My New Blog

Happy Monday~

So if you followed the housing bill at all and read my post in response to it, then you knew the news would be flowing in. The first lender has taken a stance on the elimination of down payment assistance. Chase has eliminated allowing new FHA loans where you are buying a house using down payment assistance (Nehemiah....).

Another more interesting note is that Chase is not going to allow nontraditional credit FHA buyers. What this means is that they are over turning a long standing FHA rule (still in place with FHA as a matter of fact). If you were yet to establish credit in any sort of fashion, by FHA standards you can create an alternative credit report using cable bills, insurance, cell bills.... This allows you to get a credit rating to qualify for an FHA home loan. Of course you still have to qualify with your debt ratios and the like. Chase has said they aren't going to allow these types of buyers as well.

More news to come I am sure as other lenders monitor what Chase has done as of tomorrow. Make sure you are working with an educated and licensed mortgage consultant. If you are having issues or concerns that make you uneasy about your lender, let me know via email or phone. After all, you don't want to lose your earnest money , or worse the house of your dreams.

Talk Soon~

Ray

rwilliams@summit-mortgage.com

Hey all!

I hope you are enjoying your Friday~ I have an interesting blog today for you to read. We all know recently it has been harder to sell homes then years past. Although with Colorado's new foreclosure starts report, actually decreasing in numbers (sorry to say not in Douglas county +24%). One would think we are doing better in Colorado. I would say yes, on certain fronts and locations, we are.

However, one thing many folks have done while they can't sell their homes during this softer market, is to move out of them and rent them out and buy a new primary residence.

Well, if you are doing that now and using a conventional loan through fannie mae, you will have to have 30% equity in your home you are moving out of, if you need to use the rental income from your home to qualify for your new home loan. If you don't have 30% equity (evidenced by a drive by appraisal, or BPO) then you have to be able to qualify carrying both mortgages.

As example, you move out of your home that you owe $180,000 and is worth $190,000 in value. You want to get a new mortgage for a new house and rent out that old house. Since in this example you are lacking the 30% equity in that home you are making a rental, you have to be able to carry that debt on top of your new mortgage, to qualify. So if that current mortgage payment is $1,600 and your new mortgage is going to be $2,000 then out of the gate you have to carry $3,600 plus your other debts (minimum credit card payments, auto loans, monthly student loans...). Even if you only have your house as debt to get your ratios in line to qualify you need to make a gross income of $8,300 (give or take) a month. Mind you there are compensating factors that can allow your debt ratios to be higher, but this is to be used as a guide. On top of that, be prepared as always to be able to show liquid cash (6 months mortgage payment) in the bank (IRA, 401K, savings, stocks....)  as "reserves" to strengthen your financial portfolio to the banks.

Now through knowing other loans and underwriting guidelines, there are a few work arounds for this. But email me if you are one of the masses looking to move out of your home, rent it out, and buy another home to live in.

Happy Friday~

Ray

President Bush signed H.R. 3221 Housing and Economic Recovery Act of 2008 into law on July 30, 2008. Included in this bill was the elimination of downpayment assistance (DPA) programs.  Borrowers who are credit approved prior to October 1, 2008 can receive downpayment assistance and have their loan FHA-insured.

While H.R. 3221 was intended to “rescue” the housing industry, the elimination of the DPA program will have the exact opposite effect of its intended purpose.  Not only did it eliminate DPA programs, it also instituted a downpayment requirement increase from 3 percent to 3.5 percent.  This combination is a recipe for disaster and will further hurt the already crippled housing market.

Preserve downpayment assistance programs for families who are credit-worthy, but lack the savings necessary to fulfill their homeownership goals, protect the already fragile economy, improve the current housing market, and save jobs.

Currently, roughly 40 percent of the monthly FHA loan origination volume utilizes downpayment assistance to help lower-income Americans meet the previously mandated 3 percent downpayment requirement.  It is estimated that 10-25% of potential homebuyers (approximately 50,000 nationwide) will have no way of securing homeownership with DPA programs. With the stroke of the president’s pen, millions of deserving Americans are now left with zero alternatives for attaining homeownership.

In order to save downpayment assistance programs, we need to come together NOW to convince Congress to pass H.R. 6694 that allows downpayment assistance to continue indefinitely.

On July 31, 2008, a new bill, the FHA Seller-Financed Downpayment Reform and Risk-Based Pricing Authorization Act of 2008 (H.R. 6694) was introduced by several members of Congress.  Representatives Maxine Waters, Gary Miller, Al Green and Christopher Shays sponsored the bill that if passed and signed into law will allow downpayment assistance to continue indefinitely.

Act Now! Contact your elected officials and urge them to support H.R. 6694 that allows downpayment assistance to endure. Failure to act now will ensure the death of all private downpayment assistance programs.

Here is the email response I received from Colorado Senator Ken Salazar regarding his view on this issue~

Dear Ray:

Thank you for contacting me with regard to down payment assistance programs in H.R.3221, the Foreclosure Prevention Act. I appreciate hearing from you.

Down payment assistance programs are intended to help families who would otherwise struggle to come up with the down payment necessary to qualify for Federal Housing Administration (FHA) mortgages. However, both HUD officials and a number of members of Congress have raised concerns about the way some of these organizations fund their activities.

These concerns are based on the fact that many of these non-profits work actively with sellers, often receiving reimbursements for down payments made from the sellers themselves in the form of donations. They also usually charge the seller a service fee, which amounts to millions of dollars in revenue.

In light of these concerns, H.R.3221 forbids FHA from insuring mortgages in which the borrower's down payment comes from a private down payment assistance provider. The bill passed the Senate with my support and was signed into law by President Bush on July 29, 2008.

Again, thank you for writing. Please be assured that I am supportive of efforts to encourage homeownership, especially those aimed at families who struggle to afford their own homes, and that I will keep your thoughts in mind should the Senate consider legislation pertinent to this issue in the future.

Sincerely,

Ken Salazar
United States Senator

To send him a personal message on your beliefs and viewpoints on how he should support this new bill visit:  http://salazar.senate.gov/contact/email.cfm