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FHA

How to tell if a condo or townhome is FHA Loan Approved

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When buying a condo, there is an extra step many home buyers may not understand that can effect the loan.

Lenders will credit qualify the home buyer, and of course do an appraisal review of the property.  But with any condo, the lender also needs to review the association.  This is done on all loans, including conventional, FHA, and VA.

If the buyer is using an FHA Loan, the condo or townhouse will need to have prior FHA Approval. If a condo association is  not FHA approved, it could indicate a problem with the association that could make getting financing in that complex hard or even impossible.

FHA Condo Association Approval Web site

 

How do I verify a condo association is FHA approved?

It is actually rather simple.  Simply go to the FHA condo website at https://entp.hud.gov/idapp/html/condlook.cfm.

I find it best to search by city or zip code rather than association name. It is the easiest way to get a positive search result.

If the complex is not listed, then it is not approved. If the association not approved, the association needs to get the approval. There is nothing the buyer can do on their own to get the association FHA Approved.

Many times, this forces the potential buy to switch to a conventional loan.  Conventional loans also need condo association approval, but on conventional loans, there is also a pre-approval process. But is the complex is not pre-approved, there IS case-by-case process on conventional loans.

A townhouse may actually be a condo

It looks like a town home, it acts like a town home, but it may legally be a condominium. Don’t assume. Be sure to check with your Realtor or the Association itself. A good rule, but not always is hidden in the legal description.  If it says “Lot and Block”, it is most likely a town home.  If is says “CIC” or Common Interest Community, then it is likely a condo.

Do you already live in a condo that is not FHA Approved?

If you already live in a condo and the association is NOT approved, you should attend the next association meeting to talk about getting the complex approved. Frankly, the lack of an FHA approval means less buyers can buy in your complex, therefore significantly reducing the value of your unit.  It doesn’t cost very much, and is not very difficult for the association to get FHA approval.

Low down payment mortgage loans on the rise

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hammer_bankMore mortgage lenders are offering conventional loans with down payments well below the 20% or higher levels of recent years.

In another sign of the housing market’s brightening outlook, more home buyers are discovering conventional loans with down payments well below the 20% or higher levels of recent years.

Until recently, many borrowers had to go through a government guaranteed loan program, such as the Federal Housing Administration (FHA Loans) or the Department of Veterans Affairs (VA Loans), to get a mortgage with less than a 10% down payment.

READ THE FULL STORY ON USA TODAY

Deal breakers after a pre-purchase home inspection

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St Paul, MN:  It is that time of year – and the spring housing market is off to a great start. Good inventory is low , so if you put your home up for sale, you might find that it is quickly scooped up by an eager buyer. As a home buyer, you might have to settle for a great home that doesn’t match all of your wish list items, and even then, may be in a multiple bid situation with other house-hungry buyers.

HORNot every home is perfect – and most buyers will do a home inspection BEFORE finalizing a purchase agreement. So what on an inspection is a deal breaker?

Common Deal Breakers

No home is perfect, but certain types of problems are serious enough to send buyers packing and force a seller who thinks he has a deal to renegotiate the selling price.

  • Foundation problems. The home may show a few minor cracks after settling but larger cracks may mean expensive trouble.
  • Wiring issues. Old wiring such as knob and tube or aluminum may present a fire hazard, while the fuse box or circuit box may show the wiring is inadequate for modern appliances.
  • Roof. Roofs have a lifespan that can be expanded by patching, up to a point. If the roof is past its prime, or if the flashing is in poor condition (or nonexistent), the roof can leak or admit water that causes damage before you even know you have a problem.
  • HVAC problems. A inspection can uncover ineffective and dangerous heating and cooling units.

Assessing What’s A Deal Breaker

Most of the repairs mentioned can cost a few thousand dollars – enough to make a buyer reassess whether to continue with the sale. While remodeling an outdated bathroom or upgrading the flooring does not have to be done immediately, the new owner must have serious problems fixed immediately to make the house safe for occupancy.

Some mortgage loan programs, particularly FHA, may not be willing to fund the loan if certain defects are not fixed BEFORE you can buy the house.

Handling Deal Breakers If You’re A Buyer Or A Seller

For buyers, finding problems like this on a home inspection means that unless you can negotiate repair costs with the seller, you will have to make repairs out-of-pocket if you stick with the deal. Many buyers, especially first-time buyers, cannot absorb a hit of several thousand dollars after buying a home. Even if you love the home and are feeling pressured to move, financial realities may make you reconsider whether you can afford a particular house, no matter how much you love it. House love can turn to hate very quickly if your dream home turns out to be a money pit. Before finalizing your home purchase, always be sure to have a home inspection done

For sellers, the possibility of unknown costly defects underscores the importance of having your home inspected before the house goes on the market. If the inspector finds a major flaw, you must disclose it, but you can list the house. “as-is” if you are unable to make repairs. Upgrading the electrical system or fixing other costly issues may net you a better selling price, but in any case, a pre-listing inspection will save you the grief of having to make repairs or lower the price after the buyer’s home inspection is complete.

FHA Mortgage Insurance soon to be for life of loan

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FHA Mortgage Insurance soon may be for life of loan

Minneapolis, MN:  The Federal Housing Administration (FHA) has announced that sometime in 2013, all new FHA insured mortgage loans will now require the monthly mortgage insurance be on the loan for the entire LIFE OF LOAN.

The proposed rule is NOT official — Yet.

Currently, FHA mortgage insurance premiums drop from FHA insured loans once the loan balance reaches 78% of the original balance and the home owner has had the loan at least 5-years.

FHA has not giving an official starting date yet, but it will be on all NEW loans going forward, and WILL NOT effect existing FHA insured home loans. Any existing FHA insured loan will still be able to drop mortgage insurance (PMI).

Most NEW FHA insured loans are just 3.5% down payment – therefore the mortgage insurance is currently 1.25% of the loan amount monthly. FHA has also announced that in 2013, the cost of the insurance will increase to 1.35% monthly.

As an example, on a $100,000 FHA insured loan, the homeowner will pay $112.50 in mortgage insurance every month for the entire 30-year loan.

For those capable, meeting both the higher credit score and underwriting guidelines, moving to a conventional loan with 5% down is going to result in very significant savings over an FHA mortgage loan going forward.

FHA has indicated they are making this move to increase their capital reserves after suffering major losses due to foreclosures and the mortgage market meltdown. The vast majority of the losses are attributed to loans written from 2007 – 2009 as lenders moved marginal home buyers into FHA loans after sub-prime loans disappeared from the market in 2007.

 FHA home mortgage loans will still remain a great option for many buyers, but clearly FHA has indicated they do not want to be the loan for everyone.

 

 

FHA Announces Loan Fee Increases

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Minneapolis, MN: Thinking of getting an FHA home loan?  The Federal Housing Administration, commonly known as FHA just announced increases to mortgage insurance fees it charges homes owners by 10 basis points, or 0.10%.  This is on top of the massive fee increase from last year, which effectively doubled the cost of FHA mortgage insurance.

Swamped with a record $70 billion of claims from lenders on loans originated from 2007- 2009, the Federal Housing Administration Friday said it had no choice but to hike monthly mortgage insurance.

With the fee increase, the typical FHA borrower will now pay 1.35% of their loan amount per year in mortgage insurance. For example, a home with a $100,000 mortgage will now pay $112.50 a month in PMI. FHA said the fee increase will average $13.00 a month. Two years ago, the same $100,000 home would have only paid $45.83  a month.

The increase is designed to fix a reported a 16.3 billion deficiency in the FHA insurance fund as a result of defaulted loans insured during the housing crisis. While the mutual mortgage insurance fund shortage was projected at $13.48, this estimate is still well below the 2011 estimate of $14.67 billion.

FHA does actually do home loans, they insure the loans, which means lenders are more likely to do the loans knowing they have insurance on the loans against any losses. The increase insurance will greatly lessen the chances that the FHA will require a Government bailout to cover losses.

The Federal Housing Administration, currently insures about 16% of all home mortgages.

Wells Fargo issuing refunds to some FHA mortgage customers

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Thousands of Wells Fargo & Co. home loan customers recently received a surprise in the mail: refund checks from the big bank, along with letters saying they had paid unnecessary fees for their mortgages.

The unsolicited offers of thousands of dollars arrived with a catch — if the borrowers cash the checks, they can’t later sue the No. 1 U.S. home lender. The San Francisco bank, which is Minnesota’s largest by deposit market share, said in the letters that borrowers were put into more expensive loans when they could have qualified for cheaper ones.

READ THE FULL STORY

 

Should you refinance, modify, buy, or run away?

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Saint Paul, MN: These are certainly trying times, and 70% of homeowners have some sort of financing on their home. The economy is hurting, and fear of job loss is on many minds. But what you should be doing in today’s market isn’t always clear.

The economy is hurting largely because of the initial wave of foreclosures and high gas prices of earlier in 2008. This has spilling over into all aspects of American lives, but is it really as bad as the constant beat of the media drum has one to believe?

Unemployment nationwide is averaging in the 8% range. This is significantly below the highs of years past. Foreclosures are still at historic high levels. These reports sound bad, but sit back and take a look at your own individual lives to examine if it really is bad for you and what you should be doing.

For example, while possible job loss is on a lot of minds, examine your own ability to market yourself? No job is guaranteed. If you did lose your job, how quickly can you replace it with a similar income, even if in a different field.

I am in the mortgage business, which clearly is suffering. I don’t worry about my home or income, because I know that if needed, I would take two or three jobs (even menial jobs) to always make sure my family has the three most important items: Shelter, food, and clothing. I know I can cut off cable TV, sell cars, cut expenses, and go into survival mode and that I will always be able to provide the basics.

If unemployment is averaging 8%, this means 92% of people are working. If foreclosures are averaging 10% of homes, this means 90% of people are OK. Turn off the TV, stop reading the paper. If you didn’t hear and read all the “bad news”, how would YOU personally view your situation?

BUYING A HOME: We all need a place to live. Home prices are extremely attractive, with great deals to be found everywhere. Mortgage rates are near historic lows. If you have OK or better credit, can come up with a small down payment, plan on staying in the home for at least four years, you are almost foolish to not buy something TODAY.

MODIFYING YOUR EXISTING LOAN: Many people bought homes they shouldn’t have and took risky loans to do so. Simply because a lender said yes, doesn’t mean you should have. Even more people who originally bought right used their homes as ATM machines, with a constant “cash out” refinance to pay credit cards and live lifestyles they couldn’t afford. I just spoke with a customer who bought this home 15-years ago for $85,000 who is losing it to foreclosure owing $300,000.

As little as two years ago, getting a bank to modify your loan was rare, and required you to be seriously behind in payments. Today, banks are very willing to help keep you in your home by modifying your payments. Workouts vary greatly depending on many variables, but the best ones we see lower your rate to around 3% for 5-years. Then the rates start adjusting back to where they originally were.

Unfortunately, we are seeing two problems emerge with modification. The first, is many people who got loan modifications fairly quickly fall behind again. While no one wants to lose a home, you must be realistic. Many times I speak with people where I calculate a payment based on ZERO percent, and they still tell me they can’t make the payment. Modifying only delays the inevitable. Getting out completely and into a situation you can afford releases untold weight off your shoulders.

REFINANCING YOUR EXISTING LOAN: Minnesota refinance rates are currently hovering near historic lows and it is well worth thinking about getting something better if you qualify. The basic criteria is that if you can lower your rate and you’ll be there long enough to at least break even on the closing costs, then it is a smart move.

Today, programs like VA IRRRL streamline refinances, FHA streamline refinances, and HARP 2.0 loans make refinancing available to most people.

So, should you be buying a home, modifying your existing loan, refinancing, or running away? It all depends, but I suggest we all stop living in fear, properly analyze our lives and personal situations, take our heads out of the sand, and make well educated decisions to put our lives in a better place.

An original article by Joe Metzler (C) 2012 Metzler Enterprises, LLC for www.MnRealEstateDaily.com

MN FHA streamline Refinance Loans

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FHA Refinance

Learn About Your Mortgage Options

Homeowners enjoy the benefits of investing in their property year after year. For some, there comes a time when that investment can come in handy. Refinancing with an FHA loan can prove to be an effective way to put that equity to work. Keep in mind that FHA refinancing is only available to homeowners who are currently using their home as their principal residence.

FHA options to homeowners who are considering an FHA refinance mortgage:

FHA CASH-OUT REFINANCE

This refinancing option is especially beneficial to homeowners whose property has increased in market value since the home was purchased. A Cash Out refinance allows homeowners to refinance their existing mortgage by taking out another mortgage for more than they currently owe.

FHA STREAMLINE REFINANCE

This refinancing option is considered streamlined because it allows you to reduce the interest rate on your current home loan quickly and oftentimes without an appraisal. FHA Streamlined Refinance also cuts down on the amount of paperwork that must be completed by your lender saving you valuable time and money.

FHA Up Front Mortgage Insurance Premiums (UFMIP)

FHA has recently made changes to the required mortgage insurance. June 11, 2012 is the date FHA Up Front Mortgage Insurance Premiums (UFMIP) will be lowered for some borrowers applying for FHA Streamline Refinance Loans. An FHA Mortgagee Letter 12-4 explains the changes, which affect some, but not al, FHA streamline refinancing loans:

For all FHA Streamline Refinance transactions that are refinancing existing FHA loans that were endorsed on or before May 31, 2009, the UFMIP will decrease from 1.75 percent to just 0.01 percent of the base loan amount.

Basically, those borrowers who have an FHA home loan for a single-family property that was endorsed on or before May 31, 2009 are eligible for a lower rate on their Up Front Mortgage Insurance Premiums. It’s important to note that this rule applies only to those with an FHA Streamline refinancing loan with a case number assigned on or after June 11, 2012.

The same mortgagee letter contains another announcement; “Decrease to Annual Mortgage Insurance Premium on Certain Streamline Refinance Transactions”. In this message, the FHA states, “For all Single Family Forward Streamline Refinance transactions that are refinancing FHA loans endorsed on or before May 31, 2009, the Annual MIP will be 55 basis points, regardless of the base loan amount.”

These two items make for a very significant savings on FHA streamline refinance transaction here in Minnesota, Wisconsin, and the rest of the country.

One other item. It’s important to remember that the FHA does not regulate FHA streamline mortgage interest rates or set them in any way except to state that such rates must be reasonable and customary according to the housing market in that area. Borrowers should expect to negotiate interest rates with the lender and/or comparison shop for the best rates and terms. 

FHA Mortgage Insurance REFUND Chart

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An FHA STREAMLINE REFINANCE is HOT right now because of the super low mortgage rates, so it is important to understand a possible FHA Mortgage insurance refund you may qualify for.

If you have an FHA loan, FHA charges an upfront MIP (mortgage insurance premium). This amount is calculated as a percentage of the loan amount, then added to your loan amount. That MIP amount you paid depends on when the FHA case number was requested.

If you’ve had your FHA loan for less than three years, and your are refinancing to a new FHA loan, you get a refund of some of the initial mortgage insurance premium (MIP) you paid on your FHA loan

The chart below is what FHA underwriters use to determine the amount of money refunded at the time of a FHA to FHA refinance. FHA will refund a percentage of that upfront MIP in the refinance. No refund check or anything is given to you, the refund is simply calculated into the costs of the new loan. The shorter the home owner has had the current FHA loan the higher the refund amount. This amount is displayed on page four of the application section called the “details of transaction” page.

FHA MORTGAGE INSURANCE REFUND CHART

FHA Mortgage Insurance Refund Chart

Example: You are refinancing, and at the time of closing, your current loan would be 2-years and 2 months old. Looking at the chart, you would get a 54% of the original MIP refunded to you as a credit on your new loans closing costs.

The amazing FHA Streamline Refinance Program

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The FHA Streamline Refinance Program

FHA Mortgage Loan Expert in MN and WI
FHA Streamline Mortgage Loan Expert in MN and WI

Minneapolis, MN: If you currently have an FHA mortgage you are eligible for one of the simplest money saving refinances available today. The FHA Streamline Refinance allows existing FHA borrowers to reduce their interest rate without having to jump through a lot of hoops. Basically, if you have made on time payments on your current FHA loan for the past 12 months. You get (almost) an automatic approval for the streamline refinance! How COOL IS THAT?

Most current FHA loans qualify for a no out-of-pocket cost streamline refinance loan that lowers your FHA interest rate and reduces your monthly mortgage payment without increasing the principal amount owed on your first mortgage. The FHA streamline refinance provide a rare opportunity for FHA borrowers to refinance any time the interest rate drop to level saving them more than 5% a month over their existing payment. FHA loan guidelines are changing, so ask your FHA loan expert how this could impact the FHA streamline program.

FHA mortgage rates have fallen to the lowest level since Eisenhower was President!  FHA streamline rates are as low as or even lower than conventional interest rates, so don’t sit back waiting for lower rates.  If you have made your loan payment on time and you already have this government loan, the FHA streamline refinance programs are easy to qualify for.

  1. no appraisal required

  2. lower credit requirements

  3. limited documentation

  4. skip a month of payments

HOME LOST VALUE?

You may have heard of HARP, the Home Affordable Refinance Program. HARP is only available if you have a Fannie Mae or Freddie Mac loan. and it allows you to refinance even if your home is underwater. FHA’s streamline streamline refinance has a  no appraisal option. So if your home has lost value, you can possible still refinance to today’s low mortgage rates too!

FHA streamline loans are highly regarded by FHA customers. FHA mortgage rates have never been more attractive so act now and lock into the lowest streamline rates in years.

With mortgage refinance rates this low it makes sense to reduce your monthly payment if you have any mortgage loan, but especially government insured loans like an FHA loan or a VA Loan.

VA STREAMLINE REFINANCE

An “Interest Rate Reduction Refinance Loan” (IRRRL) or VA Streamline Refinance allows Veterans to refinance their current mortgage interest rate to a lower rate than they are currently paying. This program is only available to veterans who are refinancing their original VA mortgage in which they utilized their original eligibility. 

VA Streamline Loan Guidelines:

  1. There is no cash out on an IRRRL loan
  2. The VA charges a 1/2 percent funding fee to guarantee the IRRRL Loan
  3. The VA loan being refinanced must be current and have a perfect pay history for the last 12 months
  4. No assumptions are allows
  5. Second mortgages can not be included and must be subordinated

Like the FHA streamline refinance, the VA streamline loan can be done with “no out of pocket money” by including all closing costs in the new loan or by making the new loan at an interest rate high enough to enable the lender to pay the costs.

Stupid Appraisers?

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FHA guidelines state that a house has to meet MPR (minimum property standards) for existing houses, and MPS (minimum property requirements) for new construction. FHA is very concerned with the three S’s: Safety, Security, and Soundness.

When a Realtor was asked what the three FHA S’s were, he replied, “Stupid, more stupid, and seriously stupid FHA appraisers,” which I thought was pretty funny, however, a little off the mark. The three FHA S’s have to do with the following:

Click here to READ the FULL STORY

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FHA Extends Waiver of Anti-Flipping Regulations – Why it doesn’t matter in the real world

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FHA Extends Waiver of Anti-Flipping Guidelines Through 2012.

Minneapolis, MN: In an effort to continue stabilizing home values and improve conditions in communities experiencing high foreclosure activity, the Federal Housing Administration (FHA) will extend FHA’s temporary waiver of the anti-flipping regulations.

With certain exceptions, FHA regulations prohibit insuring a mortgage on a home owned by the seller for less than 90 days.  In 2010, FHA temporarily waived this regulation through January 31, 2011, and later extended that waiver through the remainder of 2011.  The new extension will permit buyers to continue to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. It will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

The extension is effective through December 31, 2012, unless otherwise extended or withdrawn by FHA.  All other terms of the existing Waiver will remain the same.  The waiver contains strict conditions and guidelines to prevent the predatory practice of property flipping, in which properties are quickly resold at inflated prices to unsuspecting borrowers.

Sounds great, BUT too bad it doesn’t really matter in the real world because of the difficulty in meeting the “strict guidelines” and lender overlays, MOST FHA lenders DO NOT offer this exception.

Remember, FHA does not lend money, lenders do. FHA only insures loans lender make. Regardless of what FHA says they will “allow”, it is still up to the individual FHA lenders to decide their ultimate underwriting guidelines. Most FHA lenders find this exception too difficult to meet the strict guidelines, and too risky, so they simply WILL NOT ALLOW any FHA transaction less than 90-days.

While we are talking FHA here, lender overlays also are common on Fannie Mae and Freddie Mac programs.

The Waiver continues to be limited to sales meeting the following conditions:

  • All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
  • In all cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the Waiver will only apply if the lender meets specific conditions and documents the justification for the increase in value

CLICK THE SOCIAL MEDIA LINKS AND PASS THE WORD!

FHA and IRS finally to allow Electronic Signatures

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Amen…  FHA and the IRS decide to finally move into the 1980’s… in 2012

The Mortgage Bankers Association said one of its recent priorities has been to get FHA and the IRS to finally accept electronic signatures, which both currently do not for mortgage related activities. Loan application documents, per FHA, must currently have wet signatures, which seriously slows down the loan process in the digital age.

The IRS refuses to accept digital signatures on a mortgage loan application document called a 4506-T (also known as the Request for Transcript of Tax Return), which all lenders must get signed and send in to the IRS to verify a home loan applicants W2, or tax return income, for fraud. Because of this, many mortgage lenders have not moved to more efficient e-signature technology.

It has been reported that  the Federal Housing Administration and Internal Revenue Service will begin allowing electronic signatures on FHA loan documents and the 4506-T form in 2012, according to the Mortgage Bankers Association.

An electronic signature, or e-signature, is any electronic means that indicates either that a person adopts the contents of an electronic message, or more broadly that the person who claims to have written a message is the one who wrote it (and that the message received is the one that was sent). By comparison, a signature is a stylized script associated with a person. In commerce and the law, a signature on a document is an indication that the person adopts the intentions recorded in the document. Both are comparable to a seal.

Increasingly, encrypted digital signatures are used in e-commerce and in regulatory filings as digital signatures are more secure than a simple generic electronic signature. The concept itself is not new, with common law jurisdictions having recognized telegraph signatures as far back as the mid-19th century and faxed signatures since the 1980s. In the United States, electronic signatures have the same legal consequences as the more traditional forms of executing of documents.

Currently we use e-signature technology for our MN mortgage loan application documents on conventional loans, which people can just sign on their computers. Then we must send them the 4506-T separately to get a real signatures, seriously slowing down the application process, and increasing consumer costs. On an FHA loan, we must send everything out to the client for real signatures.

Moving into the 1980’s, streamlining the application and processing of mortgage loans is long overdue, will reduce client costs, improve processing times, reduce lost paperwork, reduce signature fraud, and generally make the process more satisfying for everyone.

UPDATE

January 2014.  FHA finally has officially announce and OK’d electronic signatures on FHA Mortgage loan Applications effective immediately

You DON’T need 20% down to buy a home!

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Do I need 20% down payment to buy a home?

I saw it again on the news this morning.  Some talking head “Real Estate Expert” was telling the national audience that lenders require 20% down payment.

Generally speaking, this couldn’t be further from the truth, and needing 20% down is a huge misconception in the marketplace today. For the average home buyer, there are numerous options for obtaining financing with less than 20% down.

DON”T ASSUME! Contact a local licensed mortgage loan officer and let them professionally review your individual situation. Click here to learn how to shop for a lender.

NO DOWN PAYMENT OPTIONS:

VA Financing – Here is a big thank you from the government. As a Vet, you are eligible for zero down payment, 100% financing on a home purchase. You either need to be an active or honorably discharged member of the armed forces or national guard. The seller can pay your closing costs and there is no mortgage insurance, saving you a lot of money monthly on your home. Click here for more information on VA home loans.

USDA/Rural Development – The Guaranteed USDA program offers zero down payment 100% financing for qualified borrowers purchasing a home in a rural area.  There are many locations just outside of major metropolitan areas that are eligible for this program.  The program has household income restrictions for their program, so Click here to see if the area you’re looking is USDA Rural Development eligible and if you income qualify.

LOW DOWN PAYMENT OPTIONS:

FHA Financing – FHA offers home loans with as little as 3.5% down.  FHA has no income limits for the household, but does have loan limits, based on the county in which you are purchasing the home.  Click here to check on the limits for your area.  FHA is one of the more lenient programs in regards to qualifying, and the down payment can be received as a gift from an eligible source (parents, state or local program, etc).

Local and State Bond Money Programs – Many states and even some larges cities have down payment assistance programs that can be used in conjunction primarily with an FHA loan. These programs vary widely, but if available in your area, are a great tool for those who qualify. Contact a local lender to inquire what programs may be available in the area you want to buy a home.

Conventional Financing – Fannie Mae and Freddie Mac both still offer programs with as little as 3% down.  For example, FannieMae offers HomePath financing on eligible FannieMae foreclosures.  For those with acceptable credit, many conventional loans are available with just 5% down.

WHO NEEDS 20% DOWN?

  • Investment properties typically require at least 20% down
  • JUMBO loans, which are loans generally over $417,000, generally require at least 20% down

Government to step in with new refinance options?

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Minneapolis, MN: Many reports have surfaced recently that the government is seriously considering a wide range of ideas to assist consumers in refinancing their homes loans owned by Fannie Mae and Freddie Mac to take advantage of today’s amazing low interest rates. For a variety of reason, mostly to due to negative equity or current tighter credit underwriting guidelines, large numbers of these homeowners have been left to the sidelines.

As a Loan Officer, I have never fully understood some of the silliness in some underwriting guidelines, and have a few suggestions.

If Fannie Mae or Freddie Mac (you and I since the government took the over during the peek of the credit crunch) already “own your loan”, you are current with your payments, and your basic financial position is OK, what does it matter if your home is underwater? They already own the the loan, and have all the risk. Wouldn’t lowering their payment reduce the risk and simply make sense?

While allowing these people to refinance, I would add one rule…  That being that you couldn’t “go backwards”. In other words, if the homeowner currently has a 30-yr fixed mortgage with 26-year remaining, they would not be allowed to have a new loan longer than 26-years.

While it is little know, and even less used as most people select a very traditional 15-yr, 20-yr, or 30-year mortgage, many mortgage lenders (including us) allow you to select any number of years you wish. If you want a 17-yr fixed, or the aforementioned 26-yr fixed, no problem. We can do that.

For FHA loan holders, a quick, immediate fix is possible to help those people refinance by simply changing a mortgage insurance rule. Allow people with existing FHA loans to refinance with their current mortgage insurance rate.

Everyday I speak with homeowners with FHA loans, where I could easily lower their interest rate by 1% – 1.5%, but it makes no financial sense for them to do it.

FHA loans all have mortgage insurance. Up until recently, the cost of the insurance, which is included in their monthly payment, was just 0.55% of their loan amount. A simple way to understand the cost, is on a $200,000 mortgage loan, the insurance costs $110 per month.

Last year, FHA increased the insurance to 1.15%. So on the same $200,000 loan, the monthly cost is now $230! YIKES. The higher insurance cost eats up most, if not all of their potential monthly savings, leaving many FHA homeowners unable to take advantage of today’s low mortgage rates.

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Buying a Condo and need financing, beware of some extra steps

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Many buyers in the Minneapolis St Paul, along with Duluth, Rochester, and throughout all of MN qualify for FHA financing. FHA is the government backed loan program that allows for just 3.5% down payment. With the changes in the mortgage industry, if you are buying a CONDO, there are extra step and rules you need to be aware of.

When buying a home, lenders approve the buyer, and approve the home. When buying a town home or condo, lenders also have to approve the Association.

Without bothering you with the details, the purpose of this post is to simply make you aware of the extra approval process, and to let you know this additional step can potentially cause a loan denial, but usually just involves a much longer loan approval process.

Everyone using FHA financing to buy a condo should check to see if the condo project is on the FHA-approved (HUD-approved) list. This is an absolute must-read for you! If you want an FHA loan, you can only buy in condo projects that are approved by HUD (the Department of Housing and Urban Development).

HUD has recently made available online a list of the condo projects that are already approved. Before I show you how to access the list, know two things:

(1) If a condo project is on the list, it must still be checked by your lender to make sure it still meets HUD’s requirements (for owner/occupancy ratios, etc.)

(2) If a condo project is not on the list, your lender needs to go through a long process to get it approved. This potentially could delay your closing, or even result in a loan denial if the condo project isn’t ultimately approved. At the least, you should check to see if the project is approved before making any offer on a condo, then ask questions as to why it is not approved.

Condo’s in unapproved projects typically are offered at below market prices because of the inability to get financing. Many of these units are only able to be bought with cash.

Here’s how you check FHA approved Condo list:

(1) Go to HUD’s website at this link: https://entp.hud.gov/idapp/html/condlook.cfm.

(2) Fill in the blanks as they pertain to your condo search, and click the ‘send’ button at the bottom of the screen.

Finally, understand with the additional burden on FHA condo financing, you need to make sure you are working with an NMLS Licensed Loan Officer who understand the additional complexities to make your purchase smooth and stress free.