Navigating a Changing Mortgage Navigating a Changing Mortgage IndustryIndustry

Sheila Mitchell, Realtor

Edge Home Finance

• Direct Brokers Saves Time, Money, and Stress

• Local Company Based In Edina, MN

• Best Service

• I have over 25 years experience as a Loan Officer

Mortgage Industry Changes for Self-employed Borrowers

• Stated loans are a thing of the past for self-employed borrowers

• Most lenders require a twenty four month average that is not decreasing plus a YTD P&L

There have been many changes in the lending business.

RATE = CREDIT

• Quoting rates now requires credit scores, appraisal, monthly income and monthly debts to determine your rate

• This makes your credit scores very important

NEW REGULATIONS• Stated income loans are a thing of the past• Self employed borrowers are having a hard time qualifying• Negative-Amortization have also been eliminated• Appraisals are required to be ordered through a random

automated system. They are more expensive, slower, less accurate due to non-area of expertise

• It’s more difficult to quote rates. We need an appraisal, credit, and income for loan to value

• Net Tangible Benefits threshold must be met to refinance your home.

• Credit has become much more important in pricing• Construction loans now require a minimum of 20% down. The end

loan may require less

Thinking about Refinancing?• Don’t miss out while rates

are still low• Lower your monthly

payment• Convert your ARM to a

fixed rate mortgage• Cash out to consolidate

your debt• Shorten the term of your

mortgage• Cash out for home

improvements

BENEFITS

• We must show that the borrower has Net Tangible Benefits showing why it is in the best interest of the borrower to do the loan if it is a refinance

Home is where your heart is..

Quiz Time!• WHAT PERCENTAGE OF AMERICANS

OWN THEIR OWN HOME?• A) 74.2%• B) 67.4%• C) 63.5%• D) 80.3%

The Answer Is…

It has gone down by approximately 8% since the peak in 2007

There is significant pent-up demand

Over 1 million people matriculate each year

C. 63.5%

There are some tax benefits for the home owner. You will get a form 1098 for mortgage interest deductions on your schedule A. If you are in a 25% tax bracket, it’s like Uncle Sam paying approximately 25% of your mortgage interest

Available Loan ProductsWhich product is right for you?

Lender–Paid Mortgage Insurance• If you put less than 20% down, you

have the option of lender-paid Mortgage Insurance with good credit

• Implications:– Generally this means lower payments– Also potentially a larger tax deduction

• Security on no payment shock sometimes associated with a HELOC

Edge Home Finance Product Specialties

PURCHASE LOANSREFINANCE LOANSCASH OUT LOANS

FHA LOANS/203K RENOVATION LOANSCONSTRUCTION/PERM LOANS

VA LOANSRURAL LOANSHARP LOANS

HECMJUMBO

COMMERCIALHELOC

HARP-Home Affordable Refinance Program• If your home is owned now by Fannie or Freddie and closed before 5-31-

2009 and owned by Fannie Mae or Freddie Mac, you may be able to refinance through the HARP program.

• Your loan needs to be greater than 80% LTV (or you could use a different program).

• I am able to look up who owns your loan with some basic information.• If you have no mortgage insurance now, you will not have it after you

refinance.• If you do have mortgage insurance now, it will not change. • You can’t pay off a second or a HELOC with your new HARP loan.• You must be current with your mortgage payments now.• You may not have any mortgage late payments in the last 12 months.• This program ends 12-31-2016.• Fannie Mae max LTV 125%• Freddie MAC max LTV 105%• PROGRAM HAS BEEN EXTENDED THROUGH 2016!

FHA- Federal Housing Administration

First time home buyer•Purchase– Minimum of 3.5% down or into transaction – may be a

gift from a relative•Upfront PMI – 1.75% – About $1,750 on a $100,000 loan

•Monthly PMI – .85% – Cost about $71/month on $100,000 loan

•Seller may contribute up to 3% toward CC Pre-paid taxes and insurance, and escrows•Maximum FHA loan Hennepin County $326,600 SFR

FHA STREAMLINE• Perfect 12 month payment history required• 210 day waiting period between refinances• Loan must “have purpose”, i.e. reduce payment by at least

5% (Principle + Interest + PMI)• Upfront PMI will drop from 1% to .1%.• PMI will be cut from 1.15% to .55%• Must have closed by May 31, 2009 to be eligible• No appraisal needed• Not necessary to have verified:

– Employment– Income– Credit score

• May not:– Increase loan amount to cover closing costs.– Take cash out to pay other bills (Max $500 cash out allowed)

Building a New Home? I’m the Expert to Call!

• Must have 20% cash up front front• Two closings• Rate depends on LTV,

credit, other risk• Usually Prime plus 2-3% for construction loan• Interest only during construction phase• Construction loan pays off other loans and takes

title. With additions, the current loan may stay in place

• Appraise plans and specs and sworn construction statement

• Second appraisal review when home is complete

CONSTRUCTION LOANS

Your Condo Experts• Edge Home Finance offers:– Dedicated, seasoned, full time condo staff– In-house approvals: 2 day turn time!– Full FHA project approvals– Non-Warrantable Condo options– Limited review option for Jumbo Loans– New conversions

JUMBO• Up to 10 million• Very competitive Fixed, ARM and Interest only options• One loan to 90% LTV purchase, maximum $750,000 (NO PMI)• LTV < 85%; All down payment may be from gift funds• 90 days off MLS no hit to rate• Rate and Term Refinance ARMs 90% LTV or CLTV to $750,000• $1,000,000 to 80% LTV / 90% CLTV• $1,500,000 to 70% LTV /90% CLTV• $2,000,000 to 65% LTV• First position HELOCs to$350,000

(Fixed or ARM)• NO PMI on any program• 660 – 679 Jumbo programs to

$900,000• Primary or personal second homes

to $1,000,000• Non-permanent residents acceptable• Available Nationwide

Construction Loan Requirements• Required to have 20% upfront. May use equity

in land if owned more than 12 mo.- may use appraised value

• Must prequalify for the end loan• Construction lender and end loan lender may

be different• Construction loan terms up to twelve months.• Must use licensed builder• Will need plans and specs• Will need signed sworn construction statement• May have end loan financing that is up to 96.5%

How Long Do I Wait To Buy?• Foreclosure to…

– FHA 3 years– VA 2 years– USDA 3 years– FNMA/FREDDIE 7

years– JUMBO 7 years

• Short Sale to…

• FHA 3 Years• VA 2 Years• USDA 3 Years• FNMA/FREDDIE 7 Years 81-

90%LTV• FNMA/FREDDIE 2 Years <

80%LTV FNMA/FREDDIE 7 Years >

90%LTV• Jumbo 7 Years

How Long Do I Wait To Buy? Chapter 7 Bankruptcy

to…

– FHA 2years– VA 2years– USDA 3 years– FNMA/FREDDIE 4 years– JUMBO 7 years

Chapter 13 Bankruptcy to…

–FHA 1 year–VA 1 year–USDA 1 year–FNMA/FREDDIE 2 years–JUMBO 7 years

We offer VA Loans• A great advantage is that you may

borrow the entire purchase price of your home.

• No down payment is required.• We are an excellent VA lender.• Extremely competitive rates• Knowledgeable staff

• Will need original DD-214 and Eligibility Certificate

Lock “n” RollPURCHASES

•Get pre-approved and locked on great rates while you are still house hunting.•All property and occupancy types.•Conventional fixed rates, 15, 20, & 30

NEW CONSTRUUCTION

•Locks for 55, 70, or 85 days.•Allows you to renegotiate if rates go down.•Conforming, FHA & VA

Edge Home FinanceRenovation Lending

Sheila Mitchell

Renovation Loan Programs Low down payment – 3.5 %

Minor/Cosmetic to Major/Structural

From fixer’s to dream homes

1-4 Units, mixed-use, condos, 5 to 4, 8 to 4

Almost any kind of repair or renovation – from habitability and heath & safety to upgrades and improvements

Overview of a Renovation Loan

We can finance just about any home in just about any condition

We can finance just about any repair or improvement into the loan

We finance homes and renovation funds based on the future value of a property

FHA Renovation Loan Example$407,000 - 110% of Appraised Value$370,000 -Appraised Value

Renovations - $50,000

Purchase Price - $300,000

$350,000 Cost - 12,250 3.5 % Req.$337,750 Loan

Gifts allowed for 3.5% Statutory Requirements

Benefits of 203K Loans for Borrowers

One mortgage for both the purchase and repair/update of home

Low down payment – 3.5%

Borrower often purchases home under value

Borrower often gains “INSTANT EQUITY”

Loan can be used for nearly any home repair/upgrade

Borrower can upgrade home as desired

203K Examples Of Improvements Cracked slabs Termite report findings Appliances Floors Plumbing and electrical systems Exterior and interior painting Roofs, gutters, and downspouts Heating, ventilation, and AC Room additions Repair of structural damage

What’s In It For You

Close properties that cannot appraise (i.e. damaged REOs) - $$$

Close hard to sell properties - $$$

Close client’s on dream home based on future renovations - $$$

You are paid at home closing NOT when repairs/renovations are completed

WHAT IS THE AVERAGE MINNESOTA HOME PRICE?

A) $190,000B) $229,500C) $203,000D) $175,000

The Answer Is…

B. $229,500

It has been steadily climbing in the last few years on average of 7%/year

Your Road Map to Success

EDGE HOME FINANCE

Re/Max Realtor that works for you

VocabularyFair Market Value- estimate of how much a specific home will sell for in today’s market, taking into account what similar homes in the area have sold forSeller’s Agent- that would be me! the agent helping you sell your property and helping you find the nextPre-approved Mortgage- a statement or certificate from your lender stating you qualify for a mortgage for a certain amount

Staging- a strategy where a home is purposely prepared so that it appeals to potential buyers. May involve cleaning, de-cluttering, rearranging furniture, redecorating, etc.Survey- document that defines the boundaries, measurements and structures on your propertyOffer- offer of purchase in writing for a particular propertyConditional Offer- offer to purchase with conditions such as satisfactory home inspection or suitable financing

Top Seven Reasons To Purchase A Home

Tax BenefitsThe U.S. Tax Code allows you to deduct the interest you pay on your mortgage, your property taxes, and some of the costs involved in buying a home.

AppreciationReal Estate has had stable growth since 1972. The recent housing crisis, although devastating to many, shows values are still up 7% on a cumulative basis. The number of U.S. households is expected to rise 10% to 15% over the next decade which will create a continued demand for housing.

EquityMoney paid for rent is money that you will never see again. Mortgage payments let you build equity ownership in your home.

SavingsBuilding equity in your home is a ready made savings plan. When you sell, the first $250,000 gain does not get taxed as a gain. It is $500,000 for a married couple.

PredictabilityUnlike rent, fixed rate mortgage payments do not rise over the years. Your housing costs may actually decline as you own the home longer. However keep in mind that property taxes and insurance costs may increase.

FreedomThe home is yours. You can decorate any way you want and choose the types of upgrades and amenities that appeal to your lifestyle.

StabilityRemaining in one neighborhood for several years allows you and your family to build long lasting relationships within the community. It offers children the benefit of educational and social continuity.

Consider Location Work  How will you get to work? Is public transit nearby?

School  Where will your kids go to school? Is transit or bus service available? Will your kids be able to walk to school? 

Kids Where will your kids play and hang out? Are there nearby playgrounds and parks? Neighbors  Do the local homeowners seem like the kind of people you’d like as neighbors?  Shopping  Where will you do your weekly shopping? 

Hobbies How far will you be from golf, theater, or other hobbies?   

As your REALTOR, I can help answer these questions for you.

Sheila Mitchell(612) 802-3978

You Are Ready To Sell?Getting Your Home Ready

1. What is your first impression? 2. Is it bright?3. Does it look and smell fresh and clean?4. Does your home look dated? 5. Is your home cluttered and too full?6. Is there soft upbeat music playing?7. Warm cookies or small treat for your

guests?

Re/Max What Is Your Return On Renovations?

Kitchens 85%Bath 92%Siding 85%Windows 85%Consult your Realtor about getting the most value out of every renovation dollar you spend

Showings and Open House Checklist

Eliminate Clutter

Keep, Donate, Throw Away

Remove Valuables and Breakables

Be Hospitable

Have a Family Plan of Action

Make Cleaning Up and Making Beds a Habit

Clean Out Garage, Attic, Storage Areas, Closets

Give a nice clean look to the house

Remove any sign of family photos or heirlooms. Make space to envision their own belongings in home

De-clutter the house and remove excess furniture

Clean up the outdoors with landscaping and washing exterior surfaces

Open up the curtains and blinds to bring in natural light and use brightest bulbs fixtures allow

Paint brightly colored rooms in neutral colorsHelp the buyers to picture themselves in their new home

SIGHT

Taste

Place a bowl of snacks or a tray of juice out with a note to the buyers saying “help yourself”

For those who love to cook, get taste and smell down by baking cookies or brewing coffeeJust be sure to have cups, sugars and creamers out

Avoid allergies of the buyers

Instead of using air fresheners and candles, go for a natural aroma by opening windows

An apple with cinnamon and vanilla warming adds an amazing smell

Clean bad odors from pets, smoking, and cooking

Adding flowers can bring a bright and fresh smell

Smell

Sound

Take a moment to sit in the house and listen

Creating a calming, upbeat environment helps the buyers escape their busy lives

Use soft music, a water fountain or a fire in the fireplace to create pleasing sounds

Soft Music

Touch

With buyers coming in and out, make sure that the house is cleaned from top to bottom

Think about the environment of the house by making sure that the temperature isn’t too hot or cold

Intelligent PricingYour best chance of selling your home is in the first two weeks of marketing

With a sign in the yard, MLS listing, internet marketing, open houses, broker’s caravan, ads and email blasts to buyers, your home will get immediate response

Consult with your agent and ask for feedback. Perhaps you can do more to make your home show at its best

The market can always change its mind and give your home another chance, but by then you’ve lost precious time and perhaps allowed a stigma to cloud your home’s value

Intelligent pricing isn’t about getting the most for your home – it’s about getting your home sold quickly at fair market value

Tips for Pricing Your HomeConsider comparables – What have other homes in your neighborhood sold for recently? How do they compare to yours in terms of size, upkeep and amenities?

Consider competition – How many other houses are for sale in your area? Are you competing against new homes?

Consider contingencies – Do you have special concerns that would affect the price you’ll receive? For example, do you want to be able to move in four months?

Get an appraisal – For a few hundred dollars, a qualified appraiser can give you an estimate of your home’s value. Be sure to ask for a market-value appraisal. Contact www.appraisalinstitute.org or ask me for assistance.

Ask a lender – it is important to price in line with a lender’s estimated value

Be accurate Know what you will take (Reprinted from REALTOR magazine copyright 2008)

Exterior Before and After

Living Room Before and After

Typically we can make due with the furniture you already own

Beautiful Staging Before and After

Inexpensive Kitchen Update Before & After

Cluttered Office to Nicely Staged Room

Just a Few Simple Accessories

Re/MaxTopsTheList

Re/Max is the Market Leader

Powerful Negotiator

•Knowing the value of your asset•Understanding factors like interest rates, closing costs and closing dates•Working with financing options and down payments•Guiding you through repair issues, appraisals and inspections

•Representing Your Best Interests