Archive for August, 2008
Primary Residence To Be Retained As A Rental Property…Revisited
Posted by Kevin Kueneke | Leave A Comment »
About a month or so ago, I wrote a post regarding FNMA’s new stance on purchase transactions where the borrower plans to retain their current principal residence as a rental property. You may remember that if the retained property did not have at least 30% equity then lenders would not be able to use any rental income from that property to offset the mortgage payment and help qualify.
At that time I focused mainly on the guideline change from an income qualifying standpoint because that seemed to affect the most would-be buyers. However, the reserve requirements changed as well which is now catching many borrowers, and lenders, off guard. In the breakdown that follows, the term “FNMA DU findings” refers to the assets that the automated underwriting engine requires to be verified. It can be as little as the actual amount of cash needed to close and as much as all assets that the client actually has.
Here is a breakdown of the new guideline and how it affects retained properties for rental purposes as well as retained properties as 2nd homes.
Scenario #1: The current primary residence will become a 2nd home AND at least 30% equity in the current primary residence can be documented.
New Policy: Both the current and the new mortgage PITI payments must be used to qualify the borrower for the new residence. The reserve requirements are the greater of the FNMA DU findings OR two months of PITI for both properties.
Scenario #2: The current primary residence will become a 2nd home AND at least 30% equity in the current primary residence can NOT be documented.
New Policy: Both the current and the new mortgage PITI payments must be used to qualify the borrower for the new residence. The reserve requirements are the greater of the FNMA DU findings OR six months of PITI for both properties.
Scenario #3: The current primary residence will become an investment property AND at least 30% equity in the current primary residence can be documented.
New Policy: If using rental income to offset the mortgage payment in qualifying then the reserve requirements are per the DU findings. The rental income must be documented with a fully executed lease agreement and proof that a security deposit was received from the tenant and deposited into the borrower’s account. If not using the rental income to qualify then the reserve requirements are the greater of the DU findings or two months PITI for both properties.
Scenario #4 (the big one): The current primary residence will become an investment property AND at least 30% equity in the current primary residence can NOT be documented.
New Policy: Rental income may not be used to offset the mortgage payment. Both the current and new mortgage PITI payments must be used to qualify the borrower for the new transaction. The reserve requirements are the greater of the DU findings or six months PITI for both properties. Six months PITI for both properties is typically much greater than the DU findings.
In all cases, to document the 30% equity, the lender must obtain either a statistical appraisal (AVM) or a full appraisal. However, an AVM may not be used to override the value established by the full appraisal.
Do the reserve requirements seem excessive? Maybe. But this is actually one more step to help stop future foreclosures. Please call me at (760)500-1919 or email me should you have any questions or should you think you may be affected by this change.
Popularity: 16% [?]
Related Posts: Buyers, CW Mortgage, Home Loans, Homeowners, Mortgage News, Real Estate News
12 Tips For Hiring A Remodeling Contractor
Posted by Kevin Kueneke | Leave A Comment »
Unless you are the ultimate handyman or handywomen, there will always come a time when you will need the help of a professional remodeling contractor.
As I have found out in the past, the lowest bid and the best work do not necessarily go hand in hand. Also, the biggest company is not always the best. The following tips can go a long way in helping you find a reliable and competent contractor:
1. Get at least three written estimates. 
2. Check references. If possible, view earlier jobs the contractor completed.
3. Check with the local Chamber of Commerce or Better Business Bureau for complaints.
4. Be sure the contract states exactly what is to be done and how change orders will be handled.
5. Make as small of a down payment as possible so you won’t lose a lot if the contractor fails to complete the job.
6. Be sure that the contractor has the necessary permits, licenses, and insurance.
7. Check that the contract states when the work will be completed and what recourse you have if it isn’t. Also, remember that in many instances you can cancel a contract within three business days of signing it.
8. Ask if the contractor’s workers will do the entire job or whether subcontractors will be involved too.
9. Get the contractor to indemnify you if work does not meet any local building codes or regulations.
10. Be sure that the contract specifies the contractor will clean up after the job and be responsible for any damage.
11. Guarantee that the materials that will be used meet your specifications.
12. Don’t make the final payment until you’re satisfied with the work.
Remember that most contractors work on a referral basis and the last thing they need is an unhappy customer. If your contractor forgets this very basic but very important idea, then it might be in your best interest to find someone else.
In need of a good painter, electrician, or plumber in the San Diego area? Contact me and I will be more than happy to forward their information to you.
Portions reprinted from REALTOR® magazine (Realtor.org/realtormag) with permission of the National Association of Realtors®. Copyright 2008. All rights reserved.
Popularity: 23% [?]
Related Posts: CW Mortgage, Home Improvement, Homeowners, Uncategorized
Zero-Down VA Loans Up To $697,500 In San Diego County
Posted by Kevin Kueneke | Leave A Comment »
Continued good news from the recently passed Housing and Economic Recovery Act (HR 3221). The Veterans Administration (VA) has increased the VA guaranty amount. 
The VA will now guaranty up to 25% of the FHA one-unit high-cost county loan limit. This means that a veteran can borrow up to $697,500 in San Diego County with zero down payment. However, this $697,500 must include the VA Funding Fee (click here to see if funding fee is applicable). Effective January 1, 2009, the new VA zero-down loan limit will be 115% of the local area median home price which may be as high as $625,500.
You might ask then, through the end of the year, what is the maximum sales price in San Diego County? For a veteran with full entitlement and first time use of their guaranty, this equates to a sales price of about $682,800…with no money down! For reservists or national guard, the sales price would be about $681,100. If the veteran is exempt from paying the funding fee, then the sales price can be the full $697,500.
This is truly beneficial as it allows active duty servicemen, servicewomen, and veterans to purchase homes in high cost areas without having to come up with the standard down payment. Also, the mortgage interest rates are no longer set by VA so that the veteran can actually get a fair market rate. Keep in mind that the VA Funding Fee at these loan amounts is quite sizable since it is a percentage of the base loan. However, it is typically financed and can actually be paid by the seller.
Questions? Call me directly at (760)500-1919 or email me today to find out how much home you qualify for…it might be more than you think.
Popularity: 53% [?]
Related Posts: Buyers, CW Mortgage, Home Loans, Homeowners, Interest Rates, Mortgage News
The Housing And Economic Recovery Act: Tax Credit!
Posted by Kevin Kueneke | Leave A Comment »
The recently passed Housing and Economic Recovery Act (HR 3221) has many nuts and bolts. Quite possibly the best part of the legislation is the new tax credit. This tax credit is for First Time Homebuyers (no ownership of a principal residence in the past three years; vacation or rental property ownership is o.k.) whose loan closed between April 9, 2008 and June 30, 2009.
The highest amount of the tax credit will be $7,500 for individuals earning up to $75,000 and couples earning up to $150,000. The credit is still available for those individuals earning up to $95,000 and couples up to $170,000, however to a lesser degree.
A tax credit is superior to a tax deduction. A tax deduction is added to all of the other deductible items on Schedule A (medical expenses, charitable contributions, home interest, property taxes, unreimbursed employee expenses, etc.) and then that amount is deducted from the adjusted gross income, giving you the bottom line income from which the income tax is calculated. 
A tax credit is taken after all of the deductions are calculated, the adjusted gross income is calculated, and the income tax is determined - then the $7,500 comes off of that amount! If the taxpayers owe less than $7500 in taxes, the difference between what they owe and the $7500 is payable to them as a tax refund. Owe $10,000? Now you only owe $2,500. Owe $5,000? Now you get a $2,500 refund.
This tax credit is not necessarily a gift…it is an interest-free, 15-year loan. The taxpayer must pay back 6.67% of the credit amount each year until paid in full. This equates to about $500 per year for the maximum credit of $7,500.
If the homebuyers sell their home within 15 years, and the gain on the home is less than the amount of the credit, then the remaining portion of the tax credit is forgiven. If the gain is greater than the remaining portion of the tax credit, then the balance will be due for that year’s income taxes.
Aside from income limitations, the credit is for 10% of the sales price of the home up to a maximum of $7,500. This means that the maximum credit starts at a sales price of just $75,000!
The reality is that many people will benefit from this program. Have more questions? Please feel free to contact me via phone (760)500-1919 or email me and I will be more than happy to discuss your particular situation.
Popularity: 23% [?]
Related Posts: Buyers, CW Mortgage, Home Loans, Homeowners, Mortgage News
