Beginning on Thursday, July 30, 2009, the Truth in Lending Act requirements regarding initial and final disclosures to borrowers, the timing of when fees can be charged and when closings may occur will become effective. These new regulations lengthen the time needed to close loans in order to ensure that borrowers have enough time to consider their options and feel comfortable moving forward with a loan. The factors that may impact the closing date of a loan include:
- Closing may not occur until 7 business days after initial disclosures are sent to the borrower.
- Upfront fees may not be collected from the borrower until initial disclosures are delivered by the borrower. Therefore, appraisals may not be ordered until initial disclosures sent by the lender are delivered to the borrower.
- An increase in Annual Percentage Rate (APR) by more than 0.125% requires the Truth in Lending Disclosure to be revised and delivered to the borrower 3 business days before closing.
Business days include Monday through Saturday and exclude Sundays and holidays.
Disclosures are considered “delivered” 3 business days after mailing.
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The week that was
Mortgage Loan Limits Extended: The House Appropriations Committee has approved an extension of the $729,750 loan limits for Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) through September 2010. The committee also increased the lending and guarantee authority of FHA and Ginnie Mae, as requested by the Obama Administration.
The Department of Housing and Urban Development appropriations bill authorizes FHA to insure $400B in single-family loans during fiscal year 2010, up from $315B in the current 2009 fiscal year, which ends Sept. 30.
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A lot of surge in current real estate market in San Jose & rest of San Francisco Bay Area is being driven by First Time HomeBuyers. Some sources estimate that they now account for 50% of the market. A lot of First Time HomeBuyers end up buying condominiums since it fits into their budget. In this market of low property prices, you may be able to buy a condo for almost the same mortgage payment as the rent that you are paying.
However, in last few months Fannie Mae & Freddie Mac have implemented lot of new guidelines for condos which will make getting a mortgage very tough. Lets look at some of them:
Higher Interest Rate/Cost - There is now a .75% pricing adjustment for all loans >75% LTV secured by a condominium. So as the first time homebuyer either you will pay this in form of paying extra points or taking a higher interest rate to offset the cost. Mortgages on condos with LTV’s <75% will not be impacted. So if you have downpayment less than 25% and you plan to buy a Condo, budget for higher interest rates or closing costs.
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Starting this month I will be writing about the monthly Home Sales/Real Estate trends in Bay Area. Look out for this update between 15th and 20th of every month. The update will be for month before.
DataQuick reported that Home Sales in the Bay Area jumped to their highest levels in 3 years. The median price paid for a home also increased month-to-month for 3rd month in a row. A total of 8,644 new and resale houses and condos sold across the nine-county Bay Area in June. That was up 16.1 percent from 7,447 in May and up 20.4 percent from 7,178 in June 2008, according to San Diego-based MDA DataQuick. The table below breaks down the numbers:
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Starting today, I will be writing a weekly mortgage market commentary to take a quick look back on what happened last week and a preview of the coming week. Look out for this post every Sunday or Monday.
The week that was:
Freddie Mac released it’s results of weekly Mortgage market survey on July 16th. The 30 year fixed rate mortgage rates averaged 5.14% with 0.7 points, down from last week when it averaged 5.20%. Last year at this time, the 30-year FRM averaged 6.26 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgage rates (ARMs) averaged 4.83 percent this week, with an average 0.7 point, up slightly from last week when it averaged 4.82 percent. A year ago, the 5-year ARM averaged 5.80 percent.
Note that this is for conforming loan amounts below $417,000.
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If you are a First Time HomeBuyer in San Jose or the rest of San Francisco Bay Area, you would have most likely heard of FHA loans. But like most of the other potential First Time HomeBuyer I meet and advise, you may not be sure whether you qualify for FHA mortgage or not. Below I have mentioned some of the major requirements that you should know of:
Maximum Loan Amount - Varies by county. For Santa Clara, Alameda, Contra Costa, San Mateo and San Francisco counties it is $729.750. This loan amount expires on 12/31/2010.
Credit Score - A minimum credit score of 620 is required by most of the lenders.
Down Payment - FHA Loans are available at a minimum down payment of only 3.5%.
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Though FHA Loans now represent more than 30% of mortgages, there are still a lot of misconceptions that both real estate agents and the borrowers in San Jose and the rest of Bay Area have about this program. All the myths that I have listed below have been raised to me numerous times. I finally decided to post a blog on this so that I can clarify this to a much larger audience.
1. It takes longer to close an FHA Loan- Towards the 2nd half of last year when FHA loans started exploding, most of the lenders were caught off guard. They did not have enough trained underwriters to take decisions on the loans that were being sent their way. That resulted in longer turn times for FHA loans. Within months, lenders realized that this was soon becoming the fastest mortgage product on the block. Since then they have staffed themselves adequately on the FHA underwriting side and hence it’s not atypical anymore for FHA loans to close in 30 days or less. Read more..
FHA Loan vs Conventional Loan - which one is better? I was speaking at an FHA seminar for real estate agents in Fremont, CA recently. The topic was “How FHA loans are playing a big part in qualifying more First Time Home Buyers”. At the end of the presentation, I was asked this question - “Are FHA loans really better than conventional”. I had similar questions asked by Buyers and Real Estate agents in other forums in San Jose and rest of the San Francisco Bay Area too.
There is no black & white answer to it - because it all depends on your situation. Below, I have compiled a table to compare the loan features of both the programs. As you would see depending on your specific situation, either one could be better.
** Since I wrote this post FHA Up front Mortgage Insurance Premium (UFMIP) requirements have changed**
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