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Thursday, August 21, 2014

Changes to FNMA and FHA...for the better?

As we try to navigate through the waters of the housing recovery without drowning, we've seen many changes to the various loan programs and most of those changes haven't made it easier to get a mortgage.  The most recent change by FNMA falls into this category where they eliminated the option to put 20% in order to qualify for a conventional mortgage two years out of a short sale.  This means that if you had a short sale and want to use a conventional loan to finance the purchase of your home, you will now need to wait four years - at which time you can put down as little as 5% assuming you meet the other conventional guidelines.

There is some good news from FNMA.  People who had a foreclosure used to have to wait 7 years in order to qualify for conventional financing EVEN if the mortgage was discharged through a bankruptcy.  For those who have declared bankruptcy and included the mortgage among the debts that were discharged, FNMA will now use the 4 year waiting period from the bankruptcy rather than the 7 year waiting period from the foreclosure to determine when a borrower can qualify to buy a home with conventional financing.  This is especially good considering the fact that foreclosures after a bankruptcy can take months or even a year or two (sometimes more) which means the 7 year foreclosure clock would start long after the BK clock.  Conventional borrowers everywhere can rejoice.  

So What the HAWK is FHA up to?

Word on the street is that FHA is releasing the HAWK (Homebuyers Armed With Knowledge) program sometime in the fall.  This program will provide a financial benefit to borrowers who take a 6 hour class prior to the loan closing and an additional benefit if they take a 1 hour post-closing class.  For those who take the 6 hour class, the up-front mortgage insurance premium will be reduced to 1.25% from 1.75% and the annual mortgage insurance premium will be reduced by 10 basis points from 1.35% to 1.25%.  If you take the 1 hour post closing class, the annual mortgage insurance premium is reduced another 15 basis points to 1.10% for a total of a 25 basis point reduction.  This program is for 1st time home buyers - i.e. people who haven't owned a home in the last 3 years.

I'll let you know when the HAWK program is released.  Please subscribe to the blog so that you can get timely updates like these.  Please also like The Wunderli Team Facebook page for regular updates on the mortgage bond market.  My YouTube channel has videos on a variety of mortgage topics that will benefit Realtors and borrowers alike.  Please check out and subscribe to The Wunderli Team YouTube channel.  Feel free to comment and share.  

Monday, August 18, 2014

How to Avoid the Most Common and Costly Mortgage Mistakes

When getting a mortgage, most borrowers only think about what their payment is which is a function of loan amount, loan term, and interest rate.  Many borrowers are sucked in by low quotes from unscrupulous loan officers who don't disclose what it would cost to get such a rate and by the time the borrower finds this out, it's usually too late, but that is a topic for another discussion.  This post is about the very costly mistake that borrowers make when their main focus is on getting the lowest payment.

Getting the lowest payment possible means either buying the rate down (which may or may not be cost effective - proper analysis needs to be performed) or putting a large down payment, or both.  In my YouTube video series under the same title ( I discuss the concept of opportunity cost and the kind of wealth that can be created if money is invested instead of put into the house to lower the loan amount and, thus, the mortgage payment.  As part of this discussion, I also talk about the Rule of 72 and the time-value of money.  The example I use in the video is a couple who is purchasing a $300,000 home and wants to put $150,000 down in order to get the lowest payment.  As far as creating wealth is concerned (which is a big need when it comes to preparing for retirement), this couple could put down $60,000, avoid mortgage insurance because they would be putting 20% down, and invest the other $90,000 NOW - which is key for TVM (time-value of money).  One other benefit that they will have is that they will have a liquid asset by doing it this way instead of transferring that money into an illiquid asset (the home).

Depending on what people invest in, there could be some great tax advantages as well (Roth IRA and IULs provide tax benefits vs. other investments).  Additionally, a well diversified portfolio will help this couple grow their wealth and reach their retirement goals without incredible amounts of risk.  Please watch the video for all of the details and remember that each situation is different.  It's important for every client to know their specific numbers which is why I, as a Certified Mortgage Planner, have developed spreadsheets to help clients understand how the numbers would play out for their specific situation.  What are your thoughts on the subject?  Please comment and share.  I'm happy to discuss any and all of the content of the video.