Sunday, September 30, 2012

Marriage and Mortgages FAQs

Q: Could one spouse's bad credit negatively affect the other?
A: If a couple is applying for credit jointly, say for a loan or credit card, then yes. One person's lower score can negatively impact the interest rate the couple will be offered. This is because every borrower has three credit scores, and lenders use the lowest "middle" credit score of the two borrowers. We have seen many situations in the past in which one borrower was dropped from the application – but only if the lower score belongs to a non-working spouse. This can create a serious issue, however, if the income is needed in order to qualify.

Q: Can one spouse's low score negatively affect the couple's chances of securing a mortgage?
A: Yes, if one borrower has negative credit items, such as late payments or a foreclosure, the worst of the two will be taken into account when considering your mortgage application. With a foreclosure, this could mean having to wait at least three years to be eligible for a loan again.

Q: Does the lender use both people as a measure of creditworthiness, or is it possible to focus on the spouse with the better score?
A: In the past, this was possible, but now the lowest score of the two (or however many) people on the application is used. For example, if two couples buy investment property or a second home, the lowest credit score of those four people will be used to determine the rate (which includes loan-level price adjustments or "risk-based" pricing). This could also include parents that are co-signing a loan for one of their children.

Friday, September 7, 2012

USDA Fees Are Increasing On October 1, 2012!

Act Now Before Costs Go Up!
USDA Rural Development and its loan program were designed to help improve the economy and quality of life throughout rural America. The program continues to remain a wonderful option for qualifying homebuyers, with zero down payment required.

But fee changes are coming!

Beginning October 1, the USDA Annual Fee will increase for both purchase and refinance transactions. In addition, the Up-Front Guarantee Fee will increase for refinance transactions.

If you want to find out what these fees increases could mean to you or someone you know, give me a call today. Home loan rates are still at historically low levels so if you or any of your friends, clients, or colleagues are looking to purchase or refinance a home, this is the perfect time to act...before it will cost even more to do so.

Fee Increase to Impact Home Loans

The Federal Housing Finance Agency (FHFA) has again increased the guarantee fee they charge to lenders delivering loans to Fannie Mae and Freddie Mac. This is important to know, as this increase has a rippling effect that will impact the cost of mortgage financing.

Here's what's happening and what it means to home loan rates:

What exactly is this "g-fee"? The guarantee fee or "g-fee" is an amount charged by mortgage-backed securities (MBS) providers, like Freddie Mac and Fannie Mae, to help protect against credit-related losses in the overall mortgage portfolio. In other words, it acts a lot like insurance and helps lower the overall risk...which means home loans can be offered at terrific interest rates to borrowers that have good – but not perfect – credit.

What exactly is the impact of the rate increase? The increase will impact loans with different amortizations in different ways. For example, for a $200,000 home loan, the increased g-fee (assuming a .125% increase in rate) would equate to $250 more per year in interest, or $7,500 more over 30 years. Someone buying or refinancing a home can certainly choose to buy down the cost with cash up front – but most folks will not do this.

Why is the guarantee fee being increased? FHFA has increased the guarantee fee to collect more revenue to enhance the safety and soundness of the Government Sponsored Enterprises (GSEs), and perhaps indirectly encourage private firms to participate in the mortgage market.

Who will this impact?
The change will impact all new borrowers using Fannie Mae and Freddie Mac loans.

When will it start?
Officially, the increase to guarantee fees will begin on December 1, 2012. However, Fannie Mae will also be making adjustments to pricing for those loans that are committed on or after November 1, 2012. It’s important to note that the increase is already being seen in rate sheets right now, since home loans being originated now will likely not be closed, pooled and securitized until December and therefore will need the increased g-fee priced in earlier.

The bottom line is that the g-fees will be going up...and this will impact homebuyers looking to obtain a home loan through Fannie Mae and Freddie Mac.

The good news is that home
loan rates are still at historic lows right now, and it's a great time to purchase a new home or refinance. If you or anyone you know has any questions, please call or email!