Loan Limits Have Increased!

 “With California’s home prices climbing so significantly during the pandemic, C.A.R. (California Association of Realtors) commends the FHFA (Federal Housing Finance Agency) for recognizing the record-setting home price increases and raising maximum conforming loan limits in high-cost markets to $970,800,” said 2022 C.A.R. President Otto Catrina. “Conforming loans provide safe and affordable mortgages to California’s homebuyers across the state. If loan limits were not allowed to increase every year to keep up with home prices, first-time and moderate-income  homebuyers across the state would not have access to affordable mortgage capital, which reduces homeownership opportunities for those who need it the most.”

California Association of Realtors reminds us that "The conforming loan limit determines the maximum size of a mortgage that government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac can buy or “guarantee.” Non-conforming or “jumbo loans” typically have tighter underwriting standards and sometimes carry higher mortgage interest rates than conforming loans, increasing monthly payments and hampering the ability of families in California to purchase homes by making them less affordable."

The Long Beach average home price in November was $951,203.

 

Julia Huntsman, REALTOR, Broker | www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996

Updated: The Ten Commandments of Buying a Home, Plus a Few More

Lenders are just not kidding around when they advise buyers about what to do for successful loan completion.  See the links below for my previous blog post on this subject, and in this post are more sage pieces of wisdom about how to have a best experience:

Always check with your lender, Realtor, and/or escrow officer personally on the phone, before sending a wire transfer to anyone.

Obtain complete documentation from your bank itemizing all money transfers.

Don't withdraw of deposit large sums into accounts unless absolutely necessary.

Try to avoid making career moves before close of escrow.

Don't allow your bank accounts to go negative, even if you have overdraft protection.

Don't apply for new credit.

All gift money must be documented, so avoid having a friend or relative pay for anything concerning the purchase of the home without first discussing with your lender.

If transferring money from overseas account, discuss the best time to do so with you lender.

Be aware if you close any credit card accounts, your debt ratio may appear higher, so DON'T close credit card accounts.  Just stop using them.

Avoid having your credit report run unless required by your lender of choice on a transaction.

More posts: Buyer Mistakes: https://longbeachrealestate.blogspot.com/2017/05/being-prepared-buyer-in-sellers-market.html
                    Wire Fraud:  https://longbeachrealestate.blogspot.com/2017/07/wire-fraud-in-real-estate-is.html

Four Critical Credit Tips

Dear Buyer,

Your credit score is an important benchmark for mortgage lenders, landlords and even potential employers. Use these tips to avoid hurting your credit score:

1. Don’t max out your credit cards.
A big factor in your credit score is your debt-to-credit ratio. When you hit your spending limit, your debt-to-credit ratio rises and your credit score falls. As a rule, always have more credit available than outstanding debt. Doing so not only boosts your credit score, it keeps your payments low and leaves a buffer for emergencies.

2. Consider the pros and cons of cancelling credit cards.
While removing temptation is one way to check excessive spending, cancelling credit can actually damage your credit score. Why? Cancelling credit increases your debt-to-credit ratio just like maxing out a card, dropping your credit score. If you need to cancel a credit card, obtaining the same or higher amount of credit with a new card diminishes the effect. (But it's best not to cancel, just stop using the card.)

3. Stop applying for store credit cards in the checkout line.
It might be tempting to save 15% on a one-time purchase, but applying for unnecessary credit. It can seriously damage your credit score. Lenders make a hard inquiry whenever you apply for a new card. This type of inquiry often lowers your credit score by several points, which accumulates when applying for multiple cards. A soft inquiry occurs when you check your own credit, which is highly encouraged routinely and before a major purchase.

4. Apply with multiple lenders when shopping for a mortgage.
While I have preferred lenders I would much rather work with because ultimately, professionalism and knowledge are what gets the job done, not all lenders do all loans or work with all lender sources. Buyers should know this. When you apply for a mortgage, the lender performs a hard inquiry. This will lower your credit score by a very small amount, around 5 points. However, when multiple mortgage lenders run your credit within a 45-day period, it only generates a single credit penalty. Thus, applying at one, two or even a dozen mortgage lenders only produces one minimal deduction to your credit score. Unless you have a serious credit problem, applying with more than three is probably unnecessary, but to satisfy yourself that you are getting the best mortgage rate and terms, just like shopping around for a new car, it would be wise to take a little time in the application process and ask questions.

If you want to learn more or discuss your home buying or selling options, contact me.

Some Lenders Are Checking Borrowers' Social Media Accounts

Along with new lending rules for buyers and lenders that came into effect on January 1, there's more to think about, too.  According to an article in the Wall Street Journal, a buyer's Facebook and Twitter data may help a lending company determine a borrower's creditworthiness.  Ironically, these same lending companies may be backed with venture funding from Google Ventures or Accell Partners (early Facebook investor). 

Social media accounts are a way to double check a borrower's job information (see your LinkedIn account), or there's a post about how you got fired on Facebook.  And E-Bay could be a great place to check your small business reviews by others. Right now this practice of social media review is primarily used by smaller loan sources, but Fair Isaac Corp. (your FICO credit score company) is considering incorporating social media, and since it provides credit scoring for the vast majority of lender decisions, that could have a huge impact.

Lendup, a San Francisco lending source, is one company currently using a mix of credit bureau and social media information to help assess borrowers' risk and verify identities. Applicants are voluntarily sharing their Facebook, Twitter and other social sites which Lendup is using, although they don't require it.  It just helps on the road towards loan approval.  This is a company backed by Google Ventures and which expects to make 300,000 loans in 2014.

At Moven, a mobile-only bank, customers can link up their social media accounts to learn about their own financial behavior and make payments to friends. The President of Moven says social-media activity will be one factor used in lending decision on their future loans. He believes social media data says more about customers than their FICO score.

Kabbage Inc, a loan source for small businesses, requires a customer to link at least one account such as Amazon, e-Bay, or Xero for underwriting decisions.  Kabbage, Inc., is looking at how many "likes" a customer receives, and what reviews are saying about the borrower's business.

The Consumer Financial Protection Bureau and the Federal Trade Commission are taking a close look at privacy issues. If, for example, a consumer reporting company such as Experience or Equifax has inaccurate information on a borrower, the consumer may dispute that information under the Fair Credit Reporting Act. But  companies using social media in their lending decisions don't have to verify the information about you because it isn't reported to third parties, so there apparently is little or no regulation when it comes to this type of  "background check" on a borrower.

" 'There are privacy concerns. People don't understand the implications or why they may be considered undesirable' " for credit, said Jeffrey Chester, executive director of the Center for Digital Democracy in Washington, who is calling for regulation."

See the full article at http://online.wsj.com/news/articles/SB10001424052702304773104579266423512930050?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702304773104579266423512930050.html

Tighter Lending Standards Are Making Home Sales More Difficult

Long Beach housing inventory/end of 2012

Although much is being said about the housing recovery, the fact is that mortgage loans are much tougher to get than in years past.

• It's just recently come out that some lenders are loosening up the requirement for equity (30% or more) for owners wanting to keep their current homes, but then, a lot of property owners just getting into the market didn't know about that rule in the first place.  It's one of the many things making it difficult for people to move on, because even if they otherwise qualify for a new mortgage, their property doesn't. 
• Another issue is FICO scores.  Higher than ever scores are being demanded of the "average" buyer and this has impacted the market to the extent that, per Laurie Maggiano of the U.S. Treasury's Homeowner Preservation Office, between 2007 and 2012, new home purchases dropped 30% for those with a FICO score over 780.  In that same period of time, new home sales dropped 90% for borrowers with a FICO score between 620 and 680. "Where are these folks supposed to live?" asked Maggiano.  (At one time, a FICO score of 700 or higher was considered very good for a borrower.)
• And then again, specific lenders have their own overlay of loan requirements.  Fannie Mae and Freddie Mac may accept FICO credit scores as low as 620, and FHA will approve applications with scores as low as 580, yet investors for the loans may require FICOs at least 60 points

When Am I Able to Buy Again?



Seasoning Requirements
 

The distressed property market began some time ago, and some people are beginning to wonder when they will be able to buy again.

Credit scores are important as well, depending on how severe the situation was and how long it will take to recover.

This is meant as a general guide only. 

For instance, if your short sale closed escrow in September of 2009, you could be eligible for an FHA loan, depending on your other loan criteria of course.  IF you have certain extentuating circumstances and were current on your mortgage at throughout the short sale, you may not have any waiting period for a new FHA loan.

To obtain a conventional FNMA loan, your waiting time is as early as 2 years after a short sale closed if you have 20% down payment.  And, for a FNMA loan, IF you can show certain extenuating circumstances, your wait might be only 3 years after a foreclosure.

Bankruptcy is one of the most damaging events to your credit, but if you work diligently to restore your credit as soon as possible, your wait could be much shorter in order to buy.  Paying bills on time and getting new credit established, perhaps by obtaining a secured credit card, are essential to improving your status as a good loan risk, according to John Walsh of Total Risk.

Please contact your lender (or I can refer you to one) for circumstances about your particular situation, because it may vary somewhat from the information here. Please contact me--I want to help you, even if you're not able to buy now.

Top Ten Legal Mistakes Home Sellers Make-Part III

Verifying the buyer's finances.

The standard contract form used by California REALTORS says that the buyer must provide verification of their financing and/or funds to close within 7 days after the contract is entered into.

But why wait until then? The seller shouldn't have to find out a week later to find out the buyer may not have the upfront pre-approval, or that there may be some other doubts. The buyer's motivation should be such that he or she is ready to provide all that information with their offer to the seller, and in fact, the seller may have required their agent to request this in the MLS listing.  It only makes sense to find out as much as possible in the beginning, at least that one contingency can be out of the way. All too often, it turns out the buyer can't get a loan when it's time to fund. There are underwriting issues, or appraisal issues, that may come up that were unforeseen by the buyer, but sometimes not enough of the right questions were asked in the beginning. 

So why overlook the easy things up front, such as having your agent contact the buyer's lender for a direct conversation, and getting copies of statements (via the buyer) showing source of funds if it is not submitted with the offer? And, does the buyer currently own other property that he's not selling that could impact financing; or, is their source of closing funds in a liquid account? Seven days after a contract is entered into is not the time to learn about some uncertain source of buyer funds or fuzzy loan approval, the seller should want to know as much as possible beforehand.

These are just some of the reasons for verifying the buyer's finances up front. For more questions, please contact me or visit www.juliahuntsman.com.

Will Lower Loan Amounts Hurt Some California Sellers?

July 1 was the cutoff date for loan limits that exceed the permanent loan limits. In case you've forgotten, the upper limit of $729,750 for conventional and FHA in California was a temporary accommodation. The permanent loan limit is $625,500 as of October 1, 2011.

This change is projected to have the biggest impact on the highest-end counties,  i.e., Marin and Contra Costa Counties, but also Riverside and San Diego Counties are not far behind, where 11 and 12 percent of the (non-FHA) home sales would be rendered ineligible. In Los Angeles County, about 2.3%  loans would be rendered ineligible, but Los Angeles County also represents 25% of the state's households.  The lower limits for FHA loan in Los Angeles County would impact about 5.4% of the loans.

All told, the changes could affect 30,000 California families. If liquidity in the high end market becomes slower than it already is, where do the move-up buyers move to if their eligibility is tougher, and where do the condo-to-house buyers move to in the lower range when fewer properties are put on the market?

One loan limit for the entire country cannot be right--the West Coast market rose above the national level years ago, and the current loan limits recognize that. We need to keep the high-end market moving, so the rest of the housing market does also.

Issues raised to Ben Bernanke, Federal Reserve Chairman, in a House Committee hearing July 13:

Ackerman then asked Bernanke how Congress should reconcile the possibility that many homeowners will not buy homes in this higher bracket when they would otherwise be qualified to do so.  "I don't have an answer other than to say that we have to get our housing finance system back into working order," Bernanke said. 

Researchers from George Washington University have said the FHA already exceeds the market share needed to serve its targeted demographic of low- to middle-income homebuyers. And, a separate report from the National Association of Home Builders suggests more than 17 million homes across the country will become ineligible for cheaper federal funding – at a time when the housing market continues to struggle.

The truth is, they're really not sure what works and what is needed, and getting the finance system back in order sounds good.

Buying Without Selling? Equity Will be a Player.

If you're thinking of buying a new home and renting out your current home, it will pay to plan in advance. By asking a few questions, you will start to shed light on an important subject.
 For instance, do you know your current rental market and what a reasonable rent could be expected for your property? By checking local classified ads and online rental sources, plus speaking with other local owners who are landlords, you should be able to find out fairly easily. Will that amount cover your current payment, plus property taxes, plus HOA dues, if a condo? If it doesn't you need to know what your negative cash flow will be (the amount extra every month that you will have to contribute out of your income) every month. Then, by speaking with a mortgage professional about pre-approval for a new home purchase, after a discussion about your income, debts and expenses, plus that possible negative cash flow, you will soon find out if this plan will work. And, there's another wrinkle: Since the subprime market debacle, lenders have increasingly formulated tighter lending guidelines, and one of them is that a current property needs to have a good 30% equity in it to meet a more recent lender requirement, and without that equity, there will will be no loan approval on that basis alone for a new purchase. Unless the borrower can qualify for a new purchase based on his complete monthly expenses, excluding tenant contributions, plus the new mortgage. This requirement came about to eliminate loans to borrowers who, due to falling home prices and a potential short sale, walked away from their former residences after closing escrow on a new home.

This means that if you're hoping to obtain a loan modification, but are not sure about how long you'll be living there (when do we ever know the future for sure?), it will pay to think in advance about your loan-to-value. The reality is, many borrowers do not meet that 30% standard, (see this blog in Seattle) and can't otherwise qualify, and thus are forced into thinking about a short sale (or even other options, depending on their circumstances), which in turn impacts how soon you may be able to borrow again in the future. FNMA actually revised their standards a few days ago, loosening the timeline to 2 years to buy after a short sale for borrowers with 20% down, and longer for those with a lower down payment. This is an improvement, and for those who can revive their credit scores and save money in that time, it will mean a good recovery.

For an estimate for your property, contact a Realtor to provide you with a comparable market evaluation at no obligation. It would also be a great time to discuss all options which could be open to you, find out future ramifications. This is the time to find out. Find current properties in your area at the MLS search at www.juliahuntsman.com, as well as other resource information. Or contact me for recent "sold" properties to establish a value for your property. To keep up with the local area, also see my page at http://www.facebook.com/LongBeachHomesandCondos .

2009 FNMA and Freddie Mac Loan Limits Just Announced

Fannie Mae and FHA loans limits were "temporarily" increased to $729,750 in our market area as a part of an overall Economic Stimulus Plan. Well, those loan limits are due to sunset on December 31, 2008.

The Federal Housing Finance Agency just announced today that, for the Los Angeles-Long Beach-Santa Ana metropolitan region, the new 2009 conforming loan limits are $625,500 for one unit (house, condo, etc.), $800,775 for 2 units, $967,950 for 3 units, $1,202,925 for 4 units. The conforming loan limit in other areas will remain at $417,000. Link to high cost area loan limits.

Consult your lender for more details.

California FHA Loan Limits Now Up to $729,750!

A new and long-awaited temporary loan amount increase from $362,790 to the conventional loan maximum of $729,750 passed yesterday (until end of 2008)!

Per the Los Angeles Time: "The California counties at the new maximum level for FHA loans are Alameda, Contra Costa, Los Angeles, Marin, Monterey, Napa, Orange, San Benito, San Francisco, San Mateo, Santa Barbara, Santa Clara, Santa Cruz and Ventura. "

This could make FHA loans available to 30,000 additional Californians. FHA loans are characterized by low down payments of 3% and not as driven by FICO scores as conventional loans are.

Additional loan limits in Orange and Los Angeles Counties are:

1 unit 729,750
2 units 934,200
3 units 1,129,250
4 units 1,403,400

If you are considering purchasing a new house, condo or units for yourself, please contact me for a lender referral. Not all lenders specialize in FHA loans, so it's important to find someone who is experienced in these government loans. Call me at 562-896-2609, or you can go online in the meantime and search properties at http://www.juliahuntsman.com/ or try a new type of property search at http://www.longbeachrealestate.listingbook.com/ .

Tightening the Lending Standards--Is Your FICO Below 680?

Here's more on the trend that's been going on since late last summer: tightening lending standards, and Wells Fargo Bank is just one example as it tightens its lending standards in 200 markets across the country. If you want to buy, you must get your loan lined up before making an offer. This has always been considered the normal procedure for buyers. Now it's an absolutely essential must for any borrower. Conventional loan guidelines have changed drastically since 2007 to the point higher down payments may be required and stated income loans are now off-limits in some markets.

A Wells Fargo internal memo identified 30 markets in California alone as "at risk". Fannie Mae and Freddie Mac (government-chartered mortgage financers) have surcharges for borrowers with credit scores below 680, a previously acceptable FICO score, and are requiring 5 percent down payment in markets identified as "declining". PMI (private mortgage insurance required on many loans less than 20% down) will be harder to obtain on loans with less than 3% down payment, and MGIC Investment Corp., a leading provider of private mortgage insurance, is discontinuing coverage of loans with down payments of less than 5% in 30 markets, which includes the entire state of California. So the message is: Don't count on that 100% financing or stated income loan in some instances, they're harder to find.

If finding a home is important, taking the time to invest in education about financing one is equally important.

Long Beach long beach real estate 'Voice this!