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FHA Loan Limits increased in Michigan!

I have great news to share. The FHA loan limits have just been increased.  We did see a major increase in the new loan limits which was not expected at least here in Michigan.  The new loan limit for most county’s in our area is $271,050.  That is up from $200,050.  FHA is going to be one of the absolute best mortgage solutions for people this year and potentially years to come.The program is not regulated by Fannie Mae or Freddie Mac so even if the property is labeled as being in a “DECLINING MARKET” it does not change the loan structure of FHA loans.  Fannie Mae and Freddie Mac make lenders reduce the LTV by 5% for all properties in a declining market.  FHA does not require us to reduce LTV’s by 5%.

There are many mortgage brokers and banks in our area that have not been doing FHA’s because they didn’t believe it was a worthwhile program.  It is an absolute must in the market today.  I’m proud to say that we’ve been advising a lot of our clients in this direction over the past 6 months because of it’s flexibility on LTV, allows for 100% financing in DECLINING MARKETS, has reduced monthly PMI, allows for non-owner occupant borrowers to co-sign, and often times has lower interest rates than a Conventional 30 yr. Fixed program.

If you’d like more information on how this could benefit you or anyone you know do not hesitate to contact me.  I am extremely pleased to see the government taking action and making a positive impact on our industry.  This will truly be a saving grace for many people today.

I look forward to the opportunity to help

What do the Fed rate cuts mean to me?

The Fed has continued to lower the Fed funds rate through the first quarter of 2008.  How does this affect the interest rate on my mortgage?  Should I wait to purchase my new home until the Fed is done with its rate cuts?  I’ve been thinking of refinancing, but should I hold off on this until the Fed has stopped cutting rates?The statement and questions I wrote above are on the top of everyone’s mind today especially if you are a home owner hoping to refinance or a potential home buyer.

I have attached an article here that will help dispel the myth that when the Fed lowers the Fed funds rate that it actually reduces mortgage rates by the same amount.  The article is authored by market expert, Barry Habib.  I have been a member of Barry’s online service called “Mortgage market Guide” since 2003.  Barry’s service is a must for mortgage professionals that want to know exactly what is happening in the bond market and when the best time to lock or float interest rates for their customers.

Interest rates for mortgages such as the 30 yr. fixed loan, 15 yr. fixed loan, FHA, MSHDA, etc… are all based on the value of mortgage backed securities in the bond market.  The Fed can only control the Discount rate which is what banks can borrower money at and the Fed funds rate.  The Fed has no direct control over the bond market or how the 30 yr. fixed interest rates change on a day to day basis.

As bond prices go up, interest rates on mortgages go down.  As bond prices go down, there is less demand for bonds and then interest rates go up.  If you watch how the NASDAQ is trading throughout the day you should be able to see the bond market working in the opposite direction.  When the stock market is doing well, there is less money going into the bond market.  When there is less money going into the bond market, mortgage rates will drift higher due to less demand.  When the stock market is having a couple negative days in a row, it’s likely that the investment dollars are flowing into the bond market instead, therefore helping lower mortgage rates.

The Fed reducing the Fed funds rates helps individuals and businesses that have shorter term loans that are tied to the prime lending rate.  The reduction of the Fed funds rate often creates higher interest rates for long term mortgages that most Americans are concerned about.  Keep this in mind the next time the Fed lowers the Fed funds rate which will be on March 18. It does not necessarily mean lower interest rates on your mortgage.

Quick Tips about Financing Foreclosures in Grand Rapids, Michigan

How to finance a foreclosure has been a popular question for me lately in this Grand Rapids, Michigan Market.  There are many homes in Grand Rapids, Michigan that in foreclosure right now that many purchases that I’ve financed over the past 6-12 months have been properties that have been foreclosed on.  A home goes into foreclosure when the original owner of the home fails to keep the commitment of the original loan they signed when they purchased or refinanced the home.  Once the foreclosure process is complete, the bank will typically become the owner of the home.

Financing options for a home that has been foreclosed on is not that much different than if you were buying a home from a family that is living in the home.  The main difference is that you are negotiating with a bank who is the owner and not an individual or a family.  Mortgage options for a buyer are still based on credit scores, income level, down payment or assets available, and the property type.

The biggest concern most lenders have when lending money on a home that is in foreclosure is the current condition of property.  Foreclosure is a difficult thing for anyone to go through and often times a disgruntled home owner will destroy or take many of the big ticket items from a home with them when they are forced out of the home.  I have seen people take out kitchen sinks, counter tops, flooring, water heaters, plumbing fixtures, etc…

The media glamorizes the opportunity to make a lot of money on foreclosures.  I believe there are great opportunities to buy today and it may not necessarily mean the only good deals are on bank owned properties.  When purchasing a home you have to ask yourself, what is my motivation for purchasing a particular home?  Do you want to purchase a home for your family to live in for the next 10 years that will not require a lot of work?  Do you want to buy a property that is terrible condition, renovate it, and sell it as quickly as possible?  Any type of home purchase is a large investment and whether a home has been foreclosed on or not should not be the end all reason for purchasing a particular property.

If you are interested in purchasing foreclosures or other distressed properties I would suggest seeking out the advice of a couple professionals early on in the process.  This type of transaction has the potential to be more complicated than most and requires the skill and expertise of experienced mortgage professionals and Realtors. 

I look forward to hearing any questions or concerns you may have about this post.  Please let me know if there is anything specific you would like to hear from me about.

Contributed to by:

Jon Potvin at First Horizon Home Loans


One of the most important reasons to be PRE-APPROVED early on in the home buying process is to make sure you are comfortable with the monthly payment and the amount of money you would be required to bring to the closing table.  Loan programs and guideline changes are happening so rapidly today that a Pre-Approval on a particular loan program from 6 months ago may not be applicable today.Many lenders have been caught in a tough place over the past 6-12 months by providing a borrower or Realtor with a PRE-APPROVAL letter when the borrower really isn’t PRE-APPROVED.  If a lender simply asks you what your credit score is and how much money you make and says, “you will have no problem being approved for a loan of this size” you should be aware that this is more of a PRE-QUALIFICATION and not a PRE-APPROVAL.  There is a big difference.

Buying a home is an emotional purchase.  It is also the largest purchase people usually make.  It is much more comfortable to make an offer on a home if you understand exactly what your monthly payment would be for a particular price range.  There is much less stress involved when making an offer on a home when you understand what your payment is and that you are already PRE-APPROVED.  Consider looking at homes in your area in the $250,000-$300,000 price range only to later discover that you can only be pre-approved for homes in the $125,000-$175,000 range.  Homes at the lower price range could be more difficult to be excited about if you become emotionally attached to a home in the higher price range.

There are many other important reasons for being PRE-APPROVED early on in the home buying process, but I think you will get a good idea about this topic from the information I’ve provided. 

Please do not hesitate to let me know if you have any questions or concerns about what I have discussed.  I look forward to the opportunity to help.

Contributed to by:

Jon Potvin at First Horizon Home Loans

How to get PRE- APPROVED for a Home Loan?

I could go on for a long time about the topic of why it’s vitally important to be PRE-APPROVED before beginning your search for a home. First off, I should briefly describe what being PRE-APPROVED is and how to get started.

I consider you to be PRE-APPROVED after:

  • Credit Report has been pulled
  • Review your Income and Asset documentation
  • Have the information verified by an underwriter along with a DU (desktop underwriting) approval. 

This sounds like a lot of work, but it really isn’t.  

I begin the PRE-APPROVAL process by taking the time to gather as much information from you over the phone or direct you to my web site to fill out an online application.  This will give me the information I need to get started.  Then I would request the necessary income and asset documentation to verify everything is in line with what is on the loan application.  It typically takes about 24 hours or less to determine if the loan will be approved or not.  My team typically meets with you for a face to face mortgage consultation.  The information and dialogue you will receive in the consultation is truly what separates our service from our competition.

After the consultation and PRE-APPROVAL letter in hand, you can confidently search for the right home for your family knowing your monthly payment objective is being met and that you are fully APPROVED.

Contributed to by:  

Jon Potvin at First Horizon Home Loans