In February 2009, Fannie Mae said it would up the maximum financed-property limit from four to ten to help stabilize the U.S. housing market. “Experienced investors play a key role in the housing recovery”, it said.

This is a truth.

Real estate investors buy foreclosed homes, multi-unit properties, and vacant condos as a means to build wealth long-term. And now, with rents out-gaining the rise in home prices in U.S. cities such as San Francisco, California; Fort Worth, Texas; and Seattle, Washington, investor types are clamoring for good homes — especially with financing so cheap.

15-year mortgage rates with points are below 4 percent.

Why Most Banks Won’t Do A 5-to-10 Properties Mortgage

So, why don’t all banks participate in the 5-10 Properties Financed program? The probable answer is that underwriting a 5-property-owning investor’s mortgage application can be very hard work.

As compared “traditional” homeowners who submit for loan approval with just a W-2 and pay stub, a seasoned real estate investor is asked to provide complex tax returns, complete REO schedules, and extra detail for every home underwritten and approved.

Reviewing paperwork takes time. Sometimes, a lot of it.

Furthermore, investors with 5 or more properties financed are more likely to hold title to their homes in a non-standard fashion. This, too, creates “extra work” underwriting which slows down the approval process for the subject home and for every other loan with the bank, too.

As compared to a standard purchase loan, loans for investors with more than 4 homes financed generates the same bank to the bank but with more man-hours required to approve and additional fraud risk post-closing. It’s no wonder most banks avoid them.

Note : Most banks, not all. You have to know where to find a 5-to-10 Properties loan. Then, you have to meet its guidelines.

The 5-10 Financed Properties Program Criteria

To finance a home via Fannie Mae’s 5-10 Properties program, the following criteria must be met with no exception :

• Own between 5 and 10 residential properties, each with financing attached
• Purchase : 25% down payment is required for 1-unit; 30 percent is required for 2-4 units
• Refinance : 30% equity is required for all property types (1-, 2-, 3-, or 4-unit)
• Minimum credit score must be 720
• There must not be any mortgage lates within the prior 12 months on any mortgage
• There must be no bankruptcies or foreclosures in the prior 7 years
• There must be 2 years of tax returns which rental income from all rental properties
• There must be 6 months of PITI reserves on each of the financed properties

That’s pretty much it. Tough, but not too tough.

Where To Get A 5-10 Properties Program Mortgage

Your bank may not give loans on the 5-10 Properties Program, but don’t let them tell you that it can’t be done. It can.

If you own more than 4 homes with mortgages attached and want to refinance one (or all) of them; or, if you’re planning to purchase an additional investment property, look elsewhere. The 5-10 Properties Program is a niche product but lots of banks will do them

For more information, you can reach me at 951-538-7435

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Fannie Mae’s National Housing Survey includes data from more than 1,000 U.S. households and it’s not tough to see why respondents are bullish on housing. As compared to one year ago, home values in the majority of U.S. cities have climbed — in some cases, dramatically.

Values in previously hard-hit cities such as Phoenix, Arizona and San Francisco, California have climbed by as much as one-fifth from last spring; and, nationally, values are higher by 7 percent, on average, according to home valuation trackers including the Case-Shiller Index.

As a result, fewer U.S. homeowners are underwater on their homes, an about-face which has led some to change their mind about whether “it’s a good time to sell” their home.

12 months ago, just sixteen percent of U.S. consumers thought it was a good time to sell. Today, with fewer homeowners underwater on their home loans and with a stronger U.S. economy, that figure has climbed to 40%.

There are plenty of reasons for sellers to be excited for the housing market :

• Existing Home Sales are up 10% annually
• New Home Sales are up 29% annually
• Home supply remains in “bull market” territory

Furthermore, National Association of Homebuilder (NAHB) reports more than 70% of U.S. metropolitan regions in the midst of “measurable and sustained” expansion. All of this growth has put buyers on the hot seat.

76% out surveyed consumers said “now is a good time to buy” a home

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This week’s mortgage rate jump can be attributed to Wall Street and its changing expectations of the future of Fed stimulus. It’s also the reason why mortgage rates have climbed through most of May; the Federal Reserve’s last meeting concluded May 1, 2013.

In the Fed’s post-meeting press release, it said that the group’s third round of quantitative easing (QE3) would continue into the foreseeable future, but that the Fed may increase or decrease its pace of purchases as warranted by economic growth.

To Wall Street, this means that signals of U.S. economic growth are cues to sell mortgage-backed securities (MBS). It’s a way to get ahead of the Fed’s “tapering” of purchases, which is expected to lead bond prices down.

When bonds prices fall, mortgage rates rise.

Meanwhile, Wednesday, mortgage rates were smacked with a double-whammy.

First, in the morning, in testimony to Congress, Federal Reserve Chairman Ben Bernanke said that the U.S. economy may stall if economic stimulus is lifted prematurely. Many took that to mean that the Fed would leave its QE3 program untouched — at least for a number of quarters.

In a follow-up clarification, though, Bernanke added that the Fed has not ruled out a cut to QE3 before summer’s end.

The remarks sent mortgage markets reeling. Wall Street shifted bets, pushing mortgage rates up.

If you were shopping for a loan, you would have recognized this change in the form of higher discount points. A morning quote of 3.59% with 0.7 discount points would have jumped to 3.59% with 1.2 discount points by noon.

The deterioration continued into the afternoon.

At 2:00 PM ET, the Federal Reserve released the minutes from its April 30 – May 1, 2013 Federal Open Market Committee (FOMC) meeting.

The minutes revealed that several Fed members expressed a willingness to reduce the group’s $85 billion monthly bond purchases as soon as June 2013 — well ahead of Wall Street’s expectation for a cutback, and even more quickly than hinted by Chairman Bernanke earlier in the day.

The release of the Fed Minutes sent mortgage rates higher for the second time of the day and, by market closing, required discount points had climbed another half-percentage point.

The same 3.59% rate now requires 1.7 discount points — an additional $4,170 due at settlement for loans made at the national conforming loan limit of $417,00

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As home values rise nationwide, buyers are getting anxious. Anecdotally, multiple-offer situations are becoming more common and, in some areas such as San Diego and Inland Empire, they’re currently the norm.

There are 19% fewer homes for sale nationwide as compared to one year ago and the homes which are for sale are selling faster. According to the National Association of REALTORS®, homes are now “on the market” for 24% fewer days as compared to one year ago.

Buyers are acting quickly — especially first-timers.

Because of falling mortgage rates, today’s home buyers have up to 10 percent more purchasing power. First-time buyers are using this boost to leave the world of renting, and to become homeowners.

First-time buyers represent 30% of all home buyers nationwide. Many are using low- and no-downpayment mortgage programs.

• The FHA offers a 3.5% downpayment mortgage
• The VA offers 100% mortgages for active military and veterans
• The USDA offers 100% mortgages to buyers “of modest means in modest areas”
• Fannie Mae offers  a 3% downpayment mortgage, which allows downpayment gifts

Even the jumbo mortgage market is making low downpayment programs available. With just 10% down, qualified home buyers can borrow up to $750,000.

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After months of making offers, you finally get an offer accepted. Escrow is opened and the lender orders appraisal. The appraisal report comes back and to your astonishment, the house of your dreams comes back under Sales price. In order words, the value is less than the purchase price….What do you don now??

First, what is an appraisal ?….An appraisal is the  monetary value on a property given by a licensed home appraiser.  appraising a property a home buyer has an idea of the “fair market value” on home.  The appraisal helps to determine whether you’re over-paying for a home relative to similar for-sale homes, or getting a “good price”. In a refinance , the appraisal  report — except those using a no-appraisal-needed streamlined refinance — the appraisal helps to determine your mortgage eligibility.

An appraiser has different methods for arriving to a “Fair Market Value”.In residential loans, an appraiser  uses the Sale Comparison Approach method. Via the Sales Comparison appraisal approach, a home appraiser will compare your home to similar homes in the immediate vicinity with similar physical attributes

An appraiser will utilize the value of homes that have sold, within a mile radius from your property and that have sold in the last 3 months. In some rare cases, an appraiser will go over a mile radius to find comparable sales and properties that have sold in the last 6 months. The appraiser looks at the properties with common traits to your. For examples of such traits includes number of bedrooms; number of bathrooms; age of home; quality of home finishes; and square footage. Location matters, too, such that similar homes in different school districts may have different appeal and may not be considered “comparable.

Once an appraiser arrives at a value, he issues the appraisal report. A copy of  appraisal report is given to you and to the lender. The lender will use that value to determine you down payment

What does the lender do if the appraised value is less than purchase price?

In mortgage lending, your loan is determine by the value or sale price which ever is less. In other words, if you purchase a $350,000 house with  an appraised value is $340,000, and you are planning to make a 3.5% down payment via the FHA, your down payment is calculated the following way:

Sales Price $350,000

Appraised Value $340,000

Down Payment=340,000 x 3.5=$11,900

Since your property appraised for $10,000 less than the Sales price, you have three potential outcomes :

1.Buyer and seller renegotiate a new, lower home sale price

2.Buyer increases down payment to meet new LTV and down payment minimums

3.Buyer chooses neither option, and cancels home purchase contract

The possibility of a “bad appraisal” is among the reasons why the majority of home purchase contracts are written with an appraisal contingency. In the event that the home fails to appraise for its purchase price, the contingency clause gives buyers an opportunity to re-evaluate. Unless, you agree to pay the full price. This is becoming a common practice in highly desirable and in demand neighborhoods.

In this highly competitive market where house inventory is low and competition is  very high, many sellers will tell you ,up front, that if the property does not value, you still need to come up with the difference. For example, based on the scenario above,  if down payment is $11,900 and you agreed to come up with the difference, your new down payment will be $11,9000 plus $10,000 difference.

What can I do?

If you plan to buy a home in 2013 or 2014, consider your household budget and your expected home down payment. Talk to an experienced Realtor and ask about his/her experience with under value properties. An experienced Realtor will perform a value analysis on the property that you want to purchase and give you an idea of the current value of the house. Remember, an appraisal can change your math, and so can rising home prices. In this new market, you need to PREPARE, PREPARE and PREPARE!!

Call me see how much home you can afford and start getting prepare for the purchase of your dream home– it’s free and there’s no obligation whatsoever!

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The Chart above provides  the performance of the mortgage market in the last 48 hours. Mortgage rates are essentially higher, and the recent unemployment numbers are to blame.

What does unemployment numbers have to do with mortgage rates?

Each month, on the first Friday, the Bureau of Labor Statistics releases its Non-Farm Payrolls report. More commonly called the “jobs reports”, Non-Farm Payrolls details the employment situation of the United States, summarizing by sector. On Friday, March 9th, when the government reported  the U.S. jobless rate , the jobless rate dropped to 7.7% in February –the lowest mark in over four years

High unemployment causes a weak economy and a weak economy contributed to low mortgage rates between 2009-2011. In makes sense, then, that mortgage rates should rise when the economy moves to recover.

That’s precisely what’s occurred on Friday.

In the instant that the jobs report was released, mortgage markets sold-off. In other words, investor’s confidence went up. Investors moved their money from bonds to stocks. Within seconds, mortgage bonds tanked enough to raise conforming and FHA mortgage   +0.125 percent.

More jobs support  economic growth which make investors feel better about risk and investments. Wall Street gets happy! Unfortunately, Mortgage bond markets are the anti-thesis of risk. When Wall Street chases risk, rates tend to rise

Last year’s all-time mortgage rate lows are likely gone for good, lost to an improving U.S. economy. FHA mortgage rates, conforming mortgage rates, and jumbo mortgage rates are all higher today and are expected to remain that way over the long-term, absent explicit market intervention from the Federal Reserve

What to do now?

If you’ve been waiting to lock a mortgage rate or buy a home, take advantage of what the jobs market data is telling you. The economy is improving and, with it, mortgage rates will rise. The rates you lock today may be your lowest rate ever..

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The National Association of Home Builders (NAHB) released its quarterly report. The report measures the median household income of 225 metropolitan areas nationwide, and maps those findings against each respective areas’ median housing costs.

The result is what’s called the Home Opportunity Index (HOI), a quarterly report of home affordability nationwide.

The Home Opportunity Index makes the following assumptions:

• It assumes a 10% downpayment by the buyer.
• It assumes that mortgage rates are equal to a weighted average of the quarterly fixed- and adjustable-rate mortgages.
• It assumes that a home buyer’s monthly housing payment won’t exceed twenty-eight percent of the area monthly median income.

Using these values, the NAHB Home Opportunity Index found that nearly 3 in 4 U.S. residents could “afford” to buy a home. Affordability has been boosted by low mortgage rates and low home prices.

Today, the economy is mending. More than 4.3 million jobs have been added; home prices are rising in many U.S. markets; and consumer spending is on the rise. Home affordability is among the lingering effects of last decade’s recession. Soon, homes won’t be so affordable.

If you plan to buy a home in 2013 or 2014, consider moving up your timeframe. Beyond the cliché, it really is a good time to buy. Get started by seeing how much home you can afford. Get a personalize rate quote  and start to build your budget.

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Mortgage rates have increased on the majority of calendar days this year, peaking at 3.56 percent, on average, nationwide for borrowers willing to pay closing costs and points. For borrowers wanting loans with zero closing costs, rates are closer to 4 percent.

Rates should continue to climb.

There has now been 28 consecutive months of U.S. job growth, a period during which 4.4 million net new jobs have been created. Furthermore, the number of first-time jobless claims has been steadily dropping — another sign of an improving jobs market. Jobs matter to the economy because, with more employed persons, more taxes are paid, more money is spent, and more hiring occurs. More working citizens can also correlate to higher demand for homes which can move the economy forward as well.

In response to the improving economy, the Federal Reserve has suggested a timetable against which it will begin to remove market stimulus. This, too, has contributed to rising mortgage rates.

However, the mortgage-backed bond market does remain precariously balanced. A single unexpected event could reverse market sentiment, which would lead mortgage rates lower once again. Events like these have occurred in April during the last three years of trading — it can certainly happen again this year.

• In 2010, the eruption of Eyjafjallajökull interrupted European economic output
• In 2011, Greece and its sovereign debt crisis threatened all of the Eurozone.
• In 2012, the Eurozone’s future was doubted as Spain and Italy struggled, too

For 2013, no new “crisis” has emerged to lead mortgage rates lower and start a reversal — at least not yet. Should one occur, however, and should it be euro-related and far-reaching, we can expect it to re-ignite the flight to quality assets which tends to lead U.S. mortgage rates lower.There is an early candidate in Italy’s anti-austerity vote, plus mass protests in Portugal against the same. These events could be a spark to re-ignite safe haven buying. Or, they could quickly pass over.

This year’s home buyers and refinancing households can hope, anyway — especially the FHA-insured homeowners wanting to refinance ahead of the new FHA mortgage insurance premiums.The FHA changes go into effect April 1, 2013

Get A Free, Personalized Mortgage Rate

If you’re shopping today’s mortgage rates, you’ve likely noticed changes in the market. Rates are steadily rising for all types of loans, and rates are changing quickly, too.Be safe about your mortgage rate. Get a quote, complete with closing costs. If the numbers fit your personal budget and the mortgage meets your needs, consider locking that rate in — it won’t likely last.

Email or Call me to get a Free Personalize Mortgage Rate

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