Lakeland Mortgage

Fix Up Distressed Lakeland Real Estate with a FHA 203K Streamline Mortgage

Looking to take advantage of a Lakeland short sale, bank-owned, or otherwise distressed property? Consider a Lakeland FHA 203K streamline mortgage.  It’s a great way to get a good value and some money to fix up your home as well.  First and foremost, make sure you are working hand in hand with an experienced mortgage broker, who is knowledgeable about this program and goes over the costs, time and requirement with you in great detail.

Like many other areas of Florida, the Lakeland, Florida real estate market has been hit pretty hard by foreclosures, leaving many properties in the hands of Banks, which aren’t exactly known for their property management capabilities.  As such, many Lakeland homes for sale as short sales, REOs, bank-owned properties and the like, though offered at a great value, are often in need of minor to moderate repair to be considered “move-in ready.”

I just sold a bank-owned home that was financed with a FHA 203k Streamline Mortgage with the maximum allowable rehab costs of $35,000 where I represented the buyer.  It is not for the faint at heart, it requires organizational skills of the buyer and the buyer’s agent with coordinating the estimation for repairs with vendors who have to meet the FHA guidelines.

Master Bedroom - no flooring and mold

Master Bath - w/o cabinets - mirror and mold

Enter the Lakeland FHA Streamline 203K mortgage…

The following Q &A on FHA 203K Streamline Mortgages should give you a general idea of how this home loan option can allow you to get into a distressed property at a good value and get up to $35,000 to fix up the property.   You’ll be surprised at the repairs that qualify under the FHA Streamline 203k program.

Q: I’ve heard about FHA 203K Streamline loans, but what exactly are they and how do they work?

A: The FHA Streamline 203k mortgage allows home buyers to purchase properties in need of minor to moderate repair while factoring in some or all of the needed repair costs into the loan.  As long as the repairs on your Lakeland home don’t exceed $35,000 (including fees) and are not structural in nature, you can “refurbish and rehab” the property with the costs built into your mortgage.

Q: Are there cases where the repairs you perform can exceed $35,000?

A: No- the streamline 203k is capped at $35,000 including any “soft costs.”

Q: What exactly are “soft costs?”

A: Soft costs are the those costs that don’t involve repair, but are necessary to close the loan.  These include closing costs  – including up to 2 inspection fees (approx $150/each).  These costs also account for an appraiser compliance inspection report (roughly $125), as well as a supplemental origination fee (the greater of $350 or 1.5% of the rehab costs, and a contingency reserve of 10% – to be determined by the underwriter).

Q:  What sort of downpayment will I need for an FHA 203K Streamline mortgage?

A:  The regular FHA downpayment limit of 3.5% applies.

Q: Are there limits on the types of properties that qualify for this program?

A: Yes, the FHA Streamline 203K mortgage applies only to single family residences, condos, PUD’s and 2-4 unit properties.

Q: Can this program be used to build a new property?

A: No the property must be existing at least 1 year old to be eligible for the streamline 203k.

Q: Is it possible to use this loan on a property for which I will be considered a non occupying co borrower?

A: Yes – the credit piece of this loan is the same as an FHA 203b – standard FHA qualifying

Q: How long after closing will I have to complete the repairs on my Lakeland home?

A: Work on your property has to begin within 30 days of the loan closing, and must be completed no later than 6 months from when your loan has closed.

Q: Is it required that I occupy the home while repairs are completed?

A: You are not allowed to be displaced from the property for more than 30 days during the allowable 6 month rehab time.

Q: Am I allowed to do my own repairs on the streamline 203k?

A: Yes, but only if you are qualified – as in if you work in the construction business, are a licensed contractor, etc.) and you complete the self help forms.

Q: What are the contractor requirements for work being done on a 203K Streamline loan?

A: Contractors are to be licensed and bonded and will need to complete a W9 prior to closing.

Q: What if there are repair funds left over after the work has been done?

A: Any remaining money left over after the work is completed will be applied to your principal mortgage balance.
As I said, if you’re looking to take advantage of a bank-owned property that is in need of repair and need to factor your repair costs into the mortgage, the FHA 203K streamline mortgage program is a great option.

Lakeland Mortgage

Lakeland Mortgage Update: Come Spring 2010, FHA Mortgages May Become More Difficult and Expensive to Get

Lakeland mortgage borrowers looking to finance a home purchase using an FHA loan may experience higher levels of difficulty and cost come the Spring of 2010.

Issuing a statement on Wednesday, the Federal Housing Authority (FHA) presented some significant policy changes to its mortgage assistance programs designed to minimize its risk and boost the financial position of the mortgages that it backs.

So, what does this mean for Lakeland mortgage borrowers?  Put simply – these changes mean higher costs.

Per the FHA’s official announcement, there are 3 key guideline updates you need to consider when planning to use an FHA mortgage:

1. There will be an increase in up front mortgage insurance premiums from 1.75% to 2.25%
2. The minimum downpayment requirement for borrowers with credit scores below 580 will rise to 10 percent*
3. Sellers will only be able to contribute 3% of their home’s selling price towards borrower closing costs, down from today’s allowable 6%

*Note: Though the FHA may allow credit scores at or below 580, nearly all mortgage lenders today require credit scores of 620 or higher.  Lenders have and often exercise the right to establish borrowing criteria that go above and beyond what backers like the FHA and VA require.

In addition to these planned changes, the FHA has asked Congress for permission to increase the monthly mortgage insurance premiums currently being charged to FHA home loan borrowers.

What Are the Real Reasons Behind the FHA’s Newly Tightened Guidelines?

It’s pretty clear what the FHA is trying to accomplish with these newly tightened mortgage borrowing restrictions.  It’s a balancing act, really.  On one hand, the FHA wants to provide deserving families and individuals with affordable home loan financing – something that they express in the FHA mission statement.   However, the FHA must also maintain control over the risk that comes with insuring lesser-quality loans.  (In this case, I point to FHA loans as being lesser quality as opposed to Conforming loans that often have tighter credit restrictions and higher downpayment requirements.)

By ramping up its guideline requirements, the FHA hopes to limit the negative impact of “bad lenders”  – who often do not provide any additional limits past what the FHA requires – in hopes of stopping problems like higher loan default rates where they start.  To this end, the FHA is also introducing what it calls a “termination clause.” If banks or loan officers begin to issue more than an acceptable number of loans to less than qualified or risky borrowers, they will lose their right to originate FHA mortgages.

As a result, homebuyers in Lakeland should expect tougher FHA underwriting in 2010. Not because the FHA says so, necessarily, but because banks don’t want to do “bad loans.”  This is where additional restrictions past what the FHA requires will begin to become more and more prevalent.  See, mortgage lenders are incented to turn down at-risk applicants and, already, we’re seeing examples of this.   As I’ve stated above, despite FHA allowing 580 FICOs and lower, many banks have made 620 their minimum.   Additional guidelines above what the FHA requires may also come into play as banks and lenders try to protect their right to issue FHA loans.

The FHA’s new guidelines don’t go into effect until spring.  So, between now and then, the old guidelines will apply.  Therefore, if you know you’re going to need a Lakeland FHA home loan in the next few months, consider moving up your time-frame.

If nothing else, you’ll save some money at closing.

Lakeland Mortgage

Lakeland Mortgage Update: 100 Days and Counting to Claim the Homebuyer Tax Credit

If you’re considering a move on a Lakeland mortgage in an effort to take advantage of the homebuyer tax credit, you be advised that the clock is ticking.

If you’ll recall – back on November 6, 2009, Congress granted and extension and expanded the First-Time Home Buyer Tax Credit program.  As of now, you have 100 days left to claim it.

Providing a tax credit of up to $8,000, the deadline for homebuyers has been moved forward to spring, requiring Lakeland homebuyers to have a contract on a home by no later than April 30, 2010.  You’ll also need to be sure that you close on your Lakeland home by no later than June 30, 2010.

“Move up” homebuyers in Lakeland also stand to gain from this tax credit.  If you’ve lived in your home for 5 of the last 8 years, then the IRS will allow you to receive a tax credit of $6,500.

Important Facts to Know About this Tax Credit:

Buyers should keep the following things in mind when determining whether taking advantage of this tax credit is a viable option:

• You may not buy your home from a parent, spouse, or child
• It is not permissible to purchase your home from an entity in which you have a majority ownership position
• Homes acquired through a gift or inheritance are not eligible
• All individuals involved with the purchase of the home have to meet eligibility requirements

There are also a few new updates to keep in mind:

The sales price of the home you buy cannot be more than$800,000.  You must also make less than $125,000 as a single-filer and $225,500 as joint-filers.

It’s also important to remember that this program provides for a true tax credit — not a deduction.  What this means is that if you are eligible for the full $8,00 credit, and your tax liability is,$5,000, you will get a $3,000 refund from the U.S. Treasury at tax time.

For a complete list of qualifying criteria, visit the IRS website.  Talk this move over with your accountant or other qualified tax professional.  Then put a big red circle on your calendar around April 30, 2010.  You have 100 days left!

Lakeland Mortgage

Lakeland Mortgage Update: 2010 FHA Loan Limits Released

Home buyers looking to buy Lakeland real estate using FHA loans take note, the FHA has released its loan limits for 2010.

FHA home loans represent federal assistance mortgages made by lenders and receive backing by the government.   Though some believe that the FHA lends money – this is not the case.  Rather, the FHA insures loans made to homeowners by federally-qualified lenders.

Though home sales in Lakeland have been lower than we’d like to see, those homes that are being financed are – by in large – being done so using FHA mortgages.  This trend meets with national figures on FHA mortgages when we compare 2006 figures vs. 2009 figures…

• 2006, FHA insured 3.3% of all mortgages made
• Q2 2009, FHA insured 19.2% of all mortgages made

FHA guidelines play a large role in the rise in FHA mortgage popularity.

A big guideline placing FHA mortgages in a brighter light for most entry level borrowers is the fact that they have lower downpayment requirements than do their conforming mortgage cousins Fannie Mae and Freddie Mac.  Credit standards tend to be a bit more lenient as well.  The FHA allows downpayments of 3.5 percent for homes in Lakeland and Fannie Mae and Freddie Mac do not, as an example.

Lakeland FHA loans are also attractive because they aren’t subject to credit score fees the way that conforming mortgages are. Through Fannie or Freddie, Lakeland home buyers with a 650 credit score and 20% down are subject to 3% in risk fees.  Using FHA mortgages, the fee is zero, making FHA the better “deal.”

2010 FHA Mortgage Limits

The FHA published its 2010 loan limits. There’s no change from 2009.

The base 2010 FHA loan limits are:

• 1-unit : $271,050
• 2-unit : $347,000
• 3-unit : $419,400
• 4-unit : $521,250

We say “base” because these loan limits don’t apply to all areas equally.  Higher-cost regions get higher loan limits, based on typical home values.

The official FHA announcement included a complete, county-by-county FHA loan limit list. The first spreadsheet shows each county at or above the $729,750 maximum; the second list is everyone else.

If your home’s county is on neither list, use the “base” numbers above.

Lakeland Mortgage

Lakeland Mortgage Update: 2010 Conforming Mortgage Loan Limits

With all the talk of FHA Loans lately, it is sometimes easy to forget that those looking to buy Lakeland real estate with 20 percent to put down on a home purchase can also choose to opt for a Conforming Lakeland Mortgage.

Here are a few facts about conforming mortgages and their loan amount limits moving into 2010.

A conforming mortgage is defined as one that “conforms” to Fannie Mae or Freddie Mac’s mortgage requirements.  Each year, the government establishes the maximum allowable loan amounts for conforming mortgages, based on “typical” housing costs across the US.  Any loan that exceeds this base mortgage amount limit is considered a “jumbo” mortgage.

Just as US home prices increased from 1980 to 2006, so did conforming loan limits.  However, as we’ve seen home prices decrease over the past few years, the conforming loan limit has ceased to climb and has instead held firm.

2010 Conforming Loan Limits Hold Firm for 5th Consecutive Year

Keeping in line with what seems to be financial tradition moving into 2o1o, the government set $417,000 as the nation’s 2010 single family home (including condos or other 1-unit dwellings) conforming mortgage loan limit.

The 2010 conforming loan limits, as released by the government, are:

• 1-unit properties : $417,000
• 2-unit properties : $533,850
• 3-unit properties : $645,300
• 4-unit properties : $801,950

However, it’s important to note that conforming loan limits don’t apply to all U.S. geographies equally.  As a result of various economic stimuli since 2008, the government now considers certain regions around the country ”high-cost” areas.  In these areas, conforming loan limits can range to $729,750.

Lakeland falls within the $417, 000 single unit loan limit – with high cost areas relegated to Broward, Collier, Maimi-Dade, Manatee, Monroe, Palm Beach, and Sarasota counties.

The complete list is published on the Fannie Mae website.

Lakeland Mortgage

Lakeland Mortgage Update: Is a 15-Year Fixed Mortgage Right for You?

As a Lakeland real estate professional, I am often asked by my clients to provide mortgage resources and information  – especially in regards to what type of mortgage they should consider.  When this happens, I happily refer my customers to Kevin Sandridge, a Lakeland area mortgage broker, and good friend of mine.

Recently, I had a client talk to me about whether they should consider a 15-year fixed mortgage.  Here’s what Kevin had to say on the subject.

Kevin relayed that Lakeland home buyers and homeowners who can handle the higher mortgage payments that come with a 15-year fixed rate mortgage can reduce their principal loan amount nearly 3 times faster than if they opted for a standard 30-year fixed rate option.

This is great news for those who prefer to carry mortgage debt for as little time as is necessary.  However, Kevin stated that 15-year fixed mortgages do present some things to watch out for.

“The first thing your Lakeland real estate clients should watch for when deciding whether to go with a 15-year fixed rate mortgage related to their yearly taxes.  Because the 15-year fixed rate mortgage product goes heavy on principal and light on interest, Lakeland homeowners who itemize tax returns will most likely end up claiming a smaller mortgage interest tax deduction at tax time.  Of course, I’m not a tax professional, so they’d want to verify this with their accountant.  But, this rule is pretty standard.” - Kevin Sandridge, Lakeland area Mortgage Broker.

Another negative Kevin mentioned for Lakeland home buyers and home owners to be mindful of is that the sheer size of their mortgage payment may end up being too much for them to handle comfortably.

So, consider what may happen if you run into financial trouble down the road.  The only way to reduce your monthly mortgage payment after opting for the 15-year fixed rate option would be to refinance your Lakeland mortgage into a 30-year product – and this option will cost you money in closing costs and other ancillary fees.

In other words, be sure you can cover your mortgage payments over the long-term before you opt for a 15-year term.   If you can manage it, though, the rewards – specifically in how fast you pay down your principal balance – are tangible.

Lakeland Mortgage

Lakeland Mortgage Update: Taking a Look at the New Good Faith Estimate

Lakeland mortgage borrowers will soon see a new version of the Good Faith Estimate required as part of every  mortgage loan application beginning January 1, 2010.

Expanded from the usual 1 page to a total of 3 pages, this updated Good Faith Estimate should be simpler for Lakeland home buyers and those looking to refinance Lakeland homes to understand than the former version.

The new Good Faith Estimate provides “plain-English” explanations of each feee, charge, and interest payment involved in a purchase or refinance.  It also includes a section called “The Shopping Cart,” which allows mortgage loan applicants to compare what they’d see from various mortgage lenders.

Despite moving up from 1 to 3 pages, the new Good Faith Estimate is actually more concise.  Using a series of “Yes/No” check boxes on Page 1, mortgage lenders make very clear the following aspects of your Lakeland mortgage loan:

• The interest rate on the mortgage
• Whether the interest rate can change over time
• Whether the loan carries a prepayment penalty
• The length of the rate lock

This is a nice change, as at present – this information is spread across 3 separate forms.

Furthermore, the new Good Faith Estimate will make it much easier for Lakeland mortgage borrowers to compare rates and fees, showing applicants how a lower rate can be available for a higher set of fees, and vice-versa.

For all of its clarity, though, the new Good Faith Estimate still fails to address the issue of “suitability.”  As in, is this the right loan for the right borrower?  That’s something only a mortgage professional can do, and remains one of the key reasons to seek out a qualified local Lakeland mortgage professional.

As such, you need to be sure to select and talk with a mortgage broker who both listens to your needs and helps you plan for them.  If you opt for the wrong terms on your Lakeland mortgage loan, you may be sorry in the long run.  After all, great terms on an unsuitable loan are often worse than “good” terms on the right one.

Lakeland Mortgage

Rising Consumer Sentiment Number May Mean Good Things for the Lakeland, Florida Economy

Regular readers of this Lakeland real estate blog may recall reports last month that showed Consumer Sentiment numbers falling to 4-month lows in August.  Though this decrease was not great news on the face of things, the drop wasn’t nearly as large as economists expected.  So, as  it was, Wall Street was happy to see it.

However, since hitting rock bottom about 5 months ago, Consumer Sentiment has increased by more than 10 points.

Why We Care About Consumer Sentiment Numbers

Put simply, the Consumer Sentiment index is the most important financial sector number we can track.  If Lakeland, Florida consumers are spending, the local economy gets a bump and things begin to brighten up.  However, if local shoppers begin to save more than they spend, local businesses see the brunt of that, too.

Call out all the other stats you like, but Consumer Sentiment numbers are  – quite frankly – where the rubber meets the road.

The Consumer Sentiment Index  for the Nation is a jointly published report put out by the University of Michigan and Reuters.  In short, it measures how Americans feel about their situation today, and how they envision it six months in the future.

Rising Consumer Sentiment figures serve as a sign of economic growth, mainly because confident consumers are more likely to spend money on big-ticket items including appliances, automobiles, and, of course, new Lakeland homes.

Recent Consumer Sentiment data reports provide one more reason to believe a full economic recovery is underway.

This said, the National Consumer Sentiment survey is by no means a perfect crystal ball.   There are a few reasons for this.

First, the survey’s sample set includes only 500 households nationwide – far from representing a  true cross-section of America.  Second, just because people feel more confident about their finances doesn’t always mean they’ll spend more money — sometimes, they choose to save.

For the present, stronger-than-expected Consumer Sentiment data should provide a boost to both Lakeland retail sales and Lakeland home sales volume through the fall season, and may even create some inflationary pressure on the economy.

Should present Consumer Confidence levels remain constant over the next month or so – Lakeland mortgage rates will surely rise.  So, do keep this in mind if you’re looking to refinance or buy a Lakeland, Florida home anytime soon.

Lakeland Mortgage

Lakeland Mortgage Update: Oversupply of Mortgage Backed Bonds May Push Mortgage Rates Higher

After hinting at a run lower toward 5 percent earlier this week, Lakeland mortgage rates have reversed course.

It started mid-day Tuesday and the culprit is Basic Economics.  Here’s a bit of background to explain why:

Mortgage rates for buying Lakeland real estate, or any other for that matter, are predicated on the price of mortgage-backed bonds (also known as mortgage backed securities).  Economics 101 tells us that the price of anything from a bond on Wall Street to a cup of tea in China is based on one thing: The Law of Supply and Demand.

When mortgage bond supplies grow faster than the corresponding demand for them, bond prices tend to fall and when bond prices are down, bond yields move up.

OK, I Get It… But What Does This Mean in Real Life Terms?  Glad You Asked!

This week, the U.S. Treasury made its largest weekly auction in history.  To the tune of  $115 billion in new debt, to be exact.  What this means is that before close of business on Friday, $115 billion worth of new mortgage bonds will have been introduced into the market and — so far — demand hasn’t kept pace with the new supply.

Prices for Mortgage Backed Bonds are plunging.

For Lakeland home buyers and mortgage rate shoppers, this news does not bode well, as mortgage-backed debt is less desirable to investors than is treasury debt.  Consequently, when treasury debt loses values, mortgage-backed debt tends to lose value right along with it.  Not always, but most of the time.

So, beginning with Tuesday afternoon’s auction, mortgage bond related debt supplies have been growing faster than buyer demand.

Bond markets are really getting hammered by an abundance of debt supply, and it’s been a big reason why Lakeland mortgage rates are rising.  Oh, and it’s as if I’m channeling Karen Carpenter when I say: “We’ve Only Just Begun!” … As  $28 billion is due for auction today!

If demand at the auction is similarly low, watch for mortgage rates to spike again.

As always, if you find a Lakeland mortgage rate that fits your financial situation, you should consider locking it in now.  Mortgage rates may come down again, but no one’s crystal ball is working all that well.  The news we have at hand is all we can point to… and it’s looking like an upswing in Lakeland mortgage rates or the near future.