Sonoma County Homebuyers! New Underwriting updates for 2010, of “things to come” By Pete Phillippe 707-481-2737
Buyers for Santa Rosa, Rohnert Park,Cotati,Sebastopol, all up and down the Hwy 101 Corridor–if you HAD been pre-approved for a loan a couple of months back? YOU NEED to get your lender to say you pass the NEW underwriting guidelines imposed on you now in 2010!
Our lending guy, Pete, has put together an update on the revised guidelines. We hope you find it helpful!
You will always get the best possible interest rates if the middle fico is 740 or above , have a impound account for taxes and insurance and keep the loan to value at 75% or less. This is true for an owner occupied or investment property, 1 to 4 units. Loan above $662,250, look for 25% down and 2 appraisals of the property . . . . Or certainly a appraisal review of the first one done
Gave a deed in lieu of foreclosure or did a short sale in any area of Sonoma County or Santa Rosa? That will reduce your fico scores (my fico.com) but not as much as a foreclosure or bankruptcy would. Average fico scores now 680 to 690. FHA will be looking for a middle fico score of 640 ( up from 620) in the spring , along with the probability of 5% down instead of just the current 3.5% and .60 or .65 for the monthly MIP ( mortgage insurance pre.) instead of the current .55. FHA reserves are low because of all the “claims”, so more money needs to be collected and underwriting tightened up. Probable cutting back of credits that can be given from 6% to 3% as well with FHA loans
With Sonoma County, California Bankruptcies , chap. 13 , a reorganization of someone’s debts, 48 months will have had to pass since the “dismissal” date, 24 months from “discharge” date for a new loan not to have a “refer with caution ” decision from desk top underwriting version 8.0 which has just come out for lenders to use in making underwriting decisions . A “refer with caution” will have a “pricing hit” to the rate and or points to make up for the added “risk”. Plus the borrowers will have needed to re-establish new credit with no “lates” within the last year and this is a good strategy for future home purchases in Santa Rosa or any other City in Sonoma County.
With Bankruptcies , chap.7 , complete liquidation of debts , it looks like a four year period will be the minimal amount of time that needs to have gone by since the “dismissal” or “discharge”, plus evidence of new credit having been re-established with no “lates” within the last year before a new loan can take place
FHA , at least as of the end of 2009, will do a new FHA loan after two years from dismissal / discharge for a chap 7 or chap 11 bankruptcy . . . new credit needs to be re-established with no “lates” within the last year( FHA is thinking about making this four years like FNMA and FHLMC but no decisions as of yet)
HUD has directed FHA to now accept appraisals that have come only thru an Appraisal management company (like Landsafe, the biggest one) like conventional loan appraisals requirements. Challenge is appraisers who come in from outside the area who are not local . . . . And that all lenders have to use computerized value programs that help determine a range of values for an underwriter reviewing an appraisal on the subject property. If the value is outside this range, a desk or field will be required from an outside appraisal service (Plano, Texas with Landsafe). Don’t release that appraisal contingency till after a full underwriting decision takes place where you know a possible “review” will not happened which can “cut” the value we loan on
45% of the gross income (unless exceptional reserves, fico scores in the high 700’s and low ltvs then maybe to 50% of gross for total debt servicing.) Want to buy a new home before selling your old one? You Still have to have 25% equity in your current home before a lender can count a rental agreement ( need a deposit for a renter as proof of it actually going to be rented) to help “offset” your current piti on the home . Otherwise lenders have to count the total current piti against the borrower as they try and qualify “ratio wise” for a new home purchase. .. Few are able to and thus have to sell their home before they can more to a new one
Effective in January, new RESPA laws are in force which dictates that the initial good faith statement and final good faith statement (with some minor exceptions) has to match the final “new version” HUD 1 statement that escrow issues in closing. Overstating fees ( and we are talking about title and escrow fees , inspection fees as well as our lender fees) would not be a RESPA violation with documents having to be re-drawn and lenders having to pay financial penalties . Only understating fees would be a violation. So look for good faith estimates to look much higher than they will really end up being so that we lenders “stay safe” from any fines. The Fees will be grouped instead of broken out. .. All lender fees grouped, title fees grouped etc. only broken out at closing with the new HUD 1. As part of this new RESPA law , a borrower has to respond within 10 days of receiving their GFE in writing that they approve it . . . otherwise a new one has to be sent and responded to before documents can be drawn and a loan closes , makes it tougher for “quick closes” to take place
A new national loan officer licensing program, the SAFE Act, begins next year that has to be instituted by individual states, as mandated by Federal Law. A test will have to be passed, credit history and fico scores will be looked at and a loan officer’s criminal records will be reviewed and if they have any, could prevent them from doing loans in the state!
PMI companies (the few that are left in business) want the ratios to be 36% over 41% on a 90%ltv loan . . . . 34% over a 36% for a 95% loan. Otherwise they won’t issue private mortgage insurance, which we lenders need to do a loan over 80% loans to value or ltv. The need of FHA programs with the ratios currently allowable of 45% over 55% on a 96.5% ltv becomes apparent. Few buyers, especially first time homebuyers, have debt to income ratios that will allow them to qualify without using FHA instead of conventional loans requiring pmi.
Remember, individual lenders may put additional “rules” on top of these. The more the loans conform to guidelines, the more conservative the underwriting is and yet still is able to approve the loan, makes the loan more “saleable” on the secondary market. For lenders, “salability” is what it’s all about!