Tag: Loan

Financing-home loans, Real Estate, The Market

FHA – Seasoning requirements

Posted on by Kristen K. Foley, REALTOR®

HUD has published the final version of its predatory lending rule established to combat “flipping.” Flipping is the term used to describe the resale of a recently acquired property for an artificially inflated value. Under the new rule, recently flipped properties are not eligible for FHA mortgage insurance.

Some of the other features of the rule include:

  • Only the owner of record may sell a home to an individual who will get an FHA mortgage. It cannot involve the sale or assignment of a sales contract.
  • Resales occurring 90 days or fewer after the purchase of the property are not eligible for FHA insurance.
  • Resales occurring between 91 and 180 days after purchase will be eligible only if the lender obtains an additional independent appraisal based on a resale profit percentage threshold established by the FHA. Lenders may prove that the increased value of the property is due to rehabilitation.

In areas where flipping is a problem, HUD may require that lenders provide additional documentation to sup-port the value of the property. This would supersede the 91–180 day rule shown above.

Make sure you are working with an agent who is aware of these rules if you are seeking an FHA loan..you could end up in default if you find out too late in a transaction to purchase a home that meets this criteria.  Also verify any additional risk layering that your specific lender may use to protect themselves that adds additional requirements to the above noted.

Hope this helps!

 

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Financing-home loans, Real Estate, The Market

First-Time Homebuyers

Posted on by Kristen K. Foley, REALTOR®
A bedroom in an AIMCO apartment home
Image via Wikipedia

Quoted from:

Focus on First Time Homebuyers by Tim McLaughlin

There has been a dramatic shift occurring in the housing sector. According to Realty Times, of the 8.4 million people who have purchased a home in the last two years, 41 percent of them have been first time buyers. This number is up from 35 percent in 2007, and experts believe this growing demographic will influence the home-style landscape in the years to come for first time purchasers.

Today’s first time homebuyers have as much desire to establish household independence as their parents did, but the economic environment has impacted their preferences to some degree. This demographic is much more aware of both how much home they need and what they can afford. But they also have specific preferences in layout, efficiency and neighborhood type according to recent statistics.

On average, over the past few years, first time buyers are buying smaller, lower priced houses than trade up buyers are, the majority buying homes with avg. square feet under 2,500. This buying preference is partially affected by the economy and by maintenance costs, according to Realty Times.

In addition, first time homebuyers seem to have a different mindset regarding a home purchase. They look at the transaction as securing a place to live in first and foremost. While they have less to spend, they want the space they can afford put to the most effective use. This means that the practical spaces they will use every day, like kitchens, laundry rooms and the master bedroom, are their key focus. They appreciate open spaces that can be defined by furniture rather than walls and hallways. Additionally, home location appears to be important to these buyers, who have a keen interest in transit oriented communities. This makes urban areas highly appealing, as well as suburban areas with walk able town centers.

Of biggest concern to this subset appears to be financing questions: qualifications, the right loan structure with the least amount of money down, and understanding an approval process that is much more cumbersome than what their parents had to deal with.

This market is a tough one to navigate…we have very low inventory because of sellers still waiting for appreciation before they will list, but plenty of buyers out looking to take advantage of the great interest rates and loan programs to get into their first home or move up into their “forever home”.  In this environment, it is so important to have a Realtor you trust to help you navigate the offer process as well as all of the steps between the contract signing and settlement.  Between the appraisal, the home inspection, rent-backs and more…it is important to choose someone you like and trust and who keeps current on laws, best practices and the market pulse to guide you through the process (regardless of how many times you have bought and/or sold a home).

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Financing-home loans, Real Estate, The Market, Tips and Tricks

FHA appraisals

Posted on by Kristen K. Foley, REALTOR®
Workers using special "roofing shovels&qu...
Image via Wikipedia

FHA appraisals do not differ from conventional appraisals in a large way; however, there are a few differences.

One main difference is that there can be more required repairs.  A big one is the roof.  These are the appraisal guidelines for FHA appraisers:

Roofs and Attics:

The roof must prevent moisture from entering the home and provide reasonable future utility, durability and economy of maintenance. The roof should have a remaining physical life of two years. If the roof has less than two years remaining life, the appraiser must call for re-roofing or repair.FHA will accept a maximum of three layers of existing roofing. If more than two layers exist and repair is necessary, all of the old roofing must be removed as part of the re-roofing.Roofing on slopes of 2.5/12 pitch or less must be installed by a licensed roofer using built-up roofing that meets the Uniform Building Code.

According to http://www.fhainfo.com/fhaappraisals4.htm:

These are the 12 Most Common FHA Repairs

These conditions are not listed to scare you, but to help you understand and erase any worries you may have.The purpose of a repair is to correct deficiencies which may affect the health and safety of the occupants or the continued marketability of the property. If possible, we suggest that you make any repairs to your home prior to the appraisal. This will improve the marketability and help the sale or refinance of your home go smoothly.

1. If the home was built prior to 1978, chipping, peeling paint must be scraped and painted. This includes interior, exterior, garages, sheds, fences, etc.

2. Any useful components (appliances, floor covering, etc.) of the home, especially the roof, should have 2 years of useful life remaining. A roof should have no more than 3 layers of shingles.

3. Broken windows and doors should be replaced.

4. The cause of negative drainage must be cured (i.e., improve drainage away from house, gutters, french drains, etc.).

5. Health and safety hazards (i.e. electric garage door opener won’t reverse with resistance; burglar bars). GFIC outlets are not an FHA requirement.

6. Abandoned inoperable wells must be capped and sealed by a licensed well sealing contractor.

7. Safety handrails should be installed in open stairwells of three or more stairs.

8. Infestation of any kind should be exterminated (i.e., insects, mice, bats, etc.).

9. Damaged or inoperable plumbing, electric and heating systems should be repaired. The appraiser will check these areas.

10. Structural or foundation problems must be repaired.

11. Flammable storage tanks must be removed and filler cap sealed from the inside (i.e., buried oil tank).

12. If there is a crawl space, it will be the homeowner’s responsibility to make this area accessible so that it can be thoroughly inspected

All of the information in this post was taken word for word from: http://www.fhainfo.com/fhaappraisals4.htm

This is meant to be helpful in the determining the right home for you if obtaining an FHA loan or accepting the right offer if you are a seller considering an offer with an FHA loan. Always discuss this information with your Realtor and lender to get more specifics.

**Regardless of the type of loan being used to purchase your home, it is always a good idea to fix anything broken and do all of the maintenance items you were putting off.  This will not only make any appraisal process go more smoothly, but will make a better showing to potential buyers as well.

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Financing-home loans, Real Estate

FHA Mortgage Insurance Premiums to Increase

Posted on by Kristen K. Foley, REALTOR®
Logo of the Federal Housing Administration.
Image via Wikipedia

HUD has released Mortgagee Letter 2011-10 announcing an increase in the current Annual Mortgage Insurance Premiums (MIP or known to many as PMI) by 25 Basis Points (BPS)–which is a percentage measure equal to 0.01%– for all FHA Loans (a federally insured loan allowing people to put as low as 3.5% down to purchase a home).  Upfront MIP will not be changed.

Upfront MIP:

The upfront premium will remain at 100 BPS and will be charged for all amortization terms.  

Annual Premiums:

For FHA purchases and refinances, the annual premium has been increased.  The Annual MIP shown in basis points below is to be remitted on a monthly basis and will be charged based on the initial loan-to-value ratio and length of the mortgage according to the following schedule:

LTV >15 Year Loan-Annual MIP LTV <=15 Year Loan – Annual MIP
<= 95% 110 BPS (currently 85 BPS)   <= 90% 25 BPS (currently zero)
> 95% 115 BPS (currently 90 BPS)   > 90% 50 BPS (currently 25 BPS

Effective Date: This increase in Annual Mortgage Insurance Premiums will be effective for all FHA case numbers assigned on or after April 18, 2011. 

I am not a lender, so please check with your lender for particulars on any loan programs.

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Financing-home loans, House and Home, Real Estate

Lower price vs. lower interest rates

Posted on by Kristen K. Foley, REALTOR®

Interest Rates are at historic lows hovering around 4.25%. If you are still on the fence, it may be time to seriously consider the advantages of locking in this low of a rate for 30 years.  Additionally, the increase in your buying power is significant. If the rates increase just .5-1%, you will actually end up paying more per month than if you had bought at a slightly higher priced home with a lower rate.  This may also mean that you can afford more home than you would have been able to if the rates had been higher.  This is in the favor of sellers at the same time because they now have an increased buyer pool.

Here is an example:

NOW SCENARIO 1 SCENARIO 2
Homes Decline 5% Homes Increase 5%
1% Rate Increase 1% Rate Increase
HOME PRICE $500,000.00 $475,000.00 $525,000.00
DOWN PAYMENT 3.50%
LOAN AMOUNT $482,500.00 $458,375.00 $506,625.00
INTEREST RATE 4.500% 5.500% 5.500%
MONTHLY PAYMENT $2,444.76 $2,602.60 $2,876.56
Savings – Monthly $157.85 $431.80
Savings – Life of Loan $56,826.00 $155,448.00
0
Financing-home loans, Real Estate

Applying for a home loan…some great questions to ask potential lenders

Posted on by Kristen K. Foley, REALTOR®

The following are some good questions to discuss with potential lenders when applying for a home loan:

  • Are both fixed-rate and adjustable mortgage loans available? (see adjustable rate mortgages below)
  • How long can I “lock-in” the financing at the current interest rate and what is the “lock-in” policy?
  • Is a float down lock available in case rates drop after I have locked in?
  • What are the other fees a lender may charge me in conjunction with my loan?
  • Are funds for a second mortgage available?
  • Is there a pre-payment penalty clause? This involves extra charges for paying off the loan before maturity. About 80% of all loans in the United States are paid off early.
  • What is the “grace” period?
  • How late can a monthly payment be made before a late charge is assessed?
  • What will happen if a payment is missed?
  • If you sell your house, will the new buyer (if he/she qualifies) be able to assume your mortgage at the same interest rate?
  • Do you have to pay “points” to get your new mortgage? Usually lenders charge points for the cost of giving you a mortgage loan. A “point” is 1% of the loan.  Or can you buy down points by selecting a slightly higher interest rate. If you do this and end up with negative points, the bank actually gives you money back at closing. 5% vs. 4.75% is no biggie if you aren’t planning to keep the home for a long time and would prefer to come to closing with a little less money.
  • Will the lender require mortgage insurance?
  • Is the loan serviced locally or is the servicing sold? Ask for a written “good faith deposit”.
  • What will the total closing costs be?

On Adjustable Rate Mortgages

  • How often will the interest rate be adjusted?
  • Is there a maximum limit on each rate change?
  • How often will the monthly payment be adjusted?
  • Is there a ceiling on payment adjustments?
  • Can the term of the loan be extended?
  • What is the maximum rate that can be charged over the life of the loan?
  • Is there any potential for negative amortization?
  • What is the annual percentage rate?

Hope this helps!

Happy Saturday!

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