As we embark into another year, Most of us are always wondering about which mortgage options are available and what kind of rates and fees are tied to those specific products.  So let me share what I think will be the best mortgage options for 2012.

Best Refinance Mortgage Options:

Rate/Term Refinance:

This year refinances will be driven by rates.  Right now we have historical low rates.  We are now seeing some equity in properties.  With equity the banks are approving these rate/term refinances.  Also, if you are in a property that still has quite a bit of negative equity, we have a new program coming out in March 2012, that will allow us to refinance quite a few more clients with high negative equity.  This program was first shared with the public in an announcement made by President Obama under the “HARP” program (Home Affordable Refinance Program).  At the time he announced the program, the market was not ready to implement it to the public.   This will be rolled out March 2012.

Cash-Out Refinance:

Yes for you lucky ones that have equity in your home, this option will be available.  With interest rates staying low, this is not a bad option by any standards.

Adjustable Rate Mortgage (ARM) conversion:

Some of you will be having your adjustable rate mortgages reset this year.  The rate could go up or down but knowing your best option of either staying the course with will be important to know.  I can always do a mortgage review and help you determine if a refinance option into a fixed option makes sense for you.

Term Limit Mortgage Conversion:
30 to 15 year conversion:  This is a great option to get that mortgage paid down with the historic low interest rates.
15 to 30 year conversion:  This can be a great option to help with having more cash back in your pocket.

Best Purchase Options:

Right now home prices in Arizona are at record all time lows and so are interest rates, so the timing could not be any better to buy some property.  Here will be the hottest options for 2012.

Primary Home Mortgage Option:

If you are a first time home buyer or want to convert your current home into a rental and buy a bigger home now is the time.  Rates are now at historic lows.

2nd Home Mortgage Option:

Arizona is a great place to own a 2nd home, we have excellent retirement communities for 2nd homes and great vacation homes in the mountains.  Rates are excellent and so are prices.

Investment Home Mortgage Option:

This one is got to be one of the best for investors.  Not only is our inventory of rental units affordable but our 2010 census report showed a huge growth in population statistics in the last 10 years.  Sharpen those pencils and lets make the math work out.

As your 2012 year comes together, as always, I hope you think of me for your next mortgage, where I stand behind my advice, products and services.

“Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.”, Chinese proverb

This will be the fourth loan in the last 12 months that I approved using some sort of down payment assistance.  Even though seller assisted down payment went away using programs such as Ameridream and Nehemiah, HUD has been allowing buyers to use FHA financing with down payment assistance from a 501(c)(3) nonprofit corporation.  Two companies that come to mind that I have worked with now has been Newtown Community Development Corporation Community Land Trust and Desert Mission Neighborhood Renewal.  Both nonprofits have certain guidelines that have to be met and will require home-buyer education.

Free Money!!

So far my favorite program from the nonprofits is the Individual Development Account (IDA).  This program will match buyer saved dollars of up to 3 times what they saved up. The
cap is $15,000.00.  For instance if your client saves up $2,000.00 for down payment, they can get matched up to $6,000.00 from this (IDA).  Also, FHA loans will allow the buyer to use the funds for both down payment and closing costs.

This is just one of  the many programs that are still available out there for home buyer assistance.   For more information about this mortgage program or many others, please feel free to contact me.

Did you know that Phoenix and Mesa were ranked the 4th and 5th most affordable housing markets in the country to own a home versus renting?

Right now, we all know someone close to us who is throwing their hard earned money down the drain by renting versus owning a home.  My job has become extremely difficult because of all the misinformation being shared about the difficulties of getting home financing.  Most of that information is just NOT true.

I would not typically ask for it, but I really need your help.  What I am trying to do this year is help as many people buy a home and educate them about paying less on a mortgage than rent.

Can I count on your support with this effort this year?

Here is my email address:  gmiljour@sunstreetmortgage.com Can you please reach out to a close friend or two who are renting and get their name and phone number and ask their permission if I can contact them.

We all needed that nudge and helping hand the first time we bought a home.   Please do the same for another.

“Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.”, Chinese proverb

If you are looking to buy a home and are having a hard time figuring out where the down payment is going to come from, I wanted share with you 10 great sources that can be used with an FHA mortgage to buy a home with as little as 3.5% down.

1.  Earnest Money Deposit: A lot people don’t think about this one, but your upfront money given to as Earnest Money is actually funds that can be used for that down payment.  Satisfactory documentation can include a copy of the borrower’s cancelled check.

2.  Checking and Savings Accounts: Any funds that have been in the bank account for 60 days or more are considered sourced and seasoned.  A verification of deposits and any explanation of big deposits will be required.

3.  Sales Proceeds: Any net proceeds from a sale of a house that is currently owned property may be used as a cash investment on a new house.

4.  Sale of Personal Property: The most common one’s I have run into have been Cars and Weapons.  With the Cars, a bill of sale and some type of third party value system to verify the appraised amount works.  For instance my own client had a classic car and bill of sale and an online auction site showing others vehicles selling for like value was established.  We then used these funds for his down payment.

5.  Gift Funds: FHA is one of the only loan programs left that allows a buyer to get a gift from the following sources:  The FHA guidelines specifically state:  If the donor is the borrower’s relative, the borrower’s employer or labor union, a charitable organization, a governmental agency or public entity that has a program to provide home ownership assistance to low-and moderate income families or first-time home buyers, or a close friend with a clearly defined and documented interest in the borrower.  The gift donor may not be person or entity with an interest in the sale of the property, such as the seller, real estate agent or broker, builder, or any entity associated with them.  My most common gifts have come from relatives and employers, because you can establish a clear gift relationship.

6.  Savings Bonds: These are government issued bonds and are counted at original price unless eligibility for redemption and value are confirmed.

7.  IRAs, Thrift Savings Plans, 401K’s and Keogh Accounts: Almost all retirement type vehicles can be used for a down payment source.  Evidence of redemption is required. Some people also just borrow against their retirement accounts.  This can also be done through another method I will mention next.

8.  Collateralized Loans: This is a long against some type of collateral such as stocks, bonds, retirement accounts, vehicles or other real property.  Again the most common is borrowing against retirement vehicles such as a 401K to use those funds for a down payment.  The borrower must show the ability to pay back not only the mortgage but also this debt.

9.  Cash Saved at Home: I like to call this mattress money.  This is acceptable, but understand requires a very detailed explanation which includes working through a family budget and the reasonable accumulation of funds.  Also, some investors will not accept this method anymore even though FHA does.

10.  Sweat Equity: This is not that common anymore, due to all the over building of real estate, but home builders used to use this as an acceptable method for down payment.  Basically it is labor performed or materials furnished by the borrower before closing, on the property being purchased as the equivalent of a cash investment.  Basically the borrower’s labor may be considered as the equivalent to cash, if the borrower can demonstrate his or her ability to complete the work in a satisfactory manner.  This has always been popular among builders to have a homeowner go in and paint and use that labor toward their equity.

Sometimes figuring out where to come up with the funds for the down payment on a home is more than half the battle.

With home prices being at all time lows and interest rates so low, I am puzzled why so many people are still not taking advantageof home ownership opportunities. I understand that we are in a bad economy and consumer confidence is low, but at the end of the day, you still have to live somewhere.  Well I finally have some great news to share. Phoenix and Mesa were both named as the 4th and 5th most affordable markets to own homes.  This was shared in a recent USA today article I read called Should you rent or buy your own home?.

So if you are tired of your landlord and want to buy, call me and I can share how home ownership can be possible for you.

Back on August 12, 2009 I wrote a great post that got many comments and attention called Battle of the Home Mortgage Products:  FHA vs. Fannie Mae Home Path.

Today I am revisiting the topic and making all parties aware of some changes by FHA which take place on October 4, 2010.  FHA has raised their monthly mortgage insurance costsand it has everyone in the industry wondering if FHA is a better option than in the past.  A colleague of mine Jeff Belonger wrote a great post about this called:  FHA home loans with 5% down after major FHA change are still cheaper than conventional loan many times and hands down when comparing a regular FHA mortgage to a traditional Conventional loan, the FHA option is still the best.  Now I am revisiting the question of  which option is truly the best FHA or Fannie Mae HomePath and here is what I found out.   The Clear Winner is Still: FHA!

FHA:

Lower upfront MI premium 1% of loan amount
at 95.1% or higher monthly mi factor of 90bps
at 95.00 or lower monthly mi factor of 85bps.
Rates are much lower than Fannie Mae Home Path.
Closing Costs are much lower.

Fannie Home Path:

Still No Mortgage Insurance
Much Higher Interest Rates
Much Higher Closing Costs

Bottom line, this equates out to lower payment options and less closing costs using the FHA factor.  Again on the surface the Fannie Mae HomePath looked like the clear winner, but once you peel the layers of the onion back, the clear winner is FHA.

The Arizona Housing Financing Authority is back at it again implementing new first-time home buyer programs to assist
with the finance arm of a first home purchase.

Based on the right situation, the Arizona Mortgage Revenue Bond, can be a great niche product to help with that certain
homeowners who is needing some financial help with purchasing a home.  Even though their bond rate (4.99%) is not as
competitive as market rate, some of the benefits do outweigh the drawbacks.  Here are some of the criteria.

AZ Mortgage Revenue Bond Highlights
Down Payment assistance available up to 5% of the purchase price.  This can be used for down payment, and or closing costs
or a combination of both.

This is probably the biggest advantage to this program.  A secondary advantage is if you buy a home in a specific target area
the income is less restrictive.

Here are some of the drawbacks.  This program cannot be used in Pima or Maricopa County.  So it is primarily a great tool
to lend in rural housing communities.  The down payment assistance is not completely forgiven in the first 5 years.  It
drops 20% each year.  Rate is not as attractive.

Here are the basic requirements:  Product is used in conjunction with an FHA, VA and RD insured 30 year fixed rate products.

*Must be a first time homebuyer, plan to occupy as primary residence and not had prior ownership in the last three years
(certain census tracts located in various counties do not require applicants to be first time homebuyers while offering
higher income and sale price limits.)
* Borrower must contribute a minimum of $1,000.00 of personal funds
* Borrower cannot get any cash back or debt consolidation paid
* Borrower required to complete a home buyer education class
* Must meet program’s purchase price and income limits
* House payment/total payment to income ratios cannot exceed 31/43%
* Credit score for all borrowers must be at a 620 or above
* Independent professional inspection to be done on the property and obtain a home warranty
*Again this product will be a niche for that certain client.  Also understand that only 22 lenders in the entire state of
Arizona is set up to offer this product.  I like to share this because so many think there are not options anymore.  I
say find a mortgage lender who understands real options and will work with them.

This old adage sometimes makes you think of the chicken or the egg and which came first. Those type of philosophical debates are fun for the ages but when it comes time to figure out if renting a home is more advantegeous to owning a home, there are many personal factors involved in the decision.

I will be the first to state that NOT everyone out there should be a homeowner. Homeownshership takes a lot of responsibility, and sometimes we are just not ready to make that committment. But when the time feels right and the decision has been made that you want to explore homeownership, then at that point, you will need to know if owning a home has a bigger benefit versus renting.

Now I could show some slick charts to show you everytime that home ownership is a better place to park your housing dollar versus renting, but truly until we know your unique circumstance for me to say this is just not true.

I can give you quite a few reasons where renting makes more sense than owning.

• Not ready to take on the responsibility of a mortgage obligation.
• No permanent work location.
• Rental costs per month could be cheaper at the moment.
• No down payment for the mortgage.
• No job or income source.
• Your credit is too low.

Now if these reasons above are not your situation, then I would be the first to tell you that it would make sense to run the numbers and see how much of a mortgage payment would cost you versus renting a place.   Remember, rents have a tendancy to go up over time while a fixed rate mortgage payment will stay the same.

To figure out your break even time, I have an attached link to a real slick:   buy vs. rent calculator

Bottom line, if you plan on being in a home for five years or more, most of the equations equate in your favor to purchase.  Some equate out in as little as three years.

If you have specific questons about renting vs. homeownership, please give me a call.

I am sure in no time the real estate industry will be on the evening news again and not in a good way. Consumers will again have a legitimate gripe from getting bad advice from their real estate professional.  Some real estate professionals were giving customers advice on the $8,000.00 first time home buyer tax credit.  Some agents were advising their clients that as long as they had a short sale contract signed by both the buyer and seller that this binding contract would be suffice for meeting the eligibility of the tax credit.  The last time I checked, I was not a Certified Public Accountant or worked for the Internal Revenue Service.  I made the choice to advise my clients to get a CPA opinion or call the IRS to verify for themselves this issue.

One of my clients actually took me up on my advise and called the IRS himself. My client was buying a home on a short sale.  The listing agent told my buyer straight up that he would be 100% eligible for this $8,000.00 tax credit because the seller signed the contract.  Now we did NOT have bank approval so I heard through very credible sources that the IRS was not considering this a binding contract since the banks who hold the notes for the seller have not agreed yet.  Here is the  answer my client got from the IRS.

Per IRS- “In the matter of Short Sales, pursuant to the short sale addendum, contracts are considered “not binding” unless
there is bank acceptance on or before April 30, 2010.  We suggest that banks involved with short sales have the ability to
make the contract binding prior to acceptance.  The bank would need to offer the client documentation in writing stating
the contract is a binding contract but that full acceptance is not yet available and the client would need to open escrow
on the contract”

Bottom-line, Some in our industry gave bad advice to get a short run closing to fatten their pockets.  I am very curious to see how this fiasco will play out.

The new cliché in the mortgage industry is that “We are getting back to basics.”

I have heard this phrase thrown around lately, but sometimes I wonder if anyone except other lenders knows what we are talking about?

I have a theory that if you get 2 or more mortgage lenders in a room at a party and they start talking shop, others watching probably think we are speaking Klingon, or what I been calling for a long time “mortgagese.”  You see, we like to throw a lot of words and acronyms around like FICO, DTI, LTV, flipping, deals, etc.  But I think we sometimes forget that Joe homeowner or maybe even most Real Estate Professionals have no idea what we are talking about.  So in plain old English, let me share what I know about getting back to the basics with mortgage lending.

“Mortgage Lending Guidelines 101″

Cash is King: The more funds liquid in bank deposits and retirement accounts the better.

Down payment is crucial: The more funds you have for a down payment, the stronger the loan file becomes.

Credit trumps all cards: Without a decent credit score, a mortgage lender cannot even give you lending options.

Weird deals are to be avoided at all costs: 95% of the time if the deal is a little off the wall, it won’t work.

You must have a job or income: The income source must be verifiable, believable and well documented for usually 2 years.  No job, no loan…Sorry!

Equity in your existing home will have a huge impact on the new mortgage loan being approved: Today you must either choose to sell your existing home or have some pretty good equity if you expect the bank to offset the debt with rents.  Also, it must actually be rented out!  You cannot just say “we plan to rent it out.”

Appraised value matters: The home must appraise for your offer price or the lender will cut the maximum amount they are lending.

Chain of title is important: I have run into this issue lately with short sale flipping companies.

Title seasoning is a big deal: Most lenders have sources that can do this loan 1 day after transfer of title, but are limited to where the loan can be placed.  FHA has a 90 day anti-flipping policy.

Mortgage insurance companies prevail over the lenders guidelines: If the loan is going conventional for whatever reason, the mortgage insurance companies have their own lending overlays.  It gets real fun when you are in a declining market value state.

AND LASTLY,

Mortgage Rules Change Daily: This one is the most crucial.  What your mortgage lender knew in the past means nothing today.  The good lenders study up on current mortgage guidelines sometimes daily or weekly.  Even then it is almost impossible to keep up with the ever changing mortgage guidelines.

Again, when we say “we are getting back to basics” it means that common sense underwriting will usually trump with a mortgage lender.  If you have cash in the bank for a down payment on a home with some left over cash called reserves, you have a great job for over 2 years and you have decent or better credit score; you should be able to get approved.  If you do not have those 3 items, then you might run into some challenges.  There are always exceptions to these basics, but in general, that is what a mortgage lender is looking for today in a borrower.