Charlotte NC Real Estate - Mortage Update

Freddie Mac has just announced that they are discontinuing all 100% financing options. Although Fannie Mae still offers a few, the prices have gotten higher and the consensus among industry leaders is that they will probably discontinue their 100% programs soon. Did people even buy homes before 100% financing??? (I'm kidding, of course!) The 100% financing craze has actually not been around that long, and although younger people see it as the norm, many older consumers have always thought of it as a little too loose.


Whether you like 100% financing or not, many consumers don't have very much money to put down. There will definitely be a gap left if all the conventional programs abandon 100% financing. Enter FHA. FHA stands for the Federal Housing Administration and has come to be known for helping first time homebuyers, but FHA is not a one trick pony. Although many first timers use the program, it is not restricted for first time homebuyers. There are no income limits either, but one factor has kept FHA looked at as a lower end program... loan limits.

FHA loan limits still exist, but they have been drastically changed. The new FHA loan limit for the Charlotte Metro area is $303,750. This limit change is temporary but when it expires the new limit will still be respectable $230,000.

FHA makes 100% financing possible through the allowance of gift funds. There are non-profit organizations that will cover the down payment for the homebuyer. The largest of these programs is called The Nehemiah Program. This program provides gift funds that can cover the down payment requirement for FHA loans. The seller is then required to make a donation of at least the same amount along with a processing fee of $499.00. You can learn more about The Nehemiah Program by visiting www.getdownpayment.com.

FHA is really an outstanding program for homebuyers with a limited amount saved for down payment. FHA only requires the buyer to have 3% of the sales price invested into the transaction. That would be $7050.00 for a $235,000 home, and the average FHA interest rate right now is between 6.25-6.5%. These rates would be for a 30 year fixed mortgage!


If you would like more information about FHA financing, please email me at olan@myersparkmortgage.com.


Olan Carder

Myers Park Mortgage

 

Olan is a long time lending partner and trusted advisor. Interested in a Charlotte Home?  Search Charlotte Homes~ by area

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by Olan Carder
What is an APR and why is different from my interest rate?
Most homebuyers get very confused when they first see their APR. Their loan officer told them that the interest rate is 6.25%, but they see the APR is 6.456%. What is going on?
Before understanding the APR, you need to know its purpose. The APR was invented to help consumers shop and compare mortgage loans. If one lender quotes you 6% with no points but the other lender quotes you 5.75% with one point, which one is better? The APR enables you to easily compare 2 loans because it shows you the interest rate you are paying and the fees you are paying to get that rate spread out over the term of the loan.
In theory, it should be a true apples to apples comparison of two loan quotes. Since the APR shows your interest rate and the fees you are paying for that rate, it should normally be higher than your actual rate. The test is how much higher.
There are 2 problems:
Problem #1 with comparing loans with the APR... each loan officer's computer has to be setup properly to include the correct fees into that number. That leaves it open to human tampering. Far be it from me to hint that some loan officers would willingly print a false APR to win a loan, but even an honest loan officer might make a mistake. That's why you should compare the APR, but also compare the Good Faith Estimate line for line and make sure you are getting the best deal.
Problem #2 with comparing loans with the APR... the comparison only works if you keep the loan for the entire term. If you get a 30 year loan but only keep it 6 years, the comparison might not be correct. The APR shows you which loan costs less over 30 years not 6 years. That's why I offer a "Total Cost Analysis" to my clients that calculates the total cost for period of time they plan to keep the mortgage. That is the best way to compare loan programs.
For more information about this or other loan topics, email me at olan@myersparkmortgage.com.

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I asked a skilled and thoughtful lender, Olan Carder, his opinion on the sub-prime mortgage mess and the effect on our buyers. Olan is a senior originator for Myers Park Mortgage, the #1 mortgage originator in Charlotte, NC. Here are his thoughts on it all. “What the Sub-Prime Debacle Means For the Typical Borrower” First lets get some things in perspective. You never hear anyone talk about how large the subprime market really is, and that is important to understand when considering its overall impact on the market. The truth is that subprime mortgages make up only a small percentage, approximately 14%, of the total mortgage market and only about 13% of those are late on payments, according to a recent article by Jerry Bowyer at Fox News. That leaves us wondering. If the problem is that small why are all these national lenders going out of business? Let me try to explain this in simple terms. Mortgage lenders make money by funding new loans with someone else's money. They make the loans and then sell the loans to investors for a profit. When the foreclosure rates get too high for a certain kind of loan, none of the investors want to buy them anymore. If the mortgage lenders that specialize in those loans have already tied up all their money with new loans, and then no one will buy them, they don't have any money left to make any new loans. That's when they close their doors. In the current market, investors have stopped buying subprime loans. They will still buy some of them, but at a very low price that basically costs the mortgage lenders all of their profit. When mortgage lenders can't make any profit on a loan program, you can bet that program is either going away completely or will become outrageously expensive. How does this translate to today's typical homebuyer? Not bad at all! The typical homebuyer today will not be effected very much at all by these recent changes. Since 86% of mortgages don't fall into the subprime category and traditional mortgage products are priced very well right now, the typical homebuyer should be just fine. Most homebuyers easily qualify for conventional mortgages, but for many who fall below the credit requirements for traditional loans, Fannie Mae has many affordable community lending programs that are fantastic. Another recent change you can thank Uncle Sam for is PMI becoming tax deductible. If you make less then $100,000 per year and take a loan with Private Mortgage Insurance, you can now write-off that monthly PMI payment! (my italics tm) The overall mortgage market is strong, and many of the lenders and programs that just collapsed were bad for consumers anyway. My advice to homebuyers with credit problems is to find a loan officer that cares enough to help you through repairing your credit and positioning yourself for a quality fixed rate mortgage that you can afford. To get more information, a rate or payment, visit Olan's Site. Thanks Olan!

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After a week of one bad news story after another about the "Melt-down", "Collapse" and the impending doom within the mortgage industry it might be time to take some IB, have a scotch and calm down.

The "sub-prime" markets account for less than 15% of the total mortgage market.
The number of mortgages in jeopardy? .4% (That is no typo, it is 0.40%)

Why then all they hype? Because Wall Street is crying up a storm, isn't lending anymore at the wholsale level, and we've returned to a mortgage market more similar to 2000, when you need to prove your income, have good credit and a job.

There are loans out there for you to buy a new home if you have a downpayment, good credit and a job. Thats all there is to it.


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