Some interesting news has been reported on the mortgage lending front recently. Let me refer you to two sources.

First, the blog site Mandelman Matters quoted the latest report from Ellie Mae, which reports data for February 2014. They say the average FICO score on an approved mortgage when purchasing a home was 755, with an average loan-to-value(LTV) of 80%, and an average debt to income ratio(DTI) of 34%.

The numbers for a refinance were 730, 74% LTV and 40% DTI.

If a conventional loan was denied, the average numbers were 722, 81% LTV, and 42% DTI.

If a refinance was denied, the average numbers were 698, 74% LTV and 45% DTI.

Mandelman cites one borrower attempting to refinance who was informed on day 80 of his mortgage application

that he would not be approved because he missed an $8 electricity bill two years prior that crushed his FICO score, taking it from 790 down to 680. Wow! The higher your score, the more points you lose when you slip up.

How many of us could qualify today to buy a home given these averages? How many prospects will real estate agents and brokers represent who just won't fit into these qualifying parameters?

Second, if you are looking for a mortgage loan, or know someone who is, you may want to take a look at Union Bank's My Community Mortgage Program. This is a conventional loan program for a primary residence that includes first time home buyers, with FICO scores down to 620, LTV up to 95%, and debt to income ratios up to 45%. This is a regional program and other criteria apply, but Union Bank is apparently stepping up to the plate in a way that belies those Ellie Mae numbers.

If you are in Southern California, your man is Randy Deshler. You can email Randy at Randy.Deshler@UnionBank.com. If you are outside Randy's area, ask him for a referral to your particular region.

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                         Millennials Rising 

Do you recognize a millennial when you meet one? The March 2014 report from the National Association of Realtors - Home Buyer and Seller Generational Trends -profiles a millennial as follows: under age 33, median income of $73,000+, and buys a home that averages 1800 square feet and costs $180,000. They make up 31% of the first time home buying public, followed closely by Generation X(age 34-48) at 30%.

If you buy into the Ellie Mae report I referenced above, how many of these millennials will qualify for a conventional loan? And, if you are selling a home, and a buyer that fits this profile approaches you, would you see a great prospect for you to offer an owner carry back?

Let's look at some numbers. Let's say your home just happens to be 1800 square feet, and you are asking $180,000. Here are some potential terms you can present/negotiate: 

DownPayment-     Note   -    Interest -  30 Yr Pay

10%                   $162,000        9%          $1303.49

15%                   $153,000        8%          $1122.66

20%                   $144,000        7%          $  958.04

No matter who your buyer is, you take a risk that he will not pay you next month. Your compensation for that risk lies in the amount of downpayment you demand and the interest and pay period that is acceptable to you. But, be on the lookout for this buyer, and recognize that you may very well have a solid prospect to purchase your property.

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The only people you should try to get even with are those who have helped you.

It is almost impossible to throw dirt on someone without getting a little on yourself....Dear Abby.

Success is failure with the dirt brushed off.

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              Warren Buffet and Real Estate

Warren Buffet's Annual letter to his company's shareholders focused on "What you can learn from my real estate investments." To read this fascinating story, please go to finance.fortune.cnn.com/2014/02/24/Warren-Buffett-Berkshire-letter/? section = money_real estate.

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                 Equity Makes a Rebound

The Federal Reserve and Core Logic issued separate reports last month giving us a glimpse of where the country is in terms of homeowner equity.

In 2005, at the high point of the housing boom, homeowner equity reached its zenith at $12 trillion dollars. In 2013, equity soared by $2.1 trillion dollars to $10 trillion, with 4 million homeowners around the country climbing out of negative equity.

However, CoreLogic reports that 6.5 million homeowners are still in negative equity positions, though that number is down from 12 million in 2009.

CoreLogic asks " Are you under-equitied"? This is defined as having debt in excess of 80% of your home's resale value.

This is important because, as I reported above, it makes it more difficult to refinance or obtain an equity credit line. CoreLogic says about 21% of all mortgages in the United States are underequitied, and 1.6 million owners have less than 5% equity.

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 All that is due to us will be paid, although not perhaps by those to whom we have lent.

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 If you enjoyed this Newsletter, tell a friend.

If you know how I can make it better, tell me.

Thanks for reading.

Denny Stanz

CA Broker # 01915404

760-245-5366 

760-245-5367 fax 

dennystanz@verizon.net 

www.CaliforniaNoteBuyerLLC.com