April 6th, 2013 | Important Updates to FHA and USDA Loans
FHA Mortgage Insurance – New MIP factors will be effective April 1, 2013. On a maximum LTV loan, the annual factor is 1.35% (up from 1.25%).
Also, starting in June, the Annual MIP will be payable for the life of the loan for LTVs over 90%. HUD will no longer follow the 78% drop off rule.
USDA – A Continuing Resolution recently passed to fund our government operations. The CR contained verbiage to extend USDA Eligible Areas – with no change – through the end of this fiscal year, 9/30/13.
Various bills have been introduced to modify the definition of “rural” and we will keep you updated as they make their way through Congress.
Remember! This program is budget neutral – meaning it pays for itself.
Credit Reporting Basics for REALTORS®
We are hosting educational seminars to provide basic insights into the use of credit reports. They will be led by our bureau’s Account Manager.
· 2 Hours Continuing Education Credit for DRE Licensees
· Refreshments will be served
· Free of Charge
We will hold classes in Hanford, Visalia, Selma, and Fresno. Please contact your local KMSI Branch Manager for Date, Time, and Location.
Market Wrap- Be aware that interest rates have risen quickly over the past few weeks. Time to get your clients to commit before rates push them out of the price range of the home they want. If you’d like some ‘visuals’ on the impact of rates vs. affordability – just let us know!
For most of us spending money is a lot more fun than saving money. However most, if not all, wish that we would have saved more by now.
Young Adults and Credit (courtesy of Advantage Credit Inc.)
In preparation for obtaining your first auto or home loan, it is a good idea to establish credit in advance. This will give you the foundation for a good credit history and credit scores. It is important to know how to utilize credit to make it work for you instead of against you. Having a credit card with a $300 credit limit is not the same as having $300 in cash. It is very easy to purchase those 5 music CD’s you have been wanting with a credit card, even if you don’t have cash in your checking account. But you may not realize the $75-$100 you just spent on those CD’s could cost you $150 or more if you choose to make payments over several months.
Starting with the basics, your credit score is a three-digit score that ranges from 300-850. Borrowers with high credit scores can expect better interest rates on all types of loans. Each of the three major credit bureaus, Equifax, Experian and TransUnion, collect data from your creditors about your history of borrowing and how you pay back what you have borrowed. Your credit history can be different at all three bureaus since your creditors may not report to all three. They are not required to report to the bureaus, however most do. Each of the bureaus use a different scoring model developed by Fair Isaac Company (FICO). These are statistical models and your scores can change daily depending if and when your creditors report to the three different bureaus.
According to statistics the average student now graduates with more then $8,000 in credit card debt. In addition to student loans, this means the graduate could be paying off debt for a very long time. Thanks to the new credit card act, effective February 2010, we should see this $8,000 statistic diminish. Students under the age of 21 must have a cosigner or provide financial information indicating they have the ability to independently repay the debt. There will also be no more campus solicitations or marketing for credit cards. Also an application must be submitted for any credit card.
There are several good ways for younger people to establish credit. A parent can add their child as an authorized user to one of their existing credit cards. While not having access to the credit account, they will still “inherit” the credit rating. A secured credit card is another way to establish credit. These are similar to savings accounts and most banks and credit unions offer them. The student sets up an account with a refundable deposit (i.e. $300-$500) and the bank or credit union gives them a credit card with a line of credit based on the deposit. The card holder makes monthly payments based on their balance while the account is secured by the original deposit. . Once you have established good payment history with the company (usually 18 months) they will often upgrade to an unsecured card and refund the initial deposit. A very good place to shop for and compare secured credit cards is at www.bankrate.com. Gas and Retail cards are easy to obtain with limited credit history, but be careful as these tend to have very high interest rates.
What about other types of credit? Most companies will access your credit report when you attempt to open an account. This includes cell phones, auto loans, student loans, utilities, insurance, rent, etc. If you do not have established credit the company may require a cosigner or a deposit. And the rate you pay will usually be based on your three digit credit score. Even the cost of your health and auto insurance can be dictated by that credit score.
Once you have established credit history it is very important to maintain a good credit rating. The first rule is to always pay your bills on time. One 30 day late payment on one credit card or any financed account such as an auto or student loan can lower your score 100 points or more. And that late payment will remain on your credit report for 7 years! Even though cell phones, utilities and insurance don’t actually report directly to the bureaus, if you fail to make your payments, they will turn your account over to a collection agency and these agencies report to the bureaus. Again, just like a late payment a collection account can lower your score 100 points or more and remain on your credit report for 7 years.
It is always best to pay off your credit cards every month so you do not incur finance charges. If this is not possible, you want to keep your balances on revolving debt (credit cards, lines of credit) below 30% of your credit limit. For example, you should keep your balance below $90 on a credit card with a $300 limit. Your credit score will drop if your balance exceeds 30% of the credit limit and your credit score will drop even more as the balance percentage goes up. The perfect credit mix for a good FICO score is 1) two installment loans (auto, student loan or mortgage); 2) three credit cards with balances below 30% of the high credit and; 3) additional credit cards with long payment history and no balances.
Most important – do not close credit cards that you have had open for a long time. The biggest positive impact to your FICO score is payment history, which makes up 35% of your score. When you close an account you are closing out any good history and this can lower your credit score.
Establishing a good credit foundation when you are young is a very good idea. You just need to be smart about it and remember the two most important things:
Pay your bills on time and don’t run up high balances!
By: Mindy Leisure, FICO Pro
Advantage Credit Inc. has also put together three short but informative videos you can access with these links:
Data on real estate sales and construction to be released shortly should be very interesting.
For the first time in a long time, real estate is not a drag on the economy. On the contrary, for the first time in years real estate is in a position to provide stimulus to the economy in the shadow of this current slow patch. Thus far this year the real estate market is growing approximately ten percent year-over-year. We need this continuous growth to lift the real estate market out of its long term slump and to start pulling its own weight within the economy.
When people purchase homes, they contract with moving companies, purchase furniture and undertake renovations. Millions of Americans are also refinancing and this should provide further stimulus as payments are lowered and this frees up money to increase consumer spending. However, a high percentage of these refinances are actually going toward shortening the terms of the loans. This trend is great for the long-term health of the economy as Americans pay down debt and increase the equity in their homes, yet it lowers economic stimulation in the short-term.
Source: David Hershman,The Hershman Group
Source: David Hershman,The Hershman Group
FHA Announces Increases to MI Fees Effective April 1, 2012
No, this is not an early April Fools Joke - FHA is again increasing their fees! They use the Case Number Assignment (Appraisal Request) as the effective date, so loans in process or already closed will not be affected.
If you are thinking about buying a home, please get your application in before April 1st to avoid the higher fees. You can apply online www.KingsMortgage.com or contact one of our Loan Officers to answer any questions.