What is Happening in the Mortgage Market

This Saturday Fannie Mae will be implementing some important changes to their automated underwriting system called “Desktop Underwriter or DU”. If you are a buyer or person that wants to refinance who might have an issue with any of the items listed below it is very important that you make loan application and your file run through Fannie Mae’s Desktop Underwriter by tomorrow, Friday December 11^th .

All of the changes are important but a couple that will have the greatest impact are:

· DTI expense ratio capped at 45% - can go up to 50% with strong compensating factors such as high credit scores, large down payment, reserves

· Length of time eligible for financing after Foreclosure or Bankruptcy changes

Should you have any questions or you would like me to speak with, feel free to call or email anytime!

During the weekend of December 12, Fannie Mae will be implementing a new version of DU – (Fannie Mae’s automated underwriting program which is required for all loans sold to them) Changes will include a new credit risk assessment and eligibility guidelines. These changes will only impact new loans submitted to DU on or after December 12.

Highlights of the changes include;

· Expense Ratio – max 45%

· Flexibilities to 50% for strong compensating factors.

· Will not impact DU RefiPlus, VA or FHA loans.

· Min Credit Score – 620.

· Impacts Conventional, FHA and VA Loans

· Revised Mortgage Insurance requirements – (Lower MI with LLPA must

be priced and sold directly to Fannie Mae)

· High-Balance Loans – DU will include the 2009 high cost area loan limits

· Foreclosures – 5 year time period from completion date

· After 5 years up to 7 years from completion date

§ Principal residence purchase transaction - 90% LTV and min 680 FICO Score

§ Rate/Term refinances eligible (all occupancy types)

§ Cash out not allowed

· Deed in Lieu of Foreclosure – 4 years from completion date

· After 4 years up to 7 years from completion date

§ 90% LTV (all occupancy types)

§ Limited Cash out and cash out allowed (all occupancy types)

· Bankruptcies – Chapter 13

· 2 years from discharge date

· 4 years from dismissal date

· 4 years from filed when neither discharge or dismissed

· Bankruptcies –(All except Chapter 13) – 4 years from dismissal or discharge date

· Reserves for Investment Properties and Second Homes – DU will calculate the min 2 months reserves for second homes and six month reserves for investment property

· Two Unit Eligibility

Now is a great time to either Refinance or Purchase a new home. The current market conditions are perfect for the right mind set to take advantage of either. In the last 2 week the interest rates for both Refinancing and Purchasing a property have drop to a 2 ½ year low, but they are now on the rise again. This will not last long, with the prime Real Estate market coming up in the spring, rates will most likely increase and the housing inventory will drop.

In the National Media there are many reports of how property values have decreased. This is true, but locally they have not decreased as much as other area of the nation. If you are selling a home and making a move to a larger home you can find some great buys. If you have out grown your current home or your lifestyle and income dictates an up-word housing move you need to act now!

For example: Mr. and Mrs. Jones are selling their home that was worth $225,000 last year. In today’s market they have accepted an offer for $203,000. They lost $22,000 this year. The house they are buying was on the market last year for $425,000 but they were able to purchase it for $385,000. They saved $40,000 from what they would have paid last year. Over all they saved $18,000 in today’s market. They are also saving in the long run because rates are approximately 1% less this year than the average last year.

If you add the $6500 tax credit for Step Up Buyers, you savings increase to $24,500.  Keep in mind the conditions apply for the tax credit.  Visit www.envoymortgage.us for details or call me directly.

For those Refinancing, it is simple, Interest Rates are lower! If you either purchased a home in the last 3 years or missed out on the low rates when they were available now may be a perfect time to Refinance. You may be able to alleviate Private Mortgage Insurance, get off an Adjustable Interest rate, consolidate debts, or just get a better rate and term for your home. Equity is the key!

I know I advocate the importance of Equity a lot, but it gives a person the ability to act when the time is right. Protecting your homes equity is very important! There are many ways of building equity. I take great pride in educating my clients on credit and equity building principles. If you are in the market to make a move in Purchasing or Refinancing a home, please take the time and call me. I will sit down and explain the options available.