Archive for the 'FHA/VA' Category
FHA Reform Makes it Through the Senate
The Senate’s FHA Modernization Bill, S 2338 flew through with a 93 to 1 vote yesterday. The House previously passed its own slightly different FHA reform bill in September. The measure will now go to a committee to work out compromises between the two competing version before the final draft is forwarded to the Oval Office for signature.
Two of the key issues are:
- Raises the maximum FHA loan amount to $417,000, putting it in parity with conventional loan limits.
- Lowers the required down payment to 1.5% from 3% (the House version eliminates the down payment requirement altogether)
Passage of this legislation to modernize FHA would complete a series of reforms that began a couple of years ago as FHA began eliminating many of the disincentives that drove buyers and sellers to subprime mortgages.
No longer are pest reports and clearances automatically required for all structures, and the old FHA “non allowable” costs have been virtually eliminated. With the increased loan limits and falling prices, these consumer-friendly loans will be available to more homeowners and will fill the ugly void left by the departure of the sub prime lenders.
Did you know that most lenders today are not approved to do FHA loans? And unless a lender was in the business before 2000, it isn’t likely they’ve ever done a single FHA or VA loan. Do you really want to trust your escrow or your client’s escrow to someone like that?
So ask your lender: Are you HUD approved?
More importantly, ask: how many FHA loans have you actually done?
If you don’t like the answer, Contact me for a quote or apply for a loan here. I do mortgage loans in most of the western U.S., and I’ve been doing FHA & VA loans for almost two decades.
read comments (0)With the tide shifting back toward old-school underwriting, source of down payment is once again becoming an issue. Conventional loans often require that the borrower have 5% of their own funds, and that money must be “seasoned”.
FHA is different and far more flexible.
Did you know that FHA loans do not require that the borrower have any of their own money? And there are no “reserves” required. Here are a few acceptable and interesting sources for an FHA down payment:
- Gift funds, from a blood relative or charitable organization. The donor must sign a standard industry Gift Letter stating that no repayment is required, and you must prove the donor’s ability to gift funds. In other words, plan on getting a bank Read the rest of this entry »
The New FHA: What You May Not Know About Appraisals
During the sellers’ market of the early 2000’s, FHA loans were the forgotten stepchild of the mortgage business. No seller would even talk to a buyer approved through FHA or VA. One big reason for that avoidance was the FHA appraisal and related property issues.
All that has changed.
While an FHA approved appraiser must still be used, the rest of FHA’s appraisal requirements have been brought into parity with those of conventional loans. Here are some key improvements:
- Pest reports: No longer required. Pest reports used to be an FHA fact of life, and every structure on the property—the broken down shed in the back forty included—had to be inspected. The seller was required to fix or tear down that shed and repair all Section I & Section II inspection items. Today, even if a pest report is written into the Contract as a condition of purchase, the lender will likely only ask for a letter signed by the buyer confirming that all conditions of the Contract have been met. The only time a pest report will be required is when the appraisal calls for it.
“FHA Secure”: The Solution to Foreclosure?
President Bush today announced FHASecure, a new FHA refinance program designed to help trouble homeowners keep their homes. The new program should provide an option for at least some of those people headed into foreclosure due to interest rate resets and skyrocketing mortgage payments.
Who will benefit?
Hard to say just yet, but here are five criteria listed on the HUD cite:
To qualify for FHASecure, eligible homeowners must meet the following five criteria:
- A history of on-time mortgage payments before the borrower’s teaser rates expired and loans reset
- Interest rates must have or will reset between June 2005 and December 2009;
- Three percent cash or equity in the home
- A sustained history of employment
- Sufficient income to make the mortgage payment
Number 3 in particular interested me. After all, if a homeowner needs to have 3% equity (or cash) in the home, this lifeboat won’t hold the folks who owe more than their homes are worth. That will be a key question for many here in Sacramento CA. I was hoping this might be similar to the old FHA Streamline Refi’s we did years ago. Value and appraisals were not an issue then and the borrower could refi to a lower rate as long as they had been current on their existing FHA payments.
FHA Access–A Safe Way to 103% Financing
A couple of weeks ago I wrote an article called Qualifying For a Home Loan: 6 Reasons to Consider FHA. Not all lenders have been around long enough to remember FHA loans. Those who have remember the extra requirements that made FHA loans unpopular with sellers. But it’s a buyer’s market today, and all that has changed.
Last week I originated my first FHA Access loan in 7 years, and I was reminded what a great program it is. FHA Access is a 2nd loan that pairs with a traditional FHA 1st and covers the 3% down payment and all of the buyer’s closing costs. The Access loan is an 8%, 20–year fixed rate mortgage for up to 6% of the purchase price.
While FHA loans have no income limits, Access does. The borrower’s income may not exceed 120% of the median income for the area. For most of the Sacramento region, the limit is $78,480. That’s pretty generous and shouldn’t be a problem for most people. FHA loans are no longer subject to strict debt to income ratios—instead we submit them through automated underwriting—Access debt to income ratios cannot exceed 43%.
With all the exploding 100% loans out there, FHA Access offers a path to sustainable home ownership without a big down payment.
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Got a question about FHA Access? Send me an email.
FHA loans are the forgotten toy in the box. Gathering dust like some old Atari game while we’ve played with our shiny new Xbox, FHA loans years ago lost their appeal. It’s time to reconsider.
Here six reasons every first-time buyer should consider an FHA loan.
100% financing. FHA was the first to offer 100% loans. FHA loans actually require a 3% down payment, but they can be combined with a 2nd loan to cover the down payment and closing costs. If you don’t need that 2nd loan because Aunt Betty wants to help, FHA will allow her to “gift” all of the necessary cash. You don’t have to contribute 5% of your own money to the purchase. While FHA will require you document your income—no “liar loans” allowed—they are often lenient with qualifying ratios, particularly now with the use of Automated Underwriting.