Archive for the ‘Loan Programs’ Category

Gaining Perspective

February 9, 2011


There are times when you need to view something from a different angle to better understand it.  We tilt our heads when appreciating abstract art.  We walk around a new car to take in all the lines.  We step back when we place an arrangement on the table.  Changing the view gives us new perspective in order to better understand what we are looking at.

 

The same can be said when looking at factors and indicators of the economy, housing sector and interest rates.  We have all heard that interest rates are at historic lows, but just how low is that?  Did you miss out on this recent refinance boom?  Is this refinance boom even over?  Just where are rates right now anyway?

 

Interest rates have been tracked and recorded for the past 39 years.  In that time if there has been one constant, it would be change.  Consider these facts on 30-year fixed rate loans:

 

  • The average interest rate from one month to another has only held unchanged 14 times in 39 years.
  • Interest rates have dropped 2.69 points from 1972 when the average rate was 7.38% to 2010 where rates ended at 4.69% on average.
  • Over the past 39 years interest rates climbed as high as 11.07 points above the yearly average of 1972.
  • Interest rates have dropped as much as 14.22 points since their highest in October of 1981 when that single month boasted rates at 18.45%.
  • The highest yearly average interest rates occurred in 1981 at 16.63%.
  • The lowest rates on record happened last year in 2010 at just 4.69%.
  • Over 39 years the average interest rate was 8.92%, almost double 2010’s yearly average.

So yes, we really are at historically low interest rates!  Yes, this is still a fantastic time to review your current home loan to see if refinancing makes sense for you!  No, you most definitely have not missed out on these low rates!  And yes, it is a fantastic time to buy a home.  Not a bad view from that perspective.  Give us a call to review your current loan or to help you with a pre-approval for your new home.

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We Should Talk

October 19, 2010

Unless you have been living under a rock for the past 18 months you know that interest rates on home loans have been at historically low levels.  The bad news is that you also know the effects the market has had on the value of your home.  Many homeowners feel they have few options available.  How can you refinance your home to take advantage of these great rates when your home’s value is less than before?  Well before you decide that living under a rock now sounds appealing, we should talk.

If you have taken care of your credit by paying your bills on time, watching your credit card balances and not overextending yourself there are options.  No, these are not crazy loan programs set to self-destruct in 3 years time.  We are Awareness Home Funding, we only offer solid loan programs that actually make sense and benefit you.  These are programs with exactly you in mind – designed to reward you for your efforts and good behavior.

We have programs to refinance Conventional, FHA and RD loans that allow borrowers to take advantage of the historically low interest rates without the need for a new appraisal of your home to be completed.

Here are the basics:

  • You need to live in the home you are refinancing. 
  • This cannot be a second home or an investment property.
  • You need to be current on your mortgage right now.
  • Your personal credit needs to be in good shape.  (We can help you get a complete credit report and score at no charge.)

If this sounds like you, we should talk.  We can help you determine the specific qualifications so you can make an informed decision without pressure, confusion or cost. 

Call us today at 866-982-9273.

Not all Bones are Worth Barking at

July 13, 2010

The Home Buyer’s Tax Credit program has not only received much attention, but also much success among buyers who were able to take advantage of the incentive to receive up to $8,000 in tax credits.  The program was so successful that it was granted two extensions.  The first extension happened this past winter allowing more time and more buyers to get in on the action.  And thousands did!  The second extension was signed into action just 11 days ago by President Obama.  This second extension moves the deadline to close on these home loans from June 30 to September 30, 2010. 

While this may sound good on paper, did it even help anyone?  Were home buyers just thrown the proverbial dog bone?  The second extension affects home loans for purchase agreements that were finalized by April 30 of this year.  That means these contracts are now over 60 days old with most written to close within that time frame.  If a buyer takes another 90 days to close on their home loan, it will have taken 5 months to close their loan!  Are sellers even willing to wait that long to close on the sale of their home?  What affect with that long of a wait have on a sellers next purchase?

Perhaps the underlying question is why didn’t the home loan close in the first place?  You can make the argument that with all the home buyers flooding the market, lenders, appraisers, title companies, etc were suddenly backlogged with so much business they could not possibly keep up.  For some this is probably true, but is the extension too late?  Remember that the extension only changes the closing date.  The binding purchase contract still needs to be dated on or before April 30, 2010.  If the contract was written to close by June 30, 2010 and it did not, that contract is now void.  A written addendum to change the closing date changes the purchase agreement and while the buyer and seller may agree, it also means a final binding agreement was not in place by April 30.

The other challenge we have heard is that buyers were not properly qualified before they even made an offer on the home.  Unfortunately, many lenders only pre-qualify a borrower which means you have only verbally discussed your financial situation for purchasing a home.  A stronger case is when a borrower is pre-approved.  This means actual documentation on income, assets and debt load has been reviewed and verified.  Pre-approved borrowers have fewer surprises when their home loan is processed. (Awareness Home Funding always prepares our clients.)  Unfortunately, many home buyers wanting to take advantage of the Home Buyers Tax Credit are failing to close due to challenges that should have been addressed before they even began to shop for a new home.

The Home Buyers Tax Credit program was a good program that really worked, really helped buyers and really moved home sales.  This last extension just helps very few and was put into affect way too late.  But let’s not leave this post on a down note.  There is still a home buyer’s incentive program in place, one that has been there for some time – the Mortgage Credit Certificate (MCC) program.

The MCC program is a Federal tax credit on the mortgage interest you pay on your home loan over a calendar year.  While this does not reduce your monthly mortgage payment, it is a dollar for dollar reduction from the amount of your Federal Income Tax liability.  Not every state offers the MCC since it is state run and funded despite being a federal program.  However, for states that do, it effectively reduces your annual interest rate.  Awareness Home Funding is committed to using the MCC program wherever available in the states we are licensed to conduct business.

The main point is this, while the Home Buyers Tax Credit program has ended, help is available for home buyers.  Call us today (866-982-9273) to see how we can help you.

It’s Baaack! (In a Good Way!!)

June 2, 2010

This past February we posted information on Rural Development (RD) home loans – what it is, how it works, why this is such a great program.  Interest in this program has really grown over the past few years because it is so consumer friendly.  We too have seen a steady increase in RD loans.  Our company continues to underwrite more RD loans than any other lender in the state of Michigan.

Unfortunately, by April of this year funding for the program had already been exhausted for the fiscal year that runs October 1 – September 30.  Kevin Smith, Area Director for Rural Development explained that, “Record demand, not only in Michigan but nationally, for the Guaranteed Rural Housing loan program lead to the full utilization of Congressionally appropriated funding at an early time frame this fiscal year.”

While more federal dollars have not be allocated yet, the US Department of Agriculture Rural Development has decided to continue the program again for the remainder of this fiscal year by issuing conditional commitments again.  What this means is that lenders can conditionally approve and close RD loans. 

The original article we posted on this loan program follows.  Of course you can always contact us directly to for more information (866-982-9823) too.

RD Loans – A Great Option to Consider

An RD loan is a Rural Development home loan offered by the Rural Housing Service specifically for moderate to lower income residents buying homes in rural areas.  A rural area is defined as a community with a population of 10,000 residents or less.  Although some communities located outside of a metropolitan statistical area can qualify with populations up to 20,000 residents. 

In plain English this means if you would like to purchase a home in an area that is not a large city there is a program available.  For most, when you initially think of what a rural area is you might envision acres of farmland or large acreage properties where your neighbor is a mile away.  Not so.  In many instances rural areas are just outside of major cities.  In fact in the state of Michigan, more areas qualify for rural status than areas that do not.  Many of these areas are cozy suburban towns with close knit neighborhoods and strong local schools. 

Another point to note is that the RD loan program cannot be used to purchase or refinance farms or large acre properties where the land far out values the home.  This is a program for consumers who meet the typical credit requirements of obtaining a home loan.  They are just in a slightly lower income bracket and do not have enough funds on hand for a 20%+ down payment.  If this isn’t a program that helps the “little guy” I don’t know what does!  The largest advantage of RD loans is that they currently remain one of the last true “zero down” home loan options.  (VA loans are the other zero down payment option.)

The basic guidelines for an RD loan include:

  • Loans may be used to purchase a single-family, primary residence.
  • On a refinance, the existing loan must already be an RD loan.
  • A borrower must lack sufficient resources to provide a down payment for a conventional loan (typically 20-25% of the purchase price).
  • The RD loan allows a borrower to finance up to 100% of the appraised value of the home without requiring private mortgage insurance. 
  • A one time funding fee is charged and may be financed as part of the loan.  (For purchases, 2% of the loan amount is charged.  On refinances, the fee is .5% of the loan amount.  See you Home Loan Specialist for specific details.)
  • The property must be located in a designated rural area, have all-weather street access, and have approved water and waste systems.
  • The value of the site may not exceed 30% of the total appraised property value.
  • Sellers may contribute up to 6% of the purchase price toward closing costs and pre-paids.
  • Gift funds are allowed.  (Consult a Home Loan Specialist for specific criteria.)
  • Currently, only above ground pools are allowed with RD loans.
  • The property may not be active farmland.

With comparable interest rates, high LTV (loan to value) allowance and no monthly mortgage insurance, RD loans provide a great option to home buyers who may have thought they could not qualify for a home loan.  Talk with one of our Home Loan Specialists (866-982-9823) about the specific details and how this program can work for you.

First-time Home Buyers Still have Options

May 13, 2010

The home buyer’s tax credit program has ended.  While many were able to take advantage of the savings; we also know that many more did not.  Perhaps the timing of the program didn’t fit with your current financial picture.  Do you feel left out and like the opportunity to buy your dream home is gone for good?  While this particular program may be over, what if something else existed to help?  Wouldn’t you want to know?  Fortunately one does!

The Mortgage Credit Certificate (MCC) program is a Federal tax credit on the mortgage interest you pay on your home loan over a calendar year.  It effectively reduces the annual interest rate on your loan. 

This is not a limited life program or something offered for just a set period of time.  The MCC credit remains in effect for as long as your home continues to be your primary residence and the original mortgage loan remains in place.  Only if you refinance your home loan, sell your home or purchase a second home that becomes your primary residence, will the credit end.  Plus in select targeted areas you do not need to be a first-time home buyer to qualify.

Unfortunately this program is not offered in all states.  In the 5 states we currently do business only Michigan and Indiana offer the MCC program.  (This would be a great question to ask your state senators and representatives about if your state does not offer this program.)  Even more amazing though is that not all lenders participate in this program.  Awareness Home Funding does and will continue to do so for every state we conduct business in when available.   

If you are looking to purchase a home, now or in the future, ask us about the MCC program.  We are very familiar with how the program works and more importantly, how it can work for you.

Too Much of a Good Thing?

March 18, 2010

Last month we posted an article on RD (Rural Development) home loans.  We outlined the basics and how this is a great option to consider when purchasing a home, especially when so many areas and buyers may qualify.  Unfortunately, this program may come to a sudden halt – at least for the rest of this fiscal year.

Early last week a memo from the US Department of Agriculture Rural Development alerted lenders that they anticipated funding for this year’s program to be exhausted by the end of April, 2010.  This news itself is nothing earth shattering, but the timing most certainly is.  Normally funds start to become depleted in the fall near the end of USDA’s fiscal year which ends September 30th. 

The other challenge is that there will not be any Conditional Commitments.  Typically as funds are depleted, loans are conditionally approved pending more fund allocation.  Once the department has the new fiscal year’s budget approved with new government funding those loans are fully approved and business continues as usual.  Not this year.  Since there is such a huge gap between now and the start of the next fiscal year, Conditional Commitments are just not appropriate.

So what caused this problem?  Why did the funding end so quickly?  The easiest explanation is the growing popularity of the program.  Kevin Smith, Area Director for Rural Development says, “Record demand, not only in Michigan but nationally, for the Guaranteed Rural Housing loan program will led to the full utilization of Congressionally appropriated funding at an early time frame this fiscal year.”

We too have seen a steady increase in RD loans; and our company continues to underwrite more RD loans than any other lender in the state of Michigan.  As more borrowers learn about the program with low income requirements, 100% financing options, and the vast amount of area classified as rural; demand will continue to increase. 

The next obvious question is what can be done to ease this challenge in the future?  Should more money be allocated to the program?  Should the upfront funding fee be increased like the FHA program has done?  Should this be a top subject for Congress to focus on?  Smith could not comment on policy issues of the federal government, but one thing is sure.  If you want to take advantage of this program yet this fiscal year, you need to have a signed purchase agreement as soon as possible.  There are only 6 weeks left before committed funds are anticipated to be exhausted.  Miss this window, and you may need to wait until October to get in on this program again.

Things could always change based on how the federal government reacts.  Time will tell.  In the meantime, we’ll keep watching and will let you know how this program progresses.

No Time like the Present

March 1, 2010

There are many things in life where timing matters.  In order to gain the benefits involved, we need to take action within a specific timeframe or the opportunity is gone.   You could be the one who finds out a little too late that you missed the opportunity to recoup some significant money.  The offer referred to here is the Home Buyer’s Tax Credit, and the amount of savings involved could be as much as $8,000.  If you are thinking of buying a new home this spring, your opportunity to act is now

This incentive program has been making headlines and front stories for some time, but perhaps you still wonder if this applies to you.  When the federal government extended the program last fall, they also expanded the criteria to qualify making this a widespread opportunity.  The general guidelines contain two parts: first-time homebuyers and existing homebuyers. 

First-time homebuyers have been traditionally defined as those who have not owned a home in the past three years.  For these buyers, you may be eligible for a tax credit of 10% of the purchase price of your newly acquired home, up to $8,000.  (Consult with a tax professional for specific details on meeting this program’s qualifying criteria.)

One of the most significant additions to the Home Buyer’s Tax Credit program was to extend the credit to existing homeowners.  The general criteria are that you must have lived in the same home as your primary residence for any 5 consecutive years out of the past 8 years.  Existing homeowners purchasing a new primary residence home may also be eligible for a credit of 10% of the purchase price, up to $6,500.  (Again, consult your tax advisor for the exact qualifications of the program.)

The crucial point is to act now.  This program ends April 30, 2010.  Your purchase agreement must be fully executed by both buyer and seller by this date to qualify.  Take the first step to get pre-approved for a home loan by calling 866-982-9273.  We also have a secure on-line application on our website to get you started.  This is one event where being a split second off the timing means the difference between a nice rebate and nothing at all.

RD Loans – A Great Option to Consider

February 5, 2010

An RD loan is a Rural Development home loan offered by the Rural Housing Service specifically for moderate to lower income residents buying homes in rural areas.  A rural area is defined as a community with a population of 10,000 residents or less.  Although some communities located outside of a metropolitan statistical area can qualify with populations up to 20,000 residents. 

In plain English this means if you would like to purchase a home in an area that is not a large city there is a program available.  For most, when you initially think of what a rural area is you might envision acres of farmland or large acreage properties where your neighbor is a mile away.  Not so.  In many instances rural areas are just outside of major cities.  In fact in the state of Michigan, more areas qualify for rural status than areas that do not.  Many of these areas are cozy suburban towns with close knit neighborhoods and strong local schools. 

Another point to note is that the RD loan program cannot be used to purchase or refinance farms or large acre properties where the land far out values the home.  This is a program for consumers who meet the typical credit requirements of obtaining a home loan.  They are just in a slightly lower income bracket and do not have enough funds on hand for a 20%+ down payment.  If this isn’t a program that helps the “little guy” I don’t know what does!  The largest advantage of RD loans is that they currently remain one of the last true “zero down” home loan options.  (VA loans are the other zero down payment option.)

The basic guidelines for an RD loan include:

  • Loans may be used to purchase a single-family, primary residence.
  • On a refinance, the existing loan must already be an RD loan.
  • A borrower must lack sufficient resources to provide a down payment for a conventional loan (typically 20-25% of the purchase price).
  • The RD loan allows a borrower to finance up to 100% of the appraised value of the home without requiring private mortgage insurance. 
  • A one time funding fee is charged and may be financed as part of the loan.  (For purchases, 2% of the loan amount is charged.  On refinances, the fee is .5% of the loan amount.  See you Home Loan Specialist for specific details.)
  • The property must be located in a designated rural area, have all-weather street access, and have approved water and waste systems.
  • The value of the site may not exceed 30% of the total appraised property value.
  • Sellers may contribute up to 6% of the purchase price toward closing costs and pre-paids.
  • Gift funds are allowed.  (Consult a Home Loan Specialist for specific criteria.)
  • Currently, only above ground pools are allowed with RD loans.
  • The property may not be active farmland.

With comparable interest rates, high LTV (loan to value) allowance and no monthly mortgage insurance, RD loans provide a great option to home buyers who may have thought they could not qualify for a home loan.  Talk with one of our Home Loan Specialists (866-982-9823) about the specific details and how this program can work for you.

Mortgage Credit Certificate (MCC) Program

February 1, 2010

Home ownership is a great source of pride and personal satisfaction.  At Awareness Home Funding we enjoy helping our clients reach this goal.  And with the Mortgage Credit Certificate (MCC) program, we have another tool to assist you. 

The MCC program is a Federal tax credit on the mortgage interest you pay on your home loan over a calendar year.  While this does not reduce your monthly mortgage payment, it is a dollar for dollar reduction from the amount of your Federal Income Tax liability.  To date, for the five states we conduct business, only Michigan and Indiana have this program.  (Kansas does not have this program and Florida stopped the program due to lack of funding.)

The beauty of the program is that it effectively reduces your annual interest rate. 

For example: In Michigan the program offers a full 20% tax credit on the amount of annual interest paid.  On a $100,000 mortgage at 6% interest, the approximate annual interest amount is $6,000 for the first year.  At the full 20% tax credit, $1,200 can be deducted from the amount of Federal Income Tax you owe.  ($6,000 x 20% = $1,200; making your effective interest rate 4.8%) 

The MCC credit remains in effect as long as your home continues to be your principle residence and the original mortgage remains in place.  If you refinance your home loan, sell your home, or purchase a new home as your primary residence, the credit program will end.  For most homeowners who participate in this program, there really is no need to even consider a refinance since their effective rate is already reduced.

 The benefits of this program are significant! 

  • In many areas of Michigan and Indiana, you do not need to be a first time homebuyer to qualify.
  • In Michigan, up to 20% of your mortgage interest can be credited on your Federal tax return.  Plus, the remaining 80% of mortgage interest paid will continue to qualify as an itemized deduction on your Federal tax return. 
  • In Indiana, 20-35% of your mortgage interest can be credited on your Federal tax return dependant upon the size of your mortgage loan amount.  Again, the remaining 65-80% of interest paid will qualify as an itemized deduction on your Federal tax return.
  • Since the MCC is applied after all other credits are subtracted, any unused portion may be carried forward against future Federal Tax returns for up to 3 years.  (See your tax advisor for specific federal credit criteria.)
  • The program is effective for the life of the original mortgage.
  • The program may also be applied to individuals with current non-taxed income, but who have the potential for taxable income in the future.
  • Most mortgage loan programs apply.

Talk to one of our Home Loan Specialists today for how this program can work for you!

The Rules are Changing

January 25, 2010

Over the past couple of years requirements for obtaining a mortgage loan have become tougher to say the least.  For example, no longer can you simply just tell your lender what you earn – you need to prove it.  Your credit scores also need to be very good or excellent to be approved.  Just having a pulse no longer works either.

The plus side of tighter regulations is that consumers are more prepared to purchase a home.  They have worked to maintain a strong credit score; they have money to not only use as a down payment, but also funds available in reserve for after the sale.  Lenders themselves are also doing their homework.  They are paying much more attention to what is in the best interest of the borrower, and not just the bottom line.   Lenders that have not are no longer in business.

So what changes are being proposed this time?  The most significant changes are an increase in the minimum credit score, an increase in the upfront mortgage insurance premium, and a decrease in the amount a seller can contribute to a buyer’s costs. 

For most borrowers, the increase in the minimum credit score has already happened in effect because of what individual lenders will allow.  According to FHA policies, borrowers are required to have a minimum FICO credit score of 580 to qualify for the minimum down payment requirement of 3.5%.  Most lenders however, have a much higher requirement, most at a 620 score or better in order to qualify for a loan.  If you find a lender that will still accept the lower minimum score, be prepared to pay higher fees or accept a higher interest rate.

The increase in the upfront mortgage insurance premium is a significant change.  Until now, when a borrower has less than 20% invested into the home, mortgage insurance is required.  This insurance is to protect the lender in the event of a foreclosure.  FHA is a self-funded government agency that has been able to support itself from the monies raised from these premiums.  However, with the recent increase in foreclosures, the agency has had its reserves fall below the minimum level set by Congress.  FHA hopes that increasing the premium from 1.75% to 2.25% of the total loan amount will resolve this problem.  Unfortunately this means that the borrower of a $100,000 house will have the upfront premium increase from $1,750 to $2,250, or $500 more.  This change will become effective sometime this spring and for now only affects the upfront premium, not the monthly mortgage insurance premium.

The final change is a decrease in what a seller can contribute toward the buyer in a purchase transaction.  Until now, a seller could pay for up to 6% of the buyers closing costs.  This will now decrease to a 3% maximum.  This too will affect the amount of money a buyer will need to invest into a purchase transaction.  This change is expected to be effective in the early summer.

All this means that if you have been thinking about purchasing a home, ‘now’ is becoming a better and better time to do so.  Especially when you consider the extended home buyers credit that offers up to $8,000 for first-time buyers and up to $6,500 for other buyers who meet the qualifications.  If you need to wait though, don’t panic.  Simply be prepared to be more prepared when buying that home you have your eye on.