in a Hurricane

When Disaster Strikes, Know Your Options

 

Unfortunately, Hurricane Harvey has given us a reason to bring up a tough topic.  Disasters are a sad reality of life, and the potential for them is everywhere, whether it be the result of a hurricane, earthquake, tornado, flood, volcano, or something man made.  When disaster strikes, one of the most important things to consider once in a place of safety is what to do for shelter? For those buying a home, is the home under contract still there and in livable condition?  For those with a home destroyed by disaster, where to go?

 

The 203(h) loan can help you rebuild after disaster strikes

First, a note on perspective.  When disaster strikes, people are losing their homes, and sometimes, their lives.  Your lender absolutely, positively knows how important your real estate transaction is, but when something as devastating as a natural disaster takes place, you need to expect delays, as appraisal re-inspections are often required (always in Presidential declared disaster areas), and sometimes needed repairs must be made before you can close on your new home.  While delays and hold ups aren’t ideal, you’re a lucky one if that’s the only problem to come out of a disaster while you’re buying a home.

 

The Disaster Relief Mortgage

 

For those unfortunate ones who have been displaced and had their homes destroyed by a natural disaster, there’s the FHA 203(h) mortgage.  The FHA 203(h) mortgage loan allows those with homes located in an area designated by the President as a disaster area that were destroyed or damaged to finance the purchase or reconstruction of a primary residence.

The biggest perk of the 203(h) program is that it allows a homeowner or renter who lost their home to buy a new one with 0% down payment.  The program also allows up to 6% sellers assistance (closing cost help), so there is no savings or reserve requirement to obtain a loan for a new home.

The 203(h) can be used to borrow up to the local HUD loan limit for FHA loans, and with restrictions, any mortgage obligation on a previously occupied home in the disaster area can be excluded from qualifying, so the 203(h) can be a way for someone affected by disaster to get a truly fresh start.

 

Not every Loan Officer is well versed in the 203(h) loan, and not every lender offers it, but if you have any questions on the program, you can reach out to your Mason Mac loan officer or give us a call and we’ll be happy to answer any and all questions about  the program.

 

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Can I Get a Mortgage With Less Than 20 Percent Down?

What Mortgage Options Are Available With Less Than 20% Down?

One of the biggest mortgage mysteries is how much money is needed as a down payment when purchasing a new home.  This question is often misunderstood, but also involves a lot of misconceptions.  One rumor that won’t seem to die is that to buy a home, you need a large down payment.  Usually 20% is the most common belief.  In reality, that’s about 20% more than most people need to buy a home.

With the resurgence of low- to no-down payment products and programs, getting a mortgage for a new home requires very little in the way of down payment.  Below, you can read about

Buying a home with less than 20% down
MasonMac can help bring you home with low and no down payment loan options

several programs that require little or no down payment, along with some info on when it’s a good idea to have or use a larger down payment, if possible.

 

The VA Loan program

For qualified veterans, the VA loan program allows a veteran and their spouse to purchase a new home with 0% down payment required (in most cases, as long as they have full eligibility and are buying a home using a VA loan under or equal to the VA mortgage limits for their area).

The VA loan has 0% down required, no monthly mortgage insurance, tremendous interest rates, allowances for sellers to pay closing costs, and flexible underwriting requirements for borrowers with less than perfect credit.  You do have to be a qualifying veteran to take advantage of this program, but if you can get a VA loan, it’s one of the best low/no down payment mortgage options available.

 

The USDA Loan program

USDA loans are available to low-moderate income buyers (low-moderate is subjective, but determined by county numbers, so those in high priced markets can have higher income than those in low priced markets), and require 0% down payment for qualified buyers.

USDA loans are available in rural areas (by definition, but many USDA-eligible areas are quite close to metropolitan areas), require $0 down, are flexible with credit requirements, allow sellers to pay closing costs, and have low monthly PMI.  Rates tend to be great on this product, too, so for those who can get a USDA loan, it’s a great product option for buyers without a lot of money for a down payment.

 

The FHA Loan Program

FHA loans generally have a down payment requirement, but it’s far less than 20%.  With just 3.5% down, a buyer can use the FHA loan program to obtain a great fixed rate.  To add to that, FHA allows buyers to use local or national down payment assistance programs to cover the gap between a true $0 down loan and FHAs 3.5% requirement.  There are many products and programs locally and nationally to help buyers with their down payment, and many will cover most or all of the down payment and closing cost requirements.

FHA loans have PMI, but it’s not that expensive, and the low rates and low down payment requirements, even with less than perfect credit, help to offset that cost.  Add in the fact that sellers can contribute to paying closing costs, and FHA becomes one of the best low down payment mortgage options out there.

 

Conventional Loans

This one is probably the biggest mystery, and also where the 20% down misconception comes from.  In order to get a conventional loan without PMI, a buyer needs to either have 20% down or get creative with a first and 2nd mortgage (commonly referred to as an 80-10-10 or 80-15-5).

Conventional loans, though, can be obtained with as little as 3% down.  There are also products for 5% down, 10% down, and 15% down under the conventional loan umbrella.  Conventional loans are priced (both the loan rate and mortgage insurance, or PMI, rates) based on down payment and credit score, so a buyer with great credit and 15% down will see a lower monthly payment than someone with less than good credit and 5% down, but that doesn’t mean a conventional loan isn’t possible to get.  With low fixed rates, PMI that can be cancelled when enough equity accrues, and an easy loan process, conventional loans with less than 20% down can be a great choice for many buyers.

 

Bottom line is that if someone wants to buy a home with less than 20% down, they have a tremendous amount of loan options at their disposal.  Rates, mortgage insurance, and other factors will determine which loan program is best for a buyer, and a great loan officer can share all of the available options, along with their positives and negatives.  So if a down payment is what’s holding you back from owning a home, please reach out to one of our Mason-McDuffie Mortgage professionals.  Chances are, you’ll be able to call yourself a home owner a lot sooner than you think.

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Can a Non-Citizen Get a Mortgage?

If you’re wondering if a non-citizen can get a mortgage in the US, the short answer is yes.  The longer answer is also yes…but with a few additional details and restrictions.

Straight from the Fannie Mae selling guide (the book that lenders use to determine eligibility for conventional loans):

 

“Fannie Mae purchases and securitizes mortgages made to non–U.S. citizens who are lawful

US citizenship is not a requirement to get a loan. Whether a legal resident alien, Visa holder, or foreign national, you have loan options!

permanent or non-permanent residents of the United States under the same terms that are available to U.S. citizens. Fannie Mae does not specify the precise documentation the lender must obtain to verify that a non–U.S. citizen borrower is legally present in the United States.”

 

 

 

With this paragraph in mind, lenders who approve or deny loans based on Fannie Mae guidelines can help a non-citizen get a mortgage so long as they can provide documentation showing they’re legally in the US.  This documentation usually comes in the form of a green card or a Visa.

Acceptable Visas

 

Most Visa types are acceptable to get a mortgage loan if it can be reasonably determined that a borrower will remain in the country for the foreseeable future.  The H-1B and H-1B1 Visas are the most commonly seen from applicants, and these borrowers are treated exactly like US Citizens in getting a mortgage loan.

Some Visas are not acceptable to most lenders, though.  For example, student Visas that have a reasonable expectation that the student will leave the country upon completion of an educational program could pose a problem for loan approval.  Lenders generally have the burden of proving a borrower will be reasonably able to maintain their mortgage for the 3 year period following issuance of the mortgage loan, so if there’s uncertainty, lenders will always tend to err on the side of caution.

Other Options

For those borrowers who cannot qualify for standard conventional financing, FHA has flexible guidance on if a non-citizen can get a mortgage as well, and for those who can’t obtain FHA financing, options exist through Foreign National programs.

Foreign national loans frequently come with higher down payment requirements and sometimes higher rates, but for a non-citizen looking to get a mortgage in the US, there are a lot of options available!  As for foreign national loans, the options vary greatly on those as well, and though your loan officer can answer specific questions on those programs (and more), that’s a different blog for a different day.

 

If you have any questions about getting a mortgage as a non-citizen, please give us a call and we’ll be happy to help!  We have lending options for everyone and will work with you every step of the way to buy a home.

 

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How Much Mortgage Can I Qualify For?

Learning How Much Mortgage You Can Qualify For

It’s one of the most frequently asked questions when someone begins their search for a home.  “How Much Mortgage Can I Qualify For?” is one of the most important questions someone can ask, because it will help determine what type of home they will look for, what area(s) they may look in, and will allow a Realtor to really narrow down a home search and focus on what’s within a home buyer’s reach.

how much mortgage can I get
Asking the right questions and working with someone that provides the right answers is paramount to a good home buying experience

 

Believe it or not, though, “How Much Mortgage Can I Qualify For?” is a secondary question compared with “How much Mortgage Should I Qualify For?”.  The real starting point is figuring out a monthly payment that makes sense.  Mortgage loan qualifying is largely based on a term called “Debt to income ratio”, or DTI.  DTI is a percentage of your income that is devoted to debt, and is always calculated as a percentage.

Personal Considerations

For some people, a high DTI is not a big deal, but for others, it could be disastrous.  Many loan programs (not all) don’t factor in a borrower’s disposable income – the actual dollar amount left over at the end of each month after all the bills are paid, utilities are paid to keep the lights on, and groceries are purchased.  So for a borrower with lower income, a high DTI could be disastrous as it could mean very limited disposable income to cover life’s unexpected events.  That same DTI may be no big deal for someone with lots of disposable income on hand.

 

So how much mortgage can you qualify for?  Your loan officer will guide you through different loan options available to you, and your maximum qualifying loan will depend on a few things – your income, credit, and amount of money to put down as a down payment being the big ones. Typically, having better credit will allow a higher DTI, and putting more money down, therefore reducing your loan amount, will also help lower the DTI.

Property Considerations

The type of home you buy will also determine how much mortgage you can qualify for.  For example, a condominium property may seem affordable, but could come along with high HOA dues or property assessments that may make the property unaffordable, even though the purchase price could be lower than a single family home.  Likewise, a single family home could have additional taxes attached to is, such as Mello Roos taxes in California or 3rd party tax assessments and additions that could make the cost of ownership much higher than indicated by a price tag.  This is where having a team helping you along the way makes a huge difference in the home buying process.  A good loan officer can help you price out different purchasing scenarios, and knowing the max you can qualify for AND the max monthly payment you want to qualify for, a good Realtor will guide you to properties that you’ll like AND be able to afford, all things considered.

 

Another consideration that comes along with property types lies in unique properties such as condotels, non-warrantable condos, or agricultural and mixed use properties.  The price tags on such properties may make them appealing, but additional down payment or asset reserve requirements could put this type of property out of reach.  This, again, is where working with a great home buying team can make a ton of difference in your experience.

 

Planning for the future

Nobody has a crystal ball, but thinking about the future can help you determine how much mortgage you qualify for, too.  Are you working in a field with steady income raises?  Are you relocating on a job offer in a situation where a co-borrower will be moving too and finding a job once settled in?

Perhaps you’re interested in buying a multi-unit home where you’ll have both job income and rental income to help cover mortgage payments and add additional cash flow?  Perhaps you have an auto loan with a high monthly payment that’s about to go away, or your student loans are about to be paid off?

All of these scenarios and more could affect the amount of mortgage you qualify for.  Sometimes, it makes sense to temporarily carry a high DTI because you’ll soon see your cash flow and disposable income increase.  It’s important to not overanalyze, but to consider the future, and ultimately, make a decision that leaves you comfortable and able to cover your mortgage, your other debts, and still live the lifestyle you desire.

 

Buying a home is a huge decision, and answering the questions “How much mortgage can I qualify for?” and “How much mortgage should I qualify for?” is the first step toward successfully navigating the home buying process toward your path to homeownership.  Better yet, having a team to help guide you along the way and answer the many questions you’ll have is the best way to assure yourself of a pleasant home buying experience, and a loan that will keep you happy in your home for years to come!

Have questions about the home buying process?  Ask the professional that shared this post with you or give us a call at 877-ASK-MMMC (275-6662)

 

 

 

 

 

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Think a Mortgage Involves Tons of Paperwork? Think Again.

Post-housing market collapse, getting a mortgage got tough.  Rather than a joyous experience and a simple process, the journey from application to closing on a mortgage loan sat in the same realm as root canals, DMV visits, insurance claims, and getting faulty credit fixed.

Esignatures and improved tech have made the mortgage process easy
Paperwork and mortgages are no longer synonymous. The paperless mortgage is the new normal

Since that time (nearly a decade ago!), much has changed, but there’s still a stigma attached to the loan process.  Much of this has to do with 3 things:  poorly trained Loan Officers, companies slow to adapt to new technology & processes, and the overlays some lenders stack on top of traditional guidelines.

Overlays are when a lender requires documentation beyond what is traditionally required for a specific program.  For example, while Fannie Mae may require only a verification of employment to document income, some lenders may require 2 years W2 forms on top of that – the request for W2s would be an overlay.  Overlays can result in additional layers of paperwork, and additional rounds of documentation requests along the way as overlays present themselves.

As technology progresses, lenders have access to all sorts of data verification systems behind the scenes.  Further, for many loans, automated underwriting systems have come to advance to a point where not a lot of documentation is required.  If lenders are set up to verify income through a 3rd party, verify assets through a secure online platform (of course, with borrower consent), and do a check for data accuracy on clients without the client providing anything, then the amount of paperwork needed from start to finish can be quite minimal.  In some cases, a copy of a photo ID, a signed authorization to obtain a verification of employment, and a copy of an insurance declarations page is all that’s needed from a borrower to get from application to closing.  However, not all lenders and mortgage outfits are equipped or willing to use the tech available, making the process more burdensome for their clients.

And of course there are horror stories about poorly trained Loan Officers requesting round after round of documentation because they don’t know any better.  “Ok Mr/s Borrower, I need a paystub today” then the next day, “actually, I need a months worth of paystubs and 2 years W2 forms”, and the following day, “actually, all of the above and 2 years tax returns”, etc, etc, etc.  A poorly trained or inexperienced loan officer can make the process much more tedious than it has to be.

 

How Simple and Fast Can it Be?

Let’s look at a recent, real life, MasonMac example.  13 days from application to clear to close (with a holiday weekend in the middle of that). Borrower’s income was salary and steady, so their employer documented their income – they sent in 0 income documents.  It was a refinance without the need for asset documents.  There was no additional income, no credit issues nor explanation needed.  Borrower was required to send ID, insurance, and a quick note about a previous address.  They e-signed their disclosures, appraisal and title were ordered and received within a week, and the entire loan process was wrapped up in just 7 business days.

 

Not every loan is that fast.  If we have variable income, or income derived outside of salary, there will always be additional documentation.  If assets are needed, we need statements.  If a loan is extremely complicated, the paperwork will need to go along with it.  The loan process overall, however, is not the monster we had to deal with in 2013.  Today, the process at MasonMac is quick, streamlined, and easy to navigate thanks to agency-direct underwriting, the newest and best in technology, and the incredible team working behind the scenes.

 

Have questions about the loan process, our loan products, or anything else from the MasonMac world of mortgages?  Ask an expert for an instant response or give us a call today!

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Student Loan Mortgage Rules Loosen Up

Fannie Mae lightens up on Student Loan Mortgage Rules

 

This Spring, Fannie Mae released big changes to the way they’ll allow mortgage companies to underwrite loan files involving student loans.  The student loan mortgage rules will now be more borrower-friendly, and will allow lenders to implement some common sense into underwriting loans for borrowers with substantial student loan debt.  Included in the changes

Student Loan Mortgage Rules have relaxed to make it easier for those with student debt to buy homes

are other common sense approaches to how underwriters can analyze a borrower’s debt burden, commonly referred to as DTI (debt-to-income ratio).  The recent release is best described as several small changes with potentially large impacts, opening the doors for more Americans to achieve the dream of home ownership.

Changes to Student Loan Mortgage Rules

Until now, lenders were limited in the ways they could calculate student debt into DTI – either using a payment shown on credit, or a percentage of the outstanding loan balance.  While this way of doing things makes some sense in that a payment showing on credit is generally accurate, and using even 1% of a loan balance is a conservative measurement of what people will actually pay, it left a lot of borrowers with unnecessarily large debt burdens on their mortgage applications.  For example, someone on income based repayment plans may pay much less than 1% of their loan balance or what is shown on credit.  For those with loans in deferment or forbearance their actual payment may be much lower than 1%, but may not be shown on credit during the deferment/forbearance period.

With the new rules, lenders can use a borrower’s actual payment when qualifying them.  If they have an income-based repayment schedule, the reduced payment can be used to qualify when properly documented.  This will help many recent college grads qualify for a home loans sooner than under the previous rules.

Note: When in deferment or forbearance, a lender must still verify what the payment will be when repayments begin.  This can be verified through the credit report or through the student loan lender.  If no payment can be verified, the 1% of the balance rule will apply.

 

Student Loan Mortgage Rules for Cash-Out Refinances

With the recent rise in home prices across the country, cash-out refinance programs have become more popular, and with new student loan mortgage rules, homeowners can refinance and include student loan debt into their new loan without the higher interest rates typically associated with cash-out loans.  Under previous guidelines, Fannie Mae required pricing adjustments if borrowers used the equity in their home to withdraw cash or pay off debts, resulting in higher interest rates.  Now, if the debt being paid off is a student loan, there is no such adjustment, so borrowers have the ability to wipe out their student loans with no “penalty” to their interest rate.

Note: Under this guideline, at least 1 student loan must be paid off in full with the new cash out refinance.  Student loans cannot be partially paid off, and including other types of debt will still result in a pricing adjustment.

 

Excluding Debts Paid by Others

The recent Fannie Mae changes also addressed a very common problem encountered by mortgage applicants – debt in a borrowers name, but being paid by someone else.  In the past, debts paid by another party had to be counted against a loan applicant if the debt was in their name..  Now, if a borrower has a debt and can evidence someone else has paid that debt for 12+ months (on time, of course), the debt can be excluded from a borrower’s DTI.  This will be a huge help to parents who are helping their children establish and obtain credit (think: cosigning student loans, or purchasing a vehicle that the child will pay for), and circumstances where one borrower has opened credit to help someone with a less than stellar credit history.

Note: This exclusion only applies to non-mortgage related debts

 

No Seasoning Required on Previously Listed Property Cash-Out Refinance

Fannie Mae has also changed their rules on withdrawing cash from recently listed properties.  In the past, if a property was listed for sale, the owner had to wait 6 months after withdrawing the listing to pull cash out.  Now, there is no waiting period.  Immediately after removing a property from the market, a cash-out refinance can be done.

 

While the changes to student loan mortgage rules and debts paid by others are a big deal in getting more mortgage applicants qualified, there is another plus to take away from these changes.  Fannie Mae is loosening requirements and restrictions on mortgage applicants, allowing more people to qualify, and allowing lenders to use common sense to evaluate the repayment ability of applicants.  This is a tremendous shift from years of tighter restrictions following the housing crash, and is evidence of a largely improved market place, the return of equity and appreciation to homeowners, and a commitment to helping Americans achieve a big part of their dream – homeownership.

 

Note:  All of the above requirements are guidance from Fannie Mae, not a particular lender.  Many lenders have overlays that could prevent using the above guidelines – be sure to work with a lender that underwrites their loans according to Fannie Mae guidance.  If you’re curious, yes, Mason Mac is one of those lenders.

 

Have questions on the changes to student loan mortgage rules or anything else loan related?  Reach out to an expert for an instant response!

 

 To read more about changes to student loan mortgage rules, please check out the Washington Post announcement in which we were referenced

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Case-Shiller: Home Price Growth Continues

November home prices grew by 5.60 percent year-over-year on a seasonally adjusted basis according to Case-Shiller’s reading on National Home Prices. National average home prices rose 0.80 percent from October to November. Case-Shiller’s 20-City home price index revealed that the West and Mountain regions continue to hold the top three growth rates for home prices. Seattle posted a seasonally adjusted growth rate of 10.40 percent which was closely followed by Portland, Oregon’s year-over year average home price gain of 10.10 percent. Denver rounded out the top three home price growth rates included in the 20-CityiIndex with a year-over-year gain of 8.70 percent.

Top readings for month-to-month home price gains for the 20-City home price index were 0.20 percent for Seattle, Washington and Portland, Oregon. Denver, Colorado posted a month-to-month gain of 0.60 percent. Analysts said that home prices may be topping out in some cities; San Francisco, California was one of two cities posting lower home prices in November than for October. San Francisco home prices enjoyed rapid and stratospheric gains in recent years, but may have reached a threshold as fewer buyers can afford to purchase such high-priced homes.

Home Prices Approach PreRecession Levels

September’s national home price gains matched the pre-recession peak achieved in mid- 2006. While this is positive news, the 20-city index currently averages 7 percent below its prior peak level. It’s important to note that the 20-city index does not include Philadelphia, Pennsylvania and Houston, Texas metro areas, which have enjoyed significant growth in home prices. Home prices for cities included in the 20-city index remain about 7 percent lower than their previous peak, but are 40 percent higher than their lowest point in 2012.

David M. Blitzer, Managing Director and Chairman of the S&P Dow Jones Indices committee, said that November’s readings on home prices appear to indicate that home price gains have escaped the boom-or-bust cycles seen in the last dozen years or so.

Rising Mortgage Rates, Home Prices Present Obstacles for Buyers

While homeowners listing their homes for sale continue to enjoy appreciation home values, would-be home buyers are being sidelined by the effects of accelerating home price growth and higher mortgage rates, which are expected to continue increasing. As with San Francisco, more cities included in the Case-Shiller home price indices may see slowdowns in home price growth and home sales as affordable homes and home loans slip out of reach.