Sometimes loans don’t close when they are supposed to close. During this recent refinance boom, it’s not uncommon for a lender to be unable to give you a firm closing date. What exactly can cause your loan closing to be delayed?
It seems like the whole world is refinancing their mortgages right now. Well, not the whole world. I imagine other countries aren’t experiencing the same low rate phenomenon that we are right now. However, I can assure you the mortgage industry here at home is experiencing record numbers in volume due to the current market. It’s a great opportunity for a lot of people to save big bucks, and for long term. However, since everyone and their cousin is trying to refinance right now, it’s creating some logistical difficulties.
Think about it. It’s not just the lenders who are overwhelmed with business right now. So are all the vendors they do business with to get the loan closed. That means appraisals are taking longer to get done, and title companies are scrambling to coordinate title searches and loan closings. Even more obscure vendors, like credit reporting agencies, are behind. Say you want to update a customer’s credit report to remove some erroneous information. Guess what? It’s taking longer than ever to get it done.
Because of this huge glut, lock periods for loan rates are typically longer than usual. A lock period is the timeframe in which you must close your loan to secure that fabulous interest rate that got you to commit in the first place. Lenders are having to set realistic expectations for their customers. How can you possibly close a loan in five days if you don’t have the appraisal back? You see, some things are out of your lender’s control. Realtors are very aware of the limitations that lenders are facing these days. They are ensuring that they too set realistic deadlines when negotiating purchase contracts for buyers.
There are so many moving pieces to a puzzle of a loan closing. Everything has to be coordinated to make it go smoothly. That means that you as a customer have certain responsibilities and obligations, as well. For instance, get the requested documents to your lender as soon as possible. If you dilly dally, you may run into problems. You see, your lender has a whole pipeline of loans, as do all the other mortgage lenders that work for that particular company. All of these loans have to be reviewed by an underwriter. So, basically, your loan has to take a number. And if you’re not prompt, your loan may go to the back of a very, very, very long line. Most people want their loans to close at the end of the month or in the first few days of the month, so you can imagine the huge glut and back up that occurs. Thus, be prompt and responsive to your lender’s requests to allow everyone time to do their job.
The moral of the story is to listen to your lender and keep an open line of dialogue going. Keep him/her aware of changing situations. Email is great tool for use in accomplishing this purpose. It takes only a minute or two and can save everyone lots of heartache in the long run. And if your loan closing date gets moved, take heart. It will close, eventually.
Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at www.kristinmortgage.com Home Loans Plain Talk.
Showing posts with label Federal Housing Administration. Show all posts
Showing posts with label Federal Housing Administration. Show all posts
Saturday, February 21, 2009
Saturday, January 3, 2009
FHA 2009: More Money Out of Pocket
Buying a house in 2009 and thinking about an FHA loan? Be aware your out of pocket investment is going up…
We sure have seen a bunch of changes in the mortgage industry this year. FHA has had a few noted ones, such as raising the loan limit. However, new changes will be in effect beginning in January 2009. And for this area, most important is that more money is required from the borrower.
Effective the first day of the year, any property with a case number for FHA ordered will have the new minimum loan to value requirement of 96.5%. What’s a case number, you may ask? A case number is FHA’s way of identifying a property. When you order an appraisal, you must provide the appraiser with the official assigned case number. The lender obtains this number from FHA’s system. If you’re the borrower, and you switch lenders but still have the contract on the same house, the existing case number and the assignment have to get transferred in FHA’s system.
OK, so back to the cash investment required from a borrower. The old rule was you had to have 3% out of pocket to qualify for an FHA loan. And you could finance up to 97.75% of the loan. You could use the other .75% required left over toward your closing costs. Now, you have to put a down payment equal to 3.5%. To make it a little clearer, if you were buying an home via FHA in 2008 that cost $100,000, you could finance up to $97,750, and only pay $750 in closing costs if the seller were will to pay the rest. Now, you have to put $3500 down for a loan amount of $96,500, and you and the seller have to negotiate the rest of the closing costs. Closing costs now cannot be used to meet the 3.5% requirement.
If you think about it, this change will afford FHA a few things. Number one FHA now has more wiggle room to recoup some loss in the event of foreclosure. More money down means more equity. The other aspect is that a borrower now has to a bit more serious about saving for a home if they need FHA financing.
But what hasn’t changed is that the seller can still contribute 6% of the sales pricing to help out with closing costs. That’s more generous than most lending programs with the exception of a few. And your down payment can still be in the form of a gift from a qualifying donor (blood relative is always a safe bet). Thus, these nuances of the FHA loan that have been so beneficial to many aren’t going away.
The FHA program has always been a strong one because its foundations were based upon common sense lending. Income was always verified, assets were always checked out, and the program is only for primary residences. I think these new changes may make folks have to wait a bit longer before buying a house, but it’s a smart move to keep FHA lending healthy and out of the headlines. We’ve had enough mortgage headaches due to bad decisions by lending institutions and borrowers. These changes make sense, and that’s ok with me.
Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910.
For more information visit her website at www.kristinmortgage.com Home Loans Plain Talk.
We sure have seen a bunch of changes in the mortgage industry this year. FHA has had a few noted ones, such as raising the loan limit. However, new changes will be in effect beginning in January 2009. And for this area, most important is that more money is required from the borrower.
Effective the first day of the year, any property with a case number for FHA ordered will have the new minimum loan to value requirement of 96.5%. What’s a case number, you may ask? A case number is FHA’s way of identifying a property. When you order an appraisal, you must provide the appraiser with the official assigned case number. The lender obtains this number from FHA’s system. If you’re the borrower, and you switch lenders but still have the contract on the same house, the existing case number and the assignment have to get transferred in FHA’s system.
OK, so back to the cash investment required from a borrower. The old rule was you had to have 3% out of pocket to qualify for an FHA loan. And you could finance up to 97.75% of the loan. You could use the other .75% required left over toward your closing costs. Now, you have to put a down payment equal to 3.5%. To make it a little clearer, if you were buying an home via FHA in 2008 that cost $100,000, you could finance up to $97,750, and only pay $750 in closing costs if the seller were will to pay the rest. Now, you have to put $3500 down for a loan amount of $96,500, and you and the seller have to negotiate the rest of the closing costs. Closing costs now cannot be used to meet the 3.5% requirement.
If you think about it, this change will afford FHA a few things. Number one FHA now has more wiggle room to recoup some loss in the event of foreclosure. More money down means more equity. The other aspect is that a borrower now has to a bit more serious about saving for a home if they need FHA financing.
But what hasn’t changed is that the seller can still contribute 6% of the sales pricing to help out with closing costs. That’s more generous than most lending programs with the exception of a few. And your down payment can still be in the form of a gift from a qualifying donor (blood relative is always a safe bet). Thus, these nuances of the FHA loan that have been so beneficial to many aren’t going away.
The FHA program has always been a strong one because its foundations were based upon common sense lending. Income was always verified, assets were always checked out, and the program is only for primary residences. I think these new changes may make folks have to wait a bit longer before buying a house, but it’s a smart move to keep FHA lending healthy and out of the headlines. We’ve had enough mortgage headaches due to bad decisions by lending institutions and borrowers. These changes make sense, and that’s ok with me.
Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910.
For more information visit her website at www.kristinmortgage.com Home Loans Plain Talk.
Monday, December 1, 2008
What’s the Low Down on Loan to Value?
When buying a home, most people only concern themselves with the interest rate and the type of loan they are getting. However, the loan to value may be another aspect to take into consideration.
It’s not very often that a borrower takes into heavy consideration what his loan to value is when shopping for a loan. In fact, if the subject is brought up by the customer, it’s mostly in relation to avoiding paying monthly mortgage insurance. But sometimes, a loan to value can affect even more aspects of your loan – like pricing and approval!
What is loan to value? Well, it’s exactly what it says. The loan amount compared to the value of the home you are buying or refinancing. For example, if you are buying a $100,000 home, and your loan amount is only $50,000, your loan to value or “LTV” is 50%. It’s also very common to refinance a home to obtain a lower LTV and drop mortgage insurance that was before required.
Different types of loans have different minimum requirements for LTV’s. With primary residence purchases, for instance, an FHA loan can have as high as a 97.75% LTV (soon to change to 96.5% in 2009). A conventional loan can have as high as a 97% LTV (but more common is 95% LTV). VA and Rural Housing loans can have 100% LTV’s. People who have cash to put down on the property they are buying and financing with a conventional loan oftentimes try to amass 20% of the purchase price in order to avoid mortgage insurance. Mortgage insurance is required when your LTV for a primary residence is above 80% and is issued by independent mortgage insuring companies like Genworth Financial or PMI. Fannie and Freddie, the big purchasers of conventional loans, will require one of these or other approved companies issue mortgage insurance unless the loan has an 80% LTV. And if you’re refinancing the home you live in? The whole grid of acceptable LTV’s changes for the most part, with a few exceptions. And furthermore, if you’re talking about investment properties, it’s another can of worms.
But when else does LTV mean something? Consider when a loan specialist prices your loan. Oftentimes there are pricing differentials based upon the loan to value. For instance, if you carry mortgage insurance and your LTV is 85.01% or higher, you might actually get a better interest rate than if you had an 85% LTV (but don’t get too excited because your monthly mortgage insurance will be higher). Or if your LTV is 60% or lower, you might also get a better interest rate. If you are close to tipping the scales on one of these ratios, it may be to your benefit to ask your loan specialist how close you are to a pricing break one way or another. You’d be surprised to find out it might change your mind as to how much money you decide to put down on your loan.
And guess what else? A low loan to value may be the difference between loan approval and loan denial. Why is that? Because if you are investing enough of your own money into the equity of a property, chances are you won’t default on the loan. And if you do, it’s probably a last recourse. Not to mention, the lender who holds the note won’t lose money because there is enough equity in the property to cover foreclosure costs, re-sale costs and any value loss from an upside down market. The lender is covered. So, the lender will consider the loan less risky and a higher debt to income ratio is tolerated when reviewed with a high credit score.
Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at www.kristinmortgage.com Home Loans Plain Talk.
It’s not very often that a borrower takes into heavy consideration what his loan to value is when shopping for a loan. In fact, if the subject is brought up by the customer, it’s mostly in relation to avoiding paying monthly mortgage insurance. But sometimes, a loan to value can affect even more aspects of your loan – like pricing and approval!
What is loan to value? Well, it’s exactly what it says. The loan amount compared to the value of the home you are buying or refinancing. For example, if you are buying a $100,000 home, and your loan amount is only $50,000, your loan to value or “LTV” is 50%. It’s also very common to refinance a home to obtain a lower LTV and drop mortgage insurance that was before required.
Different types of loans have different minimum requirements for LTV’s. With primary residence purchases, for instance, an FHA loan can have as high as a 97.75% LTV (soon to change to 96.5% in 2009). A conventional loan can have as high as a 97% LTV (but more common is 95% LTV). VA and Rural Housing loans can have 100% LTV’s. People who have cash to put down on the property they are buying and financing with a conventional loan oftentimes try to amass 20% of the purchase price in order to avoid mortgage insurance. Mortgage insurance is required when your LTV for a primary residence is above 80% and is issued by independent mortgage insuring companies like Genworth Financial or PMI. Fannie and Freddie, the big purchasers of conventional loans, will require one of these or other approved companies issue mortgage insurance unless the loan has an 80% LTV. And if you’re refinancing the home you live in? The whole grid of acceptable LTV’s changes for the most part, with a few exceptions. And furthermore, if you’re talking about investment properties, it’s another can of worms.
But when else does LTV mean something? Consider when a loan specialist prices your loan. Oftentimes there are pricing differentials based upon the loan to value. For instance, if you carry mortgage insurance and your LTV is 85.01% or higher, you might actually get a better interest rate than if you had an 85% LTV (but don’t get too excited because your monthly mortgage insurance will be higher). Or if your LTV is 60% or lower, you might also get a better interest rate. If you are close to tipping the scales on one of these ratios, it may be to your benefit to ask your loan specialist how close you are to a pricing break one way or another. You’d be surprised to find out it might change your mind as to how much money you decide to put down on your loan.
And guess what else? A low loan to value may be the difference between loan approval and loan denial. Why is that? Because if you are investing enough of your own money into the equity of a property, chances are you won’t default on the loan. And if you do, it’s probably a last recourse. Not to mention, the lender who holds the note won’t lose money because there is enough equity in the property to cover foreclosure costs, re-sale costs and any value loss from an upside down market. The lender is covered. So, the lender will consider the loan less risky and a higher debt to income ratio is tolerated when reviewed with a high credit score.
Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at www.kristinmortgage.com Home Loans Plain Talk.
Monday, September 1, 2008
Interest Rates: One Man’s Gain Is Another’s Loss
How can two borrowers can buy the same house, and get completely different interest rates? There are multiple considerations to take into account when a lender is pricing an interest rate for a customer……
In the old days, you used to be able to call a lender, give them a note amount and term, and get a quote. Lickety split. Not a lot of questions. Just “boom”, there’s your answer. It certainly made interest rate comparison much easier. But in today’s mortgage lending world, it’s just not that easy.
In fact, say you’ve got two customers buying identical homes in a development. Each customer can be quoted completely different interest rates for different reasons. Even if they have the same credit score. That’s because you’re granted different discounts or assessed with different cost additions for various aspects of your lending profile.
For instance, one guy may be getting a conventional loan, and the other an FHA (Federal Housing Administration) loan. With FHA and a credit score of 620, there are no discounts or additions for credit score that a lender will add to the total price. But, dip below a 620 and there will be quite a pricing differential. With a conventional loan, you’ll get discounts the higher your credit score. Thus, a 620 credit score in the conventional realm does not have as much interest rate muscle as a 720. And there are different cost hits in between for every 19 point differential. Plus, if you have less than a 620, you probably won’t get conventional approval. A typical lender nowadays has to be really good at reading a chart to quote a loan in the conventional world.
Another big factor is loan size. Again, you’ll probably pick up a discount if you’ve got a healthy sized loan. However, if you’re financing a smaller amount, it may cost you a bit. Thank goodness for excellent first time homebuyer programs that let qualified borrowers avoid some of these pricing hits.
Another big difference in interest rates available is the buyer’s intention for the property. If it’s a primary residence or a second home, one gets a better rate than if it’s an investment property. From an underwriting perspective, a borrower is less likely to quit paying a mortgage for a property that is intended for personal use. Statistics have proven this aspect of lending to be quite true. Of course, if it is an investment property, the borrower is going to have to come up with a heck of a lot more money out of pocket anyway. If it’s a manufactured home, you have to reconsider loan programs again. Some programs aren’t available for manufactured homes, and especially if it is a manufactured home that is an investment property. You’ll have to find a lender that specializes in this type of loan.
As touched on before, the type of loan matters, too. Conventional rates are different than FHA rates, which are different than VA rates, which are different than Rural Housing rates. Even for the same house. And again, as mentioned before, throw THDA or another first time housing program into the equation, and you start all over again. Of course, you can’t get a VA loan if you’re not a veteran or the spouse of one buying a loan. And you can’t get a rural housing loan if you’re in the wrong zip code and make too much money. So, at times, your choices are limited for you.
Even if you get the same interest rate, it doesn’t necessarily mean your payment will be the same. If your loan requires mortgage insurance, your monthly premium could differ because of your credit profile.
I guess the best advice is to be patient when considering loan programs and payments. Make sure you explore all your options. And don’t worry about the guy sitting next you. Just keep your eyes open and work with a lender that’s trustworthy.
Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at www.kristinmortgage.com Home Loans Plain Talk.
In the old days, you used to be able to call a lender, give them a note amount and term, and get a quote. Lickety split. Not a lot of questions. Just “boom”, there’s your answer. It certainly made interest rate comparison much easier. But in today’s mortgage lending world, it’s just not that easy.
In fact, say you’ve got two customers buying identical homes in a development. Each customer can be quoted completely different interest rates for different reasons. Even if they have the same credit score. That’s because you’re granted different discounts or assessed with different cost additions for various aspects of your lending profile.
For instance, one guy may be getting a conventional loan, and the other an FHA (Federal Housing Administration) loan. With FHA and a credit score of 620, there are no discounts or additions for credit score that a lender will add to the total price. But, dip below a 620 and there will be quite a pricing differential. With a conventional loan, you’ll get discounts the higher your credit score. Thus, a 620 credit score in the conventional realm does not have as much interest rate muscle as a 720. And there are different cost hits in between for every 19 point differential. Plus, if you have less than a 620, you probably won’t get conventional approval. A typical lender nowadays has to be really good at reading a chart to quote a loan in the conventional world.
Another big factor is loan size. Again, you’ll probably pick up a discount if you’ve got a healthy sized loan. However, if you’re financing a smaller amount, it may cost you a bit. Thank goodness for excellent first time homebuyer programs that let qualified borrowers avoid some of these pricing hits.
Another big difference in interest rates available is the buyer’s intention for the property. If it’s a primary residence or a second home, one gets a better rate than if it’s an investment property. From an underwriting perspective, a borrower is less likely to quit paying a mortgage for a property that is intended for personal use. Statistics have proven this aspect of lending to be quite true. Of course, if it is an investment property, the borrower is going to have to come up with a heck of a lot more money out of pocket anyway. If it’s a manufactured home, you have to reconsider loan programs again. Some programs aren’t available for manufactured homes, and especially if it is a manufactured home that is an investment property. You’ll have to find a lender that specializes in this type of loan.
As touched on before, the type of loan matters, too. Conventional rates are different than FHA rates, which are different than VA rates, which are different than Rural Housing rates. Even for the same house. And again, as mentioned before, throw THDA or another first time housing program into the equation, and you start all over again. Of course, you can’t get a VA loan if you’re not a veteran or the spouse of one buying a loan. And you can’t get a rural housing loan if you’re in the wrong zip code and make too much money. So, at times, your choices are limited for you.
Even if you get the same interest rate, it doesn’t necessarily mean your payment will be the same. If your loan requires mortgage insurance, your monthly premium could differ because of your credit profile.
I guess the best advice is to be patient when considering loan programs and payments. Make sure you explore all your options. And don’t worry about the guy sitting next you. Just keep your eyes open and work with a lender that’s trustworthy.
Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at www.kristinmortgage.com Home Loans Plain Talk.
Saturday, August 23, 2008
Want to Make Your Landlord Rich? Renew Your Lease!
When you make your payment to your landlord every month like the dutiful renter you are, you are placing cash in his pocket. Maybe it’s time to consider keeping some of that money for your self…..
No doubt about it. Renting definitely serves a need and a purpose. It also is typically hassle-free. There’s very little maintenance. If something goes wrong, you call someone, and they fix it. But is it always necessary or the smart choice?
Think about it. Every month when you write that check out to Joe Landlord, you are paying your landlord’s mortgage for him (or at least some portion of it). And, in the meantime, you are building equity for him in the property he owns. That’s really quite nice of you. Very thoughtful indeed. So, if he decides to sell that property in the future, do you think he will write you a thank you note for all the money you’ve made for him? That might happen when pigs fly.
Say you pay $1000 a month for rent. Most landlords cover their mortgage when they set the rent payment. Typically, but not always. So if you stay in this place for two years, you will end up making $24,000 worth of mortgage payments for your landlord. That’s mighty nice of you. Now, in turn, think of the property’s appreciation that will occur simultaneously. For instance, when you first started renting the house, it was worth $100,000. Now, two years later, it’s worth $124,000. Since you’ve been so considerate to make his mortgage, oops, I mean your rent payment on time, your landlord is smiling. He’s just accumulated $24,000 in equity. And it’s all thanks to you!
Hmm, that gives you pause for a moment, doesn’t it?
I’m not trying to make you feel bad. Like I said before, renting definitely serves a need and a purpose. Some people can’t qualify for a mortgage. Perhaps they are self employed, and need to build up some type of income history of earnings to get a home. Or maybe their job is transient or unstable, and they don’t want to have to deal with selling a home in a few months. There are many instances when renting makes sense.
However, if you are just being complacent or nervous, then you might reconsider renting. Yes, I said nervous. You see, fear keeps many people from homeownership. The paperwork and numbers can be daunting, even to a person who is buying their fifth house. And if you are a first time homebuyer considering a thirty year debt, it can be overwhelming and cause great anxiety.
But I’ll let you in on a little secret. Homeownership is easily attainable. You just have to set a little cash aside and pay your bills on time. That’s it. No great mystery. And here’s another little tidbit. It’s a buyer’s market right now. That means there are deals to be found and lots of inventory available.
So if you’re a renter, consider paying yourself instead of a landlord. Contact a trusted mortgage lender. There are tons of options that can be explored if you just know where to look. Let your mortgage lender help you figure out how long it will be before you can move out!
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Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at http://www.kristinmortgage.com/ Home Loans Plain Talk.
Wednesday, July 30, 2008
FHA Mortgages: What Is a Flip and How Can it Affect you?
You may have heard the term “flipping” lately, especially as investors find good buys in the real estate market. What exactly is flipping, is it a bad thing and how might it touch you?
Flipping is a word that can cause many a lender anxiety. Not the traditional flip that you see in gymnastics or diving. But flipping as it pertains to the real estate and lending community. The flipping I’m talking about means buying a home for a bargain and then re-selling it quickly for profit. Sometimes huge upgrades are made to the property, sometimes not so much. But anytime someone is in the market to make money turning houses, opportunity for fraud can arise. That’s why lenders are particular and have so many rules attached to flipped homes.
Not too many years back, certain markets became inundated with fraud flipping schemes. Realtors, lenders and appraisers in these situations were all in cahoots with one another. As the saying goes, one bad apple can spoil the whole bunch. It was a very terrible thing, and the regulations we have today are reflective from that lesson learned. In particular, FHA has established strict guidelines to follow to alleviate flipping fraud on its homes that it insures.
FHA released a 90 day flipping waiver policy in reaction to the current market and buying climate. Basically, it outlines the following: FHA requires that: a) only owners of record may sell properties that will be financed using FHA-insured mortgages; b) any resale of a property may not occur 90 or fewer days from the last sale to be eligible for FHA financing; and c) that for re-sales that occur between 91 and 180 days where the new sales price exceeds the previous sales price by 100 percent or more, FHA will require additional documentation validating the property’s value. FHA also has flexibility to examine and require additional evidence of appraised value when properties are re-sold within 12 months.How can this policy affect you? If you are selling or buying a home that is a flip and you want FHA financing available, don’t even think about executing a contract until the 91st day. Your appraiser will note that it hasn’t been 90 days since the last sale, and immediately your FHA underwriter will read it and, in turn, reject the loan. And if on the 91st day since settlement you are buying a home that was in deplorable condition and has been fixed up nicely, you might need to get a second independent appraisal to support the value. Even if it is really apparent that it’s not the same house it was 3 months ago.
Certain properties are exempt from the rule. For instance, if HUD has foreclosed on the property, it’s not going to make itself wait 90 days to sell its own real estate. That would be kind of silly. Also, if one can show the seller inherited the property, it should be ok. And properties acquired by employers or relocation companies are kosher, too. There are a few other exemptions sprinkled about, but these are the most common ones encountered.
Not too many years back, certain markets became inundated with fraud flipping schemes. Realtors, lenders and appraisers in these situations were all in cahoots with one another. As the saying goes, one bad apple can spoil the whole bunch. It was a very terrible thing, and the regulations we have today are reflective from that lesson learned. In particular, FHA has established strict guidelines to follow to alleviate flipping fraud on its homes that it insures.
FHA released a 90 day flipping waiver policy in reaction to the current market and buying climate. Basically, it outlines the following: FHA requires that: a) only owners of record may sell properties that will be financed using FHA-insured mortgages; b) any resale of a property may not occur 90 or fewer days from the last sale to be eligible for FHA financing; and c) that for re-sales that occur between 91 and 180 days where the new sales price exceeds the previous sales price by 100 percent or more, FHA will require additional documentation validating the property’s value. FHA also has flexibility to examine and require additional evidence of appraised value when properties are re-sold within 12 months.How can this policy affect you? If you are selling or buying a home that is a flip and you want FHA financing available, don’t even think about executing a contract until the 91st day. Your appraiser will note that it hasn’t been 90 days since the last sale, and immediately your FHA underwriter will read it and, in turn, reject the loan. And if on the 91st day since settlement you are buying a home that was in deplorable condition and has been fixed up nicely, you might need to get a second independent appraisal to support the value. Even if it is really apparent that it’s not the same house it was 3 months ago.
Certain properties are exempt from the rule. For instance, if HUD has foreclosed on the property, it’s not going to make itself wait 90 days to sell its own real estate. That would be kind of silly. Also, if one can show the seller inherited the property, it should be ok. And properties acquired by employers or relocation companies are kosher, too. There are a few other exemptions sprinkled about, but these are the most common ones encountered.
Basically, if you’re in the home for an FHA mortgage, just keep your ears and eyes open. Knowing your limitations upfront can make you a better negotiator and save you headaches.
Sunday, June 22, 2008
Call the Movers! You’re Closing Date is Extended!
Sometimes loans don’t close when they are supposed to close. It’s usually not your lender’s fault. What exactly can cause your loan closing to be delayed?
You’ve called the movers, you’re all packed, and it’s the eleventh hour before closing. Your phone rings and it’s your lender with bad news. Your loan’s not going to close tomorrow. Whatch you talking about, Willis? Everything’s ready, the utilities are being turned off tomorrow, and the movers are showing up! Why is this happening?
There are so many moving pieces to a puzzle of a loan closing. Everything has to be coordinated to make it go smoothly. For instance, get the requested documents to your lender as soon as possible. If you dilly dally, you may run into problems. You see, your lender has a whole pipeline of loans, as do all the other mortgage lenders that work for that particular company. All of these loans have to be reviewed by an underwriter. So, basically, your loan has to take a number. And if you’re not prompt, your loan may go to the back of a very long line. Most people want their loans to close at the end of the month, so you can imagine the huge glut and back up that occurs. Thus, be prompt and responsive to your lender’s requests to allow everyone time to do their job.
Also, don’t quit your job and expect to close because your approval depends on you receiving proven income. On the day of closing, a lender is going to make a call to ensure you’re still employed. Funny, but your ability to repay the loan is important when someone’s fronting you thousands of dollars. No job, no moola.
If you’re a seller, be sure you’re ready for that final walk through. If the buyers are expecting you to leave the bathroom mirrors and the curtains, then don’t pack them up. The house should be broom clean (unless otherwise noted in the contract) and there shouldn’t be any new damage or sudden repairs needed that previously didn’t exist.
Weird things can happen, too. I know of a loan that was delayed in closing because two days prior to the deadline the title company found out that the builder/seller had filed bankruptcy. It seems that he was not in a position to sell the home anymore, and he failed to tell anyone (however, the new owner who got the property in bankruptcy was happy to sell, but closing was delayed). Another odd tale was that of the seller who failed to disclose he had a $49,000 tax lien outstanding on a property. He didn’t feel it necessary to mention this situation to anyone. It was pretty much a deal killer, as you can imagine.
Another thing that can cause a hiccup is failure to alert anyone that that one of the parties (buyers or sellers) will be out of town for a closing. These situations aren’t insurmountable, but they require careful planning and coordination. Sometimes, the contract changes and the lender isn’t notified until after the loan is fully underwritten. Contract changes most usually require a loan to be shot back through underwriting. Remember, you get in the back of the line.
Another minor hitch that frequently occurs involves self employed borrowers. The lender takes a loan application over the phone and writes down the borrower’s income. When tax returns are collected, the lender comes to find out that what their borrowers earn isn’t exactly what they claim with Uncle Sam. A lender will almost always use the income you report to the government, not what shows on your bank statements. All of a sudden, the borrower is no longer income qualified to close the loan. Time to scramble.
The moral of the story is to listen to your lender and keep an open line of dialogue going. Keep the him/her aware of changing situations. Email is great tool for use in accomplishing this purpose. It takes only a minute or two and can save everyone lots of heartache in the long run.
Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at www.kristinmortgage.com Home Loans Plain Talk.
You’ve called the movers, you’re all packed, and it’s the eleventh hour before closing. Your phone rings and it’s your lender with bad news. Your loan’s not going to close tomorrow. Whatch you talking about, Willis? Everything’s ready, the utilities are being turned off tomorrow, and the movers are showing up! Why is this happening?
There are so many moving pieces to a puzzle of a loan closing. Everything has to be coordinated to make it go smoothly. For instance, get the requested documents to your lender as soon as possible. If you dilly dally, you may run into problems. You see, your lender has a whole pipeline of loans, as do all the other mortgage lenders that work for that particular company. All of these loans have to be reviewed by an underwriter. So, basically, your loan has to take a number. And if you’re not prompt, your loan may go to the back of a very long line. Most people want their loans to close at the end of the month, so you can imagine the huge glut and back up that occurs. Thus, be prompt and responsive to your lender’s requests to allow everyone time to do their job.
Also, don’t quit your job and expect to close because your approval depends on you receiving proven income. On the day of closing, a lender is going to make a call to ensure you’re still employed. Funny, but your ability to repay the loan is important when someone’s fronting you thousands of dollars. No job, no moola.
If you’re a seller, be sure you’re ready for that final walk through. If the buyers are expecting you to leave the bathroom mirrors and the curtains, then don’t pack them up. The house should be broom clean (unless otherwise noted in the contract) and there shouldn’t be any new damage or sudden repairs needed that previously didn’t exist.
Weird things can happen, too. I know of a loan that was delayed in closing because two days prior to the deadline the title company found out that the builder/seller had filed bankruptcy. It seems that he was not in a position to sell the home anymore, and he failed to tell anyone (however, the new owner who got the property in bankruptcy was happy to sell, but closing was delayed). Another odd tale was that of the seller who failed to disclose he had a $49,000 tax lien outstanding on a property. He didn’t feel it necessary to mention this situation to anyone. It was pretty much a deal killer, as you can imagine.
Another thing that can cause a hiccup is failure to alert anyone that that one of the parties (buyers or sellers) will be out of town for a closing. These situations aren’t insurmountable, but they require careful planning and coordination. Sometimes, the contract changes and the lender isn’t notified until after the loan is fully underwritten. Contract changes most usually require a loan to be shot back through underwriting. Remember, you get in the back of the line.
Another minor hitch that frequently occurs involves self employed borrowers. The lender takes a loan application over the phone and writes down the borrower’s income. When tax returns are collected, the lender comes to find out that what their borrowers earn isn’t exactly what they claim with Uncle Sam. A lender will almost always use the income you report to the government, not what shows on your bank statements. All of a sudden, the borrower is no longer income qualified to close the loan. Time to scramble.
The moral of the story is to listen to your lender and keep an open line of dialogue going. Keep the him/her aware of changing situations. Email is great tool for use in accomplishing this purpose. It takes only a minute or two and can save everyone lots of heartache in the long run.
Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at www.kristinmortgage.com Home Loans Plain Talk.
Tuesday, May 20, 2008
Like an Old Shoe- The FHA Loan is a Good Fit
You hear so much about FHA (Federal Housing Administration) loans lately? Why? Because sometimes an FHA loan is the best fit for your mortgage needs…
FHA (Federal Housing Administration) loans are really a hot product right now. Mortgage companies and brokers are scrambling to become approved FHA lenders left and right. However, FHA loans have been around for a long time, helping a lot of people get into homes. Some people say it’s become the new “sub prime” loan. What that really means is that if you can’t qualify for a conventional loan, FHA’s guidelines are more flexible than some loan products. And because of this point, the FHA loan fits a lot of people’s needs and goals.,
When should you consider an FHA loan? One great fit for an FHA loan is if you are buying a property and are looking to put as little money down on the property as possible. I had one couple that had plenty of money and excellent credit, but the seller of the property they were buying was conceding “nada”, and all the funds for closing were being footed by this couple out of their own check book. They were retired and relocating. Their goal was to spend as little money as possible, but still get into the home they desired. FHA fit their needs perfectly, because they were able to finance 97.75% of the loan amount. Their rate was competitive and their mortgage insurance was reduced. Also, they had plenty of money left over to buy plane tickets to visit the grandkids. Be aware, however, there is a loan limit for the FHA loan, so not all properties will qualify. But the limit is pretty generous.
Many times people have very little cash to put down on the property, but they have very nice credit. Again, FHA fits their needs greatly. Since FHA can pretty much offer the lowest cash necessary to close available to many, it’s easier for a buyer to negotiate for the seller to make a concession to lower or even eliminate the buyer’s cash out of pocket. Naturally, the seller has to be ok with what they are netting from the sale of the property. And the lender will make sure the house is worth the contract price. But FHA allows the seller to pay up to 6% of the buyer’s closing costs and on top of that, will let them gift the buyers the minimum required 3% investment through a down payment assistance program. So you see, you can get into a house with little or no money if you qualify for an FHA loan.
Another great thing about FHA? It doesn’t have any major pricing hits for a minimum qualifying credit score of 620. In the conventional loan world, there typically are pricing increases for loans every corresponding 19 point increase in credit score. Most secondary lenders who offer FHA loans will only give you a pricing hit if you dip below a 620 credit score.
And what if you have a credit score below 620? If you don’t get an automatic underwriting approval, you can possibly obtain a manual approval. What’s a manual approval? It’s when a real live human being looks at your file, and considers actors other than your credit score to qualify you. You may have to show you’ve paid other bills that don’t appear on your credit report on time for the past year. These types of bills would perhaps be your cell phone bill, utility bill, rent, or car insurance premium. Couple this evidence with a strong, hard explanation of why your credit score is less than perfect, and you still have a good chance of loan approval. But, be aware that your minimum credit score must typically be a 580 or higher.
Another nice fit for an FHA loan? Manufactured homes. You can still obtain an FHA loan to buy a new or refinance an existing manufactured home. Of course, there are stringent guidelines regarding the property that must be met, but FHA is still in the manufactured home market. In fact, it’s one of the few product types offered on the secondary market that still will endorse a manufactured home loan. The VA will too.
So, if one of the above mentioned situations reflects your scenario, make sure you investigate your options with FHA financing. You won’t be sorry you did. You know what they say? If the shoe fits - wear it.
When should you consider an FHA loan? One great fit for an FHA loan is if you are buying a property and are looking to put as little money down on the property as possible. I had one couple that had plenty of money and excellent credit, but the seller of the property they were buying was conceding “nada”, and all the funds for closing were being footed by this couple out of their own check book. They were retired and relocating. Their goal was to spend as little money as possible, but still get into the home they desired. FHA fit their needs perfectly, because they were able to finance 97.75% of the loan amount. Their rate was competitive and their mortgage insurance was reduced. Also, they had plenty of money left over to buy plane tickets to visit the grandkids. Be aware, however, there is a loan limit for the FHA loan, so not all properties will qualify. But the limit is pretty generous.
Many times people have very little cash to put down on the property, but they have very nice credit. Again, FHA fits their needs greatly. Since FHA can pretty much offer the lowest cash necessary to close available to many, it’s easier for a buyer to negotiate for the seller to make a concession to lower or even eliminate the buyer’s cash out of pocket. Naturally, the seller has to be ok with what they are netting from the sale of the property. And the lender will make sure the house is worth the contract price. But FHA allows the seller to pay up to 6% of the buyer’s closing costs and on top of that, will let them gift the buyers the minimum required 3% investment through a down payment assistance program. So you see, you can get into a house with little or no money if you qualify for an FHA loan.
Another great thing about FHA? It doesn’t have any major pricing hits for a minimum qualifying credit score of 620. In the conventional loan world, there typically are pricing increases for loans every corresponding 19 point increase in credit score. Most secondary lenders who offer FHA loans will only give you a pricing hit if you dip below a 620 credit score.
And what if you have a credit score below 620? If you don’t get an automatic underwriting approval, you can possibly obtain a manual approval. What’s a manual approval? It’s when a real live human being looks at your file, and considers actors other than your credit score to qualify you. You may have to show you’ve paid other bills that don’t appear on your credit report on time for the past year. These types of bills would perhaps be your cell phone bill, utility bill, rent, or car insurance premium. Couple this evidence with a strong, hard explanation of why your credit score is less than perfect, and you still have a good chance of loan approval. But, be aware that your minimum credit score must typically be a 580 or higher.
Another nice fit for an FHA loan? Manufactured homes. You can still obtain an FHA loan to buy a new or refinance an existing manufactured home. Of course, there are stringent guidelines regarding the property that must be met, but FHA is still in the manufactured home market. In fact, it’s one of the few product types offered on the secondary market that still will endorse a manufactured home loan. The VA will too.
So, if one of the above mentioned situations reflects your scenario, make sure you investigate your options with FHA financing. You won’t be sorry you did. You know what they say? If the shoe fits - wear it.
Saturday, March 15, 2008
FHA Raises the Roof! New Loan Limits for Homebuyers
The FHA (Federal Housing Administration) has recently increased its loan limits for various areas. This announcement is great news for a lot of people. The FHA loan has become increasingly a very popular home loan solution for many folks. It is exciting news for homebuyers, realtors and the mortgage industry in general. And if you’re closing on a loan after March 21, 2008, you may want to take a look at the FHA loan.
You see, previously, FHA loans in the Knoxville and surrounding area were limited to $200,160 for the note amount. If you wanted to buy a $210,000 home, you had to pay the difference out of your own pocket. The new increase limit allows for a note amount of $271,050. That’s a remarkable leap. And that big jump means the FHA umbrella has widened. Again, great news.
What’s so fabulous about FHA? First and foremost, a FHA loan only requires a 3% contribution out of pocket from the buyer. And, FHA allows the seller to pay up to 6% of closing costs and pre-paid costs (“pre-paid costs” are the money held in reserves to pay for your taxes, insurance and per diem interest). Look at it this way. If you wanted to buy a $250,000 home now, you would only need to have $7500 into the deal if you could negotiate with the seller to pay the remainder of the closing costs and pre-paid items. On this particular example, that would mean the seller could pay up to $15,000 in closing costs for you. In reality, the closing costs/pre-paids would be more around $5,000-6,000, but you get the picture. It’s a very affordable program.
The other highlights of FHA? Flexibility from an underwriting stand point. Credit scores can be as low as 560 (with proper documentation) and medical collections accounts are ok. Judgments do have to have been satisfied. Also, there is no income limitation. You can make as much money as you want and still qualify for the program. And the monthly mortgage insurance that is required is at a reduced rate. An upfront mortgage insurance premium is collected, but it’s financed into the loan amount. The loans can only be for your primary residence, and you can get adjustable rate mortgages or buy downs (money collected upfront to make your payment less for the next year or so-usually seller paid) if you want, too. What else? No need to worry about a pre-payment penalty. They don’t apply to an FHA loan.
I’ve personally seen a huge increase for my customers in FHA loans lately. Where they previously may have qualified for conventional financing, they now prefer the FHA program. It better suits their goals and they qualify more easily for the program if they have minor credit challenges. Oftentimes, they are denied a conventional loan but obtain FHA underwriting approval.
Chrissi Rhea, President of Mortgage Investors Group, states, “We are so excited that these anticipated changes are now a reality for FHA borrowers. When we announced to our sales team that they could start taking applications for the higher loan limit beginning March 10, they were excited to communicate this information to their customers and realtors. It’s really going to open doors for many mortgage customers. It’s nice to see an underwriting limit expand when so many options have actually become extinct in the recent months.”
The new FHA loan limit should help many people in months to come. Also, look for the conventional conforming limit take a higher jump (it’s currently at $417K). That move will also allow more flexibility for purchasing and refinancing homes. I’ll write about that later. But right now, the FHA has raised the roof, so take advantage of it!
š
Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at http://www.kristinmortgage.com/ Home Loans Plain Talk.
You see, previously, FHA loans in the Knoxville and surrounding area were limited to $200,160 for the note amount. If you wanted to buy a $210,000 home, you had to pay the difference out of your own pocket. The new increase limit allows for a note amount of $271,050. That’s a remarkable leap. And that big jump means the FHA umbrella has widened. Again, great news.
What’s so fabulous about FHA? First and foremost, a FHA loan only requires a 3% contribution out of pocket from the buyer. And, FHA allows the seller to pay up to 6% of closing costs and pre-paid costs (“pre-paid costs” are the money held in reserves to pay for your taxes, insurance and per diem interest). Look at it this way. If you wanted to buy a $250,000 home now, you would only need to have $7500 into the deal if you could negotiate with the seller to pay the remainder of the closing costs and pre-paid items. On this particular example, that would mean the seller could pay up to $15,000 in closing costs for you. In reality, the closing costs/pre-paids would be more around $5,000-6,000, but you get the picture. It’s a very affordable program.
The other highlights of FHA? Flexibility from an underwriting stand point. Credit scores can be as low as 560 (with proper documentation) and medical collections accounts are ok. Judgments do have to have been satisfied. Also, there is no income limitation. You can make as much money as you want and still qualify for the program. And the monthly mortgage insurance that is required is at a reduced rate. An upfront mortgage insurance premium is collected, but it’s financed into the loan amount. The loans can only be for your primary residence, and you can get adjustable rate mortgages or buy downs (money collected upfront to make your payment less for the next year or so-usually seller paid) if you want, too. What else? No need to worry about a pre-payment penalty. They don’t apply to an FHA loan.
I’ve personally seen a huge increase for my customers in FHA loans lately. Where they previously may have qualified for conventional financing, they now prefer the FHA program. It better suits their goals and they qualify more easily for the program if they have minor credit challenges. Oftentimes, they are denied a conventional loan but obtain FHA underwriting approval.
Chrissi Rhea, President of Mortgage Investors Group, states, “We are so excited that these anticipated changes are now a reality for FHA borrowers. When we announced to our sales team that they could start taking applications for the higher loan limit beginning March 10, they were excited to communicate this information to their customers and realtors. It’s really going to open doors for many mortgage customers. It’s nice to see an underwriting limit expand when so many options have actually become extinct in the recent months.”
The new FHA loan limit should help many people in months to come. Also, look for the conventional conforming limit take a higher jump (it’s currently at $417K). That move will also allow more flexibility for purchasing and refinancing homes. I’ll write about that later. But right now, the FHA has raised the roof, so take advantage of it!
š
Let My Experience Work For You!
Email your home loan financing questions to Kristin Abouelata, Home Loan Specialist with Mortgage Investors Group, at question@kristinmortgage.com or call direct: (865) 567-0113 Toll Free: 1-800-489-8910. For more information visit her website at http://www.kristinmortgage.com/ Home Loans Plain Talk.
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