The Different Kinds of Mortgage Insurance

February 1, 2012 by Leave a Comment

New House PMIMost folks want to avoid PMI… but they don’t realize that they are happily paying a “kind” of mortgage insurance no matter what kind of loan they are getting!

Mortgage Insurance is not the insurance that covers you if you die, or are disabled and can not pay the mortgage… it’s the insurance that protects the BANK in the event you go into foreclosure.

Given the recent UP TICK in foreclosures, you can see why banks are requiring higher coverage amounts!  If you are applying for a Conventional mortgage, and you are putting more then 20% on a property you plan to live in, you avoid this additional insurance…

New House PMIIf not, well, there are some cases whereby you can get it Lender Funded (meaning the rate is higher to cover the cost) or you might be offered secondary financing (often called a 80-10-10). OTHERWISE, you’re stuck… but it’s often tax deductible, and PMI is what’s keeping the mortgage wheels rolling, so play along!

If you are applying for a FHA mortgage – you’re insurance premium has gone up to 2.25% with monthly payments of .55% of the total loan amount.  For more information on the FHA PMI (or MIP), please click here.

USDA and VA loans both have Guarantee Fees.  These fees are charged by the respective agencies – but I’ve always considered them as the “insurance” collected to cover the agency in the event of a default on the mortgage.  The main difference between the Guarantee Fees and PMI (or MIP) is that there’s no MONTHLY fee (plus they call it a fee, not insurance)!

If you have additional questions about MIP, PMI or Guarantee Fees, CALL US!

Steve and Eleanor Thorne, Mortgage Banker in Cary 919-649-5058

 

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WoWho! VA Does Not Requre A Credit Score!

January 19, 2012 by 5 Comments

veteran home loansWell… I wouldn’t get TOO excited! According to the underwriters I’ve talked to lately  – even though the VA doesn’t require a Credit Score, clean credit for at least the last 12 months is required.

Here’s good news!  No matter what your score is – as long as you meet the minimum score requirements, you will get the best Home Loan Rate for Veteran’s!  A lower score will not change your mortgage interest rate with a VA loan!

If you’ve had a Bankruptcy – you can still get a VA Mortgage loan. You must be at least 1 year out of Chapter 13 and 2 years out of Chapter 7.  Most underwriters want you to have re-established credit and have those “pesky” 12 months of clean credit. [Read more...]

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VA Mortgage Loan After A Short Sale

June 21, 2011 by Leave a Comment

home in ralieghWe just answered a question from a Veteran that went something like this, “I sold a home last year that had two mortgages.  The first mortgage was paid in full, the second mortgage was not.  Can I get a VA Loan now that it’s been more than 12 months?”

There are two really, really important facts that we need before we can answer the Veteran’s question.

The first one is – why did you short sale the home? Strategic Short Sales are not going to sit well with an underwriter, and could be the basis for denying the loan.

Additionally, since it’s been 12 months, we need to know if there were any late payments on the mortgage prior to the Short Sale.  If there were missed payments, then VA will make us wait three years before we can do another VA Mortgage Loan.

Since it was a first mortgage that was paid in full, it is unlikely that the Veteran has a delinquent FHA, VA or USDA mortgage loan balance showing.  If there WAS a delinquent Government loan balance – you would not be eligible for another Government Insured Loan.

The Veteran in this case has a credit score of 660, and the second mortgage does not show a deficiency balance owed, but it does clearly show on the credit report as a short sale.  The reason for the move was because the Veteran lost their job in Florida and relocated to NC with a job they’ve now held for over a year (same line of work). In this case, the Veteran never missed a payment on the mortgage – they simply did not have cash (they’d been living on savings while looking for a job) to cover the $25,000 short on the second mortgage.

In a case like this – 12 months must pass from the time of the short sale, and the application for a VA loan. Our underwriters require that we get some sort of statement from the Second Mortgage Holder indicating that they are not going to file a deficiency balance against the Veteran… we ARE able to make this loan.

If you’ve had a short sale, and you want to know if you can now purchase a new home in North Carolina – call Steve and Eleanor Thorne, Mortgage Banker in Cary , 919-649-5058 – we have the best mortgage rates and the lowest fees available!

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FHA Guidelines to Qualify “Rent to Own” in NC

May 5, 2011 by 1 Comment

Rent-to-own agreements and or sales that take place between a tenant and landlord have special FHA Guidelines. Often times, when someone moves to our area with a short sale, or previous forced foreclosure in their past – they will rent a home here until their “waiting period” is over.

If you are in this situation, and plan on buying a home under a rent to own scenario, there are different rules for different types of loans. All Government loans are popular, because of their low downpayment requirements.  VA has no “formal” guidelines for this scenario, and neither does USDA- however, most Underwriters follow the FHA Guidelines for all Government loans in a lease to own scenario.

The appraiser will determine the fair market rent for the property.  Any money paid ABOVE the fair market rent will be used as a credit towards a future downpayment. So, if the appraiser says the fair value rent for the home is $1000, and you pay $1500 a month – $500 for each month you paid that could be paid by the Seller as Downpayment for you at closing!

The rent to own agreement must be approved by the lender. There also is a loan to value restriction (85% LTV) if the parties are related and they haven’t rented for a long enough period of time-usually at least 6 months.  For NON related sales agreements, you can currently go up to 96.5% and not have to have a minimum rental period. Rules and underwriting are OF COURSE always subject to change at any time and any additional lender overlay.

If you are purchasing a home in NC, and want more information about FHA Guidelines and Rent to Own contracts – please call Steve and Eleanor Thorne, 919-649-5058 we are the NC FHA Experts!  We also have the LOWEST mortgage interest rates! :-)

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Bankruptcy and VA Home Loans

April 29, 2011 by Leave a Comment

We are talking to folks every week who lost a job in the last several years, lost medical insurance – or had some other tragedy that made it necessary for them to take steps they never thought they would have to.  The reality is that in today’s economic conditions, unfortunately, bankruptcy has been the only way a family could get a fresh start. As a Veteran, considering a home purchase in North Carolina, you need to know a few things about how Bankruptcy can effect your ability to buy a home.

So, can you get a VA Guaranteed Home Loan if you have a bankruptcy?  The short answer is YES!

The good news is that as of today, the VA underwriting guidelines are far more relaxed than the guidelines for other mortgage loan types (USDA, for instance, makes you wait 3 full years before you are eligible for a mortgage).  The rules for applying for a VA Mortgage Loan after Bankruptcy are different based upon what type of Bankruptcy you took and weather you were able to KEEP your home, or if it was included in the bankruptcy.

Chapter 7 Bankruptcy

Chapter 7 bankruptcies are essentially when the borrower is freed of all liability from creditors. VA loan guidelines typically call for a 2 year waiting period after a Chapter 7 bankruptcy before you can receive VA financing again.

There are rare circumstances in which the 2 year waiting period will be reduced to 1 instead. You would have to be able to show that circumstances beyond your control were the driving force behind your financial hardship.   For instance, we’ve seen this done when a spouse died… we also had a situation where a couple had a children that were less than 12 months apart in age, and the wife could not afford childcare and had to quit her job.  If you can prove the extreme circumstance – then we might be able to make it work after the 12 month waiting period.

As mentioned earlier, USDA Home Loan guidelines call for a 3 year waiting period, and conventional loans require a 4 year waiting period.  IF you had a home that was included in the Chapter 7 Bankruptcy, and it was foreclosed upon – then VA Underwriters also require a three year waiting period.

Chapter 13 Bankruptcy

Chapter 13 bankruptcies involve the establishment of a repayment plan instead of being cleared of liability immediately.

Veterans and military personnel can qualify for a VA mortgage loan, based upon current guidelines,  even when they are still in Chapter 13 bankruptcy. However, you will have to show that you have made a minimum of 12 payments on-time and be approved by the court trustee for the new mortgage loan.  This is VERY, VERY RARE… but again, we saw this happen with a couple who had a restaurant, field Chapter 13, they closed their restaurant and went to manage a National Chain Restaurant.  That was approved… it just takes the right circumstances.

Once you complete a Chapter 13 Bankrutpcy, VA Mortgage Loan Guidelines allow you to immediately apply for a mortgage! Yippee! Conventional Loan guidelines, for instance require a 2 year waiting period!

Don’ Forget About Your Credit Score

All of this talk about being able to qualify for a VA mortgage Loan after (or while) you have a Bankruptcy, assumes that you have a credit score that’s recovered from this event, and is high enough for the Underwriters to approve.  The Veteran’s Administration does not make these mortgage loans – they only insure them.  The VA does not have a minimum credit score that they will insure… however, Underwriters have a minimum Credit Score that they will APPROVE… and these days, that number is a MINIMUM of 620… and some underwriters will only allow loans for those Veterans with scores of at least 640.  So, even after you have finished the bankruptcy process, there are still actions you need to take to get your credit scores up and increase your likelihood of qualifying for a VA loan after bankruptcy.

For example:

  • Re-establish your credit as soon as possible if you do not have any creditors after the bankruptcy process. Remember, approving a potential borrower with no credit is almost impossible!  We NEED a credit history that’s Clean For At Least 12 Months, with 3 Tradelines! You can re-establish credit using secured credit cards, apply for credit with FingerHut, or you might be able to be added to a credit card with a family member.
  • Once you re-establish credit, be sure to always make payments on time... and be sure that the folks who are extending credit to you are reporting those payments to all three credit repositories!  If you are paying for a car over time, and making payments to the dealer – he’s probably not reporting those on time payments to the credit bureaus!  Credit Unions often will not report to all three repositories either, because each submission costs them money!
  • Get in the habit of checking your credit at a minimum of once a year. This will give you an idea of where you stand, especially when you begin shopping for a VA mortgage loan.
  • Upon the discharge of your bankruptcy, send a copy of all your discharge paperwork (including all applicable schedules) to the three credit bureaus: Equifax, Experian, and TransUnion. This is important… it’s also important to KEEP the paperwork for at least 7 years.

We do TONS of VA Mortgage Loans in NC.  We have bases at Fort Bragg, Pope Airforce Base and Camp Lejuene… plus, there are TONS of Veterans who live in Johnston County, Wake, Harnett and Pinehurst!  If you qualify for a VA mortgage loan in NC call Steve Thorne, 919-649-5058.  We have BEST Mortgage Loan Rates Available!

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Used Eligibility Once VA Mortgage Loan

March 28, 2011 by Leave a Comment

People moving to Ft. Bragg, in Fayetteville NC might be moving here with little or no equity.  Did you know that even if you’ve used your VA eligibility before, you can use it more than once… under certain circumstances.

You need to either:

  • pay off your prior VA loan
  • and disposed of the property, you can have your used eligibility restored for additional use. Also, on a one-time only basis, you may have your eligibility restored if your prior VA loan has been paid in full but you still own the property. In either case, to obtain restoration of eligibility, the veteran must send a completed VA Form 26-1880 to the local VA Center.  In NC the Eligibility Center is in Winston Salem.  We suggest that Veterans include evidence that the previous loan is paid in full with a notice from the bank, and a copy of your HUD-1 Settlement Statement.  Including this information will speed up the process, and you will avoid delays.

If you allowed the folks who purchased your home to assume your VA loan, you can still get the Eligibility Reinstated, if the person who assumed the loan is also an eligible veteran who is willing to substitute his or her available eligibility for yours.  Otherwise,  the Veteran cannot have eligibility restored until the assumer has paid off the VA loan.

If you allowed someone to assume the VA Home Loan, and they defaulted, or the Federal government lost money AT ALL, you will not have your VA Eligibility restored. Even if it’s not your fault, and the VA does not hold you responsible.  Additionally, if you short sold your home, or did a deed in lieu, the VA will not reinstate your Eligibility. Although you might be released from liability on the loan and/or the debt was waived, the VA will not restore the Eligibility.

The law does not permit the used portion of the veteran’s eligibility to be restored until the loss has been repaid in full.

If you are considering a home purchase in NC, and have questions about your Eligibility – please call Steve Thorne 919-649-5057, NC’s VA Mortgage Expert! Remember, Veteran’s who have been deployed still qualify for the $8000 Tax Credit!  If you want to know VA Home Loan Qualifying basics, click here.

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USDA Home Loans and Deferred Student Payments

March 13, 2011 by Leave a Comment

People are moving to Raleigh, and staying in the Triangle because we have jobs. Folks who are considering putting down roots here, and getting a North Carolina Home Loan need to learn more about how their Student Loans will be viewed by Underwriting Guidelines.

Whether it is a USDA Home Loan, an FHA Loan, or a VA Mortgage Loan – if you have have existing student loans, first off they need to be current. If you are past due – call TODAY and see what can be done to create a payment plan.   Once you’ve made 6 to 7 payments on the new plan – you will be closer to being able to buy a home in NC.

The USDA Loan Program is very popular among recent graduates, and a couple reasons are because there’s not a down payment requirement and it is the simplest home loan to get with credit scores of 620 being used to qualify.

Because you don’t need to fork out a ton of cash to get into the USDA Home Loan Program it has gotten VERY popular over the last few years… and it’s our understanding that Johnston County, NC is one of the HIGHEST Counties in the Country when it comes to people who buy a house using the USDA Rural Development Loan!

Student loans come in two classes: deferred and not deferred.  And one thing to keep in mind when looking at the USDA Loan Program is that it does treat student loans differently than the other loan programs available.  At first glance you would intuitively think that a deferred student loan would not be considered in qualifying for your new home loan.

The rule changed slightly with the publication of Administrative Notice 4543.  Now, any student loan whether it is in repayment or deferred must be included in the qualifying calculations.

So, Even though the payment may be deferred, USDA Home Loan Underwriters in NC will still consider this to be a long term debt. This means that if you have 6 payments or more left on a student loan – we will calculate that payment in qualifying you for a mortgage loan.

The maximum total debt payment ratio for USDA is 41%.  This means that your credit card payments, student loans, car payments (etc) plus your mortgage, taxes and insurance on the house should not represent more than 41% of your GROSS (before taxes) monthly income.  We have seen a few cases where this was bent by an underwriter… but not often.

If you do have student loans that are in deferred status and plan on getting a USDA Loan, be sure you know exactly how much the monthly payment will be once the loan is back in repayment status.  If you do not have that information, the USDA Underwriters will use 1% of the loan balance as the monthly payment.

See what part of your county qualifies for USDA Mortgage Loans!

To find out if you qualify for a USDA Home Loan in NC call Steve Thorne (919) 649-5058.  We work with hundreds of families using this program each year here in NC!

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Profile of 2009 – 2010 First Time Home Buyer

November 9, 2010 by Leave a Comment

The National Association of Realtors released information about First Time Home Buyers last week that showed some interesting trends!

  • 93 percent of those surveyed in 2009 – 2010 reported that they purchased using one of the first-time buyer tax credits. (Who’s surprised??? Nope, we’re not surprised either!)
  • Ninety-five percent chose a fixed-rate mortgage.
  • The median age of first-time buyers was 30 and the median income was $59,900. (This part was a little surprising!) The typical first-time buyer purchased a 1,540 square foot home costing $152,000 (bet they were keeping their total payments under the $1000 mark)
  • First-time buyers who made a downpayment used a variety of sources: 74 percent used savings, 38 percent received a gift (or a loan) from a friend or relative, (READ:  their parents) Eight percent tapped into a 401(k) fund, and 6 percent sold stocks or bonds.
  • Women accounted for 1 in 5 purchases, and single Males made the largest leap in the survey ever – which was attributed to the tax [Read more...]

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Raleigh One of the Smartest Cities in America!

October 4, 2010 by Leave a Comment

We keep getting good news about Raleigh / Cary! In the past month we’ve been named as the first place to most likely see appreciation in Real Estate, one of the best places to Retire, One of the best areas for Single Rich folks and now… one of the BRAINIEST Cities in America!

According to new Census Bureau data, the national average for cities with people 25 years or older who have bachelor’s, master’s, professional school or doctorate degrees is less than 25%… In Raleigh, that concentration is at 42.4% putting us at number 4 on the list!

“There’s a very high correlation between earnings and educational attainment,” said Todd Gabe, an economics professor at the University of Maine.

Cary currently trends at number 13 on the fastest area in the country for Job Growth!

According to CNN Money, Wake  County is one of the nation’s leader in a high-tech and biotech jobs.

Wake County is home to Research Triangle Park, the country’s largest industrial park, where IBM has extensive operations, employing 11,000, along with GlaxoSmithKline, Cisco Systems, and SAS Institute.

Even though there are more than 160 companies in RTP, the lion’s share of Wake County’s jobs come from the public sector. The lion’s share of local jobs are with the state government or the public school system. North Carolina State University and the county are also major players.

If you are considering a home purchase in Raleigh or Cary NC – call Steve and Eleanor Thorne, 919-649-5058.  Professional Mortgage Planners with over 20 years experience. We have the best FHA, VA and Conventional mortgage rates and the lowest fees available!

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