Some exciting new developments
coming in 2017
While we expect interest rates to be higher in 2017, there are a few welcomed new developments, which should help make our lives easier. In last month’s newsletter, we announced that conforming loan limits have been increased. Also:
1. No appraisals required on some transactions. If you’re refinancing a single-unit property, either your primary residence or a rental property, you MAY be able to do it without an appraisal. When we take your application, we submit it to Fannie Mae’s automated underwriting program, which analyzes your income, assets, debts, etc., and determines whether you’re eligible for a Fannie Mae loan. This software may also decide, by comparing your property with many thousands of other similar homes in your area, that your home has enough equity to dispense with the need for a full appraisal. That should save you about $500 and weeks of waiting. But it’s only for loans up to $636,150, and only on refinances. If you purchase, or need a “jumbo” loan, you still need to pay for a full appraisal.
2. No paystubs or W2s needed. You may have seen Quicken Loans’ ads for their “Rocket Mortgage”: “Push button, get loan”. Well, as you may imagine, that slogan is a SERIOUS oversimplification of a process whereby your income and assets are validated through various automated methods so that you don’t need to provide your bank statements, paystubs, or W2s. Several of our lenders are adapting these new verification methods. That should save time, although not as much as Quicken would have you believe. And it only works for salaried employees. If you’re self-employed or retired, nothing’s really changed.
3. 80-15-5 financing: You can buy a home with 5% down WITHOUT the need for mortgage insurance or impounds when you combine a first mortgage with a second mortgage. The first mortgage would equal 80% of the purchase price, with a HOME EQUITY LINE of CREDIT (HELOC) making up the other 15% after your 5% down payment. This will be of great benefit to those who can’t raise 10-20%, or for those who can, but choose to keep their money in an interest-bearing account rather than committing them to down payment. The HELOC is adjustable, tied to the Prime rate, but the combined payments will be less than traditional or FHA loans requiring mortgage insurance. Programs like this haven’t been available since before the big crash of 2007.
4. Bigger reverse mortgages. The amount of money a senior can borrow with a reverse mortgage is limited by a number of factors, but the absolute maximum for an ideal candidate has increased from $625,500 to $636,150. Unlike some of the questionable programs offered in years past, today’s reverse mortgages are government-regulated (FHA).
5. Bigger loans on duplexes and fourplexes: In high cost Bay Area counties, you can purchase a duplex for $1,085,000, or a 4-plex for $1,631,300, put 25% down, and still get highly-favorable government-subsidized “conforming” loans. It’s only roughly a 2% increase, but it’s the first increase in over 10 years.
6. No more delays waiting for IRS tax transcripts: For the past several years, lenders have required us to obtain copies of tax transcripts directly from the IRS before loan approval. Why? The lenders wanted to be sure that the tax returns you submitted with your loan application are the same that you submitted to the IRS. This often caused serious delays, as the IRS was often overburdened with requests to produce transcripts. Now, several of our lenders are removing this requirement. Has trust returned? (Not completely, but this is progress).
As always, you can feel free to contact us at Finet Mortgage at 408-872-8100 for a no-obligation conversation about real estate financing.