Renovation Lending Aids the Property Search Given Available Inventory

One problem facing buyers in the current market is the lack of available inventory. Sellers continue to bide their time. However, buyers do not need to miss out on low interest rates or the ability to purchase in their target neighborhoods. Although Renovation Lending is not the solution for every borrower, it is an opportunity to get into certain areas by purchasing a potentially lower- priced property and then borrowing enough money to fix it up.  It is by no means a panacea, but it is certainly an option and in many cases, one which can rapidly increase the equity in your property.

A Renovation Loan differs in many ways from a traditional construction loan. Reno loans are closed one time, with the purchase money going to the seller and the renovation funds placed in an escrow account held by the lender throughout the draw process. In most cases, there is no upfront money from you or the lender for the contractor; the General Contractor works on a draw basis. This is not a hardship for any solvent contractor as they should have the ability to buy materials and pay their sub-contractors while being reimbursed through inspected draws.

Most neighborhoods still have a large quantity of foreclosures that need to be fixed up or even properties that are simply outdated.  Here are some key words that indicate that the property may be right for a Renovation Loan:

• Sold “as-is
• Estate Sale
• Any foreclosure that has NOT been recently updated
• Fannie Mae or Freddie Mac foreclosures (especially the Fannie Mae HomePath properties)
• “fixer-upper”
• Handyman’s dream
• Current occupant has 400 cats
• Property needs “love or attention”

Depending on your budget, you can gut a property or just update the kitchens and bathrooms. As long as the property is habitable at the end of the six month rehab period and you remain within the guidelines of the loan program, you can often use your imagination as to what you would like your home to end up looking like. You can even purchase and rehab a 2-4 unit property as long as you occupy one of the units!

So, before you start your next tour with your agent, consider asking about properties that are ripe for renovation. It may be an opportunity to create the home you dream about and live in the neighborhood you choose!  Contact Carrie Rosenberg, renovation loan specialist, for more information.

Next topic: Which Renovation Loan Product is right for you?

TaxSmart Mortgage Credit Certificate Program

TaxSmart is a Mortgage Credit Certificate (MCC) program that provides a federal income tax credit to qualified homebuyers. A tax credit is a direct reduction of taxes due. Under the program, a homebuyer would receive a MCC to reduce income taxes by an amount equal to 20 percent of the interest paid on a mortgage. The tax credit may be claimed each year the home buyer continues to live in a home financed under this program. The homebuyer will be charged a $375.00 application fee of which $225.00 is due at loan closing to the City of Chicago, Department of Planning and Development. A charge of $100.00 will apply to replace or reissue a Series 2013 MCC Certificate for any cause including, and without limitation, due to being lost or misplaced, being damaged, a refinance of the existing mortgage, or any other reason allowed by the Code or the Program Regulations.

Federal law requires that a home buyer satisfy each of the following guidelines:

First-Time Homebuyer or Target Area Purchase

Any person who has not owned a principal residence at any time during the three years prior to closing a loan under this program is considered a first-time home buyer. Non first-time homebuyers are also eligible if they purchase a home in a designated target area.

Income

Federal law imposes maximum limits on the annual gross income of home buyers.

Purchase Price

Federal law also imposes limits on the purchase price of homes financed under the program.

Principal Residence

The home buyer must occupy the home as a principal residence within a reasonable period which, under most circumstances, may not exceed 60 days after financing is provided. A principal residence is a home occupied primarily for residential purposes and does not include a home used as an investment property, as a recreational home or a home in which 15 percent or more of its total area is used for a trade or business.

One-to Four-Family Home

Each residence financed must contain 1-4 units. A one-family residence includes a detached home, one unit of a duplex, a townhouse or a condominium unit. If the residence is a 2-4 unit building, one unit of the residence must be the principal residence of the building owner and the residence must have been first occupied for residential purposes at least five years prior to applying for a mortgage loan financed in connection wi t h the MCC.

New Mortgage

The mortgage loan financed in connection with a MCC certificate is required to be a new mortgage and may not replace a prior mortgage on the home (whether or not previously repaid).

Program Area

In order to be eligible for a MCC certificate, the home financed under the program must be located in the City of Chicago.

Mortgage credit certificates are issued to eligible home buyers on a first-come, first-served basis. The certificates are available in connection with any type of mortgage loan (except loans from tax-exempt bond programs), including fixed rate and adjustable rate mortgages.

First-time homebuyers must receive pre-purchase counseling to be eligible and must provide a certificate of completion of pre-purchase counseling with their applications. Applications and additional information are available from participating TaxSmart Mortgage Lenders.

Income Limits Non-Target Area Target Area Less than three-person Household $88,320 $88,320 Three or more person Household $102,985 $103,040

Purchase Price Limits*                                                  Non-Target Area                                               Target Area Existing New Construction Existing New Construction One Unit $357,750 $357,750 $437,250 $437,250 Two Unit $457,973 Ineligible $559,744 $559,744 Three Unit $553,598 Ineligible $676,619 Ineligible Four Unit $687,961 Ineligible $840,842 Ineligible

*These limitations are periodically adjusted and do not apply to mortgage credit certificates issued with respect to qualified home improvement loans.

Neena Vlamis Talks Homebuying and Credit with Bill Moller on WGN News Radio

In order to maintain the absolute best credit score make sure to set your bills on auto pay for the minimum payment.  This way when you are out of town you won’t miss a payment!

Listen to Bill Moller interview Neena Vlamis on WGN Radio News on homebuying and credit scores right here:

Image 1 credit: Bill Moller and WGN News Radio

Call Neena at 773-305-LOAN for a pre-approval


THIS IS AN ADVERTISEMENT. This is not a commitment to lend. A and N Mortgage Services, Inc. is an Illinois Residential Mortgage Licensee and Equal Housing Lender. IL MB.0006638, FL MLD288, IN 11122, IA 2006-0064, MA MC5413, MI FL0012625, WI 19291BA NMLS# 19291 

Borrowing Against Your Home May have its Benefits

Did you know there are two types of home equity loans: fixed rate and lines of credit. Both loan types are offered with loan terms that generally range anywhere from 5 to 15 years and require the borrower to repay the loan in full if the home against which they are borrowed is sold. Though there are borrowing and term similarities, each loan has its differences. A home equity loan (also known as a second mortgage) is a fixed amount that you borrow to be paid off over a certain number of months, while the home equity line of credit (HELOC) is a variable rate. Much like a credit card, a HELOC pre-approves you, the borrower, for a certain spending limit of which you may withdraw.

Is Mortgage Fraud on the rise even with the new Fannie Mae requirements for QC?

While commercial loan origination and median home prices have been trending downwards, mortgage and property fraud rates have been steadily increasing, up 75% from pre-recession peaks. According to the CoreLogic Fraud Index, $12 billion worth of originated loans were found to be fraudulent in 2010, and while the total for this year is expected to be around $7.4 billion, the rate of mortgage fraud remains constant due to the currently contracting revenues of the mortgage business. 

In all, these fraudulent mortgages could carry a price tag of up to $375 million a year for lenders. However, also according to the CoreLogic Fraud Index, mortgage fraud has taken on a new identity, with the traditional identity and employment fraud rates falling a combined 56% from their 2010 levels. 

Current market conditions- distressed and depreciating properties, as well as overwhelmed loan servicers scrambling to mitigate growing losses following the mortgage bubble’s collapse in late 2008- have proven to be strong catalysts for the growth of property, occupancy, and debt fraud in a time when US regulators are watching the mortgage business more closely than ever. 

Further examination of CoreLogic’s data have also show higher fraud rates in the Midwest and Northeast, with Chicago receiving the top national ranking where the risk of mortgage fraud is over 30% of the national average. Furthermore, Suspicious Activity Reports filed by large lenders was 70,472 in 2010, up from 67,507 in 2009. However, it is important to note that while SAR reports are increasing, this increase may show a growing trend of due diligence and stricter compliance with mortgage laws following the housing bubble’s collapse in late 2008.

Stats cited from http://mortgagedaily.com

What Does 25 Percent PMI Coverage Actually Mean

Question?   What does 25 percent PMI coverage actually mean
Answer:  25 percent coverage actually means that the MI company will pay out 25 percent of the loan amount and total expenses to the lender when a property goes into foreclosure (the file is of course scrubbed for fraud first)
The average MI paid claim is 51,000 dollars.

The government is looking to get rid of Fannie Mae and Freddie Mac. What? And go back to real common sense underwriting????

Fannie Mae and Freddie Mac are publicly traded companies.

Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corp.) were taken over by the government in 2008 after billions of dollars in losses and years of mismanagement.

Fannie was created as a federal agency in 1938 and chartered by Congress in 1968, followed by Freddie in 1970, to increase access to home loans. But they also are publicly traded corporations and -- before their taxpayer bail out -- had a duty to maximize shareholder return.

Those two, divergent missions were criticized as a "fundamentally flawed" business model by the Financial Crisis Inquiry Commission, which was created by Congress to examine the causes of the economic crisis that began in 2007.

Fannie and Freddie loosened underwriting standards leading up to the financial crisis, buying and guaranteeing riskier loans and ramping up purchases of mortgage-backed securities to please Wall Street analysts and "ensure generous compensation for their executives and employees," the commission determined.

With the housing market in turmoil in 2007 and 2008, Fannie and Freddie reported billions of dollars in losses. They were placed in conservatorship under the Federal Housing Finance Agency in September 2008. Since then, the Treasury Department has provided $169 billion to cover their losses (with re payments the net cost to taxpayers is $141 billion). The total could rise to $363 billion, the FHFA said. Other estimates put the total closer to $390 billion.

Still, senior executives at the mortgage giants continue to receive multimillion-dollar salaries. The top six executives received a combined $35 million in compensation over 2009 and 2010.

They are paid as if they are risk takers when really the government is taking the risk!

Fannie and Freddie's future is uncertain right now.

The Obama administration and Republicans in Congress agree that Fannie and Freddie should be. In housing. abolished. In February, President Barack Obama proposed gradually phasing them.