TheRealtorMcCoy's Weblog

By now, you have received your property tax bill from the county, and if you are like most people, you were probably surprised that your taxes haven’t dropped, maybe even risen, even though property values have fallen! This is mainly due to Measure 50, passed by voters in 1997.

Because tax valuations are determined as of January 1^st each year, you may want to consider an appeal to the tax board if you purchased a new construction home in 2009 that would have been assessed in January 2009, and you believe the value of that home has dropped substantially since then. I would be happy to run some comparables for you to determine if that is the case.

Cheryl McCoy, RE/MAX Equity Group, Inc.- Portland

Our very knowledgeable and astute in-house financial planner and mortgage broker, for Equity Home Mortgage, had this to say about mortgage availablity:

“In response to concerns about the availability for your clients to obtain financing on their real estate needs, I want to assure you that, regardless of what the media might be reporting, loans are being made. There is no question that things are more difficult than they used to be and guidelines do change daily. Since we are in a very fluid market, it is highly recommended that your clients seek the advice of a mortgage professional before planning a change in financing arrangements.

That said, Fannie Mae and Freddie Mac are still our major source of financing for conventional loans. The current loan limit is $417,000. Anything over that amount is considered jumbo. Conventional financing typically requires at least 5% down and good credit. With less than 20% down, mortgage insurance is required. This requires us to follow the mortgage insurers’ guidelines in addition to the lenders’ and Fannie Mae’s. One big change that has come about is that we need to verify income for all applicants. No longer can we just state their income. Documentation requirements are dependent upon how the client’s income is generated. The debt-to-income ratio being used has become more conservative also. As a rule of thumb we will allow the client’s total monthly debt (mortgage payment, property taxes, property insurance, credit card debt, auto loans, etc. – anything that would show up on a credit report plus spousal and/or child support) to be 45% of their stable, verifiable, gross monthly income.

Current rates are around six percent. Lower credit scores now require higher loan costs. The same applies for the lower down payment transactions.

FHA has become a major participant in the lending place today. These programs are more aggressive in credit quality – lower scores don’t necessarily require higher loan costs. Loan amounts can go to the same limit as Fannie Mae ($417,000). Down payment is only 3%, however, come January 1, it increases to 3.5%. Full income documentation has always been required.

VA loans are still a great source of financing for our veterans and are still available with no down payment to loan amounts of $417,000. VA loans can actually go above that limit, however, they do require down payment.

There are many other state and local government sponsored programs available to first time homebuyers requiring little or nothing down. There is also the USDA program for cities with populations less than 25,000. These loans have very favorable terms with no down payment required.

As for jumbo programs (over $417,000) that market is still very fragmented. Many lenders would prefer not to lend over the conforming limit and, if they do, their rates are substantially higher. We do know of a few ‘portfolio’ lenders. These lenders do not sell their loans or have them insured with any government entity. These lenders will usually keep the loans for their own investment portfolio. Most of these lenders prefer to lend on an ARM product with a fixed period of 5 -10 years. The rate on these loans are typically below the standard conforming rates. I know of one portfolio lender who still does jumbo loans on a 30 year fixed basis. These lenders typically want 10% or more down (many will only lend if there is 20% down). Full documentation and good credit is required. Although we primarily use these lenders for jumbo products, they can lend on loan amounts as small as $100,000.

Obviously, this is just an overview of our lending parameters. You can see that there are still many sources of funds available. Some of the more closely scrutinized issues today surround homeowners who will keep their existing residence, rent it, and then buy a new home to occupy. These loans are being reviewed very closely. Refinance with cash being taken out are also on the target list. Employment in certain fields (like the mortgage business) are also on the list.

The bottom-line is that good borrowers are still getting the money and the riskier transactions are getting a lot more difficult to make. The lending process is taking a little longer due to more documentation and a greater credit/risk analysis. But, we are still closing loans.”

Bob Chiodo, CFP

Equity Home Mortgage, LLC

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RMLS Stats as of February 2010

Property Tax Ramifications For 2009 New Construction Buyers

What Will It Take To Stimulate The Economy?

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