USDA Drastically Reduces Guarantee Fees for 100% Financing

USDA Rural San JoaquinBeginning October 1st, 2016 USDA loans will drastically reduce their upfront and annual guarantee fees.  It will allow home buyers and homeowners in rural communities to reduce the costs associated with closing and holding a USDA 100% financed loan.

USDA guarantee fees are very similar to FHA’s MIP/ UFMIP(Mortgage Insurance Premium and Upfront MIP) or VA’s Funding fee.  Both FHA and USDA charge and upfront (financed) fee and an annual fee (paid monthly), while VA only charges an upfront funding fee.

 Upfront Guarantee FeeAnnual Guaranty Fee (Paid Monthly/12)
October 2016-20171.00%.35%
2015-2016 September2.75%.50%

Over the past several years delinquency rates and foreclosures have reduced to normal levels and USDA has reduced its risk which led to a reduction in the amount of insurance they need to collect.  This is a win for borrowers who plan to move into an USDA eligible community.

What areas can I buy a home and use a USDA home loan?

USDA will allow financing on homes in areas they have deemed rural.  Below is a list of some towns, cities and communities within 75 miles that will currently work:

Galt, Lathrop, Jackson, Sutter Creek, Wilton, Linden, Lockeford, Rancho Murieta, Plymouth, Thornton, Farmington, Escalon, Oakdale, San Andreas, Del Rio, Ripon, Patterson, Discovery bay, Newman, Waterloo, Valley Springs, Wallace, Walnut Grove, Rio Vista, Camino, Placerville, and many more in between

How much will the lower Guarantee fees save me?

On a $300,000 home, the new lower USDA upfront Guarantee fee of 1.0% will save you $5,250!  This will help keep your loan balance lower because the USDA upfront Guarantee fee is normally added to the loan balance.The new .35% annual fee (paid monthly) will reduce your monthly payment by approximately $37.50/month or $450/yea.

Why hasn’t my lender offered this program to me?

The truth is, Most lenders either don’t offer the program or don’t understand it.  It’s a Niche type of loan that isn’t available for use in big cities, so many large banks and lender don’t bother with it.  We live in an area that rightfully suits USDA financing due to the surrounding rural landscape ithat is far reaching and affordable.

Banks that don’t offer USDA or the other ‘niche’ loan programs that we offer, will often purposely withhold educating and informing their customers in hopes they don’t go elsewhere for their mortgage.

And don’t think USDA is the only low down payment option you have.

If you would like to find out of you can qualify for a USDA loan and interested in comparing that option with several other home buyer assistance programs that offer down payment and closing cost assistance, call me at 209-474-7111 or email

Fannie Mae’s Foreclosure and Short Sale Waiting Periods Updated

Fannie Mae recently changed their policies regarding the purchase of a home after a major credit event like a foreclosure, short sale and bankruptcy. The changes are both positive and negative, but seem to focus on reducing the wait times for those that encountered an “extenuating circumstance” or in layman’s terms a one-time or temporary event that led to the negative credit event. These changes show Fannie Mae’s focus on helping those that were hit hard by the recession.

Derogatory EventWaiting Period RequirementsWaiting Period with Extenuating Circumstances
Bankruptcy Chapter 74 Years2 Years
Bankruptcy Chapter 132 Years from discharge date
4 Years from dismissal date
2 Years from discharge date
2 Years from dismissal date
Foreclosure Included in Bankruptcy4 Years2 Years
Short Sale or Deed in Lieu4 Years2 Years
Foreclosure7 Years3 Years


After bankruptcy, foreclosure, or short sale a borrow must re-establish credit in order to meet minimum Fannie Mae guidelines. For specific down payment and documentation needed please contact me directly.


What’s considered an extenuating circumstance?

Extenuating Circumstances must be verifiable hardships that are considered out of the borrower’s control that significantly reduce income or expense. This can be anywhere from job loss to health issues.

I foreclosed when my property lost substantial value, is that an extenuating circumstance?

Unfortunately no, that falls under a strategic default and is exactly why Fannie Mae is drawing a line in the sand. If you fall into this category waiting 3 years and using FHA may be the best option for you.

Buying a Home After College

Buying A Home After College

You’re graduated from college or trade school, and ready to ditch your rental in favor of a property you can call your own. You’ve weighed your options and decided it’s time to invest in real estate ASAP. It’s likely you won’t have the cash needed to purchase the home out right and you’ll need to obtain a loan.  Cover your basis and review the steps below to graduate from rental status into home ownership.  Do you have what it takes to qualify?

Step 1 – Employment

Loan guidelines will accept two years of school transcripts in place of a two year work history as long as the education is in line with the job you’ve landed. Loans can close after you’ve received 30 days’ worth of pay-stubs.

Step 2 – Credit

Many college students have limited credit, but programs like FHA allow lower scores and alternative credit sources like cell phone, insurance, rent, and health club memberships. Learn about building credit in my understanding credit score article.

Step 3 – Funds

You just spent thousands on school and probably have limited savings; although you may be able to buy a home without much money at all. Down payment assistance programs like CALHFA, CHF Platinum, WISH, and County/City programs can bridge the gap for first time homebuyers without notable assets.

Home Energy Ratings and Energy Efficient Mortgages

Feeling powerless against high energy costs isn’t acceptable anymore.

If you’re in the market for a home it would be wise to order a HERS report and possibly obtain an EEM.

Acronyms and programs may be a bit boring, but I assure you knowing the energy flaws of a home before you buy could save you thousands in energy costs.

  • HERS (Home Energy Rating System) is a powerful tool you can use to evaluate your homes energy consumption with an in depth diagnostic report.
  • EEM (Energy Efficient Mortgage) is added into your current mortgage to pay for energy upgrades on a home purchase.

Home Energy Rating System (HERS)
HERS inspection results are based on diagnostic testing using specialized equipment, such as: a blower door test, duct leakage tester, and infrared cameras to determine:

  • The amount and location of air loss/leakage throughout the home
  • Percentage of air loss/leakage through HVAC
  • The quality and effectiveness of current insulationgreener Solutions Energy Efficient Mortgage
  • Window and Door energy loss
  • Appliance energy assessment (Water heater, HVAC, Kitchen Appliances)
  • Solar benefit analysis

The report will produce a computerized simulation analysis with accredited rating software to calculate a rating score on the HERS index. The report will provide recommended improvements based on a cost benefit analysis and expected return on investment through energy savings. These energy upgrades can be financed through what’s called an EEM (Energy Efficient Mortgage).

Energy Efficient Mortgage
Energy Efficient Mortgage program (EEM) helps home buyers save money on utility bills by enabling them to finance the cost of adding energy efficiency features to a home as part of their home purchase or refinancing mortgage. Items that can be included in an EEM

  • Appliances (Water Heater, Kitchen Appliances)
  • Insulation
  • HVAC and Duct repair
  • Windows and Doors
  • Solar

Loan amounts vary by county and price of the home, as well as lender limits. So we like to stress that the best way to approach the topic of EEM is during the Pre-Approval/Approval stage of the lending process, not when they are looking at homes or after they found one. It’s better to go into the search with open eyes knowing your options opposed to finding out later.

The EEM shouldn’t be an added stress, the process is simple, and when you think about it, you want the savings your upgrades will bring to be greater than the cost of the upgrades, we often use the analogy you give us $50 we will give you $51 and new windows! The program is set up to provide buyers the opportunity to upgrade the home without incurring additional costs; the additional loan payment should equal the energy savings. An EEM on an older home will provide the funds necessary to upgrade while also adding which should be a no brainer.

Who should obtain a HERS report and EEM?
All homeowners can benefit from the homes energy data; however homes built before 2000 would likely benefit more. Energy focused building has improved drastically in the recent years and older homes stand to save the more.

Is the EEM used in Stockton?
The amount of Energy Efficient Mortgages in Stockton is increasing, because of companies like ours that draw attention to the cost and energy saving potential. Stockton was built in phases and the majority of homes were built prior to 1980, which leaves thousands of potential homes without energy improvements. Think about single pain windows, ineffective insulation, Missing weather stripping, Old HVAC, and aging appliances.

San Joaquin County Loan Limits – 2014 – Updated!

2014 San Joaquin County loan limits have been announced by HUD, Dept. of Veterans Affairs, and Fannie Mae. Unfortunately FHA reduced San Joaquin loan limits, while VA and Conventional limits were left relatively unchanged.

HUD reduced the San Joaquin County max FHA loan limit from 488,750 down to $304,750. That’s a reduction of $184,000 which is a 37.6% loss in FHA buying power. According to the Wall Street Journal, San Joaquin County had the 2nd highest reduction in the state and 15th highest in nation. You can view all FHA loan limit decreases on the WSJ site.

2014 Loan Limits

Loan Limits1 Unit2 Unit3 Unit4 Unit
Fannie Mae/ Freddie Mac417000533850645300801950

How will lower FHA loan Limits affect San Joaquin County?

James (JJ) Godi, of Art Godi Realtors in Stockton shared some interesting stats with me regarding a property search he did using Metrolist. From January 1st 2013 through Dec 31st 2013 there were 1,764 homes sold in San Joaquin County between $304,750 and $488,750, and 22% of those were purchased using FHA financing. That means that 22% of FHA borrowers wouldn’t be able to buy that same home in 2014. There are currently 245 active home listings in San Joaquin Valley with price points between $304,750 and $488,750 that now have fewer potential buyers.

What does this mean?

FHA isn’t an option buyers choose nowadays; it’s likely there only option. First time buyers find FHA to be the only choice due to expensive and restrictive conventional guidelines for those with less than perfect credit and limited assets. Those buyers will be forced to improve credit and save more. FHA also permits shorter wait periods for borrowers with short sales, foreclosures, and bankruptcies.  Conforming conventional loans allow down payments as low as 5% and credit scores of 620, but they typically price them differently than FHA.

How do I combat this?

It’s important to review all options available and contact me direct to discuss this personally.  Mobile 209-565-4540 | Office 209474-7111

What’s the Qualified Mortgage Rule and how will it affect you?

What’s the Qualified Mortgage Rule and how will it affect you?

The Qualified Mortgage Rule was formed by the Consumer Financial Protection Bureau (CFPB) to satisfy the “ability-to-repay” requirement from the 2010 Dodd-Frank Wall Street Reform and Consumer protection act.  Banks have the option to offer privately funded loans outside of these rules, but it could leave them vulnerable to litigation.

Ability to Repay

Over the last five years banks and the lending industry have restricted access to many of the programs that left the economy and housing industry in shambles.  The Ability-to-Repay requirements will solidify the rules; to prevent the possibility the flawed policies could return.

  • All financial information must be verified including credit history, income, assets, employment, and credit obligations.  This prevents “No-Document” loans that permitted un-qualified buyers with unverified assets to purchase homes they couldn’t afford.
  • Borrowers must meet minimum and maximum qualifying guidelines to ensure they can repay the loan.  This is in direct reference to debt-to income ratios which is calculated dividing monthly debt by monthly gross income.
  • Teaser Rates can no longer be used to qualify borrowers. Adjustable rate mortgages will be available but borrowers will be qualified based on the maximum possible rate, not just the introductory rate.

Qualified Mortgage

The CFPB created the Qualified Mortgage rules to meet all of the ability-to-repay requirements.  The Qualified Mortgage rules will be followed by lenders when a borrower is obtaining FHA, VA, USDA, Freddie Mac, and Fannie Mae home

  • No excess upfront lender points and fees.
  • No toxic loan features: including interest-only loans, mortgages with negative amortization, balloon payments, loan terms greater than 40 years (balloon payments permitted in approved rural communities)
  • Cap debt-to-income ratio of 43% (all debt divided by gross income).  

What does all of this mean for me?

It all depends on your situation on whether this will impede your plans.  According to the Core Logic only 12.8% of the mortgages in 2012 would have been affected by the Qualified Mortgage rules.

  • With limited points and fees expect most lenders to raise minimum loan amounts in order to comply.  The limitedQualified Mortgage Stockton fees lenders can charge will make loans under $100,000 harder to come by.
  • “Toxic Loans” were in fact toxic for some, but helpful for those that understood what the loan entailed and why they needed it.  Most of these programs were meant to help self-employed borrowers, investors, and commissioned employees.  Fortunately this won’t impact the market much since most of these programs were sent out to pasture years ago.
  • Lenders will be providing buyers with pre-qualification letters based on the maximum 43% debt to income ratio which could reduce the amount you qualify for (FHA currently permits DTI’s above 50% with compensating factors, but will be reduced when this takes affect).