September 30th, 2009
I get a lot of excited questions based on information people see on the latest “average interest rate” news. This data is usually published monthly by the media, so it is a regular source of misleading data.
The average interest rate is a compilation of a lot of different interest rate quotes and variables, that do not apply to everyone’s exact situation. The average interest rate is a national average figure, with interest rate quotes from across the country that may not apply locally, and many times also includes interest rate quotes with points. But most consumers do loans with 0 points. Hence, the “average interest rate” you see on TV or in the newspaper always looks artificially low. Read the rest of this entry »
Tags: average interest rate
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September 28th, 2009
Construction/renovation loans are a bit complicated, you really have to be dedicated to the process, and be ready to take this on as a second full time job.
A construction/renovation loan is typically used when you are building a home from scratch, or have a large renovation.
The initial “acquisition loan” to buy the house and then start the renovations is usually an “Interest Only” loan based on “Prime Rate”. So you may pay Prime Rate + 1%, for example, during the construction phase. Banks usually restrict your time period on the construction, for example they may give you 6 months to complete the work. After the construction is over, you get a “permanent loan”, with a market rate for a traditional loan (like a 30 Year Fixed Rate), that is locked-in at the time the work is complete.
There is some interest rate risk, since you won’t get your “permanent loan” with a final fixed rate, until the work is complete. This could be quite a risk. Obviously a benefit with a finished home not needing construction or renovations is that you can “lock-in” an interest rate right away.
Also, a construction/renovation loan is a complicated Read the rest of this entry »
Tags: construction loan, construction-permanent loan, general contractors, renovation loan
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September 25th, 2009
In 2008, a group of homeowners in Mount Pleasant launched a solar rebate program in their neighborhood. By the end of next month, 48 homes will have had solar panels installed on their rooftops. Most of them will receive an approximate $7,000 rebate and a 30% tax credit. In addition, they will be able to sell their unused energy to Pepco. They were able to accomplish all this by coming together and forming the Mount Pleasant Solar Co-Op. Read the rest of this entry »
Tags: Mount Pleasant, solar power
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September 24th, 2009
Desktop Underwriter is Fannie Mae’s computer-generated loan underwriting tool. Using completed loan application information, an automated underwriting systems retrieves relevant data, such as a borrower’s credit history, and arrives at a logic-based loan decision. In addition to the time savings, automated underwriting is preferred because it is based on algorithms, eliminating human bias. Freddie Mac maintains and markets a large automated underwriting engine known as Loan Prospector.
The latest version of Fannie Mae’s Desktop Underwriting System is being modified to only accept and approve loans that have a DTI (Debt-To-Income ratio) of 45% or less, with exceptions to 50% for borrowers with strong compensating factors. Assets are definitely a strong compensating factor.
FHA financing may allow for higher debt ratios. However, with HUD’s required capitalization ratio falling dangerously close to the industry minimum, they will likely follow suit.
The bottom line is to make sure homebuyers and Realtors are working with competent lenders who are versed in changes like these prior to shopping for a home.
Tags: Automated Underwriting, Desktop Underwriting
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September 23rd, 2009
Getting a mortgage to buy a condominium is getting more complicated. The best advice I can give you is to make sure you talk to an experienced mortgage professional BEFORE YOU WRITE A SALES CONTRACT. This applies not only to the market I cover most in Washington DC, Maryland and Virginia, but nationwide.
Checking with a lender beforehand ensures that the condo is able to be loaned on. You would be surprised how many condos cannot get financing, especially with Conventional mortgage insurance.
Below are some of the latest twists and rules that a bank or PMI company will be looking for: Read the rest of this entry »
Tags: condo financing
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September 22nd, 2009
I am working on an interesting loan that will make for a good case study someday, and I think homebuyers and Realtors will find it interesting too.
I am doing a loan for a homebuyer to buy a single family detached home in Falls Church, Virginia. The sales price was a little over $500,000 and the new loan is a Conventional Fixed rate 80% loan-to-value loan, which of course means we are subject to the HVCC rules. So I ordered the appraisal from the bank’s Appraisal Management Company (AMC).
For once, the appraiser was local, from Falls Church, VA so we all figured this appraiser would know the local marketplace and that we would be getting an accurate and fair appraisal. But the appraisal came in several weeks later at a price approximately $35,000 lower than the sales price. The seller was angry, the Realtors were upset, and the buyer was confused. Read the rest of this entry »
Tags: appraisal problem
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September 21st, 2009
New Development Proposed in Prince George’s County
Earlier this month, over opposition from some residents, the Prince George’s County Council approved legislation, called the Subregion 5 Master Plan, which would allow more land development in some rural areas in the southern part of the county.
The proposal includes a plan to rezone the Hyde Field airport in Clinton and replace it with about 300,000 square feet of retail space and 2,100 housing units, to include 1200 single family homes and 900 townhouses and apartments.
Developer and owner, Nabil Asterbadi, a Washington-based doctor who has owned Hyde Field since 1995 says the airport has not done well since the attacks of 9/11. Since then, there have been severe restrictions on the flights of private aircraft and business at the airport is down to 15% of what it was before 9/11.
The plan, which would impact residents of Accokeek and Clinton, is not without opposition. Area residents objecting to the new plan cite potential traffic nightmares and negative impact on a rural way of life.
Don’t locals always want to stop land development, once they buy in an area? And don’t developers just want to develop and pave over the whole country? I am sure there must be a way to provide for a happy medium. It seems to me the questions is how much density can a certain area sustain, as well as, should some areas be restricted from further growth to maintain the green space or the scenic beauty of the raw land. Whatever the answers, I think we can all agree the answers are found at a local level, and its best to let the locals, the town councils, and the developers, battle it out.
Tags: Land Development, Prince George's County
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September 18th, 2009
This post will be interesting to people buying a home, Realtors, appraisers, and most anyone involved in the real estate process.
I recently had a loan get rejected, which I am currently working to get approved. The loan was rejected due to “an unacceptable property”. Upon further questioning, the bank told me this was due to “functional obsolescence”.
The Fannie Mae Seller/Services Guide says, “Functional depreciation (which is traditionally referred to as functional obsolescence) is a loss in value that is caused by defects in the design of the structure—for example, inadequacies in such items as architecture, floor plan, or sizes and types of rooms. It also can be caused by changes in market preferences that result in some aspect of the improvements being considered obsolete by current standards—for example, the location of a bedroom on a level with no bathroom, or access to one bedroom only through another bedroom. Read the rest of this entry »
Tags: functional obsolescence
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September 17th, 2009
Getting a mortgage for a condominium in the Washington DC area has gotten more difficult, as it has for condos in all areas.
An FHA condo loan is easier to get than a Conventional condo loan. There are many rules to remember when you want to buy a condo, but the basic ones to remember to ensure that you get a mortgage are below. For FHA loans:
-the condo building usually must be 5 units or more.
-the building must be at least 51% owner occupied (this is how many units are occupied by primary residents versus investor owned units).
-there can be no right of first refusal in the condo docs.
-the condo should be complete, with no additional phasing.
-no special assessments pending.
-no legal action against condo.
-the HOA must have been in control of the owners association for at least 1 year.
-at least 90% of the units are sold.
-no single entity owns more than 10% of the building.
-adequate insurance and reserve funds in the budget.
Getting a Conventional condo loan is similar to the above, except that you must usually have at least 60% owner occupancy (some banks requires 65% or even 70%).
When a home buyer wants to buy a condo, the bank will not only qualify the home buyer, but they are also qualifying the condominium. So there are more questions to ask when buying a condo, when you want to get a mortgage.
Tags: condo, condo loan
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September 15th, 2009
FHA loans are federally backed loans insured by the Federal Housing Administration. FHA loans are traditionally used by buyers who cannot come up with the larger down payments required on a Conventional loan (which are normally 5% down to 20% down). FHA loans were typically used more by lower to moderate income buyers, however, that has all changed recently.
The program started during the Great Depression of the 1930s, when the rate of foreclosures and defaults rose sharply, and the program was intended to provide lenders with sufficient insurance to encourage them to lend.
FHA loans fell out of favor during the real estate boom of 1998-2006, as sellers did not want to be exposed to the more marginally qualified buyers that were usually attached to an FHA loan, nor did they want to hassle with the more stringent appraisal requirements of an FHA loan.
However, in a buyer’s market, FHA loans are now commonly accepted in most markets, and FHA loans have become a savior for many home buyers, and the real estate and mortgage industry in general. If it were not for the FHA loan, many real estate transactions would not occur.
FHA loans have more relaxed underwriting standards, below is a sample: Read the rest of this entry »
Tags: FHA, FHA loans
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