Posts Tagged FHLMC

So what’s it take to get a home loan these days?

The last year has seen many changes in home lending, some for the better, some for the worse.  Over the next couple of blog posts I’ll cover these changes and what is required to get approved for a home loan in today’s lending climate.

Full Doc loans only

In today’s lending climate only Full Doc loans are available.  These are loans where documentation to prove income and assets stated on the credit application must be provided.  Documentation includes such items as W2’s, 1099’s, and tax returns.  Assets must be supported by bank statements, IRA statements, statements from stocks and bonds, etc.  All down payment funds must be sourced and seasoned at least for 60 days back from the application date.

At this time Stated Income loans are a thing of the past.  Obviously this puts many self-employed borrowers at a huge disadvantage since many do everything possible with itemized deductions to reduce their tax burden.  Many times tax returns will not reflect the actual income of the borrower, but Line 37 of Form 1040 is the last word on what a lender will base a borrower’s ability to repay the loan on.  Lenders do allow some itemized deductions to be added back-in, however these allowed items rarely increase the Adjusted Gross Income by much.

Hopefully Fannie Mae, Freddie Mac, FHA and VA will change some of their guidelines in the near future to help accommodate the self-employed; maybe by allowing a percentage of Line 1 of  Schedule C as qualifying income or allowing more itemized items to be added back into Adjust Gross Income.

If you have any questions regarding becoming qualified to purchase a new home (and it truly is a good time to do so) or any other mortgage-related item, please do not hesitate to call me at (801) 971-7916.

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Congress looking at increasing tax credit up to $15,000

Congress is considering a new tax credit that would modify the current $7,500 tax credit for first time home buyers to $15,000 for any home buyer.  This could really help a lot of people.

Here’s how it will work: Home buyers would get 10% of the purchase price of the home as a tax credit when they file their 2009 tax returns.  The maximum amount of the credit is $15,000.  If the tax payer usually pays less than $15,000 in taxes the credit can be split over two tax years, so the home buyer would get a $7,500 in 2009 and another $7,500 in 2010.  And this is a true tax credit, not a tax deduction, so the home buyer gets $7,500 deducted from thier tax liability, not from their gross income.  For someone owing some money this could mean they owe less or nothing at all.  For someone already getting a tax return this would add up to $15,000 on top of it.

I’m sure for most middle-class home buyers this could mean a nice surprise at the end of the year.

The only way they could make it better?  Make 90% to 100% of the rebate available at the closing table to be used as the down payment.  $15,000 would be more than 6% down on the average home in Salt Lake City.  Fannie Mae and Freddie Mac require 5% down payment and FHA requires 3%, so 6% would give the average FHA borrower the required 3% down plus an additional 3% to cover any closing costs not accounted for by seller concessions (which on short-sales there are no seller concessions to cover closing costs).

Let’s hope the Feds figure this out and either do something like that, or maybe the State of Utah could front the rebate money and make it due upon filing of taxes or in the case of those not getting a refund, repayable over, say, 10 years at a minimal amount of interest (such as not exceeding the note rate of the loan).

For Salt Lake City, UT today’s average mortgage rates are as follows:

30-year fixed: 5.25%

15-year fixed: 4.625%

Conforming Jumbo 30-year fixed: 5.75%

FHA 30-year fixed: 5.50%

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Salt Lake City’s Mortgage Market Update for Jan. 6, 2009

I hope everyone had a great holiday season and are adjusting well to returning to real life and work again.  I’ve returned to work with incredible news for the new year.  The Federal Government has started it’s $500 Billion purchase of Mortgage Backed Securities (MBS) which has spurred interest by investors in Mortgage Bonds and has driven the rates even lower than last week (which were pretty dang good).  Analysts are saying that we could see some record low rates over the next three months.

In other news, the Board of Realtors has released November’s data for home sales in Utah.  Sales overall in November were lower than November of 2007 and 74% of homes sold in Salt Lake City and surrounding areas were below $300,000.  I feel this goes back to my theory that since there is no more stated income loans and borrowers must be able to document income and assets, that is all the majority of Utah borrowers can qualify for.

For instance, according to the Census Bureau’s income data (which is collected from the IRS) the median household income (the amount that 1/2 of people make less than and half make more than) is Utah is about $62,000 a year.  This would qualify half of Utahan’s for a home of $243,000 or less.

This number is probably skewed a bit too, since those that sign the front of checks don’t report their income the same way as those who sign the back.  Many business owners do not W-2 themselves, but rather file a Schedule C or K in which they work hard to minimize their taxable income by writing-off as much as they can, so their true take-home income from being a business owner is usually way understated.  In reality they can afford a $500,000 home (or more), but they can only on paper prove they qualify for a home in the $300,000 price range or less.

So until HUD (who oversees lending guidelines for FHA, Fannie Mae and Freddie Mac) changes their guidelines for calculating self-employment income, I think we are going to see much of the same, with homes under $300,000 selling quickly and those over $300,000 staying on the market for longer periods of time.

If you are looking to refinance a home or purchase a new home, right now is the time, though.  Rates are truly as low as they’ve been in over five years, and definitely the lowest they’ll be for a while.  So don’t delay.  Call me for a no-charge review of your current mortgage and if refinancing will benefit you.  Also, if you are looking at a home, call me for a mortgage quote or to get you pre-approved for the loan.

For Salt Lake City, UT today’s average mortgage rates are as follows:

30-year fixed: 4.75%

15-year fixed: 4.625%

Conforming Jumbo 30-year fixed: 5.125%

FHA 30-year fixed: 5.00%

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