Hill Slowinski • Real Estate: Blog

$625,000 To Be Maximum Loan Amount in Much of DC Area

More buyers in high-cost areas may be motivated to purchase a home before an Oct. 1 deadline when the government plans to scale back the size of “jumbo” mortgages it guarantees in much of our real estate markets.

By Oct. 1, the maximum loan amount that Fannie Mae and Freddie Mac is set to decrease from $729,750 to $625,500.  Buyers should have ratified contracts by August 31 in order to settle by the end of September or sooner if possible.  (The change could occur before October 1.).

This might make mortgages more expensive or more difficult to get for buyers in higher cost areas such as ours.  For example, after Oct. 1, a borrower who seeks a government-backed mortgage for a $1 million property may have to come up with a $375,000 down payment instead of $270,000.

Once the current jumbo loan limit expires, lenders who want to make loans over $625,500 will have to either hold onto the mortgage themselves or find a private investor to purchase it.

Mortgage Insurance Premium, Credit Scores, and Seller Contribution Affected

On January 20, 2010, FHA announced major changes to ensure its long-term financial soundness. FHA is trying to balance three fundamental objectives:

1. Financial soundness of the FHA insurance fund - ensuring that its capital ratio returns above 2 percent,
2. Fulfilling its mission of serving borrowers not adequately served by the private sector and
3. Facilitating the recovery of the housing industry and the over-all economy.

FHA has carefully balanced the need to make financial reforms with the need to keep FHA insurance available to a large segment of consumers. This is evident by retaining the 3.5 percent minimum down payment requirement and allowing the up-front mortgage insurance premium to be financed. FHA announced changes in the following areas:

• The upfront mortgage insurance premium (UFMIP) will increase to 2.25 percent up from 1.75 percent. (Effective April 5, 2010)
• Borrowers with a credit score below 580 will be required to have at least a 10 percent down payment. The minimum down payment will remain at 3.5 percent for all other borrowers.
• FHA will seek legislative authority to increase the annual premium (currently capped at .55 percent). Over time, increasing the annual premium may allow FHA to reduce the upfront premium.
• Seller concessions will be reduced to 3 percent from 6 percent.

Buyers are advised to be aware of these potential changes as they prepare to make offers on new purchases, as timing in the contract process is important.

Also, remember, to take advantage of the First Time Homebuyer Tax Credit, contracts must be ratified by April 30, 2010 and settled by June 30, 2010. There is no extension of this program being prepared at this time.

To Discourage Rush Closings, Reduce Last Minute Rescues, and Cut Down Closing Table Changes

Both buyers and sellers need to be aware of the changes brought about by the HVCC (see article below) and the Housing and Economic Recovery Act (HERA), which goes into effect July 30, 2009.  HERA is intended to better inform the consumer, slow down the settlement process, and ensure more accuracy and transparency in the lending terms. 

HERA requires that a lender must provide two initial disclosures to the customer -- the Truth in Lending (TIL) statement and the Good Faith Estimate -- before the lender can collect any fee to process an application for a loan.  The lender can then collect the application fee, but he cannot order an appraisal before the fee is collected.  The customer must receive the disclosures from the lender at least seven business days before closing. 

Further, if the Annual Percentage Rate increases by more than 0.125% from that stated in the initial TIL statement, the customer must receive from the lender at least three business days before closing a Pre-Closing TIL statement, which is the final binding TIL statement.

It is wise to plan for at least a 30-day close. Here are 4 things you can do to help keep the process on track:

1. Obtain a credit-checked preapproval before you start to shop for a home. (Applying in person, instead of over the phone or Internet, may help expedite the process.)
2. Upfront and throughout the process, review the timeline and potential impacts with your home mortgage consultant so you can keep your REALTOR or Builder informed.
3. Review the initial disclosure packet you receive. It contains important details about your loan transaction.  Make sure to pose any questions to your home mortgage consultant.
4. Review the appraisal delivery disclosure and determine whether or not you wish to waive the 3 business-day prior-to-close review period.

Hill Slowinski, licensed in DC, MD, and VA

W.C. & A.N. Miller Realtors, A Long & Foster Company

4701 Sangamore Road,  Bethesda, Maryland  20816

Cell: 301-452-1409  Direct: 301-320-8430  Ofc: 301-229-4000

         Email: hslowinski@longandfoster.com or Hill@HillSlowinski.com

What the Home Valuation Code of Conduct (HVCC) Means to You

Both sellers and buyers must be aware of the Home Valuation Code of Conduct (HVCC) legislation recently enacted in response to the mortgage crisis brought on by lenders who took unacceptable risks.  This is a legislative effort to create consistent business practices among lenders and to protect consumers.  There are new timeframes regarding appraisals and underwriting, and my efforts are to ensure my clients a smooth settlement in a complex process, as we can no longer expect expedited settlement or appraisal processing.

HVCC went into effect May 1, 2009.  The HVCC creates a firewall between lenders and appraisers and applies to Fannie Mae and Freddie Mac mortgages only.  HVCC requires appraisers to mail appraisals at least seven days before settlement and provide them for buyer review at least three days before closing.  If any financial adjustment to the sales contract is requested or expected by the buyer, e.g., following a home inspection or walk through, the appraisal must go back to the underwriter to determine if the adjustment affects the appraisal and affects the home's value.  

The coordination of timing between completion of the appraisal, approval of the appraisal and home valuation by underwriting, and removal of an appraisal or financing contingency must be carefully managed.  The timeframe to expect for a smooth transaction now is settlement 30-60 days after contract ratification.  These changes will slow the frequency of last minute closings and limit eleventh-hour rescues of deals.  Any late changes to sales contracts in the days just before settlement will affect appraisals and will result in delayed closings.

Hill Slowinski, licensed in DC, MD, and VA

W.C. & A.N. Miller Realtors, A Long & Foster Company

4701 Sangamore Road,  Bethesda, Maryland  20816

Cell: 301-452-1409  Direct: 301-320-8430  Ofc: 301-229-4000

         Email: hslowinski@longandfoster.com or Hill@HillSlowinski.com

Good for Closing Costs, Rate Buy Down, But Not Minimum Down Payment

The first-time homebuyer tax credit, worth up to $8,000, is available to households that haven't owned a home in at least three years.  The credit is a true credit, not a loan, and does not have to be repaid, and is fully reimbursable, so households can get their credit returned to them in the form of a payment. It was enacted last year to help encourage households to enter the housing market while interest rates are low and affordability is high.

FHA-approved lenders received the go-ahead this week to develop bridge-loan products that enable first-time buyers to use the benefits of the federal tax credit upfront, according the U.S. Department of Housing and Urban Development May 29.  Under the guidance, FHA-approved lenders can develop bridge loans that home buyers can use to help cover their closing costs, buy down their interest rate, or put down more than the minimum 3.5 percent. However, the loans can't be used to cover the minimum 3.5 percent down payment.

Buyers applying for FHA-backed financing with an FHA-approved lender that offers a bridge-loan program can get a bridge loan to bring down the upfront costs of buying a home significantly but would still have to come up with the minimum 3.5 percent downpayment.

Source:  Daily Real Estate News,  May 29, 2009

Hill Slowinski, licensed in DC, MD, and VA

W.C. & A.N. Miller Realtors, A Long & Foster Company

4701 Sangamore Road,  Bethesda, Maryland  20816

Cell: 301-452-1409  Direct: 301-320-8430  Ofc: 301-229-4000

Email: hslowinski@longandfoster.com or Hill@HillSlowinski.com

Now that conventional loan limits have increased to $729,750, our clients have been able to take advantage of a higher loan at rates below 5% with a fraction of points.  For example, in markets such as the Washington DC area, buyers with 20% down payments who have been waiting can move on homes whose prices are now within the acceptable price ranges for their financing planning.

Just to give you an idea of where zero point rates are right now (assuming good credit)...

• Conventional:  Up to $417,000 = 4.875%;  $417,000 - $729,750 = 5.125%;  Over $729,750 = 6.25% fixed;  Over $729,750 = 5.25% 5/1 ARM
• FHA:  Up to $417,000 = 5.0%;  $417,000 - $729,750 = 5.375%; 

Of course rates are very dependent on credit scores and down payments.  These are the kind of rates our clients received as of Friday, May 1.   

  Hill Slowinski

WC&AN Miller Realtors, A Long&Foster Company

4701 Sangamore Road,  Bethesda, Maryland  20816

Cell: 301-452-1409  Direct: 301-320-8430  Ofc: 301-229-4000

Email: hslowinski@longandfoster.com or Hill@HillSlowinski.com

My office has received word that conventional loan limits, which were lowered late last year to $625,000, have finally returned to $729,750.  This means that clients who were facing jumbo loan rates for loans above $625,000 may now be able to take advantage of a higher loan at rates below 5% with a fraction of points. 

In markets such as the Washington DC area, this is doubly good news to buyers with 20% down payments who have been wiating to move on homes whose prices are now within the acceptable price ranges for their financing planning. 

 Hill Slowinski

WC&AN Miller Realtors, A Long & Foster Company

4701 Sangamore Road,  Bethesda, Maryland  20816

Cell: 301-452-1409  Direct: 301-320-8430  Ofc: 301-229-4000

Email: hslowinski@longandfoster.com or Hill@HillSlowinski.com