Every year, the Federal Housing Finance Agency (FHFA) sets a dollar cap on conventional mortgages that Freddie Mac or Fannie Mae are allowed to back, commonly referred to as a conforming loan limit. In 2020, the conforming loan limit for a single-family home was $510,400. This year, the conforming loan limit for a single-family home increased to $548,250, nearly 7.6% higher!
This means Freddie Mac or Fannie Mae can purchase conventional loans valued at or under the conforming loan limit from mortgage lenders. In most areas, the maximum conforming loan limits are as follows: Read the rest of this entry »
Tags: loan amount, loan amounts, loan limit, loan limits, maximum mortgage, mortgage limits
Posted in Home Buying Process, Loan Types, mortgage, Refinance, Underwriting Rules | No Comments »
2023 conforming loan limits have been announced! The Federal Housing Finance Agency (FHFA) sets the loan size limits each year on conventional mortgages that Freddie Mac or Fannie Mae will buy from mortgage lenders. In 2022 the conforming loan limit for a single-family home was $647,800. This year, the conforming loan limit for a single-family home has increased to $726,200, a little over a 12% increase! Read the rest of this entry »
Tags: Fannie Mae, Freddie Mac, loan amount, loan limits, loan size, mortgage limits
Posted in Home Buying Process, housing values, Loan Types, mortgage, Underwriting Rules | No Comments »
People spend a lot of time looking for the perfect home. There are the countless hours spent poring over real estate listings, the weekend trips to open houses, and the days of driving with your realtor from showing to showing. However, choosing a mortgage lender or broker is often treated as an afterthought—many buyers simply go with their own bank or a broker/lender recommended by their realtor without researching competitive rates and looking for lenders who will also educate them.
This is a critical mistake. Read the rest of this entry »
Tags: choosing a lender, mortgage broker, mortgage lender, mortgage loan officer
Posted in Home Buying Process, interest rates, Loan Process, Loan Types, mortgage, Refinance | No Comments »
FHA Loans vs Conventional loans is an important discussion. Since you can no longer drop the MIP on an FHA loan, I wanted to show a comparison between a 3.5% down payment FHA loan and a 5% down payment Conventional loan. I think it may encourage some buyers to save up a bit more to get 5% down for a Conventional loan. Read the rest of this entry »
Tags: Conventional loan, FHA loans, interest rates
Posted in FHA, interest rates, Loan Process, Loan Types | No Comments »
I am guessing that if rates climb, as many people expect has to happen at some point (although the way things have been going, who knows!), that Adjustable Rate Mortgages (ARM) will become more and more popular. Hence, Read the rest of this entry »
Tags: ARM loans
Posted in Loan Types | No Comments »
Those “no cost” refinance deals, while real, are a bit misleading. They are usually advertised on cable TV or radio, and are short on details. What they don’t tell you is that they charge a higher rate for a “no closing cost” refi. Read the rest of this entry »
Tags: no cost refi, refinance
Posted in Loan Types, Refinance | No Comments »
Jumbo loans, also called Non-Conforming loans, are loans that do not conform to the Conforming loan limits. Conforming loan limits can be found by clicking here. If you have a loan amount that is higher than the Conforming loan limits, then you have a Jumbo loan. Jumbo loans require that a mortgage borrower has cash reserves. The Jumbo loan cash reserves requirement is different from Conforming loans, in that Conforming loans many times do not require cash reserves at all.
Cash reserves is a certain amount that a lender may require that the borrower has left over after they pay their down payment and closing costs at closing, in reserve.
Different lenders have different requirements for cash reserves for their Jumbo loans. There are requirements for the amount of cash reserves, and there are requirements for the types of cash reserves.
Amount of cash reserves (the below is illustrative as it may vary from lender to lender):
6 months of the PITI (principal, interest, taxes, and insurance) are required in general.
4 months PITI if you are retaining your current primary residence
4 months PITI for each rental property you own
4 months PITI for a second home/vacation home that you own
Cash reserves are based on all recurring housing expenses for the subject property and in some cases for other property owned by the borrower. Cash reserves are also cumulative, so if you are buying a new home and have a rental property, per the above, you may need 10 months of cash reserves. Housing expenses, also known as principal, interest, taxes, insurance, and assessments (PITIA), include but are not limited to:
- Principal and Interest (as used in the qualifying payment amount)
- Insurances (hazard, flood, and/or mortgage)
- Real Estate Taxes
- Ground rent/leasehold
- Special Assessments
- Homeowners’ association fees
- Monthly co-op fees
- Any home equity loan or HELOC payment, if applicable
Types of cash reserves:
- Cash accounts (checking account, savings account, money market accounts, CD’s)
- Mutual Funds
- Stocks
- Gift money is usually not allowed to count towards cash reserves
- Retirement accounts may or may not be allowed to count towards cash reserves
I have seen lenders go back and forth over the years on allowing retirement accounts, such as 401(k), 403(b), IRA, and TSP; to be used as cash reserves.
When a mortgage lender is considering retirement accounts as cash reserves, they are not suggesting that you must liquidate or borrow against the retirement account to generate cash. Lenders are only considering the balance of the retirement account without having to liquidate any of it or borrow against any of it.
Retirement accounts are not very liquid, and hence they shouldn’t be considered cash, which is why at some points in time I’ve seen lenders not allow retirement accounts to count towards cash reserves requirements.
But currently, as of the date of this blog, we have many lenders we work with that allow retirement accounts to be used as cash reserves. This is an important development because it now allows borrowers to only need to have their down payment and closing costs liquid, but not the cash reserves.
Mortgage guidelines can change frequently, please schedule a call or email me with questions on your specific situation.
Tags: cash reserves, Jumbo loans, mortgage guidelines, mortgages
Posted in Loan Process, Loan Types, mortgage, Underwriting Rules | No Comments »
Both Fannie Mae and Freddie Mac changed their seasoning requirements for cash-out refinances. They are now requiring 12 months seasoning for cash-out refinances when paying off an existing mortgage. What does this mean? Read the rest of this entry »
Tags: cash out refinance, cashout refinance, mortgage guidelines
Posted in Home Buying Process, interest rates, Loan Process, Loan Types, mortgage, Refinance | No Comments »
Each mortgage lender has dozens of loan programs. And there must be hundreds of lenders. We work with 50 lenders or so. And each lender may have a different interpretation or guideline for each category of the loan. These categories would be related to credit, income, appraisal, assets and debt ratios.
Read the rest of this entry »
Tags: loan programs, loan types, mortgage shopping
Posted in FHA, Loan Types, Underwriting Rules | No Comments »
Buy Fannie Mae Foreclosures using the HomePath Program, visit: http://www.homepath.com for property listings.
Owner Occupied loans to 97% LTV Read the rest of this entry »
Tags: Homepath Loan Program, mortgage loans
Posted in Loan Types | No Comments »
For VA loans closed on or after October 1, 2011, the VA Funding Fee (which is the VA equivalent of mortgage insurance) is dropping. This change is due to passage of Public Law 112-26, Restoring GI Bill Fairness Act of 2011. It is surprising to see fees actually drop! Read the rest of this entry »
Tags: VA loans
Posted in Loan Types | No Comments »
I am occasionally asked about construction/renovation loans or the FHA 203k loan (which is FHA’s version of construction/renovation loan), so I wanted to write an overall analysis/opinion of these loans. They are very complicated Read the rest of this entry »
Tags: construction loan
Posted in Loan Types | 2 Comments »
Some things are permanent, and some are temporary. The cardboard house in this picture, I’d speculate that it is temporary, very temporary. The recent FHA loan limit increase, the one that the NAR (National Association of Realtors) was busy patting itself on the back for having lobbied for it, and helping to get it passed; it seems to be temporary. So what is all of the fuss over. For now, we have one extra month of getting loans done at the higher loan limit, that is a big deal? The NAR, however, said the loan limit increase is good for two years. Here is their announcement: Read the rest of this entry »
Tags: FHA, FHA loan limits, loan limits
Posted in FHA, Loan Types | No Comments »
In 2008 Congress decided the mortgage world and the economy in general were imploding. And one of the hundreds of ways they decided that they knew better than anyone else and that they would help (i.e. interfere), was to raise the maximum conforming loan limit that Fannie Mae and Freddie Mac offered for loans.
Read the rest of this entry »
Tags: loan limits
Posted in Loan Types, Underwriting Rules | No Comments »
If you have an FHA loan, you have probably heard you can do an FHA streamline refinance. This FHA loan is a type of refinance where you can refi without an appraisal. Read the rest of this entry »
Tags: FHA, FHA loans, FHA refi streamline
Posted in FHA, Loan Types | 1 Comment »
Getting a 2nd trust mortgage when you bought a home, called a “Purchase Money 2nd trust,” was something I had never heard about when I got in the mortgage business in 1986. I’d always thought a 2nd trust was something you got when you lived in a property for a long time and had built up a lot of equity (i.e. an equity line) and then wanted to tap the equity for home renovations or debt consolidation. However, 2nd trusts to help purchase a new home became common in the real estate boom Read the rest of this entry »
Tags: 2nd trust, HELOC
Posted in Loan Types | No Comments »
A VA loan is a mortgage loan guaranteed by the Veterans Administration. There are numerous mortgage guidelines for a VA mortgage. I wanted to list some of the more important ones below, but you always need to speak to an experienced mortgage loan officer and have them discuss your specific circumstances as there are many other things to consider in addition to the below. Read the rest of this entry »
Tags: va loan guidelines, VA loans, VA mortgages, veterans administration
Posted in Loan Types, mortgage, Underwriting Rules | No Comments »
Anyone that reads my blog knows that in general I am not a fan of Interest Only (IO) loans. I have said before that an IO loan is like putting your mortgage on a credit card. But on a refinance it may make sense if you have already built a lot of equity, are more interested in savings than equity building, and know you are not going to live in the property forever so have no interest in getting the mortgage paid off.
I had a client tell me recently Read the rest of this entry »
Tags: Interest Only loan, interest rates, refinancing
Posted in interest rates, Loan Types | No Comments »
Do you remember when Interest Only loans were all the rage? And now I never get a phone call about them, and the only loan that anyone wants is a 30 year fixed-rate (and the occasional 5 Year ARM-fully amortizing by the way). How is it that we can dupe ourselves so easily in the middle of an investment bubble and lead ourselves to believe just about anything? Below is an old e-mail that I dug up that I wrote someone when they inquired about an Interest Only loan. I thought it was interesting. Read the rest of this entry »
Tags: Interest Only loan
Posted in Loan Types | No Comments »
There was an article recently on TechCrunch.com that was titled “This Could Be The Mortgage Industry’s iPhone Moment” that proclaimed “Quicken Loans sees Rocket Mortgage as the turning point in home financing” and “It’s home financing’s iPhone”, and “The process takes less than 10 minutes.” Hmmm, we’ll see about that. Read the rest of this entry »
Tags: mortgage offers. rocket mortgage
Posted in Loan Process, Loan Types, Refinance | No Comments »
Jumbo mortgage loans are usually confusing to the average mortgage consumer. No one seems to know what defines a Jumbo mortgage loan, and no one realizes that there can be different underwriting guidelines for Jumbo mortgage loans than for non-Jumbo (also called Conforming) mortgage loans.
Jumbo loan amounts may vary county by county.
It is first important to know that there can be three different loan amount categories. There are:
- Conforming loans, which in 2019 go up to $484,350
- Conforming “High Balance” loans, which can go from $484,351, to as high as $726,525 if you are in a high cost area.
- Jumbo loans (also called Non-Conforming loans) are loans higher than the county Conforming loan limit.
Read the rest of this entry »
Tags: Jumbo, Jumbo loans, Jumbo mortgage, Jumbo mortgage guidelines
Posted in Loan Process, Loan Types, mortgage, Underwriting Rules | No Comments »
The 10 Year Treasury Bond was around 1.8% as of October 28th 2019.
The 10 Year Treasury Bond is not a direct correlation to mortgage rates. It is simply good to know historical information on treasury bond rates.
On August 2nd 2019 the 10 Year Treasury Bond was 1.846%.
On September 3rd 2019 the 10 Year Treasury Bond was 1.461%.
Below are some interesting historical numbers:
In 2018 the average yield of the 10 Year Treasury Bond was 2.91%.
In 2017 the average yield of the 10 Year Treasury Bond was 2.33%.
In 2007 the average yield of the 10 Year Treasury Bond was 4.63%.
In 1997 the average yield of the 10 Year Treasury Bond was 6.35%.
In 1987 the average yield of the 10 Year Treasury Bond was 7.18%.
In 1977 the average yield of the 10 Year Treasury Bond was 7.42%.
Where is the 10 Year Treasury Bond headed next? Stay tuned!
*The source for these numbers comes from:
https://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart
and
https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx
Tags: bond market, interest rates, mortgage rates
Posted in interest rates, Loan Types, mortgage, Refinance | No Comments »
The Good Faith Estimate (GFE) is one of the worst ways to compare lenders. I must get asked for a GFE 10 times a week, and 10 times a week I try and explain that using a GFE is the wrong way to compare lenders. Below are a few reasons why: Read the rest of this entry »
Tags: Good Faith Estimate, interest rates, mortgage shopping, rate shopping
Posted in Government, interest rates, Loan Types, Refinance | No Comments »
Many ARM loans are based on the LIBOR index (London Interbank Offered Rate), which currently stands at 0.58%. If you Google “LIBOR interest rate adjustment chart” you can find your own results to see how LIBOR has adjusted over time, or go to a chart of historical LIBOR rates by Read the rest of this entry »
Tags: ARM, ARM loans, LIBOR
Posted in interest rates, Loan Process, Loan Types | 2 Comments »
Fannie Mae and Freddie Mac just announced loan limits for 2011, and they have remained unchanged from 2010. Each year Congress Read the rest of this entry »
Tags: loan limits, mortgage loans
Posted in Loan Types | No Comments »
There are some mortgage agencies, like Fannie Mae, that will not do a loan for an investment property buyer that already has what they consider to be excessive financed properties.
If you are buying a new primary residence, there is no limit to the number of financed properties that you already have.
However, if you are buying a second home/vacation home or rental property, you cannot have more than 10 financed properties already. Read the rest of this entry »
Tags: investment property, investment property financing, Real estate investor
Posted in Home Buying Process, Loan Process, Loan Types, mortgage, Underwriting Rules | No Comments »
The mortgage loan limits have been changed for 2017. For Conventional loans the new limits are:
Conforming loans are:
| Units |
|
|
| 1 |
$424,100 |
|
| 2 |
$543,000 |
|
| 3 |
$656,350 |
|
| 4 |
$815,650 |
|
For Conforming “High Balance” loans in designated high cost areas the new limits are:
| Units |
|
| 1 |
$636,150 |
|
| 2 |
$814,500 |
|
| 3 |
$984,525 |
|
| 4 |
$1,223,475 |
|
Find more details on Conventional loan amounts click here.
Any Conventional loan amount which is higher than the above limits is considered a Jumbo loan (aka non-conforming) and is subject to different underwriting guidelines.
To look up FHA loan limits for your area click here.
To look up VA loan limits for your area click here.
Tags: loan amount, loan limits
Posted in Loan Types, mortgage, Underwriting Rules | No Comments »
I frequently have people ask me for “one of those no-cost refi’s”. Some people think that mortgage lenders are so hard up for business that they are willing to lose money and simply pay the closing costs for the mortgage borrower. I don’t know of any businesses where losing money is part of the process of making money. A no-cost refi actually comes with a cost…a higher interest rate.
The reality is that a no-cost refi is one where the closing costs are built into a higher interest rate. Read the rest of this entry »
Tags: interest rates, mortgage rates, no cost refi, refinancing
Posted in interest rates, Loan Types, mortgage, Refinance | No Comments »
Everyone likes to think PMI (Private Mortgage Insurance) is evil. Everyone likes to think they should not have to pay it, and everyone wants to find a way around paying it. There are ways to work around PMI, but like all things in life, there are trade-offs. A person really needs to look at all the options and trades-offs, and consider how long they think they are likely to spend in their new home. Then everyone needs to consider paying PMI! What do I mean? Read the rest of this entry »
Tags: Combo loan, interest rate, interest rates, LMPI, loan process, loan types, PMI
Posted in Loan Types, Uncategorized | 2 Comments »
READ THE FINE PRINT! READ THE FINE PRINT! Got it? Good.
I have a client who wants my help after having received a mortgage through another bank one year ago. He has been thinking he had a 3/1 ARM on his 2nd trust. A 3/1 ARM is when you have a fixed rate for the first 3 years of the mortgage, and then it adjusts annually thereafter. But, what he really has is a 1 Year Balloon! Read the rest of this entry »
Tags: financing options
Posted in Loan Types | No Comments »
I have heard more and more clients tell me that some nameless, faceless mortgage people or “friends” have told them they should refinance from a Conventional loan to an FHA loan. Huh? Usually the smart advice giver is giving the advice because they know the client has had a hard time getting a sufficient appraisal to refinance as a Conventional loan, and that FHA requires much less equity.
Wow, I am surprised that such incredibly expensive advice is still being passed out. Read the rest of this entry »
Tags: FHA refi, refinance
Posted in Loan Types | No Comments »
A Reverse Mortgage is when your house pays you back, or that is how the commercial goes. But at what cost? And is it worth it?
I have been doing some more research on these Reverse Mortgages (RM). I have been trying to condense 80 pages of data down into something manageable. Here are a few important notes I came up with. Read the rest of this entry »
Tags: reverse mortgage
Posted in Loan Types | No Comments »
I get a lot of clients asking me if they would save a lot of money by setting up a bi-weekly mortgage payment plan. A bi-weekly mortgage is one where you make a partial mortgage payment that gets deducted out of every paycheck, which for most people is every 2 weeks. With 52 weeks in a year, and 26 pay periods if you get paid twice a week, it is a convenient way to make 13 payments a year instead of 12. I hear people say it is a fraud, and not to do it. And then I hear people say that you can cut 13 years off of a 30 year loan, and that it is amazing. It is neither. Yes, you will Read the rest of this entry »
Tags: bi-weekly mortgage, biweekly mortgage, mortgage prepay, pre-payment, prepayment
Posted in Loan Types | No Comments »
The maximum loan size on mortgages varies from area to area. Most people are aware that the Conforming loan limit can be extended in high cost areas, which are typically the more urban, high cost markets. But many people are not aware that the Conforming loan amounts as well as the Conforming High Balance loan limits vary from area to area, based on a formula using median sales price information for the area. So a Conforming loan can be raised to a higher Read the rest of this entry »
Tags: Conforming High Balance loan, Conforming Plus, Conventional loan, loan limits, Super Conforming
Posted in Loan Types, Underwriting Rules | No Comments »
What are tax & insurance escrows? Escrow generally refers to money held by a third-party on behalf of transacting parties. In the case of a mortgage, a lender will hold money in escrow on behalf of the mortgage borrower to pay the property tax and homeowners insurance bills as they are due. Read the rest of this entry »
Tags: escrows
Posted in Loan Types | No Comments »
Actually, the refinance boom is indeed over; however, there are a fair amount of people that still need to refinance. For example, I know of many people who have excellent interest rates on a 15-Year fixed rate mortgage because they thought they would be in their home forever and wanted to get the mortgage paid off over a shorter term, but now have suffered a job setback or some other sort of financial blow, and need to revert to a 30-Year mortgage to reduce the monthly payment. Let me give Read the rest of this entry »
Tags: 15-year fixed, 30-year fixed, refinance
Posted in interest rates, Loan Process, Loan Types, Refinance | No Comments »
Actually, the refinance boom is over; however, there are a fair amount of people that still need to refinance. The problem is that the people that have not refinanced when rates were low simply don’t realize that they should still refinance. The people that obviously needed to refinance have already refinanced, in some cases multiple times. There are many people left that can refinance. For example, Read the rest of this entry »
Tags: ARM, ARM loans, Fixed rate, interest rate, refinance, Refinance boom
Posted in interest rates, Loan Types, Refinance | No Comments »
Actually, the refinance boom is indeed over; however, there are a fair amount of people that still need to refinance. There are a stunning amount of home equity lines (HELOCs) outstanding and most people will need to refinance those. Most HELOCs were set up so that the first ten years of the loan only require interest only payments and no principal is due. Then, in year 11, the principal would start to amortize, and it amortizes over 20 years, not 30. This is a problem because Read the rest of this entry »
Tags: HELOC, interest rate, refinance
Posted in interest rates, Loan Process, Loan Types, Refinance | No Comments »
The Home Affordable Refinance Program (HARP) is a mortgage assistance program, set up by the Federal Housing Finance Agency in March 2009 to help underwater and near-underwater homeowners refinance their mortgages.
After the housing market crash in 2009 many homeowners were faced with a situation where their house was considered “underwater”. In this scenario, the house value was less than the mortgage loan cost, in other words, having a negative equity value in the home. Refinancing was not an option, nor was selling the home unless they paid the lender for the difference. Unfortunately, this lead many homeowners into foreclosure. Read the rest of this entry »
Tags: Fannie Mae, Freddie Mac, HARP, Loan, Loan Lookup, refinance, underwater mortgage
Posted in Loan Types, Refinance | No Comments »
Prior to 2020, veterans could borrow more than the Veteran’s Administration (VA) Loan Limits capped amount, but had to have a down payment of 25% of the difference between the maximum loan limit and the sales price. As of January 1, 2020, the VA has started to allow $0 down loans that exceed the county loan limits.
So now, if a veteran wants to buy a home for $1,000,000 with no money down, they can. $2,000,000? Sure thing. $3,000,000? No problem! However, there are rules and guidelines that come with this new change. Read the rest of this entry »
Tags: VA down payment, VA mortgage, VA mortgages
Posted in Home Buying Process, Loan Process, Loan Types, mortgage, Underwriting Rules | No Comments »
With a VA loan, the United States Department of Veterans Affairs requires that the closing costs on a VA refinance be recouped in 36 months or less. If the recoupment period is over 36 months the loan will be rejected.
In other words, the refinance closing costs divided by the monthly savings has to be 36 or less, signifying the number of months in the recoupment period.
For example, if the closing costs on a VA refinance are $3,000 and the monthly savings on the refinance are $400 a month, the recoupment period is 7.5 months because $3,000 divided by $400 a month in savings = 7.5 (well within 36 months). Read the rest of this entry »
Tags: Recapture Period, recoupment period, VA mortgage, VA refinance
Posted in interest rates, Loan Process, Loan Types, mortgage, Refinance, VA Mortgage | No Comments »
Watch out for the asterisk in a sales contract! If you are negotiating with a builder to buy a new construction home and are being offered an incentive to use the builder’s preferred lender or title company, watch out for the asterisk! Or sometimes if you are being asked to consider using an “affiliated service provider” by a Realtor, remember you can always say “no thank you.” Read the rest of this entry »
Tags: seller credits
Posted in Loan Types | No Comments »
If you own a business and have a loan for it, and you are planning on buying a home, you might be wondering if the business loan will affect whether or not you can get a mortgage. A business loan can impact your credit score if you are the sole proprietor of the business and take out the business loan in your name instead of the business’ name, or if you personally guarantee the loan. A lender will be looking to see if you and your credit are stable when they decide to give someone a mortgage loan.
Read the rest of this entry »
Tags: mortgage rules for self employed, underwriting
Posted in Loan Process, Loan Types, Local News | No Comments »
