Posts Tagged ‘fha mortgages’

FHA “Flipping” Rule Has Been Waived

June 9, 2008: FHA’s Assistant Secretary for Housing - Federal Housing Commissioner, Brian D. Montgomery signed the Waiver of Requirements of 24 CFR 203.37a (b)(2) which waives the requirement of the seller of a property holding a property for 90 days prior to obtaining FHA financing. This waiver is good for one year and expires June 9, 2009.

What does this mean to Charlotte?

Buying a home in Charlotte now means more options. No longer does property purchased by an investor, or foreclosed on by a lender have to be held for 90 days prior to selling in order to qualify for a Charlotte FHA mortgage loan!

Under FHA’s guidelines, once the ownership of a property changed hands, it had to be owned for 90 days before FHA would extend a loan on it. This restriction would cause many Charlotte foreclosures to have to sit for 90 days before a contract could even be executed on it!

CORRECTION: After futher review, it appears that investors will still be subject to the 90 day rule. The intent is for mortgage companies with foreclosures to have easier access to liquidate their foreclosed properties. This correction should be noted. This also opens the market up for investors that “flip” homes.

In my opinion, I would love to see this opened up to investors as well. There are many investors that will buy a home that needs some serious work, rehabilitate the home and then sell it for a quick profit. The neighborhood and community benefit from such rehabilitation, and in many cases the home buyer gets a great home at a great price! An investor has to own the home for 90 days before they could sell it to someone using FHA mortgage financing, even if the home was ready in 30 days! If this waived was extended to include investor properties, it would allow Charlotte homes for sale by an investor to be sold as soon as they are ready. Maybe HUD will review this as well.

Regardless, this waiver of foreclosed home should open up many options for home buyers using Charlotte’s FHA mortgage programs. If you are considering purchasing a home in Charlotte, now is time to take advantage!

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New Risk Layering Added to FHA Mortgages

Effective July 14, 2008 FHA mortgage loans will charge new mortgage insurance premiums based on a combination of credit scores and percentage down. Currently all FHA mortgage loans enjoy the same premiums.

Right now, an FHA mortgage loan requires 1.5% of the loan amount to be paid up front for mortgage insurance, plus an annual mortgage insurance premium 0.50%, paid monthly. Using a $100,000 loan amount, the upfront mortgage insurance premium would be $1,500 and the monthly insurance premium would be $41.67. (0.50% annual = $500 / 12 monthly payments = $41.67 a month.)

Lets see how this new Risk Layering will impact FHA mortgages after July 14.

Most FHA purchases are done using the minimum 3% down. So with the new risk layering, someone with a credit score of 640 would see an upfront fee of 1.5% and an annual rate of 0.55%. Not bad! Realistically you are talking a difference of roughly $4 a month.

However, someone with a credit score of 550 would see an upfront premium of 2.25% and an annual premium of 0.55%. On a $100,000 mortgage loan, this equates to an upfront premium of $2,250 and $45.83 a month for the annual premium.

The good news is that the upfront premium can be financed back into the loan amount, so the additional $750 won’t be required in cash! And this small amount won’t make any significant monthly payment changes that will hurt your wallet!

This is a small change and not one to be too upset about. Yes, its an increase in premiums, but with the increase of foreclosures across the country, HUD has to ensure that they can continue to offer these great FHA mortgage loans!

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What FHA Can Do With No Alternative Credit

Earlier I began a 3 part series on Alternative Credit for FHA mortgage loans. Recently HUD released a memorandum letter to all lenders describing the types of Alternative Credit they are looking for. This includes alternative tradelines from 2 different credit reference groups. But what if you can’t provide options from these two groups?

HUD does offer guideance to lenders on evaluating alternative credit when only references from the Secondary reference group, or no alternative credit at all. If there are some references, a 12 month history with no more that one 30 day late is permitted. There should also be no collection accounts (beyond medical) nor any public records (judgements, liens, ect) filed within the past 12 months. In addition, underwriters will be held to tighter debt to income ratios to enure there is enough cash flow to maintain monthly mortgage payments. Finally, at least 2 months of cash reserves (enough to make 2 mortgage payments) should be available, which must be the borrowers own funds.

While HUD sets these guidelines it is important to understand that lenders have the freedom to adapt and add to the FHA guidelines when they approve a loan. So just because a borrower just fits in the guidelines does not mean that borrower will be approved. It is the job of the loan officer to help build a case to present to the lender and underwriter showing why that borrower deserves that a risk be taken on them.

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HUD Clarification on Alternative Credit

A while back, I wrote an article dicussing how FHA mortgage loans are not Subprime Mortgage Loans. Obviously, too many loan officers are not getting that point very clear in their minds. With the lack of mortgage loans available to individuals with very poor credit, many loan officers that worked strictly in subprime lending have turned to FHA as their savior. This is causing a lot of trouble and a major backlog with many lenders in their government underwriting departments.

The mess has gotten so bad with many lenders that loans can take up to 30 days just to get their government deals looked at! This includes both FHA and VA mortgage loans!

So in an attempt to help bring loan officers back to reality, HUD has released a Mortgagee Letter (#2008-11) to clarify Nontraditional Credit Verification and Evaluation. In this letter HUD addresses using alternative credit references, when they can be used and how they should be verified.

The idea is that using these alternative tradelines is appropriate when a borrower does not have sufficient credit to create a credit score. Alternative credit can also be used to help support what is considered to be a “thin” credit file where a credit score is created but based on very limited credit. HUD does clairify that if the credit is in bad shape, you can’t simply turn in a payment history for a light bill and get it approved!

“nontraditional credit reports may not be used to enhance any poor credit history on a traditional credit report.” HUD Mortgagee Letter 2008-11

Alternative credit lines must have a solid 12 month history and be one of two groups of trade line references. In the next couple postings, I will go more into what these groups are and how HUD wants these references to be verified.

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Federal Government Providing DownPayments?

With the Economic Stimulus Package checks being mailed out, many potential home buyers may be getting the down payment they needed to buy a home! And if you ask me, you can’t find a better use for the money!

The checks being sent out can be quite large. Most people will get $600, with married couples getting $1,200. Each dependent child will get $300 more. So the average family of 4 can stand to get a check for $1,800! A family of 5 will see a check of $2,100!

This can go a long way towards buying a home. On a $100,000 started home, a 3% down payment is only $3,000. With $1,800 coming from the government, you only need $1,200 in cash to buy your home! And with the check coming from the US Dept of Treasury, you won’t have to worry about “seasoning” the funds. (Seasoned funds are funds that you have had for at least 60 days.)

So when you are thinking about what to do with that big check from Uncle Sam, seriously consider putting it somewhere that will make a real difference in your family’s life… A home of your own.

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“Fire Sale” for Charlotte Firefighters

That’s right! Firefighters in Charlotte can buy a home for HALF OFF! Using the Charlotte Good Neighbor Next Door program for Firefighters, any full time Firefighter (or EMT) can buy a HUD home for 50% off the list price! And with our Firefighter Mortgage Loans, Charlotte Firefighters can save big time!

You risk your life to save and protect our community. While we can’t repay what we really owe you, the Firefighter Half Price Home program can certainly help! As a full time firefighter in Charlotte, you could qualify to purchase a HUD home for only half price and get 100% mortgage financing with only $100 down!

These special program homes are HUD foreclosed properties located within HUD’s designated “revitalization” areas. As you can see by the map (red areas) this is just about anywhere in Charlotte! Every week a new list of these homes become available for only 5 days! Using a HUD approved Realtor, you can make an offer on these homes and purchase them for only 50% of the home’s list price.

Here’s an example. A HUD home is listed at $170,000 and if offered for only 5 days through this program. A qualified Charlotte Firefighter can buy this home for only $85,000! While you must live in the home for at least 36 months, the equity you get when you eventually sell is yours to keep! That’s a nice payday!

So how do you get started?

First, you need to get pre-approved for a Charlotte mortgage loan. Our special Charlotte Firefighter Mortgage Loans will put you in position to make an offer on these special homes when they become available. Since there is only 5 days to make your offer, having the mortgage pre-approval out of the way puts you way ahead of the pack! Next, you will need a qualified HUD approved real estate agent to make the offer for you. If needed, we can help you find a HUD approved Realtor in Charlotte. Once your offer is accepted, you are on the fast track to closing. Then simply move in and enjoy your great home!

Get started now and take advantage of this awesome program for Charlotte Firefighters.

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Home Buying Program for Charlotte Law Enforcement

Police officers, Sheriff Officers and any Law Enforcement Officer in Charlotte have the unique opportunity to purchase a home for half price! That’s right… Charlotte law enforcement officers can buy a HUD home for 50% off the homes sale price!

HUD offer the Good Neighbor Next Door program to Charlotte’s law enforcement officers to help build and secure the areas they serve and protect. For example, a CharMeck Police Officer could purchase a HUD home worth $140,000 for only $70,000! And using our special mortgage programs for Charlotte police officers, you can get 100% financing with only $100 down!

These special homes are HUD homes listed in Charlotte’s “revitalization” areas (which surprsingly covers most of Charlotte) and are offered through this program for only 5 days before being opened to the general public! To jump on this special home buying program for law enforcement in Charlotte, you must use a qualified Charlotte Realtor. (we can offer a referral if you need it!)

The map below shows the areas these homes are found in. Notice the red colored areas… Most of Charlotte falls into this!

To qualify, you must be employed full time as a law enforcement officer sworn to protect and have the ability to make arrests for violations of laws. Additionally, you must be willing to live in the home for 3 years to get the 50% dicsount on the home’s price. (there are a few other details… ask for more info)

So how do you get started?

First, you will want to get pre-approved for your Charlotte Good Neighbor Next Door mortgage loan through Residential Mortgage, a HUD approved mortgage lender. Once approved you will be in the driver’s seat to make an offer on the perfect home when it becomes available. Only HUD approved Realtors can make the offer for you, so we will get you connected with the right real estate agent in Charlotte. Once you have found the right home and have an approved offer, we can close your mortgage loan in just a few weeks!

This is a unique program that offers Charlotte’s Finest the opportunity to own a part of the city they serve, and rewards them for it! Just imagine doubling your money on a home in such a short time!

So what are you waiting for? Get approved now and let’s get you connected with a HUD approved Realtor to find your Half Priced Home in Charlotte!

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Charlotte Teachers Buy Homes at 50% Off!

Teachers looking to buy a home in Charlotte have a great opportunity before them! Using the Good Neighbor Next Door program, and working with a qualified real estate agent (ask for a referral) teachers have the opportunity to pick up select HUD homes for half of the listing price!

For example, HUD lists a home for $150,000. Using this program, a Charlotte-Mecklenburg teacher can purchase that home for $75,000. After living in the home for 36 months as a primary residence, you can sell the home and make an instant $75,000! Add to that the appreciation value and you can make out big!

So what’s the catch?

There are a few things you need to be aware of. First, this must be a HUD home in an area designated as a “revitalization area.” Don’t worry… most of Charlotte and Mecklenburg county is designated as a “revitalization area!”  (see red colored area of map)  Second, it has to be a home that HUD is offering as a GNND home. These homes are posted once a week and only open for this program for 5 days! Third, you must occupy the home as a primary residence and actually live there! Fourth, you must live there for 3 years or pay back the other 50% you were discounted. And finally, you must use a qualified Realtor in Charlotte to make the offer.

Imagine buying a home for half price, needing only $100 down and getting great low mortgage rates in Charlotte! This is a great program for Charlotte school teachers to take full advantage of!

So how do you start?

First, you need to get pre-approved for your Charlotte Good Neighbor Next Door mortgage. Since the window of opportunity to snag these home is limited to 5 days, you will want to make sure you can qualify to buy one of these homes. Once you are qualified, we can connect you with a HUD approved Realtor to help you find the perfect home for half price! From there, the Realtor and I will work together to get your home purchase and mortgage loan closed quickly. Then move on in!

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Recent Mortgage Changes Catching Buyers by Surprise

I have been getting a lot of phone calls lately from Charlotte area real estate agents and salespeople. It seems that they have been seeing a lot of mortgage approvals getting denied! What in the world is going on?

One of the most common concerns has to do with big local banks, such as Bank of America and Wachovia. Because these are such big banks in Charlotte, many Realtors and sales people have just sent their clients to them. The problem is that large banks like Bank of America only offer Bank of America mortgage products. So when they make changes to their own mortgage loan products, it becomes a “yes or no” decision, not a “let’s move it to another program” decision.

Case in point… Joe was approved to buy his first home using a Charlotte FHA mortgage loan from one of these big banks. We’ll call them “Big Bank USA.” Joe didn’t have the best credit in the world, but it was enough to get approved to buy a home in Charlotte. When the approval came from Big Bank USA, Joe was excited to be able to buy his first home! But then, half way through the processing of his mortgage loan, something changed. Big Bank USA changed their underwriting criteria and implemented a credit score requirement that was above what Joe had. All of the sudden this approval was turned down.

Since Big Bank USA is only a bank, they had no other FHA mortgage programs to turn to. However, Joe’s loan is now with the Carolina Mortgage Connection. With the multiple lenders and programs available to us, we are working to place Joe’s loan with a viable lender and get it closed! If Joe had started his loan process with us, we would have been able to move things around a lot faster and easier.

The moral of the story is that big banks have far less flexibilty. The Carolina Mortgage Connection is part of Residential Mortgage Center in Charlotte, NC and operates under a Lender’s license in North Carolina. While we can make mortgage loan decisions using our own money, we still have the ability to broker and close mortgage loans with other wholesale lenders, giving us far greater flexibility and adaptability than your conventional banks. And with great low mortgage rates that rival Charlotte area banks, the Carolina Mortgage Connection will quickly become your most trusted source for mortgage loans in the Charlotte area.

Good News Surfaces in a Crazy Market!

Enough Already!

It’s time for GOOD NEWS! And while this news does not directly impact Charlotte mortgage loans, this is still good news for us all.

A major (and I mean Major) lender has lowered the required credit score for FHA mortgages using down payment assistance in “declining markets.” This is a great positive thing to see!

A declining market is one that is seeing home values decline rather than increase. With FHA mortgage loans, the minimum down payment is only 3%, which in all reality does not place the mortgage company in any tremendous equity position! When you consider that down payment assistance pays for the buyer’s downpayment, you have a home owner with virtually nothing invested in a home located in an area that is seeing declining values. That would scare anyone lending home purchase money!

So to help ensure that only the best credit risks were able to buy these homes, many FHA mortgage lenders have imposed high credit score requirements. This one major lender placed a credit score requirement of 680 for this type of FHA mortgage loan using down payment assistance. Well, today they announced the score will be lowered to 620!

Could it be that the declining markets are not declining as much? Maybe there is a returning back to sanity and a realization that someone with mid 600 scores is still a good credit risk? I don’t know the exact reasoning, but I sure like to see this being relaxed a bit.

As I said, this does not affect FHA mortgages in Charlotte. Since Charlotte is not a declining market (due to Charlotte’s solid real estate market), we have not had to face this higher credit score requorement in order to use down payment assistance programs. However, if this is an indication of things to come, we may begin to see a relaxing of the credit market, which has gone a little too far in tightening up!

Again, it may not directly affect Charlotte’s FHA mortgage loans, but it’s good news and I will take it!

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