Sonoma County Home Loans Blog

April 30, 2010 is the last day USDA Rural Development Home Loans will be committing to funding loans in Sonoma County.  This is a result of temporarily depleting funds.  Temporary halts in funding occur each year until Congress approves new funding for the program.  Expect to see funds again available in Sonoma County in October of 2010.

Some lenders like Wells Fargo and Freedom Mortgage have stopped taking USDA loan applicaitons using the program.  Mountain West Financial is still accepting applicaitons through the beginning of April.

Remember, this is excellent 100% financing for areas of Sonoma County outside metro cities.  Areas served  include Larkfield, Windsor, Cloverdale, Sebastopol, Healdsburg, Russian River, and Sonoma.

For more about the USDA Rural Home Loans 100% financing, go to http://activerain.com/blogsview/1271709/100-usda-rural-home-loans-in-sonoma-county.

   For up-to-the-minute-rates  www.SonomaCountyHomeLoans.com 

Genworth mortgage insurance company is now insuring and has made available financing up to 95% LTV home purchase loans in California and Sonoma County for specific conventional loan programs including Fannie Mae's My Community Mortgage and Freddie Mac's Home Possible financing.  This is an improvement over the previous 10% down requirement for all conventional lending in any declining market.  And all of California and Sonoma County had been deemed a declining market.  There are some restrictions but the pricing is good (5.125% - 5.25%).  An advantage of the My Community Mortgage program is the mortgage insurance to 95% LTV comes at a lower MI rate than standard for conventional.  Here are some highlights.

• Up to 95% LTV Purchase Transaction only
• 680 Minimum Score Requirement
• 1 unit property only (SFR and PUDs.  Condos maxed at 90% LTV)
• 2 mos. reserves required regardless of AUS findings
• Full appraisal required regardless of AUS findings
• 3% Seller Concessions maximum allowed
• available in CA, FL, NV, and AZ
• Freddie's Home Possible Doc #5335  (Fixed Rate only)
• FNMA MyCommunity Doc #5325  (Fixed Rate, 5 yr ARM and 7 yr ARM)

Fannie Mae's Deed for Lease (D4L) Program

For loans owned by Fannie Mae (http://loanlookup.fanniemae.com/loanlookup/), the program Deed for Lease is meant to allow some homeowners facing foreclosure to hand the deed back to their lender but remain in the home as a renter.  The servicer has to decide that the borrower qualifies for a "deed in lieu of foreclosure." The rent can't exceed 31% of their monthly gross income, the borrower cannot have 12 or more past-due payments on their mortgage and they must have made at least three payments since the loan was first taken out. Primary residence only - and no non-Fannie loans please! The borrower's credit score is indeed impacted, but not as badly as a foreclosure.

Tax Credit Extension

Just a reminder that for the new tax credit, it needs to be paid back if the buyer sells the home within 3 years after purchase.

Rates

Rates remain excellent as the stock market retains strength in spite of unemployment numbers.  The 7/1 ARM is an excellent product to consider as rates are down to about 4.125%.  Especially good for first time homebuyers or investors getting into the market who know they will be out of that property within 7 years.

Today's Rates            http://www.sonomacountyhomeloans.com/

Monday Morning Mortgages ~ Sonoma County Home Loans Newsletter for Real Estate Professionals

Monday Morning Mortgages is a brief week-opening report on mortgages in our area.  This is a tool to assist my realty partners on loan trends, rates, program changes, and problem solutions.

Current rates available at https://www.sonomacountyhomeloans.com

Fannie Mae Upcoming Changes to DTI

Fannie Mae manages the automated underwriting system called DU (Desktop Underwriter).  This is the system that loan officers use to run a potential borrower's financial data to achieve a pre-approval.  In the past, total expense ratios (debt compared to income or DTI) could go as high as 69% and still get an approval. To go over 55%, the system is acknowledging some compensating factors such as reserves and credit history.  The old FHA limit used to be 43% to give some perspective here.  Many lenders have put their own "overlays" on DTIs.  For example, Sierra Pacific Mortgage will not take a loan over 50% DTI even though DU gives the loan an approve rating.  But many other lenders available to brokers will accept whatever the DU system accepts.  I like those lenders.  Big changes are upcoming to how Fannie Mae approves a loan.

Here is the link to live Fannie Mae Guidelines: https://www.efanniemae.com/sf/guides/ssg/sg/pdf/sg0309.pdf

Well, December 12, 2009 Fannie Mae will usher in a major change in the new DU version 8.0.  Fannie Mae is now limiting the DTI to 50%.  This change will make for more conservative lending, but also make it difficult for borrowers with non-traditional income to get approved.  One of the hardest sectors to get approvals seems to be retirees.  Although they can have sizeable investment income and enough assets to buy the property outright, the lending industry is gun shy of stock portfolio values and income.  This is in reaction to the volatility in the market in the last 18 months.

Another Fannie Mae change will also make 620 FICO the absolute maximum.  Only 60% of retirement account funds can be used on an application, and 70% of stock, bonds or mutual funds.  If an asset will be liquidated for downpayment, this will have to be done and documented prior to underwriting approval.

Other news...

Loan-Mods-R-Us Fees

Among the real estate legislation signed into law 2 weeks ago by Governor Schwarzenegger is Senate Bill 94 banning foreclosure and modification companies from collecting any fees prior to completion of the services contracted.  That means no non-refundable deposits. 

New Laws

Unless you are living under a rock (where I will admit I sometimes spend my weekends) you know it is now a felony to commit loan fraud on a mortgage loan application punishable by 1 year in prison (SB 239).  And AB 957 eliminates buyers from being forced to use those Escrow and Title companies selected by the RE) banks and assets managers. Finally!  That was a nightmare.  They just do things DIFFERENTLY in Southern California...

Rates

The 10-year Treasury note hit 3.5% this morning before setting down to 3.48%.  This is an indication of slowing rising rates for the past couple of days.  The Fed's mortgage backed securities purchase program, which many mortgage bankers believe is still the only thing keeping mortgage rates as low as they are, still has the capability to absorb close to $15 billion a week through the end of the first quarter of 2010.

Today's Rates (see current days throughout the day with APR calculations at

www.sonomacountyhomeloans.com

100% USDA Rural Home Loans in Sonoma County

100% financing, with no MI?  Yes!  In Sonoma County, "rural areas" are eligible for USDA Rural Development home loans.  This is a gov't insured loan for owner occupied single family homes for moderate income household incomes in Sonoma County.  Rates are great (www.sonomacountyhomeloans.com) and there are no limits on loan amount or price limits.  The home loan consists of one 30 year fixed loan at a rate that runs about .25% over the day's FHA rate.

Income and Asset Limits

This special 100% Sonoma County home loan insured by USDA has income restrictions.  In Sonoma County, household income is limited to a generous $92,000 for up to 4 in a household.  In a household of 5-8 income can go up to $121,450.  Assets are also limited to 20% of the purchase price.  So a buyer with less $60,000 in assets (savings, investments) is eligible to buy up to a $300,000 sale price home in Sonoma County.

Eligible Sonoma County Locations

A large area of Sonoma County is eligible for this 100% USDA Rural home loan.  Excluding Santa Rosa up to Larkfield, Rohnert Park/Cotati, city of Sonoma and Petaluma, the rest of Sonoma County is eligible.  Included are communities like Healdsburg, Sebastopol, Cloverdale, Windsor, all Russian River area, Graton, and Sonoma Valley along Hwy 12.

Details

Some of the attractions of this USDA Rural Development home loan is for 100% of the purchase price, it will allow a 6% interested party contribution, requires no reserves, FICO scores can be as low as 620, and it can be used for a single family home, PUD, or a condo in a HUD or Fannie Mae approved condo project.  Some of the restrictions are that it can only be used for a single family dwelling, the debt-to-income ratio (DTI) is limited 47% with a 660 FICO, and the loan requires a guarantee fee.  Also, the property site cannot be worth more than 30% of the total property value, limiting the size of the parcel to a specifc valuation percentage.  The appraisal is done by a HUD certified appraiser and all section one of any produced termite report needs to be cleared.

The guarantee fee goes to the USDA Rural Development Department and is 2% and can be financed as part of the loan.

This is an excellent loan for any Sonoma County home buyer looking to buy in Windsor, Cloverdale, Healdsburg, Sebastopol or anywhere around the Russian River with no money down.

 Condo PUD  Loan Guidelines are established by Fannie Mae and FHA.

As opposed to a single-family dwelling in a subdivision, condos or PUD units are highlighted by "Ownership of a unit, interest in common elements, mandatory homeowners' association membership, and documents defining/restricting usage of the unit or common elements (CC&R's). Before listing or making an offer on a condo or PUD, it is important to understand any loan restrictions that may derail your deal.

"New" condo projects and "existing" projects have 2 separate sets of lending guidelines per Fannie Mae.  Neither can be manufactured housing. 

A new condo project is defined as:

••      fewer than 90% of the total units in the project have been conveyed to the unit purchasers;

••      the project is not fully completed, such as proposed construction, new construction, or the proposed or incomplete conversion of an existing building to a condo; or

••      the project is subject to additional phasing or annexation.

Existing condo projects are defined as:

••      at least 90% of the total units in the project have been conveyed to the unit purchasers;

••      the project is 100% complete, including all units and common elements;

••      the project is not subject to additional phasing or annexation; and

••      control of the homeowners' association has been turned over to the unit owners.

New Condos Requiring "Lender Full Review"

New condo projects require a "Lender Full Review" which has strident eligibility requirements.  Here are a couple of red flag requirements.

••      No more than 20% of the total square footage of the project can be used for nonresidential/commercial purposes.

••      No more than 15% of the total units in a project may be 30 days or more past due on their homeowners' association (HOA) dues. For example, a 100 unit project may not have more than 15 units that are 30 days or more delinquent.

••      At least 70% of the units in the Condo Project must have been conveyed or are under contract to purchasers who will occupy the unit as a primary residence or second home.

••      For the EOM Program, the minimum percentage of owner occupied units is 50%."

••      Additional guidelines apply if the condo is a conversion.

Limited Review for Existing Condo Projects

Fannie Mae financing-eligible existing condos would be approved either from being on the approved condo list (https://www.efanniemae.com/sf/refmaterials/approvedprojects/index.jsp?from=hp), or by performing a "Limited Review".  Requirements for Limited Review are:

••      The project must be an established project.

••      Mortgages CANNOT be secured by attached condo units that are investment properties.

 LTVs

For existing condos, LTVs are limited.  For a principle residence, max loan-to-value is 90% (yes, there is still mortgage insurance for condos to 90%).  For a second home, 75% LTV is the limit.  Investment properties cannot utilize the limited review.

FHA

FHA insured financing follows different guidelines than Fannie Mae.  Here is the link for FHA approved condos in Santa Rosa.  https://entp.hud.gov/idapp/html/condo1.cfm .  You can use this website to search approved condos in any city.  It is becoming harder to find a lending investor who will do a formal approval on a condo project that is not on this list, so beware when listing or making an FHA offer on a project not on this list.

PUDs

A planned unit development (PUD) is a project or subdivision that consists of common property and improvements that are owned and maintained by a homeowners' association for the benefit and use of the individual PUD units. In order for a project to qualify as a PUD, each unit owner's membership in the homeowners' association must be automatic and nonseverable, and the payment of assessments related to the unit must be mandatory.

Fannie Mae does not require a lender to perform a review of a PUD project if the mortgage is secured by a detached unit within a PUD.  When reviewing a PUD project with attached units (whether new or established), lenders should determine that the project meets the following requirements:

••      The project does not consist of single-width manufactured housing units.

••      The individual unit securing the mortgage satisfies Fannie Mae's insurance requirements for PUD projects.

••      The individual unit securing the mortgage is 100% complete.

Today's Rates throughout the day http://www.sonomacountyhomeloans.com/

The FHA anti-flipping rules are growing in popularity by lending investors and being adopted for both VA lenders and many conventional mortgages as more lenders are looking to protect themselves from financing property "flips".  Here in Sonoma County where opportunistic investors are putting recently purchased homes on the market it is important to understand how many of these properties will be un-financable in traditional financing terms.

The FHA rules are defined by HUD issued Mortgagee Letter 2006-1(http://www.nlihc.org/doc/MortgageeLetter2006-14.pdf). The anti-flipping rule established by HUD defines a flip as a property that is purchased by a speculator, and sold within 0-6 months, at a price at least 20% greater than the previous sale price, absent of improvements supported by appraisal note.   According to the rule, the seller cannot hold title for less than 90 days.  For reslaes between 91 and 180 days, where the new sales price exceeds the previous sales price by 100%, additional validation of the property's value will be required. 

Here is Sonoma County, property flips are common.  Investors, many of them real estate agents themselves, have swooped in to pick up distressed properties needing some improvements.  These properties often are purchased at foreclosure process auction for as little as 30% of market value had the property been in fair shape.  Upon fixing up the property, the investors want to get it back on the market as fast as possible, flipping their investment.  For turn-around sales that take place less than 90 days from previous acquisition of title, FHA will not insure the mortgage.  VA doesn't have a guideline anti-flipping rule but the lending investors who provide the funds for the purchase loan will not allow it now for VA.  And most conventional lending investors are disallowing less than 90 day flips to protect themselves from inflated valuations on the subject property and to discourage speculation.

Exceptions to the Rule

There are exemptions to the 90 day anti-flipping rule.  The exemption most commonly cited in Sonoma County is "Sales of properties by state and federally chartered financial institutions and Government Sponsored Enterprises."  This applies to banks that have ownership of the property which applies to REOs owned by the banks.  Other exemptions include HUD owned homes, Government agency owned homes, non-profits with deed restricted housing, inheritance sales, employer purchased housing for relocation, and homes in federal disaster areas.

Red Flags

There are Red Flags alerting underwriters to violations of anti-flipping policies when they review home purchase loan files.   The following items will red flag a lender of a potential property flip.

·   Property seller is not owner on record.

·   Seller has recently acquired title and the mortgage lien date is new.

·   Cash was paid for the home in a recent transaction (no liens on property).

·   The preliminary title report submitted to new lender has no title company name or logo.

·   Any reference in contract to "double escrow".

·   For Sale by Owner.

·   Affiliated parties to transaction.

•   Appraisal date precedes contract date.

For more Sonoma County real estate financing info and up-to-the-minute rates, go to www.sonomacountyhomeloans.com.