Conventional Mortgages

FHA Mortgages

Jumbo Mortgages

VA Mortgages

Go to any of these links and you’ll see that Google generates a search for the type of mortgage you want and that at the top of the page is a yellowish area with a compare rates button. Press the magic button and you get a list of mortgage offers which can be localized for your community.

You can arrange the ads by monthly payment, APR, interest rates, lender fees and lender names. The best strategy is to set the “points” option on the right to zero so see you can see par pricing, the real interest rate without points. This makes comparing loans easy.

Once you have your table set up look for the lowest rate AND the lowest fee level. For instance, with conventional financing I see at this writing that one lender is offering financing at 5.353 percent and $6,140 in fees. Another offers the same loan for 5.297 percent plus fees worth $4,952. While the APRs and lender costs differ, the nominal interest rate for both loans is 4.875 percent and the monthly payments are identical.

Picking A Lender

I very much like the idea of visible, uniform mortgage comparisons. That said, there are concerns with the Google system.

First, the Google system is only open to advertisers and there’s no stone tablet which says advertising lenders always have better rates than lenders who do not advertise.

Second, I do not see lenders at this writing who I think of as being local. I do see at least one lender who by name must be 1,000 miles from my location.

Third, advertised mortgage rates whether online or in a newspaper are, well, the best advertised rates at one point in time. Alas, rates are constantly in flux, the best rates certainly won’t be available for borrowers with weak credit and advertised rates are always subject to a number of caveats such as a check of credit and income, the value of the property, credit scores, etc. In other words, great rates and low costs may not be available to everyone — including you.

Fourth, if everyone is charging 5 percent and $2,000 in fees and someone else is offering 4.5 percent and no fees you need to wonder how that’s possible. Money is money, and while some variance of rates and fees makes sense, caution should be in order when someone has terms which are too good to be believed.

Fifth, borrowers need more information about a given loan program than just rates and costs. For instance, there’s a reason FHA mortgages are often a better deal than other loans (can we spell T-O-X-I-C financing) even if the rate is sometimes higher.

The Real Value Of The Google System

The attraction of the Google system comes in the form of consumer education and intelligence. Borrowers rely on lenders for information, program options and rates — but under federal rules lenders have no obligation to get the best rates and terms for borrowers.

In this system the lender has every advantage — but at least the Google ads provide some sense of the rates and costs available from various lenders. Armed with this information, borrowers can then check with such sources as community banks and local credit unions to see how their offers stack up.

Lastly, the Google comparison system is important if only because Google itself is so huge, so significant and so transformational. It’s an addition to the mix of options available to mortgage borrowers which should be welcomed — as should anything which makes the lending process more competitive, more open and more transparent.

Google Mortgage Ads — Do They Reduce Borrower Costs? is a post from: Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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A conventional loan is traditionally defined as a fixed-rate mortgage with equal monthly payments, a 15-year or 30-year term, and a fixed interest rate established when the mortgage is created.

A conventional mortgage can also be defined in terms of its loan to value ratio or LTV. An 80 percent LTV is the standard for conventional loans, a percentage which means that if a house costs $300,000, the lender will provide financing worth $240,000 (80 percent of the purchase price) and the borrower will put up $60,000 (20 percent). Closing costs are EXTRA AND ADDITIONAL above the $60,000.

Private Mortgage Insurance

Since most people do not have 20 percent down to buy a home it follows that there has to be a way to get a conventional loan without the need to pay so much cash up front. There is. Buyers can finance with a conventional loan plus private mortgage insurance (or “MI”). By using MI borrowers can often buy with as little as 5 percent down plus closing costs.

Loan Limits

It used to be that there was one set of loan limits which applied nationwide in the continental US and higher limits in Alaska, Hawaii, Guam and the Virgin Islands. Those days are gone. Today we have a complex conventional loan limit system which depends in large measure on the county where you live. To see the maximum conventional loan amount for your community go to the all-in-one loan limits page.

Jumbo Loans

So-called “jumbo” mortgages are simply loans where the amount financed is greater than the conventional loan limit for a given area. Borrowers typically pay a somewhat higher rate for jumbo financing, so it’s good to stay within the conventional loan limit when possible.

How Much Can You Borrow?

Lenders qualify borrowers in part on the basis of their income. In general terms, with fixed-rate conventional mortgages no more than 28 percent of your gross (pre-tax) monthly income can be used for housing costs such as mortgage principal, mortgage interest, property taxes and property insurance (PITI). As much as 36 percent of your income can be used for PITI plus recurring bills such as credit card payments, auto loans, etc. These numbers are sometimes expressed as 28/36.

Let’s imagine that you have two household members with a combined income of $90,000 annually or $7,500 per month before taxes. Under general conventional qualification standards, the buyers would be allowed to spend as much as $2,100 on housing costs (PITI) and as much as $2,700 for all regular monthly debt.

The front and back ratios for fixed-rate conventional mortgages are more conservative than the ratios used for other loans. Given the same income you can borrow more with an adjustable-rate mortgage or with loans insured by the FHA or VA. Of course, you can REALLY borrow more if you get a toxic loan but that’s not a good idea.

Shop Around

A plain vanilla, fixed-rate conventional loan is the same as every other plain vanilla, fixed-rate conventional loan. What may not be the same is the cost: Different lenders can and will change different combinations of interest and points so it pays to shop around and compare rates. One of the best ways to compare loan offers is to ask lenders to provide a quote with “par” interest — the rate with zero points.

How To Apply

In recent years the loan application process has been greatly simplified, however proper information from borrowers is still required. Most lenders today are looking for fully-documented loan applications. This may sound intimidating, however it’s not a big deal. Just take these steps:

• At least three months BEFORE you finance or refinance real estate get a copy of your credit report. The reason to do this is to check and see if there’s any information on your credit report which is factually incorrect or out-of-date (most negative items can stay on a credit report for seven years, 10 years for a bankruptcy). If you start looking at your credit report three months ahead you should have some time to correct errors. You can get a free credit report with no strings attached by going to AnnualCreditReport.com.
• Get your paperwork in order. Have in hand your last three pay stubs, your last three tax returns, and statements for all savings and checking account, mutual funds, retirement accounts, credit cards, student loans, car loans, etc. Make a file and stick the paperwork in it. You want to show ALL income and you must show ALL debts. When in doubt add it to the file.

• Ask some questions: Do you expect to receive “bonus” income now or in the future? Do you expect to receive “overtime” income now or in the future Will “other” income in addition to your salary continue at current levels? If you own your home and use it as a prime residence, what’s the estimated fair market value? What’s the value of all financing now secured by your current home if you’re refinancing?

Seller Contributions

Because it’s tough to sell home these days in many markets, some owners are willing to pay some or even all buyer closing costs. Lender rules generally allow so-called “seller contributions” of as much as 3 percent to 6 percent of the purchase price to help offset closing costs, depending on the amount you put down. A seller contribution may be used to offset various closing costs however you must always provide your downpayment in cash. Speak with your real estate broker and lender for specifics.

Gifts

Gifts are allowed under the most conventional loan programs and gifts may be used to cover some or all of the downpayment. A “gift letter” from the donor will be required. This is a letter which says the money given is really a gift and that no repayment or interest will be sought. Speak with lenders for specifics.

Important Points

___ You do NOT need a co-borrower to apply for a mortgage. However, the additional income represented by a co-borrower may allow you to obtain a bigger mortgage.

___ If you own rental property, lenders will generally add back the depreciation deducted each year on “improvements” such as a house, but not stoves, clothes washers, etc.

___ You are NOT required to disclose the receipt of alimony, child support payments or separate maintenance to a lender. However, disclosure of the additional income represented by such payments may allow you to borrow a larger amount.

___ In addition to the minimum down payment, you may and are likely to have other closing costs as well. Such additional costs can include prepaid expenses, points, mortgage insurance premiums paid in cash, non-realty expenses, taxes, title insurance, transfer fees, settlement charges and miscellaneous costs. Always obtain a Good Faith Estimate from any lender who offers you financing. This government-mandated form outlines the loan-related costs you will be required to pay at closing.

Conventional Mortgage Basics is a post from: Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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The VA mortgage program is the single best form of real estate financing available because qualified individuals can purchase with nothing down and there’s no annual mortgage insurance premium.

Qualifying

To get a VA loan you must be able to demonstrate qualifying federal service. Since 1990, according to the Veteran’s Administration, you must have:

• Completed 24 months of continuous active duty or the full period (at least 90 days) for which you were called or ordered to active duty, and been discharged under conditions other than dishonorable, or
• Completed at least 90 days of active duty and been discharged under the specific authority of 10 USC 1173 (Hardship), or 10 USC 1173 (Early Out), or have been determined to have a compensable service-connected disability, or
• Been discharged with less than 90 days of service for a service-connected disability. Individuals may also be eligible if they were released from active duty due to an involuntary reduction in force, certain medical conditions, or, in some instances, for the convenience of the Government.

Active Duty Service Personnel

If you are now on regular duty (not active duty for training), you are eligible after having served 181 days (90 days during the Gulf War) unless discharged or separated from a previous qualifying period of active duty service.

Selected Reserves or National Guard

If you are not otherwise eligible and you have completed a total of 6 years in the Selected Reserves or National Guard (member of an active unit, attended required weekend drills and 2-week active duty for training) and

• Were discharged with an honorable discharge, or
• Were placed on the retired list, or
• Were transferred to the Standby Reserve or an element of the Ready Reserve other than the Selected Reserve after service characterized as honorable service, or
• Continue to serve in the Selected Reserves

Individuals who completed less than 6 years may be eligible if discharged for a service-connected disability.

You may also be determined eligible if you:

• Are an unremarried spouse of a veteran who died while in service or from a service connected disability, or
• Are a spouse of a serviceperson missing in action or a prisoner of war

Note: Also, a surviving spouse who remarries on or after attaining age 57, and on or after December 16, 2003, may be eligible for the home loan benefit. However, a surviving spouse who remarried before December 16, 2003, and on or after attaining age 57, must apply no later than December 15, 2004, to establish home loan eligibility. VA must deny applications from surviving spouses who remarried before December 6, 2003 that are received after December 15, 2004.

Eligibility may also be established for:

• Certain United States citizens who served in the armed forces of a government allied with the United States in WW II.
• Individuals with service as members in certain organizations, such as Public Health Service officers, cadets at the United States Military, Air Force, or Coast Guard Academy, midshipmen at the United States Naval Academy, officers of National Oceanic & Atmospheric Administration, merchant seaman with WW II service, and others.

Loan Limit

The VA Loan limit is generally set at $417,000. However, the amount available to qualifying military personnel may be higher in selected “high cost” counties and in Alaska, Hawaii, Guam and the Virgin Islands. (In some areas loans for as much as $1,094,625 are available.) Check the loan limits page for the latest information.

The VA Funding Fee

The government guarantees the loan’s repayment to a lender, an incentive that greatly benefits borrowers because lenders will finance a home with little down if a borrower is backed by VA insurance.

To obtain a VA-insured loan it follows that one must pay a premium called a funding fee equal to 2.15 percent of the loan amount for regular military personnel. There’s no annual insurance premium with the VA loan program, just the one-time charge upfront.

If you borrow $150,000 and pay an upfront funding fee of 2.15 percent the cost will be $3,225. This fee can be financed with the mortgage, meaning you do not have to pay it in cash at closing. Instead, the upfront funding fee is added to the loan amount.

Be aware that there may be different funding fees for National Guard and Reserve personnel and that the funding increases if the VA loan program is re-used. For specifics, speak with a VA counselor or with a lender.

How To Get Started

The first step is to complete VA Form 26-1880. This is a Request for a Certificate of Eligibility. Once completed, says the VA, “send this form to the Winston-Salem Eligibility Center, along with proof of military service. In some cases it may be possible for VA to establish eligibility without your proof of service. However, to avoid any possible delays, it’s best to provide such evidence.”

Lenders can also help you establish eligibility through what is known as the WEB LGY online system. This system is quicker then using the VA form.

How Much Can You Borrow?

Lenders qualify borrowers in part on the basis of their income. In general terms, under the VA program no more than 41 percent of your gross (pre-tax) monthly income can be used for housing costs such as mortgage principal, mortgage interest, property taxes and property insurance (PITI). As much as 41 percent of your income can be used for PITI plus recurring bills such as credit card payments, auto loans, etc. These numbers are sometimes expressed as 41/41.

Let’s imagine that you have two household members with a combined income of $90,000 annually or $7,500 per month before taxes. Under general VA rules, the buyers would be allowed to spend as much as $3,075 on housing costs (PITI) and as much as $3,075 for all regular monthly debt.

Notice that the debt-to-income ratios for the VA program are the same for both PITI and PITI plus other debts. In other words, if you keep down your spending for cars loans, credit cards, etc., then you can qualify for a bigger mortgage.

Shop Around

Every VA loan has the same terms (length, no prepayment penalty, etc.) as every other VA loan. What may not be the same is the cost: Different lenders can and will change different combinations of interest and points so it pays to shop around and compare rates. One of the best ways to compare loan offers is to ask lenders to provide a quote with “par” interest — the rate with zero points.

How To Apply

In recent years the loan application process has been greatly simplified, however proper information from borrowers is still required. Just take these steps:

• At least three months BEFORE you finance or refinance real estate get a copy of your credit report. The reason to do this is to check and see if there’s any information on your credit report which is factually incorrect or out-of-date (most negative items can stay on a credit report for seven years, 10 years for a bankruptcy). You can get a free credit report with no strings attached by going to AnnualCreditReport.com.
• Get your paperwork in order. Have in hand your last three pay stubs, your last three tax returns, and statements for all savings and checking account, mutual funds, retirement accounts, credit cards, student loans, car loans, etc. Make a file and stick the paperwork in it. You want to show ALL income and you must show ALL debts. When in doubt add it to the file.

• Ask some questions: Do you expect to receive “bonus” income now or in the future? Do you expect to receive “overtime” income now or in the future Will “other” income in addition to your salary continue at current levels? If you own your home and use it as a prime residence, what’s the estimated fair market value? What’s the value of all financing now secured by your current home if you’re refinancing?

Seller Contributions

Because it’s tough to sell home these days in many markets, some owners are willing to pay some or even all buyer closing costs. VA rules allow so-called “seller contributions” of as much as 3 percent to 6 percent of the purchase price to help offset closing costs, depending on the amount you put down. A seller contribution may be used to offset various closing costs AND the downpayment under the VA program. Speak with your real estate broker and VA lender for specifics.

Gifts

Gifts are allowed under the VA program and gifts may be used to cover some or all of the downpayment. A “gift letter” from the donor will be required. This is a letter which says the money given is really a gift and that no repayment or interest will be sought. Speak with lenders for specifics.

Important Points

___ You do NOT need a co-borrower to apply for a mortgage. However, the additional income represented by a co-borrower may allow you to obtain a bigger mortgage.

___ If you own rental property, lenders will generally add back the depreciation deducted each year on “improvements” such as a house, but not stoves, clothes washers, etc.

___ You are NOT required to disclose the receipt of alimony, child support payments or separate maintenance to a lender. However, disclosure of the additional income represented by such payments may allow you to borrow a larger amount.

___ In addition to the minimum down payment, you may and are likely to have other closing costs as well. Such additional costs can include prepaid expenses, points, mortgage insurance premiums paid in cash, non-realty expenses, taxes, title insurance, transfer fees, settlement charges and miscellaneous costs. Always obtain a Good Faith Estimate from any lender who offers you financing. This government-mandated form outlines the loan-related costs you will be required to pay at closing.

VA Mortgage Basics is a post from: Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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There are several types of mortgage loan limits. Generally, most borrowers need to look at conventional, FHA and VA loan limits to see how much can be financed with the most-widely originated loans.

If you borrow at or below the conventional loan limit for non-government mortgages, you would have what is generally known as a “conforming” loan. If the amount borrowed is above the conventional loan limit, you would have a “jumbo” loan and face a higher rate because larger loans imply more risk to investors, the folks who buy mortgages.

As well, a “conventional” mortgage can be seen as loans originated from the private sector. FHA and VA mortgages are originated in the private sector but insured through government programs. For specifics, look at FHA and VA mortgage requirements.

Conventional Loans

For 2010 the conventional loan limits depend on the county where you’re located. Instead of one national mortgage limit, we now have one for each county — and there are more than 3200 counties.

In general terms, 2010 loan limits for a single-family home range from $417,000 to $729,750. Once you know the loan limit for a single-family home in a specific area you can then see the limits for owner-occupied homes with two to four units.

Example #1 — Basic Loan limit

One Unit — $417,000
Two Unit — $533,850
Three Unit — $645,300
Four Unit — $801,950

Example #2 — Loan Limit for Certain High-Cost Areas

One-Unit –$729,750
Two Unit — $934,200
Three Unit — $1,129,250
Four Unit — $1,403,400

Also, in 2010 there are loan limits for so-called “higher cost” areas. In other words, instead of looking at “counties” you can also look at “areas.” These selected areas are located in Arizona, California, Colorado, Connecticut, The District of Columbia, Delaware, Florida, Georgia, Hawaii, Idaho, Massachusetts, Maryland, North Carolina, New Hampshire, New Jersey, New Mexico, Nevada, New York, Ohio, Oregon, Pennsylvania, Rhode Island, Tennessee, Utah, Virginia and West Virginia.

The chart for specific high-cost areas and loan limits can be found at:

Loan Limits for 2009 Mortgage Originations — High-Cost Areas (Remember, the limits for 2010 are the same as 2009)

VA Loans

For 2009 the Department of Veterans Affairs (VA) will use a locality-based approach to establish VA loan limits. Official loan limits for specific areas range from $417,000 to as much as $1,094,625. To find the VA loan limit for a given area, please use the chart below:

2009 VA County Loan Limits for High-Cost Counties

Some important points about financing for vets made by the VA:

• Vets can purchase homes with one to four units provided that they live in one unit. The veteran must certify as to occupancy.
• In the case of an active-duty veteran who cannot occupy because of his or her status as an active duty member of the armed forces, occupancy by the spouse can satisfy the occupancy requirement.

FHA Loans

The FHA loan program has loan limits for owner-occupied homes under its 203(b) program, the most-common FHA option. The FHA loan limit varies according to whether you live in a typical real estate market, a “high cost” market or in Alaska, Guam, Hawaii, and the Virgin Islands.

For 2010 the FHA loan floor for owner-occupied properties look like this:

One-Unit — $271,050
Two-Unit — $347,000
Three-Unit — $419,400
Four-Unit — $521,250

For 2010, FHA loan limits in higher-cost areas are as follows:

One-Unit — $729,750
Two-Unit — $934,200
Three-Unit — $1,129,250
Four-Unit — $1,403,400

The FHA has special, higher potential loan limits outside the continental U.S. for Alaska, Hawaii, Guam and the Virgin Islands.

One-Unit — $1,094,625
Two-Unit — $1,401,300
Three Unit — $1,693,875
Four-Unit — $2,105,100

To qualify for the FHA loans above, at least one unit must be owner occupied.

HUD has an online database which shows the latest FHA loan limits by state and county. The system can be reached by going to the

FHA Loan Limits Page

FHA-Insured Reverse Mortgages

The loan limits for FHA-insured reverse mortgages (also known as home equity conversion mortgages or HECMs) has been set at $625,500.

A Brief History

Loan limits used to be set annually and the same limit applied to all states and all counties in the lower 48 states. The limits were 50 percent higher outside the countinental U.S.

The real estate marketplace began withdrawing from the highs seen in April 2007 and price reductions continued into 2008. Given lower home values, conventional loan limits were supposed to be reduced for 2009. At this point the government stepped in and changed the rules with the Economic Stimulus Act of 2008 (ESA) and the Housing and Economic Recovery Act of 2008 (HERA). These laws gave us the loan limit system we have in place today.

In 2009 a Congressional Continuing Resolution (Public Law Number 111-88) extended the maximum loan limits seen during 2009.

A CAUTION: Because maximum loan limits can change at anytime, visitors to OurBroker.com are advised to speak with local real estate brokers and lenders BEFORE entering the real estate marketplace for the latest mortgage information.

Mortgage Loan Limits — Conventional, FHA, VA is a post from: Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Until this point HUD has generally allowed lenders to offer their own Good Faith Estimate of Closing Costs, however the new standard form for all lenders — a form that took 14 years to develop — will finally assure that borrowers actually understand what’s being charged for their loans, why and by whom.

“The mortgage crisis,” says former HUD Secretary Steve Preston, the last HUD secretary appointed by President Bush, “was fueled in part by people agreeing to mortgages that they ultimately could not afford. In some cases, people didn’t understand or know that their mortgages could result in large payment increases after just two or three years. Others did not recognize the total costs that come with homeownership. And others paid higher loan origination and closing costs simply because they did not know about other affordable options.”

So what makes this form better?

First, it’s a three-page document that every lender will have to use — meaning that offers from lenders will be the same and can readily be compared whether you are looking for a conventional, FHA, VA or jumbo loan.

Second, the document is not just a list of fees and charges, it also explains in basic terms the purpose of each expense.

Third, mortgage brokers will have to show their yield-spread premiums (YSPs), costs which Preston says were “rarely understood by, or fully disclosed to, borrowers. These premiums are directly tied to the higher interest rates that borrowers pay. Consumers deserve to understand this and they need to get credit for essentially paying these premiums.”

Fourth, it goes together with the government’s new HUD-1. This is the three-page form which all closing and settlement agents must use after January 1, 2010. It is now easy to compare the GFE with the HUD-1, thus assuring borrowers are not overcharged at closing. For details, please see our consumer’s guide to the HUD-1.

Fifth, there’s no charge for a mortgage application under the new rules, though lenders can charge for a credit report.

Page One

The first page is actually a summary of loan costs — the specifics are found on page two.

Item 1 tells you how long the quoted rate and terms last. Items 3 and 4 concern loan lock-ins — how long the rates and terms will last if you lock them in at the time the GFE is issued.

The loan summary tells you the amount of the loan, the initial loan rate and monthly payment. IMPORTANT: If you have an ARM the next few items will tell you:

• How high the interest rate can go.
• When the interest rate can first rise.
• The maximum monthly payment you can expect.
• If a prepayment penalty is allowed and, if yes, how much it will cost.
• Whether there is a balloon payment at the end of the loan terms.

Next the form will tell you whether the lender will create an escrow or “trust” account to collect money each month for property taxes and insurance. Generally, if you buy with less than 20 percent down an escrow account is required by the lender.

Finally, the form adds your origination charges (the “A” items on page two) with other settlement costs (the “B” items on page two). Be aware that you can have additional costs at closing, depending on how the sale agreement is written.

Page Two

The second page is divided into two parts, A and B. Part A looks at “origination” fees, the cost to buy your mortgage.

First, the form shows your origination fee in a dollar amount, including any yield spread premium (YSP). Under the old rules, the yield spread premium could be shown as either a dollar amount or as a percentage of the loan. Now, the entire cost of the loan, including any YSP, is shown as a single dollar amount.

Next, the form shows if your interest rate is being impacted by the origination fee. In other words, let’s say you can borrow $100,000 at 6 percent interest over 30 years with no points. This is called the par pricing for this loan. But, let’s say that you could also borrow $100,000 at 5.75 percent — if you were willing to pay 1 point at closing. A point is equal to 1 percent of the loan amount or $1,000 in this case. The form shows if you are paying for any reduction of the interest rate OR any increase in the rate by paying a smaller origination fee.

Next we go to part B. This part of the form shows the cash costs you can expect to pay at settlement (or escrow) when the loan closes. As the bottom of part B is a total which shows “Your Charges for All Other Settlement Services.”

The totals for parts A and B are then shown at the bottom of the page and on the bottom of page one as well.

HUD encountered considerable opposition from the lending industry, especially with regard to the question of how yield spread premiums should be disclosed. In an important decision which reviewed 14 years of effort to update the good faith form, a court found in 2009 that HUD had acted fairly and in the public interest with the form it produced.

Page Three

The last page should really be the first page because it contains instructions for understanding the form.

The first section lists charges that the lender cannot increase, charges that can rise by as much as 10 percent, and charges that change prior to settlement. This is important information, it means that you should check the numbers on your good faith estimate with the final figures presented to you at closing.

Next, HUD gets into the issue of higher or lower settlement fees. In the same way that mortgage loans have par pricing, so does the settlement process. In other words, if you are willing to pay a somewhat higher interest rate you may be able to lower your cash costs at closing. Indeed, you may not have to bring any cash to closing.

In the third section HUD offers borrowers the opportunity to compare loan offers from different lenders. This is important because borrowers should look at different loan offers to find the rates and terms which best meet your needs.

Lastly, HUD notes that your loan may be sold in the future. If so, after settlement “any fees lenders receive in the future cannot change the loan you receive or the charges you paid at settlement.” Translation: A contract is a contract.

HUD estimates that the new form will save typical borrowers $700 each time they finance or refinance a home. That’s a lot of money, but more could be done to cut borrower costs — and it shouldn’t take 14 years to make additional changes.

IMPORTANT: Always keep your GFE in a safe place to assure that your loan terms are actually the same as disclosed. For questions regarding GFE issues, speak with your real estate broker and mortgage lender.

How To Read The New Good Faith Estimate Forms is a post from: Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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If you borrow at or below the conventional loan limit for non-government mortgages, you would have what is generally known as a “conforming” loan. If the amount borrowed is above the conventional loan limit, you would have a “jumbo” loan and face a higher rate because larger loans imply more risk to investors, the folks who buy mortgages.

Important: This file has been revised for the coming year. Yup, a new year means a required new look at loan limits. Please press here for the latest loan limit news and information.

In last half of 2008 the government substantially increased mortgage loan limits on a “temporary” basis. This means that when 2009 began the country was supposed to return to the lower loan limits that were in effect at the start of 2008. That’s largely what happened for the months of January and February. However, under HR1: The American Recovery and Reinvestment Act of 2009 we largely went back to the higher limits used at the end of 2008.

Below is a list of the loan limits for 2009. For specifics, please check with local lenders before entering the marketplace to finance or refinance real estate.

Conventional Loans

For 2009 the conventional loan limits depend on the county where you are located. Instead of one national mortgage limit, we now have one for each county — and there are more than 3200 counties.

So, to know your mortgage loan limit you have to look at the government chart which lists the limit for all areas. The chart can be found at:

Loan Limits for 2009 Mortgage Originations — All Counties

In general terms, 2009 loan limits for a single-family home range from $417,000 to $729,750. Once you know the loan limit for a single-family home in a specific area you can then see the limits for owner-occupied homes with two to four units.

Example #1 — Basic Loan limit

One Unit — $417,000
Two Unit — $533,850
Three Unit — $645,300
Four Unit — $801,950

Example #2 — Loan Limit for Certain High-Cost Areas

One-Unit –$729,750
Two Unit — $934,200
Three Unit — $1,129,250
Four Unit — $1,403,400

Also, in 2009 there are loan limits for so-called “higher cost” areas. In other words, instead of looking at “counties” you can also look at “areas.” These selected areas are located in Arizona, California, Colorado, Connecticut, The District of Columbia, Delaware, Florida, Georgia, Hawaii, Idaho, Massachusetts, Maryland, North Carolina, New Hampshire, New Jersey, New Mexico, Nevada, New York, Ohio, Oregon, Pennsylvania, Rhode Island, Tennessee, Utah, Virginia and West Virginia.

The chart for specific high-cost areas and loan limits can be found at:

Loan Limits for 2009 Mortgage Originations — High-Cost Areas

VA Loans

For 2009 the Department of Veterans Affairs (VA) will use a locality-based approach to establish VA loan limits. Loan limits for specific areas range from $417,000 to as much as $1,094,625. To find the VA loan limit for a given area, please use the chart below:

2009 VA County Loan Limits for High-Cost Counties

Some important points about financing for vets made by the VA:

• Vets can purchase homes with one to four units provided that they live in one unit. The veteran must certify as to occupancy.
• In the case of an active-duty veteran who cannot occupy because of his or her status as an active duty member of the armed forces, occupancy by the spouse can satisfy the occupancy requirement.

FHA Loans

The FHA loan program has loan limits for owner-occupied homes under its 203(b) program, the most-common FHA option. The FHA loan limit varies according to whether you live in a typical real estate market, a “high cost” market or in Alaska, Guam, Hawaii, and the Virgin Islands.

For 2009 the FHA loan floor for owner-occupied properties look like this:

One-Unit — $271,050
Two-Unit — $347,000
Three-Unit — $419,400
Four-Unit — $521,250

For 2009, FHA loan limits in higher-cost areas are as follows:

One-Unit — $729,750
Two-Unit — $934,200
Three-Unit — $1,129,250
Four-Unit — $1,403,400

The FHA has special, higher potential loan limits outside the continental U.S. for Alaska, Hawaii, Guam and the Virgin Islands.

One-Unit — $1,094,625
Two-Unit — $1,401,300
Three Unit — $1,693,875
Four-Unit — $2,105,100

To qualify for the FHA loans above, at least one unit must be owner occupied.

HUD has an online database which shows the latest FHA loan limits by state and county. The system can be reached by going to the

FHA Loan Limits Page

FHA-Insured Reverse Mortgages

The loan limits for FHA-insured reverse mortgages (also known as home equity conversion mortgages or HECMs) has been set at $625,500.

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Copyright 2009 Peter G. Miller. All Rights Reserved. Use of this material without permission is illegal, however up to 300 words of this material may by reproduced online PROVIDED credit is given to the author AND a plainly-visible link is provided to my home page, OurBroker.com.

2009 Mortgage Loan Limits (Updated) is a post from: Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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If you read the documents the Administration has posted to date, you can see that the plan offers real benefits to millions of borrowers and provides for federal cash to back-up federal policies.

Given the total failure of foreclosure prevention efforts under the Bush Administration, Obama at least gets credit for trying something bold, innovative and different — and something which helps actual people rather than just friends and contributors in the financial community.

That said, the Obama plan will not help everyone.

For instance:

___If your housing costs are not reduced to 38 percent of your gross monthly income you can’t qualify for help.

___ If the value of your mortgage is 25 percent greater than the value of your home you don’t qualify for help. This means that a lot of people who bought with little or nothing down during the past few years are are now in financial trouble are out.

___ If the combination of your housing costs and consumer debts are more than 55 percent of your gross monthly income you can’t get help.

___ If you have an investment property or a second home the Obama program cannot help you.

___ If the investor who owns your loan will not make sufficient concessions — despite financial benefits offered to lenders under the program — then you will not be helped.

___ If you lose your job and cannot make your payments with savings or other income, the Obama plan (and no plan) will help you.

___ The program is designed for conventional borrowers; that is, it won’t help those with jumbo mortgages.

The limitations are a big deal if your finances are so bad that you can’t get assistance under the plan because then the odds are overwhelming that you will be foreclosed.

Alternatively, the limitation makes sense because no federal program can bailout everyone. The Obama plan essentially says that some homeowners have so much debt and so little equity that further help is fruitless.

Want to know what the Obama Plan really says? Here are the basic links you need to the new Homeowner Affordability and Stability Plan.

• Homeowner Affordability and Stability Plan Executive Summary
• Homeowner Affordability and Stability Plan Fact Sheet
• Helping Homeowners Under the Homeowner Affordability and Stability Plan: Three Cases
• Homeowner Affordability and Stability Plan Questions and Answers
• Obama Statement from Phoenix
• White House Q&A

Who Won’t Be Helped Under The Obama Foreclosure Prevention Plan is a post from: Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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That term “in the process of being foreclosed” is important. Neither borrowers nor lenders benefit from foreclosures. For borrowers the loss of a home is a personal tragedy as well as a huge credit stain that will impact finances for years. For lenders, foreclosures suggest losses, legal bills, vanished interest, unrecovered principal and lots of explaining to regulators.

The result is that a large percentage of homes which are “in the process of being foreclosed” are never actually foreclosed. The property is sold before the foreclosure, the loan is re-worked, the property is refinanced or back payments bring the loan current and the matter is resolved with as little damage as possible to both lenders and borrowers.

But figures from RealtyTrac, the online foreclosure marketplace that gets data from 2,200 counties nationwide, show that in August 2008 the number of homes entering the foreclosure process reached a new plateau: For the first time in a single month more than 300,000 American families received foreclosure notices of some kind.

Eternal optimists may say this is good news for those who deal in foreclosures. But while foreclosure clean-up is necessary, if there’s an increased number foreclosures in your neighborhood and properties begin to sell at low values, guess what happens to local home prices? Guess what happens to the value of your home?

You have to wonder: Are we seeing more foreclosures than last year as toxic mortgages mature? These are “nontraditional loans,” a sterile description for mortgages with ridiculously low monthly costs at first (but higher costs later) as well as mortgages that feature limited documentation and overly-large initial loan balances. Specifically, we’re talking about option ARMs, interest-only loans, stated-income financing and super-jumbo mortgages.

In April 2005 we asked Rick Sharga, RealtyTrac’s vice president of marketing, about the impact of toxic loans on the rising number of foreclosures and here’s what he had to say at that time:

Question: Are toxic loans linked to the rise of foreclosures?

Answer: While we haven’t seen any report that definitively links the two, it’s logical to surmise that higher risk loans will default at a higher rate than more traditional loans. And the fact that a larger percentage of home loans fall into the high risk category than at any time in recent memory makes the possibility of a spike in foreclosures more likely.

Question: Have toxic loans begun to impact the marketplace?

Answer: It’s hard to assign the increase in the number of properties in default and foreclosure specifically to high risk loans, but they’re almost certainly a contributing factor. As large numbers of ARMs reset this year and next — we’ve seen numbers as high as $300 million in loans this year and $1 billion in 2007 resetting — we’ll be better able to gauge the impact on national foreclosure rates.

Question: Will we see a further increase in foreclosure levels?

Answer: We anticipate that foreclosures will increase throughout 2006 for several reasons.

First, the number of properties in foreclosure has been below historic averages for several years, and the market appears to be moving back toward more “normal” levels.

Second, increasing interest rates are driving up monthly payments for homeowners with ARMs, and will significantly increase monthly payments for people with 3/1 or 5/1 ARMs due to reset.

Third, house values appear to be cooling off, which gives homeowners less equity to leverage in the event that they find themselves in a financial bind — and limits the opportunity to sell a property at a profit for homeowners in default.

There are ancillary economic factors that also come into play. Rising interest rates have had an effect on monthly credit card payments in an economy with a very high amount of consumer credit card debt. Energy costs have risen faster than anticipated. In some parts of the country, major employers such as Ford and GM have announced plans for massive layoffs, and there tends to be a strong correlation between higher-than-average unemployment rates and higher-than-average foreclosure rates.

Question: How long will it take to clean out weak borrowers?

Answer: It’s almost impossible to answer that question because there are so many factors involved, ranging from house appreciation rates to rising and falling interest rates to supply and demand within any given market to how far lenders are willing to extend themselves to “save” a troubled loan and even to the overall strength of the economy.

Question: Any general industry comments?

Answer: One of the trends we’re following is the number of properties that actually end up becoming REOs (bank repossessions). Over the past year, even as the general numbers of properties entering foreclosures has increased, the number of homes that actually end up as REOs has consistently stayed below 20 percent of the inventory. That relatively low number suggests that the market has been strong enough to allow owners to either re-finance, work out new terms with lenders, or sell the properties before they’re foreclosed on. It’s a statistic we’ll be watching closely, as we believe that a spike in the percentage would be a red flag.

The other statistic we’ve been tracking is the sales price of properties in foreclosure relative to estimated market value of the properties. In “hot” markets like CA, foreclosure properties have retained 80- to 88-percent of full market value over the past six months, whereas in other areas the numbers have been significantly softer (Minnesota, for example, was just below 50 percent). These relative prices also bear watching as a dramatically lower price combined with a high number of foreclosure properties could have a definite impact on home prices in a given area.

What we may be seeing is the coming together of slowing local markets at the very same time that large numbers of borrowers are facing stiffly higher payments. This combination of events will surely test those who believed that rising home values were assured, certain and guaranteed; an easy escape valve if monthly payments could not be met.

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Published originally by Realty Times on April 28, 2006 and posted with permission.

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Such loans were generally sold with the thought that in the best case the additional money could be used to pay off credit card debt, buy a new car, start a new business, pay for college or whatever.

And why worry about repayment? After all, money from rising stock values and appreciating homes could be used to pay off the debt. In the best case, no cash other than monthly payments would ever come from the borrower.

Oh well, whoops.

The presumptions which powered what I call “super-jumbo” loans (and what lenders generally call “high-LTV” financing) are about to be challenged in a big way. What’s going on is not a by-product of the September terrorist attacks, but rather the predictable, expected, typical, usual result of mainstream economics: There are good times and there are slow times. We are now at the cusp of a slow period.

To obtain 125 percent financing a lender has to believe that the borrower can repay the loan at some point. If homes appreciate at 5 percent a year, then a home which now sells for $200,000 will be worth $255,256 in five years. Given that most homes are owned for more than five years and also that 5 percent appreciation has not been unusual in many areas during the past decade, the lender’s risk is not great. Moreover, super-jumbo loans imply more risk so lenders have been able to obtain above-market interest rates.

At this point we have a happy borrower and an ebullient lender.

But with the economy slowing, super-jumbo loans are suddenly much more risky.

• Given lay-offs and a recession, home prices are not rising as quickly as in the past and in some areas are falling.
• In terms of taxes, the amount above the value of the property may be regarded as “excess” mortgage. The “excess” amount may be taxable when the home is sold.
• Also, interest on that portion of the financing which tops the property’s fair market value may not be a write-off. See a tax pro for specifics.
• If you need to move and the value of the home is less than the loan balance you’ll need to bring cash to closing. If you don’t have the cash, some lenders will place a lien against your new home for the shortage. Alas, some lenders won’t.
• If the idea of a bigger mortgage was to pay-off credit card debt it might be possible to substitute high-cost debt for less-expensive obligations. But if credit cards were paid off and new credit card debt was created, the borrower now has both a super-jumbo mortgage and credit card debt.
• Big monthly payments may be sustainable at a time of wage increases, bonuses, and credible stock options. But when the economy slows, big payments may seem crushing if not overwhelming.

It’s hard to imagine that some number of super-jumbo borrowers are not now among the financially distressed — or soon will be. And it’s easy to see that super-jumbo loans will be a source of losses for many lenders.

It’s good to test the boundaries of convention, to see what works and what doesn’t. But given the economic slow-down we now face, super-jumbo loans are unlikely to be a common loan option — nor should they be.

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Published originally by Realty Times on October 24, 2001 and posted with permission.

Super-Jumbo Loans Face Hard Times is a post from: Refinance, Home Mortgage Loans & Rates, Home Equity Loan

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Answer: “Conventional” loans are mortgages that meet certain standards established by big loan buyers such as Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac will buy loans from lenders which meet certain standards. By meeting those standards a loan can be seen as “conventional” financing.

Why does a local lender want to sell a mortgage? To replace capital so that new loans can be made and new fees generated. Conforming loans can be sold immediately to Fannie Mae, Freddie Mac and other private mortgage buyers without hassles or complications.

What does it mean to you? Conventional loan standards tend to be cautious and conservative. Expect lenders to verify income and employment, to check tax returns and ask a bunch of questions. Don’t be offended — you’d do the same thing if a stranger asked you for money.

Just to test the market, ask lenders about non-conforming loans, mortgages that sometimes have better terms and more liberal qualification standards.

If you need a big mortgage, then look for the word “jumbo” – that means a loan amount above the conventional mortgage limit as well as a loan with a somewhat higher cost.

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Syndicated originally by Content That Works and posted with permission.

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