Breaking News: Fannie Mae and Freddie Mac to the Rescue?

This week in response to the Homeowner Affordability and Stability Plan (HARP) both Fannie Mae and Freddie Mac have released their own versions of Refinance programs. Fannie Mae’s DU Refi Plus and Freddie Mac’s Relief Refinance Mortgage. The programs are geared to help homeowners that are underwater on their house refinance. This will allow consumers to capitalize on the low rates that are available today.

The Program – Both programs will allow consumers to refinance their first mortgage up to 105% of the value of their home currently. Any second lien holder can be subordinated to an unlimited CLTV. The program is not restricted to a primary residence.  If your current loan does not have Mortgage Insurance it will not be required on the new loan. If you have Mortgage Insurance currently your Mortgage Insurance provider will have to agree to modify which they may not be willing to do. There are no minimum credit scores but there are adjustments for the lower scores on the Fannie Mae Program. So far each wholesaler is a little different in their offering of the product. This is due to their own internal risk tolerance. Some will offer the High Balance temporary loan limits and others have restricted it to 417K.

The Catch – Your loan has to be owned or serviced by Fannie Mae or Freddie Mac. To determine if you are eligible for the program you have to visit:

Freddie Mac at http://www.freddiemac.com/avoidforeclosure/ and click on “Does Freddie Mac Own Your Mortgage?”

Fannie Mae at http://www.fanniemae.com/index.jhtml and click on “does Fannie Mae own your Mortgage?”

With limited information they will tell you if they own or service your Mortgage. If they do then you have the first major step done on your journey.

The program itself is not very complicated but due to the fact that every institution will have their own overlays on the product it will be best to consult your Mortgage Professional for your individual situation.

All information in this post has been taken from a variety of my sources and from a variety of wholesale channels. Please keep in mind that this is a very new program and with that patience will be an extreme virtue.

As always I thank you for reading,

“You will always get the facts here!”

The Top 3 Mistakes Buyers Make when getting Pre-approved.

The very first thing that a buyer should do when considering  a new home purchase is contact their Mortgage Broker or Banker and get pre-approved. However, many times this is not the case. Many times buyers see a home that they like either by driving buy it or searching on-line. This home sparks the interest and they use on-line calculators to see if the home is affordable. The payment appears affordable and within their budget. The question is with tightening credit and underwriting criteria will the documentation support that theory…….

Mistake #1 – Test Driving Homes before Pre-approval – Looking at homes on your own or with a Realtor prior to have a clear understanding of your qualification, the cost and the payment is a recipe for let down. Two things commonly happen to the consumer when this approach occurs. They fall in love with the home and either buy it even though it was above their comfort level or get disappointed when they find out they do not qualify. Both are dangerous as one could lead to financial disaster and the other could lead to inaction that will cost you later.

Solution – Consult your Mortgage Broker or Banker on your qualification levels when you get the desire to buy. The consultation is free and can save you time, money and heartache. If you do not have a Mortgage Broker or Banker get a referral from someone you trust and respect or do thorough research and interview two or three. Generally your Realtor will know someone that you can trust.

Mistake #2 – Getting Pre-approved without providing your documentation – If the Mortgage Broker or Banker is willing to issue you a pre-approval in today’s credit market without reviewing all of your income and asset documentation and looking at the credit  RUN! Every dollar counts and without reviewing the tax returns and the income documentation we may qualify you using an income that will not stand when the loan is underwritten. Your Mortgage Consultant should take the conservative approach to your income to leave room for the unknown.

Solution – Find a Mortgage Professional that you feel comfortable with and invest in yourself by meeting with them face to face to get your pre-approval. This will allow you and the Mortgage Professional to talk in detail about the situation and make sure that you explore all options. If you are unable to meet in person the next best thing is to provide all the documentation necessary and have a phone appointment on speaker phone. (You could always do Webcam or Webinar meetings as well).

Mistake #3 – Assuming the Pre-Approval is good indefinitely – Pre-approvals are credit approvals. Credit is a snapshot in time and can change daily if you are an active user of credit. If you were borderline on your credit approval from the beginning say 623 Fico and you are going FHA and you go buy some 0% interest at Home Depot you may be at risk. A credit report is generally good for about 60 days. Since a Pre-approval is a credit and income approval any change in either make make it invalid. Another thing buyers are not aware of is programs and guidelines are frequently changing and if they are not being updated by their Mortgage Professional they may again be at risk.

Solution – Stay in constant contact with your Mortgage Professional (They should be in contact with you but it is a two way street). Make sure that there have not been any program changes that would affect your approval status. You also have to keep your Mortgage Professional aware of anything that you have done that may help or hurt your approval. An example would be a pay raise or a new credit purchase. Communication is the key to protecting your Pre-Approval.

The next time you are considering buying a home and you are in California, Oregon or Idaho go to http://capitolmortgage.com/officers-detail.aspx?LONum=161 for your pre-approval.