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Posts from the ‘Mortgage Education’ Category


New Fannie Mae “3% Down” Program Means Even More Options for Homebuyers

Fannie Mae announced in mid-December 2014 that they would be offering a brand new low down-payment option for homebuyers.  This new policy—referred to as the “expanded LTV” program by Fannie Mae—allows for loan-to-value (LTV) ratios greater than 95%, and a maximum of 97% LTV. The program was implemented the weekend of December 13, 2014.

The new 3% down program was created with the goal of assisting first-time homebuyers who may have the qualifications to receive a Conventional loan, but do not have the resources to front a 5% or higher down-payment. While the program is geared toward loans in the MyCommunityMortgage (MCM) program, first-time buyers not qualified for MCM are also eligible for the 3% down option.

Pundits often question the rationality of lowering down payment requirements so soon after the Great Recession was driven by loose mortgage lending guidelines.  When asked how 3% own payments promote responsible borrowing, Daniel Podesto, CFO for Central Coast Lending, is quick to point out the radical difference in home prices since “responsible” lending guidelines were implemented with the formation of Fannie Mae in the 1930s.  “In California and many other coastal real estate markets, where homes cost upwards of $500,000, a three percent down payment is $15,000 plus closing costs plus impounds.  That’s $25,000 to buy a home.”  Podesto continues, “This isn’t 1950 where homes cost $25,000 and a twenty percent down payment was only $5,000, or 1980 for that matter when homes cost $200,000 and a twenty percent down payment was $40,000.  Wages have not risen commensurate with home prices during that time period so the reduced down payment requirements keep homeownership affordable.”

Current homeowners with an existing Fannie Mae loan are also able to take advantage of the new program in order to refinance their home. Homeowners whose homes have lost value, but were unable to qualify for the Home Affordable Refinance Program (HARP), may be eligible for the 3% down option.

There are certain criteria in order to qualify for Fannie Mae’s new loan program. The loan must be a fixed-rate loan with a term of up to 30 years, and high-balance, adjustable-rate, and HomeStyle Renovation loans are not permitted. The property in question must be a one-unit principal residence, meaning single-unit homes that are primary residences. Multi-unit homes, vacation homes, and manufactured housing are not allowed with this program. For homebuyers, at least one borrower must be a first-time buyer in order to be eligible for the 3% down option. MCM loan participants must have an income concurrent with the median income limits listed in Fannie Mae’s Selling Guide. There are, however, no income limit requirements for non-MCM borrowers. MCM borrowers must have 18% mortgage insurance coverage, but non-MCM borrowers need 35% mortgage insurance coverage. Additionally, for those eligible for MCM loans, Fannie Mae is also allowing reserves to come from gifts (read more about gift giving guidelines in our FAQ section).

Some who are familiar with Fannie Mae’s options may wonder if the current “expanded LTV” program is simply a revival of the Conventional 97 program that was retired in 2013. However, this new version of the 97% LTV option differs from the Conventional 97 program, as it is more forgiving toward homebuyers and allows homeowners to refinance to today’s mortgage rates.

This new low down-payment option has again leveled the playing field between Fannie Mae and other government agencies who offer loans requiring little or no money down, such as the FHA loan option. It is extremely beneficial for today’s homebuyers to have more options when looking to minimize their down-payment.

Jason Grote, President of Central Coast Lending, reminds homebuyers, “The biggest advantage of this new Fannie 97 program over FHA is that the mortgage insurance can be removed when the LTV reaches 78%, either by principal pay-down or home value appreciation, unlike FHA mortgage insurance which remains in place for the life of the loan.”

Call us at 805.543.LOAN to talk to a loan officer and determine if this new program is right for you!

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Gift Giving and Home Loans: A Guide to Giving (and Receiving) Cash Help on Mortgages

Gift guidelines are carefully regulated by lenders. A mortgage is a large commitment, and lenders need to ensure that borrowers can repay the loan, but also that they will repay the loan.

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Refinance for a Purpose: Drop Mortgage Insurance, Save Hundreds

Mortgage insurance is a monthly fee that is built into your monthly loan payments. Luckily, borrowers have the ability to refinance their loan and eliminate or reduce mortgage insurance fees, thus saving up to hundreds of dollars on monthly payments. Read more »


Refinance for a Purpose: Cash-Out Refinancing Explained

Central Coast Lending is a mortgage lender based on the California Central Coast. The Refinance for a Purpose articles are part of our Mortgage Process Explained series, which walks readers through the loan process step-by-step.  
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Tips to make the appraisal process run smoothly

Pismo Beach 3If you’re looking to refinance your home, an appraisal of the property is generally required to determine that the house is adequate collateral for the loan. Although there’s not much you can do to drastically increase your homes’ appraised value (without making significant home renovations and improvements), there are some basic tips homeowners should follow to assure the appraisal will run smoothly:

  • De-clutter the house.
    Although it may seem like a no-brainer, having a clean, de-cluttered house with all rooms and areas easy for the appraiser to access makes the process run a lot quicker.
  •  Spruce up the yard.
    Similarly, have a nice looking yard gives the appraiser a good first impression of the house. Simple things like mowing the grass and sweeping the sidewalk show that the property is maintained and taken care of.
  •  Research similar properties in the area that may be on the market or have sold recently.
    This can help aid the appraiser with comparable properties to base your appraisal off of. It’s also good to be informed of the local housing market to make sure your home is getting a reasonable appraisal.
  •  Prepare a list of any recent improvements made to the home.
    These can increase your home value, and it’s good to make sure the appraiser is aware of them.
  •  Have the proper documents on hand before the appraiser arrives. These include:
    • A survey or plot map of the home (if available)
    • A copy of the title policy (if available), with information on encroachments
    • Your most recent real estate tax bill and/or legal description of the property
    • Any recent inspection reports, such as septic, termite, etc.
    • If your home is a condo, a copy of the “Homeowners Associations” agreements
  • Be sure your home meets all state housing laws and regulations.
    For instance, a CO2 sensor is required by law in all homes. This needs to be installed and working in order for your home to pass an appraiser’s inspection.

Following these basics steps can assure your appraisal goes smoothly, and your refinance loan processes in a timely manner. And, considering the recent changes to the appraisal process, any steps a homeowner can take to assure the appraisal process is hassle-free will certainly be appreciated by all parties involved.


Documentation Checklist: What you need for your loan to file

We’ve talked before about how proper documentation is crucial for the loan process to run as quickly and hassle-free as possible.

Here’s a rundown of the basic paperwork you’ll be asked to provide in order for your loan to file (you can print your own checklist HERE):

  • 2011 and 2012 signed federal tax returns
  • 2011 and 2012 W-2s and/or 1099s
  • Pay stubs covering the most recent 30-day period
  • Bank account statements covering the most recent 60-day period (all pages even if blank)
  • Homeowners insurance declarations pages and most recent mortgage statements for all real estate owned (if applicable)
  • Pension/annuity award letter (if applicable)
  • Social security/disability award letter (if applicable)
  • Corporation, Partnership and/or LLC tax returns and K-1s for 2011 and 2012 (if applicable)
  • Dissolution of Marriage and/or Separation agreements (if applicable)
  • Photo ID’s
  • Copy of 2nd Lien Note or HELOC Agreement (for subordinations)

As always, the exact paperwork you need to submit will vary based on the loan program and type of loan you are receiving. Any questions you may have about submitting paperwork, or just about your loan in general, can be emailed to your loan officer, or you can give us a call at 805.543.5626.

Your can learn more about the loan process HERE.

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Mortgage Insurance Basics Part 3: Mortgage insurance options for FHA, USDA, and VA loans

This is part 3 of 3 in our series on mortgage insurance. You can learn about the basics of mortgage insurance HERE, and more about mortgage insurance options for conventional loans HERE.

Though conventional loans are the most popular for home purchase and refinance, we have a slew of other loan programs available for unique property and financial situations. Some of these programs- namely FHA, VA and USDA- have mortgage insurance fees associated with them. Below, we have outlined these fees for each loan program, and offer a graph to show the variance in mortgage insurance between loan programs.

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Mortgage Insurance Basics Part 2: Mortgage insurance on conventional loans

This is part 2 of 3 in our series on mortgage insurance. You can learn about the basics of mortgage insurance HERE and mortgage insurance for FHA, VA, and USDA loans HERE. This article covers mortgage insurance options for conventional loan programs.

Although FHA, VA and USDA loans all have associated mortgage insurance fees, a conventional loan is the most common choice for people looking for a purchase or refinance loan. This “go to” loan program has three different mortgage insurance payment options to suit different financial situations:

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The Lending Process Explained: Documentation Difficulties to Avoid

The borrowing process has become more challenging, but proper documentation will save time (and avoid headaches) during the loan process. In years past, lenders required less documentation and allowed for exceptions. Today, we find that lenders are the exact opposite – they require fully documented files with little room for deviation. Following are a few tips to avoid documentation troubles:

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Mortgage Insurance Basics Part 1: Understanding mortgage insurance

Mortgage insurance can be a tricky topic in the finance world. Lender paid, borrower paid, up front fees, monthly payments…it all gets a little confusing if you don’t know what questions to ask. In this three part series, we’ll ask (and answer) those questions for you, as we go through the basics of mortgage insurance so you can better understand why you need it, what fees are associated with it, and which loan type and payment option is best for you.

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