I attended a meeting today with an account rep from one of the biggest lenders in the country. She told us that in the very near future we can pretty much forget about 100% financing in Minnesota for a number of reasons;
1. These are some of the loans that investors are currently losing their butts on.
2. There are no longer any investors who want to buy these mortgages.
3. The mortgage insurance companies have decided not to write mortgage insurance over 95% in Minnesota.
4. The market for second mortgages up to 100% died awhile back as lenders who wrote these loans have really taken a beating lately with all the foreclosures and short sales.
Over the past few days it has been a mad scramble by Minnesota real estate agents, loan officers, lenders and everyone else involved in the transaction to quickly close as many 100% loans as we could before they are gone for good. The next few months will be very challenging for Realtors, Minnesota mortgage brokers and home buyers as we search for ways to get people into homes who have little or no money for a down payment.
Our only saving grace may be FHA financing where borrowers can still qualify for 97% financing and may also qualify for a down payment assistance (DPA) program of another 3% bringing the total financing to 100%. If you are thinking about buying a home this year and you have little or no money for a down payment, you'll want to move fast as this last hold out of 100% financing may not last for long.
Also, keep in mind that there are still plenty of great homes for sale in the Minneapolis metro area. You can see about 20,000+ of them at www.mnonlinemls.com
Thursday, February 28, 2008
Monday, February 25, 2008
Declining markets in Minnesota
Recently I had a loan for a purchase pre-approved for a Minnesota mortgage by Fannie Mae for 100% financing. I called my lender rep and asked about "declining markets" and whether the county and city where my borrowers home was located was in a declining market. He said to the best of his knowledge. it was not. When we got our approval and moved on to the next step. Then the lender said that in fact the home was in a declining market and said we must cut our LTV (loan-to-value) to 95% and since it appeared that our borrower didn't have 5% funds sourced and seasoned, they denied the loan.
Get this, the appraisal, a rock solid appraisal I might add, came in at $219,000. The purchase agreement was for $198,000, approximately 10% below the appraised value. I asked my lender rep, "does declining markets refer to appraised value or loan to value?" He said he didn't know. I said, "well think about it, if the tag "declining markets" simply says that home prices in this area are going down and we are going to knock 5% out of the deal to cover our butt, than if you have a buyer who is buying a foreclosure or short sale in the area, and there is a solid appraisal which shows the value at 10% or greater than purchase price, wouldn't it make sense to allow 100% financing because the lender still has covered their butt and then some. The lender rep agreed that it made sense but wasn't sure if that is how it would go down.
Guess what? If lenders cry "declining market" all across the country and don't acknowledge the purchase of foreclosures and short sales well below the market to go through at 100% financing, we are all in for a rude awakening, especially the feds and our president because if you think the housing market and our economy is bad now, just wait until the few remaining buyers with good credit, good income and no money for a down payment get kicked to the curb.
In the end, I got the loan done at 100% but the future of 100% is not looking good and if it should go by the way side, get ready for another tough year in real estate.
Get this, the appraisal, a rock solid appraisal I might add, came in at $219,000. The purchase agreement was for $198,000, approximately 10% below the appraised value. I asked my lender rep, "does declining markets refer to appraised value or loan to value?" He said he didn't know. I said, "well think about it, if the tag "declining markets" simply says that home prices in this area are going down and we are going to knock 5% out of the deal to cover our butt, than if you have a buyer who is buying a foreclosure or short sale in the area, and there is a solid appraisal which shows the value at 10% or greater than purchase price, wouldn't it make sense to allow 100% financing because the lender still has covered their butt and then some. The lender rep agreed that it made sense but wasn't sure if that is how it would go down.
Guess what? If lenders cry "declining market" all across the country and don't acknowledge the purchase of foreclosures and short sales well below the market to go through at 100% financing, we are all in for a rude awakening, especially the feds and our president because if you think the housing market and our economy is bad now, just wait until the few remaining buyers with good credit, good income and no money for a down payment get kicked to the curb.
In the end, I got the loan done at 100% but the future of 100% is not looking good and if it should go by the way side, get ready for another tough year in real estate.
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