A Word about Lenders and Today’s Market 03/08
After being on the market now for about 7 months and selling 13 units, we have watched various lenders change their criteria and qualifications from monthly to daily. This keeps us on our toes, and talking to a multitude of lenders on a daily basis.
The sub-prime market fallout now engages most lenders’ qualifying process, and they are dinging the first-time homebuyer who has good credit, a good job and a rock solid payment history. Normally, getting out of an adjustable rate loan into a better loan is no problem, except the people who should have never qualified for their loan in the first place will definitely not qualify now for a refinance. So they are stuck. In a nutshell, an ARM or interest only loan is still a great loan with very low payments for a qualified buyer without a lot of cash to put down.
So how are lenders dinging the first-time homebuyer? Most importantly, they are calling the entire county of Los Angeles a “depressed or declining market,” which allows lenders to require 10% down for a home purchase. As one underwriter explained, “this is what came up in my computer today, there is nothing I can do about it.”
Well, we can.
We have always maintained a philosophy of choice here at The Hudson, a choice in concessions, a choice in units, and a choice in using any lender you want. By law, you are allowed to use any lender, but in order to help you actually close on your home, with the loan you want, we now have the following requirements:
1) 5% loans are still out there, and with great rates. If you want to go this route we require you to get pre-approved with Steve Fox at Wells Fargo (contact info at bottom of page). We know he can do 5% loans with great rates, and he can close on the property. This path also gets you the cash back concessions offered by the seller.
2) For a loan where you are putting 10% or more down, most lenders will do this, so it only matters in the sense that you have your lender call us immediately to qualify the property…about half the lenders out there cannot close on new subdivisions.
As I mentioned in a previous post below, BofA had a great program, but now require 10% down for it.
We have gone through the gamut of lenders saying they can do 3-5% loans, only to demoralize a buyer by changing the terms in the middle of the process- making promises they cannot keep. To help keep the lending process smooth and a positive experience for you, we will only take a unit off the market for you by following this path. If you want to try another lender with a 5% down loan, we will write up the offer after we are sure they can perform for the buyer.
Adams Hill is a wonderful and safe neighborhood. The last appraiser on the property even went as far as superseding the blanket status of “declining” and upgraded our neighborhood to “holding its value.” This allows Wells Fargo to continue giving our buyers loans with just 5% down.
As the market opens up, we will re-evaluate different lenders and see what packages they offer that best benefit our buyers. We are still selling and closing on units because the interest rates are at a historical low and these homes are priced very competitively for this market. If you have a good job and good income, there is no better time to buy a home.
Demystifying the Loan Process 12/07
Financing can be an overwhelming topic, especially for the first time homebuyer. You can use any lender you want, but to make things easier, we are always interviewing lenders and looking for the best deal available for you.
Most of the people coming to us have great jobs, good credit but are short on cash (all of it goes to rent!). So we looked high and low to find lenders that can offer zero and 5% down with no PMI (more about PMI on the next post down).
Currently, we found out that Bank of America has a great program, a straight fixed 30 year with 5% down and no PMI!
Wells Fargo was able to match that, and have customized more options that pertain specifically to this property. Our Specialist over there is Steve Fox, and he has his own blog with a plethora of info on the lending process- start to finish.
Steven Fox
Home Mortgage Consultant
Wells Fargo Home Mortgage
MAC E2877-050
10880 Wilshire Blvd., Suite 550
LOS ANGELES, CA 90024
310.446.3147 Tel
310.365.8592 Cell
310.234.8547 Fax
steven.fox@wellsfargo.com
Posted by Steve Fox 12/27/2007
The Difference Between Private Mortgage Insurance And Homeowners Insurance
Private mortgage insurance (PMI) is insurance for the mortgage lender in the event of homeowner default.
PMI helps the lender recover its costs and losses after foreclosing and selling a repossessed home.
PMI rates vary by loan type, loan size, and loan characteristics. The higher the risk to the bank, the higher the cost of PMI.
The two types of PMI are:
- Borrowed-paid mortgage insurance
- Lender-paid mortgage insurance
Borrower-paid MI is the more common version of PMI. It may be payable up front, payable monthly, or both. However, once the mortgage balance is reduced to 80% of the home's value, PMI may no longer be required by a lender.
This reduction can occur by principal being paid down, home appreciation, or a combination of the two.
With lender-paid PMI, there is no monthly payment because the mortgage note's interest rate is increased and is, therefore, "self-insuring". That is, the lender collects higher payments each month and usually buys an insurance policy with the extra proceeds.
Different from private mortgage insurance is another type of insurance called homeowners insurance, or hazard insurance.
HOI is property insurance that protects against losses in the event of a catastrophe.
Mortgage lenders require borrowers to carry homeowners insurance because it protects the bank if the home is destroyed. However, it's a good idea to have additional coverage for personal property and for liability related to accidents that occur on-site.
For example, if a home is destroyed in a fire:
- The homeowners insurance will repay the lender for the amount due on the mortgage
- The personal property insurance will repay the homeowner for personal possessions destroyed
- The liability insurance will protect the homeowner from third-party claims related to the fire
HOI is typically paid in annual installments to an insurance company and rates vary by type of home and type of coverage requested.
Sources
Private Mortgage Insurance
Wikipedia
http://en.wikipedia.org/wiki/Private_mortgage_insurance
Home Insurance
Wikipedia
http://en.wikipedia.org/wiki/Home_insurance