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FHA Loan Limits Extended

Nov 30th, 2011
by Mike.
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FHA Loan Limits Extended

On February 18th, President Obama signed The Agricultural Rural Development, Food and Drug Administration and Related Agencies Appropriation Act of 2012. A provision in this bill reinstated the higher mortgage loan limits that expired on October 1st.  The loan limits had been increased back in 2007 in an effort to stimulate the beleaguered housing markets. The expiration of this provision was proving particularly threatening to high cost markets where alternate mortgage financing is not readily available.

Many Democrats in Congress opposed the increase as did the Obama administration because they felt this would enable FHA to continue to gain market share at the same time the administration wanted private lending to take on a bigger role in home mortgage financing. Ultimately, both the House and Senate voted to advance the bill beyond the votes needed to override a Presidential veto.

The new loan limits for FHA now cap out at $729,750 in designated high cost markets. The loan limit in the Houston area which also includes The Woodlands, Conroe, Tomball, Spring, Katy and other parts of the metro area will remain at $271,050 for a single family property, $347,000 for a duplex, $419,525 for a three-family home, and $521,250 for a four family home. The FHA continues to provide a necessary funding source for home buyers who cannot meet the rigid underwriting requirements in effect for conventional loans and has kept the Houston housing market relatively stable. Getting pre-qualified for an FHA loan is a fairly simple process that only takes a few minutes on the phone with one of our loan officers.

Finding a Mortgage Broker in Houston, The Woodlands, Conroe, and Tomball

Nov 30th, 2011
by Mike.
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Selecting a mortgage broker to work with on refinancing your home or obtaining financing on a new Houston-area home purchase can be a challenge.

There are a number of criteria that are important to any consumer such as service, pricing, and convenience.  But how do you evaluate a mortgage lender on these standards?

Some consumers will automatically visit their bank to obtain mortgage financing, but using them is far from a guarantee that you will receive the best rate or the best service. Keep in mind, the big banks are only representing their own mortgage products, not programs or pricing that is available by other institutions in the wholesale marketplace. Furthermore, when mortgage volume gets high, as it has recently with the large number of refinances, the time to get a loan approved and closed with a large bank goes up dramatically. I have heard from more than one consumer about having to wait three months to get their loan closed.

Other people will simply look for the best rate they can find. This strategy is also not without its pitfalls. While many unscrupulous lenders have left the business in the wake of the mortgage meltdown, there are still some out there who will promise the world and then rarely live up to their word. Often, the lowest rates are offered by lenders who cannot compete on other metrics so they simply try to win your business based solely on rate. This might result in increased closing costs or an inability to promptly return phone calls.

When evaluating mortgage brokers in the Houston area, there are some minimum criteria a consumer will want to consider. First, do some research with the Better Business Bureau www.BBB.org. A good mortgage lender should have a minimum rating of “A”, and even better, be an Accredited Business. This indicates that the BBB has done some additional research on their backgrounds and licensing.  In the mortgage industry, the importance of service cannot be stated enough. You can have the greatest rate in the world, but trying to get a loan closed through an incompetent lender can result in delays, frustration, and the possibility that your loan will never close.  In addition to investigating the lender, you should also do some research on your loan officer. Check out social media sites like LinkedIn for their background and reviews.

Second, although not the only factor, remember that rate is important.   A lender’s quoted rates should be at or below the national averages which can be found weekly on a number of web sites including http://www.freddiemac.com/pmms. You can also check your local newspapers – The Houston Chronicle Sunday Edition has rates posted in the Business section every week.  This is a survey completed by a local research firm who does not charge the lenders for appearing in the survey. Keep in mind that, often, rate surveys show lagging rates, meaning those from a few days to a week ago and can be misleading in a rapidly changing rate environment. Also understand that national marketing firms, like LendingTree, charge a fee to the lenders wanting to appear in their system and these fees can be exorbitant. Many local mortgage brokers and bankers would rather pass savings onto their clients than pay a national marketing firm for a lead.

When obtaining a rate quote, be sure to request a Good Faith Estimate, as this document makes the quoted fees associated with your rate quote binding for ten days. You should also make sure that any rate quotes you receive are within the same day so that you are comparing apples to apples and not giving one lender an advantage of providing a quote after the market has improved.

Lastly, when possible, work with a local lender. While they may not have the marketing power of national lenders, and thus the ability to put television ads in front of you constantly, going local supports your community, and you also have the comfort of knowing that there is a local office you can visit if the need ever arises.

Choosing from whom to obtain a home loan is one of the most important financial decisions a person can make.  It is imperative that any homebuyer/homeowner do so with as much knowledge as possible.

Free Credit Repair Workshop for Houston Homebuyers

Oct 11th, 2011
by Mike.
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If your credit not quite good enough to purchase a home now,  consider attending!

This is your chance to receive FREE advice on how you can repair and rebuild your credit with the possibility of purchasing a home in the near future!

Home Loan Specialists, Inc. and National Credit Federation are teaming up to present a FREE workshop for anyone interested in improving their credit scores.

Saturday, October 22, 2011
10:30 a.m. – 12:30 p.m.
Barbara Bush Library | 6817 Cypresswood | Spring, Texas 77379

Printable Credit Repair Flyer

Click here for a printable version of our flyer to share with friends and family!

Is it Really Possible to Refinance Your Houston Mortgage without Closing Costs

Oct 10th, 2011
by Mike.
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Can money trees grow in Houston?

Are Houston home refinances without closing costs too good to be true?

This question is an important one to Houston homeowners who might be considering refinancing their mortgage at today’s record low rates. Given the economy, it is understandable that many people may not want to part with their hard-earned cash to pay for closing costs or they may not have sufficient funds to cover closing costs.  Don’t fret; you do not have to miss out on the refinancing boom due to a lack of funds. There are ways to cover your costs without breaking the bank.

First, we need to make one thing clear: there is no free lunch. You are not going to get a rock bottom rate with no closing costs.  Anyone who promises this is being disingenuous. Many closing costs are “hard costs” of your loan paid to third parties, independent of your mortgage lender. These include title insurance (the rates for which are set the by the state insurance commissioner in Texas), appraisal, recording costs, and in many cases, escrows for taxes and insurance. Your lender is also not going to work for free. Though their fees may not be charged directly to you, I am often reminded of the old Prego spaghetti sauce commercial that features the tag line “it’s in there”.  Well, so is your lender’s fee.

There are two ways to avoid paying some, or all, of your closing costs out of pocket. One way to do this (and still obtain some of the lowest rates available in the marketplace), is to roll these costs into your loan amount. The benefit of this strategy is that you keep your cash in the bank and get a very low rate. The downside is that you will end up paying more interest over the life of the loan because you are increasing your loan balance by the amount of the closing costs. This is still not a bad strategy, particularly if you plan to remain in your home for several years.

Another possibility is for your lender to pay all or a portion of your costs on your behalf. As we discussed earlier, there is a cost to this. You will have to settle for a higher interest rate. The lender will pay your costs and earn their fee when your loan is sold because the buyer of your loan will pay a premium for a premium rate. Nevertheless, if you can reduce your rate with no additional costs, you are saving money on your mortgage no matter how you slice it. I have been able to help countless homeowners using this strategy over the past month.

If you have a Texas mortgage with a rate of 5% or higher and would like to take a look at your refinancing options, please contact us at info@hlstx.com or at (832) 286-1600.  Many people we talk to about refinancing are astounded at the amount of money they will save over the life of their loan.  We can do a free refinance analysis for you and determine your breakeven point if you do refinance. There is also a Texas Mortgage app available for iPhone and iPad users that uses current rates to give you an idea of monthly payments on a refinancing.  Search the App Store on your device for “Houston Mortgage” or click here to download the app from iTunes.

Contact us today, we will be happy to help you save money!

Houston Homeowners are Feeling HOT, HOT, HOT!

Aug 5th, 2011
by Mike.
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Home Loan Specialists, Inc.With this seemingly never-ending heat wave gripping the Houston area, here are some simple ways that homeowners can attempt to stay a little cooler while inside their homes.

  • Close your blinds and curtains to keep out the sun and the heat.
  • Close the vents and doors to any rooms that aren’t being used.
  • If you do not have air conditioning, keep your activities to the lowest level of your home since heat rises.
  • Avoid using the stove or the oven (use the microwave) and put-off on running the dishwasher (don’t use the heat cycle for drying) or washing laundry until after the sun goes down.
  • Replace manual thermostats with programmable thermostats and set them at around 78 degrees or higher during summer months.  Raise the temperature of the thermostat when you leave, but do not turn the air conditioning off. Your unit will have to work too hard to get your home’s temperature back down later.
  • Keep your air conditioner clean. Outdoor units can get clogged from weed pollen and other materials that are floating around in our outside air.  Use a hose to spray your a/c unit down; making sure all plant debris is washed away from the unit.  Ensure the inside filters are cleaned or changed monthly.
  • Use ceiling fans (or install some) to allow you to be comfortable at a higher ambient temperature. The air movement can make you feel several degrees cooler and make it much easier on your a/c and utility bill.
  • Have a pitcher of icy water ready in your refrigerator. Letting the water run from the tap until it turns cold is wasteful and inefficient.

Aside from keeping yourself and your family safe from these brutal temperatures, also be sure to check on your neighbors, friends and relatives you think might be at risk in this kind of weather, and keep your pets inside with you.

How Do I Cancel My Mortgage Insurance?

Jun 21st, 2011
by Mike.
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In this age of slow economic growth, families are looking for any way possible to reduce expenses. Furthermore, homeowners who have taken advantage of low mortgage rates and attractive home prices to buy a new home may be looking for ways to reduce the cost of the mortgage over time. One way to accomplish this goal is to explore ways to cancel the mortgage insurance on your mortgage loan. Before we can talk about cancelling MI, we need to explore what mortgage insurance is and what it does.

Mortgage insurance, whether provided by private insurers on conventional loans (PMI), or government sponsored mortgage insurance on an FHA loan, protects lenders against default up to a certain amount. The availability of MI allows these lenders to make loans to borrowers who put less than a 20% down payment on the purchase of a home (loans that would otherwise be considered too risky). This mortgage insurance can run anywhere from about .25% of your loan amount to 1.15% of your loan amount depending upon the type of loan, your down payment, and your credit score.

To have your mortgage insurance cancelled, you must be able to demonstrate that you now have that 20% equity in your home that would not require mortgage insurance. There are two systems for getting MI removed: cancellation using the purchase price of the home and cancellation using the current market value. The Homeowner’s Protection Act of 1998 (HPA) creates the ground rules for both of these scenarios.

First, lenders are automatically required to cancel a mortgage insurance policy when the mortgage loan balance is scheduled to reach 78% of the original value or purchase price based upon the original amortization value, regardless of the outstanding balance. The borrowers must be current on their payments for this provision to activate.  Borrowers can actually request their mortgage insurance be cancelled prior to the schedule date, when their mortgage balance reaches 80% of the initial value based upon the initial amortization schedule or 80% of value based upon the current balance.  So simply paying attention to your amortization schedule or making principal reduction payments along the way and being proactive can save you a few month’s worth of MI payments, putting more money in your pocket.  To do this, the homeowner needs to have a good payment history to take advantage of this and demonstrate the property’s value has not declined.

The other way to have your private mortgage insurance removed is through a written cancellation request based upon current value. The rules for removing MI are typically set by each lender individually, but typically the loan needs to be seasoned at least two years and have a good payment history. A new appraisal must be secured by an independent appraiser that indicates the loan balance is now 75% or less of the market value if the loan is five years old or less, or 80% or less of the market value if the loan is more than five years old.  Mortgage insurance on FHA loans cannot be cancelled earlier than five years into the loan.

To put this potential savings into real dollars and cents,  a recently secured FHA loan where a borrower puts the minimum required 3.5% down payment will typically carry an annual mortgage insurance cost of 1.15%, or $143 per month on a $150,000 loan. This mortgage insurance will automatically fall off about ten years into your loan. However, if you made principal reduction payments and perhaps added a swimming pool, you could have that MI removed early. If you were able to demonstrate that your equity exceeds 20% six years into your loan, the remaining four years worth of MI savings would amount to $6,900. I expect you can find much better ways to spend this money than giving it to the government.

Some private mortgage insurers have web sites that detail the process for a cancellation request, but your first call should be to the servicer of your mortgage. They should be able to inform you of whether you have government or private mortgage insurance, who the MI company is, and the process for requesting cancellation.

Why Does Your Agent Want You to Get Pre-Qualified?

Jun 2nd, 2011
by Mike.
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Have you ever tried to visit a home for sale on the market only to be told by a real estate agent that they won’t show you the property until you are pre-qualified for a mortgage?  You might see this as a time-consuming obstacle or an unnecessary intrusion into your finances; however, there are a number of good reasons to support this requirement.

First, many sellers do not want their house being shown to someone who is not serious about buying it. Look at it from the current homeowner’s perspective.  The seller has to clean the house and clear their family out and on a Sunday for someone who might be “just looking”.  Furthermore, there is a potential security risk in showing a home to someone whom the seller and, in reality, the buyer’s agent know little about.  Many sellers are uncomfortable with this.

Even if someone does like the home and is ready to make an offer, a seller will not seriously consider any offer from a buyer who has not been pre-qualified.  They simply cannot accept the risk of taking their home off the market while a buyer figures out if they can even qualify for a loan to buy that house.

Another good reason to get pre-qualified is to see how much of a home a buyer can qualify for and on what terms. The pre-qualification process involves taking some basic information, running a credit report, as well as determining the potential borrower’s debt ratios.  Typically, a buyer can be pre-qualified within a couple of hours from the beginning of the process. This procedure will often uncover unknown credit report items that can be addressed in advance to enable the buyer to obtain a better rate and thus, more of a loan.  It will also allow the buyer to shop around for a lender so that valuable time is not wasted while they are under contract.  Lenders can also advise on what types of programs might be available in certain areas.

Lastly, there is the question of etiquette. Believe it or not, there are people out there who look at houses as a hobby, with no true intention of buying.  It is important to remember that a real estate agent’s time is extremely valuable.  Realtors work on straight commission and often give up many hours of personal family time on the weekends to show property; many times to people who will never buy a home.  Very simply, it is disrespectful to monopolize an agent’s time if a buyer is not serious enough to answer a few questions for a lender a couple of hours before going to look at property.

Ultimately, getting pre-qualified benefits all parties involved and represents a small time investment given the magnitude of a home purchase.   The pre-qualification indicates to the seller a serious intent to buy; the buyer and buyer’s agent know the buyer’s financial background and purchase limitations; and the buyer will already have “one foot in the door” with their home purchase.   It is a win-win for everyone!

Some Last-Minute Tax Tips for Houston Homeowners

Mar 21st, 2011
by Mike.
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If you haven’t yet pressed “Enter” to send your 2010 tax return to the IRS, it is probably a good idea to make sure that you have taken advantage of all the tax benefits available to Houston homeowners.

If you didn’t already do the math on itemizing, it is a worthwhile exercise. Almost 40% of homeowners who are eligible to take the home mortgage interest deduction do not. In many cases the math justifies this decision, but in others it doesn’t. It is best to use a tax planning software that computes your tax liability both ways to make sure you aren’t paying more than you need to in taxes. Remember, if you are in the 28% tax bracket, every dollar your taxable income is reduced by mortgage interest you’ve paid cuts your tax liability by 28 cents.

If you purchased a home last year, you may be able to deduct “points” paid on your mortgage, considering these points typically represent pre-paid interest. To qualify, the points must represent a percentage of your loan amount and be reflected on your HUD Settlement Statement. Even points paid by the seller may be deductible if your cost basis is adjusted. Now, qualifying points cannot represent costs for genuine third party costs such as appraisal or survey, or prepaid expenses such as tax or insurance escrows. Only points paid on your primary residence are eligible to be deducted in the year paid, points on second homes must be deducted over the life of the loan. If you refinanced your home, your points are generally deductible over the life of your loan.

If your joint income is $100,000 or less, or you file single and make $50,000 or less, your mortgage insurance premiums paid may be deductible. Single, annual, or lump-sum mortgage insurance premiums are fully deductible through the end of this year. The deductibility is phased out at higher income levels. The amount of these premiums should be reflected in the 1099 you receive from your mortgage lender.

If you consummated a mortgage modification, lost your home through foreclosure, or sold your home through a short sale in 2010, there are special tax rules that apply to you. Normally, any time all or a portion of your debt is forgiven or eliminated, you are taxed on this amount – which the IRS calls Cancellation of Debt Income. The Mortgage Debt Forgiveness Act of 2007 provides a waiver of these rules through 2012. If you are facing a distressed sale situation right now, it is in your interest to get the transaction completed as soon as possible. These circumstances can often takes months, or even over a year to close, and you might be pushing the 2010 date.

Lastly, make sure to set your alarm to remind you to protest your property tax appraisal with your local taxing authority. Declining home values carry the subtle benefit of lower property taxes IF you do the leg work. Appraisal district values somehow seem to stay high even when market values fall. Go figure!

Your home provides you with a place to live, serves as a method of forced savings, and can even deliver a myriad of tax benefits for the homeowner who knows how to take advantage of them.

Houston Investor Mortgage Loans in Today’s Tight Underwriting Environment

Feb 28th, 2011
by Mike.
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Houston Mortgage Rental Invesment LoansThe Federal Housing Finance Agency is reporting that US home prices have fallen 14.9% since they reached their peak in April of 2007. Houston mortgage rates have increased less than 1% from their all-time lows during 2010. Underwriting standards continue to be more restrictive each passing day leaving a large percentage of would-be buyers unapproved. Combined, these factors have created a “near-perfect” storm for investors who buy and hold rental properties. So what do Houston investors face when they finally decide to make an offer on a foreclosure, bank REO, or short-sale property?

Loans to investors are available through a variety of sources: Local banks, national banks, non-recourse lenders, mortgage brokers and bankers, hard money lenders, and owner financing. Each has their distinct advantages and underwriting requirements.

Down payment and reserves

In general, an investor needs a minimum of 20% “skin in the game” down payment to begin the process. Additionally, a minimum of six months cash-equivalent reserves must be documented to cover mortgage, tax, and insurance payments after closing. This condition is required of all rental properties in the investor’s portfolio. Therefore, if an investor has three mortgaged rentals with an average P.I.T.I. (principle, interest, taxes, and insurance) of $1200 per month, they will need to prove reserves of $21,600 ($1200 x 3 rentals x 6 months).

Income and debt

The investor’s debt to income ratio cannot exceed 45% by most traditional lender standards. Rental income from existing units must have a minimum 12 month history and a 25% discount is applied to recognize periods of non-occupancy. This must be substantiated by signed and executed rental agreements and tax returns.

Maximum number of properties mortgaged

Currently, Fannie Mae has set a limit of 10 properties financed for any individual. However, there are only a small handful of national lenders who will approve more than four properties, and that is including the individual’s personal residence. A further restriction is imposed by those lenders willing to recognize more than four financed properties: limited loan program selection. Generally these more liberal lenders will require 30-year amortizations for fixed or limited adjustable rate programs. Shorter term loans are not available through the major banks to investors with more than four financed properties.

Credit scores and risk-based pricing adjustments

The minimum mean credit score is generally quoted as 680 by most lenders. Portfolio and non-recourse lenders have lower limits with higher rates. Private (hard money) lenders generally ignore credit scores but offset that risk with onerous rates, upfront fees, and lower loan to value requirements. Some owner financing can be found with a minimum of 25% down payment at the highest rates. Loans for FICO scores below 740 are available from major lenders, but the rates increase with each 10 point increment in score. This “risk-based” element can add up to 1% to the rate of an investor with a 680 score as compared to that available for the 740 qualifier.

Rates and programs

Major lenders price investor loans using the same daily table structures that they use for owner-occupied properties. The major difference is the imposition of discount points. Investors who make 25% down payments are required to pay 1.75 discount points. For those paying more than 25% but less than 20%, the hit increases to 3.0 points. These points are normally paid by locking higher rates. This normally equates to a rate of only ½% to ¾ % higher than those available for owner occupants. Along with purchase loans, refinance programs are generally available. Cash-out loans on investment properties are available through a very limited number of investors.

If you are an investor with all of your financial “ducks in a row”, this is a fantastic time to buy an investment home. Be sure to call your Houston-area mortgage home loan lender for more information or to get pre-qualified.

Increased Down Payments May Be Coming for Houston Mortgages

Feb 22nd, 2011
by Mike.
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Down payment requirements on Houston mortgages might look very different in a few years if a new proposal by President Obama is adopted. The proposal to increase down payments to 10% on federally-guaranteed mortgages is part of a far-reaching effort to reform government mortgage agencies Fannie Mae and Freddie Mac, which were bailed out by the government in 2008. Today, conventional mortgage loans in Houston that are backed by the government require a minimum down payment of 5% for well-heeled borrowers. The strategy is to turn more of this sector of the housing market over to private lenders whom today commonly require 20% or more down.

A direct correlation between has been discovered between the amount of down payment and the risk of foreclosure. An analysis of foreclosures in 2008 by McDash Analytics showed that 16% of foreclosures came from homeowners who paid down payments of less than 3%.  Another 35% were the result of negative equity which, most likely, is a function of both low down payment and a decrease in home prices.

In 1998, the percentage of borrowers who obtained a loan with no money down was less than 4%.  Conversely, eight years later at the height of the housing bubble, more than 20% of loans were made with no borrower investment. Today, almost 27% of homeowners nationally have negative equity, though the numbers in Houston are lower.

In looking at the impact of these potential changes on the home markets in Houston, many have pointed to Canada as a model for what the U.S. mortgage market should look like. In Canada, a far higher percentage of mortgages are retained by the lender on their balance sheets which has led to higher and more consistent underwriting standards. In addition, between 50% and 60% of mortgages initiated have terms of 25 years or less, whereas in the U.S. the benchmark 30-year mortgage makes up the vast majority of financing on newly purchased properties.  Furthermore, 20% down payments are common in Canada as are adjustable rate mortgages, though these variable rate mortgages are far more palatable than the exotic products offered here during the height of the housing bubble. Interestingly, in Canada, mortgage interest is not deductible and it is far easier for lenders to foreclose. Overall, the housing market to the north has remained healthy with foreclosures remaining well below 1% while in the United States, that rate has risen to more than triple that number.

Conservative home equity laws and a relatively healthy economy have spared the Houston mortgage and housing market from the chaos that has plagued states such as California, Florida, Nevada, and Michigan; however, the proposed changes to mortgage financing will undoubtedly affect 90% of all mortgages originated in Texas because they are being sold to Fannie Mae and Freddie Mac. The delicate recovery of the Houston mortgage and housing sector will be delayed by what amounts to a further tightening of the credit markets.

Houston homebuyers are advised to take advantage of near record low mortgage rates, affordable home prices, and the availability of low down payment financing now before this environment is not quite as friendly.

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