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Back to Basics: Mortgage Lending 101

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Mortgage Basics provides information about mortgage products and programs that will help real estate agents realize success. Topics include:

- when you need to ask for more time to close,
- property types and characteristics that might be more difficult to sell (and how to sell them),
- how to use various products/programs to help increase a buyer's purchasing power.

Published in: Real Estate
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Back to Basics: Mortgage Lending 101

  1. 1. Back to Basics: Mortgage Lending 101 June 16, 2015 Emily C Ingram New American Funding
  2. 2. Who is Emily C Ingram? • Local mortgage lender with New American Funding • 14+ years experience • Loan originator, processor, and underwriter • Bachelor’s degree in mathematics • Board member, Jefferson Co Home Builders Association • Board member, Real Estate Professionals for Affordable Housing • Occasionally skips work to go sailing.
  3. 3. Obligatory Disclosures • I’m pretty smart, but I don’t know everything. • Change is inevitable.
  4. 4. Objectives • Discuss types of mortgage lenders • Recognize categories of mortgage products • Identify (and sell) “problem” property types • Utilize mortgage programs and products to increase buyer’s purchasing power.
  5. 5. Types of Mortgage Lenders Origination Underwriting Funding Servicing Depository Institution X X X X Mortgage Bank/Lender X X X X Correspondent Lender X X X Mortgage Broker X
  6. 6. Categories of Mortgage Loans • Conventional Conforming FNMA / FHLMC • Government FHA / VA / USDA • Conventional Non-Conforming Funky Products / Funky People / Funky Properties
  7. 7. Conventional Conforming • Who is Fannie Mae & Freddie Mac? • Guidelines established by FNMA and FHLMC • Popular vanilla loan choice • Make sure your lender can choose! The GSEs asset holdings – either through mortgage securitizations or direct portfolio holdings – have increased from approximately 7% of total residential mortgage market originations in 1980 ($78 billion) to 46.7% in 2010 ($5.3 trillion). - Federal Housing Finance Agency
  8. 8. Features & Benefits “Standard” Conventional Conforming My Community Home Possible Minimum Down Payment 5% 3% Up Front Mortgage Ins private MI required with < 20% down lower private MI requirementsMonthly Mortgage Ins Income Limits none $72,680 Property Type SFR, 2-4 units, manuf, condo SFR, condo Occupancy primary, 2nd, non owner primary Interested Party Contribution 2% - 9% 3% Max Loan Amount $417,000 $417,000 Max DTI 45% 43-45% Credit Score 620 660 FTHB Restriction no yes and no Home Buyer Education not required required
  9. 9. Interested Party Contributions Occupancy Down Payment Max Contribution Primary/2nd < 10% 3% 24.99 – 10% 6% > 25% 9% Investment all 2%
  10. 10. Government - FHA • Who is FHA? • More lenient guidelines • Have a bad rap • Guidelines will change in September
  11. 11. Features & Benefits FHA Minimum Down Payment 3.5% Up Front Mortgage Insurance 1.75% Monthly Mortgage Insurance 0.85% / 12 Income Limits none Property Type SFR, 2-4 units, manuf, condo Occupancy primary Interested Party Contribution 6% Max Loan Amount $322,000 Max DTI 45%’ish Credit Score 580 FTHB Restriction no Home Buyer Education not required
  12. 12. Government - VA • Who is VA • Eligible veterans (COE) • Big draw = 0% down • Non-allowable fees • Tougher appraisals
  13. 13. Features & Benefits VA Minimum Down Payment 0% Funding Fee (MI) 0 – 3.30% Monthly Mortgage Insurance 0% Income Limits none Property Type SFR, 2-4 units, manuf, condo Occupancy primary Interested Party Contribution up to 4% for prepaids and funding fee Max Loan Amount none Max DTI 45%’ish Credit Score 580 FTHB Restriction no Home Buyer Education not required
  14. 14. Government - USDA • Who is USDA? • Rural properties / income limits • No down payment • Allow additional time for closing • No income producing properties
  15. 15. Features & Benefits USDA Minimum Down Payment 0% Guarantee Fee (MI) 2.0% Monthly Mortgage Insurance 0.5% / 12 Income Limits $75,650 Property Type SFR, condo Occupancy primary Interested Party Contribution 6% Max Loan Amount none Max DTI 29/41% (32/44%) Credit Score 620 FTHB Restriction no Home Buyer Education not required
  16. 16. Condominiums • Condo project must be eligible • No “spot” approvals • FNMA/FHLMC, FHA, and VA all have slightly different guidelines • If you list a condo, have it pre-approved by your lender!
  17. 17. Manufactured Homes • Fewer options • Doublewide • Built after June, 1976 • Moved only once • Permanent foundation • Foundation inspection • L&I inspections
  18. 18. Down Payment Assistance • Available through WSHFC • Second mortgage used for down payment • Some have deferred payments/no interest • Follow standard underwriting guidelines • No FTHB requirement • Must work with an “approved” lender • Income limits • Home buyer education required • Higher interest rates
  19. 19. Mortgage Credit Certificate • Tax credit equal to 20% of annual interest • Afford a slightly larger home • Program can be combined with any mortgage • Must work with an “approved” lender • First time home buyer • Income limit $70,000 (1-2 people) • Acquisition limit $310,000 • Home buyer education required
  20. 20. Conventional Non-Conforming • Funky products, people, or property • Lenders determine guidelines • Lenders determine interest rates • Fewer options
  21. 21. Funky Products Jumbo Loans • Loan amounts > $417,000 • Intense competition • 20-25% down payment • Credit scores 680+ • Lower debt to income ratios • Reserves required Other funky products: interest only, construction loans, lines of credit
  22. 22. Funky People • Recent major derogatory credit • Asset dissipation • High debt to income ratio • Stated income • Foreign national
  23. 23. Funky Properties • Non-warrantable condos • Hobby farms • Log homes • Handled case-by-case
  24. 24. Refer to New American Funding! (aka Shameless Self Promotion) • More product options • Better customer service • Who ya’ gonna call? • Local appraisers • Go the extra mile • 40 years combined experience in Port Townsend
  25. 25. Referral Best Practices “The first lender I would have you talk to would be​:​ Emily Ingram of New American Funding, her phone number is 360-531-1934 and I have seen her follow through and admire her work style and dedication. I, by office policy, must recommend two other lenders for you to contact. ​ Acme Bank has a good reputation (www.acme.com). And also USA Mortgage Co, specifically, Jane Doe at 360-555-1212.” • Call with the buyer sitting in the office • Give the referral partner the buyer’s name/number • The “multiple business cards” scenario
  26. 26. Contact Me! emily.ingram@nafinc.com www.facebook.com/emilycaryl www.linkedin.com/in/emilycaryl www.slideshare.net/EmilyCIngram1

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