Mortgage Rates
Current mortgage rates again held true to form yesterday. Tomato / tomato, seesaw / teeter totter… As stock prices declined on one end of the teeter totter, for the 2nd day in a row, bond prices also went up for the 2nd day in a row. The bond prices ended the day higher than where they started which means current mortgage rates went down for the 2nd day in a row. While the see saw correlation between the stock prices and bond prices moving in opposite directions is not always 100% accurate, it does appear to happen more often than not.
Every once in a while we do get to experience the double treat of both stock prices rising, bond prices rising, and current mortgage rates declining. After experiencing and enduring the economic climate of the last two years or so, it sure would be nice for the sun to shine on us in that way more often. We all can use a little more sunshine.
I realize as much as we wish for it….we do not live in a perfect world. This is also true when we are in the market of buying a new home while also owning a current residence.
In a perfect world we close on our new home either after or at the same time as when we list, sell and close on our current home. As much as we wish for this to be true, it doesn’t always work out that way…
This may happen for a number of different reasons:
-We fell in love with a house we wanted to buy and the sellers were not willing to allow any contingencies and for what ever reason we couldn’t sell our home in time. (ie: sales contract contingent on you selling your current home prior to executing the purchase of the new property)
-We want to keep our current home as a 2nd home.
-We want to keep our current home as a rental property
Agency Loans…
Both Agency loans (Fannie Mae and Freddie Mac) and also FHA have guidelines pertaining to these situations. You may want to keep in mind the following if you think you may find yourself in this particular situation.
For agency loans (Fannie Mae and Freddie Mac conforming loans) if you cannot sell your current residence in time or you choose to keep your current residence as a second home then….They will require you to not only qualify with both PITI mortgage payments BUT you will also need 6 months of mortgage payments (PITI) each for BOTH properties. NOTE: if you can show you have at least 30% equity in the departing residence then the reserve requirement will be reduced to cover 2 months of mortgage payments (PITI) for each property. FHA mortgage loans do not have any reserve requirements but you will have to qualify with both mortgage payments.
Required Equity
If you would like to keep your departing residence as an investment property you will need to document at least 30% equity in the property for agency loans and 25% equity for FHA loans. If you can document the required equity you must ALSO provide a signed executed lease agreement, proof of security deposit paid by the renter (front and back of cancelled check) and proof of security deposit being deposited into your account. If the above requirements can be documented, then for Agency loans you will be able to use 75% of the monthly rental amount as income (specific lenders may have different guideline overlays) and for FHA up to 85% of the monthly rental amount as income. (The 85% is based on the area of the country you live in)
If you can not document the required equity then you must be able to qualify with both mortgage payments (PITI) towards your monthly obligations and also show 6 months of PITI reserves for each property.
NOTE: 401k, IRA accounts etc may be used towards your reserve requirements yet you will only be allowed to count 60% of your balance/vested balance towards your reserves.
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Smith
August 13, 2009 @ 2:46 am
Hey I just gone through the content of your blog and I also want to add that as the mortgage industry slows and consolidates, it is increasingly relying on competent and specialized service providers.
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fha mortgage loan
August 16, 2009 @ 7:40 pm
fha mortgage loan…
Because of the problems in the housing industry as well as the financial crisis (which is also tied to the housing trans atlantic mortgage boom), the stock market has taken a beaten. Whilst a word of mouth referral from a friend or neighbor is ideal, i…
TiV
September 11, 2009 @ 11:12 pm
I just went thru this problem with my mortgage to finance to purchase a property due to job transfer, and they need us to show that we have %30 equity on the home that we already have a lease for $2200/mth and our current mortgage balance on this property is $224K and $1250/mth, and the horrible appraisal which come in way below our expectation. A 2020sqf home built in 2002, 4bd, 3 full bath. It cost us $310K to build and ~30K in improvement. Zillow.com give $385K, and the appraisal came in at $260K. If we want to sell I would think it would go in less than 60 second at $350K full cash…
Our credit FICO is 780-809, we pay down %20 and willing to pay more on the new purchase, but it failed to close due to our Professional Appraiser, what a joke! If the appraisal process is not regulated properly I think the home foreclosure will continue to go up.
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fix credit
September 20, 2009 @ 1:16 am
I recently came across your blog and have been reading along. I thought I would leave my first comment. I don’t know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often….
Home Design
May 5, 2010 @ 5:51 am
The Mortgage Financing industry was estimated approximately at US $ 18 billion in India. The mortgage industry is undergoing a change as the market is dominated by banks in the direct housing finance sector. Though the housing finance industry in India is growing for the past few years still financing through the organized sector continues to account only for 25% of the total housing investment in India
Home Design
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