HARP 2.0 is President Obama’s revised version of the Home Affordable Refinance Program. The main revision is that it will be available to underwater homeowners no matter how underwater they are. Previously it was only available up to 125% of the appraised value. This excluded many homeowners from qualifying.
Now the HARP won’t even require an appraisal because the value of your home won’t make a difference. Even if you owe $417,000 and your home is worth $300,000 you will be eligible to refinance into today’s low rates. Of course there are a few other qualifiers.
All the details have yet to be released. Here’s what we know so far:
1. You will NOT need an appraisal because the value is not considered
2. You must have made the mortgage payment on time for the last 6 months and have only one late in the last 12 months.
3. Your loan must be owned b either Fannie Mae or Freddie Mac (you may make your payment to Bank of America however that doesn’t mean they own it. In most cases they are just the servicer). If you want to find out who owns your mortgage give us call and we can check for you.
4. Even if you have PMI you can still qualify
5. You are still eligible if you have a second mortgage
The rest of the details are slated to come out in the next few weeks and implementation of the program will likely begin at the first of the year. There will be a great opportunity to save money for many homeowners. Especially since 15.8% of all homeowners are currently underwater.
Why will the revised HARP be successful this time around? The original version’s success was predicated on Bank participation. They had the loans and would be writing the new ones. The way it was set up increased their risk from defaulting loans after the refinance. As a result they didn’t participate and the program was a failure.
This time around the added risk features have been removed making it more feasible for banks to participate. Last I heard all the largest banks had signed on and are gearing up to help as many as possible. Of course only time will tell. We are remaining optimistic.
VA and FHA Loan Misconceptions are all over the real estate world. I often hear about Realtors not writing contracts because the borrower is using FHA or VA financing. Mainly because they think the home won’t qualify for FHA or VA financing.
This is also something sellers fall victim to They refuse to work with VA or FHA buyers because they fear the loan will be denied due to the condition of the house. Or they believe that VA and FHA financing is much more difficult to obtain than a conventional loan.
There is nothing further from the truth. In fact the two are sometimes a lot easier than conventional. The buyer is allowed to have a higher debt to income ratio which means it’s easier to qualify a buyer. These loans have more lenient gift rules so the buyer can get money from family to help pay for closing costs and down payment.
The three main concerns from sellers and Realtors are:
1. FHA or VA won’t approve the condition of the house
2. The FHA or VA appraiser uses different, stricter guidelines when evaluating the property which leads to problems when trying to close.
3. The seller has to pay for VA loan fees that would normally be charged to the buyer.
Let’s tackle this one at a time. First is the condition of the house. Conventional, VA, and FHA guidelines are nearly the same when it comes to the condition of the property. In almost every case if there an issue with the house that wouldn’t be allowed under FHA and VA rules, it’s not going to work with a conventional loan either.
There was a time when VA and FHA rules were stricter however those days are gone. Did you know on an FHA loan you don’t have to have a termite report (CL100) if it’s not indicated on the contract? Of course you always want your buyer to get a termite report done. However if it’s not on the contract you don’t have to turn it in to the bank which prevents delays from minor termite issues that can be resolved after closing.
For instance there may be a corner of baseboard that shows no active infestation however an inspector would request that it be replaced at a cost of $200. That would have to be replaced if you turned in the report and it could delay the closing because you have to have a repair man go out and do the work, then have it re-inspected which would cost the buyer even more money.
Had you left it off the contract and still did the inspection. The seller could easily give the buyer a $200 credit at closing towards closing costs and the buyer could then have it fixed after closing. This would save everyone time and money.
Next there’s the issue of appraisals. Again the differences between VA, FHA and Conventional Appraisals are very small and this misconception has turned away a lot of solid offers. The two main differences are:
1. On a VA and FHA loan, the appraiser is required to make sure the utilities are in working order so they must be turned on at the time of appraisal. They have to see that the lights are on and the water is running. In some cases this could lead to discovering leaking pipes or faulty wiring. At the same time it’s important that you find these things out anyway. Isn’t this something you would check for anyway?
2. FHA and VA Appraisal tend to take a little longer. Especially VA. A VA appraiser is given a 14 day window to complete the appraisal and in most cases they take the entire 14 days. SO getting this ordered as soon as possible is important. Also requiring a 35-45 day escrow is also smart so expectations are met and everyone is happy. A happy informed seller and buyer are more likely to give referrals.
The last major misconception about VA loans is that the seller has to pay for certain fees that would normally be charged to the buyer. This is not true. There are certain fees the buyer is not allowed to pay for however that can be resolved by the lender issuing a lender credit. In the contract all you have to do is write “all buyer non allowable fees to be paid by lender.” That’s it, it’s very simple.
Not to mention our Hometown Hero Program is in full effect. For VA buyers Coastlend Mortgage covers al the closing costs. So who pays what is already taken care of. This is not only available to Veterans and active duty military in Charleston, South Carolina. The Hometown Hero Program is available to VA buyers in all of South Carolina and California.
We also offer the Hometown Hero Program to South Carolina and California Nurses, Firefighters, Police and other first responders. Check out the full details of the program at https://coastlendmortgage.com/hometown-hero/
5% Down and NO PMI is still our most popular loan these days. With this loan buyers are able to increase their purchase power by reducing their monthly mortgage payment when they don’t have to pay PMI.
A lot of people are asking is it better to rent or buy in this market. The answer in most cases is buying. Rents are quickly increasing and have gone up almost 15% nationally in the last 2 years while buying a home is cheaper than it was in 2003 because of current prices and lower interest rates.
Take a look at the below comparison of renting and buying. For less than a $1200 a month payment you could purchase a $225,000 home with our 5% NO PMI loan program. After you factor in the tax benefits from owning your net payment is only $846/month for a $225,000 home. In addition what do you gain from renting aside from a place to live? Well the answer is NOT an increase in Net Worth. In this example you can see your increase in net worth over 15 years is zero when renting. On the other hand your net worth increases by over $324,000 if you had purchased.
The number one obstacle to buying according to a poll of renters was saving enough money for the down payment. This can be overcome with our low down payment programs. Also we have access to grants that can be used for down payments. Just give us a call or email if you’re interested.