Fannie Mae loosens guidelines on student loans

New rules for student loans that were announced by Fannie Mae earlier this year allow people who have income based repayment plans and graduated payment plans to qualify for more house!   The old way: if the student loan was an income based or graduated payment, the lender would consider the payment to be 1% of the balance on the loan despite whatever the actual payment is.  New way: use the actual income based program.  These rules will make it possible for people who would have previously been shut out or limited to a lower sales price to qualify for more!  In one example the borrower had $85,000 in student loan debt and an income based repayment plan of $300 but a payment of $850 had to be used in qualifying (1% of the balance on the loans).  Under the new rules, the borrower can use the $300 payment and qualifies for $550 more per month in housing payment!!  If you know anyone who tried to get a mortgage in the past couple of years but their student loan debt got in the way, let them know that things have improved!  Click here to see a recap of the new loan guidelines.

Additionally Fannie Mae’s automated underwriting system is being updated on July 29, 2017.  At that time it is expected that more people will be approved for total debt ratios (housing + debt / income) up to 50%. Most loan programs, including Fannie Mae, require the loan to be run through automated underwriting successfully.   For most the cap for debt ratio has been 45% or less but the new guidelines anticipate that more, but not all loans, will be capped at 50%  Now a person with income of $5000/month will potentially qualify for $250/month more in a housing payment!

And there’s more good news!  Many housing agencies use Fannie Mae automated underwriting, including the NH Housing Finance Authority!

Author: Renee Duval – A Certified Mortgage Professional (CMP) with the NH Mortgage Bankers & Brokers Association.  NMLS# 97937.  Merrimack Mortgage Company, NMLS#2561, is an Equal Housing Opportunity lender.  The views expressed in this blog are those of the author, Renee Duval,and do not reflect those of her employer, colleagues or its clients.  The information provided is for informational purposes only and is not intended as legal or tax advise.  Programs are subject to change without notice and underwriting approval. 

Check out www.nhmortgages.com for more info on mortgage loans and qualifying for a mortgage.

What happens after the sales agreement is signed?

Congratulations!  You found the house you want to buy.  You’ve negotiated a sales agreement – you have a signed offer.   What next?

1. You need to give the sales agreement to your lender.   Your lender will create a property-specific loan application and forward the applications and disclosures for you to sign.  Once you have signed these documents you will have officially applied for your mortgage loan.  Note that the sales agreement will specify that this step must occur within “X” number of days from the time an agreement is reached.  Typically you are required to apply for the loan within 5 days of agreement but that # is negotiable.
2. Arrange for the home inspection(s).  You will need to arrange for the required and optional inspections.  Your sales agreement has an area where you specify which inspections you have a right to do.  The only required inspection is a water quality test if there is well water.  Most people do a general building inspection and a septic inspection if public sewer is not available.  You will be required to provide copies of any invoices for any inspections done.  Please do not pay for this in cash — if the seller is paying your closing costs you cannot be reimbursed for things paid for with cash.   If the seller is paying your closing costs you may need to document that the payment for the home inspection came out of your checking/savings.
3. Order the appraisal.  You will be required to pay for the appraisal early in the process.   The appraisal determines the value of the home (must equal or exceed the sales price) and whether the property complies with the minimum property standards for the type of mortgage you are taking.  The appraiser meets the listing agent at the house and writes up a detailed report.  You will receive a copy of the appraisal report.   Occasionally an appraisal comes in below the sales price or comes back with required repairs.   If this happens, your lender and REALTOR will help you identify the options!
4. Submit all requested information.  You may be asked to provide updated bank statements, paystubs and other information.   You may be asked to explain and/or document large deposits, payroll deductions, things on your credit report and a hundred other possible things.  Most people find this annoying.  The reason the lender requires so much documentation is that the lender needs to defend its decision to give you a loan.   Lenders are under extreme regulatory control following the housing crash of 2009.   Work with your lender to get them everything they ask for and keep smiling.   There will come a time when your loan is fully approved and you do not need to provide another stitch of information.
5. Cleared to Close!  In mortgage terms these are the three best words you can hear!  It means we are at that point where the lender is fully satisfied with the documentation in the file.  The closing can be scheduled!   The lender must provide you with a preliminary Closing Disclosure which you must receive and acknowledge at least 3 days before closing.
6. Consummate the Transaction!  Finally it’s closing day.  A third party vendor will be the closing agent.  Before the closing date they will do a lot of behind the scene work to make sure title is clear and the current liens will be paid off, etc.   The actual  closing could be at the closing agent’s office, at the REALTOR’s office or any other mutually agreed upon place.  The required parties are the Buyers, Sellers and the closing agent.  Most often both REALTORs are present and your loan officer will check in to make sure everyone is happy!
7. Move in!  Of course there is more to moving than getting the keys.  You will need to line up all of the appropriate utilities and services.
8. Start making payments!!  Typically the first payment is due on the first of the month starting after the first full month you have lived in the house.  So if you close in January, your first payment would be due on March 1.  Mortgage interest is paid in arrears meaning that the payment made on March 1 is paying for interest charges that accrued in the month of February.
9. Enjoy your new home.

NH Housing issuing tax credits for home buyers!

The Home Start Homebuyer Tax Credit of up to $2000/year for first time buyers (or second time buyers buying in targeted communities) is available through NHHFA (NH Housing Finance Authority).   In order to participate, you must apply for a Mortgage Credit Certificate through NH Housing at the time you are purchasing your home.  The fee is up to $550 (discounted to $250 if your mortgage is a NH Housing product).  You must appy for the MCC before you close on your loan!   

If you are buying in NH and want to know more about the tax credit call Renee Duval from Merrimack Mortgage Company at 603-225-LOAN (5626).   Or email Renee Duval using this link.

You can find more info on mortgages at Renee's blog -  Click On and enjoy!  

The tax credit is a direct dollar-for-dollar reduction in your federal taxes -- up to $2000/year!!  You receive the credit for as long as you continue to live in the home and remain eligible.   The actual credit is equal to 35% of the interest paid or $2000 (whichever is less).

Income Limits apply and maximum sales prices apply.  Click here for link to find those limitations.

The following targeted areas allow the tax credit to go to people who are not first time buyers: Berlin, Claremont, Concord, Dover, Gofftstown,  Laconia, Lancaster, Littleton, Manchester, Newmarket, Pittsfield, Portsmouth, Rochester, Somersworth & Whitefield.

You are required to take on online course (about 15 minutes long) in order to apply for the Homebuyer tax credit.   Use this link to access that course.

Author: Renee Duval – A Certified Mortgage Professional (CMP) with the NH Mortgage Bankers & Brokers Association.  NMLS# 97937.  Merrimack Mortgage Company is an Equal Housing Lender, Licensed by Massachusetts and the NH Banking Department . Mass Lender MC2561-119.  The blog is Renee's opinion and not necessarily the opinion of her employer.  This is not meant to be tax or legal advise.

Ability to Repay

What is the Ability to Repay all about?  

The Consumer Finance Protection Bureau (CFPB) -  www.consumerfinance.gov - wants to make sure that lenders are lending to borrowers who can afford the homes they are buying.  As a result new rules regarding “Qualified Mortgages" and the “Ability to Repay” went into effect in January 2014.   These rules are meant to protect homebuyers and effectively will also protect lenders by giving additional guidance on mortgage loan fees and costs and underwriting.

How does 'Ability to Repay' effect a home buyer?     Well in very general terms, the new rules may cause underwriting to be more strict than it had been.  But in many cases the underwriting has not changed at all. 

One underwriting standard getting alot of attention is the maximum total debt ratio of 43%.  The translation of this formula is simple math:  borrowers’ gross monthly income X 43% is the maximum they can get for housing & other debt (car loans, student loans, other loans, minimum payments on credit cards, monthly child support & alimony payments).   This rule does not apply broadly across the board and in some cases, loans can still be approved with total debt ratios as high as 55%.    ATR (ability to repay) rules are mostly basic underwriting standards that many mortgage lenders having been using all along.  So what do  home buyers need to know about ATR?  If you are considering a home purchase, contact a mortgage lender and prequalify or preapprove for the mortgage before you make an offer to purchase a home. Make sure you have the ability to repay!

If you are considering a home purchase, we would be happy to assist you in determining what you qualify for and what your best options are.  Pick up the phone and call 225-LOAN or find more interesting info at www.nhmortgages.com 

Author: Renee Duval – A Certified Mortgage Professional (CMP) with the NH Mortgage Bankers & Brokers Association.  NMLS# 97937.  Merrimack Mortgage Company is an Equal Housing Lender, Licensed by Massachusetts and the New Hampshire Banking Department . Mass Lender MC2561-119

The Home Financing Process Step by Step

So you are thinking of buying a house.  This is a big decision.  You want to get it right.  Lets break it down step by step into digestible pieces. 

Here are the main topics we will go over:
1) understanding and comparing the basic loan types and which is best for you.
2) understanding the costs involved in financing a home and the options to reduce those costs
3) understanding how credit has a large influence on the terms available to you and techniques you can employ now to get your credit as mortgage ready as possible
4) understanding the difference between prequalified and preapproved
5) tools to help you figure this out all on your own
6) the opportunity to work with a professional to determine your own qualifications.

There's so much to know!  www.nhmortgages.com is a good resource for basic info.
Please feel free to email me with specific questions; I love to chat about mortgages!
email: Blog@NHmortgages.com

Author: Renee Duval – A Certified Mortgage Professional (CMP) with the NH Mortgage Bankers & Brokers Association.  NMLS# 97937.  Merrimack Mortgage Company is an Equal Housing Lender, Licensed by Massachusetts and the NH Banking Department . Mass Lender MC2561-119

Am I eligible for a mortgage tax credit?

If you are purchasing in NH an you are a first time buyer (haven't owned in the past 3 years) or are buying in a targeted area (those in bold font below) and you meet the income requirements, you may qualify for up to $2000/year for the next four years (up to $8000) in tax credits.   Ask your lender about this.  The MCC (mortgage credit certificate) program is the best kept secret.   If you have not been informed about this, then ask!  

Home Start Homebuyer Tax Credit

INCOME LIMITS

Belknap County
Laconia $96,600 income for a 1-2 person household;  $112,700 for 3+ person household
All other communities $80,500 for a 1-2 person household  $ 92,500 for 3+ person household

Carroll County
All Communities $80,500income for a 1-2 person household; $ 92,500 for 3+ person household

Cheshire
All Communities $80,500 income for a 1-2 person household; $ 92,500 for 3+ person household

Coos
Berlin, Lancaster, Whitefield $96,600 income for a 1-2 person household; $112,700 for 3+ persons
All other Communities $80,500 income for a 1-2 person household; $ 92,500 for 3+ persons

Grafton
Littleton $96,600 income for a 1-2 person household; $112,700 for 3+ person household
All other Communities $80,500 income for a 1-2 person household; $ 92,500 for 3+ persons

Hillsborough
Goffstown, Manchester $96,600 income for a 1-2 person household; $112,700 for 3+ persons
All other Communities $80,500 income for a 1-2 person household; $ 92,500 for 3+ persons

Merrimack
Concord, Pittsfield $96,600 income for a 1-2 person household; $112,700 for 3+ person household
All other Communities $80,500 income for a 1-2 person household; $ 92,500 for 3+ persons

Rockingham
Newmarket, Portsmouth $96,600 income for a 1-2 person household; $112,700 for 3+ persons
All other Communities $80,500 income for a 1-2 person household; $ 92,500 for 3+ persons

Strafford
Dover, Rochester, Somersworth $96,600 income for a 1-2 persons; $112,700 for 3+ persons
All other Communities $80,500 income for a 1-2 person household; $ 92,500 for 3+ persons

Sullivan
Claremont $96,600 $112,700 income for a 1-2 person household; for 3+ person household
All other Communities $80,500 income for a 1-2 person household; $ 92,500 for 3+ persons

PLEASE NOTE:
Targeted Communities are in bold: first-time home buyer requirement does not apply.

For more info on this and other mortgage types visit: www.NHmortgages.com

Author: Renee Duval – A Certified Mortgage Professional (CMP) with the NH Mortgage Bankers & Brokers Association.  NMLS# 97937.  Merrimack Mortgage Company is an Equal Housing Lender, Licensed by Massachusetts and the NH Banking Department . Mass Lender MC2561-119

What if the house needs repair?

Thinking of  purchasing a distressed property in need of repair?  Do you already own a home that needs repair and you don't have the cash?  You may be able to use a rehab loan to get cash to fix it up after closing.   These options include FHA 203K and FHA 203Ks programs.   For purchases in eligible areas (more rural areas) RD/USDA also has provisions for a minor amount of rehab money (under $10K).  State housing agencies like NH Housing, also often have rehab programs (in NH it is possible to get up to $40K in rehab funds thru NH Housing Finance Authority).
Generally the buyer or owner of the home must have contractors look at the project and give a written proposal to do the work.  The contractor must be appropriately licensed (or use licensed subcontractors) and insured. Much paperwork does apply!
The rehab loan process is more complex than obtaining a regular loan but it doesn't have to be too difficult if your lender has the knowledge and experience to guide you through it.   I prefer not to accept an application for a rehab loan from the buyer or owner until they have the contractor's bid(s) in hand.   It is imperative to get the contractors out to the property as soon as possible to get those bids.   Sometimes they will determine the cost is less or more than you thought and this can really influence your decision on financing (and/or your ability to qualify).  It is normally recommended that you have 3 contractors bid on any project.  Doing so will really help you to see the project more clearly.  As you meet with each contractor, each will have ideas which will enlighten you.   So you need to be prepared to spend many hours within the first ten days of your offer being accepted, meeting with contractors and making important decisions on what you want to include in your rehab.   Carpeting allowances, appliance allowances, etc are really important.  If your contractor gives you $500 for flooring and the flooring you want is $1500 then you may end up having a problem down the road.   So if you are considering a rehab loan, consider the upfront time necessary to do it right and surround yourself with good people who know what they are doing!
Author: Renee Duval -- a top ten loan officer for NH Housing loans and a Certified Mortgage Professional (CMP) with the NH Mortgage Bankers & Brokers Association.  NMLS# 97937.  Merrimack Mortgage Company is an Equal Housing Lender, Licensed by Massachusetts and the NH Banking Department . Mass Lender MC2561-119