All Blog Entries by Nicholas Ballard

In the wake of the financial crisis and recent recession, millions of would-be homebuyers with foreclosures, short sales, or bankruptcies listed in their credit histories naturally wonder as to their prospects for new mortgage financing. Since lending requirements vary from product to product (such as conventional to FHA) and because investor guidelines are in constant flux, there is no easy answer as to which options a given borrower may have. Another complicating factor is "lender overlays." These are additional requirements that lenders routinely impose on the loans they underwrite in an effort to manage portfolio risk. Examples range from higher credit scores, limitations to loan sizes, increased assets, etc., and these will be adjusted…

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FHA (Federal Housing Authority) loans are a great option for home buyers who would otherwise be precluded from financing due to compromising factors such as limited down payment funds, poor credit ratings, or insufficient income or assets. The FHA does not actually offer financing. Instead, it insures higher risk loans -and the cost of this insurance is paid for by every borrower who gets an FHA loan. Nonetheless, for those lacking other sources of funding, FHA loans have been a bargain, opening the door to home ownership for millions buyers with down payment funds of as little as 3.5% of the purchase price.

Over the past few years, the cost of FHA loans has steadily risen through increases to the one-time, Up-Front…

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Federal Housing Authority (FHA) financing is a great option for many buyers, particularly those unable to meet the more stringent down payment and higher credit score requirements of conventional financing. FHA loans offer competitive, low 30-year fixed rates and allow for supporting income from a family member to qualify. But FHA loans carry significantly higher closing costs. One way to offset the increased costs is to take a lender credit in exchange for a slightly higher interest rate. While choosing a higher rate may seem counter intuitive, some borrowers may need help to cover closing costs and even those who don't may consider the exchange a bargain.

FHA loans fall into two categories: conforming loans up to $417,000,…

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Each year, the Department of Veterans Affairs (VA) releases a revised list of loan limits covered under its Loan Guaranty program. The Guaranty limits are based off of Federal Housing Authority estimates of median home values on a county-by county basis. Veterans who are eligible for full entitlement may borrow up to 100 percent (no down payment required) of a county's maximum limit with 25 percent of the loan guaranteed by the VA Loan Guaranty program.

VA loans fall into two categories: regular conforming VA Loans to $417,000, and Jumbo VA loans which support counties with higher maximum Guaranty limits. Newly adjusted Guaranty limits have been issued for all San Francisco Bay Area counties, with the exception of Solano County…

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When working on purchase transactions with gift money, I frequently see delayed regret from generous family members once they've had a chance to speak with their accountant and determine their gift tax liability. The moment of reckoning often arrives when they're asked to sign a letter (required by all lenders) verifying that the money they're offering represents a non-refundable gift. As gift taxes can add up to significant sums, the fact that the lender will not be sharing this information with the IRS provides limited comfort. (The gift-maker is the one who is responsible for reporting this information.) For those who are not willing or able to suffer the tax burden associated with gift funds, there may be a more palatable alternative in the…

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Sales contingent offers, in which a prospective buyer's bid to purchase a home carries the precondition of selling their current home, have never been attractive to sellers and are generally given little consideration. In a low inventory market where multiple offers are common, few sellers see any benefit in linking the fate of their transaction to the sale of another property. Homeowners looking to buy a new residence have a few strategies they can employ to work around this issue. When lacking sufficient income to qualify with payments on both properties, borrowers can sometimes use a rental income off-set on their current home. (See my blog on using rental income from a departing home: Blog link). But many buyers need the equity…

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In addition to the hazard or "fire" insurance coverage all lenders require, you will also need flood insurance when purchasing property located in an area identified by the Federal Emergency Management Agency (FEMA) as "Zone A." These high risk flood areas -examples of sub-designations are A1-A99, AE, AH, and AO - are assessed as having a 1% annual chance of flooding. Federal law requires lenders to mandate flood insurance coverage on properties located in high-risk areas. Most lenders do not require flood insurance for properties located in moderate risk areas, such as B, C, or X, even though FEMA reports that nearly a quarter of all claims are on properties in moderate risk zones.

Elevation Certificate

Flood maps…

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There's a common misperception that self-employed borrowers cannot qualify for mortgage financing in today's strict lending environment. While securing a loan for self-employed borrowers is a bit more complicated, advance preparation greatly improves the odds of a favorable outcome. Fannie Mae guidelines (followed by most lenders and loan programs) consider any individual with a business ownership interest of or exceeding 25% to be self-employed. There are four basic structures of self-employment (sole proprietorships, partnerships, corporations, and S corporations) and a lender's underwriter will have different requirements for their analysis of each one. Instead of looking at the specifics of each classification, let's outline…

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The combination of low, long-term interest rates and significantly moderated housing prices seems to be generating a strong demand for borrowers looking to trade up and buy into a larger or better home. Of this group, I am seeing an increasing number, enticed perhaps by a strong rental market, looking to retain their current home as an investment property. For those following this course of action, it is important to note that borrowers are limited through most financing channels to only one property with an "owner-occupied" loan secured within a 12-month period. If the current home was recently financed in this preferred category, or if you are considering a cash-out refinance for down payment funds on the new purchase, your…

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In recent months, the Bay Area's relatively low inventory of homes for sale has created a bit of a seller's market. Although sellers remain open to negotiations once in contract, they are almost universally unwilling to consider any offer that is contingent on the sale of the buyer's current home. For this reason, homeowners looking to trade up or move to a new area are left with three options: 1) sell their home and rent until a prospective new home is found, 2) Qualify for the purchase mortgage carrying both properties' housing payments or, 3) qualify with projected rental income on their current home. 

Although most buyers would prefer to have their new home lined-up before parting with their current, for many there may be no choice.…

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