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I just wanted to give you guys a quick overview of guideline changes
that have taken place in the last 24 hours. I know we have a ton of
stuff working, and I will make sure I address each pre qual to ensure
timely disclosure to our borrowers.
1st and foremost: NO MORE 100% FINANCING STATED. Best case right now
is 95% (need a 680 credit) with Mortgage Insurance. Rates are still
good, so I can always sell the MI as opposed to a subordinate lien.
The good thing about this conforming loan is that it is underwritten
stated/stated, meaning if there is equity in the home we can get
creative on down payment. This does require Taxes and Insurance be
escrowed.
2nd: The secondary market has put measures in place to limit
borrower's ability to buy homes they can not afford with creative
financing. In layman's terms, banks will not pay brokers to do Option
Arms anymore. You guys all know I hate these loans to start with, so
not a big deal to me, however they are requiring that if we do an
Interest Only, the borrower has to qualify at the fully amortized (P &
I) payment, not the I/O payment.
3rd: No more short term financing. Kiss that 2 or 3 year ARM
goodbye, can't write them anymore. Borrowers must qualify at a 5 year
arm or 30 year fixed rate.
To sum up, sub prime loans are impossible to close now days, and A
paper banks have tightened their guidelines to avoid buybacks. This
will create a market where MUCH fewer prospective buyers will be able
to turn to homeowners. If I were you guys, I would begin to ask
disqualifying questions when someone approaches you about a home. EX:
How much money do you have for down payment/closing costs? If they
say 1K, you pretty much know they're dead in the water.
I should also note that the FTHB programs are still in place for 100%
Financing (The My Community, Fannie Flex, DreaMaker, etc) however
they now require a min 600 credit score and have to fall in conforming
guidelines (loan amount below 417K, Full Doc, Trade line Requirements,
Asset Requirements, etc).
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