First Time Home Buyer: FHA at a glance

First Time Home Buyer: FHA at a glance

 

The following was a general overview of the FHA loan program and a guide to figure out if this is the loan program for you.

 

Availability: Available in all areas.

 

Type of Homes they finance: Most property types. Single Family Properties and Multi-Family Properties will qualify. Site Condos are viewed the same as Attached Condominium Properties and are acceptable if they are approved condominium projects. You can search approved projects here: ******. Manufactured properties are acceptable if they meet individual lender requirements. Modular, Stick-Built, or BOCA-code properties are acceptable. Working Farms, unique properties, and dome-homes will not qualify.

 

Down Payment Required: 3.5%. Can be a gift from family, friend, or employer. Down payment assistance is only available from grant programs.

 

Mortgage Insurance: 1.75% financed into your loan and and .55% is billed monthly.

 

Interest Rates: Vary greatly because of the great variance between lenders offering FHA financing and the Yields paid to those making the loan for you. Careful shopping will be required in obtaining the best interest rates.

 

Maximum Loan Amount: Varies by county. Most counties in Michigan fall at $278,000 or lower.

 

Income Limits: No income limits apply.

 

Credit Requirement: Varies from lender to lender. In general, a 620 FICO and 2 credit references at least 12 months old with no late payments is required. 36 months from Bankruptcy or Foreclosure.

 

Reserves: Varies between lenders, but in general, 2 months of mortgage payments are required. Can come from retirement savings, checking or savings account, or as a gift.

 

Repair Escrow: Available on HUD-owned properties with no contingency plan.

 

General Overview: Available to all borrowers meeting credit standards, emphasis on credit requirements in regards to payment history within 12 months, credit discretions explainable to underwriter are acceptable, easy qualifying with acceptable credit references.

First Time Home Buyer Tax Credit as Down Payment or: Dirty Deeds Done Dirt Cheap

First Time Home Buyer Tax Credit as Down Payment or: Dirty Deeds Done Dirt Cheap

I think this is an important discussion to have so I am going to post this blog a few days in a row to make sure it gets out. There is a lot of confusion concerning the First Time Home Buyer Tax Credit especially now that FHA has approved the funds to be used towards down payment and I am looking to simplify things for you like I have been trying to do with all of my blogs.

This one, I feel is of great importance because I hate to be the one to you know: burst the bubble, but as I hear folks industry wide rejoice at the possibilities of borrowers being able to use their tax credit as a down payment for their new home I would like at least make a few points to the contrary.

1. Premature Jubilation: Everyone right now is scrambling to get the info to you that you can now use your tax credit as a down payment for an FHA loan. The thing they don’t realize is that until lenders roll out a program which allows you to use your tax credit in such a way, it makes NO difference whatsoever. So before you get yourself all worked up, we first have to actually have it available for you.

This is most easily show with this example- in July of last year FHA approved funding for the Hope fro Homeowner program in which they were going to refinance people that were having trouble making their mortgage payments. This was the program that was supposed to stabilize our housing market. Instead, no Lender ever even touched the program, and it was ultimately just discontinued in January 2009.

2. There’s a Snake in that Grass. Please also understand that they are not just letting you use your money for your down payment. What they want to do is give you a loan that you can in turn pay back. Now, if that suits you, then fine. But understand that this is not the same as the free stimulus that it is meant to be. Ultimately you allowing someone to give you a loan on that money it is going to benefit you, not them. Just understand that it is NOT in your best interest to take free money and turn it into a loan. DON’T LET THE VULTURES GET TO YOUR MONEY!!!

So, I shouldn’t take it? I am not saying that it can’t help anyone…but use your head, weigh your options, ask more than one person, and always read the fine print. If you don not absolutely NEED to use the money as a down payment…DON’T.

You may not even be thinking about it now, but there are so many good ways to use this money, please do not get ripped off before you even have the chance! Here are just a few examples of what to do:

Pay down the principle balance of your mortgage. In fact, if you get $7500 and put it directly on your principle balance of a $100,000 mortgage, that one payment will cut 4 years and $60,000 in interest payments right off of your mortgage!

Pay down high interest credit cards. Pay that high credit card loan off, use the boost in credit score to get a better credit card at a lower interest rate, let the paid off card sit there open with no balance and enjoy a great credit score for quite some time and save thousand on future mortgages, credit cards, car insurance…you name it.

Invest it. Ok, so maybe the stock market isn’t so hot now, but if you can find something safe that it sure to yield, it is a win-win for you my friend. Heck, even a high yielding savings account or a 2-year CD will make you great money.

Take advantage now, because the tax credit goes away if you close on your new home after December 31st, 2009. Happy Home Hunting to you all!

For more in-depth help, go to our website:
www.iconmortgagelending.com

Michigan Mortgages: Hope for Homeowners? This time it just may be true.

Call me a softy and a nerd. It’s hard to believe, but yes I was one of the few that sat and watched Steve Preston’s address to the National Press Club this past Wednesday. Many of you may not know who that is, but he is one of the most powerful people in the nation right now because he is the Secretary of the U.S Department of Housing and Urban Development (HUD) and he is trying to create hope for thousands of Americans that are currently facing foreclosure, or are soon to be facing foreclosure.

 

Unfortunately, as powerful as he may be, he is still all but hog tied by private industry and private industry is not budging. How bad is it? It was said that in the first two weeks of October 42 people applied for the Hope for Homeowners and all 42 were denied. First of all…42? Nationwide 42??? That’s a joke. A joke that Steve Preston did not find funny.

 

Why has it failed? Simple, the private markets are already strapped for cash and not looking to spend more. FHA’s flaw is that it cannot move without lenders to make the loan that they will insure. Lender participation has been non-existent and has crippled the legislation set forth to help “Main Street.”

 

So, what’s going to be done? There are two important things to remember. FHA will be raising the LTV cram-down from 90% to 96.5%. FHA will be providing up front payment to second liens holders for immediate release of these liens. Both of these actions should provide enough incentive for current lien holders to chose negotiation over foreclosure.

 

Debt ratios are normally strictly 31% for your housing payment and 43% for your total debt with FHA. The Hope for Homeowners program will open up to 38% and 50% for those that can get down to 90%, again adding more qualifying applicants to the pool.

 

They also will open the program to longer loan terms. If your debt ratios don’t quite qualify at a 30 year term, you can also use a 40 year term to qualify. I suspect this is something that will come to the normal FHA loan soon. 40 and 50 year terms have successfully brought homeownership to thousands of Europeans over the past three decades and it’s very long overdue in America.

 

Lender participation will still dictate the effectiveness of FHA’s proposed help, but hearing these changes delivered from a very poised and positive Steve Preston finally brought me hope for the Hope for Homeowners program.

 

At least now we will see once and for all which is the proper method for dealing with this crisis- government intervention or capitalizing private market. Let me assure you, this is the final straw. If banks do not take to these changes and start making new loans….your tax dollars for the “bailout” will have been COMPLETELY WASTED. These banks have made billions, the CEOs have made millions at least one of them needs to step up now and join the club in trying to actually help people…I’m looking at you Chase.

 

For more in-depth help, visit our website:

 

www.iconmortgagelending.com

Michigan Real Estate Purchase: The Deadly Repair Escrow

Bum Bum Buummm.  Enter scary music and cold sweats, you just fell in love with a home that has a broken furnace and a big orange stain where a bathtub used to be. Chances are your financing is going to resemble that orange gunk on the tile right?

 

There are options. With conventional financing, yes you will be sunk. The bank will only want a safe asset to secure. There are some programs that allow flexibility here like HomePossible, but it is very impractical.

 

The good news is, that with the foreclosure boom, came the need to repair existing homes as production of new homes slowed to a crawl. Government financing fills the void of sensible repair financing. Actually it filled a long time ago before the housing boom started and home construction grew out of control.

 

With FHA there is a possibility for a repair escrow; however the repairs must be minimal. The better option is the 203k loan that will allow a closing to take place like normal but provide you with money for all sorts of repairs including essential appliances.

 

If you are lucky enough to find a good loan officer that knows how to work the USDA repair options, they are far superior. You will need to find a property in an eligible area, but it is a very easy process on the borrower.

 

No matter what, be prepared for a little extra time and effort by both you and your purchase team. Always shop around for your repair quotes and check the reputation of any contractors with resources like the Better Business Bureau before making any decision.

 

For more in-depth answers or help go to our website:

www.iconmortgagelending.com

FHA Modernization Act of 2008- What it means to you

As many of you have heard in the news- President Bush sign the bill H.R.3221 into law on July 30, 2008. This bill encompasses many separate Acts and Provisions including: The FHA Modernization Act, The Mortgage Disclosure Improvement Act, The Building American Homeownership Act, so on and so forth.

I offer for you here, some condensed information on what has actually come through and how it will impact us. This is, obviously, still in its infant stage and (as with most of our legislation) still left for interpretation but I will be sure to distinguish here what is said and what is speculation.

What I feel is the most important part of this legislation is The FHA Modernization Act of 2008, if only for the sheer bulk of changes in relation to the rest of the bill.

(Sec. 113) Raises the FHA minimum borrower contribution to 3.5% and officially prohibits the use of any down payment assistance programs. This should be a minimal impact though because the lenders had pretty much done away with this on their own.

(Sec. 115) Makes permanent the ability of HUD to insure Rehabilitation loans- so the 203k is here to stay. I am hoping, again hoping that this means that considerable thought will be put into cleaning up the processing of these loans since rehabilitation is very important to Michigan’s housing market.

(Sec. 122) Will open the Home Equity Conversion Mortgage or “Reverse Mortgage” to be used to purchase a new home. This is also a very important bit because it will allow many seniors that can not sell their current home the chance to purchase a new home using the equity of their current home to cover the payments.

(Sec. 124)Will offer a five-year pilot program to offer mortgages to borrowers that do not have traditional credit as an automated process. So, hopefully the borrowers that only have rent, utilities, insurance and these types of non-traditional credit can enjoy the same streamlines credit rating as borrowers with a normal FICO risk assessment. This, if implemented properly, should really open up FHA mortgages to a lot of new borrowers. 

Those are what I fell will have the biggest impact on our business, specifically in Michigan. Some other notable changes this legislation implements on FHA mortgages include: limiting the increases in risk-based MIP (which has skyrocketed lately for borrowers under 620), Increasing loan limits, tightening down on kickbacks and unearned fees, and introducing further criminal action against fraudulent activity.

I will be writing a separate blog for the remainder of H.R. 3221, the above is strictly about the FHA portion, so check that out too because it has the most exciting piece of news of the entire bill! I hope you find this helpful and if you would like easy access to the actual paperwork I have included a link to the Library of Congress page below.

http://thomas.loc.gov/cgi-bin/query/z?c110:H.R.3221:

For more in-depth help or answers, go to our website: www.iconmortgagelending.com