While some of my industry friends rushed to be the first to get this information to the streets it seemed more prudent to verify the information found in the FHFA letter dated October 24. Now that a week has passed and the initial smoke has cleared here is a bullet point review of the important factors covered by this revamp of HARP.

• The existing loan must have been sold to Fannie or Freddie on or before May 31, 2009
• The current loan amount must be greater than 80% of the current value (LTV)
• This revamp removes the 125% LTV limit for fixed rate loans (there is no new ceiling)
• Lenders will get a new set of Representations and Warranties (this will affect some who may not participate)
• This eliminates the need for a new appraisal when there is a reliable Automated Valuation Model (AVM) available
• The program extends through December 31, 2013 (and you can bet some people will wait that long)
• This allows people to also refinance into a shorter loan term (because of the lower rates and their DTI)
• The mortgage cannot have been previously refinanced under HARP unless it was from March-May of 2009
• The borrower must be current on their loan payments at the time of refinance
• The borrower cannot have been late on payments in the previous six months and not more than once in the previous 12 months
• If refinancing into a fixed rate there is no maximum LTV
• If refinancing into an adjustable rate (ARM) there is a maximum LTV of 105%
• Condominiums are eligible under Enterprise requirements
• When this becomes available will vary by mortgage lender
• Program participation by lenders is not mandatory

Those are straight from the horse’s mouth. There has been a lot of speculation and some of it is not in the official document.

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Once there was a young prince who sat for hours waiting on his chance to capture the great, white unicorn. The sorcerer from the other side of the mountain decided to trick the young prince and duct-taped a stick to a horse’s head and sent him into the forest. The prince, seeing the horse with the duct tape, thought he had finally found his unicorn …

Once there was a young home owner who heard an exciting story about the “no-cost home loan” and rushed to his computer to apply online. When he received his Good Faith Estimate he was so sure he was getting the best of all worlds he did not even bother to notice his loan amount was higher than it should have been and his interest rate was a little higher than he had heard from the reputable lender he had spoken with earlier …

Okay so the tale really isn’t always that grim. It is, however, always about that technical. There is no such creature as a “no-cost” or “zero cost home loan”. There are closing costs and somebody pays them. Not the sheriff of Nottingham, not the prince … the home owner or buyer. The person who is about to become the mortgagor, also referred to as borrower, is the one who always pays the closing costs.

There are three ways to pay closing costs:

• The buyer or seller can pay the costs in cash at the closing and they’ll be shown on the HUD 1
• The loan officer can increase the interest rate a little to get a higher yield and pay the closing costs
• The loan officer can increase the loan amount, when possible, and pay the costs from the refinance proceeds

The second and third bullet points in the list above are the ones used to cover the costs in the so called no-cost closings. This does not make these evil, bad or even suspect. In fact there are times when this method makes great business and can work in the favor of the borrower.

Borrowers generally keep the same loan for no more than 5 to 7 years. There are some instances, say when someone intends to live in the home only for a couple of years, where the methods can be beneficial. With that in mind the spread sheet below should illustrate the point nicely and help the borrower make the decision of which method is best to use for their immediate circumstance. See Figure 1 comparing a vanilla closing to a no closing costs home loan.

Figure 1: No closing costs home loan chart

While this chart is not 100% accurate to today’s interest rates or closing costs it is accurate enough to illustrate the point. The best you can do for yourself is to ask your loan officer for a quote in all three ways to help you make up your mind how you wish to proceed. With rates higher than personal yield from most stock investments and certainly CD’s you can see paying the costs at closing is generally a more fiscally sound decision, especially long term, than going for the exciting sounding no cost home loan. Your mileage may vary.

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A parent can be the non-occupant co-borrower for a child with an FHA home loan

No. Well, yes. Sort of. Mortgages can have co-borrowers. Instead of getting all wrapped up in the differences and similarities let’s simply cut straight to what a mortgage can have and when and how it is used. More specifically let’s look at the non-occupant co-borrower. In other words someone will be on the loan but not living in the property.

While a NOCB is not exclusive to FHA home loans that is the most common place to find them allowed. Some smaller lenders who portfolio or have special products may also allow them but generally this technique is permitted only FHA home loans.

The NOCB must have qualifying credit and so must the occupant borrower. The reason for using a NOCB is for income calculations. The upside is a borrower who does not have enough income to qualify on their own can have a family member or significant other help them to meet their monthly expenses. The non-occupant is equally responsible in making sure the mortgage is paid on time as is the occupant.

Non-occupant co-borrowers cannot overcome bad credit on the part of the occupant borrower. In fact if the occupant borrower is not credit qualified a non-occupant is moot because the loan will not be approved.

An ideal situation for a NOCB would be if the occupant is a student and has good credit scores but limited income and the parents would serve as the co-borrowers to make sure the debt-to-income ratio is within specifications. In this case the credit of both and the income of both will be used and the income of the child (occupant) can be zero provided the parent’s income is high enough to cover all of their existing obligations and well as the new mortgage.

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Mortgage rates lowest in history.

The news is everywhere today that home loan rates have dropped to an all time low – even lower than the historic lows we have been seeing for the last several months. While this may be a reflection on the poor state of the economy it is also an opportunity for those who are ready, qualified and able to refinance or purchase to save a tremendous amount over the lifetime of their home mortgage.

Today I just priced a fifteen year fixed mortgage at 3.25% with an APR of 3.78% on a $180,000 refinance and low closing costs (point in yield). This is an incredibly low rate and most certainly cannot be sustained.

Why are rates so low? The 10 Year Treasury yield is low. That’s the main reason.

Ti qualify for these low rates you need a good credit score, at least 20% equity in your home (or a 20% down payment), steady income and a few minutes to complete an application.

Even though you may have heard and read “mortgage rates can’t stay this low for ever” and they seem to have been hanging pretty low for the last few months the statement is still correct. Here’s what it looks like on a few different loans at low rates:

*This does not constitute and offer to lend. Applicant must qualify by applying for the loan and providing the necessary information and documentation to prove eligibility. These are conventional rates and the APR may vary based on how closing costs are paid: the borrower may pay them in cash, they may be “rolled in” to the loan amount or they may be paid from rate yield.

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Sometimes FAST is the key to success. You may have seen advertisements from lenders who “guarantee” very quick closings and offer to “make it right” if they don’t meet the deadline. That is not what this is – in fact instead of promising something that cannot be delivered unless a long, long list of stipulations is met we’ll start with the facts and deliver based on the borrower’s ability along with the ability of a few third party providers to deliver. Eight days is possible and can be done and something reasonably close can be achieved in the majority of cases.

Fast Home Loan Closings for Georgia Mortgages

1. Good credit, income and assets are required for the fastest closings. Some hopeful competitors won’t even consider a loan application with someone who has challenges and they only want to work with “the cream of the crop”. So do we, however we work with anyone and everyone.
2. The property must be acceptable and ready to occupy under standard lending guidelines.
3. The borrower(s) need to have all of the requested verifying documentation in the lender’s hands within hours of being requested.

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We hear, and see, the words “executive home”. Do you know what it is? If not don’t feel too alone because even among seasoned professionals who attempt to define “executive homes” there is dissension. Today I asked a few REALTORS for an answer. Is there a specific designation for an executive home? Their answers were, “No.”

Cobb County, Marietta, Executive Homes

Around my base of operations in Marietta, Cobb County, Georgia – just a few minutes north of Atlanta on I75 – there are plenty of homes for sale which would fall into this somewhat imaginary “Marietta, Georgia Executive Homes For Sale” category. In researching and over years of experience I have been able to surmise that an executive home here in Georgia would be one which falls into the following:

• Is near mass or easy transportation
• Is a single-family home
• Generally in a PUD (Planned Unit Development)
• Has a sales price between about $400,000 and $650,000 (but can go lower or higher)
• Includes an office or study in the floor plan
• Often is in a gated community or has security patrols
• Is for families and individuals equally
• Features amenities like swimming, tennis, pathways, and golf

While other homes may also, especially in Cobb County, Georgia, be considered executive style homes this is the general description of what I have long seen referred to as an executive home. Priced just a little higher than the starter home and just a little lower than many luxury homes the executive home is built well enough and with the right floor-plan to be the final home purchased prior to retirement and downsizing if that is your plan.

There are several people in the Atlanta metropolitan area who can help you find an executive home once I have qualified you for the purchase.

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Seems like you should just be able to pick up the phone or go online and apply, right? Well technically you can. If, however, you want to help the results here are five things you can do, starting right now, to help yourself get the best mortgage for your buying and credit power.

1 – Pull Your Own Credit – A little inside joke, not funny because it’s at the borrower’s expense, is when a loan officer asks during the initial consultation, “you have any late payments or other derogatory information on your credit” and the application prospect answers “no” only for the loan officer to pull the credit of the applicant and find a couple of pages of nothing but late payments. Don’t let this be you. You can pull your own credit a any number of websites and usually for free. All you really need to look for is if you have late payments, judgments or liens against your credit, if you see something that isn’t yours, and get a general familiarity with your own credit report. You should do this at least once every year anyway.

Caution: You do not know how to make credit decisions so the advice above is not meant to have you think just because you have a late or two on your credit you are not going to be approved. Every loan solution is different. The advice above is just so that you already have some familiarity with your credit record which you always should anyway. Even if you see lates on there go ahead and call a licensed professional in your area.

2 – Know Your Finances – If you are the type of person who has no idea how much you have in your checking account you should take this time right now and review. If you never balance your checkbook this may be a difficult process for you because you’re going to be digging for some paperwork regardless of where you close your loan. Take the time before starting the application and familiarize yourself with your assets. Check your banking balance, retirement accounts and other liquid type investments so you’ll know the answers when asked and you won’t have any surprises later.

Caution: Every loan program is different and loan purposes are different, too. Purchase loans where you are making a large down-payment will require you to demonstrate you have the funds for the down-payment and closing costs and that they are, indeed, your funds. In other words you’ll have to prove it’s your money and it didn’t come from the seller trying to “help” you buy the home. If you have had the money for at least 2 months it is now called seasoned and the burden of proof diminishes rapidly to nil.

3 – Know Your Work Info and History – All mortgages require 2 years of employment history. Sometimes that can be a little crazy especially if you, or the borrower, work temp jobs. What this means is the lender (we) need to know everywhere you have worked for the last two years and if there are any gaps in employment a good reason. Go ahead and map this out and get the contact information and your pay history for each of these employers.

Caution: Even if you have gaps or have worked at multiple places in the last 24 months you cannot count yourself out.

4 – Know Your Residence History – You would be surprised how many people don’t know their last address when it’s needed on the loan application. We, any lender, will need to know where you have lived for the last two years and to whom you paid rent. If you are currently or have lived rent free we will need what is called a “rent free” letter that we get from the person who owned the home or had authority to permit you to live with them for free. Examples of this are room-mate, friend or even family. This is important because we are trying to prove your ability and intent to repay the money we are about to buy your new home with.

Caution: Only a mortgage professional who knows the guidelines and makes the lending determination can make the final decision on this. Don’t think you can’t buy just because your residence history is jumbled or obfuscated.

5 – Get Your Records Together – Most lenders for most loans are going to need (at least) some or all of the following so you may as well start getting them together right now. Find the last 2 (or even 3) years of tax returns, all pages, all schedules. Find the last 2 months of your bank statements for checking and savings all pages – even blank pages believe it or not. Find the last 2 years of your W2 forms. Find your last 1 month’s worth of your pay stubs. Some lenders need more, some lenders may not ask for all of these though most do.

Caution: Chances are you’re going to asked for some verification or statements about something so be prepared when you get asked by the loan officer or processor to provide them. Arguing about it really doesn’t do much good so it helps to be prepared and understand you are asking someone to “let you hold” $100k to $500k or more to purchase a property with really no guarantee you’re ever going to pay it back. It is their job to protect both you and the investor in the transaction.

Most of all it is better to not be surprised at the things that come up during your approval process. If you are a detailed record keeper you will be just fine. On the other hand if you’re a little shakey in the personal history department you may have a bit of a bumpy ride with the underwriter “making” you look for things. The best thing to do is find them now, before you apply.

Avoid online mortgage companies or big banks where you may be nothing more than a number and a dot on the page. Call a local, licensed, mortgage professional and be prepared to help them get you approved!

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Atlanta Luxury Home Market – People are always asking me, how’s the Atlanta real estate market? In August 2011 there were 32 luxury homes that sold that were listed for over $1,000,000.  In August 2010, that number was pretty close to the same with 28 luxury homes sold.

What was the difference?

In August 2010 the lowest sales price was $850,000 with just 11 days on the market.  The average number of days on market for all the luxury homes sold was 193 days and an average sales price of $1,317,598.  The highest price Atlanta luxury home sold for $2,400,000 with 805 days on the market.

In August 2011, we saw a decrease in the number of days on the market in the Atlanta Luxury Home Market.  The lowest number of days on market is 0, yes, not even 1 day on the market for a home that was listed at 1,099,000 and sold for $520,000 in McDonough.  The average number of days on market for all luxury homes in the Atlanta area was 116 days with an average sale price of $1,620,534.  The most expensive luxury home that sold in August in the Atlanta area was $9,000,0000.  It was on the market 454 days.

Many of the Atlanta Luxury Homes are in golf course communities with fabulous amenities.

Where did the Atlanta area Luxury Homes sell in August 2011?

Buckhead  - 8 of the Luxury homes sold in Buckhead

• London Estates in Atlanta
• Kingswood – Atlanta Fulton County
• Woodward Investment (near Buckhead in Atlanta)
• Sugarloaf Country Club in Duluth – Gwinnett County – 2 of them sold here – For the same time period last year, 4 Luxury Homes sold at Sugarloaf
• Peachtree Manor Heights –Atlanta in Fulton
• Atlanta National in Alpharetta in Fulton
• St. Marlo in Duluth Forsyth County
• Tuxedo Park – Near Buckhead in Atlanta
• High Gates on Robinson in Marietta – Cobb County
• Chatham Park in Roswell –Fulton County
• Riverwood in Johns Creek – Fulton
• Sentinel Ferry at the River in Sandy Springs –Fulton County
• Lake Lanier in Cumming – Forysth
• Atlanta National – On the Golf Course in Alpharetta
• McDonough in Henry County
• Atlanta Country Club in Marietta
• Country Club of the South in Johns Creek –Fulton County
• Chastain –Atlanta Fulton County – Last year same time period 3 Luxury homes sold in Chastain
• Spalding Stables Estates in Atlanta – Sandy Springs area of Fulton County
• Chatsworth in Atlanta near Buckhead
• The Enclave at Jett Ferry – Dunwoody – New construction by John Wieland

If you’re thinking of buying or selling an Atlanta Luxury Home, contact Jen Bowman, Broker Associate with Keller Williams Realty Atlanta Partners, Luxury Homes by KW at 404-456-5024.

www.LuxuryHomesGA.com

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These days it is almost impossible to get the best home loan without the best credit. During the “sub-prime” boom it was possible to achieve high balance financing with low credit scores if you had the right income and assets. During that time borrowers simply paid a higher interest rate to “offset the risk”. In today’s economy and lending environment, however, the industry has returned to more common sense lending practices. As a result having the best credit score and history possible is key to achieving the best home loans available at the best interest rate.

Key Number One

Have open credit with activity on it. The older the credit line and the better the activity on it the higher your score. New credit lines can temporarily lower your score until the reporting agencies see that you are going to manage your credit well. There are some offers in consumer lending which require the credit line to be at least 15 years old or older to qualify for the offer. This is generally for extremely low rate or high balance/high reward credit cards. So Key Number One is to actually have credit that has always been paid on time and is used regularly.

Tips for great credit for Georgia mortgages

Key Number Two

One of the best ways to tank your credit score and history is to make a late payment. Even a late payment on an auto or credit card can adversely impact your credit score and history enough to eliminate you from qualification for the best home loans. Some loans require there to have not been a late payment on any consumer credit in the last 12 to 24 months and most require no home mortgage late payments in the last 12 to 24 months. So Key Number Two is never pay late. By never I mean never.

Key Number Three

Keep your loan balances low. Paying a loan off, believe it or not, may have less of a positive effect than keeping your loan for the duration but paying it down quickly. With credit cards keeping a very minimal balance is key to increasing scores. For example if you have a credit card with a $5,000 limit and your outstanding balance is $4,900 this can hold your scores down. Conversely if you have a $100 balance on that same card you will notice an up trend in your scores. Likewise with car loans and other types of credit. Paying them off and closing them is not usually as good as paying them down and keeping them open. So Key Number Three is low balance to loan amount or credit line amount.

If You Have Questions

If you have questions about getting the best home loan to purchase or refinance a home loan in Georgia don’t hesitate to contact me. My office is in Marietta near the intersection of Windy Hill and Power’s Ferry so if you want to come by to discuss your situation and opportunities feel free to contact me to schedule an appointment. The coffee or soft drinks are on me! I specialize in Cobb County luxury home financing as well as any home for primary residence or real estate investment purchase or refinance in the north metropolitan Atlanta area of Cobb, Cherokee, Fulton, Paulding and Gwinnett.

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This is not one of those “dangerous” loans made during the sub-prime runup. In fact this loan pre-dates those loans and has performed very well over the years even though it does not require the buyer to have “skin in the game”. We’re talking about the section 502 Guaranteed Rural Home Loan available to homes in designated areas to buyers who demonstrate steady income and a good credit history.

Finding out of the home is in a designated area is simple and takes just a phone call or email. I can help you if your property search is in Georgia and it only takes a few minutes. Listen to this short audio message for more information and call me at the numbers listed all over this page and on the audio segment.

To request more information directly from me (I do not sell leads, ever) simply complete the form below or telephone me during normal business hours:

I am a multi-year veteran of the industry who has served in the highest offices in the industry. I can help you get the best deals and avoid getting ripped off!
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