Simply checking online for today’s posted rate may not lead to your expected outcome due to the many factors that can cause each individual rate and closing cost scenario to fluctuate.

We can preach communication, service and education all day long, but it’s our ultimate goal to earn your trust so that you can be confident in our ability to successfully lead you through this complex mortgage process.

Since mortgage rates can change several times a day, the following questions will help determine whether or not your lender truly knows what to look for so that they can provide you with the best rate once you’re in a position of locking in your loan:

Who determines mortgage rates, and what are they tied to?

Mortgage interest rates are determined by the pricing of Mortgage Backed Securities or Mortgage Bonds. The media often implies mortgage rates are based off the 10-year Treasury Note, which is incorrect.

While the 10-year Treasury Note has been known to trend in the same direction as Mortgage Bonds, it is not unusual to see them move in completely opposite directions.

How often do mortgage rates change?

Mortgage rates may change throughout the day, however they only change on days when the Bond markets are trading securities since mortgage rates are based on Mortgage Bond prices.

Think of a Mortgage Bond’s sales price similar to that of a Stock that trades up and down during the course of a day.

For example – let’s assume the FNMA 30-Year 4.50% coupon is selling for $100.50. The price is 50 basis points lower from the previous day’s closing price of $101.00.

In simple terms, the borrower would have to pay an additional .50% of their loan amount to have the same rate today that they could have locked in the previous day.

What causes mortgage rates to change?

Mortgage Bonds are largely affected by various market forces that influence the changing demand for bonds within the market. Some of the key economic factors that have the greatest impact are unemployment percentages, inflationary fears, economic strength and the overall movement of money in and out of the markets.

Like stocks, most fluctuation is caused by consumer and investor emotions.

What do you use to monitor mortgage rates?

There are several great subscription based services available to monitor Mortgage Bond pricing.

The key is to make sure the lender is aware they should be monitoring Mortgage Bond pricing, such as the Fannie Mae 30-Year 4.50% coupon… and not the 10-Year Treasury Note or the news media.

When the Fed changes rates, why do mortgage rates move in the opposite direction?

It is a common misconception that when the Federal Reserve implements a rate cut it is immediately correlated to a reduction in mortgage rates.

The Federal Reserve policy influences short term rates known as the Fed Funds Rate (“FFR”). Lowering the FFR helps to stimulate the economy and increasing the FFR helps to slow the economy down. Effectively, cutting interest rates (FFR specifically) will cause the stock market to rally, driving money out of bonds and creating potential for inflation.

Mortgage Bond holders need to obtain a higher rate of return on their money if inflation is increasing, thus driving up mortgage rates. With the Federal Reserve Board meeting every six weeks, this is an important question to ask. If your lender does not have a firm understanding of this relationship, they may leave your rate unprotected costing you thousands of dollars over the life of your mortgage.

Do different programs have different interest rates?

Conventional, FHA and VA loans can all carry different rates on a 30-Year fixed mortgage. FHA and VA loans are insured by the Federal Government in the event of defaults. Conventional mortgages are insured by private mortgage insurance companies, if insurance is required.

Typically, FHA and VA loans carry a lower rate because the investor views the government backing as less of a risk. While rates are usually different for each program, it may be more important to compare the monthly and overall cost during the life of the loan to determine which program best suits your needs.

Why is an Adjustable Rate Mortgage (ARM) rate lower than a fixed rate mortgage?

An Adjustable Rate Mortgage (ARM) is usually fixed for a specific period of time. The period is typically 6 months, 1 year, 3 years, 5 years or 7 years. The shorter time period the rate is fixed, the lower the interest rate tends to be initially.

This is due to the borrower taking the future risk of increasing interest rates. The only instance where this would not be true is when there is an inverted yield curve where short-term rates are higher than long-term rates.

Why are rates higher for different property residence types?

Mortgage interest rates are based on risk-based pricing. Risk-based pricing allows adjustments to par pricing for risk factors such as; FICO scores, Loan-to-Value percentages, property type (SFR, Condo, 2-4 Units), occupancy (Primary, Vacation or Investment) and mortgage type (Interest Only, Adjustable Rate etc).

This allows the investors who lend their money for mortgages to receive additional compensation for taking additional risk.

If the borrower encounters a financial hardship, are they more likely to make the payment on the home they live in or the one they rent out?

All of these factor into your rate for your FHA mortgage and an experienced loan officer like myself can help guide you through the interest rate maze.

Short answer: it’s either ignorance on the seller’s part, or the property cannot pass the FHA inspection that is required.

Long answer: Lately, FHA loans are harder to finish and close.  There is a set of FHA rules.  In addition to those rules, “investors,” the entities that buy the “paper” on Wall Street,  can add their own “over-lays” to the rules.  For instance, if an investor decides that anyone below a 620 credit score is too risky for their appetite.  Well, no one can make them buy a loan with a 580 credit score borrower.  Therefore, no lender will tolerate a loan on their books that can’t be sold to provide liquidity (cash) at some point.  They won’t do the loan, even though “the rules” may allow for it.  Seller’s get nervous at the time-frame needed to close because there are lots of little details to pay attention to.

Sellers may feel that an FHA borrower is inherently more risky.  That is not true.  It simply takes a broker with FHA experience and current working knowledge to know whether or not the file is doable from the get-go.  In fact, as mortgage insurance companies increasingly stop insuring conventional loans with less than 20% down payment, by the time a seller can actually find someone with that much cash, you could have already closed your FHA loan!  Simple ignorance, in many cases.

If the property can’t pass the inspection, you can easily do the FHA 203K rehab loan.  Sellers get nervous over the extra length of time these can take…but if the property is in bad condition, by the time they find someone with 20% AND enough cash to fix it…hello, you’ve already closed your FHA loan.  Simple ignorance.

FHA loans are no magic pill…they can take longer to close.  But there is no better medecine for this ailing lending market than only 3.5% down payment, 6% allowable contribution from the seller and an option to finance repairs right into the original loan.

If you’re in Georgia and looking for a FHA Loan or FHA 203K Loan then call me. If you are in California than call my friend and fellow loan officer Brian Wiesner. We know our stuff and he knows his! Here is his original post from the best FHA site on the net, MyFHABlog.com.

http://www.myfhamortgageblog.com/2009/06/why-wont-sellers-accept-my-california-fha-offer/

FHA 203K renovation loans are the best loan for this market now, but it is no secret they require some additional effort and some additional time from the participating parties. Realtor’s take heed, your first step is to find a loan officer with renovation loan experience. If you do so you’ll make your life and your clients lives a little less stressful!

Want more info on renovation loans? Give us a call! We don’t just write about FHA 203K financing we ACTUALLY CLOSE THEM!

Serving markets all over the SOUTHEAST!

Atlanta | Savannah | North Georgia | Augusta | Warner Robbins | Birmingham | Huntsville | Montgomery | Central Alabama | Mobile | South Georgia | Florida Panhandle | Orlando | Jacksonville | Tallahassee | Panama City | Miami | Tampa | Ft. Lauderdale | Chattanooga | Nashville | Knoxville | East Tennessee | Central Tennessee | Memphis | South Carolina | Charleston | Greenville | Columbus | North Carolina | Charlotte

Today we will discuss the topic of FHA gift money for homebuyers looking to purchase a home in Atlanta and the rest of Georgia via FHA or FHA 203K renovation financing.

Gift money for an FHA loans can be used to cover the down payment and closing costs.

Acceptable places to receive FHA Gift money from:

• Family Member
• “Documented” Close Friend
• Employer
• Church
• Non-Profit

Non-acceptable places to receive FHA Gift money from:

• FHA Lender
• Seller
• Agents / Loan Officers
• Any other party involved in the purchase transaction
• Business partner

Allowable FHA closing costs range from 3 - 6% of the purchase price, depending on the size of the loan.  Since FHA allows the seller to pay closing costs of up to 6%, it is highly likely that a borrower can have enough money to cover costs and buy a lower interest rate with the properly negotiated FHA deal.

Per 2009 Georgia FHA guidelines, the minimum down payment requirement on an FHA loan is 3.5% of the purchase price.

Frequently asked questions about FHA Gift Money:

Q:  What is the maximum amount of gift money that a borrower can receive?

A:  There is no maximum other than the 6% of the purchase price limit.

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Q:  Does the borrower have to pay the gift money back?

A:  No, then it is not a gift, it is a loan.  Donors must complete paperwork stating no expectation of repayment. 

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Q:  Just to clarify, can a borrower receive enough gift money to cover  all closing costs and down payment, essentially allowing the borrower to move into a new property with no money down?

A:  Yes

Read all of our FHA advice to prepare yourself for your FHA purchase transaction!

APPLY NOW for FHA Financing!

APPLY NOW for FHA 203K Renovation Financing!

Here are the 10 things you need to know about these changes to your Georgia FHA Refinances:

1. The max LTV for rate & term refinances (including streamlines WITH an appraisal) is 97.75%*

2. The max LTV for cash-out refinances is 95%* for loan amounts less than the conforming limit and 85%* for loan amounts at or above the conforming limit. (Must have 12 months seasoning and no 30 day late payments)

3. Two appraisals will be required for all cash-out refinances with an LTV above 85%.

4. The mortgage must be current for the month due.

5. New or current 2nd mortgages are eligible with no maximum CLTV.

6. Loan amount for streamline refinances WITHOUT an appraisal cannot exceed the original loan amount.

7. UFMIP rates: 1.75% for all rate & term and cash-out refinances AND 1.5% for all streamline refinances.

8. The FHA Secure refinance will be terminated.

9. Loan amount CAN include: Closing costs, discount points, current interest, prepayment penalties, prepaids, late charges, and escrow shortages.

10. Cash back on rate & term and streamline refinances CANNOT exceed $500.

Jonathan Blackwell FHA 203K Renovation Specialist Hometown Lenders Atlanta, Georgia, 30317	Work: 404-551-3845 Mobile: 404-519-5383 www.203KLoan.net

This is the first in a series of posts outlining the basics of FHA loans. What you qualify for, how much the down payment is, underwriting and documentation along with tips and tricks for a smooth closing will all be covered. Feel free to contact me directly with any specific questions.

How Much Can I Borrow?

How much do I qualify for is ALWAYS one of the first questions I’m asked. There are two things to consider when you are looking to purchase via FHA in Georgia. First, you’ll be limited by FHA loan limits. These are county specific. For example an Atlanta FHA loan is limited to 2009 Metro Atlanta loan limits of $320,850 for single family residences. The rest of Georgia, including Savannah, are limited to $271,050.

The second thing to consider is debt to income ratio. FHA guidelines like for you to use no more than 31% of your income for housing. It is possible to exceed this amount with compensating factors such as a high credit score or plenty of assets. As far as your total debt to income ratio, FHA would like you to spend no more than 43% of your total income on debt. Of course, the same compensating factors listed above apply to this ratio as well so you can exceed that guideline in some instances.

What is the Down Payment Required?

The down payment requirements are changing to 3.5% in 2009 for traditional FHA purchases. However, FHA 203K Loans, along with FHA 203H loans for disaster victims and FHA Energy Efficient Mortgages, are not affected by the change and will remain at 3% down. One note is that on the FHA 203K and other FHA specialty products requiring the lower down payment, you can still include the appraisal and a portion of your closing cost in the down payment.

What Paperwork Will I Need?

When applying for your Georgia FHA loan you’ll need to fully document your income and assets along with providing full explanations of any credit problems in the past 2 years.

1. Two Years W2 & Two Most Recent Paystubs.
2. Tax Returns generally only needed for self-employed borrowers, borrowers with rental income and borrowers using commission income to qualify.
3. Two months full bank statements. Must be “official” statements and must include ALL pages.
4. Most recent statements for retirement and investment accounts.
5. Color copy of Driver’s License and Social Security Card.
6. Credit explanation letters, bankruptcy papers, divorce decrees, child support documentation, leases on rental properties, etc are required if applicable.

What Credit Score do I Need?

FHA and lender guidelines generally require a 580 mid score or above to qualify. However, 620 or above should get you the best FHA rate available. The higher the better though and home buyers with excellent scores will generally be required less documentation and have faster underwriting turn times.

How Long Does the Process Take?

That depends on a number of factors, but 30 days or less should be the goal on a purchase. Borrowers with lower credit scores will generally be required to document more and therefore can sometimes take a little longer than borrowers with excellent credit. If you are doing a FHA 203K Renovation Loan then 30 days is still reasonable on the 203K streamline version, but plan for 45-60 on the full 203K due to the additional third party items needed. FHA Streamline refinances should be the quickest to close because of the reduced documentation requirements.

How Do I Get Started?

The first step is ALWAYS to call an experienced FHA loan officer to help you determine what you are qualified for so you can get a pre-approval. You should also be prepared with you income and asset documentation. The speed in which we can close you loan often depends on you more than anyone else.

Apply for Your Georgia FHA Loan

Jonathan Blackwell FHA 203K Renovation Specialist Hometown Lenders Atlanta, Georgia, 30317	Work: 404-551-3845 Mobile: 404-519-5383 www.203KLoan.net

The Housing & Economic Recovery Act of 2008 made quite a few changes to the mortgage industry, but none so important to home buyers looking to purchase in Atlanta with a FHA loan as the revision to the FHA required down payment and how it is calculated.

Under current FHA guidelines, borrowers need to come up with 3% for the down payment. This 3% could include closing costs, appraisal fees, earnest money and cash-to-close. Under the new requirements the down payment for Atlanta FHA home buyers has increased to 3.5% and you are no longer allowed to include closing costs or appraisal fees in the calculation. So when many loan officers and home buyers heard that the 3% down payment was moving to 3.5% their reaction was muted. However, when you get down to the facts of the increase you realize that this apparently small down payment increase is actually larger than you think.

There is a bright side to the changes Georgia FHA 203K Renovation Loans, Georgia FHA Energy Efficient Mortgages and Georgia FHA 203H Loans for Disaster Victims ARE NOT AFFECTED! That’s right, it requires LESS down payment for you to purchase and renovate than it does for you to simply purchase. Here’s the text from the Mortgagee Letter issued by HUD:

Specialty products with higher LTVs: Section 203(k), Section 203(h) for disaster victims, and FHA’s Energy Efficient Mortgage (EEM) programs are not affected by the LTV limit. All existing policy guidance regarding the rehabilitation program under Section 203(k), including streamlined (k), mortgage insurance for disaster victims, and the EEM program remain in effect.

If you are looking to simply purchase a property that isn’t needing repair you can still get in under the old guidelines if you call us before Jan. 1st, 2009. In other words, get to it! You don’t have much time.

Jonathan Blackwell

Hometown Lenders

404-551-3845

EMAIL

We all know how expensive college can be and in a down economy we are all searching for ways to tighten the purse strings. One of the easiest ways to save some money on college housing is to look at the possibility of using FHA’s Kid Condo Rule to purchase your college student in Georgia a house or condo instead of renting. So, how does it work?

FHA Kid Condo Rule

FHA guidelines allow for a non-occupant coborrower to go onto a FHA loan for income purposes. They don’t have to live in the property to be included. To qualify your son or daughter will need to have some credit with above a 580 middle credit score. It helps if they have a part-time job as well although it isn’t required. The loan will be based of the combination of your income and credit along with that of your college aged student. So, how can this save us money? Besides being a good investment with potential for future appreciation, let’s look at a real live example of rent vs. own and how you can come out ahead on payment as well.

290 Appleby Drive # 153, Athens, GA 30606

Georgia FHA

Purchase Rent

Price                                      $83,000                                                         N/A

Payment                                 $689 PITI                                                      $700 Rent

Tax Deduction                       $4345/yr                                                         $0

Pmt Difference                         -$11                                                            +$11 Assuming No Rent Increases

Principal Reduction                $1171                                                            N/A

As you can see, not only does this investment yield a lower payment, but you are also reducing principal each year your child is in college as well as providing yourself with a tax deduction! If you’d like more info on the above property call Jerri @ 706-296-4395. If you’d like to see if you qualify for this program visit AtlantaHomeLoans.net and fill out our quick and easy pre-qualification form.

Jonathan Blackwell

Hometown Lenders

404-551-3845

EMAIL

2008 is almost gone and 2009 is just around the corner. Home buyers in Atlanta need to be aware that we are facing some changes if we are looking to purchase a home using in FHA financing in 2009. The first big change is the FHA loan limits for Georgia will be decreasing some in 2009.

FHA Loan Limits 2008

Single-Family = $346,250

Two-Family = $443,250

Three-Family = $535,800

Four-Family = $665,850

FHA Loan Limits in 2009

Single-Family = $320,850

Two-Family = $410,750

Three-Family = $496,500

Four-Family = $617,000

The limits in the rest of Georgia outside the metro area will remain the same in 2009 as they were in 2008.

Georgia Non-Metro FHA Loan Limits 2008 & 2009

Single-Family = $271,050

Two-Family = $347,000

Three-Family = $419,425

Four-Family = $521,250

Finally, in addition to Atlanta’s FHA loan limits decreasing, the down payment will be increasing as well. Previously, FHA required 3% as the down payment. In 2009 FHA will require Atlanta home buyers to put 3.5% down on their next FHA purchase. There is still one exception to that rule for HUD foreclosures. They will still only require $100 down for home buyers purchasing a primary residence. You still have time to take advantage of the higher FHA loan limits and lower FHA down payments though, but you have to act FAST!. Give us a call TODAY to get started on your FHA purchase! If you are purchasing with a FHA 203K Renovation Loan then your down payments will remain the same!

Jonathan Blackwell

Hometown Lenders

404-551-3845

EMAIL