Premiere Mortgage Services Inc. - Dana Bain

Newsletter-April 24th, 2017    
Provided by
Dana Bain
Dana Bain
Premiere Mortgage Services
11 Malvern Hill Road
Sterling, MA 01564
Phone: (978) 422-2311
Fax: (978) 422-2313
E-Mail: dana@bainmortgage.com
 
 

Market Comment

Mortgage bond prices finished the week near unchanged which kept rates steady.  Rates started the week lower Monday morning but the improvements were erased by Thursday.  The NAHB Housing Market Index printed at 68 versus the expected 70. The index is based on a monthly survey of members belonging to the National Association of Homebuilders (NAHB) is designed to measure sentiment for the U.S. single-family housing market.  Weekly jobless claims were near expectations.  Leading economic indicators rose 0.4% versus the expected 0.3% increase.  The Philadelphia Fed survey showed strong economic activity in the Mid-Atlantic region.  Mortgage interest rates finished the week unchanged to better by approximately 1/8 of discount point despite some volatility.


LOOKING AHEAD

Economic
Indicator

Release
Date & Time

Consensus
Estimate


Analysis

FHFA House Price Index

Tuesday, April 25,
10:00 am, et

Up 0.4%

Moderately Important.  A measure of single family house prices.  Weakness may lead to lower rates.
New Home Sales

Tuesday, April 25,
10:00 am, et

600K

Important.  An indication of economic strength and credit demand.  Weakness may lead to lower rates.
Consumer Confidence

Tuesday, April 25,
10:00 am, et

126

Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.
Treasury Auctions Begin

Tuesday, April 25,
10:00 am, et

None Important.  2Y Notes on Tuesday, 5Y Notes on Wednesday, and 7Y Notes on Thursday.
Durable Goods Orders

Thursday, April 27,
 8:30 am, et

Up 1.8%

Important.  An indication of the demand for “big ticket” items.  Weakness may lead to lower rates.
Weekly Jobless Claims

Thursday, April 27,
8:30 am, et

240K Important.  An indication of employment.   Higher claims may result in lower rates.
Q1 Advance GDP

Friday, April 28,
8:30 am, et

Up 2.1% Very important.  The aggregate measure of US economic production.  Weakness may lead to lower rates.
Q1 Employment Cost Index

Friday, April 28,
8:30 am, et

Up 0.5%

Very important. A measure of wage inflation.  Weakness may lead to lower rates.
U of Michigan Consumer Sentiment

Friday, April 28,
10:00 am, et

98.2 Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.

Employment Cost Index

The employment cost index is a quarterly report issued by the Department of Labor.  The report measures the growth of wages, salaries, and benefits costs over a certain period of time.  Though ECI figures are usually weeks old, the data remains the best indicator of employment price pressures considering it factors employees’ total compensation.

 

If wage pressures become evident, higher expectations of inflation also tend to arise.  However, increasing compensation does not necessarily lead to increased inflationary pressures.  Oftentimes, increased productivity enables employers to increase compensation without increasing the costs of their goods or services.  Be cautious heading into this release.

 


Dana Bain & Robin Dunbar Bain
Premiere Mortgage Services Inc.
www.BainMortgage.com
https://danabain.mortgagemapp.com
978-422-2311
Mortgage In Massachusetts & New Hampshire for over 30 years.  Most Competitive mortgage rates available.  Find Us On LinkedIn & Face Book www.Bainmortgage.com/DanaBain-PremiereMortgage-Reviews

 
   MORTGAGE MARKET IN REVIEWNewsletter-April 24th, 2017    

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Posted by Dana Bain on April 21st, 2017 6:43 PM
Newsletter-April 3rd, 2017     
Provided by
Dana Bain
Dana Bain
Premiere Mortgage Services
11 Malvern Hill Road
Sterling, MA 01564
Phone: (978) 422-2311
Fax: (978) 422-2313
E-Mail: dana@bainmortgage.com
 
 

Market Comment

Mortgage bond prices finished the week a little higher which helped rates hold steady. Rates started the week lower with no data Monday in response to the failure to repeal the Affordable Health Care Act. Stocks took a hit early amid concerns that stimulus spending would run into similar legislative issues. Some of the rate improvements were erased mid-week as several Fed officials talked about rate hikes. Weekly jobless claims were 258K versus the expected 245K. Q4 GDP rose 2.1% versus the expected 2% increase. Personal Income rose 0.4% as expected. Outlays were a little weaker than expected with an increase of 0.1% versus 0.2%. PCE core inflation (The Fed's preferred inflation gauge) rose 0.2% as expected. Mortgage interest rates finished the week better by approximately 1/8 of discount point despite some volatility.


LOOKING AHEAD

Economic
Indicator

Release
Date & Time

Consensus
Estimate


Analysis

ISM Index

Monday, April 3,
10:00 am, et

57.9 Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates.
Trade Data

Tuesday, April 4,
8:30 am, et

$49B deficit

Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.
Factory Orders

Tuesday, April 4,
10:00 am, et

Up 0.9% 

Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
ADP Employment

Wednesday, April 5,
8:30 am, et

296K

Important. An indication of employment. Weakness may bring lower rates.
Fed Minutes

Wednesday, April 5,
2:00 pm, et

None

Important. Details of the last Fed meeting will be thoroughly analyzed.
Weekly Jobless Claims

Thursday, April 6,
8:30 am, et

256K

Important. An indication of employment. Higher claims may result in lower rates.
Employment

Friday, April 7,
8:30 am, et

4.7%,
Payrolls +240K

Very important. An increase in unemployment or weakness in payrolls may bring lower rates.
Consumer Credit

Friday, April 7,
3:00 pm, et

$9.5B

Low importance. A significantly large increase may lead to lower mortgage interest rates.

ADP Employment

The ADP employment report is a measure of employment derived from data of roughly 500,000 US businesses. The survey focuses on the private sector of the economy. In contrast, the Bureau of Labor Statistics releases the regular employment report which includes both private and government employment statistics.

The Fed is usually focused on inflation. Tightening employment conditions can result in wage inflation. The ADP report provides solid data on these conditions. Despite this, the data can still diverge from the regular employment report. The employment report is derived from a household survey and an establishment survey. These surveys often differ from one another and from the ADP employment report in that they are based on different data sets. There are no guarantees that the most important employment report the first Friday of each month will mirror the ADP report released 2 days prior but the Fed looks at all the data.

 


 

 
   MORTGAGE MARKET IN REVIEWNewsletter-April 3rd, 2017     





http://mortgagesinmassachusetts.com/ http://www.bainmortgage.com/Home #MortgagesInMassachusetts #RealEstate Dana Bain & Robin Dunbar Bain 978-422-2311 ** See Testimonials At http://www.bainmortgage.com/DanaBain-PremiereMortgage-Reviews

Home Status Report

Want to know if a home is still on the market, or if the price has changed? We can help. Simply fill out the information below and with no obligation to you we'll get back to you with your requested information. We guarantee your privacy.

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Posted by Dana Bain on March 31st, 2017 4:43 PM

Lender List


Wholesale Lenders
1st Alliance Lending
ACC Wholesale
ACH Trust
Acopia Capital
Advancial
American Financial Resources
American Southwest Mortgage
AmeriSave Lending
AnnieMac
Astoria Mortgage
B of I Federal Bank
Bank of Hawaii
BHL – BANC Home Loans
Blustream Lending
Caliber Funding
Carrington Mortgage
Century Lending
Cherry Creek Mortgage
CMG Financial
Commerce Mortgage Wholesale
Direct Mortgage Wholesale
Endeavor America
Envoy Mortgage
Essex Bank
Ethos Lending
Fairway Wholesale Lending
FBC Mortgage
Finance of America
First Cal Wholesale
First Guaranty
First Hawaiian Bank
Flagstar
Florida Capital Bank Mortgage
Franklin American
Freedom – Fees In
Freedom – Fees Out
Fremont Bank
GMFS
GreenBox Loans
Guaranty Trust
Guild Mortgage
Home Bridge
Home Point Financial
Homeward Residential
IMPAC Mortgage
Interfirst
JMAC Lending
Lakeview
LDWholesale
LHFS – Land Home Financial
Live Well Financial
LoanStream
Luxury Mortgage
M&T Bank
Majestic Home Loans
MB Financial
Michigan Mutual
Mid-Island Mortgage Corp
Mortgage Solutions Financial
Motive Lending
Mountain West Financial
Nations Direct
New American Funding
New Leaf Wholesale
New Penn Financial
NexBank
NYCB Mortgage
Oaktree Funding Corp.
Pacific Union Financial
Parkside Lending
Peoples Home Equity
Platinum Mortgage
Plaza Home Mortgage
Primary Capital Mortgage
PRMG
Provident Bank
Provident Funding
Quicken Loans
REMN
Residential Acceptance Corp.
Ridgewood Savings Bank
Santander
Sierra Pacific
Stearns Lending
Stonegate
SunWest Mortgage
TJ Financial
Total Mortgage Services
Union Wholesale Mortgage
UNMB
US Bank Prime Plus Portfolio
US Bank Wholesale
UWM – United Wholesale Mortgage
Western Bancorp
Correspondent Lenders
Amerihome
B of I Federal Bank
BB&T Mortgage
Caliber Funding
Chase
Ditech
Envoy Mortgage
Everbank
Farmington Bank
Fifth Third
First Guaranty
Flagstar
Florida Capital
Franklin American
Freedom Structured Products
Guild
Homeward
Impac
Interfirst
Liberty Savings Bank
M&T Bank
MB Financial
Nations Direct
Nationwide Bank
NYCB Mortgage
Pacific Union
Parkside Lending
PennyMac
Plaza Home Mortgage
Provident Funding
Stearns Lending
Stonegate
SunTrust
SunWest
The Money Source
US Bank
Wells Fargo


Posted by Dana Bain on March 29th, 2017 1:25 PM

“Before you start trying to work out which direction the property market is headed, you should be aware that there are markets within markets.”

We once again seem to be in a buyer’s market locally, with demand outpacing inventory, homes getting bid-up and buyers frustrated. How do you find listings and fresh inventory? How do you identify potential sellers, or help those on the fence decide that now is the right time for a move?

As the spring market warms up, here are some ideas that may help:

Call through your past client database-88% surveyed by NAR said they would work with their agent again, but how many agents reach out and assess when “again” might be? Call and ask! Remind them you are there when they are ready, ask what their concerns are, make sure to give your updated contact info, and to get theirs. Add them to a weekly email with homes for sale in their neighborhood, along with a place of interest to them, so they can see for themselves that now may be the right time to sell.

The local real estate market is at a peak, so it could be a great time to sell, even for those not sure where they want to land next. Empty nesters who no longer have to worry about schools may be more willing to experiment with lifestyle, sell their home and rent in the city, or in a more resort-like area. Now is a great time to check out what’s next. Be the one to market to people’s dreams and help them see the future.

Anticipate objections and be prepared to help. Many would-be sellers get overwhelmed by repairs or updates they think are needed prior to selling, or the amount of work to cull through and get rid of their accumulated stuff. Offer a free home assessment to identify the minimum repairs or updates, and recommend services like transition specialists and tradespeople that could alleviate that burden. You want to be an invaluable resource for all things related to the sale of the home, not just the sale itself.

In Other News:

Credit Alert-On Friday it was reported that one of the 3 main credit reporting agencies has been fined by the CFPB for misleading consumers about its PLUS Score product. This product, sold by Experian, is considered “educational” and intended solely to educate consumers about their credit score. The CFPB found that the PLUS Score was represented as the same score used by lenders, which is false. The CFPB found that in some cases there were substantial differences between the PLUS Score and the actual score used by lenders, creating confusion regarding how lenders determine credit worthiness. Please remind your clients that they are entitled to a FREE credit report annually and can obtain one from: AnnualCreditReport.com For more information, here is a link to the CFPB’s page on obtaining credit reports.

As always, we are here to help you and your clients have a smooth and successful home buying experience!

How To Contact Us

By Phone: 978-422-2311 (Office)
  1-800-480-0545 (Toll Free)
  978-501-0427 (Mobile)
By Fax: 978-422-2313 (Fax)
By e-mail:Dana@BainMortgage.com
Address:PREMIERE MORTGAGE SERVICES INC.
11 Malvern Hill Rd
Sterling, MA  01564-2829


Posted in:General
Posted by Dana Bain on March 28th, 2017 3:19 PM

More and more borrowers today are looking for ways to finance their home purchase without making a full 20% down payment. As FHA continues to increase fees, many are turning to private mortgage insurance (PMI) combined with a conventional loan.

To the surprise of many homebuyers, there is more than one way to obtain PMI. One of those PMI alternatives is called Lender Paid Mortgage Insurance, or LPMI.

What is Lender Paid Mortgage Insurance?

Lender Paid Mortgage Insurance is a form of PMI that is paid for by the lender via a one-time fee, rather than by the borrower monthly. Some form of PMI is required whenever a borrower puts less than 20% down on a conventional loan.

The term “Lender Paid Mortgage Insurance” is a bit misleading, however. The lender does not pay the borrower’s mortgage insurance premium out of the goodness of its heart. Rather, the lender raises the interest rate on the mortgage to generate enough profit to pay the mortgage insurance company the required one-time fee.

The party who ends up paying the cost of LPMI is ultimately the borrower, since it’s the borrower’s interest rate that is increased. For this reason, LPMI is sometimes referred to as Single Premium mortgage insurance.

The reason it is often called “lender paid” is that the borrower is not allowed to pay the one-time premium directly out of their own funds. The funds must come from the lender, or from another party, such as the builder or seller.

Some lenders offer a PMI option where the borrower pays the one-time premium out of their own funds. This is known as either Borrower Paid Mortgage Insurance, BPMI, or Borrower Paid Single Premium mortgage insurance. If you want to buy out your own mortgage insurance to avoid the LPMI rate increase,  ask your lender about their BPMI programs.

How Does LPMI work?

What’s not readily apparent to homebuyers is that the higher the interest rate on your mortgage, the more profit is available to the lender. So, let’s imagine that you accept an interest rate on your mortgage that is 0.50% higher than market rates. The rate increase generates an extra $5000 in profit on that loan.

Let’s also imagine that a PMI company agrees to accept a one-time payment of $5000 in lieu of receiving a monthly PMI payment from the borrower.

The lender could opt to take that extra $5000 in profit and essentially prepay the PMI premium. The borrower ends up with a higher rate, but no monthly mortgage insurance fees.

Is LPMI better than FHA?

Federal Housing Administration (FHA) loans have been a great tool for homebuyers over the past few years. If not for FHA, many would be locked out of homeownership. However, FHA is increasing fees again as of April 1, 2013, to steady its troubled financial position. LPMI might become a more attractive option.

It’s true that the interest rate on an LPMI loan would be higher than an FHA loan. But FHA has very high monthly mortgage insurance costs, and also an upfront fee of 1.75% of the loan amount. FHA mortgage insurance negates any savings from a lower interest rate.

Still, FHA may be a better option for some homebuyers. FHA allows for as little as 3.5% down, compared to LMPI’s 5% down requirement. FHA also allows for more seller contributions toward closing costs. Leniency from FHA means a lot less out-of-pocket expense for FHA borrowers.

In addition, borrowers can qualify for an FHA loan with a lower credit score.

As shown in the chart below, each borrower would have to analyze their available funds, their monthly payment tolerance, and their credit rating to opt for LPMI or FHA.

Payments and Out-Of-Pocket Expense: LPMI vs Monthly PMI vs FHA

Which mortgage option comes out on top? Let’s look at an example of a $250,000 home purchase.

 

LPMI 5% down

Monthly PMI 5% down

FHA 3.5% down

Credit Score

740

740

680

Loan Amount

$237,500

$237,500

$245,471 (includes 1.75% upfront fee)

Interest Rate & APR

4.0% (APR 4.053%)

3.5% (APR 3.948%)

3.25% (APR 4.798%)

Principle and Interest Monthly Payment

$1133

$1066

$1068

Monthly mortgage insurance

$0

$132

$269

Estimated Monthly Taxes and Insurance

$268

$268

$268

Estimated Total
Monthly Payment

$1401

$1,466

$1,605

Estimated Total Cash Needed to
Close the Loan

$17,870

$17,831

$14,070

LPMI seems to come out on top based strictly on monthly payment. But that’s not the whole story. LPMI has its advantages as well as disadvantages depending on other factors.

LPMI Advantages

  • Homebuyers can put as little as 5% down on a home, rather than the standard 20%, yet avoid monthly PMI
  • The initial monthly payment for LPMI loans is often lower than that of monthly PMI or FHA financing
  • When rates are low, homebuyers can get a great rate despite the LPMI rate hike
  • Those who qualify for monthly PMI probably also qualify for LPMI
  • As FHA costs increase, LPMI will become cheaper in comparison.

LPMI Disadvantages

  • Your interest rate remains higher through the life of the loan.
  • With monthly PMI, you can cancel monthly PMI when your loan reaches 80% of the home’s value.
  • A fairly high credit score is needed to qualify for LPMI
  • LPMI requires higher out-of-pocket costs than FHA
  • LPMI is not offered by every lender

Ask Yourself: How Long will I Keep this Mortgage?

Even though the monthly payment on an LPMI loan might be cheaper initially, it might cost more than monthly PMI if you keep your loan for 30 years. This is because you can cancel monthly PMI when your loan reaches 80% Loan-to-Value (LTV), but you can’t lower your LPMI interest rate at any time without refinancing. Let’s look at a cost comparison of a person who keeps their mortgage for 10 years and 30 years. All scenarios assume a 5% down payment:

 

LPMI
after 10 years

Monthly
PMI after 10 years

LPMI
after 30 years

Monthly
PMI after 30 years

Interest Rate & APR

4.0% (APR 4.053%)

3.5% (APR 3.948%)

4.0% (APR 4.053%)

3.5% (APR 3.948%)

Lifetime MI cost

$0

 $11,801

$0

$11,801

Principle and Interest Payments

$1133 x 120 months: $135,960

$1066 x 120 months: $127,920

$1133 x 360 months: $407,880

$1066 x 360 months: $383,760

Total Principle, Interest, and
PMI costs

10 years: $135,960

10 years: $139,721

30 years: $407,880

30 years: $395,561

Should You Choose LPMI?

The main benefit to LPMI is simply lower monthly payments at the beginning of the mortgage, when you’re first starting out on your homeownership journey. It’s also nice to know that you won’t be seeing that pesky mortgage insurance payment on your statement each month for the first 7-10 years of your mortgage. It’s a great program for those who want a low monthly payment and don’t mind a slightly higher interest rate. Ask your mortgage professional and see if a loan with Lender Paid Mortgage Insurance is right for you.

All PMI scenarios based on $250,000 purchase price and value, 5% down, 740 credit score. 30 year fixed rate 1st mortgage with principle and interest payment. FHA scenario based on $250,000 purchase price and value, 680 credit score, 3.5% down. Mortgage payments rounded to the nearest dollar.

When can I remove private mortgage insurance (PMI) from my loan?

Answer: To remove private mortgage insurance you must be up to date with your monthly payments. And you have to reach the date when the principal balance of your mortgage is scheduled to fall to 80 percent of the original value of your home.

To remove private mortgage insurance (PMI) that you pay on your mortgage loan, you must be up to date with your monthly payments. These rules apply to mortgages closed on or after July 29, 1999. Federal law generally provides two ways for you to remove PMI from your home loan: canceling PMI or PMI termination.

http://www.consumerfinance.gov/askcfpb/202/when-can-i-remove-private-mortgage-pmi-insurance-from-my-loan.html

 

How To Contact Us

By Phone: 978-422-2311 (Office)
  1-800-480-0545 (Toll Free)
  978-501-0427 (Mobile)
By Fax: 978-422-2313 (Fax)
By e-mail:Dana@BainMortgage.com
Address:PREMIERE MORTGAGE SERVICES INC.
11 Malvern Hill Rd
Sterling, MA  01564-2829


 

Posted in:General and tagged: PMI LPMI FHA
Posted by Dana Bain on January 17th, 2017 7:37 PM

Mortgage lending underwriting criteria falls into three general categories, credit, collateral, and capacity. Credit has to do with how well you pay your bills (as evidenced by a credit report and score), collateral has to do with the type and quality of the property you’re using to secure the loan, and capacity has to do with your financial ability to repay the loan. Your debt-to-income ratio falls into the latter category – capacity – and is considered an important factor in determining your financial ability to pay back your mortgage.

What is a Debt-to-Income Ratio?

Your debt-to-income ratio, or DTI, expresses in percentage form how much of your gross monthly income is spent on servicing liabilities such as auto loans, credit cards, mortgage payments (including homeowners insurance, property taxes, mortgage insurance, and HOA fees), rent, credit lines, etc.

Living expenses such as cable, gas, electricity, groceries, etc., are not considered part of your DTI.

If your DTI is high, it means you are highly leveraged and have tight finances, which, naturally, is considered risky from a lending standpoint. On the other hand, if your DTI is low, the lender knows you have plenty of room in your monthly budget to absorb unexpected expenses and still make your mortgage payments.

In today’s mortgage marketplace, the maximum DTI allowed is 45% for Fannie Mae loans and 50% for FHA-insured loans. In other words, for a Fannie Mae loan, no more than 45% of your gross (pre-tax) monthly income can go to debt service and mortgage and housing-related expenses.

Both Fannie and FHA allow for higher DTIs under limited circumstances, but these are the standard guidelines.

Calculating Your Debt-to-Income Ratio

If you’re in the market for a home loan, it doesn’t hurt to calculate your debt-to-income ratio ahead of time so you know where you stand. To do this, simply tally up your total monthly debt obligations and divide by your gross monthly income, as follows:

  1. Either obtain a recent copy of your credit report or gather up your most recent statements for all your debt obligations. Note that only debt obligations are included in your DTI, not utility bills, phone, cable, etc.
  2. Tally up your payments for all debts, including auto loans, credit cards (use just the minimum payment), credit lines, student loans, and any other debt obligations that you have.  If you have an American Express credit card, use 5% of the outstanding balance if the minimum payment is showing as the full balance on your credit report. Note that underwriters will include any child support payments in your DTI.
  3. Add your rent or home mortgage payment, including monthly property taxes, homeowner’s insurance, homeowner’s association (HOA) fees, and private mortgage insurance (PMI) premiums.
  4. Divide your total debt obligation figure by your gross monthly income (assuming you’re a W2 wage earner), then multiply by 100 to get a percentage.

If you’re self-employed, I recommend working with your loan agent to determine your qualifying DTI. Self-employed income verification is more complicated and there’s really no way to determine your qualifying income definitively without tax returns.

Keep in mind that when you’re qualifying for a home loan, your qualifying DTI will be based on what your expenses will be after the loan is complete. In other words, if you’re currently renting and are taking on a house payment higher than what you’re paying for rent, your qualifying DTI will be based on the new mortgage payment. If you’re refinancing and consolidating debts, your qualifying DTI will reflect your expenses after the various debts are consolidated.

How To Contact Us

By Phone: 978-422-2311 (Office)
  1-800-480-0545 (Toll Free)
  978-501-0427 (Mobile)
By Fax: 978-422-2313 (Fax)
By e-mail:Dana@BainMortgage.com
Address:PREMIERE MORTGAGE SERVICES INC.
11 Malvern Hill Rd
Sterling, MA  01564-2829

Posted in:General
Posted by Dana Bain on December 27th, 2016 5:35 PM

Will ‘Mixed’ Jobs Data Bode Well for Housing?

Unemployed-ChalkboardThe positives in the BLS November 2016 Employment Situation released Friday prompted one analyst to declare that the economy is “running largely at full steam” and another called the economy “stable and strengthening. One analyst commented that the report was a “mixed bag” while another called it “unremarkable.” Still another said the economy “appears to be stable and strengthening.”

Job gains totaled 178,000 for November and the unemployment rate fell by 30 basis points down to 4.6 percent, its lowest level since August 2007. Still, the report had its low points—namely, a 3-cent decline in wage growth over-the-month (down to $25.89) after gaining 18 cents over the previous two months, and a labor force participation rate (62.7 percent) stagnating near a four-decade low.

Nearly all of them agreed, however, that the report did nothing to discourage a rate hike by the Fed later this month.

“November was a bit of a mixed bag as far as jobs were concerned. While the headline figure for job growth is a positive, both labor force participation and wage growth declined,” said Curt Long, Chief Economist with the National Association of Federal Credit Unions. “Still, the report provided no impediments for a rate hike from the Fed later this month, and a quarter-point increase is now a certainty.”

An increase in the federal funds target rate may not mean good news for the housing market, however. Mortgage rates have already spiked by 51 basis points since the presidential election and are at their highest level in 16 months.

“The good news: the economy appears to be stable and strengthening,” realtor.com Chief Economist Jonathan Smoke said. “The bad news: rising rates could pose a challenge to many homebuyers, especially first-time buyers who now represent more than half of the potential buying pool. The key question for the months ahead is whether the demand created by more jobs and wage growth will be enough to offset the affordability and qualification challenge posed by higher rates. Mortgage rates have already moved in that direction, surging higher than we have seen in two years.”

Fannie Mae Chief Economist Doug Duncan stated, “Today’s Labor Department employment report was unremarkable, suggesting a small Federal Reserve rate hike will occur—as the market expected—in December. Some attention will be paid to the drop in the unemployment rate to 4.6 percent, but that is driven by the combination of jobs added and a decline in workforce participation, the latter of which was disappointing. The income growth number dropped back, thus easing Fed concerns about compensation as a driver of inflation through tight labor markets. Professional services showed broad-based employment growth, and state government employment made a healthy contribution. Manufacturing employment, currently featured in many headlines, showed a fourth consecutive month of minor employment declines, but housing more than offset that with a third consecutive month of healthy job growth. Housing supply growth continues to grind upward adding to economic growth. In sum, there’s no reason to believe that the pace of future rate hikes will pick up based on this release.”

Zillow Chief Economist Svenja Gudell noted that “the report shows an economy running largely at full steam, with the unemployment rate—already low—falling to its lowest level since August 2007,” and that some of the largest job gains occurred among residential constructors and developers, which could bode well for housing.

“Residential construction employment rose 4.9 percent from a year ago, continuing recent strength, though some of the bump is likely attributable to re-building efforts in the Southeast after Hurricane Matthew,” Gudell said. “Over the past three months, the construction industry overall has added 59,000 jobs, largely in residential construction. Continued hiring in this sector could be a good sign for home buyers struggling with incredibly tight inventory, and a continued ramp up in home construction activity will only help alleviate the problem as we move past the holidays and into 2017.”

Click here to view the full November 2016 Employment Summary.

Posted in:General
Posted by Dana Bain on December 2nd, 2016 2:15 PM

Because Fannie Mae financing is so dominant in today’s mortgage market, it’s important that real estate investors understand how Fannie prices risk into mortgage interest rates using loan-level price adjustments, or LLPAs. Once you understand how risk-based pricing works, you’ll be better equipped to “groom” your financial profile to qualify for the best rates and maximize the cash flow and ROI of your bank-financed real estate investments.

What is an LLPA?

LLPAs are essentially charges for risk factors such as low credit scores, high loan-to-value (LTV), property type, etc. Check out the image below, which shows a variety of LLPA hits for various combinations of credit score and LTV. Note that for a 95% LTV loan, there is a 3.000% hit for borrowers with credit scores less than 620 but no hit for borrowers with credit scores better than 740. Assuming all other factors are the same, this means that the borrower with a qualifying credit score of less than 620 will have to pay a charge of 3% of the loan amount to get the same interest rate as the borrower with a 740 credit score. For example, on a $200,000 loan, the borrower with the low credit scores would have to pay a $6,000 buy down fee to get the same rate as the borrower with the good credit scores.

Though LLPAs act like fees, they usually are not passed on to the end borrower as additional closing costs on the loan. Lenders typically price LLPAs into the base rate they offer, so the end result is that LLPA hits usually result in higher rates instead of higher fees. See Matrix https://www.fanniemae.com/content/pricing/llpa-matrix.pdf

Fannie Mae LLPAs Table 1

Now, check out the chart below, which shows the LLPA hits for investment property (highlighted in red).  As you can see, the hits are steep, and they’re a standard charge applied regardless of credit score. If you’re willing to put down 25% (which means a 75% LTV), the LLPA hit is a relatively modest 1.75%. However, if you’re only willing to put down the minimum 15%, the LLPA hit is a whopping 3.75% (not to mention you’ll pay mortgage insurance because the LTV is over 80%). 

Why LLPAs Matter to Real Estate Investors

It’s obvious that Fannie views investment properties as riskier than owner-occupied properties, particularly those with little equity.  These LLPA hits are the reason investment property rates tend to be significantly higher than owner-occupied rates.  See Matrix https://www.fanniemae.com/content/pricing/llpa-matrix.pdf

Fannie Mae LLPAs Table 2

Conclusion

If you haven’t noticed already, credit scores are a big part of LLPA pricing. If your credit scores are in the mid to high 600 range, you’re going to get hit with some significant LLPAs unless you owe less than 60% of the value of the property. This is why it’s important to keep your credit scores as high as possible – ideally above 740. 

If your plan is to purchase a property with short-term financing such as private or hard money, it’s also important to make sure you’re buying your properties right so that you have a built in equity position when you need to refinance into a traditional bank loan. For instance, if you purchase a fixer property with hard money, rehab it, and still have a 30% equity position in it when you’re done, it should be relatively easy to convert the hard money loan into a permanent bank loan.

For More information on LLPAs  https://www.fanniemae.com/content/pricing/llpa-matrix.pdf 

There’s a lot more that goes into pricing out a loan, so it’s important to work with a mortgage professional to get information specific to your particular situation. If you’re looking at financing residential investment real estate (4 units or less), feel free to give me a call.

 http://www.bainmortgage.com/ContactUs

Massachusetts License Number Broker MB1498

Dana Bain NMLS #18693

Robin Dunbar Bain NMLS #18699


Licensed by the State of New Hampshire Banking Department- License Number 5430-MBR Premiere Mortgage Services Inc. NMLS #1498 is a licensed broker and not a lender. We arrange but do not make loans.           


Posted in:General
Posted by Dana Bain on November 21st, 2016 3:41 PM

FHA Debt-to-Income (DTI) Ratio Requirements

When you submit an application for an FHA-insured home loan, the mortgage lender will evaluate your debt-to-income ratio to see if you're qualified for a loan. If you have too much debt in relation to your monthly income, you might have trouble qualifying. On the other hand, if you have a manageable level of debt (as defined below), you have one less thing to worry about.

The current (2015) limits for FHA debt-to-income ratios are 31% for housing-related debt, and 43% for total debt. But there are exceptions to these general rules. So don't be discouraged if you're slightly above those numbers.

Here's an overview of FHA debt ratio requirements for 2015 - 2016:

Definition of a Debt-to-Income Ratio

The debt-to-income ratio (DTI) is a percentage that shows how much of a person's income is used to cover his or her recurring debts. Lenders calculate DTI at the monthly level using the borrower's gross, or pre-tax, income.

There are actually two numbers used for FHA qualification:

  • The "front-end" ratio looks at housing-related debts only (monthly mortgage payments, property taxes, etc.).
  • The "back-end" number takes all recurring monthly debts into account. This can include the mortgage payment, credit cards, car loans, etc.

The math is fairly simply. You can calculate your DTI ratio by dividing your total monthly debts by your gross (pre-tax) monthly income. For example, if my recurring monthly debts total $2,000, and my gross monthly income is $6,000, I have a DTI ratio of 33% (2,000 ÷ 6,000 = 0.33, or 33%).

The Department of Housing and Urban Development (HUD) has specific guidelines for FHA debt-to-income ratios. HUD is the government entity that establishes all of the rules and requirements for the FHA loan program, including the DTI limits.

According to HUD: "Qualifying ratios are used to determine if the borrower can reasonably be expected to meet the expenses involved in home ownership, and provide for his/her family."

2015 DTI Limits for FHA Loans: 31% / 43%

According to official FHA guidelines, borrowers are limited to having debt ratios of 31% on the front end, and 43% on the back end. Here are the relevant excerpts from the HUD Handbook:

  • Front end: "The relationship of the mortgage payment to income is considered acceptable if the total mortgage payment does not exceed 31% of the gross effective income."
  • Back end: "The relationship of total obligations to income is considered acceptable if the total mortgage payment and all recurring monthly obligations do not exceed 43% of the gross effective income."

Stated differently, the borrower's housing-related expenses should add up to no more than 31% of his or her gross monthly income. And the borrower's total debt load (including the monthly mortgage payments, credit cards, car payments, etc.) should not exceed 43% of his or her gross monthly income.

Those are the current FHA DTI ratio limits for 2015. We expect these requirements to remain in place for 2016, since HUD has not announced any changes to them. If they do update their debt ratio guidelines in 2016, we will update this page to reflect those changes.

Compensating Factors for Borrowers with High Debt

On the surface, this suggests that borrowers with DTI numbers above the stated limits could have a harder time qualifying for FHA loans. But that's not always the case. There are exceptions to the official debt-to-income caps.

HUD gives mortgage lenders some leeway to approve borrowers with DTI ratios higher than the above-stated limits, as long as the lender can find and document "significant compensating factors."

A partial list of compensating factors is presented below.

  • Down payment: HUD requires a minimum down payment of 3.5% for FHA loans. Making a down payment above the minimum could create an exception to the debt-to-income limits mentioned above. For instance, borrowers who put down 10% could still qualify for an FHA-insured mortgage loan, even if their DTI ratios are higher than the 2015 limits mentioned earlier (31% / 43%).
  • Payment history: If, in the past, the applicant has successfully managed mortgage payments equal to or greater than the estimated payments on the loan they are currently seeking, he or she may still qualify for the program.
  • Savings: HUD also allows FHA debt-to-income exceptions for borrowers who have demonstrated a "conservative attitude toward using credit" in the past, and have the ability to accumulate savings. In other words, limited use of credit and substantial savings could work in your favor, even if your DTI ratio is higher than the stated limits.
  • Good credit: The borrower's credit history plays a role here as well. In short, borrowers with excellent credit scores have a better chance of getting approved for a government-insured home loan, even if their debt exceeds the minimum HUD guidelines.
  • Cash reserves: We touched on this earlier, under "savings." Lenders can make DTI exceptions for borrowers who have substantial cash reserves in the bank. In this context, "substantial" means the borrower has at least three months worth of mortgage payments in the bank after closing.
  • Minimal increase: If the FHA loan being sought will only cause a minimal increase in the borrower's housing expense, he or she may still qualify for an FHA loan with a higher-than-average debt burden.

Reference: HUD Handbook 4155.1, Chapter 4, Section F

Note: Mortgage applicants don't necessarily have to meet all of these compensating factors. One or more may be sufficient for FHA qualification purposes.

To learn more about FHA debt-to-income ratios in 2015, and the compensating factors that could allow you to circumvent them, refer to Chapter 4 of HUD Handbook 4155.1.

To recap, FHA's maximum qualifying debt ratios for borrowers in 2015 are 31% and 43%. This means the monthly housing payments should not exceed 31% of gross monthly income, while the total debt burden should not exceed 43% of monthly income. But there are exceptions to these rules, as noted above.

Disclaimer: HUD makes changes to their FHA requirements from time to time. While we make every effort to keep this website up to date, there is a chance the information presented above will become inaccurate over time. This website is not meant to replace the official guidelines found on the HUD website, but only to explain their policies in plain English. For the most current and accurate information available, refer to HUD.gov.



Read more: http://portal.hud.gov/hudportal/documents/huddoc?id=40001HSGH.pdf

https://www.fha.com/fha_loan_requirements

Posted in:General
Posted by Dana Bain on November 21st, 2016 3:03 PM

Hold onto your seats, folks, because mortgage rates are going on a wild ride after the election. Thirty-year fixed rates skyrocketed by nearly a quarter of a percentage point, while 15-year rates and 5/1 ARM loans jumped significantly on Thursday.

If there’s one thing investors hate, it’s uncertainty. And there’s plenty of that going around in the bond markets, because no one is sure what a Donald Trump administration has in store.

On Wednesday, the 10-year Treasury yield closed above 2%, about 25 basis points higher than it was before Tuesday’s election. It’s also the highest yield since January, according to Freddie Mac’s weekly survey of mortgage rates, released today.

Posted in:General
Posted by Dana Bain on November 10th, 2016 4:22 PM

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