Tag Archives: Fha

Why didn’t my house appraise for more?

I hear this often, especially on refinance applications.  Sometimes it happens on a purchase when the sellers have the price of the home higher than the market will bear.  Other times, it happens when a home buyer is asking the seller to pay closing costs on the purchase and they agree to increase the price to offset the closing costs so the seller will net the same after paying off their mortgage and sales costs.  This is a common event in a hot real estate market such as the Treasure Valley.

The purpose of the appraisal is to establish the value of the property being secured by a mortgage.  The lender needs to know the current value of the property so in the event of foreclosure, the property is worth more than the amount owed by a borrower.  For a refinance application, it usually means a lower loan amount to reflect the lower than estimated home value.  For a purchase transaction, the following options apply:

If the value is lower than the purchase price, the buyer has the option of either bringing the difference to closing (not the best choice, IMO) or negotiating a lower purchase price with the seller.  Sometimes a compromise such as lowering seller  concessions like closing costs while lowering the purchase price will spread the difference between both parties.  It comes down to how much does the buyer want THAT property or how motivated the seller is to sell their property.  Other times, I have seen both parties walk away from the transaction.  In the case of FHA loans, the seller signs a document letting the buyer out of the contract and return earnest money if the property doesn’t appraise for the purchase price on the contract.

For a home seller accepting an FHA offer, be aware that FHA will log the appraised value in their system, and even if you turn down a counter offer lowering the sales price, FHA will recognize this value for the next 180 days.  Another appraisal or lender cannot get a higher value regardless of the result of a new appraisal.  If you or your agent feel you are at the top of the market price for homes like yours, you should not try to increase the price to pay a buyers closing costs.  There are options for buyers who need closing costs or down payment assistance.

For more information about home appraisals, check out my other site.

Not so fast….FHA Mortgage changes rescinded!

Within hours of President Donald J. Trump being sworn in as President, HUD has rescinded the proposed reduction of Mortgage Insurance Premiums on new FHA loans.  The reduction of Mortgage Insurance Premiums, called MIP on an FHA Loan, was supposed to be reduced by 25 bps per month on new loans at the end of this month.  This would have saved the FHA home loan borrower about $50 per month on a loan of $250,000.

While this is not great news for new FHA home loan seekers, I prefer to look at the re examination of FHA Mortgage Insurance Premium funds and see what can be done to reduce the monthly mortgage payments for FHA home loan seekers.

Possible changes include the life of the loan provision currently on FHA Mortgage Insurance Premiums.  It would be less costly for home owners with a FHA Mortgage if the FHA MIP would drop off automatically in later years.  Currently, for the life of the loan, FHA will collect Mortgage Insurance Premiums.  On a conventional loan with Private Mortgage Insurance, the PMI can be dropped when your equity reaches 20%, or when by normal amortization schedules, you reach the 78% of the original loan to value.

Right now, the only way to drop the FHA Mortgage Insurance Premium is to pay off the loan, most likely with a refinance or sale.

If you are in the Treasure Valley, we have seen massive home appreciation. Someone with a home loan from 2013 or 2014 might have enough equity in 2017 to refinance into a conventional loan without PMI or MIP, and save that money every month.

To see what you can save, contact me here.

 

 

 

Mortgage improvements and updates in 2017, My predictions…

 

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2017 will bring many new and exciting changes to the mortgage industry and those seeking a home loan.  Some are new programs and new sources for those programs, others are updates and changes to existing residential home loan programs.

These include:

FHA lower Mortgage Insurance premiums                                                              

Increased loan limits on Fannie Mae and Freddie Mac loans

New, affordable home buying programs for first time home buyers

Higher, maximum loan limits on Home Equity Conversion Loans (Reverse Mortgages)

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Some, others are more predictions, like:

Higher interest rates

An improving economy, or even the expectation of a better economy and consumer confidence will cause higher interest rates as investors demand a higher return for their money.  The rates we have seen the last few years were below market in an attempt to keep the economy from slipping back into a recession.

Continued home sellers market

This contributes to higher prices, although higher rates will eventually slow this down.

Housing shortages in some markets

Home buyers continue to move out of state for work or other reasons.  Our market in Boise, Idaho continues to benefit from the influx of out of state buyers moving here.

Tightening of the zero down payment options.

last year, Idaho Housing and Finance Association made several changes to their down payment assistance programs.  Still there are several zero down payment options available and ways to make it very little out of pocket.

With all the changes that happen in the market, it’s really important to get a local expert team working on your behalf.  That being said, I feel optimistic for home buyers and home owners seeking a home loan in 2017.

For more information or answers, contact me here at www.loansbyrogerhowell.com and I will be delighted to help you.

 

 

Are you buying a home next year and need an FHA loan? Better check with your lender first.

Next year the loan limits for new FHA loans has been lowered in our area.

The new loan limits are $271,050 for new FHA loans reserved after 1/1/14.

Previously, the loan limits for the Boise are was $303,750.

If you have found a home and are in the process of obtaining a home loan but plan on closing in early 2014, make sure your lender gets the FHA case file # before the end of the year.  By doing this, you get “grandfathered” in with the current, higher loan limits.

 

FHA’s back to work program requirements

The changes to FHA’s back to work initiative have opened up the housing market to many potential home buyers  who otherwise would have to wait another year.

The Back to work guidelines allow for a home buyer to purchase a home after 12 months from the date of a Foreclosure, Bankruptcy, or short sale.  Until now, the guidelines required 24 months or longer after those events.

Its not without its qualifications, here they are:

  • Borrower(s)      must have a FICO score of 640 and above.
  • Borrower(s)      experienced an “economic event” such as job loss, loss of income, or combination of both which caused a foreclosure/pre-foreclosure, deed-in-lieu, or short sale.
  • “Economic event” resulted in at least 20% decline in household income and      lasted six months or more.
  • A   minimum of 12 months has elapsed since “economic event”.

Borrower(s) must receive HUD-approved counseling.

 

I’m not sure how I feel about the changes, on one hand it gets people into homes earlier than in the past.  On the other hand, I didn’t feel than 24 months after a bankruptcy and 36 after a foreclosure was too long to sit out of the home ownership market.

Bottom line is, some people will be sufficiently motivated to go through the counseling, gather documents proving the economic event and have made efforts to get their credit straightened.  Those people are probably the ones who will be ok buying a home sooner than later.

 

 

Will a so-called “government shutdown” affect the mortgage market?

It could, depending on the type of loan you are seeking and what still needs to be done on your loan.

There are several government agencies that come in to play when you seek a home loan.

  1. First of all, borrowers will have their tax returns verified through the IRS with a form 4506t.  The IRS has said its staff will still be operating in the event of a so-called “shutdown” but I wouldn’t take that for a definite that you can get the tax transcripts in a timely manner.  If you are seeking a mortgage, get your mortgage loan officer to order them asap!
  2.   Government insured programs such as VA Loan, FHA loans, and the USDA require a special report called CAVIRS to be run beforehand.  Once again, get it done asap.  If you don’t have a clear CAVIRS, your loan can’t be approved.
  3. Third, the USDA has indicated that its staff might be furloughed in the event of a “shutdown” and that will affect the final approval from USDA that is a part of getting an RD loan.  If you have an RD loan and it’s not ready to close right now, you should have a conversation will all parties about a possible extension if there is a “shutdown.”
  4. Furthermore, the RD’s eligibility map is in limbo over the budget.  Right now, the map is not fully accurate as to what properties are in an eligible area.  I would be hesitant to rely on an RD loan in an area such as Kuna, where they have indicated it is coming off the eligible areas.  We won’t know for sure what parts of Kuna will be eligible and what parts wont.

Anyway, the next week or two could be very exciting to say the least.  The key is to be proactive in the event of a “shutdown” of the Federal Government.

 

Changes to FHA loan program waives the 3 yr waiting period after a foreclosure or short sale!

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Borrowers who lost their homes through foreclosure or short sale will no longer have to wait three years to get a mortgage to buy another home.

The Federal Housing Administration has changed the rules to help buyers whose credit was tainted due to the loss of a job or income reduction. They will now be able to get a mortgage to buy again after a one-year waiting period through the FHA’s new lending program, dubbed Back to Work. The FHA previously required these buyers to wait three years before applying for a mortgage.

Buyers who can document they lost their home to foreclosure or filed for bankruptcy because they were laid off or because their income was reduced by at least 20 percent will be eligible to apply for a loan after paying their bills on time for a year, according to the instructions the FHA sent lenders last week.

The change is effective immediately until September 2016.

Some of the qualifications:

Borrowers will be required to provide documentation showing the loss of income or employment, including termination notices, tax returns and W-2s.

The program is designed to help potential buyers who went through a period of financial distress but have been able to get back on their feet and can afford a home again.

The program is especially helpful to borrowers who went through bankruptcy and foreclosure simultaneously. Often, the lender doesn’t take title of the property until years after the discharge of the bankruptcy, which has delayed the start of the waiting period for many potential buyers.

During the one-year waiting period after the foreclosure sale, bankruptcy discharge or short sale closing, the borrower should have:

  • No late housing payments (rent/mortgage).
  • No more than one 30-day late payment on all other      accounts.
  • No accounts in collection.

Borrowers will also be required to go through housing counseling prior to being approved for the loan-I expect Idaho Housing to offer this and be a leader in this program.

As you can see, it’s not simply a wipe the slate clean and start over program, it will take some preparation to get requalified.

If you need a lender who will do the hard work, call me.

How long do I have to wait after a foreclsoure or bankruptcy to get another loan?

Bankruptcy:

  • Chapter 7 or Chapter 11: A four-year waiting period is required, measured from the discharge or dismissal date of the bankruptcy action.
  • Chapter 13: Requires two years seasoning from the discharge date to loan application date or four years from the dismissal date to the loan application date.
  • Multiple Filings: For a borrower with more than one bankruptcy filing within the past seven years, a five-year waiting period is required, measured from the most recent dismissal or discharge date.

Foreclosure: Loans require 84 months seasoning from foreclosure completion to loan application date regardless of reason

 

Now for Short Sales and Pre-Foreclosures, the rules are a little different:

 

2 years – 80% maximum LTV
  • 4 years – 90% maximum LTV
  • 7 years – standard LTV

Now for FHA loans, the waiting period is less:

Bankruptcy: 2 years must have elapsed since discharge or dismissal of Ch 7 or Ch 13.

 

Bankruptcy High Balance Cash-Out Refinance: Not allowed in past 7 years.

 

Foreclosure, Deed in Lieu or Short Sale: 3 years must have elapsed since completion. The wait period for short sales can be waived if all of the following conditions are met:

·        The loan was current at the time of the short sale

·        The loan was paid on time in the 12 months preceding the short sale

·        All other installment debts were paid on time in the preceding 12 months.

 

Can I get a “gift” from my parents for a down payment?

Yes, you can! This is the classic case where the parents help out the kids buy their first home. It is allowed under Fannie Mae, Freddie Mac, and FHA mortgage guidelines.

The rules vary by program, but generally, the rules are it has to be a true gift and no expectation of repayment. It can’t be a loan to be paid back.
There will be a letter stating that it is a gift from the parents (or any other family member) to the borrowers and it is signed by all parties.

There is also a set of documentation that needs to accompany the gift to prove that it was the parents to give, it was deposited into the borrower’s account, and what the balance is after the gift was deposited. FHA also requires that the parents show what account it came from.

There is also a provision in the FHA mortgage guidelines that allow a family member’s “gift of equity” to purchase a home that the parents own but want to sell to the kids.

For Fannie Mae and Freddie Mac, the rules are slightly different. You can get a gift for part of the down payment but you would need a minimum of 5% of your own funds into the deal. Here is how this could work. You have 5% saved for a down payment and want to go with a conventional loan. You can get a gift for 15% from a family member and that would give you a total down payment of 20%. Having 20% down allows you to get a conventional loan without having to purchase private mortgage insurance. This is the exact deal that my wife and I got when we purchased our first home. Thanks Mom and Dad!

Anyway, if you think you will need a gift for a down payment, its best to come see your local mortgage professional ahead of time. There is a little extra work and time required to put this together. You also want to make sure your family members are aware and able to do the gift when you need it.

If you need further assistance with a gift for down payment, contact me at 208-955-1234 ext. 30.

Just finished up my busiest month since May of 2006!

Interest rates moved up around memorial day but my clients who listened to my advice to lock their loans got deals that probably wont come around again.

Right now, if someone was looking for a no cost VA refinance or an FHA streamlined refinance would pay about 1.25% higher than what was available before memorial day.

That doesn’t mean that rates are bad, in fact they are still great, just higher than they were a short time ago.

I keep track of my clients situations and needs and when I see a chance to improve it, I will contact them and let them know what is available. It was those past clients that listened to my advice and had me lock their rates that were successful in getting a no cost refinance in the low 3’s. The clients who didn’t want to lock all thought the rates would drop a little more and missed the opportunity when rates moved up 4 weeks in a row.

While I wish everyone had listened to my advice, most did and that made for a lot of work and long hours getting their loans set up, processed and closed. I did have to skip a few trips to the gym or lunch invites, but it was worth it to take care of my clients.

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