Archive for the 'FHA' Category
August 17th, 2008 Categories: FHA
Eliminating the Down Payment Assistance Programs Including AmeridreamHUD has claimed that those loans that have a Seller Contributed Down Payment Assistance have a disproportionally higher foreclosure level. According to an article on FHA Mortgage Guide, Scott Syphax, the president and CEO of Nehemiah Corporation of America, says that HUD’s “own inspector general cited as unreliable. In short, FHA undercounts the number of DPA loans by up to three times and divides that number into the number of claims it pays.”
We hear things like three times as many. We never hear actual numbers. I would like to know what the number is and how does it really compare to other loans. I have a feeling the problem is not in the DPA program but in more in the area of fraud. The reason I say that FHA is a fully documented loan. There is no stating your income. You have to prove income, rent… I think that the price is increased to compensate the cost which in turn puts pressure on the appraisers.
So let’s look at how many HUD homes (a HUD home is foreclosed FHA loan) are out there right now. Currently in the Wasatch Front MLS which covers 29 Counties less than 1/10th of a percent of the active listings are HUD homes.
So in hindsight we are going to punish those that can actually afford to make payments while tons of people made fortunes committing loan fraud. The fraud was not at this level but somehow the government seems to think this is a good idea.
I recommend that the program be modified to allow only a three percent contribution. Then the buyer and the lender have to use premium pricing to cover the loan closing cost. I believe that when the loan officer and the buyer have to pay the closing cost that the cost will be monitored and scrutinized little better.
This helps on a couple of levels, in the end the buyer owes less. Yes they may have a little higher interest rate, but that’s the price for not having a down payment. It is better to owe less at a slightly higher rate than to owe more with a little lower rate. I know the lower rate makes sense in the long haul, a borrower can always do a stream line re-fi or come up with a down payment. Besides the life expectancy of the loan is about five years. Plus prices won’t be falsely inflated to cover the down payment and the closing cost.
Discussion: 1 Comment »|
June 1st, 2008 Categories: FHA
FHA and The Salt Lake Real Estate Market
I have been talking about FHA loans since last summer and the role FHA will have now that the market has shifted. FHA is not as sensitive to FICO scores. This does not mean you can have bad credit and still get a loan. Some people have lower FICO scores not because of a less than desirable payment history. Believe it or not there are still people that do not use credit to buy things other than a house.
FHA only requires a 3% down payment and it can be a gift, a grant or Down Payment Assistant Program aka DPA.
Some people interpret this as a Government bailout and the Government is making bad loans. FHA DOES NOT LOAN MONEY, FHA is an insured loan that is funded by the mortgage insurance premiums of the borrower. The reason FHA works is very simple, it is what is called a full doc loan. Meaning full documentation, all things must be verified. You know trivial things like employment, rental history…
FHA has loosened up in the past few years on some physical requirements. They used to be so stringent that it didn’t make sense. Things like a handrail going to a basement could not be raw wood or a small crack in a window of a detached garage. The purpose of the requirements is to assure people were buying safe homes.
The latest is the increase in the loan limits. This one is huge, there are a lot of people that have homes that were considered a jumbo and therefore the loans had higher interest rates. Even with mortgage insurance FHA loan will be better than most conventional products that have 10% or less down. After all why shouldn’t someone with a good credit history good income minimal debt and a fair down payment get a good interest rate?
I have written quite a few pieces on FHA and still say when choosing a mortgage company make sure they are an FHA approved lender. For more read 8 Reasons Why You Should…
Discussion: 2 Comments »|
FHA Raises It’s Loan Limits Along with
Fannie Mae and Freddie Mac
Yesterday the limit on conforming loans were raised from $417,000 to $729,750. This can help the housing market for sure and help reduce the debt service of those that currently have loans from $417,000 to 700,000. Before anything over $417,000 was considered a jumbo loan and jumbo loans usually carry a higher interest rate.
One of the problems that came from the sub-prime debacle is the secondary market for jumbo loans, it is rapidly disappearing. Normally a jumbo loan is more risky, but $417,000 in some markets is not jumbo it is a starter home. Also what about the guy that bought a $630,000 home and put down 20%, that is $126,000 cash and a $504,000 loan. I don’t see the risk there, but because it was above the conforming limit it was.
FHA released it’s limits today. Here is a list of the Utah FHA Limits by County
Discussion: 5 Comments »|
Holy cow, how else do you describe the mortgage rates this week. There was a point where lenders were not locking in rates because they were changing so fast. They were at their lowest in a long time, they were back up, they Feds droped the short term rate by 75 basis points, the DOW Jones had a 600 point swing in a day.
So what does all that mean? Rates are great and houses are available, hmmm. A good time to buy? Maybe.
FHA buzz flying around today, there has been talk about raising the FHA limit and lowering the 3% down payment to 1.5%. Before everyone starts crying that kind of lending got us in trouble in the first place. NO IT DIDN’T. FHA is a full doc loan, meaning you need a job that you can prove. Lenders are more regulated. Boy has there ever been a time to be a FHA loan officer for a FHA qualified mortgage company (most aren’t).
Rates are under six for the basic stuff and not much more for the not so basic.
Call Cindee at 801-381-3863 or Cindee@CindeeStone.com
Discussion: 1 Comment »|
December 14th, 2007 Categories: FHA
Banging On My FHA Drum Again
First let’s look at the risk assessment fee for those buying with a higher than a 70% loan to value ratio.
Credit scores will determine the amount of the rate adjustment.
- Credit scores between 660-679: 0.750% of loan size in fees
- Credit scores between 640-659: 1.250% of loan size in fees
- Credit scores between 620-639: 1.750% of loan size in fees
- Credit scores below 620: 2.000% of loan size in fees
This can have an impact on home prices, because when qualifying for a loan, the borrower is based on a monthly debt to income ratio. The same amount of monthly income is now able to borrow less money.
I like this solution so far, it doesn’t affect people that have good credit or a large downpayment. Let’s face it, if you have a less than favorable credit history and no down payment, you are a higher risk.
Now let’s look at the other fee.
Fannie Mae’s new fee is called an “Adverse Market Delivery Charge”
Freddie Mac’s new fee is called “New Market Condition Postsettlement Delivery Fee”
They both are charging an additional .25% fee at closing. Although it is not a huge cost, this one appears to be across the board. The other fees are based on credit score which is the best way to determine the risk. This one is a little unfair, because it lumps everyone together.
FHA Loan and Limits In Salt Lake
Now with all that said, they DO NOT apply to FHA or VA Loans that are insured or guaranteed by the Federal Government. Although FHA an VA have always had a upfront fee FHA Does Not Use FICO Score, VA has it’s own set of rules that are pretty similar to FHA.
Hmmm, I wonder which loan program is going to be become very popular in the next couple of years. So I am going to bang on my FHA Drum again. I know FHA only goes up to $362,790 in loan amount. That is approximately 83% of all the homes sold in Salt Lake County this year.
Discussion: 4 Comments »|
November 1st, 2007 Categories: FHA
Below is an update on the Down Payment Assistance Front. Recently HUD stated that they were going to do away with the DPA. A DPA is where a seller contributes 3% of the purchase price plus an administration fee to the DPA and the DPA will gift the buyer the down payment.
This program works for FHA loans and that is why HUD is in the middle of it.
A buyer’s down payment can be a gift, however the gift cannot be directly from the seller. So this clever little money laundering technique has benefited many of homeowners get a 100% loan but instead of it being a sub-prime adjustable type thing or an interest only for two years and kaboom. The buyer would have a nice 30 year fixed rate with low monthly mortgage insurance.
So here is the deal in action. Billy Buyer makes an offer on Sally Seller’s home. The offer has an addendum that says that Sally will contribute 2.5% of the purchase price to pay for the buyer’s closing cost. Then Billy Buyer will ask Sally Seller to contribute 3% of the purchase price + a $500 processing fee. So depending on the price of the home, the seller will contribute approximately 6% of the sales price on behalf of the buyer.
Usually the difference is split, meaning the sales price is increased by 3%. The seller agrees to the full 6% concession. SO the buyer gets 100% loan and finances the closing cost.
October 31, 2007
Gaithersburg, MD – United States Federal District Court Judge Paul L. Friedman today ruled in the case of AmeriDream v. Jackson that the Department of Housing and Urban Development cannot implement its regulation on downpayment assistance, which had been scheduled to go into effect today. AmeriDream, Incorporated, a 501(c)(3) charitable entity dedicated to helping low and moderate income families purchase their own homes through the provision of downpayment assistance and other services, had brought suit against HUD Secretary Alphonso Jackson challenging the regulation, which would have reversed prior HUD policies regarding downpayment assistance.
Judge Friedman agreed with AmeriDream’s position that there was a “substantial likelihood” that the regulation violated applicable law. Judge Friedman further stated that the regulation lacked a “reasoned analysis” and was based on “flimsy” support. Judge Friedman also questioned whether HUD acted appropriately in issuing the regulation in view of a published report that Secretary Jackson was committed to that course of action regardless of whatever public comments HUD would later receive. In view of those shortcomings and other considerations, Judge Friedman issued an injunction, effective immediately, preventing the regulation from taking effect.
As the Gold Standard for down payment assistance, AmeriDream remains committed to continue to fight the HUD Rule and to continue its mission to help individuals and families that are in need of a DPA program. Please check http://www.ameridream.org/ for the latest information regarding the HUD Rule.
AmeriDream is fully prepared to meet your DPA needs and to assist you with any transition issues as a result of the HUD Rule. Please contact your Outreach Representative or Customer Service
(or call 1-866-263-7437) for timely and professional service.
Again, thank you for your valuable support through this process.
Discussion: 23 Comments »|
Cindee Stone called me and said that the grants had been funded and there was money to be had. In the hectic day of helping families move around the country, that is a call I don’t mind getting. So I asked her a few specific questions about grants because she is the grant queen.
1) What is a grant?
A down payment assistance grant is not free money. Depending on what city you get the grant from will determine if you have to pay it back at some time or if it is forgiven. For instance, in Taylorsville they have a $5000.00 grant and if you live in that home for 5 years it is forgiven. If you get a grant in Magna for $10,000 it is forgiven after 15 years. But, if you get a grant where there is not a city grant available and we use the federal grant which is up to $10,000, it is never forgiven. But, you will only need to pay it back only if you sell the home, refinance and take cash out or take out a 2nd mortgage. So, they are all different depending on the city.
The grant will go in as a silent 2nd mortgage where no interest will accrue and no payment is due.
2) How much can I get?
The grants start at $5000 and can go up to $15,000. There are restrictions on each one, so you would need to call for more details.
3) What can the money be used for?
The money can only be used for down payment and closing cost only.
4) What restrictions are there?
First, there are restrictions on income. There is a scale that is used and depending on how many people are in your family, will determine how much they will allow you to make.
You have to be a first time homebuyer (this includes people who have not owned a home in the last 3 years) or recently divorced.
You also have to have $500.00 of your own money involved in the transaction.
There are other guidelines, but these are the basics. The other guidelines will apply to which grant you are going for and which city.
5) Is it all of Salt Lake?
We currently have money in all cities and counties in Salt Lake Valley. We even have money in Utah county (expect Provo and American Fork)
6) How do I get it?
Me! I will help you determine how much and if you can qualify. I will also assist you in filling out the application and submitting your paperwork. This is all part of the service that I offer to my borrowers.
Discussion: 9 Comments »|
October 22nd, 2007 Categories: FHA
8 Reasons Why You Should Use An FHA Approved Lender
- 1. FHA Approved Lender Can Offer You Conventional Products, But A Non FHA Approved Lender Cannot Offer You FHA
- 2. FHA Approved Lender Has To Have A $250,000 Net Worth, 20% Has To Be Liquid
- 3. FHA Approved Lender Has To Have A Written Quality Control Plan.
- 4. FHA Approved Lender Has To Go Through Annual Audits Of Their Files
- 5. FHA Does Not Use FICO Score*
- 6. FHA Allows The Seller To Contribute Up To Six Percent For The Buyer*
- 7. FHA Allows The Down Payment To A Be Gift*
- 8. FHA Allows Co-Signers
I only refer FHA Approved lenders to buyers. FHA is not always the best loan out there. However when it is the right one, conventional won’t touch it. Referring to item number one, a lender that is FHA Approved has all the products of the non FHA lenders, but the non FHA lenders don’t have FHA. That fact alone is enough to only refer FHA approved lenders.
Does that mean those lenders that are not FHA approved are not as good? Absolutely NOT. There are plenty of great non FHA approved lenders, they just have less to offer.
In the recent past the Salt Lake City Real Estate market was very strong (Salt Lake 3rd Quarter Report) and conventional loans were lax, so FHA was not used to often but is coming back read FHA Roaring Back To Life In Salt Lake
Discussion: 4 Comments »|
October 10th, 2007 Categories: FHA
Important HUD ruling on FHA Down Payment Assistance:
• On October 1, 2007 HUD published a final regulation that establishes that a prohibited source of down payment assistance is a payment that consists, in whole or in part, of funds provided by any of the following parties before, during, or after closing of the property sale: the seller, or any other person or entity that financially benefits from the transaction; or any third party or entity that is reimbursed directly or indirectly by the seller, or any other person or entity that financially benefits from the transaction.
• This regulation is effective October 31, 2007. Therefore, in order for a homebuyer to use down payment assistance derived from a seller the homebuyer must have entered into a contract of sale (including any amendments to the purchase price) that was signed by the homebuyer on or before October 30, 2007. However, in accordance with a settlement agreement resolving previous litigation between the Nehemiah Progressive Housing Development Corporation (Nehemiah) and HUD, this regulation will not apply to the Nehemiah down payment assistance program until April 1, 2008. Therefore, in order for a homebuyer to use down payment assistance derived from a seller under the Nehemiah program, the homebuyer must have entered into a contract of sale (including any amendments to the purchase price) that was signed by the homebuyer on or before March 31, 2008.
Please contact your TB&W Sales Representative should you have any questions.
Discussion: 2 Comments »|
September 30th, 2007 Categories: FHA
Yep it’s true.
FHA is NOT based on your FICO Score.
Before you decide to stop paying all your bills and then apply for an FHA loan, that’s not what it meant.
FHA is still based on credit history just not the way the credit bureaus report it. Typically a low score is based on one of two reasons. One because you don’t pay your bills plain and simple, Two because you lack Traditional Credit History like a credit card…
The first one can prevent you from getting an FHA loan but the second will not. You can alternate trade lines such as utility bills and other forms trade lines that can be verified.
But it is a full document loan. Meaning all the other items need to be verified, such as income.
So if lack credit you can still buy a home.
Discussion: 8 Comments »|