Rent out your home and buy a new one...Not so easy!

If you want to buy another home while you are still carrying the mortgage on the first home, you will need to have your ducks in a row. You will want to have cash reserves available so you can make repairs on the other home or cover the mortgage between renters. You will need to have a renter sign the lease prior to your getting another mortgage. Lenders are wary of borrowers who show fake leases, get a mortgage and immediately foreclose on the first home. So, you want a legitimate lease drawn up, showing a security deposit from the renters.

Conventional Mortgage

In today's economy, there are strict requirements for those claiming to be renting out one home and buying another. If you are getting a conventional mortgage, you will need to have a signed lease, plus 75 percent equity in your first home. If you do not have 75 percent equity, you will need 6 months PITI reserves on the first house and six months PITI reserves on the second house. "PITI" refers to principal, interest, taxes and insurance. So, in essence, you are required to have the entire mortgage payment for six months for each home. Plus, you will need a signed lease with proof of a security deposit.

FHA

As of 2009, the Federal Housing Administration (FHA) will no longer count any rental income on your application for a new home. Therefore, you must qualify for both mortgages without the rental income. Your debt-to-income ratio cannot exceed 41 percent, and that will need to include the mortgages on your first and second homes. If you are going the FHA route and are having trouble with your ratio, try paying off some debt like that on credit cards or car loans before applying.

health-care legislation to impose sales tax on all real estate sales...REALLY?

 Benny L. Kass from The Washington Post breaks it down: http://tinyurl.com/3x7gzwm

FICO scores keep plummeting

Close to 1/4th of US consumers have sub 600  FICO scores, which is more than the average over the last couple years.

Fair Isaac & Co's new figures compiled from 2008 to 2010 showed that the biggest deterioration in credit grades came in two categories: 550 to 599, and 500 to 549. 

Needless to say that a mortgage is most likely out of the question for anyone in these groups. 

Loan Closings Drag On

By Paul Muolo

Top-flight loan officers in search of job security have been fleeing the confines of nonbank lenders for the megabanks, in search of job security and a future. But it now appears some of these LOs are headed back to the nonbanks because the big boys take much too long to close a loan.
What's at stake here, quite simply, is loan commissions. Not only are there reports of firms like Bank of America and Wells Fargo tightening the hatch on how much they pay in commissions, but because these lenders take so long to close a mortgage, some Realtors won't give certain branches referrals anymore.... Read more: http://tinyurl.com/28lxo5m

FHA loans continue to be "King" of the market

It's easy to remember when a few years ago when the only people able to take advantage of FHA financing lived in "the outskirts". Low loan limits and a myriad of easy to qualify for loan products kept FHA origination (at least in my neck of the woods) at low levels.

These days I can honestly say 4 out of 5 purchase applications that hit my desk are for FHA insured loans.

No ones complaining though! With record low rates and the LOWEST down payment option for most buyers, FHA will continue to rein supreme...for the moment anyway.

Small dip in overall home loan applications means that refinancing is strong in 2010

Although the number of new home loan applications has not been so low in thirteen years, the overall number of home loan applications is only sightly off, down only 2.9 percent. This means that loan refinance applications are on the rise. The reason is simple--rates are incredibly low [fill in example?]. Indeed, anyone with an interest rate in the mid-fives, which really is millions of Americans, should seriously consider refinancing now, don't wait, complete an app at http://www.mypurchasemoney.com/ to take advantage of these record times!

Intrest only ARM's just got a lot harder to qualify for.

Fannie Mae Tightens Guidelines On ARMs And Interest Only Products

Posted: 04 May 2010 07:45 AM PDT

For the first time this year, Fannie Mae announced significant updates to its mortgage underwriting guidelines.
The changes include newer, harsher ARM qualification standards, the elimination of a once-popular loan product, and tighter rules for interest only mortgages.
Fannie Mae made its official announcement April 30, 2010. The changes will roll out to home buyers and homeowners over the next 12 weeks.
The first guideline change is tied to ARMs of 5 years or less.
Mortgage applicants must now qualify based on a mortgage rate 2% higher than their note rate. For example, if your mortgage rate is 5 percent, for qualification purposes, your rate would be 7 percent.
The elevated qualification payment will disqualify borrowers whose debt-to-income levels are borderline.
The second change is Fannie Mae's elimination of the standard 7-year balloon mortgage. Balloon mortgages were popular early last decade. Lately, few borrowers have chosen them, though. Mostly because rates have been relative high as compared to a comparable 7-year ARM.
And, lastly, Fannie Mae is changing its interest only mortgages guidelines.
Effective June 19, 2010, Fannie Mae interest only mortgages must meet the following criteria:

1. The home must be a 1-unit property
2. The home must be a primary residence, or vacation home
3. The borrower's FICO must be 720 or higher
4. The mortgage must be a purchase, or rate-and-term refinance. No "cash out" allowed.

Furthermore, borrowers using interest only mortgages must show two full years of mortgage payments "in the bank" at the time of closing.
Earlier this year, Fannie Mae-sister Freddie Mac announced that as of September 2010, it will stop offering interest only loans altogether.
Between Fannie Mae, Freddie Mac, the FHA, and other government-supported entities, the U.S. government now backs 96.5% of the U.S. mortgage market. So long as mortgage default rates are high, expect approvals for all borrower types to continue to toughen.