9 Ways Your Property Becomes “Unmortgageable”

According to HUD, the Federal Housing Administration insures 4.8 million single-family mortgages as well as mortgages for 13,000 multifamily buildings. These account for 16% of mortgages written this year and 20% of those for new homes. For first-time buyers, FHA standards are especially important.

But the government is stringent about which loans it will approve or insure. The FHA and HUD give property appraisers a clear list of home problems that are not acceptable, including health, safety and structural hazards.

According to HUD and an array of real-estate experts and brokers, these 10 problems may make home-loan qualification difficult — or downright impossible — for buyers, no matter what credit score they may have.

1. Leaning walls, crumbling foundations  

Before the FHA will sign off on a mortgage, it requires the repair of any structural defect that, without fixing, would leave a house unmarketable.

If the subject property is in such poor condition that it may be impractical to bring it up to FHA’s minimum property requirements, the appraiser should recommend rejecting the property.

Sinking, disintegrating and otherwise failing foundations can lead to a mortgage rejection under FHA rules.

Non functioning drains or any drainage issues can also hurt you. In addition, soil issues indicated by peripheral walls leaning or collapsing can also rise as a serious problem if your house is on the side of a steep hill or valley.

2. Living near an airport runway

The loud noises of jet engines rattling a home, is not necessarily the main reason for this potential mortgage killer.

The FHA has one key condition when it comes to living near any airports or runways: There must be “evidence of acceptance (of the noise) in the market and (that) use of the dwellings is expected to continue.” In other words, the mortgage likely is acceptable if the airport isn’t planning on expanding.

Buyers must also receive a notification whether the house is a “runway zone”. When the loan-application process begins, the would-be buyer must be informed of all implications that come with living near a runway. The buyer then must sign a document acknowledging the receipt of that information. Without these in place, lenders may hesitate on making a deal.

3. A leaky roof

Whether you’re talking about its walls, floors, windows or doors, homes must be waterproof. That, of course, all begins with the roof.

The FHA, in particular, doesn’t want a roof to just block moisture, it has to last.

4. Avalanche or mudslide threat

Government lending standards frown upon homes that face a threat of any mud or landslide.

Federal housing regulations require that residential properties be free from foreseeable hazards … which may affect the health and safety of the occupants or the structural soundness of the property.

The FHA identifies rock slide areas as red or blue zones. Homes located within either color on federal housing maps are ineligible for FHA insurance and should be rejected.

5. Missing appliances

In an era thick with foreclosures, real-estate professionals may be used to going through  distressed properties and seeing that stoves, dishwashers, bathtubs and mounted appliances and fixtures are missing.

In some real-estate-owned properties — homes possessed by a bank, a government agency or a government-loan insurer, typically after an unsuccessful foreclosure auction. For instance, all or some of the appliances may be missing, and there may be damage to the floor, wall or ceiling finish as a result of the removal which will back loans on these properties, if certain hurdles are cleared. Depending on the damage, the FHA advises appraisers to note those holes, cracks and gouges as “deferred maintenance” and make sure the house is devalued appropriately.

6. Unheated rooms

All rooms must have a heat source or receiving at least some source of heat source, according to FHA rules.

There are, however, a handful of geographic exceptions: homes in Hawaii and the Florida counties of Lee, Charlotte, Glades, Hendry, Palm Beach, Collier, Broward, Monroe and Miami-Dade don’t require heat if the lack of a furnace is normal for the local housing market and doesn’t hurt the property’s marketability.

7. Lava flows

Given that thousands of American homes are in the Hawaiian islands, FHA mortgage rules include the threat of hot lava in those areas.

Federal housing policies on volcanic hazards were established in 1971 and include boundaries for two specific areas on Hawaii’s big island that may be in lava’s path. The FHA will not back loans in these zones.

Zone No. 1 includes the summit areas and active parts of the rift zones of Kilauea, a volcano on the southeastern side of the island, and Mauna Loa, a volcano on the southern end of the island. Zone No. 2 includes several areas adjacent to and down-slope from the active rift zones of those two volcanoes.

8. Underground oil tanks and wells

Whether they are still operating or abandoned, fuel tanks and wells buried below a residential property could derail a mortgage loan if they are detected or noted in property records.

Tanks and wells point out that they pose potential hazards via fire, explosion and ground pollution. Therefore, no dwelling may occur closer than 300 feet from an active drilling site or 75 feet from an operating well.

9. Termites

Wood-chomping bugs can eat through walls, ceilings and can have a major impact on a home’s chances of qualifying for a mortgage, real-estate experts say.

Termites can cause serious problems in the wood structural components of a house and may go undetected for a long period of time. However, the agency requires inspection only if there is evidence of “active infestation.”

FHA designated two termite infestation probability zones.

The first — a “very heavy” termite infestation — includes Alabama, Florida, Georgia, Mississippi, South Carolina and Puerto Rico. The second, classified as having “moderate to heavy” termite activity, includes Illinois, Indiana, Kentucky, North Carolina and Tennessee.

Understanding Mortgage Credit Scores

Your credit report is separate from your credit score, even though your score is based on your report. In addition to viewing credit reports from the three major reporting bureaus, you also should obtain your FICO score.

Credit Checklist

• Payment history — Do you pay your bills on time?
• Amounts owed — What is your overall debt?
• Length of credit history — How long have you been borrowing money? Lenders like it if you have a long credit history
• New credit — Have you applied for any new credit?
• Types of credit used —  Bank cards, car loans, student loans, etc.

What’s a Good Score?

The FICO scores range from 350 to 850; an 850 is the best and 723 is the average score in America.  You can expect good mortgage interest rates at the 720 to 760 level and up.

If you notice you are receiving a lot of zero percent credit card or lines of credit offers, your credit is probably in a good shape.

Homebuyers who pursue an FHA loan, one of the most common loan types for first-time purchasers, can usually secure a loan if their credit is 620 or over.

Free Reports

Your credit report is easy to get. Consumers can access one free credit report per year from each of the three reporting bureaus: Equifax, Experian, and TransUnion. The online report is generated after you answer a series of security questions and only takes about 10 minutes to complete.

Each FICO score costs approximately $15, but, this may save you thousands over the life of your mortgage if you end up with a lower interest rate.

Insurance

How do you know what a good score is and what a bad score is?

It’s a little bit tricky since different scores are calculated in different ways. Scores may range from around 300 to 900 with the average credit score in America being at about 740. Here is an approximate range of how credit scores are judged:
Excellent credit = 720 and above

Good credit = 660 to 719

Fair credit = 620 to 659

Poor/bad credit = 619 and below

How Credit Reports Affect Your Mortgage

Before you start house hunting and getting pre-approved for a home loan, check your credit report and get your FICO scores. Why? Your credit rating may be the single most important piece of financial information you have to obtain a mortgage at the best interest rate.

Checking your credit rating before you purchase will give you time to correct any errors and to clean up your ratings.

What’s in a Credit Report?

Credit reports are a history of your track record of borrowing and repaying banks, credit card companies, and any other lenders. When you apply to borrow money, the lender uses the credit report to decide if you are a safe bet, or a risk. They also base whatever interest rate they offer on that report and your score.

A credit report includes:

• Credit history. This includes account information detail, such as your payment history, and specifically information about accounts that may have been sent to debt collection agencies. It also includes the number of accounts you have and the type of each, and if you are in good standing with each.
• Who is examining your credit. Any inquiries by lenders or others about your credit is recorded as well.
• Any judgments against you, such as bankruptcy.
• Personal information about you, such as your addresses. Social Security number and your previous employers.

How to Request a Report

There are three major credit-reporting agencies: Equifax, TransUnion, and Experian. You can receive a free copy of your credit report once a year from AnnualCreditReport.com, which gets the reports from each of the three companies.

Which Mortgage is Right for You?

The mortgage world can be very confusing. Every mortgage has variables that determine how much a borrower ends up paying.

Before you begin your purchase, take a look at the different types of loans available today and which one are you most likely to benefit from.

30-year Fixed-Rate Mortgage

This mortgage combines a stable, fixed interest rate with a long loan term that helps create manageable payments for millions of people. During the years leading up to the current mortgage crisis, many homebuyers strayed from this in search of loans with lower interest costs. Today, many borrowers are returning to the 30-year fixed-rate way.

This is best for borrowers who plan to remain in their homes for a long time and/or who want the security of knowing their monthly payment will never change.

30-year Jumbo Mortgage

Jumbo mortgage loans are 30-year fixed-rate loans too big to be bought and repackaged by mortgage giants Freddie Mac and Fannie Mae for resale to investors. Banks that issue jumbo mortgages have to hold onto the debt themselves.

As a result, jumbo borrowers can expect not only a higher interest rate on their loan, but also have more difficulty finding a lender.

Jumbo loans are best for buyers who want large, expensive or midrange homes in areas of where housing is more expensive.

One-year ARM

ARM stands for adjustable-rate mortgage. Unlike fixed-rate mortgages, these loans don’t have a rate guaranteed to remain stable for the duration of the loan. The introductory rates on these loans, which last only for the first year, often are significantly lower than rates on fixed-rate loans. The term for these types of loans are usually 30 years.

After one year, the interest rate and the monthly payment, adjusts periodically based on a mortgage index such as the Libor (London Interbank Offered Rate) or COFI (11th District Cost of Funds Index). In a falling-rate environment, that’s a good thing, as it results in lower payments. However, if rates increase, you’ll have higher payments.

ARM’s are good for buyers who don’t plan to stay in their homes very long and who are looking for lower borrowing costs.

5/1 ARM

The 5/1 ARM is an adjustable-rate mortgage that has a fixed rate for five years. After that, the rate adjusts periodically. Buyers benefit from lower borrowing costs when interest rates fall, but get stuck with higher payments when interests rise.

5/1 ARM are for buyers who intend to sell within five years and are looking to cut down on their mortgage costs.

10 Tips Every Homebuyer Needs to Know Before Buying

Buying a home can be confusing, especially for first-time homebuyers.

While it will never be a quick and easy process, there are answers to several questions that if understood up-front, it can relieve some stress.

These ten tips are designed to ease the process and help you understand what you can expect from contract to closing.

1. Determine Your Needs

The process of purchasing a home can be especially daunting if you don’t take the time to determine what you really need. A real estate professional will be able to best assist you. But first, ask yourself these questions:

• What is your current lifestyle and how will that play into the neighborhood or community you choose?
• Size of home including bedrooms, bathrooms, and specialty rooms such as media, pool, office rooms
• Style of home: Ranch vs. Two-Story and Mansion vs. Cabin

2. Cost of Homeownership

The most important thing to consider is how buying a new home will fit into your budget, on top of all of your other financial commitments.

You need to ensure that you can afford the monthly mortgage payment, as well as any other expenses including utilities and/or possible homeowner’s association fees.

3. Interview a Real Estate Professional

The interview process is one of the important first steps in buying a home. An experienced sales associate will be eager to share their expertise and skills so you can make an educated decision.

Ask for references and listen to what other people have to say about their experiences with a particular agent. Ultimately, you want to find someone that knows your area, has a good grasp on current market conditions and that you feel comfortable with.

4. Decide if You Will Build or Buy Resale

Are you going to buy an existing home or build something new? You need to understand the pros and cons to both and taking your lifestyle and needs into consideration before making a decision.

5. Location

Location is one of the key factors to consider in any home purchase. Make sure that you buy a home in areas where the value of property is set to increase as opposed to those with low prices and high chances of stagnation, along with other factors such as (good neighborhood, safety, etc).

6. Understand Your Mortgage Options

Speak with a mortgage professional about your options and make sure to share details about your current financial situation, including your monthly budget for a new home. They will be able to offer guidance on which loan program will work best for you.

 7. Home Inspection

A home inspector will inspect the home prior to purchase to examine for structural and safety issues. An inspection is not required, but it will determine if the home is structurally sound and wiring and pluming are up to code, so it’s a wise choice to do so.

They will also check for safety hazards, including loose railings, rotted or damaged porch or entryway steps and broken windows.

8. Get Everything in Writing

The best way to protect yourself is to ensure that every part of your transaction is captured in writing. An example would be repairs that the seller agrees to make prior to closing.

Your real estate professional is there to make certain those repairs are added to an addendum which becomes a part of the purchase agreement. You do not want to have a casual conversation with the seller that could be left to interpretation when it comes to the largest purchase you will probably ever make.

 9. Finalize the Purchase

To avoid problems at the closing table, make sure you have a clear understanding of what to expect. Go through your loan details thoroughly so there are no surprises when it comes to interest rate, loan amount or mortgage term.

There will be a substantial amount of paperwork to sign so give yourself plenty of time to adequately review the details and take in all the information.

10. Home Improvements

Your home is a valuable asset. Once you close, don’t forget to keep putting money aside on a monthly basis for any necessary repairs or maintenance that might surface.

It’s also important to note that certain upgrades may contribute to lower insurance premiums. It’s important that you keep in touch with your real estate agent so they can provide you guidance in all your questions and concerns.

30-Year Mortgage Rate Drops to 4.5%

The average U.S. rates on fixed mortgages declined this week amid signs the economic recovery is slowing.

The average rate on the 30-year loan fell to 4.50 percent from 4.57 percent last week. The average on the 15-year fixed mortgage came down to 3.54 percent from 3.59 percent last week.

The retreat in the average rate of a 30-year mortgage comes just a couple of weeks after the rate reached a two-year high of 4.58 percent on Aug. 22. The average rate on a 15-year mortgage also hit a two-year high — 3.60 percent — that day. But overall, mortgage rates remain low by historical standards. 
The Long-term mortgage rates have risen more than a full percentage point since May, when Federal Reserve Chairman Ben Bernanke first signaled that the central bank could begin reducing its monthly $85 billion in bond purchases this year if the economy looked strong enough.

Many economists had expected the Fed would to decide at its policy meeting last week to scale back the bond purchases. But on Wednesday, the central bank voted to continue the bond-buying program at the current levels.

They also cut the economic growth forecasts for this year and 2014, warning that the upcoming debt ceiling and budget battles between the White House and Congress could pose risks to financial markets and the economy.

Growth and hiring remain modest by the standards of a robust economic recovery. Employers have added an average of 180,000 jobs a month this year, about the same as last year and in 2011. From April through June, the economy grew at a 2.5 percent annual rate, little changed from its 2.8 percent rate in the quarter when the Fed began its bond buying.

Concerns over the possibility that interest rates will continue to rise have spurred some homeowners to close deals quickly. And U.S. sales of previously occupied homes rose 1.7 percent last month to a seasonally adjusted annual rate of 5.48 million, the National Association of Realtors said Thursday. That’s the highest level since February 2007.

So now that investors fell secure that the Feds are going to keep buying the 85 Billion in bonds each month we are seeing the 10 year Bond pricing stabilize and come down,  which in turn has helped lower Mortgage Rates. No one has a Crystal Ball into the future but for now it seems we are headed lower at least for the time being.

 

 

What You Need to Know About Mortgage Insurance

If you are on the verge of buying real estate, you’ve probably heard the term Private Mortgage Insurance. Mortgage professionals talk about it a great deal, but you may be asking, “What is it exactly? And why should I care?”

Private Mortgage Insurance Defined

PMI is required by lenders if the down payment of a purchase is less than 20 percent of the home’s value. It protects the lender if the borrower defaults on the loan.

With that said there are a few types of PMI you can choose from each have a unique benefit to them.

1. The traditional where you will have a monthly Private Mortgage Insurance (PMI) payment until you can show your home has 20% or more equity against your mortgage balance. I.e. $400,000 loan amount and a value of $500,000 or more gives you 20%+ loan to value. With this type PMI there is not tax deductable advantage, it is and added cost to your monthly mortgage payment.
2. Lender Paid Mortgage Insurance (LPMI) in which the cost will be rolled into the Interest Rate, this rate would be a little higher than if you chose the Traditional Monthly Private Mortgage Insurance. But with LPMI your PMI is part of your Interest Rate in which you have the ability to get a tax deduction, on your primary residence.
3. Borrower Paid Mortgage Insurance allows the borrower to pay the cost up front which can increase your closing cost but does not increase your Interest Rate.

Each of the Private Mortgage Insurance coverage’s have a unique advantage, and our staff at 0PointLoan.com will help each client choose which one may be best for their particular circumstance.