FHA Loans – The Real Estate Beat

Finding Their Way Home – Anthony & J’Risha

Turning Real Estate Goals into Reality

I am so happy to share this moment – the opportunity to be part of a friend’s journey home is amazing.

Anthony and I go way back – back to our days as college students and bankers. When he and his lovely wife J’Risha called me saying – they were ready to buy a home – I was so excited.

They shared their goal, their budget; we did the Real Estate math. With loan parameters varying county to county, a quickly escalating East Bay market, and the last corner lot in a new development – well – let’s just say – we couldn’t have done all this without trust. I was grateful to have my friends trust and hash this out together.

Having actively worked in the East Bay for years; The Caton Team is well-versed on market value, competition, and the window we had to work with. I’ve never crunched the data so fast in my life. Grateful to speak candidly and toss ideas around. Soon it was clear to Anthony and J’Risha – what their path would be.

So grateful to be a part of their journey home – thank you for making The Caton Team a part of it. Cheers and to many happy years in your beautiful new home!

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First Time Home Buyer Loan Programs

Happy New Year!

I wanted to share this article about loan programs becuase owning your own home is a goal near and dear to my heart. If you’re looking to make homeownership your goal – contact The Caton Team – we love what we do and we love helping people achieve their goal of homeownership!

Summary: First-time homebuyer loans and programs

FHA loan program: A loan insured by the Federal Housing Administration. Good for those with low credit scores and little money saved for a down payment.
USDA loan program: A loan program 100 percent guaranteed by the U.S. Department of Agriculture for lower-income borrowers in eligible rural areas.
VA loan program: A loan backed by the U.S. Department of Veteran Affairs that allows no down payment for military personnel, veterans and their families.
Good Neighbor Next Door buyer aid program: A HUD program that provides housing aid for law enforcement officers, firefighters, emergency medical technicians and teachers.
Fannie Mae or Freddie Mac loan program: Conventional loans backed by Fannie Mae or Freddie Mac require 3 percent down. Good for those with strong credit.
HomePath ReadyBuyer Program: A program that provides 3 percent in closing cost assistance to first-time buyers. Must complete an educational course and buy a foreclosed Fannie Mae property.
Energy-efficient mortgage program: Backed by FHA or VA loan programs and allows borrowers to combine the cost of energy-efficient upgrades onto a primary loan upfront.
FHA Section 203(k) loan program: Borrow the funds needed to pay for home improvement projects and roll the costs into one FHA loan with your primary mortgage.
Local first-time homebuyer programs and grants: Many states and cities offer first-time buyer programs and grants for down payment or closing cost assistance.
Native American Direct Loan: This VA-backed program provides direct home loans to eligible Native American veterans to buy, renovate or build homes on federal trust land.

1. FHA loan

Best for: Buyers with low credit and smaller down payments.

Not having enough money for a 20 percent down payment may deter you from buying a home, but it shouldn’t. Insured by the Federal Housing Administration, FHA loans typically come with smaller down payments and lower credit score requirements than most conventional loans. First-time homebuyers can buy a home with a minimum credit score of 580 and as little as 3.5 percent down or a credit score of 500 to 579 with at least 10 percent down.

FHA loans have one big catch called mortgage insurance. You’ll pay an upfront premium and annual premiums, driving up your overall borrowing costs. Unlike homeowners insurance, this coverage doesn’t protect you; it protects the lender in case you default on the loan.

Learn more about finding the best FHA lender for you.

2. USDA loan

Best for: Borrowers with lower or moderate incomes purchasing a home in a USDA-eligible rural area.

The U.S. Department of Agriculture, or USDA, guarantees loans for some rural homes and you can get 100 percent financing. This doesn’t mean you have to buy a farm or shack up with livestock, but you do have to buy a home in a USDA-eligible area.

USDA loans also have income limits based on where you live, meaning they’re geared toward folks who earn lower to moderate incomes. Typically, you need a credit score of 640 or higher to qualify for a streamlined USDA loan. If your score falls short, you’ll have to provide extra documentation on your payment history to get a stamp of approval.

3. VA loan

Best for: Active-duty military members, veterans and their spouses.

Many U.S. military members (active duty and veterans) are eligible for loans backed by the U.S. Department of Veterans Affairs, or VA. VA loansare a sweet deal for eligible borrowers because they come with lower interest rates than most other loan types and require no down payment. A funding fee is required on VA loans, but that fee can be rolled into your loan costs and some service members may be exempt from paying it altogether.

Other VA loan perks include no PMI or minimum credit score. If you struggle to make payments on the mortgage, the VA can negotiate with the lender on your behalf to take some stress from the equation.

4. Good Neighbor Next Door

Best for: Teachers, law enforcement, firefighters and emergency medical technicians.

The Good Neighbor Next Door program is sponsored by the U.S. Department of Housing and Urban Development (HUD). It provides housing aid for law enforcement officers, firefighters, emergency medical technicians and pre-kindergarten through 12th-grade teachers.

Through this program, you can receive a discount of 50 percent on a home’s listed price in regions known as “revitalization areas.” Using the program’s website, you can search for properties available in your state. You must commit to living in the home for at least 36 months.

5. Fannie Mae or Freddie Mac

Best for: Borrowers with strong credit but minimal down payments.

These government-sponsored enterprises, or GSEs, set borrowing guidelines for loans they’re willing to buy from conventional lenders on the secondary mortgage market.

Both programs require a minimum down payment of 3 percent. Homebuyers also need a minimum credit score of 620 (or higher, depending on the lender) and a relatively unblemished financial and credit history to qualify. Fannie Mae accepts a debt-to-income ratio as high as 50 percent in some cases. You’ll still pay for PMI because you’re putting less than 20 percent down, but you can get it canceled once your loan-to-value ratio drops below 80 percent.

6. Fannie Mae’s HomePath ReadyBuyer Program

Best for: First-time homebuyers who help for closing costs willing to buy a foreclosed home.

Fannie Mae’s HomePath ReadyBuyer program is geared toward first-time buyers interested in foreclosed homes that are owned by Fannie Mae. After taking a required online homebuying education course, eligible borrowers can receive up to 3 percent in closing cost assistance toward the purchase of a HomePath property. The trick is finding a HomePath property in your market, which might be a challenge since foreclosures account for a smaller chunk of listings today.

7. Energy-efficient mortgage (EEM)

Best for: Homebuyers who want to make their home more energy-efficient but lack up-front cash for upgrades.

Making a home more energy efficient is good for the environment, and good for your wallet by lowering your utility bills. Making green upgrades can be costly, but you can get an energy-efficient mortgage, or EEM loan, that’s insured through the FHA or VA programs.

An EEM loan lets you tack the cost of energy-efficient upgrades (think new insulation, a more efficient HVAC system or double-paned windows) onto your primary loan upfront — all without a larger down payment.

8. FHA Section 203(k)

Best for: Homebuyers interested in purchasing a fixer-upper but who don’t have a lot of cash to make major home improvements.

If you’re brave enough to take on a fixer-upper but don’t have the extra money to pay for renovations, an FHA Section 203(k) loan is worth a look.

Backed by the FHA, the loan calculates the home’s value after improvements have been made. You can then borrow the funds needed to pay for home improvement projects and roll the costs into one loan with your primary loan amount. You’ll need a down payment of at least 3.5 percent, and improvements must cost more than $5,000.

9. State and local first-time homebuyer programs and grants

Best for: First-time homebuyers who need closing cost or down payment assistance.

In an effort to attract new residents, many states and cities offer first-time homebuyer grants and programs. The aid comes in the form of grants that don’t have to be repaid or low-interest loans with deferred repayment to cover down payment or closing costs. Some programs may have income limits, too. Before buying a home, check your state’s housing authority website for more information.

Contact a real estate agent or local HUD-approved housing counseling agency to learn more about first-time homebuyer loans in your area.

First-time homebuyer programs by state:

10. Native American Direct Loan

Best for: Eligible Native American veterans wishing to buy a home on federal trust land.

The Native American Direct Loan provides financing to eligible Native American veterans to buy, improve or build a home on federal trust land. This loan differs from traditional VA loans in that the VA is the mortgage lender.

The NADL has no down payment or private insurance requirements, and closing costs are low. And you’re not limited to only one property; you can get more than one NADL. Not all states are eligible, though.

Learn more:

I read this article at: LOAN PROGRAMS

Got Real Estate Questions? The Caton Team is here to help.

Call | Text | Sabrina 650.799.4333 | Susan 650.796.0654

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The Caton Team does not receive compensation for any posts. Information is deemed reliable but not guaranteed. Third party information not verified.

How to apply for a mortgage: Your 4-step guide.

Applying for a home loan is the first step to take when getting serious about buying a home. It will help you understand how much house you truly can afford. Get ready for the application process by gathering your financial info, finding a lender to work with, and getting pre-approved. You can always shop around and pick another lender once you get an accepted offer.

Mortgage loan pre-approval means approaching a lender with financial, credit, debt, and other information that will help them determine if you qualify for a loan at a certain amount.

There are four essential steps involved with mortgage pre-approval:

Gather financial information
Select a lender
Get a mortgage pre-approval
Close on your home

This article will give you an idea of how to get pre-approved for a mortgage and why pre-approval is important for buying a home.

How to get pre-approved for a home loan

Step 1: Gather financial information

Before heading to your lender’s office, gather and prepare the following financial information:

Credit Information: Your credit score and reports will determine the size of loan you may qualify for and the type of financing plan you will be offered. For example, a borrower with a credit score below 740 will usually have a higher interest rate associated with their loan. A borrower with a score below 580 will usually have to put down a higher down payment.

Pro Tip: Check your credit score for free with credit.com.

Debt Information: Gather and prepare any of your debt obligations. This includes student loans automobile loans, and credit card payments.

Pro Tip: If you have a significant amount of debt, the amount that you’re pre-approved will likely be smaller or rejected. Before applying for your pre-approved mortgage, try paying off your debts and minimize the number of new debts you take on.

Income Information: Gather and prepare income information from the previous two years. This includes tax returns, W-9s, pay stubs, and additional income information (from second jobs, overtime pay, social security payments, alimony or child support payments, etc.).

Asset Information: Asset information refers to assets you own other than your income. This involves gathering bank statements, property statements, investment information, and money received by family members.

Personal Information: Bring a personal ID such as a driver’s license or passport and your social security number to your lender’s office.

Employment Information: This includes your proof of employment and the length of time you’ve been with your employer.

Budget Information: Before going to see a lender, determine your budget for buying a new home.

Pro Tip: Your total housing payment budget should not exceed 35% of your pre-tax income. The ideal percentage is 25% of your pre-tax income.

Step 2: Select a lender to work with

There are two types of lenders you can work with (1) big lenders (aka the bank) or (2) small lenders (aka small, community banks or small mortgage lenders).

There are pros and cons associated with each type of lender:

Pros of big lenders:

Security: You can trust that big banks will protect your sensitive information as it’s a crucial part of their reputation.
Customer support: Banks usually offer 24/7 customer support.
Availability: Making an appointment for a loan will be easier with big banks as they have a larger number of loan officers available.

Cons of big lenders:

Rates: The rates of the big banks are usually higher than the rates at small loan offices.
Approval: Banks have a specific ‘credit model’ that they like to use as a guideline for approving people looking for loans. You may have a hard time being approved for a loan by a big bank if you don’t fit this ‘credit model.’

Pros of small lenders:

Rates: Small lenders tend to have better rates than the big banks. Furthermore, smaller lenders generally let their customers exit early. In other words, small lenders allow their customers to pay off their mortgage early and either sell their house or find a better mortgage.
Approval: Small lenders will generally approve loans to freelance workers, property investors, or someone who doesn’t fit the bank’s credit model.
Customer Service: Small lenders provide more personalized customer service and usually have faster response times.
Specialized Financing: Smaller lenders offer more specialized financing options than big banks. For example, if you’re looking for a small mortgage, most big banks won’t accept your application because it’s not worth their time. The smaller lender, however, will be happy to work with you.

Cons of small lenders:

Vulnerability: Due to their size, small lenders are more sensitive to market fluctuations.
Availability: Smaller lenders may not have as many available lenders as the big banks.

Should I get pre-approved by multiple financial institutions to compare rates?

Yes, because you can still shop rates before locking into a rate and accepting an offer. Research different lender’s reputation, search for their past clients, read their online reviews, and give them a call to get a ‘feel’ of whether or not you want to work with them.

Step 3: Get pre-approved

Most first-time home buyers are confused about the pre-approval process. So, to clear things up, we answer “how to get pre-approved for a mortgage” and the 6 other common questions first-time home buyers ask about mortgage pre-approval:

1. How do I get pre-approved for a mortgage?

Gather Documents: Gather the necessary documents (as listed in step 1).
Organize Documents: Create a Google Drive or Dropbox where you can organize all information in one, easily-accessible place.
Contact a Lender: Call, go online or visit a loan office/bank. The loan officer will review your documents and give you a preliminary estimate of how much house you can afford, your monthly mortgage payments, and mortgage interest rate.
Find out if you’ve been pre-approved: You will receive a pre-approval letter that secures your interest rates for the next 90-120 days (more on this below). On the other hand, your lender will notify you that you have not been pre-approved.

2. Why get pre-approved for a mortgage?

Benefits of Pre-Approvals:

Accurate: The best pre-approvals will give you an accurate idea of how much house you can afford. Furthermore, you’ll get an idea of your monthly mortgage payments and your short-term mortgage interest rates.
Protection: When you apply for a mortgage pre-approval, there is usually a 90-120 day protection against rising rates. In other words, pre-approvals lock-in interest rates and allow you to search for a home without worrying about interest rates increasing significantly.
Trustworthy: A pre-approved mortgage signals to sellers and real estate agents that you’re serious about buying a home.
Advantage: A pre-approved mortgage may be the deciding factor between you getting a home over another home buyer.
Free: Getting pre-approved for a mortgage is free, and there is no obligation to use the lender that pre-approved your mortgage.

3. What is the difference between pre-qualification and pre-approval?

Pre-qualification: During the pre-qualification stage of securing a mortgage, a lender will interview you to determine your income, expenses, and assets. The purpose of getting pre-qualified is to give you a rough estimate of how much house you can afford.
Pre-approval: During the pre-approval stage of securing a mortgage a lender will look through your income, expenses, and asset more thoroughly. A pre-approval is a more concrete estimate of how much house you can afford.

4. What if I don’t get pre-approved for a loan? Now what?

If you don’t get pre-approved for a loan, your lender can tell you why you were rejected. Lenders can also offer advice of how to get approved in the future.

For example, you may have to:

Build Credit: If bad credit was the reason you aren’t pre-approved, then pay off your credit cards and try not to miss your debt payments for the next 6-12 months.
Build Savings: Lenders usually want to see a significant amount of cash reserve in your savings account. Again, pay off your debts and try to save some money before applying for a pre-approval again.
Build Income: If your lender says that you don’t make enough income for a certain loan amount, either try applying for a smaller loan or, if you’re married, ask for a joint-loan with your spouse.
Build Employment History: Usually, lenders don’t like to see inconsistencies in employment history. Wait until you’ve been at the same job for two years before applying for a loan.

5. Does pre-approval guarantee a loan?
Pre-approval does not guarantee a loan. It is only a review of your qualifications for how much you might be able to borrow.

A buyer receives their pre-approval letters, searches for their dream home within their pre-approved amount, has their offer and financial structure accepted by the sellers, and then submits their proposal to the lender.

The lender then reviews the proposal, the buyer’s finance details, and the details of the property. If everything goes smoothly (i.e., the home doesn’t look like a money pit), the buyer will be approved for a mortgage.

However, the pre-approval letter alone does not guarantee a mortgage.

6. How long does it take to get pre-approved for a mortgage?

Depending on who you’re working with, you can get pre-approved for a mortgage in minutes. Sometimes all it takes is a phone call.

7. What impact (if any) will this have on my credit?

The short answer here is that it depends.

As mentioned above, lenders will look at your credit score and history to determine if you’ll be pre-approved. These are called credit report inquiries.

First-time home buyers usually don’t have to worry about inquires damaging their credit score. However, the more inquires your credit history shows, the more it can damage your credit score.

Inquires hurt your score because it shows lenders that you could be doing something with your credit that puts you at risk.

Step 4: Close on your home

Once you’re pre-approved for a mortgage, you can start the process of searching for a home, within your pre-approved amount.

The process of closing your home looks like this:
1. Application: The mortgage application involves submitting the documents outlined in step 1.

Time it takes: 1 day

2. Loan estimate: The lender analyzes your financial information and produces a loan estimate. A loan estimate describes the details of your loan including the terms and the predicted costs associated with your loan.

The loan estimate does not tell you if you have been approved for a loan. It simply estimates what your loan would look like if you’re approved and will help you determine if you would like to move forward with the mortgage application process.

Time it takes: The law states that you must receive your loan estimate 3 days after submitting your mortgage application.

3. Open a file: Your file is submitted to a loan processor who analyzes your financial documentation and property information. The loan processor places all this information into a loan package that is to be submitted to the underwriter.

Time it takes: 1 day

4. Loan underwriting: An underwriter analyzes your loan to determine the risk of approving your mortgage. Essentially, the underwriter is the key-decision maker and determines if you’re a good candidate for a loan based on the likelihood of you paying your mortgage each month.

The duties of an underwriter:

A. Assess: The underwriter assesses your risk by verifying that your credit, debt, income, and savings information is true. For example, they may call your employer to confirm that you do in fact work x amount of hours and are paid x amount of dollars.

B. Appraise: This is where the underwriter determines if your desired property’s price is comparable to the prices of similar properties. The purpose of the appraisal is to determine if the money you would like to borrow matches the value of the home you would like to purchase. If the appraisal is less than the loan amount, the underwriter will usually disapprove the mortgage or suggest another loan amount.

C. Approve or reject: The underwriter considers all this information and then approves or rejects your loan application.

Time it takes: 1-7 days

Pro Tip: The underwriting process generally takes longer and requires more documentation if you’re self-employed.

5. Mortgage Commitment: If the underwriter approves your loan, you are officially locked-into an interest rate.

Time it takes: 2-4 days

6. Closing: This is the step in the home-buying process where you sign all the necessary documents to own the home officially.

I read this article at: Open Listings

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FHA mortgage insurance premiums – going down

Earlier this year, President Obama announced that HUD will lower its FHA mortgage insurance premiums by 50 basis points, from 1.35 percent to .85 percent, effective Jan. 26. This move will make it easier for hundreds of thousands of home buyers to get a mortgage and provide greater access to homeownership for historically underserved groups and credit-worthy families. On a $300,000 loan, that could mean a savings of $1,500 a year.

The annual mortgage insurance premium for most FHA transactions has been reduced. What does this mean for you?

· Monthly savings: borrowers can purchase a home with the lowest possible total monthly mortgage payment. For those with an LTV greater than 95% or high credit scores, FHA financing will provide a lower total monthly mortgage payment than conventional loans with private mortgage insurance.

· Repeat homebuyers are eligible for high LTV financing: conventional loans with private mortgage insurance restrict LTVs greater than 95% to first-time homebuyers. Alternatively, FHA financing is available for first-time homebuyers and repeat principal-residence purchasers with LTVs up to 96.5%.

· Qualify more buyers : A lower total monthly mortgage payment results in a lower DTI ratio, potentially allowing more borrowers to qualify for mortgage financing.

· Afford more home: You may be able to purchase a more expensive property without increasing their total monthly mortgage payment.

· Refinance savings: Clients who have recently purchased a home with FHA financing may be eligible to refinance their mortgage and lower their total monthly mortgage payment for immediate savings.

This is great news for homebuyers! Call us for more information!

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Buying a Home After a Short Sale or Foreclosure Just Got Easier!

Home buyers qualify for FHA loan despite short sale or foreclosure

Mortgage borrowers may now qualify for an FHA mortgage under new guidelines established by the Department of Housing and Urban Development (HUD), according to Eli Younes of Viking Realty Group in Pembroke Pines on Tuesday.

As a result of the housing collapse, many homeowners experienced a serious reduction in income or lost their jobs due to the crumbling economy. Some mortgage borrowers were forced to file bankruptcy or short sale their home to avoid foreclosure.

Others were not so lucky and lost their home on the courthouse steps.

The new HUD rules allow borrowers whose credit was damaged due to a temporary loss of employment or income to qualify for an FHA mortgage if they have substantially recovered from that situation and maintained a positive credit history for at least 12 months.

Borrowers who recently experienced a bankruptcy, foreclosure, short-sale, loan delinquencies, deed-in-lieu, debt collections or other situation negatively impacting their FICO credit score may now be able to qualify for an FHA loan.

Recognizing that any number of events may have impacted a borrowers’ credit rating, the Federal Housing Administration (FHA) believes that such catastrophic event does not mean they are not financially stable or unable to make a mortgage payment.

As such, the previous 3-year waiting period required by the FHA on financing a new home has been revised.

“Referred to as the ‘Back to Work’ initiative, this program is designed for borrowers who lost their home through foreclosure, short sale, bankruptcy or deed in lieu and also suffered a 20% or more loss in household income,” Eli Younes of Viking Mortgage told Examiner. “As with most FHA loans, this program only requires a 3.5% down payment and is applicable for all purchase loans other than the Home Equity Conversion Mortgage.”

In order to qualify for a mortgage under the “Back to Work” initiative, there are several steps that must be taken to prove an “Economic Event” that was beyond the borrower’s control.

Employment Requirements:

The lender must verify that the borrower lost at least 20% or more in household income – or became unemployed – for a period of six months prior to the foreclosure, short-sale, or deed-in-lieu. To verify loss of income, the lender must request a written Verification of Employment to show the termination date or loss of income, receipt of unemployment compensation, or signed W-2’s and tax returns detailing the reduction in earnings.

To demonstrate a loss of income for part-time or seasonal employment, the borrower must prove a 2-year history in the same field prior to loss of employment. Borrowers will also be required to prove that they have fully recovered from their hardship, increased earnings and have maintained other credit obligations for a period of 12 months following foreclosure, short sale, bankruptcy or deed in lieu.

Credit Requirements:

When evaluating a borrower for the “Back to Work” initiative following a foreclosure, the lender may deem the borrower eligible if:

1.) The borrower’s credit report is free of any late housing payments within the last 12 months;

2.) All other mortgage accounts must be current for the last 12 months, even if the loan was previously modified to avoid a foreclosure action;

3.) The borrower’s credit report contains no more than a single 30-day delinquency on payments due other creditors; and

4.) The borrower’s credit report contains no current collection accounts or public records. This condition may be waived in instances of identity theft or borrower’s with medical collections.

Bankruptcy Filings:

1.) Chapter 7 Bankruptcy: One year must have elapsed since the bankruptcy discharge. Proof must also be shown that the bankruptcy filing was the result of an “Economic Event” covered within the FHA program guidelines.

2.) Chapter 13 Bankruptcy: Most lenders will require that the bankruptcy filing be discharged with all payments required under the agreement having been made on time. For borrowers currently in bankruptcy, written approval from the court allowing them to enter a new mortgage contract is required.

Housing Counseling Requirement:

For purposes of establishing satisfactory credit following an “Economic Event,” mortgage borrowers’ under the “Back to Work” initiative must:

1.) Receive homeownership counseling or a combination of homeownership education and counseling, at a minimum, one hour of one-on-one counseling from HUD-approved housing counseling agencies, as defined at 24 C.F.R. §214.100; and

2.) Be completed a minimum of thirty (30) days but no more than six (6) months prior to submitting a loan application to a lender, as application is defined in Regulation X, implementing the Real Estate Settlement Procedures Act, 24 C.F.R. §3500.2(b).

The housing education may be provided by HUD-approved housing counseling agencies, state housing finance agencies, approved intermediaries or their sub-grantees, or through an online course. It may be conducted in person, via telephone, via internet, or other methods approved by HUD, and mutually agreed upon by the borrower and housing counseling agency.

Rules for Renters:

Under certain circumstances, renters may qualify under the “Back to Work” initiative. For purposes of establishing satisfactory credit, mortgage borrowers must:

1.) The borrower’s credit report is free of any late rental payments within the last 12 months;

2.) The borrower’s credit report contains no more than a single 30-day delinquency on payments due other creditors; and

3.) The borrower’s credit report contains no current collection accounts or public records. This condition may be waived in instances of identity theft or borrower’s with medical collections.

A foreclosure, short-sale, Chapter 13 bankruptcy or deed-in-lieu will continue to plague a borrower’s credit report at the Equifax, Experian and TransUnion consumer reporting agencies for a period of seven years. A discharged Chapter 7 bankruptcy will remain on the credit report for a period of ten years.

“With the housing crash, many homeowners experienced unemployment or depreciated home values and for one reason or another were not able to make their mortgage payments,” Carlos J. Reyes, a foreclosure defense attorney with the Reyes Law Group in Fort Lauderdale, told Examiner. “The recent changes in the FHA guidelines have finally recognized the financial hardship faced by many borrowers and is allowing them to once again reach for the American Dream through homeownership.”

The new guidelines are in effect immediately and will be in force through at least September, 2016.

This is truly great news for people who faced economic hardships during our market down turn. You have a chance to be a homeowner again.

I read this article at: http://www.examiner.com/article/home-buyers-qualify-for-fha-loan-despite-short-sale-or-foreclosure

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Thanks for reading – Sabrina

The Caton Team – Susan & Sabrina – A Family of Realtors

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How to Assess the Real Cost of a Fixer-Upper House

How to Assess the Real Cost of a Fixer-Upper House

When you buy a fixer-upper house, you can save a ton of money, or get yourself in a financial fix.

1. Decide what you can do yourself

TV remodeling shows make home improvement work look like a snap. In the real world, attempting a difficult remodeling job that you don’t know how to do will take longer than you think and can lead to less-than-professional results that won’t increase the value of your fixer-upper house.

* Do you really have the skills to do it? Some tasks, like stripping wallpaper and painting, are relatively easy. Others, like electrical work, can be dangerous when done by amateurs.

* Do you really have the time and desire to do it? Can you take time off work to renovate your fixer-upper house? If not, will you be stressed out by living in a work zone for months while you complete projects on the weekends?

2. Price the cost of repairs and remodeling before you make an offer

* Get your contractor into the house to do a walk-through, so he can give you a written cost estimate on the tasks he’s going to do.

If you’re doing the work yourself, price the supplies.

Either way, tack on 10% to 20% to cover unforeseen problems that often arise with a fixer-upper house.

3. Check permit costs

Ask local officials if the work you’re going to do requires a permit and how much that permit costs. Doing work without a permit may save money, but it’ll cause problems when you resell your home.

Decide if you want to get the permits yourself or have the contractor arrange for them. Getting permits can be time-consuming and frustrating. Inspectors may force you to do additional work, or change the way you want to do a project, before they give you the permit.

Factor the time and aggravation of permits into your plans.

4. Doublecheck pricing on structural work

If your fixer-upper home needs major structural work, hire a structural engineer for $500 to $700 to inspect the home before you put in an offer so you can be confident you’ve uncovered and conservatively budgeted for the full extent of the problems.   Get written estimates for repairs before you commit to buying a home with structural issues. Don’t purchase a home that needs major structural work unless:

You’re getting it at a steep discount

You’re sure you’ve uncovered the extent of the problem

You know the problem can be fixed

You have a binding written estimate for the repairs

5. Check the cost of financing

Be sure you have enough money for a down payment, closing costs, and repairs without draining your savings.   If you’re planning to fund the repairs with a home equity or home improvement loan:

* Get yourself pre-approved for both loans before you make an offer.

* Make the deal contingent on getting both the purchase money loan and the renovation money loan, so you’re not forced to close the sale when you have no loan to fix the house.

* Consider the Federal Housing Administration’s Section 203(k) program, which is designed to help homeowners who are purchasing or refinancing a home that needs rehabilitation. The program wraps the purchase/refinance and rehabilitation costs into a single mortgage. To qualify for the loan, the total value of the property must fall within the FHA mortgage limit for your area, as with other FHA loans. A streamlined 203(k) program provides an additional amount for rehabilitation, up to $35,000, on top of an existing mortgage. It’s a simpler process than obtaining the standard 203(k).

6. Calculate your fair purchase offer

Take the fair market value of the property (what it would be worth if it were in good condition and remodeled to current tastes) and subtract the upgrade and repair costs.

For example: Your target fixer-upper house has a 1960s kitchen, metallic wallpaper, shag carpet, and high levels of radon in the basement.   Your comparison house, in the same subdivision, sold last month for $200,000. That house had a newer kitchen, no wallpaper, was recently re-carpeted, and has a radon mitigation system in its basement.

The cost to remodel the kitchen, remove the wallpaper, carpet the house, and put in a radon mitigation system is $40,000. Your bid for the house should be $160,000.

Ask your real estate agent if it’s a good idea to share your cost estimates with the sellers, to prove your offer is fair.

7. Include inspection contingencies in your offer

Don’t rely on your friends or your contractor to eyeball your fixer-upper house. Hire pros to do common inspections like:

* Home inspection. This is key in a fixer-upper assessment. The home inspector will uncover hidden issues in need of replacement or repair. You may know you want to replace those 1970s kitchen cabinets, but the home inspector has a meter that will detect the water leak behind them.

* Radon, mold, lead-based paint

* Septic and well

* Pest

Most home inspection contingencies let you go back to the sellers and ask them to do the repairs, or give you cash at closing to pay for the repairs. The seller can also opt to simply back out of the deal, as can you, if the inspection turns up something you don’t want to deal with.   If that happens, this isn’t the right fixer-upper house for you. Go back to the top of this list and start again.

My words to the wise – if you get outbid – don’t fret – start again. Each home you take the time to break down and understand the cost of repair – the better prepared you will be when the next opportunity arises.

We bought a condo as our first purchase – and though you mainly own just the paint in – we budgeted $10,000 in repairs only to spend $17,000 in the end. Hind sight is always 20/20 – but now when we buy our next home, we’ll have the experience under out belt and a better picture of a budget and our limitations.

By: G. M. Filisko

I read this article at: http://members.houselogic.com/articles/how-assess-real-cost-fixer-upper-house/preview/

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Thanks for reading – Sabrina

FHA Trims Waiting Period for Borrowers Who Experienced Foreclosure

Great news for those who experienced hardships during the economic downturn!

FHA Trims Waiting Period for Borrowers Who Experienced Foreclosure

The Federal Housing Administration (FHA) is allowing borrowers who went through a bankruptcy, foreclosure, deed-in-lieu, or short sale to reenter the market in as little as 12 months, according to a mortgage letter released Friday.

Borrowers who experienced a foreclosure must wait at least three years before getting a chance to get approved for an FHA loan, but with the new guideline, certain borrowers who lost their home as a result of an economic hardship may be considered even earlier.

For borrowers who went through a recession-related financial event, FHA stated it realizes “their credit histories may not fully reflect their true ability or propensity to repay a mortgage.”

In order to be eligible for the more lenient approval process, provided documents must show “certain credit impairments” were from loss of employment or loss of income that was beyond the borrower’s control. The lender also needs to verify the income loss was at least 20 percent for a period lasting for at least six months.

Additionally, borrowers must demonstrate they have fully recovered from the event that caused the hardship and complete housing counseling.

According to the letter, recovery from an economic event involves reestablishing “satisfactory credit” for at least 12 months. Criteria for satisfactory credit include 12 months of good payment history on payments such as a mortgage, rent, or credit account.

The new guidance is for case numbers assigned on or after August 15, 2013, and is effective through September 30, 2016.

I read this article at: http://www.dsnews.com/articles/fha-trims-waiting-period-for-borrows-who-experienced-foreclosure-2013-08-19

Got Questions? – The Caton Team is here to help.

Email Sabrina & Susan at: Info@TheCatonTeam.com

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Thanks for reading – Sabrina

Changes are Coming to FHA Home Loans…

Changes are Coming to FHA Home Loans

I am a fan of the FHA home loan because it helps so many first time buyers get a home here on the SF Peninsula where home prices are an the high side. What saddens me are the recent changes in store for FHA clients.

Newly Originated FHA-Insured Loans Will Become More Expensive Beginning June 3, 2013.

One of the attractive features of FHA mortgages is the low down payment option. In fact, many FHA loan programs require as little as 3.5% down.

Today, mortgage insurance on FHA loans remains in place for a finite period of time. However, on most new FHA loans originated on or after June 3rd, the MI premium will remain for the life of the loan.

Now sure how this will impact you? Give The Caton Team a call or email!

If you or someone you care about have considered purchasing a home, please contact us immediately to ensure this new FHA policy doesn’t increase the lifetime cost of the transaction. Beating the June 3rd clock could potentially save thousands over the life of the loan.

And please do not be discouraged – there are several different loan options and programs available!

Thank you Melanie Flynn of First Priority Financial for this information. If you would like to connect with Melanie – give us a call or email!

Got Questions? – The Caton Team is here to help.

Email Sabrina & Susan at: Info@TheCatonTeam.com

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Please enjoy my personal journey through homeownership at:

http://ajourneythroughhomeownership.wordpress.com

Thanks for reading – Sabrina

FHA to Increase Fees on Mortgages!

Difficult news for FHA clients. As home prices climb on the San Francisco Peninsula, saving money for your down payment feels like a heroic act. FHA offers low down payments, 3.5% of the purchase price, but now the strings attached are growing tight. Please enjoy this article from CNNMoney.

FHA to hike premiums on mortgages

The Federal Housing Administration, which is the largest insurer of low-down payment mortgages, announced that it will raise premiums by 10 basis points, or 0.1 percent, on most of the new mortgages it insures.

Making sense of the story

A borrower opting for a 30-year, fixed-rate mortgage who puts down 5 percent or more will now pay an annual insurance premium of 1.3 percent of their outstanding balance. Someone who puts down less than 5 percent will pay a premium of 1.35 percent.
The FHA said it also will raise premiums for borrowers with jumbo loans – loans of $625,000 or more – by 5 basis points, and increase the minimum down payment requirement on these loans to 5 percent from 3.5 percent.
Additionally, the FHA said it will require most buyers to pay insurance premiums for the life of their loan. A policy that was put in place in 2001 allowed borrowers to cancel premium payments once their debt fell below 78 percent of the principal balance. One exception will be for borrowers who put more than 10 percent down at the time of purchase.
Other new policies include a requirement that any mortgage for an applicant with less than a 620 credit score and debt-to-income ratio above 43 percent must be underwritten manually. Lenders who want to issue loans to these applicants must be able to adequately document why they decided to approve the loans.

The FHA also decided to put new restrictions on reverse mortgages, no longer permitting retirees to take such large, upfront payments.

There is Home Ownership after a Foreclosure or Bankruptcy

I came across this article and had to share it. With so many people effected by the real estate bust, many people we’re forced into bankruptcy or foreclosure. But there is light at the end of the tunnel! And I hope this news puts a few smiles on those faces.

Enjoy – Sabrina

Re-Entering Homeownership: FHA Loan Guidelines After Foreclosure and Bankruptcy

By: Lisa Burden

Many people who have been through a foreclosure in the recent past would like to become homeowners once again. For some, three years have already passed which makes them eligible to purchase a home through an FHA loan. Since being eligible does not automatically mean qualified, there are several issues that these potential home buyers should know in order to make the return to homeownership as easy as possible.

FHA will accept mortgages, after three years have passed, from borrowers who had a previous principal residence foreclosed on or that borrower gave a deed-in-lieu of foreclosure. FHA allows a lender to make an exception to this three year requirement if the foreclosure was the direct result of extenuating circumstances that were beyond the control of the borrower, such as a serious illness or death of the wage earner. This event must be fully documented and the borrower must show the re-establishment of good credit since that time. While an occurrence such as divorce is not extenuating, it may be considered if the ex-spouse received the residential property and proceeded to foreclosure. On the other hand, situations such as being unable to sell the property due to a transfer of work or relocation is not considered an extenuating circumstance.

FHA mortgages also have specific rules regarding Chapter 7 bankruptcy (liquidation) and Chapter 13 bankruptcy:

For a Chapter 7 bankruptcy, a period of two years must have passed since the date of discharge of the bankruptcy. During these two years, the borrower must have re-established good credit or chosen not to incur new credit obligations. In some cases, a period of less than two years, but not less than 12 months, is acceptable for an FHA insured mortgage. In these instances, the borrower must be able to show that the bankruptcy occurred due to extenuating circumstances beyond their control and can document that they have once again established the ability to manage their financial affairs in a responsible manner. It is important for the lender to show through documentation that the events that led to the bankruptcy are not likely to occur again.

For a Chapter 13 bankruptcy, documentation must show that at least two years have passed from the discharge date of the bankruptcy. Less than two years downgrades the loan to a “Refer” which then must be manually underwriter by a Direct Endorsement underwriter. Chapter 13 requires that the lender document that at least one year of the payout period has passed and that the borrower has made all required payments on time since payment performance must be satisfactory. The borrower must also have written permission from the bankruptcy court to enter into a mortgage transaction.

While the country continues to meet the challenges that occurred due to the consequences of the housing crisis that started to appear in late 2006, many previous homeowners are now ready to make another home purchase after suffering through one of these unfortunate circumstances. For many, since the required time has passed, they are now eligible to be considered for an FHA mortgage. Borrowers must have all of these important documents ready for submission to the lender, as well as, be ready to prove their creditworthiness for qualification.

I read this article at: http://www.freerateupdate.com/fha-loans/re-entering-homeownership-fha-loan-guidelines-after-foreclosure-and-bankruptcy-10684/

Got Questions? – The Caton Team is here to help.

Email Sabrina & Susan at: Info@TheCatonTeam.com

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Please enjoy my personal journey through homeownership at:

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Thanks for reading – Sabrina

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Summary: First-time homebuyer loans and programs

1. FHA loan

2. USDA loan

3. VA loan

4. Good Neighbor Next Door

5. Fannie Mae or Freddie Mac

6. Fannie Mae’s HomePath ReadyBuyer Program

7. Energy-efficient mortgage (EEM)

8. FHA Section 203(k)

9. State and local first-time homebuyer programs and grants

First-time homebuyer programs by state:

10. Native American Direct Loan

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How to get pre-approved for a home loan

Step 1: Gather financial information

Step 2: Select a lender to work with

Step 3: Get pre-approved

Step 4: Close on your home

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