Loan Limits Rise for FHA and Conventional Loans

Loan limits rise in San Joaquin County and Sacramento county for the third year in row.  Over the past 8 years our housing prices have shifted drastically and many of our home prices saw 40-60% drops from their 2007 highs.  The economy has been improving and our housing market has rebounded faster than most thought was possible; which is why were seeing loan limit increases. This is welcomed news as many homes in San Joaquin and Sacramento counties have been priced above FHA loan limits for years.

When Loan limits rise potential buyers can purchase a home that may have been out of reach by offering a wider variety of favorable guidelines that FHA and conventional loans provide. Buyers purchasing above set loan limits can still use Jumbo financing, but that also comes with many the negatives borrowers are looking to avoid like larger down payments, higher interest rates, and strict UW guidelines.  Using traditional conforming financing is typically the cheapest and easiest financing to obtain which is why it’s so great when they widen the limits.

2017 FHA Loan Limits San Joaquin

2017 FHA Loan Limits - San Joaquin County (Stockton, Lodi, Manteca)
SingleDuplexTriplexFourplex
$362,250$463,750$560,550$696,650

2017 Fannie Mae Loan Limits San Joaquin

2017 Fannie Mae Loan Limits for San Joaquin County (Stockton, Lodi, Manteca)
SingleDuplexTriplexFourplex
$424,100$543,000$656,350$815,650

2017 FHA Loan Limits Sacramento

2017 FHA Loan Limits Sacramento (Elk Grove, Natomas, Galt, Folsom, Sacramento)
SingleDuplexTriplexFourplex
$488,750$625,700$756,300$939,900

2017 Fannie Mae Loan Limits Sacramento

2017 Fannie Mae Loan Limits Sacramento (Elk Grove, Natomas, Sacramento, Folsom,Galt)
SingleDuplexTriplexFourplex
$488,750$625,700$756,300$939,900

 

 

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 jwomack@themortgagehouse.com

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.

New Home Owners Checklist

You didn’t think your work was over did you?

After waiting weeks to close, providing piles of documents, and signing countless forms the home you dreamed of is finally yours. Yes the buying process is over, but the hard work isn’t and I’ve compiled a list to help. The new home owners checklist should help guide you into a smooth transition.

Change the locks
You never know who might have a key to your home and it’s important to re-key the home ASAP to prevent unlawful access.

Hook up utilities
Contact your local utility providers to set up service. Some providers will require the deed before activating service. The most common items are electricity, gas, water, trash/sewage, cable, and internet)

Change your address
Visit your local post office and grab a change of address package. The package comes with coupons for home related services and items like hardware stores, window coverings, and moving supplies.

Replace batteries in smoke and CO2 alarms
The batteries may be working currently, but you have no idea when they were replaced.

Map the circuit breaker
Before moving everything in the home; locate the circuit breaker and label it. This can help you with troubleshooting problems later.

Find the water and gas shutoff valves
Finding this will shorten the time it takes stop a gas leak or plumbing disaster.

Create a House Binder
Organizing documents associated with your home will help with future problems. The items listed below are important, but they are rarely looked at and often get lost.

Items to include in the binder

  • Notes, Deeds, and Contracts from the purchase
  • Contact information of all parties involved (Lender, Realtor, Insurance, Escrow, Title, etc)
  • Appliance Information (Manuals, Receipts, Service/ Warranty info)
  • Utility account and contact numbers (Water, Cable, Trash, Electricity)
  • Neighbor’s name and phone numbers
  • HOA bylaws and contact info
  • Irrigation pipe layout
  • Insurance Policies

First Aid and home safety
Make sure the home has safety items like flashlights, fire extinguishers, and a first aid kit.

Congratulations on your new home purchase!

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
FHA304750390100471550586050
Fannie Mae/ Freddie Mac417000533850645300801950
VA417000N/AN/AN/A
HECM625500N/AN/AN/A

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
loans.

  • 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).