Focus On Financing

2018 San Bernardino & Riverside FHA, VA and Conforming Loan Limits

It’s about time! I’m happy to report that the 2018 FHA, VA and Conventional Conforming loan limits have increased once again. This occurred because each year the governing agencies get together and review the area median incomes and area median home prices and update their loan limits for all counties in California. accordingly.

2018 Conforming Loan Limit in San Bernardino & Riverside County

The term ‘Conforming’ is often used to refer to Conventional loans that are underwritten to Fannie Mae and Freddie Mac.

2018 San Bernardino and Riverside County Conforming loan limit is now $453,100. An increase of $29,000.

This basically means that in order for Fannie Mae and Freddie Mac to acquire a loan, the loan amount may not exceed $453,100. If the loan amount does exceed the conforming loan limit there are still options which are as follows:

  1. Secure a Jumbo or Non-Conforming loan
  2. Secure a piggy-back loan which consist of splitting the loan amounts into two loans. For instance, the first mortgage would be based on a conforming 1st trust deed at $453,100 and a 2nd loan for the balance exceeding that amount. This is also known or referred to as a 80/10/10 or 80/15/5

2018 FHA Loan Limit in San Bernardino & Riverside County

The Federal Housing Administration (FHA) sets a floor and ceiling loan limit for each county in California.

2018 FHA loan limit in San Bernardino & Riverside County is now $405,950. An increase of $26,450. 

To put this into perspective, you were to put the minimum down of 3.5% on an FHA loan, the max sales price you’ll be able to obtain is about $420,500.

If you would like to purchase a home that is higher than $420,500 you would need to have the difference in price to put down.  You can also inquire about a conventional loan with a 3% down payment requirement or even a 1% with special requirements.

2018 VA Loan Limit in San Bernardino & Riverside County

Although the the Dept. of Veteran Affairs (VA) technically doesn’t have a maximum loan limit, the VA loan establishes a limit to determine how much of a down payment the Veteran will need when exceeding the limit.

2018 San Bernardino & Riverside County VA loan limit is $453,100

In order to finance your home without a down payment the loan amount must be $453,100 or lower. Keep in mind that Veterans can still secure a VA loan (with no monthly mortgage insurance) that exceeds $453,100 with the 25% rule. This means that the down payment required will be based on 25% of the difference between the loan limit and the sales price.

For example: If the county VA loan limit is $453,100, and the Veteran is buying a $500,000 home, they’ll need to come in with 25% of the difference between $453,100 and $500,000.  So the VA loan down payment requirement would be $11,725….assuming the Veteran has full entitlement.

It’s Essential to Work with A Creative Loan Advisor

Working with a lender that is creative is key to obtaining the best program for your needs. A creative lender reviews your unique situation and thinks out of the box when looking for the program that fits your needs. Once a list of programs are found and presented, you’ll receive unlimited advice and transparency in the figures to make sure you make the best possible decision.

Call me at 951-662-3389 or contact me here to discuss your scenario, get an estimate, or simply ask a question.

December 21, 2017 by · Leave a Comment

The FHA 203k Rehab Loan – What You Need To Know

 

WHAT IS AN FHA 203K HOME LOAN?

The FHA 203k rehabilitation loan allows you to finance the repair or renovation costs into the loan. This is able to be done because the lender will manage both the mortgage and repairs within the loan at the same time.

WHEN DO I RECOMMEND USING A 203K LOAN?

  1. When the home is being sold “as-is” typically from a bank as an REO or short sale property, and is required to sell without repairs; or, the home is aged and in poor shape .
  2. The home must be purchased “as is” (due to the request of a seller or market conditions) and would not pass the appraisal inspection for a Conventional or regular FHA/VA home loan
  3. When the home buyer(s) simply do not have the available funds, apart from their down payment to make the repairs or upgrades 
  4. When a homeowner is in need of home repairs, but may not qualify for a traditional Cash-Out refinance
  5. When a buyer may have limited buying power and may only qualify for a “fixer upper”

203K HOME LOAN ELIGIBILITY:

As I mentioned earlier, the 203k loan is essentially an FHA mortgage. FHA qualifying guidelines (with a couple additional requirements) will still apply:

  1. Must be owner-occupied (cannot be used on a flip or investment home)
  2. Minimum 620 credit score (can make case-by-case exceptions down to 580)
  3. Minimum down payment of 3.5%
  4. FHA mortgage insurance is required (monthly .85% w/ 1.75% upfront MI premium fee)
  5. Can be used on a multi-family home (duplex, triplex…)
  6. FHA county loan limits apply (max loan amount $379,500 San Bernardino/Riverside County)
  7. Seller can pay up to 6% closing costs
  8. You can borrower up to 110% of the future appraised value
  9. Gift funds allowed for down payment and closing costs

HOW TO WRITE YOUR 203K OFFER (IMPORTANT-REAL ESTATE AGENTS):

One of the most common mistakes (misunderstandings) is how to write your offer and structure the repairs **Into** the transaction. Here’s a short overview:

The strucuture of the contract will remain the same with the exception of a couple of items. Simply put, write the offer like you would normally write it when there is a regular FHA loan. Make sure you note that a FHA 203k loan will be used as financing. It’s important to always look to make sure that the price of the house is not at the top end of the market because remember that this program will only allow finanicng up to 110% of the future after-repair-value (APV). If the price is already capped and the property needs a lot of repairs guidelines will not be met.

WHAT REPAIRS CAN I DO WITH A 203K LOAN:

Before getting into the allowable repairs, it’s important to know that there are 2 types of FHA renovation loans. The first and most common is the Streamline version which is used for cosmetic repairs and improvements and will allow costs of up to $35,000. The second is the Standard version which is used when there are structural changes and for projects higher in costs, exceeding $35,000.

The allowable repairs for the “streamline” program are:

  • Painting
  • Energy-efficient upgrades
  • Windows
  • Roof replacement
  • Carpet and flooring
  • Appliances
  • Repairing health and safety issues
  • Kitchen and bathroom remodels
  • And more…

Please note: The limit to costs is $35,000 for the streamline 203k loan program. However, FHA requires a buffer equal to 15%-20% of the bids. This “buffer” is to create a contingency fund to cover overages that you may encounter. If the contractor remains on task with the bid(s), then you get a refund of the 15% buffer. So with the 15% buffer factored in, the “real” maximum amount of repairs that you can finance is $31,000 (not $35,000).

THE 203K LOAN PROCESS

(1) Apply for a FHA 203k loan – Apply Here

(2) Complete 203k intro packet/meeting with Steve

(3) Get underwritten approval

(4) Find a contractor w/ FHA 203k experience (should be licensed, bonded, insured)

(5) Get bids, submit to Steve and Team

(6) Order the appraisal (a “subject to” appraisal is made)

(7) Close the loan (you get keys!)

(8) Complete repairs (within 6-months)

(9) Move in! (entire process can take up to 60-days, 45-days is common)

If you are a Real Estate broker, I am happy to show you how this program can add tremendous value to your business. If you are a consumer, let’s connect and talk about your goals as well as your options. There are other renovation programs in addition to the FHA 203k loan.

As with anything, it is important that you are working with a professional. Let my Team and I walk you through this process. It can be stressful and take longer than conventional financing, but education and communication is key!

I WANT TO BE YOUR MORTGAGE ADVISER!

I LOVE connecting with my social media followers and readers! You are the reason I take time out of my day to produce this content and share it with you as often as I can.  I can always be reached directly at 951-662-3389 or via email at stevec@focusonfinancing.net. 

If you found this information valuable, please share it! If you are a real estate broker and would like more information don’t hesitate to call me to set up a one-on-one meeting. 

 

To apply for a loan click here and follow up the prompts. 

October 25, 2017 by · Leave a Comment

The New 5/5 ARM

For home buyers who want the stability of a fixed mortgage and the low rate of an adjustable mortgage, our 5/5 ARM provides the perfect balance. The low initial rate of the 5/5 ARM is fixed for five years before it can adjust — then it’s fixed for another five years, then another five years and so on. That’s just two adjustments within 15 years. Plus, it can only adjust by a maximum of 2% each time and it’s capped at just 5% from the initial rate over the entire 30-year life of the loan.

Our 5/5 ARM is a great option for just about any home buyer, and the guidelines are the same as for our other conventional ARMs.

Want to find out if you qualify, fill out the loan application and we’ll get back to you shortly.
 

June 15, 2017 by · Leave a Comment

MIP Reduction Makes FHA More Affordable

UPDATE: The reduction of MIP premium has been suspended indefinitely by the Trump administration. Click here to read more on this. 

The U.S. Department of Housing and Urban Development (HUD) recently announced a quarter-percent reduction in mortgage insurance premiums on certain FHA loans. According to HUD, homeowners may save $500 per year on mortgage insurance. The current MIP rate of .85% will drop to .60% for all loans originated on or after January 27, 2016.

FHA loans have benefits that can include small down payment requirements and, in some cases, easier qualification. Whether you purchase or refinance, the recent reduction may help by:

• Improving affordability
• Allowing access to higher loan amounts
• Offsetting the impact of recent increases in mortgage interest rates

Improve Affordability or lower your payment

For people buying a home this recent change can help increase their buying power by approximately $10,000 dollars.

For existing homeowners with FHA loans, you may Streamline Refinance to take advantage of this new MIP reduction.

Check out the MIP changes throughout the years

 Change date Monthly MI Upfront MIP
 April 2010 .55% 2.25%
October 2010 .90% 1.00%
April 2011 1.15% 1.00%
April 2012 1.25% 1.75%
April 2013 1.35% 1.75%
January 2015 .85% 1.75%
January 2017 .60% 1.75%
If you have questions about FHA loans, mortgage insurance or any other aspect of mortgage financing, I’ll be happy to help. Please call or send me an email at your convenience.

January 19, 2017 by · Leave a Comment

Planning for a Mortgage Application

Planning ahead for your mortgage application will increase your success of owning a home. 

I see it many times… people call me interested in starting the home buying process, but after we hang up they lose motivation to gather their documents and follow instructions that I provide. Buying a home doesn’t happen overnight or sometimes even over a few months. Buying a home takes a game plan. One that if executed, will put you in the position to purchase a home seamlessly and without headaches. Knowing what to expect can increase your success of owning a home without the most common obstacles and/or stress. Take some time and study the the following bullet points and familiarize yourself each item.

Here is the list of the items and important points to consider before entering the pre-qualification stage. These items are critical to getting a quick turn around time and to improve your motivation to move forward.

Income:

  • Provide your last two pay-stubs along with your W2s and Federal tax returns for the last two years (include all schedules). State returns are not needed.
  • If you are self-employed, ask me for the additional documentation requirements.
  • If you receive bonus or commissions or have changed your job or position, let’s talk.

Assets:

  • Combine all the funds needed to close into one account at least two months prior to your application.
  • Document any other deposits here as each could be scrutinized.

Your Statements:

  • Save all pages of your asset statements, even if some are blank or advertisements.

Deposits:

  • Make copies of checks and deposit slips to prove they are not borrowed money.
  • Deposit checks individually.
  • Don’t deposit cash without clear proof of the source.

Liquidation:

  • If you are going to sell stocks, bonds, investments or borrow against a retirement account, do it now. Cashing out now may cost you a few dollars in additional gains, but it also protects against losses.

Current housing:

  • If you own and are selling, provide a copy of the HUD-1 settlement statement.
  • If you own and are not selling, you’ll need to qualify for both homes or meet the requirements for renting the current.
  • If you are renting, show 12 months of canceled checks demonstrating timely payments and/or written verification from your management company (Case-by-case). Ideally, pay your rent on the same day each month on or prior to its due date.
  • If you live with family, you may need a letter stating that you live rent-free (I will advise if this is needed upon our consultation).

Credit:

  • Check your credit report at www.annualcreditreport.com. I will need to run your credit using our credit service, but checking your credit in advance with this FREE service prior to your application will help you know approximately where you stand. Remember, your credit doesn’t have to be perfect.
  • Identify any errors now and consult with us for the correct action to take.
  • If you co-signed a loan or are being reimbursed for a loan that’s in your name, you’ll need at least twelve months of checks to exclude it.
  • Avoid new credit or inquiries. These can lower your score and increase your rate.
  • If you have more than one credit card that are maxed out, this would be a good time to drop those down to at least the halfway mark.

Employment Stability:

  • Ideally, you’ll have two years or more with your current employer.
  • Consult with us before changing employers, position or method of compensation. For example, don’t switch from salary to commissions.

I’m here to help you now, not just once you’ve found a home. Contact me with your questions and/or if you need a game plan drawn. 

June 10, 2016 by · Leave a Comment

New FHA Rules Regarding Deferred Student Loans

Sad GraduateFHA has recently announced that all deferred student loan payments must be included in the borrower’s debt-to-income (DTI) starting September 14, 2015. FHA was considered the last option available after Fannie Mae and Freddie Mac announced their change to no longer accept deferred student loan payments to be omitted. Student loans in forbearance are also required to be accounted for when qualifying for a home loan.

How does this affect you?

The more debt that is included in your debt-to-income (DTI) ratio will cause your buying power to be affected because the higher the debt the less they’ll qualify. This does not only affect basic qualifications, but also first-time homebuyer programs as well. 

Let’s look at this closer:

If the payments on that $40,000 were 2% of the balance which is conservative, the payment would be $800/mo. If that graduate once qualified for a $350,000 home (with a 3.5% down payment and excluding the deferred payments) this new rule would decrease that amount by approximately 30% or more.

What you need to know about your student loans when applying for a mortgage

In a nutshell, all payments from a student loan must be provided to ensure that they are being accounted for in your debt-to-income. It is imperative that you are able to get a statement or letter from the creditor showing what the terms will be once the payments have commenced; otherwise, a larger payment must be used to calculate your DTI ratio.

The following are excerpts from HUD’s Handbook 4000.1:

Lenders must obtain written documentation of the deferral of the liability from the creditor and evidence of the outstanding balance and terms of the deferred liability. The lender must obtain evidence of the anticipated monthly payment obligation, if available.

The lender must use the actual monthly payment to be paid on a deferred liability, whenever available.

If the actual monthly payment is not available for deferred installment debt, the lender must utilize the terms of the debt or 5 percent of the outstanding balance to establish the monthly payment.

For a student loan, if the actual monthly payment is zero, the lender must utilize 2 percent of the outstanding balance to establish the monthly payment.

What if my spouse has student loans, but they are not on the loan?

This is a very common question and a good one at that. In a community property state such as California, all government insured loans such as FHA, VA and USDA require all debts (including deferred student loans) from the borrower’s spouse to be included in their DTI. Which means your spouses’ student loans can possibly cause a loan denial.

If your spouse has student loan debt but you don’t, your other option is to qualify using a Conventional loan with a 3% down payment. All Conventional loans do not require the non-qualifying spouse’s credit to be provided, therefore; her/his debts will not be included in the borrower’s DTI ratio.

What now?

Now that FHA has implemented not only this change but the lowering of the loan limits, working with a knowledgable loan officer is more important now than it’s ever been. You need to know your options and strategies that will help you obtain homeownership.

The use of non-occupant co-signors such as mom and dad will be more popular going forward. The Mortgage Credit Certificate (MCC) is also another useful program that can help you get credit to be used as income to offset some of the student loan debt.

To explore your options and to begin your home financing journey in San Bernardino county and surrounding areas call me at (951) 662-3389 or/and you can start an application by clicking here.

June 16, 2015 by · Leave a Comment

FHA Announces MIP Reduction

Update: 2017 MIP reduced again. Click here to read about it.

In efforts to promote homeownership, Obama announced the reduction of the Mortgage Insurance Premium (MIP) from the current rate of 1.35% to .85%.

This change is to become in effect for case numbers ordered on or after January 26th, 2015 and expected to reduce the annual premium by an average of $900 resulting in more buying power and/or a lower payment.

With Fannie Mae and Freddie Mac stepping up with new programs and changes in their existing products, FHA has not been as popular. Even though these agencies have come out with their new programs FHA will still be a product to consider for many homeowners, especially those affected by a short sale or foreclosure. FHA remains more flexible with waiting periods pertaining to short sales, foreclosures, and deed-in- lieu with 3 years of seasoning. FHA also offers the Back-to-Work program which allows a home buyer that has overcame one of these events to buy after only 1 year. The 203k rehabilitation program is also a useful program which allows a buyer to purchase a home in need of repair and renovation and finance the cost of the project into the loan amount.
FHA is also allowing people currently in the process of buying a home with an FHA to cancel their existing case number in order to take advantage of the lower MIP rate. 

Homeowners Currently Under An FHA Loan

Many people that bought homes with an FHA loan within the last year have the higher MIP rate of 1.35%. It is important to have me analyze your current loan to find out if a Streamline refinance will benefit you. Small savings with the right strategy can dramatically change the outlook of your financial future. I will look thoroughly into your current loan and coupled with your goals and objectives I will give you my recommendation paired with a Total Cost Analysis.


The following is a Total Cost Analysis that illustrates the comparison between the current MIP rate of 1.35% to the new rate of .85%. Click on the image below to view the analysis:

mortgagevid

To start a loan application click here to be directed to the Loan Application page.

 

 

February 4, 2015 by · Leave a Comment

MyCommunity® Mortgage, The FHA Alternative…

Update: The down payment requirement has been reduced to 3%. With this option, at least one of the borrowers has to be a first time homebuyer (has not owned a home in the last 3 years). If a refinance, the mortgage being refinanced has to be owned by Fannie Mae. 

 

FHA has been and will always come to mind when thinking about home financing for first-time homebuyers. When HUD decided to change the MIP rules for FHA loans, the sought after program suddenly became less attractive. Soon after, Fannie Mae remerged with a competitive program designed to be used by first-time homebuyers to purchase a home and also for current homeowners to use to refinance. 

FannieMae-Logo

 

 

MyCommunity Mortgage Described

MyCommunityMortgage® (MCM®) is a conventional community lending mortgage that offers underwriting flexibilities to qualified borrowers who meet specific income criteria. Fannie Mae designed this program to provide lower rates due to lower risk-based price adjusments, and reduced mortgage insurance costs as explained below. 

Fannie Mae has made this program ideal for the home buyer who has a credit score of 700 or less, limited funds who will need to utilize a gift from a third party for their down payment, or if they want to use a form of an approved down payment assistance such as CalHFA’s CHDAP program.

Low Interest Rates Due to Low Risk-Based-Price -Adjustments

Interest rates remain low with this program due to minimal Loan-Level Price Adjustments (LLPA). LLPAs are the reason why an interest rate can differ from one borrower to another. For a standard conventional loan there can be price adjustments for certain risk factors such as credit scores and/or loan-to-value (LTV). MyCommunity® implemented a cap on these adjustments at .75% compared to 2% or even higher based on certain scenarios. 

Affordable Private Mortgage Insurance (PMI)

PMI is required for loans that have a LTV of 80.1% or higher (less than 20% down payment). When PMI is called on a loan the amount of coverage and the amount of the premium will be based on many factors, similar to the LLPAs explained above. MyCommunity® coverage requirements have been significantly reduced which will have a drastic effect on the cost of it. Reference below to the coverage amounts required by MyCommunity®.

MyCommunity® PMI Coverage Comparison

  • 90.01% – 95% LTV = 16% | Standard Coverage = 30%
  • 85.10% – 90% LTV = 12% | Standard Coverage = 25%
  • 80.01% – 85% LTV = 6%   | Standard Coverage = 12%

Loan comparison shown towards the bottom of the page.

Lower Down Payment Options

A common reason people don’t buy a home of their own is because they don’t have the money for the down payment. This program offers flexibility regarding where you can get the money from. You may get a gift for up to 100% of the down payment from a family member, employer or someone that you have a long term relationship with. MyCommunity® also offers the ability to combine an approved down payment assistance program such as CalHFA’s CHDAP program.

The following are the basic guidelines and notable features of this program:

  • 620 minimum FICO score (Mid score of all three or the lower if only two)
  • 45% Debt-to-income (DTI)
  • 100% of the down payment can come from a gift (family member, employer or Community 2nd)
  • Boarder income (income from roommates) can be used to qualify
  • The borrower’s income can not exceed 140% of the Average Median Income (AMI) in California (Surrounding Counties listed below)

Local County Income Limits:

  • San Bernardino – $84,980
  • Riverside – $84,980
  • Orange – $91,980
  • Los Angeles – $91,980
  • San Diego – $101,780

MCM Loan Comparison

 

 

 

 

 

 

Many banks do not offer this program and many Loan Officers don’t take the time to present and educate clients about all their options. If you want to work with a mortgage advisor who is always transparent and will not push you toward a couple of programs that they are familiar with or understand, contact me at (951) 662-3389.

Get a head start and fill out a loan application, click here to access my secured online application.

October 20, 2014 by · Leave a Comment

Changes to Short Sale Waiting Periods for Conventional Loans

Picture1Fannie Mae announced that on Saturday August 16, 2014, the waiting period for short sales will be extended to 4 years. Before this change, people who sold two years ago and had the ability to invest at least 20% towards their down payment were able to buy. Read Fannie Mae’s Announcement SEL-2014-10.

What this means:

If you had a short sale and planned to buy with a 20% down payment you can now no longer qualify using a Conventional loan. The program that would help you become a homeowner the quickest would be through FHA, but there are some drawbacks to this program. First, FHA allows you to purchase a home after 3 years, but the program comes with a hefty mortgage insurance premium, which is paid upfront through your loan as well as with your monthly payment. Secondly, this mortgage insurance will be included for the life of the loan unless a you buy with 10% down payment or you get a loan term of 15 years. Although there are drawbacks to FHA, it is still a great program to get you in to a home so that you can begin receiving tax benefits and ultimately increasing your net worth. You also have the option to then refinance out of the program once you meet Conventional guidelines. On the upside, if you are at the 4 year mark or close to it, the minimum down payment you’ll need is only 5%. It’s also important to know that you can purchase a home after 2 years with a Conventional loan if you put down 10% and can document that the reason you short sold the home was due to extenuating circumstances.

Not close to the 4 year mark?

There are still ways to purchase a home. For FHA, there are a couple ways that will allow people to buy right away. If you were on time with your payments while your short sale was being processed (at least 12 months) you can purchase right away; as long as you’re not selling and buying just to take advantage of the current market. The second method is with the Back-to-Work program also offered through FHA. This program will allow you to buy after 12 months, but only if you can document extenuating circumstances that caused either a 20% decline in household income or loss of employment for at least 1 year.

What if I had a foreclosure? Are there any new changes?

If you had a foreclosure you will be required to wait 7 years to buy using a Conventional loan. People who had a Deed-In-Lieu of foreclosure (DIL), which are usually treated the same as a foreclosure, can now repurchase after 4 years.

My mortgage was included in a bankruptcy, what are the waiting periods for this?

There is good news relating  to this situation. Before, if a foreclosed mortgage was included in a bankruptcy the waiting periods would resort to the waiting period that extended out the most (foreclosure or bankruptcy). The new guidelines will allow a buyer to purchase a home based on the waiting periods of only the bankruptcy, which can be in as little as 2 years.

Recap… Old Guidelines and New Guidelines
  • 2 Years with 20% Down Payment ———— 4 Years with 5% Down Payment
  • 4 Years with 10% Down Payment ———— 4 Years with 5% Down Payment
  • 7 Years for a Deed-in-Lieu of Foreclosure — 4 Years with 5% Down Payment
  • 7 Years for a Foreclosure ———————- Remains the same

August 21, 2014 by · Leave a Comment

Add This To Your New Year Resolution

With 2014 now here and your new year resolutions are in place, why not include paying your mortgage down in your plan. Would you be willing to give up something that cost you $5 per day like a coffee or bagel, if it means achieving financial freedom sooner? An amount as low as $5 per day can make a big difference with a 30 year loan, that may just surprise you.

The image below illustrates the effect of investing $150 per month ($5 per day x’s 30 days) and how fast it can get you closer to financial freedom.

StarbucksInfographic

 

 

 

mortgagevid

December 31, 2013 by · Leave a Comment

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