The Board of Governors of the Federal Reserve System officially approved Bank of America’s plan to purchase Countrywide Financial Corporation. After Countrywide’s shareholders approve the deal, B of A will become the country’s largest mortgage lender and loan servicer. The Countrywide name will be no longer, and Bank of America is promoting one of their employees to run the new mortgage division instead of using a Countrywide executive. What does this mean for you?

This may be an important step in helping to fix the ongoing credit crisis. Countrywide will have access to B of A’s huge cash reserves and credit power, further allowing them to approve loans at an increased rate. Additionally, consumers can cultivate their relationship with Bank of America as it will become essentially a one-stop shop for all banking and credit needs. Savings, checking, credit card, mortgage, home equity, retirement, investments - you can now obtain all of these services at one location.

It is my hope that consumers can regain that old, small town feel with their bank and banker. As community savings institutions continue to be bought by larger regional or multinational banks consumers do not feel like they know who they are dealing with.

This is by no means an endorsement of either institution. It is my hope that by publishing this news that potential buyers will know that there are many options out there, and B of A will certainly be one of those options. Good luck getting that mortgage!

The folks over at Inman news found out that Fannie Mae, one of the beloved government sponsored enterprises (GSEs), will end their increased down payment requirements for property purchased in declining markets. This will change as of June 1. If you are thinking about purchasing a home, you will still need to come up with 3% down, but the additional 5% that was required starting this past January in areas where prices were falling will be eliminated, at least for single family homes.

Is this good news for home buyers? I would say yes. Hopefully this will ease a bit of the credit crisis as well. However, if private mortgage insurers do not go along with the changes, there will still be trouble. Anyone not putting at least 20% down is required to pay private mortgage insurance (PMI), and the insurers were not approving deals in these same declining markets because of the restrictions imposed by Fannie and Freddie. If the insurers change their policies to reflect the changing ones of Fannie Mae, then we won’t see potential borrowers getting a ‘NO’ on their applications for loans. Time will tell.

Ask your loan officer if you have questions about these ever-changing guidelines, and if you don’t have a good relationship with a lender, ask your agent or anyone you trust for help. It is hard to get a loan at the moment, but seeking answers and being proactive is a great way to start.

Are you a first time buyer? Have you not bought in a long time? Do you have questions about how you can save money in this buyer’s market? Well my goodness do we have something special for you.

Join us at Countrywide’s Peabody branch on 202 Newbury St. on Route 1 south on May 20th. I promise you won’t be disappointed. The program starts at 7pm and will run until 9 or so. You can reserve a seat by calling 978-536-1313. This free program is sure to be valuable to you if you are thinking about buying a home in the next 6-12 months or just want some questions answered.

What will be covered? How to buy foreclosures, negotiating tips in this market, determining how much to offer, how to buy with little or no money down, problems to avoid when buying, home inspection tips, and information for veterans on VA loans. If you have any questions, feel free to attend and pick our brains.

A real estate attorney, a member of the buyer broker hall of fame, and loan consultants with experience in home repair/rehab loans, credit repair, and government loans will all be presenting. Hope to see you there!

Home sales are way down, that much we know. Sales closing in March of 2008 were down almost a third from the same time frame a year earlier. How come? Without knowing all the facts, one would first point to the struggling economy. Recession fears are all over the news right now. Is that the problem? No. Boston’s economy continues to improve, and although there have been some layoffs in the financial services industry, job growth in our area remains steady. Popular sectors still hiring and growing in the Boston area are high tech and biotech firms. In fact, the economy has grown 3% in the first quarter.

So what’s the deal? Unfortunately, it’s the credit crisis. Lenders are continuing to restrict their loans. They are having a harder time finding money to lend to buyers, and if you don’t have at least 5% saved to put towards a down payment, you will find it very hard to get a loan. I have spoken to quite a few potential buyers who are not able to get preapproved, and in most cases it is because they are looking to buy with little to no money down. Until lenders can access money more readily, this trend is bound to continue.

The majority of owners with homes on the market right now will be looking to turn around and buy again as soon as their current home sells, but with fewer qualified buyers looking at their home, time on the market will not go down until this credit crisis eases.

If you are a buyer with less than a 5% down payment, there are alternatives out there. FHA loans are becoming increasingly popular and may be a good alternative to traditional lenders and brokers. If you are thinking about entering this buyer’s market, ask for help in obtaining preapproval for a loan. Many good agents know about current loan standards, and we at Buyer’s Choice are knowledgeable in this area and can point you to available resources.

As stated in our previous post, there are new restrictions regarding who can actually get approved for a loan. I’d again like to thank Dawn Davis, president of Rate One Mortgage, for her explanation of this issue. As we wrote previously, this will mostly affect potential buyers who do not have a large amount to put down on their purchase. Here are the details, as provided by Ms. Davis.

For those looking for 100% or 97% financing, it will not be available. 100% financing will be reduced to 95%, and 97% financing will be reduced to 92%. In these cases, buyers will need to increase their down payment by 5%. For some, this may not be possible and they may be forced to wait until they are able to save some money. But, for many, there are some alternatives to obtaining the additional funds needed for down payment.

Buyers who are approved for 100% financing and will actually receive 95% financing can use their own funds or gift funds for their down payment. They are not permitted to borrow the money unless they make a loan against retirement funds such as a 401k account. Lenders document gift funds by obtaining a gift letter from the donor and evidence that the gift funds have been received by the buyer.
After closing, many buyers actually repay the gift money they received. Clients who are approved for 97% financing and will actually receive 92% financing must demonstrate that 3% of their down payment is coming from their own funds. Lenders document this by obtaining a copy of the buyers’ most recent asset statement. The remaining 5% of their down payment can come from their own funds, from a gift, or from a loan against a 401k.

Buyers who are approved for 95% financing and will actually receive 90% financing must demonstrate that 5% of their down payment is coming from their own funds. Lenders document this by obtaining a copy of the buyers’ most recent asset statement. The remaining 5% of their down payment can come from their own funds, from a gift, or from a loan against a 401k.

Maximum allowable seller contributions are as follows: If the buyers are receiving 95% financing, the seller can contribute up to 3% of the purchase price toward the buyers’ closing costs and prepaid items.If the buyers are receiving 90% financing or less, the seller can contribute up to 6% of the purchase price toward the buyers’ closing costs and prepaid items.

Dawn Davis, president of Rate One Mortgage, recently alerted us to new lending regulations regarding conforming loans, which are loans that meet GSE guidelines. While this may seem like a mouthful, in reality it is a simple concept. Fannie Mae and Freddie Mac, two government agencies that purchase loans and repackage them to sell on the secondary market. Conforming loans have set standards which can be found at the link just presented, and they encompass the vast majority of loans that lenders will make, because they are much easier to sell than non-conforming loans.

Because of the vast purchasing power Fannie and Freddie have, every lender except local banks that portfolio all their loans (essentially use their own money and do not sell them) must follow the guidelines set forth by them.

All counties surrounding Boston have been named declining markets by Fannie and Freddie. What is a declining market? There’s no set definition, but basically it is any area (as defined by zip code for instance) where property values are falling. It is explained somewhat on a page from Fannie Mae’s website.

Now to the info - if you as a consumer/potential buyer have saved enough to put down 10% of your purchase, there should be no problems. The issue comes in with buyers who are seeking 95, 97, and 100% loan-to-value loans. These buyers will essentially have to come up with at least 5% for a down payment in order to qualify for funding. Private mortgage insurance companies have agreed to this new stipulation as well, and buyers generally must pay PMI if they finance more than 80% of the value of their home. Unfortunately, this will remove many potential buyers from the market until they save money. Also, a buyer must prove that a substantial amount of their down payment is coming from their own funds, so gifts and loans from a 401k will not pass muster.

If you have questions about loans and any terms that you come across in your research about financing a home purchase, please call us at 978.468.2138, or log on to Buyer’s Choice Realty to find more contact information. We will do our best to help answer any questions you may have. Creativity is key for buyers who do not have a significant amount of cash for a down payment.