Part One 

In our post-crisis housing finance system we see only about 10% of all new home loans as strictly private.  The remaining 90% are either acquired by Fannie Mae or Freddie Mac, or insured by the Federal Housing Administration (FHA).

Congress recently outlined its game plan for housing finance and they want to shake things up a bit.  This involves shrinking the federal government's involvement in the markets.

Fannie Mae and Freddie Mac have tightened their requirements, but by much less than the strictly private sector.  The agencies today will accept a credit score of 620 with 20% down, and 680 with 5% down.  However, when coupled with risk-based pricing and borrowers with mediocre credit and small down payments, many choose to opt out and use FHA financing.

Nationwide, the average down payment on new loans is about 35%, and the average FICO score is about 765.

FHA still has the most liberal requirements, allowing as little as 3.5% down and acceptable credit scores as low as 640.

The plan presented includes a gradual phase-out of Fannie Mae and Freddie Mac, combined with a reduction in the scope of FHA operations.  The ultimate goal appears to be a system in which the strictly private market would account for about 85% of the mortgages, and FHA would have about 15% (who currently capture about 30% of the market).

 Source: S&PCase-Shiller 

Consider that mortgage rates, though about a percentage point above last fall's deflation scare low, remain 2 percentage points below their long-run average.

We are hearing of more people choosing to lease with an option to buy.  Rent credit for option to purchase is an acceptable source of funds toward the down payment or minimum borrower contribution.  Borrowers are not required to make a minimum borrower contribution from their own funds in order for the rental payments to be credited toward the down payment.

Credit for the down payment is determined by calculating the difference between the market rent and the actual rent paid for the last 12 months.  The market rent is determined by the appraiser in the appraisal for the subject property.  Please let us know if you have any questions. 

Source: MyFICO.com 

Credit score facts & fallacies - Part II

Fallacy: My score determines whether or not I get credit.

Fallacy: Credit scoring is unfair to minorities.

Fact: Scoring considers only credit-related information. Factors like gender, race, nationality and marital status are not included. In fact, the Equal Credit Opportunity Act (ECOA) prohibits lenders from considering this type of information when issuing credit. Independent research has been done to make sure that credit scoring is not unfair to minorities or people with little credit history. Scoring has proven to be an accurate and consistent measure of repayment for all people who have some credit history. In other words, at a given score, non-minority and minority applicants are equally likely to pay as agreed.

Fallacy: Credit scoring infringes on my privacy.

Fact: Credit scoring evaluates the same information lenders already look at - the credit bureau report, credit application and/or your bank file. A score is simply a numeric summary of that information. Lenders using scoring sometimes ask for less information - fewer questions on the application form, for example.

Fallacy: My score will drop if I apply for new credit.

Fact: If it does, it probably won't drop much. If you apply for several credit cards within a short period of time, multiple requests for your credit report information (called "inquiries") will appear on your report. Looking for new credit can equate with higher risk, but most credit scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score. 

The number of homes bought with cash jumped to 32% in January compared to 26% a year earlier, according to the National Association of Realtors.

In Southern California, about 30% of the sales in January were cash, according to DataQuick Information Systems. Same thing in Denver. In Phoenix and Las Vegas, cash sales topped 50% of all deals.

Source: WSJOnline.com

Federal watchdogs are expected to offer two different proposals for regulating "lower-risk" loans. One will call for minimum 20% down payments on new home loans; and homeowners would need a 75% loan-to-value ratio for refinances and a 70% loan-to-value for cash-out refis. The second proposal will recommend 10% down. The real-estate industry has joined with consumer advocates to lobby against tougher standards.
The number of homes bought with cash jumped to 32% in January compared to 26% a year earlier, according to the National Association of Realtors.

In Southern California, about 30% of the sales in January were cash, according to DataQuick Information Systems. Same thing in Denver. In Phoenix and Las Vegas, cash sales topped 50% of all deals.

PER HOUSEHOLD - The average American household has $7,100 of credit card debt as of the end of last year (i.e., 12/31/10), down from $7,800 as of 12/31/09. (Source: Federal Reserve)

STATE OF THE UNION - Only 1 out of every 14 workers in the private sector (7%) is a union member. Less than 2 out of every 5 state and municipal workers in the public sector (39%) are union members. (Source: Census Bureau)

HOME VALUE DISPARITIES - The average home price in the USA declined by 11.5% (in aggregate) over the last 5 calendar years (2006-10). Homes in North Dakota appreciated +18.5% over the period, while homes in Nevada declined by 52.8%. (Source: Office of Federal Housing Enterprise Oversight)

PROVE IT - Only 1 in every 12 individuals earning at least $1 million was audited by the Internal Revenue Service during fiscal year 2010. (Source: IRS) 

NOT OVERPAID - Warren Buffett is the # 3 richest individual in the world, worth $50 billion.  As CEO of his firm, Buffett has paid himself only $100,000 in salary for each of the last 30 years. (Source: Forbes)

I just wanted to say that Vicki and I are so grateful for all of the help we received from Pete. We were young first time homebuyers with a very unique situation, and in the middle of January we told him we wanted to be in a place by the 25th of February. That ended up being our closing date. With my wife Victoria having only a part time job and me being paid through the University for being a Graduate Student Instructor Pete had to pull out all of the stops to make sure this loan got through. I cannot be more excited about getting this house in time for the arrival of our daughter in April, and we did not have to give up one thing that we wanted because the house is perfect for us. Thanks again Pete for making our dream of home ownership come true.

Brett & Vicki H.

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Dear Ann Arbor Mortgage,
 
We have recently purchased a home in Saline thanks to our friends at Ann Arbor Mortgage! It was such a pleasure to do business with you. Although our situation was complicated due to our new business you made it very easy for us.

The personal care that we received while working with Bill Holmes and his staff was exceptional. He welcomed us and stayed in constant contact with us every step of the way.
 
My entire family thanks Ann Arbor Mortgage and will surely recommend you to our friends and family when they make their next purchase.
 
Sincerely,
 
Shannon & Melissa C.