Mortgage Loan Limits 2014

It's hard to believe another year is coming to a close. The year 2013 turned out to be a pretty excellent year for real estate in Michigan!

Every year Fannie Mae (FNMA), Freddie Mac (FHLMC), FHA and VA all adjust their loan limits. These limits are the maximum loan amount for a specific loan program. FNMA and FHLMC control the Conventional Loan limit. Conventional loans are your standard plain vanilla mortgage loan and include fixed and adjustable rate loans with loan terms between 10 and 30 years. The Fannie / Freddie loan limit has been set at $417,000 for the past several years. Loans over $417,000 are Jumbo Loans and generally involve a higher interest rate, larger down payment and more strict underwriting guidelines. For 2014 the Conventional Loan limit will remain unchanged at $417,000.

VA loans have long held to the standard of limiting loan amounts to the Conventional Loan Limit (except in certain high cost areas where the limit may be higher). The VA loan limit will remain unchanged in Michigan and is set at $417,000.

The FHA loan limits vary all over the country and are based on average home values in a specific area. FHA increases or decreases the loan limit based on changes to home values over the past year. When home values rise so do loan limits. Conversely, if home values fall then loan limits would go down as well. FHA, in an effort to help support the housing recovery, has allowed loan limits to remain constant over the past 5 years even in the face of falling values. This year that is coming to an end. For Oakland, Macomb and Wayne County, Michigan the FHA loan limit will fall to $271,050 for 2014. Previously the FHA loan could go as high as $297,500 so this is a significant drop and will impact an FHA borrower's purchasing power. Please note that if a home buyer has an accepted offer, makes a loan application and the lender gets the FHA case number prior to December 31st then the loan amount can be up to the 2013 loan limit and will not be subject to the reduction.

So, if you are an FHA buyer and want to purchase a home around $300,000 then get out there and try to find a house to buy before Christmas!

Ken Mascia, Licensed Loan Officer NMLS 135323
(248) 644-1200, ext 15

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FHA Back to Work Program

Recently HUD announced a change to the FHA loan program with the idea in mind to assist potential home buyers who experienced unemployment or other severe reduction in income due to the recent recession and help these people to be eligible for a new home loan. Previous FHA guidelines called for a minimum of 3 years after a foreclosure or shortsale. Under the new rules a borrower may be eligible for a new FHA mortgage loan after just one year.

This is great news for people who had a shortsale or foreclosure that was specifically due to a loss of income and not just a loss of value in the property. The borrower must be able to demonstrate that the credit impairment was directly tied to an economic event that was beyond their control and then have re-established good credit for at least a year since the event. Also, as part of the mortgage approval process the borrower must attend a HUD approved housing counseling course.

The rules that have been set down are very specific so there are going to be a lot of people who have situations that fall outside of these new rules and those will have to continue to wait for a 3 year time period on FHA and up to 7 years for a conventional loan (minimum of 4 years from a shortsale and 7 years from a foreclosure). Here are the specific guidelines:

1. Must be able to document an Economic Event that was beyond their control that resulted in at least a 20% drop in income - loss of employment, etc.

2. The date of the Economic Event must coincide with the beginning of any credit impairment that occurred. Meaning, the credit issues, which could include a shortsale, foreclosure, bankruptcy, collection accounts or late debt payments, occurred beginning with the loss of income. It is very important that the borrower had a nice clean credit report prior to the loss of income.

3. The borrower must have re-established good payment histories for at least a 12 month time frame since recovering from the loss of income. Bottom line - no late payments in the past 12 months.

These rules are pretty specific but will help some potential home buyers to move back into home
ownership. If you know of someone who could benefit please pass this along to them!

Ken Mascia, Licensed Loan Officer NMLS 135323

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Top Three Reasons to Buy a House Now!

Top Three Reasons to Buy a House Now!

The Real Estate Market has been through some crazy gyrations over the past 5 years, right?

Between 2008 and 2011 home prices were in a downward spiral caused by a weak overall

economy and high unemployment. The good news? That's all changed!

Over the past year or so distressed sales (foreclosures and shortsales) are accounting for a very

small portion of overall sales - a very normalized condition. It can be difficult to even find a

foreclosed home for sale in our local market. USA Today reported on November 10th the "Top 10

States where home prices are surging" and Michigan was reported 5th with an almost 14%

increase in home values over the past 12 months! If you were not aware, now your are. Real

estate values have gone up considerably! The other thing that has happened is mortgage rates are rising. Economic conditions have improved and that has pushed rates up from their 2012 lows of around 3.5% for a 30 Year Fixed to today's 4.5% 30 Year Fixed.

Rising home values combined with higher interest rates are putting a damper on home affordability and are increasing the monthly payment on the house you'd like to buy. I did a search of sales of2,000 square foot 2 story homes in Bloomfield Township for 2012 compared to 2013 and found the average sales price had risen from $238,000 to $273,000 - a 14% increase! The chart below illustrates how the combination of rising prices and higher interest rates has impacted payments:

	Home Price	Interest Rate	Loan Payment
2012	$238,000	3.5%	$855
2013	$273,000	4.5%	$1,107
Increase			$252
Assumes a 20% down payment, 30 Year fixed rate mortgage

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So, here are the top three reasons to buy a house now:

1) Real Estate Values are rising

2) Mortgage rates are rising

3) The monthly payment on your dream home is going up!

The moral of the story here is, if your sitting on the fence wondering if now is the time to either buy your first home or sell your existing home and buy a new one, then the answer is yes! Waiting longer is just going to cause you to pay more money for the new house and get a home loan at a higher rate. Now IS the right time to buy a house in Southeastern Michigan!

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Mortgage Market Update

You know the old saying, "What goes up must come down", well, this is also true in the financial markets and with interest rates. As far as mortgage rates go an increase in the price of Mortgage Backed Securities (MBS) causes a decline in current mortgage rates. So, when MBS are in high demand from investors that causes mortgage rates to fall and vice versa. Also, heavily influencing rates is current economic activity. Interest rates generally move lower in a weak economic environment and go higher as the economy improves. The weak economic conditions in the US over the past 5 years has been the single biggest factor in causing the low mortgage rates we have been enjoying for a long long time.

The Federal Reserve Bank has also had a significant impact on mortgage rates as they have been actively buying MBS by the billions in an effort to keep mortgage rates down and improve the housing market. That has all clearly worked well as we are enjoying the best housing market in 5 years!

Over the past 10 days mortgage rates have moved steadily higher. Last week consumer confidence was reported significantly improved and the governments index of leading economic indicators was also quite positive. Both of these factors caused mortgage rates to start trending higher. Then, yesterday, Ben Bernanke, Chairman of the Federal Reserve Bank was testifying before congress about the state of the US economy. Investors are focused on if and when the Fed may curtail their massive bond buying program which has been the main factor keeping rates low. The Fed's focus has been to push interest rates lower to spur new economic growth. Once the Federal Reserve tapers off on it's accommodative monetary policy then interest rates will rise.

The comments made by Bernanke yesterday now make it appear that the Fed may taper off on it's aggressive program to keep rates low as early as next month. The market reacted to these comments and sent mortgage rates higher by .25%. Overall, mortgage rates have risen in the past 2 weeks from 3.5% to 3.875% today.

Although mortgage rates have moved up a bit they are still very attractive. For the balance of the year we could see them move higher but should still stay under 4.5%.

Ken Mascia, Licensed Loan Officer NMLS 135323

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Turf War! Conventional vs. FHA Financing

Mortgage finance has gone through some significant changes over the past 5 years. Underwriting standards have gotten more strict and differing mortgage programs have emerged as the best way for buyers to finance a house. In 2009, 2010 and 2011 FHA was practically the only way to get a low down payment loan to buy a house and so FHA was dominating the first time home buyer market. Over the past 18 months that has changed as FHA has more than doubled the cost of monthly mortgage insurance and Conventional financing has once again become easily possible with only a 5% down payment.

So, the question is, which is the better way for a person to buy a house with a low down payment - FHA or Conventional financing?

Well, right now if a buyer has 5% available to put down and has good credit then a Conventional loan is going to serve them a lot better than FHA. Take a look at this comparison of a $200,000 purchase price:

	Conventional 5% Down	FHA 3.5% Down	Monthly Savings
Base Loan Amount	$190,000	$193,000
Upfront Mortgage Insurance Premium (financed)	$4,085	$3,377
Total Amount Borrowed	$194,000	$196,377
Principal & Interest Payment	$898	$909
Monthly Mortgage Insurance Premium	$0	$201
Total Monthly Loan Payment	$898	$1,110	$212

Basically, by making an additional $3,000 down payment the home buyer saves $212 per month in their house payment and has no monthly mortgage insurance premium (MMIP). Like FHA, we would do a single upfront mortgage insurance premium (UFMIP) and then would pay nothing monthly (FHA charges both upfront AND monthly PMI). The payment savings adds up to over $2,500 per year as long as they own the house!

As you can see in this example, the Conventional financing saves the homebuyer a significant amount monthly. As long as the home buyer has a little more money available to put down then it looks like the Conventional financing is the winner!



Ken Mascia, Licensed Loan Officer NMLS 135323(248) 644-1200, kmascia@primecapitalmortgage.com

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My Crystal Ball Predictions for Real Estate & Mortgages in 2013

What My Crystal Ball Says About 2013

Well, another year has come and gone. Where does the time go? The good news is it was a great year for the Real Estate Market in Metro Detroit and a pretty good economic year for the entire State of Michigan. Michigan's unemployment level reached a peak of 14.2% back in August of 2009 in the midst of the financial crisis and I'm happy to report that unemployment has dropped to 8.9% since! Still a touch higher than the national average but what an improvement. This marked improvement in the State economy has led to a 180 degree turnaround in the real estate market. In Oakland county the number of homes sold in 2012, through November, was up 6% over 2011 and average sales price was up over 14%! Yes, that's right, home prices are rising! In Macomb County the number of homes sold was up over 13% and the average sales price was up over 11%. The supply of homes on the market has dropped considerably and now properly priced homes are selling in a matter of days, and sometimes with multiple offers. Now is really a great time for people to take advantage of the market and upgrade their home as values have gone up, making it easier to sell an existing house, but you can still buy your dream house for a good price. Plus, interest rates remain near all-time lows.

A great 2012 but what's in store for 2013? Well, I decided to consult my trusty crystal ball and see what it had to say (the thing does lie to me a lot but usually some of what comes out of it actually comes to pass). First - What is the next PowerBall winning number?. . . . . . nothing. Ahh who cares. I think $200 million would probably ruin my life anyway. Right?

The crystal ball says In the year 2013 interest rates will rise a bit. An overall improving U.S. economy is going to put upward pressure on rates. I expect by year end that mortgage rates will be 1/2 to 3/4% higher than they are currently. That would put the 30 Year Fixed rate somewhere in the 4.0 to 4.25% range - overall still very low from a historical perspective and should not be enough of an increase to hamper home sales.

I see Real Estate sales accelerating causing further increases in prices. A continued low supply of homes on the market combined with the current fervor of buyers will push home prices up 8 to 10% in Southeast Michigan over the course of the year. Cool!

The crystal ball is really positive about the new year and so am I. It seems the storm has passed. 2013 is shaping up to be a GREAT Year for Real Estate and for Michigan in general! Here's to a successful and Happy New Year for us all!

Ken Mascia, Licensed Loan Officer NMLS 135323



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