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Courtesy of Rob & Sandy Racz – Managing Broker, AB, CRS, GRI, ABR Windermere Real Estate Rob@EverettRealEstate.com
425.345.7229 www.EverettRealEstate.com
Active duty personnel, veterans, retired members of the military, and employees of the US Department of Defense and the Department of Homeland Security are eligible to apply for up to $5000 in down payment and closing costs in the purchase of a first home. More information is at www.PentagonFoundations.org and click on the “Dream Makers” link.
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Courtesy of Rob & Sandy Racz – Managing Broker, AB, CRS, GRI, ABR Windermere Real Estate Rob@EverettRealEstate.com
425.345.7229 www.EverettRealEstate.com
Picture a mortgage program that seems to defy many of the lessons of the housing bust:
• 91 percent of its borrowers make zero down payments.
• Loan amounts go well into the jumbo range, to $1 million and sometimes above, even with little or nothing down.
• Credit standards are flexible and generous. Underwriting rules encourage loan officers to look for ways to approve applications rather than to reject them.
• Mortgage originations are up, almost triple what they were just three years ago and are on track this year to exceed 2010′s volume. The rest of the loan industry, by contrast, is down 25 to 30 percent.
You might assume that any home-loan program with come-ons like these must be swimming in bad mortgages, loaded down with serious delinquencies and foreclosures.
Yet this one, which gets relatively little attention in the media, has better mortgage performance than FHA and is comparable with some “prime” loan operations that have far more stringent credit rules.
Can you name this financing phenom? It’s the Department of Veterans Affairs’ home-loan guaranty program.
At a time when federal regulators are considering a mandatory 20 percent minimum down payment for most conventional mortgages, the VA program, which is restricted to veterans, offers important insights on how to get families into homes with little cash upfront, and to keep them out of foreclosure, even in tough economic times.
What’s in the special recipe? Tops on the list: a combination of loan features that are by far the most attractive available in the current market.
While the FHA program also offers minimal down payments — 3.5 percent — the VA goes to zero even if you need a jumbo-sized loan.
Unlike low down-payment loans you can get from Fannie Mae and Freddie Mac and FHA, there are no monthly mortgage-insurance premiums.
VA loans do have an upfront “funding fee” that varies based on the down payment and other criteria. Currently this fee ranges from 2.15 percent for zero-down borrowers to 1.25 percent for applicants putting down 10 percent.
Most applicants opt to roll the fee into the loan amount and finance it over time.
The VA imposes no credit-score minimums. Its average FICO score is 708, compared with the 750 to 770 scores typical for Fannie Mae- and Freddie Mac-backed conventional mortgages at the best interest rates.
It does, however, require underwriters to look closely at credit-bureau reports and documented income to ensure that borrowers have the ability to repay their loans.
The agency is exceptionally flexible on seller contributions to help buyers pay closing costs, escrows and loan-origination charges — more lenient, in fact, than any other national program. That, in turn, can significantly lower the net cash outlays needed from borrowers at closing.
The VA also stretches debt-ratio norms when needed to help creditworthy, income-strapped borrowers get into a home. Though the official “back end” ratio of total household monthly debt to household income is 41 percent, lenders say the VA will let them push this higher, even to 55 percent, on a case-by-case basis.
With all these accommodations to borrowers, how is it that the VA’s 90-day delinquency rate in the latest Mortgage Bankers Association study is 2.2 percent while the FHA’s is 4.8 percent? Or its total seriously delinquent plus in-foreclosure rate for borrowers is 4.5 percent against the FHA’s 8.04 percent and the conventional prime market (Fannie and Freddie) at 4.3 percent?
Michael Fratantoni, the association’s vice president for research, says the VA’s record “is remarkably good, given that they’re allowing first-time buyers to get in with no down payments,” which is traditionally linked to high defaults and foreclosures.
Michael Frueh, the program’s acting director, says the key to the agency’s quiet success is its nearly paternalistic emphasis on servicing its 1.5 million borrowers, moving early and quickly to intervene at the slightest hint of payment problems.
“At the end of the day we are veterans’ advocates,” he said. “We exist solely to help them,” not only to afford to finance their homes but to remain in them.
In the past three years, the VA has instituted industry-leading techniques such as requiring lenders to establish “single point of contact” servicing systems, where customers deal with one person about their mortgage issues, rather than anonymous multitudes.
Could this mindset — intensive “advocacy” servicing as a borrower benefit built into the loan itself — be duplicated in other segments of the mortgage market?
Maybe the real question is: Why not?
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Courtesy of Rob & Sandy Racz – Managing Broker, AB, CRS, GRI, ABR Windermere Real Estate Rob@EverettRealEstate.com
425.345.7229 www.EverettRealEstate.com
After a decade, the city of Everett finally can call itself home to the Air Force’s new refueling tanker, built by the Boeing Co.
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Courtesy of Rob & Sandy Racz – Managing Broker, AB, CRS, GRI, ABR Windermere Real Estate Rob@EverettRealEstate.com
425.345.7229 www.EverettRealEstate.com
Homeownership brings with it a host of amazing benefits. It’s the American Dream for good reason. From health to wealth, it stands out as a great long-term investment, and that’s why 67 percent of American households are owner-occupied.
The National Association of Realtors (NAR) knows a little something about how homeownership affects American lives. And that’s why they are getting the word out about why you should be a homeowner. According to NAR:
Many economists have been touting a jobs recovery as the key to the housing recovery, but perhaps it is the other way around.
Recent indicates that housing makes up more than 15 percent of our Gross Domestic, and for every home purchased, up to $60,000 is pushed into the economy over time in improvements and furniture.
Additionally, each home sale touches 80 different occupations!
According to the NAR, “America needs jobs. Housing creates jobs. That’s one of the many reasons home ownership matters to people, to communities, to America. Strong federal government support of home ownership equals strong support for American jobs. We urge the Obama Administration and the U.S. Congress—as they debate the new federal budget and reform proposals for the nation’s mortgage finance system—to continue federal support for home ownership.”
Courtesy of Carla L. Davis Hill Realty Times, Managing Editor/Producer
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Courtesy of Rob & Sandy Racz – Managing Broker, AB, CRS, GRI, ABR Windermere Real Estate Rob@EverettRealEstate.com
425.345.7229 www.EverettRealEstate.com
