Monday, September 29, 2014

What’s New on the Mortgage Front?

From low down payment options for first-time buyers to jumbo loan options for move-up purchases, find out what lenders are offering buyers today.

Buyers’ loan options may have changed more than you may realize. Restrictive lending requirements since the Great Recession are starting to loosen up, and lenders are offering more flexible financing options for borrowers. Here’s a reference guide of new products (as of mid-September 2014) that you can recommend to new buyers, move-up clients, and home owners who want to refinance. But always advise your clients to check with lenders or mortgage brokers for the latest terms and conditions of any loan product.
Chase Mortgage Banking

  • Chase’s DreaMaker loan is geared for low- to moderate-income borrowers, including first-timers, says Jim Manelis, senior vice president in Phoenix. Funds are available for up to 95 percent of the home’s value, and there’s no upfront private mortgage insurance. Unlike FHA loans, interest rates don’t increase or decrease based on borrowers’ FICO score, and borrowers can cancel PMI when they get to an 80 percent loan-to-value ratio. “In some cases, we think this is cheaper than an FHA loan,” says Manelis.

  • In late September, Chase will introduce fixed-rate and adjustable jumbo loans with a maximum 85 percent LTV. Maximum loan amounts will be $1.5 million with a minimum 740 FICO score. Chase will also offer fixed and adjustable jumbo loans with 80 percent LTV. Maximum loan amounts are $2 million; these also require a 740 minimum FICO score.

  • Chase is also expanding its loans for nonowner-occupied properties in late September. Post-recession, it offered only 15-year amortization; 30-year amortization will now be available. It’s also expanding these loans to states it had previously not offered them following the recession, including Arizona, California, Nevada, Oregon, and Washington.

  • Though not at the volume it reached before the recession, Manelis says Chase is also seeing its home equity business warm up. “As values come back, to finance home-improvement projects or fund kids going to college, our volumes are way up.”
Guaranteed Rate

  • “We’re seeing the reemergence of lower down payments needed in the jumbo market,” reports Dan Gjeldum, Chicago-based senior vice president

  • Guaranteed Rate is offering 80-10-10 jumbo loans of up to $1 million, in which borrowers put 10 percent down and then do a first mortgage of 80 percent of the home’s value coupled with a second mortgage for the remaining 10 percent. Borrowers need a minimum 720 FICO score and will pay about 1/8 percent more on their interest rate than if they’d have put 20 percent down.

  • The caveat: Documentation for these jumbo loans can get a little heavy for self-employed borrowers. Assume a borrower’s income tax return may show income from a company she owned in 2013 but not in 2014 because the entity was dissolved. The underwriter will now ask for corporate dissolution records.
HomeTrust Mortgage Corp.

  • The down payment is the main barrier millennials face to home ownership, says Evan Geiselhart, the Schaumburg, Ill.–based company’s CEO. HomeTrust is marketing what it calls a launch loan. Borrowers need a job and a minimum credit score of 660. They need at least 5 percent down, but that entire amount can be a gift. In exchange for paying no monthly PMI, borrowers will pay a higher interest rate, typically 1/8 percent or 1/4 percent higher.

  • HomeTrust Mortgage is also offering asset-based adjustable mortgages for borrowers with a FICO score of at least 680 who have substantial assets but not necessarily adequate income to qualify for a mortgage. Perhaps retirees have $400,000 invested in the stock market. HomeTrust will take 70 percent of those invested assets—but not amounts in checking or savings accounts—and divide that number by 60 to arrive at an income it imputes to the borrowers. That income, plus any actual monthly income, allows borrowers to qualify without drawing from or pledging the asset.
Quicken Loans

  • “People still think they need 20 percent down,” says Bill Banfield, vice president of the Detroit-based lender. Not true. Quicken’s offering loans for borrowers who put only 5 percent down and allowing them to pay a one-time fee or a slightly higher interest rate to avoid monthly PMI. Borrowers need a 680 or higher FICO score.

  • If interest rates rise, Banfield says assumable loans may become a valuable marketing tool for home owners whose loans are assumable. FHA and some VA loans are assumable, he notes, as are conventional ARMs after they adjust. They typically require buyers to requalify for the loan on their own, just as they would with any mortgage.

  • In addition, buyers would be required to replace any equity the seller has in the home. Assume the home’s value is $200,000, and the owners’ current mortgage is $160,000. Buyers looking to step into the owners’ mortgage would have to come up with $40,000.
Wells Fargo

  • In hot markets where buyers may be forced to make an all-cash offer just to push their bid to the top of the multiple-offer heap — think San Francisco, Manhattan, Washington, D.C., Los Angeles — they can apply for a Wells Fargo jumbo purchase loan within 90 days of the closing, says Joe Rogers, executive vice president in Columbia, Md.

  • Technically that would be considered a refinance situation because the consumer already owns the home, and terms are less favorable for refis than for purchase loans. However, Wells Fargo will treat it as a purchase loan. Minimum loan amounts are $417,000, and the maximum is $6 million.

  • Wells Fargo is also offering borrowers the opportunity to lower their monthly payments by slapping down a chunk of money. Typically, that lowers only the principal amount of the loan; the monthly payment remains unchanged. However, Wells Fargo will recast the loan to lower the monthly payment for borrowers who make a one-time payment of at least $20,000.