Cool Tools News Spool

Category: Loan Programs

  • Astounding jumbo mortgage rates

    For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

    by G. Steven Bray

    One of the more interesting developments in the mortgage industry this year has been the competitiveness of jumbo loans. Remember that a jumbo loan is one with a loan amount greater than $417k, the conforming loan limit in TX. Traditionally, jumbo loans have had slightly higher interest rates than conforming loans because they don’t have the implicit backing of the US government through Fannie Mae and Freddie Mac.

    As mortgage credit has thawed a little, mortgage bond investors, particularly the large banks, have realized that well-heeled jumbo mortgage customers make good prospects for other financial services. As a result, they’re taking a more holistic view of the customer relationship and offering jumbo mortgage rates that can be lower than conforming rates.

    However, the jumbo loan process isn’t all roses and wine. Given that the banks often are holding the loans in their portfolios, the loan guidelines tend to be a bit stricter. In particular, most jumbo programs require the homebuyer to have significant cash in the bank in addition to what’s needed for closing, and most programs require 20% down.

    That last requirement may be changing. Several mortgage insurance companies have started offering insurance for jumbo loans with as little as 10% down. The interest rates are maybe a half point higher, but in the current ultra-low rate environment, that’s still a bargain. For homebuyers who want to conserve their cash or savvy homebuyers who want to lever their money, this could be an attractive option.

  • USDA RD changes coming Oct 1st

    For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

    by G. Steven Bray

    USDA is making some significant changes to its rural development (RD) mortgage program starting Oct 1st. If you don’t know the RD program, it’s worth learning more. The program requires no down payment and has much lower monthly mortgage insurance than FHA.

    The first change concerns that mortgage insurance. For all loan commitments after 9/30, USDA is increasing its monthly rate from 0.4% to 0.5%. That still makes it a bargain compared to FHA. For a $150k loan, the difference in total housing payment between USDA and FHA is more than $100. In fact, a homebuyer could get a $170k home, $20k more home, for the about same housing payment.

    But before you load your customer in the car to look at USDA-eligible properties, know that for homebuyers with good credit, FHA allows higher debt ratios than USDA. I’m hearing USDA will not accept a debt ratio above 48% whereas I’ve seen FHA approvals as high as 56%. On net, your customer may be able to qualify for more home with an FHA mortgage, but that comes with a higher housing payment.

    USDA bases the MI rate on the date it commits to the loan, not the date the homebuyer applies. If you have customers considering a USDA loan, they need to apply soon to beat the deadline.

    The second change concerns USDA property eligibility. The RD program targets “rural” areas, but rural includes many of exurbs of the major TX cities. The new maps carve off a few of those exurbs. The USDA eligibility Web site, which I linked at the end of my blog, lets you compare the new and old maps. The main changes I noticed were the expansion of ineligible areas in Pflugerville, Round Rock, and San Marcos in the Austin area and Denton and McKinney in the DFW areas. In addition, the ineligible area on the west side of Ft. Worth expanded significantly. San Antonio and Houston escaped mostly unscathed.

    USDA bases property eligibility on the date it receives the loan file. For most lenders, this will be a couple weeks after loan application. So, again, homebuyers need to act soon to beat the changes.

    USDA property eligibility maps.

  • Changes for the USDA mortgage program

    For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

    by G. Steven Bray

    The USDA RD loan is a great option for homebuyers in more rural locations. The loan requires no down payment and has much lower monthly mortgage insurance than an FHA loan.

    USDA is implementing some changes this fall that may affect your homebuyers’ ability to use the program. The changes take effect Dec 1st.

    – First, USDA will change some of its property guidelines.
    — The 30% limit on the ratio of land to total property value will be removed as will the restriction against in-ground pools. I’ve seen no guidance yet on how USDA intends to handle rural properties with high land values.
    — Guidelines concerning outbuildings have been clarified. Outbuildings that could be used to produce agricultural income, such as a barn, cannot be included in the property value used to determine the loan amount. This guideline will apply whether or not the property actually is producing income.
    — Private wells and water systems generally will be considered acceptable, but they may require inspection or documentation that they meet health standards.

    – Second, USDA will change some of its credit standards.
    — At least one applicant must have a valid credit score, and the credit report must show at least 3 trade lines with at least 12 months of history. There is no indication at this time that USDA will allow alternative credit scoring, such as through the use of rent and utility account payments.
    — Additionally, USDA has it indicated that for student loans, it will use 1% of the outstanding balance if the loan doesn’t have a fixed monthly payment. This could affect homebuyers that have used graduated or income-based payment plans to lower their student loan payments.

    – Finally, USDA will limit seller contributions to 6% of the purchase price.

    USDA is also changing its guarantee fee and property eligibility maps. We’ll cover those changes next time.

  • Will we see lower down payment conventional loans?

    For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

  • Minimum credit score drops for FHA loan

    For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

  • HAWK program still leaves FHA MI rates too high

    For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

  • Can your poor-credit buyers qualify for FHA?

    For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

  • FHA’s new manual underwriting guidelines

    Click here for a link to the FHA mortgagee letter.

    For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

  • Take advantage of higher FHA loan limits

    Click here to review the loan limits on the FHA Web site.

    For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.