No-cost refinances; too good to be true?

 No-cost refinances are available but with an explanation. Nothing is free, so the term "no-cost" is not exactly accurate. A no-cost refinance is accomplished by taking a slightly higher interest rate that will credit Yield Spread Premium back to you. This credit will be applied to your closing costs thus reducing or eliminating the funds that are normally required at closing. It's important to consider your long and short term goals before you decide if the higher rate with reduced/no fees is better versus taking the lower rate and paying fees. A qualified loan officer will be able to show you both options side-by-side and calculate a break even point. It's important to remember that the lowest rate is not always the best rate for you. Make sure when you are shopping, you are looking for the best rate; this may or may not be the lowest rate.

Here is an example of a no-cost refinance that is available today.

7/20/11
Loan amount $250,000
Single Family Primary Residence
740 Credit score
80% LTV or less with no impounds

Note Rate 4.75%
APR 4.75%

ORIGINATION CHARGES $0
Underwriting Fee $995.00
Appraisal Fee $435.00
Credit Report Fee $35.00
Closing/Escrow Fee $425.00
Notary Fee $150.00
Lender's Title Insurance $625.00
Courier $45.00

Credit to borrower for 4.75% interest rate. $(2,710.00)

Principal & Interest $1,304.12
Due at Closing $0.00

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About our rates

Cash Out Refinances With No Seasoning Now Allowed

June, 28, 2011

Fannie Mae has updated their selling guide to allow cash out refinances without the previously required 6 month seasoning period.

Currently, Fannie Mae requires a minimum of six months to elapse between the time a borrower 

purchases a home and subsequently applies for a cash-out refinance. The Selling Guide has 

been updated to allow a cash-out refinance within six months of a purchase transaction when 

no financing was obtained for the purchase transaction under the following parameters:

• The new loan amount is not more than the actual documented amount of the borrower’s initial investment in purchasing the property, plus the financing of closing costs, prepaid fees, and points (subject to the maximum LTV, CLTV, and HCLTV ratios for the transaction).   
• The purchase transaction was an arms-length transaction. 
• The purchase transaction is documented by the HUD-1, which confirms that no mortgage financing was used to obtain the subject property.  The preliminary title search or report must also confirm no liens on the subject property. 
• The source of funds for the purchase transaction can be documented (bank statements, personal loan documents, HELOC on another property).  Any loans used as the source for the purchase transaction will be required to be repaid on the new HUD-1. 
• All other cash-out refinance eligibility requirements are met and cash-out pricing is applied. 

In addition, the multiple financed property policy is being updated to allow cash-out refinances that meet the delayed financing exception.

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Fannie Mae Announces Expansion of HomePath Incentives

HomePath® Buyer Incentive: June 14 – October 31

Fannie Mae is currently offering buyers up to 3.5% in closing cost assistance through October 31, 2011. A $1,200 selling agent bonus is also available to selling agents who close on an owner occupant property and meet all eligibility requirements and terms and conditions.

Terms and Conditions:

• Buyers and/or selling agents (the agent representing the buyer) must request the incentive upon submission of initial offer.
• Initial offer must be submitted on or after June 14, 2011 and close by October 31, 2011. Initial offers made prior to June 14 are not eligible for the June 14 – October 31 incentive.
• Sale must close on or before October 31, 2011. No exceptions will be made to this deadline. (Note: Initial offers submitted after September 15, 2011 may not close by the incentive deadline of October 31, 2011.)
• Buyers must be purchasing a HomePath property to use as their primary residence to receive closing cost assistance. Second homes and investment properties are excluded from the incentive.
• Sales closed via the retail channel are eligible, including those utilizing public funds. Pool and auction sales are ineligible.
• Buyers must sign the Owner Occupant Certification Rider to the Real Estate Purchase Addendum.
• Buyers with total closing costs under 3.5% are not eligible to receive the difference as a credit.
• Properties where Fannie Mae acquired the property in connection with financing under a reverse mortgage are not eligible. Ask the listing agent for details.
• Buyers should consult their lenders for guidance on financing. Lenders and mortgage products may impose their own limitations on the use of the 3.5% incentive. For example, the lender may consider the incentive a Seller Contribution and limit the amount to 3.0%. In those instances, the remaining 0.5% will no longer be available to the buyer.
• Fannie Mae reserves the right to remove any property from promotion or end the promotion at any time. Any dispute over the payment of the incentive shall be resolved by Fannie Mae in its sole discretion.

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VA Loans With No FICO Requirement

Requirements  VA loans

• Maximum debt ratio is 46% and veteran must meet the residual requirement with compensating factors
• Although there is no minimum FICO, the veteran must meet the ratio requirement and have residual income 120% over that required for family size
• Verification of rent or 12 months cancelled checks for the last 12 months’ rental history with no lates
• No derogatory credit within the past 12 months
• Letter of explanation for any derogatory credit and credit inquiries
• VA considers open collections as recent derogatory credit; this would count if the collection was reported within the last 12 months. Recent short sale of a previous mortgage or a previous foreclosure for the veteran or the non-purchasing spouse will be a substantial negative issue in a veteran’s credit review
• No down payment assistance programs allowed
• Any VA cash-out refinance cannot exceed 90% LTV/CLTV

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Documents Required For Mortgage Loan Approval

All Borrowers:
1. Copies of W-2’s for the last two years.
2. Copies of paycheck stubs for most recent 30 days.
3. Copies of checking and savings account statements for last two whole months. (All Pages)
4. Copies of quarterly or semi-annual statements for checking, savings, IRA’s, CD’s, money market funds, stocks, 401K, profit sharing, etc. (All Pages)
5. Copy of sales contract when ratified. (Purchases only)
6. Employment history, last two years (Please explain any gaps in employment).
7. Residency history last two years, including name, address, phone number and account number of current mortgage company and/or landlord.
8. Canceled earnest money check when it clears or corresponding bank statement, if applicable.
9. Commissioned or bonus income – if 25% or more of base, please include your last two years of tax returns.
10. Copy of check for expense of appraisal and credit report if applicable.
11. Copy of Homeowners Insurance Declarations Page. (Refinance Only)
12. Any assets used for down payment, closing costs, or cash reserves must be documented by a paper trail. Please provide evidence of its origin.
13. If paid off mortgage in the last two years, please provide a copy of the HUD-I.
14. Copy of social security card and driver’s license for each applicant and co-applicant.

When sending documents with multiple pages, please include all pages even if the information on them is irrelevant. If page one states 1 of 6, all 6 pages need to be submitted.

Self-employed Borrowers:
1. Copies of most recent years tax returns ( Last 2 years with all schedules, including k-1’s if applicable).
2. Copy of current profit and loss statement and balance sheet.
3. Copy of corporate/partnership tax returns for most recent two year period if owning
25% or more of company – copies of W-2’s and/or 1099 forms.

Documents Which May Be Required:
1. Relocation Agreement if move is financed by employer, i.e. buyout agreement plus documentation outlining company paid closing costs benefits.
2. Previous bankruptcy needs copies of petition for bankruptcy and discharge including supporting schedule.
3. Divorce decree if applicable.
4. Documentation supporting moneys received from social security/retirement trust income, i.e. copies of direct deposit bank statements, awards letter and evidence that the income will continue.

VA Loans
VA: Original Certificate of Eligibility and copy of DD-214 Discharge Paper.
VA: Name and address of nearest living relative.

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FHA Mortgages with 500 Credit Score

If you have been looking to purchase a home and have a few credit issues, FHA may be the answer for you. Currently FHA guidelines allow you to purchase a primary residence with 10% down payment if you have a credit score of at least 500. FHA allows you to purchase with 3.5% down if your score is 580 or above. In addition to the required scores and standard FHA qualification such as stable employment with documented earnings and a 12 month rental history, you will also be required to complete a homebuyer education course and provide the signed certificate.

This opens up the housing market to many people with blemished credit. Life has it's ups and downs and events such as divorce or medical emergencies can wreak havoc on one's credit. With these FHA guidelines, you may get a second chance and still be able to qualify for a purchase. Contact me for more information and to see if you qualify; I have this program available now.

Gregorio Denny - WeFixRates.Com

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