Welcome Realtors and consumers. Tell me your loan scenario or view free videos and guides to the right, or scroll down and read brief articles that affect you and the California real estate loan market. I look forward to earning your trust and business. Give me a call with any questions or scenarios 805-276-1942.
New 2015 FHA guideline changes take affect September 14, 2015. Most changes are constricting. We’re going to highlight some of these changes that California home buyers, Realtors and the general public need to know.
Deferred student loan debt is now going to be added as a monthly obligation even though it’s in deferment. The lender will do a calculation and add the payment into the borrowers debt to income ratios. This is a big change in that many students are being saddled with mountains of student loan debt. This new guideline may change the way we look at student loans and how they are applied for.
Non borrowing spouses (a spouse not going on the loan or title to the property) for purchases will now be asked for social security number verification and a credit report will be pulled so that their debts will be added to their spouses debts.
Borrowers with delinquent federal tax debt will not be able to get FHA financing until they are in a valid repayment plan. Typically documenting three monthly payments made on time will be enough for an FHA loan application to move forward. The tax lien will remain in place as a lien until the agreed amount is paid off. Simply ignoring the lien will ensure a loan denial.
Co-signors on notes, if parents buy a vehicle for their child and their child makes all the payments, if the child didn’t sign the purchase contract and didn’t sign loan papers, the debt will now be counted against the parents even if they have documentation (records) that their child made the payments. So now, add the child to the contract and loan so that the obligation can’t be counted against you.
Gift of funds: Cousins can no longer be used as sources for cash gifts that go toward buying a home. However in-laws are now included whereas before they weren’t. Step relatives ie..step father, and foster parents are allowable gift fund sources.
Major delinquencies remain the same, bankruptcies have a wait period of two years, foreclosures 3 years, and short sale have no wait period as long as all mortgage payments were made on time for the 12 months preceding the short sale, same goes for all other consumer debt.
Revolving credit that requires a full payoff each month: If a payment isn’t on the credit report 5% of the outstanding balance will apply. This may affect borrowers negatively who have a business credit card and their employer pays it. Borrowers can supply 12 most recent credit card statements to show that it was paid in full each month. Before the lender didn’t count this debt as a monthly payment as long as the credit report showed current.
Part time income: Must now be uninterrupted for the past 2 years to consider as income.
Earnest money deposit on a home purchase: If this amount exceeds 1% of the sales price, it will need to be documented that it came from borrowers funds and have to make sense.
There are many more new 2015 FHA guideline changes, the above are just some of the more common lenders and California home buyers will encounter.
If you have any other questions regarding these new FHA rules, feel free to contact me I’m here to help!
Certified Mortgage Advisor, Best Capital Funding
September 14, 2015 a new FHA guideline, involving deferred student loan debt, will take affect that will affect borrowers when qualifying for a home loan
One of the big changes is how deferred student loan debt is now going to be counted as a monthly debt even though it may be in deferment. These debts didn’t use to be counted into the debt to income ratio if they were in deferment, however now the lender is to do a calculation to show the loan as a monthly payment, and include it as a debt, which may decrease a home buyers chances of qualifying for a home loan.
This is a huge disadvantage to many individuals who have a mountain of deferred student loan debt. It is important to note that FNMA and Freddie Mac have not adopted the same rules at this time, but a lender may add their own overlays (their own rules) to the equation and the deferred student loan can be counted as a monthly obligation. This varies from lender to lender.
Deferred student loan debt may need to be thought of differently in light of these changes. It may be best to stretch out the debt over the longest period possible to ensure the lowest monthly payment. When qualifying for a home loan, you want to show the lowest minimum monthly payments as possible to maximize your home buying power. So college students need to be coached to look for the longest repayment term possible on their student loans to help them in the future when it comes time to qualifying for a home loan.
Best Kevin Walton
Certified Mortgage Advisor, Best Capital Funding
800-506-0632 ext. 0
As of February of 2014, the city of Ventura water lateral pipe ordinance is requiring property owners who are selling their homes to have their water lateral pipe inspected prior to the sale of the home and the 203k loan may be on the horizon.
So why is the city of Ventura doing this and how is this going to effect selling the home and the close of escrow? The answer is a bit complicated. The first thing a home seller has to do is get a licensed plumber who has access to a camera that goes into the water lateral pipe and which than goes all the way out to where the pipe connects to the street, this is now a part of the home sale process. It’s the homeowners responsibility to keep the water pipe clear of tree roots and debris, which has always been the case. The video must be reviewed by someone at the city of Ventura, the escrow company has this contact information, to ascertain that this pipe is free of debris or not. In fact the city of Ventura is going a step further with an ordinance that homeowners can not plant a tree within 15 feet of the water lateral pipe to ensure tree roots don’t get in the pipe and clog it up! I personally had this happen with my water main line and had it replaced.
If the pipe isn’t free of debris and needs to be unclogged or at worse case scenario be replaced, than the city mentions this in their report which is than viewed by the prospective home buyer. At that point, the home buyer makes a decision to continue with the home purchase or not depending how the purchase contract is structured but…..the city isn’t requiring that the damage be fixed prior to the close escrow.
It’s strictly a buyer beware tag on the property. Sooner or later that pipe has to be fixed or replaced. But what do lenders think of this? Nothing yet since it’s not a condition of escrow that the report be disclosed to the lender but you can bet this will change in the future. Lenders will want to view this water lateral report, just like a termite report, and their collateral to be fixed or else they will deny the loan. It’s not the case as of March of 2014, but think about it, if a seller says you can by their home but the water lateral inspection can’t determine whether or not they buy the home or not, and…the home buyer buys the home anyway, and than has to pay $10,000 to replace the water lateral pipe, they aren’t going to be happy and could come after the lender for damages. Their plea will be “hey you knew about this and you let it happen”. The lenders have the deep pockets so they have to protect themselves so a loan denial will is likely.
So than what? You have a house you really want to buy in a nice neighborhood, good schools, close to work but this water pipe issue pops and you or the seller don’t have the funds to pay for the repairs. Here’s an option, the FHA 203k loan. This loan allows a home buyer to close escrow in as is condition and do the work within 6 months, give the home buyer funds for repairs and remodeling and add the repair/remodeling funds to the purchase loan…all in one loan on a 30 year fixed rate.
This scenario isn’t the case right now but you can bet lenders are going to catch on and start reading the water lateral reports and making it a condition that these repairs be made. Just know there is an option, the 203k loan, that can make everyone happy…. a closed escrow!
If you have a question or concern on the city of Ventura water lateral pipe ordinance and how it effects lending, or how the 203k loan works, go to my homepage and click on the “tell me your scenario” text in the upper right corner and I’d be glad to help.
Certified Mortgage Advisor
Best Capital Funding, a local and trusted lender.
800-506-0632 ext. 0
Effective October 15th, 2013, FHA is tightening up on how they look at collections accounts and disputed accounts that show up on a typical California first time homebuyer credit report with new 2013 rules for collection accounts and disputed credit report accounts.
All loans today whether they are FHA or conventional, get run thru an automated underwriting system which pulls a credit report, and than based on the borrowers income, assets and other loan application information that was input into the system, renders a decision on whether or not the borrower(s) is approved for a California home loan or not. All this can be done in 10 minutes or so.
The automated underwriter reads the loan application and credit report findings and generates a list of conditions that need to be fulfilled that go along with the loan approval. If the automated underwriter sees collection accounts and disputed accounts on the credit report, than there will be instructions issued on how the account is to be handled, for the loan approval to be valid.
First, let’s look at the collection account changes. If the cumulative outstanding balance of all collection accounts is less than $2,000, than the lender is not required to consider the accounts, meaning they can be overlooked. If the cumulative balance is equal to or over $2,000, than the lender must include monthly payments in the borrower’s debt to income ratio for all accounts that will remain open after the loan closes. This means that the borrower needs to contact the collection company and negotiate a payment schedule, something they will not be thrilled with.
A disputed credit report trade line is something where a balance is owed and maybe the borrower disagrees that they owe the money or on the amount of the balance. Maybe a parent co-signed on a car loan for their son, who stopped paying and once the car was repossessed and sold. a balance remained that the parents didn’t think was fair that they owed, so they dispute it and the account just sits there showing as “disputed” on the credit report.
It used to be that disputed accounts were ignored by lenders, but no more. Now if the total outstanding balance of all disputed derogatory credit accounts are equal to or greater than $1,000, than the loan needs to be manually underwritten. This means the loan goes thru an additional rigorous approval process which many lenders do not offer.
These rules are only for FHA loans, and please know that even though FHA says these are the new rules, lenders have the right to put additional lender overlays (additional rules) on top of these rules to make it even more difficult.
To help avoid these problems, it’s a good idea to pull your own credit report before you apply for a loan through a service like annualcreditreport.com which gives you a free copy of your report per year. Pull your report at least 3 months before you apply for a California home loan. It may take you 60-90 days to clear up a disputed account or handle a collection account. Prior to making any calls to the collection company or creditor who is showing negative credit information on your report, select a lender who you are to use for prequalifying for your home loan. Talk to your loan originator about new 2013 rules for collection accounts and disputed credit report accounts and other accounts in question for guidance prior to applying for the home loan. We are here to help!
Lenders are looking at credit report disputes in a different light now and now credit report disputes can doom home loan chances . It used to be when obtaining a California home loan and the borrower had a dispute with the creditor for whatever reason, lenders would turn their heads the other way. Lenders didn’t feel the dispute would end in the creditor suing the borrower and attaching /garnishing their wages which would put the repayment of the mortgage loan in jeopardy.
Those days are gone. Borrowers should pull their own credit report thru a free service such as annualcreditreport.com to see what their credit looks like prior to applying for a California home loan. It’s important for the borrower to see what’s there before a lender pulls their credit report. There are erroneous items that may show up unbeknownst to the borrower and these items may be pulling down the credit score. Clearing one of these such items could take months. Lenders are putting the onus on the borrower now to fix these types of issues more than ever before instead of rolling the dice and granting a loan.
A disputed item on a credit report will read as a “dispute” on the credit report. For the mortgage process to keep moving forward the disputed item needs to be resolved and either gets deleted altogether or shows as a paid collection account. But…beware when an account that’s been disputed for a few months or years gets changed to read as a paid collection account, the credit score may drop! That’s why it’s best to get these items fixed well in advance of applying for a California home loan. Lenders who have borrowers with disputed accounts who are applying for a mortgage will require that a new credit report be pulled during the loan processing period and prior to funding their loan to reflect that the dispute comment on the report is gone and the account is resolved to the point that the lender feels safe that this particular creditor can not sue the borrower at any future time. After the lender pulls your credit report again, the credit score must still be high enough to obtain the loan as well.
Some lenders for one reason or another in the past as well as presently do not put much weight on medical collection accounts. These lenders even today won’t hold medical collection accounts against the borrower even though they show on the credit report. But in the near future they may not be the case.
It’s a good idea to take advantage of the annualcreditreport.com free credit and pull your credit report before you apply for a loan and at least once per year to see if anything is there that doesn’t belong. Credit report disputes can doom home loan chances. Crossing your fingers and hoping the lender credit report comes back “clean” isn’t a good idea. Identity theft, fraud and misreported information is very common in today’ s environment. So whether you’re applying as a California first time homebuyer or if you’re buying a car, check your credit and get your disputed accounts taken care of, it could make a huge difference in obtaining favorable credit terms or getting a loan at all!
Getting a California home loan in 2014 will be tougher. January of 2014 will present another set of lending guidelines designed to keep lenders in line and make better California home loans. An unintended consequence will be that 1 in 4 or 5 borrowers will not be able to get a FNMA type loan.
The new rule, aka QM, stands for quality mortgage. The definitive rules have yet to be laid out by the CFPB due to the November elections. Isn’t it amusing how the government ties mortgage lending rules to elections? Hmmmmm. The CFPB is basically the mortgage cops. It is a new agency created to hold lenders and people who originate loans to a standard of excellence. Loan brokers are who they police, but they don’t police the big banks, ie..BofA, Chase, Wells Fargo, and Citi and their loan originators. They still let them run amok. Why? I don’t know. Loan brokers and big banks should be held to the same standards, after all we all offer the same loans and in 2013 alone, several of the big banks were fined millions of dollars for subpar lending practices (they also pay millions of dollars toward political campaigns!.)
The new rules will not only affect a California home loan borrower, it’s a nationwide rule. What is changing? No more interest only loans, a cap on lender and loan originator fees per loan, no more 40 year loan terms, larger down payments will be needed and one of the most difficult hurdles for the consumer is the maximum of 43% debt to income ratio.
The 43% debt to income ratio limit will mean many homebuyers will not be able to afford a California home loan. 43% of your gross income is the maximum amount that can go out towards mortgage, auto, credit card and other credit related expenses on a monthly basis.
So what happens if you’re above that? Than the loan will not be able to a FNMA, or Freddie Mac loan. Why is this important? These are the most common loans out there right now, and they are bought and sold on the open market in bundles as investments. A borrower that doesn’t meet the QM guidelines can not be included in those bundles. Lenders need the availability to sell your loan on the open market so that they can get their money back, and lend it out again, collect their fees, and than lend that same money to other homebuyers, it’s about liquidity. So each loan must be able to be bought and sold on the open market and each loan must meet certain guidelines to be included in these investment pools. FHA loans are not affected by these new rules but word is out it also is working on similar guidelines to roll out mid to late 2014.
There will be other options out there for buyers who don’t meet these new rules, but you can bet it will come at a steep cost in the form of higher rates and costs. Many California first time homebuyers hover at the 45-50% debt to income ratio since they are just starting out with their careers, so this new rule will hit them particularly hard.
Getting a California home loan in 2014 will be tougher. We can’t afford to see another calamity like we did from the 2007 bubble bursting, we are still to this day feeling affects from it, but our real estate economy is slowly recovering. These new rules will put a damper on the California first time homebuyer but I do remember the days when it took a minimum of 20% for a down payment to buy a home, it hasn’t got quite back to those days but January 2014 in some ways will mirror lending from the 1970′s. Hopefully unintended consequences don’t scare off borrowers trying to get a California home loan to the point where they feel renting is a more affordable option. Having something you can call your own along with the tax breaks that come with it, when possible, still to me outweigh renting property.
Pic Credit To Sujin Jetkassettakorn
The 2013 summer California real estate market avoided the bubble. Property values regarding Los Angeles county real estate and Ventura county real estate are still hot, and in general property values have been aggressively soaring this spring and summer in 2013 prompting fears of another bubble ready to pop. However in July, asking prices tapered off .03% as inventory expanded, mortgage rates rose and investor demand dipped.
For sellers of property, this may have been bad news, but to buyers and the overall market, it was a healthy trend. The real estate market can’t sustain increased sales prices every single month.
From this time last year to now, prices of homes have rose nationally by 11%. There are some areas that are hotter than others such as Southern California and Nevada, where asking prices are all over the place but the general trend for the rest of the country shows asking prices have regressed some.
So even though 2013 summer California real estate market avoided the bubble, more properties should be hitting the market soon in Simi Valley, Thousand Oaks, Ventura and the San Fernando Valley so keep an eye out, make a fair offer and as always you need to be prequalified with a lender before making an offer to buy a home. If you need any help with that let me know!
More and more California first time home buyers are competing with cash offers. Cash offers to buy California in 2012 broke an all time record according to Realty Trac statistics. This means that California first time homebuyers have to be more patient than ever.
But who really wins here? Cash offers can be 5-20% less than California first time homebuyer offers. Real estate agents may make a quick commission, and if the property is lender owned, the lender moves a non income earning asset off their books, but how is this helping homebuyer families and the refinance market? The answer is that it’s not helping them.
The home sells for less on a cash offer, agents make less commission, a homebuyer loses out on an opportunity to buy a home for their family and refinance loans fall apart because of a home selling for less which brings down the value of their comparable home. If the cash buyer fixes up the home, can the refinance consumer try to refi again once the house sells? Sure, but now they have to pay for another appraisal, and wait for the home to resell and quite possibly miss out on historic low interest rates.
Cash is king. California first time home buyers are competing with cash offers. California first time homebuyers just need to persevere and hopefully more inventory will hit the market in the spring 2013 market. Also Foreclosure sales are at the lowest point in 5 years right now, so hopefully more sellers will give families a shot at buying a home instead of taking the low ball cash offer and give them a chance at earning the American dream.
Dataquick released figures, in February of 2013, that California cash home sales of residential homes is over double the normal rate.
Los Angeles county is up 26%, Orange county nearly 29%, San Diego is over 32%, Riverside up 9%, San Bernardino 5%, Ventura increased 27%, with Imperial being the only county showing a decrease of nearly 7%.
So what does this say? Investors are still out there looking for deals and the affluent are showing they aren’t afraid of making a deal either. Who does this hurt? The first time homebuyer, the buyer using FHA financing, senior citizens looking to downsize and just about anyone looking for a California home loan.
Inventory of property is low right now, hardly any condos for sale, and short sales are thinning out. Hopefully when the “buying season” opens in the spring we’ll see more properties hit the market and you can bet bidding wars for most properties as well.
Again, California first time home buyers are competing with cash offers. Just know that if you agree on a purchase price and the home does not appraise for at least your agreed upon purchase price, the buyer will have to pay the difference in cash or if you’re lucky, the seller will renegotiate and lower the sales price to match the appraised value.
The national foreclosure inventory fell 19.5% in 2012. This is in part to the banks being more receptive to short sales and streamlining the process so that it takes less time to execute a short sale. Banks for the most part have staffed their short sale departments since they’ve learned a short sale is better for all involved than a foreclosure.
California lead the way in 2012 with 100,000 completed foreclosures. But still the decline is good news for the housing market and will help achieve real estate market stabilization when dealing with home values.