Nevada Real Estate >> Las Vegas Real Estate Specialist: Florida

 

 

In the ever changing world of mortgages, you really need to stay on top of what is going on. So many think it's simple when pre-qualifying a borrower. But if you don't ask the right questions upfront and get very detailed, even the cleanest of deals could crash and burn.

So what is a 4506-t and what is its importance in the mortgage process?  Basically it's a form used by lenders that allows them to request a transcript copy of your tax returns from the IRS.  In the past, this form most times was used for those that were self-employed or to keep fraud in check. If a lender suspected something funny regarding your income, they could send this form to the IRS.

 

 

 

Your income is being examined very closely now by most lenders. No matter if you are self-employed or the lender/investor thinks there might be fraud involved, 4506-t's are being pulled on all borrowers. Now, I have heard some lenders brag that they aren't doing this, but is that true?  I don't know, but I can tell you this, all the lenders that I know are doing this.

So I am a loan officer who pre-qualifies a borrower, asking them their current income situation. The primary borrower has a full time job at their current job of 8 years and makes a salary of $85,000 a year. Hey, it sounds cut and dry, right?   Wrong !!! The borrower also has a side job in which she has been collecting and selling antiques for 3+ years. She even files taxes on this legally. Okay, so what's wrong?  Well, she shows a loss on her tax returns. On a salary borrower, in most cases, we just have to collect W-2 forms for 2 years on FHA loans. Some lenders require the borrowers full tax returns no matter what.  But what happens if your lender doesn't require this? Hence the reason now for the 4506t. When we get the transcript back from the IRS, it will list what she grossed on her primary job and show any other types of incomes, no matter if she showed a profit or a loss.  In this case, the borrower showed a major loss, which had to be counted towards her income. And just because of this, it killed the deal because her qualifying ratios went through the roof.

 

 

 

Summary : No matter what the loan officer asks you, especially when it comes to your income, give them every bit of information for the last 2 years.  If the loan officer tells you that they don't need your other sources of income, especially if it's showing a loss, just pick up and leave.  Find a new lender. The 4506-t is extremely important and could be the difference of you moving into your house or not. And this doesn't matter if you are applying for a FHA loan, a USDA loan, a VA loan, or a conventional loan. It all comes down to the lender or the investor buying the loan.

 

 

 

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For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

This makes FHA loans sound to EASY. This is extremely misleading...

 

I must digress... this post was just sent to me. FHA loans have no minimum credit score for Florida Homeowners -

From reading this post, the author makes it sound very easy to obtain FHA loans with less than perfect credit. The author states this -  "At the same time FHA loans to (do) not penalize Florida buyers with a higher interest rate because of having less then perfect credit."

Much of the information above and in the post is extremely misleading. I would consider this as a FHA mortgage myth per se. Let me break it down for you.

 

 

 

Misleading info about FHA Loans :

 

FHA mortgages don't have minimum credit score requirements.  Okay, this is actually true, there is no minimum credit score from FHA. But many lenders have minimum credit scores. Here are some changes that FHA is trying to implement before the end of this year. I wrote about it here. FHA mortgage changes with down payment and credit scores. .

Let me take this one step further. Many lenders won't go below a credit score of 620. Yes, there are a few lenders that will do credit scores from 580 to 619, but you need to be very very careful when promised this kind of loan. First off, they are much more difficult, that the guidelines are much tougher. Secondly, the interest rates and fees are usually much higher, sometimes up to 1 percent more in interest rate with points. And I have come across many borrowers in the last 6 months that were promised a FHA loan with less than a 620 score and many of them never closed. Again, not saying that it can't be done, but it's not easy.

 

 

 

Summary : Overall, this kind of post with the information is very misleading. Here is another statement from that article.

Easier to qualify: Because FHA insures private Florida mortgage  lenders, FHA lenders are  more willing to give you loan terms that make it easier for you to qualify.

More willing?  Okay, getting an FHA loan can be easier sometimes than getting a conventional loan. But this statement makes it seem like it's easy. Each borrower is different, not one borrower being the same. You need to work with a very good professional loan officer. I currently have a borrower with a 637 credit score who was first pre-approved in the first week of May 2010.  She just received this from the lender.

"I'm sorry I was out of my office all day today. The reason a commitment hasn't been given is because your credit score does not meet the required score needed to get the loan"

Wow.. rut row... this lender knew about this same credit score back in May, and now she is just saying this?  I told the client that I can help. It's not an easy deal, but I have been helping her get all her ducks in a row in the last 10 days. We are ready to proceed.

 

My point?  Just because someone promises you a loan, gives you a pre-approval letter, or even a commitment letter, it does not guarantee you a FHA loan.  Yes, FHA loans with less than perfect credit and lower scores (620 or higher) can happen, but not everyone can handle these types of loans. Mortgage Myths or misleading mortgage information is out there, just be careful. Do your research carefully.

 

 

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For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

STOP :  Listen clearly... this has only been approved by the House.  The Senate still needs to approve this.

 

The House has passed another temporary extension for Flood Insurance. Let me repeat, (because of the misleading posts about the Tax Credit from last week ) a temporary extension has been approved by the House, good through September 30th, 2010.  The Senate still needs to vote on this extension.

The program has been suspended since May 31st, 2010. Many of us in the real estate world know how important this is.  But why is the government having such a hard time coming together on this, or at least adding the appropriate provisions in order for this to work. This issue has stopped 1,000's of closings from taking place lately and or putting many in jeopardy that live in flood areas with the hurricane season fast approaching. Not only do we need the Senate to vote on the Flood Insurance extension, but we need some sort of bill in place for a longer period, such as 5 years or so. What se thee?

You can read about it here : House passes the flood insurance extension.

 

 

 

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_____________________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

The cost of FHA loans could increase before the end of the year is over with.  Right now, depending on your LTV (loan to value), the FHA monthly mortgage insurance is either .50% or .55% of the base loan amount.  We could see increases any where from .90% to 1.55%. That is a significant increase. Michael LaFido gives more details in this post : FHA mortgage insurance premiums approved to triple in cost

 

 

FHA Monthly Mortgage Insurance Premiums  (with less than 5% down)

Current premium                    -   .55% monthly

Expected increased premium  -  .90% monthly

Maximum increased premium  - 1.55% monthly

 

 

As in the article mentioned above, it can be established that monthly payments on a $200,000 mortgage could increase any where from $59/month to $167/month. Two things happen here.

1. Yes, the borrowers payment increases and even $150 extra a month could impact the borrowers ability to pay

2. But it also would reduce the purchase price by $20,000 or more.

 

 

Below is an excerpt from what Mr. LaFido stated in his post.

 

 

 

 

 

 

 

Here is my problem with this kind of statement, in which HUD has even stated the same thoughts. I call it smoke and mirrors. Here is how I break it down.

First off, he stated that it would reduce closing costs by $2,500.  Even though the Upfront Mortgage Insurance is considered closing costs, it does not have to be paid in cash at settlement. It can be rolled into the loan amount. With that said, the difference alone in payment is only $14 a month if you reduce the loan amount by $2,500.  So even  if they raised the monthly percentage to the next tier, that is a difference of $59/month. So if you reduce the upfront, that is a difference of $45 more a month.  And if you went to the highest tier, that is a large difference of $167 a month, minus the $14, gives you a difference of $153 a month. Just in 16.33 months, you paid off the difference of the $2,500.  So if you stayed in the house for just 3.2 years, you doubled your costs, paying an extra $2,500.  Think about it, FHA says they will give you a break on the upfront. In reality, they are receiving money pretty quickly in a short time, to help the depleted mortgage insurance funds. I really don't have a problem with that, because FHA is a vital part of the housing industry and we need to make every effort to sustain this type of financing.

 

 

Here is an excerpt from what HUD stated in January of 2010 which can be found here : FHA Announces Policy Changes to Address Risk and Strengthen Finances

 

 

 

 

 

 

 

 

 

Notice what they said..... "with less impact to the consumer". Come on, please don't insult my intelligence. $100 to $150 wouldn't have an impact on the average borrower?

 

 

Conclusion : As I mentioned, don't so much have a problem with what needs to be done to help with FHA mortgages, but I do feel that they could reduce the monthly percentages by at least a 1/4 of a percent. As I showed above, just in 3.2 years on a $2000,000 loan, FHA would recapture an additional $2,500 in that time period. And just for the fact that FHA has realized that it's funds have been depleted for a few years, why couldn't they have looked at this seriously a few years ago or even a year ago, and made a slight change instead of what I feel is a drastic change.  Yes, FHA loans are vital to home buying, but at what cost? What are your thoughts?  We need to let the government hear our voices on this subject.

 

 

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

 

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_____________________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

Are mortgage commitment dates important?  YES…

 

Mortgage Commitment dates are very important for several reasons.  I wrote about this below... please read -

What time is it? It's COMMITMENT time!! Has your commitment letter been on time?

The problem that I am seeing now more and more?  I am seeing unreasonable commitment dates in the agreement of sale. I am not the only one that has noticed this because I have asked a few loan officers that I respect and they have agreed.

 

 

 

 

We all know that realtors, buyers, sellers, and lawyers get upset when commitment dates are missed.  Just recently, I had 2 different transactions that had unrealistic commitment dates in my opinion.

 

Here are two examples of what I think are unrealistic commitment dates.

Buyer # 1

Contract signed 3/31/10 -  Mortgage Commitment date 4/16/10  - Closing date   4/28/10

 

Buyer # 2

Contract started and signed by buyers on March 11^th  - seller’s signed March 17^th  - When the contract was drawn up, the commitment date was set for 4/2/10 with a settlement date 4/30/10. Because of the delay with the seller accepting the agreement of sale, the commitment date was never extended.

 

 

So, why were these commitment dates unrealistic? 

It's called a time line. There are certain things that need to take place in order to give a good and accurate mortgage commitment letter. Sure, many lenders and loan officers can give conditional commitment letters. And I am talking about such letters that have conditions out the ying yang. Almost like it was never underwritten.

What needs to be done to perform a good commitment letter in order to meet that commitment date?

     1. An acceptable appraisal - Many of us don't order an appraisal until we know that we have a fully executed contract.  Now, an appraisal has to be ordered, a date and time set to inspect the home, and then that appraiser getting the appraisal back to the lender in a timely manner.  It could take 2 days to order the appraisal, 3 days until the appraiser gets out to the property, and 3 more days until the appraiser gets it back to the lender. Just right there is 8 days. And in some cases, this could be a quick turn-around time. Keep in mind, it also depends on the type of loan, if one is dealing with the HVCC, or just the fact that the appraiser is having a hard time contacting the listing agent. Overall, it could be a solid 10 business days until a lender sees an appraisal and this would not include weekends. So if my numbers are correct, this is 13 days, almost 2 weeks.

     2. Time of mortgage application - In regards to my example number 1 above?  The borrower couldn't meet with me and get me their appropriate information until April 5th.  That means I have roughly 11 more days, 9 of them which are business days, to get a commitment letter out in time.

     3. Difficult loans - Each and every borrower is different from the next. I keep hearing some realtors say that x,y,z lender got such and such borrower done very quickly.  All I can say is that each and every buyer is different from the next. Some loans are easy and some are difficult. In many cases, once we start to dig deeper into that borrower, we need more information. A good example are self-employed borrowers. Sometimes we need more proof for write-offs to justify more income, etc, etc.

     4. Underwriting Time - Each lender is different and each time period can be different if real estate is busy or slow. It's safe to say that it should take 5 business days for a loan to be in underwriting,  But this time needs to be factor into the whole equation.

 

Overall, as you can see, there can be many reasons why it could take more than 2 weeks to get a realistic commitment letter to meet the commitment date. If you take my #2 and # 4, subtract the underwriting days, it says that I have 4 realistic days to process a loan.  And this is just not enough time.  And what about the appraisal?  What good is a commitment letter if it is subject to an acceptable appraisal?  So.....

 

 

 

Team Work & Communication

So how can a realtor help in achieving the commitment date?  They should be calling up the loan officer to get a better feel for that client. To find out such things as their current underwriting time. Is the borrower complicated?  Meaning, do I have everything that I need to properly process and underwrite the deal. ... and so much more.

Overall... keep in mind everyone, that each borrower is different from the next. That we see too much misleading advertising for 10 day closings from certain lenders. (read the fine print to see how this has to happen) And lastly, that we all need to work together. Don't hesitate to ask and not assume.

 

 

 

Food for thought…  A 30 day closing in my opinion is very realistic, but a commitment letter due in 14 days is not. Weekends and appraisal times need to be considered.

 

 

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_____________________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

Important Information about the First Time Homebuyers Tax Credit

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

Important facts about the New Good Faith Estimate

 

The Main Negatives : The New Good Faith Estimate does not show :

• the total monthly payment. It only shows the principal, the taxes, and if mortgage insurance required.

• the total costs for the entire mortgage. It just shows your total estimated settlement charges, that doesn't include the down payment.
  

• a signature & date spot. Yes, this form is suppose to be given to you within 3 business days of applying for a mortgage.  Read about the 6 trigger points that define the mortgage application. Yes, there are methods of tracking if the GFE (Good Faith Estimate) was sent to you. But in reality, there is no clear proof since you are not required to sign this form. Meaning that there can be ways around the fact if your received it or not.

• a break down of all lender costs. It just shows the total, in Box A. The title of Box A reads as, "Your adjusted Origination Charges". I will further explain this in detail below.
  

 

Please read Part 1 before you proceed to get a clear idea of what I am explaining and why :

Good Faith Estimates Explained - FHA Loan Good Faith Estimates - Understanding the whole process - Part 1 of 2

 

 

 

Break down of Box A for the Good Faith Estimates

 

It's been argued by some that you can't throw junk fees into the Good Faith Estimate last minute. That statement is correct, because you can only make certain changes on the New GFE.  These are called "changed circumstances", which I will talk about later. But one fact that is misleading is the part that some loan officers state that the borrower can clearly see what the total of the lender charges are in Box A.  I want to explain on how this might still hurt the borrower, if not explained properly.

 

 

Box A with Points and NO lender closing costs - Example # 1

 

 

 

 

 

 

 

My main focus is on Box A.   It states, "your adjusted origination charges". In this case, the $2,488.71 are just points and no other lender charges, such as commitment fee, processing fee, or warehouse fee.

 

 

 

Box A with Points and lender closing costs - Example # 2

 

 

 

 

 

 

In this scenario, Box A has points and lender fees. The problem is that you don't truly know what your total points are and that they do not appear on the New Good Faith Estimate. If you clearly are given a Itemization Fee Sheet or a 2010 Itemization Sheet, you would be able to see the break down. The unfortunate part of this is the fact that all the forms mentioned, the Good Faith Estimate, the Itemization Fee Sheet, or the 2010 Itemization Sheet don't require a signature and a date. Sorry, but a sneaky loan officer could hide this from you. And you wpn't see the true charges until you actually go to settlement, because they will be broken down on the HUD settlement statement by numbers.  The same exact numbers that were located on the Old Good Faith Estimate. 

 

 

 

Detailed Box that would only show such items on the Itemization Fee Worksheet

 

 

As you can see with this form, this is a snap shot of the Itemized Fee Worksheet. You can see the total origination fee which is $3,288.71 and this matches Box A in example #2.

But as you can see, the break down shows you the other charges that Box A in example 1 doesn't show.  Why do I think this is critical? I have 2 main reasons.

 

 

 

 

 

 

Jeff Belonger’s 2 Main Reasons

 

1. This would be based on a $200,000 mortgage. I charge the borrower 2 points that would be equaled to $4,000 and no lender fees, so my Box A would say $4,000. Yet my competition is charging 0 points and $3,500 in lender fees and their Box A total was $3,500. You would think that this lender is cheaper by $500, right?  Incorrect.  Why?  You would need to speak to your tax accountant, but my reasoning would be because you can write off a percentage of your points, but you can't write off any of your lender fees. 

So simple math says that if the borrower is in the 28% tax bracket, they would be able to write off $1,120 of my total points.  Now, this is strictly for purchases. When it comes to refinancing, this is stretched out over the term of the loan, or for how long that they have the loan. Again, you need to speak to a tax accountant or CPA.

Overall, if I was charging $4,000, but the borrower gets to write off $1,120, my net expense to the borrower is $2,880.  This technically means that I am $620 better than the other lender. Yes, the argument could be made that I would initially be $500 more out of pocket to the borrower. But this can be reviewed several different ways. I just wanted to show that the total of Box A is not your best proof of which loan could be cheaper for the borrower.

 

2.  I have done a few experiments with borrowers recently to prove my point on this 2nd part. As I mentioned, the borrower does not see the total break down on the New GFE, aka the New Good Faith Estimate. I have sent out all disclosures to the borrowers and at first, didn't go over the actual break down which is listed on the Itemization form. I would then ask them if there were any questions and they would say no. I then would say, let me go over your break down anyhow. My point is that many people just look at the totals and not the separate charges.  And just for the fact that the loan officer could get away without even disclosing the Itemization sheet upfront because it does not require a signature and a date. How would a borrower know unless they were properly educated about the procedures and such.

 

 

 

One excellent feature : 

 

I do love this feature, because it explains to you if you have a fixed rate or an adjustable rate.  It also tells you if you have any pre-payment penalty or a balloon payment.  If HUD would just put this on the old Good Faith Estimate, I would love it then.

 

 

 

One Last Thing - CHANGED CIRCUMSTANCES –

 

Overall, it's a little more detailed in this, but I wanted people to beaware of this and to be careful on how some loan officers or lenders that might try to pull a fast one over you. Sure, they could be caught and fined, but some will take the risk on this. They have done it in the past.

 

 

 

Summary :  HUD's intentions were to express to all borrowers to shop and shop effectively.  I think that is awesome. But I have my opinions about that and how they have gone about this. I have spoken to about 15 different well respected loan officers and each one, including myself, think that they did a horrible job on the new Good Faith Estimate.  I have shown a few reasons why and there are a few more that I could talk about at a later time. But they were briefly explained in the beginning.  The average consumer just needs to speak to a trusted loan officer who will take the time to educated them on all details and not just rate and points.

 

 

 

The Series on the New Good Faith Estimates for 2010

• Good Faith Estimates Explained - FHA Loan Good Faith Estimates - Understanding the whole process - Part 1 of 2

• Good Faith Estimates Explained - FHA Loan Good Faith Estimates - Detailed changes - Part 2 of 2

 

 

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Experience & Knowledge at its BEST !!!

 

 

________________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

 

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

Will it be cheaper to close on my property at the end of the month of the beginning of the month?

 

 

How many times do we read something that may not be true?  Or that you get misinformation, just because someone thinks they know.  Can this confuse so many?  I could be here all day on this topic.

Today's topic is Interest Per Diem - It's very simple on real estate transactions. It is the interest charged to the borrower daily for that specific month until the loan closes, or on a refinance, until the loan disburses.  If you were to close on the 25th of February 2010, then you are paying daily interest until February 28th, 2010, which is 4 days of interest.

What I wanted to point out is that there are some lenders, mortgage companies, that can do what is called an interest credit. This basically negates your interest per diem.

 

 

 

This was an answer from a realtor who claims to have been a loan officer for 15 years. This info is misleading...

 

 

 

 

 

 

 

Depending on the lender that you are working with on your mortgage transaction, this might not necessarily be true. Here at Infinity Home Mortgage Company, I can offer you an interest credit.  It doesn't matter if you are doing a FHA loan, a conventional loan, a VA loan, or a USDA loan. We can offer such a credit up until the 5th day of the month. How does this work?

This example will be based on a loan amount is $200,000 with a interest rate of 5.00%. Your daily interest charge would be $27.40 a day. If you closed on the 25th of February, you would pay interest for 4 days, up until February 28th.  This total charge would be about $109.59 to you at closing. And your mortgage payment would be due April 1st.

Now, if you were to close on March 4th, you would be charged no interest at all. We actually credit back the interest to you on the sheet, so that you will not pay anything extra. Keep in mind though, your first mortgage payment would still be due on April 1st.

 

 

 

Conclusion :  Many of you have been told that it's best to close at the end of the month, because this would be cheaper. In theory, this is true, but as you can see, it still wouldn't cost you anything extra if you closed by the 5th of the month. Now, some lenders are different and might extend this to the 7th or so.  And some may not offer this at all.  Why can this help you?  If your purchase transaction has been postponed for numerous reasons, this could save you a lot of money.  If the lender wouldn't do an 'inerest credit', then you could be charged 27 days of interest on the example that I used above.  That could be an additional $739.80 that you would have to bring to your closing.

One thing to keep in mind.... closing your loan at the beginning of the month might not always benefit the seller though.  It all depends on the type of mortgage that they have or the restrictions associated with that loan.  Example : On FHA loans, you are always 2 months in the arrears and if that seller has an FHA mortgage, it could cost them a lot more money to close on the 5th than it would on the 25th. Just food for thought...

 

 

 

Interest Per Diem Reminder :  Just keep in mind that if your loan officer doesn’t bring this up to you, that you should ask them about it.  Especially if something were to delay your closing into the next month, it could cost you thousands of dollars more upfront.

 

 

 

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- Conventional Loans - 203 k loans -

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Experience & Knowledge at its BEST !!!

 

 

________________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

 

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

How many FHA Loans can I have?

 

FHA Mortgages have become increasingly more popular for 2 reasons. You just need 3.5% as a down payment and that many lenders will go down to a 620 credit score. What I am seeing now is the confusion about whether you can have 2 FHA loans because loan officers and lenders are giving the wrong information on the basic guidelines.  And yes, you can have two, and even more, FHA mortgages.

Example :

Just yesterday, I had a client that was told that they need 30% down on their new property in order to have a FHA mortgage, because they currently have a mortgage. What gets worse is that this borrower has a conventional mortgage on their current property, not a FHA loan. Not only did the loan officer get the percentage down wrong, but they never asked what kind of mortgage they have now. In this example, this borrower could buy a new primary property with a FHA loan and only with 3.5% down. But beware of the Buy and Bail, mentioned below.

 

 

 

 

Why would someone have 2 FHA mortgages?

 

The main reason would be that borrower can't sell their current property that has a FHA mortgage because they could be under water on the house.  And this could cost them additional monies just to pay off the house in order to sell it. Overall, the borrower has a need to move because they need to upgrade because of family size and or because they are relocating.  But in order to do this, you have to fall into a few different categories. Please read on...

 

 

What things should you be aware of when it comes to having two FHA loans :

 

There are considerations in determining the eligibility for a borrower in having more than 1 FHA loan in regards to the exceptions that I will list below.  The considerations are as follows :

• your length of time of time on the current property that you own, that has the FHA mortgage, and
  

• circumstances that make that same borrower want to purchase another property with a FHA insured mortgage
  

 

 

Policy Exceptions & Eligibility Requirements

- Increase in Family Size - If the borrower's legal dependents increase beyond a point that is not conducive to the current housing structure, that house no longer meets the family needs, the borrower must :

• pay down 25% equity in their current property or 25% down on their new property, which represents a 75% LTV  (loan to value)

• provide satisfactory evidence of the increase in dependents & the property's failure to meet such family needs
  

Note : A certified FHA appraiser must do a new appraisal on the old home to determine such value. Tax assessments or market analysis reports aren't acceptable.

 

- Relocation - a borrower can relocate while currently having a FHA mortgage if :

• relocating and

• if they establish residency in an area not within reasonable distance from their current principal residence (reasonable will be different with all FHA lenders)
  

If the borrower returns to the area in which they currently own a property with a FHA mortgage, they are not required to re-establish primary residence in that property.

Note : The relocation doesn't need to be employer mandated in order to qualify for this exception.

 

- Vacating a jointly owned property - A borrower can be eligible if they are vacating a property that will be occupied by the co-borrower.

• An example would be in case of a divorce and the ex-spouse will be buying a new property with a FHA mortgage.

 

- Non-Occupying Co Borrower - A borrower who has co-signed for another family member to purchase or refinance a primary residence with a FHA mortgage, that borrower is allowed to buy or refinance their own property with a FHA loan. This is as long as they are a non-occupying co-borrower -  FHA Non-Occupant Co-Borrower loans - Also known as Kiddie Condo loans

 

All of these exceptions are found in : HUD 4155.1  4.B.2.d

 

 

 

On a temporary basis – While FHA analyzes this situation - September 18th, 2008 - ML 2008-25

 

Converting Exsisting Homes to Rentals - Known as the FHA Buy and Bail - This is stated in Mortgagee Letter 2008-25, which is to prevent those that knowingly give false or misleading rental information/leases in which they will just let that property fall by the waste side and not make mortgage payments.

The borrower will now need to be able to have sufficient income to qualify for both mortgage payments. There are exceptions to this rule that relate to minimum loan to values and relocation's as well, so you need to cross reference these requirements to determine if you really do qualify.

 

 

Important Information : In all the cases listed above, if the borrower doesn’t meet these exceptions, then they can only obtain a FHA mortgage if :

• the homeowner pays off the current FHA loan in full or

• terminate ownership of that residence
  

 

 

 

A few things to remember - Not all lenders and or loan officers are on top of these current changes and or ask the appropriate questions when determining what you can qualify for when it comes to FHA Home Loans in general.  Speak to a reputable loan officer and not one that tells you what you want to hear or sounds good.

NEW FHA LOAN CHANGES - 2010 FHA mortgage changes

 

 

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- FHA Loans - USDA Loans - VA Loans -

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- Conventional Loans - 203 k loans -

- FHA Home Loans - Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

________________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

 

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

Important Blog Today – FHA loans & HUD’s changes - You can make your voice heard. Please read further..

 

 

So much has transpired in the last week with FHA loans and there are things that you need to know and understand why some of these changes took place.

Last week HUD put out their policy changes and what could take place in the near future. FHA loan changes go from fact to fiction. The next day, they put out the official HUD mortgagee letter, ML 2010-02.

Overall, I have noticed several comments that either the commentor seemed confused about the changes or believed that the changes would be no good and or destroy home buying. Which will lead me into my next blog tomorrow. We must ABOLISH FHA loans. (please stop by tomorrow for any eye opener)

 

 

 

Some important FHA changes -

 

What were the FHA loan changes by HUD? Please read : FHA loan rumors become a reality. Keep in mind, the only change that is official is # 1. The other specified changes will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.

 

1. Raising the FHA UPMIP (upfront mortgage insurance premium) - So many keep saying that this is an added expense to borrowers at closing. Yes & No. This statement is misleading, even though it appears on the HUD settlement statement. In reality, you are allowed to finance this upfront mortgage insurance into the loan. The new change was only 50 basis points, going from 1.75% to 2.25%. This change will go into effect on or after April 5th, 2010, with all new FHA case numbers assigned.

 

Example on the difference :

On a $300,000 loan, you are talking about an additional $1,500 added onto the loan. This equates to an additional $8 per month. That is not much to disqualify someone, unless you were already exceeding the debt-to-income ratios already.

 

Why was this change made?  To help re-establish FHA's capital reserves. David Stevens gives an explanation to some of this in FHA changes.  Just a FYI - David has just recently joined us at Active Rain and was appointed the Assistant Secretary of Housing in early 2009. I wanted to share my thoughts because some of my views slightly differ from what Mr. Stevens wrote in his blog post.

 

 

2. FHA credit score changes & down payment updates - With all FHA loans, you still don't need a credit score. Keep in mind most lenders and investors have what are called lender overlays.  The lender can add to the FHA guidelines. Why would a lender do this?  To make it more sellable to other investors on Wall Street.

This is a change that is not really a huge change. You must now have a credit score of 580 or above in order to be allowed to use the regular 3.5% down payment guideline. Any score below this, the borrower will need at least 10% down. Why is this not such a huge concern? Most lenders are at 620 and several are at 640. The reason being is that most investors on Wall Street don't want to purchase loans less than a 620, because more loans under this score don't perform as well.

Credit scores under 620 - Yes, there are a few investors that allow for scores under 620, but BUYER BEWARE. Just because a loan officer has this program, doesn't mean that it will happen. On top of that, most lenders have major penalties if you fall under the 620 score. These penalties are anywhere from a 1/2% in rate to up to 2 additional points in fees, and sometimes both. Why?  Because that lender will portfolio that loan, hoping that they can sell it in 12 months. The additional points and higher rate is to help with their risk, for those loans that don't perform. 

My opinion on this?  Work with a trusted loan officer that is not pushing the lower credit score. Work with a loan officer that will help you get your credit scores up in 6 months to a year. So what you missed the first time homebuyers tax credit. Because of the difference in fees and rate, it will cost you more money over the longer period than if you just waited and worked on your credit.

 

 

3. FHA seller concessions from 6% to 3% in seller help - Mr. Stevens stated this in his blog, FHA changes. "The current level exposes the FHA to excess risk by creating incentives to inflate appraised value.  This change will bring FHA into conformity with industry standards on seller concessions."

Hey, I love making loans, but I will have to agree with HUD's assessment here. Now, I will say this though. It will hurt many markets across the U.S. Especially those families that are middle to lower income and those buying homes that are priced at $160,000 or lower, especially those at $90,000 and less.

 

 

Overall, we can have that whole argument that you need skin in the game, etc, etc. On all FHA loans, the borrower still needs 3.5% of their own money into the transaction. Sure, you can get a gift from family members, or even grants, and or even money from non-profit organizations. But the outcome in my opinion, could dampen the housing recovery even more. And that is why you can voice your concerns and add comments to the Federal Registry. FYI - I will be posting a powerful blog tomorrow on Abolishing FHA loans overall. Please stay tuned.

 

 

 

Make your VOICE heard in February 2010

 

 

The Federal Register

 

PS.. - Reminder - I will post a new blog when these changes become public on the Federal Registry, allowing everyone to voice their opinions. Here is when you can stand up and be officially heard. YOUR VOICE.

 

 

• FHA Loans Rumor Alerts - 3% seller concessions & FICO scores - Part 1 of 2

• FHA Loans Rumor Alerts - You don't need 10% or 20% down & more about credit scores - Part 2 of 2 (not truly all about part 2, but I do go into discussions about the credit scores - because of the recent FHA changes, I didn't get into great details about 10% or 20% down)

 

• What is Transparency?? Best Mortgage Rates/Online services - (Part 1 of 2)

• Transparency in Real Estate/Mortgages - Interview your Realtor or Loan Officer - (Part 2 of 2)

 

Okay.. it's been stated and written....

We need to ABOLISH FHA Loans!!!!

 

 

 

                   

                                                                                               FOLLOW ME ON FACEBOOK

 

 

- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

_________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

 

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

Take the TIME to do your own INTERVIEW….

 

 

What is an interview? Wikipedia defines interview as a conversation between two or more people (the interviewer and the interviewee) where questions are asked by the interviewer to obtain information from the interviewee.

When you are shopping for a mortgage or for a realtor to help you sell your house or to help you buy a house, those that you talk to, should be interviewing you. Why should they be interviewing you? To get a feel for you, to understand your needs, and to get a feel for what your goals are now and in the near future. I have written about this several times, what a loan officer should be asking their potential client. Jeff Belonger's Interview process as a loan officer.

 

 

So as a consumer, when shopping for someones services to help you with your mortgage or home buying/selling process from a realtor, what things should you consider?

First off, take this process seriously and just don't go with someone that typically uses the words : I guarantee you, I promise you, I am the best, etc, etc -

Secondly, take the time to interview these individuals. There are several ways at your fingertips. What you should be looking for is transparency in the individual and their services. I talked about this in : What is transparency all about? -

 

 

 

 

So what are the ways that you can conduct your own interview? It can be simple and not take much time at all. Here are some options (keeping in mind that more of these options are when researching your loan officer) :

• You can do a search online by using Google.com and Bing.com. Just type in the person's name and also do a search on their company. You might be surprised at what you find out.

• BBB - Better Business Bureau - Find out about the company that individual works for. Keep in mind that not everyone is always happy and likes to complain, so some complaints might be fluff per se.
  

• The National Mortgage Licensing System & Registry (NMLS) will be a great place to not only find out if that loan officer is licensed, but their credentials, and some history about that person. Here is the website : The National Mortgage Licensing System & Registry - This site is currently being used by 38 states and will be mandatory for everyone by the end of January.There will be a separate link just for this new site and for these searches. Keep in mind that this is a good form of transparency, but not 100%. It should be a solid tool though.

• State and local agencies - Each state has their own web site for loan officers, mortgage companies, and realtors. There are different ways to search through these sites, but not every state has the same requirements.

• FHA Approved Lenders - HUD Lender Locator - This tool allows you to see what lenders are actually FHA approved.

 

 

 

Summary : The bottom line is that you should become pro-active in your searches, when searching for that true professional. Even if someone gives you a referral, just don't take their word for you. I have seen referrals backfire for several reasons. And don't just take in account someones years of experience. I approved a loan 2 years ago with 15 years of experience at the time, after a loan officer had denied the loan 30 days later, who had 30 years of experience. Questions do matter, and not just name, rank, and serial number. Get to know who you are dealing with.

 

PS...I know I didn't hit upon every type of method. If you have some other means of searching for people, please feel free to include them in the comments below and I will include these with your name.  Thanks

 

 

All pictures are courtesy of istockphoto.com

 

• What is Transparency?? Best Mortgage Rates/Online services - (Part 1 of 2)

• Transparency in Real Estate/Mortgages - Interview your Realtor or Loan Officer - (Part 2 of 2)

 

 

 

 

                    

                                                                                               FOLLOW ME ON FACEBOOK

 

 

- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

_________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

 

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

Give it to me all..... the more that you have down, the more things will work out, that you won't leave your home. And as an investor, I will feel much better. Give it to me, every dime.

Here is my point.  There have been a few articles written in the last week or so and several of the comments are screaming for more skin in the game. These comments aren't just coming from realtors and loan officers, thinking that this will help correct the foreclosure market and the housing market, but this is also coming from the government.

There was an article written last week titled : Proposal would boost FHA Down-payment requirement. Some Congressman wanted to raise the FHA downpayment to 5%, adding 1.5%. Hence what propelled me to write : FHA loans to 5% down?  

 

 

 

Now, do we really think that an extra 1.5% down will correct and or help the foreclosures? In my opinion, I don't think so. Lenn Harley gave a good comment in my FHA 5% down article. Here is a snap shot of what she stated...

"ZERO down payment loans are no riskier than 20% down loans IF THE MORTGAGE COMPANY HAS FULLY DOCUMENTED THE BORROWERS INFORMATION AND DETERMINED THEIR ABILITY TO REPAY. -  Ability to repay.  What a concept."

Bingo... and here is what angers me with those on Capital Hill that apparently have no clue and or just don't do their research. Did anyone read this article by Kenneth R. Harney. Who's most likely to walk away from their mortgage? -

Wow, someone actually did some research that might blow your socks off per se. Yes, common sense says that more skin in the game would be best, more practical. I don't mind opinions, but assumptions without doing your research and or putting 1 and 1 together does get my blood boiling. Besides, here is a hint to who might walk away: "It's probably not who you think."

Let's take it a step further. Howard Sumner wrote : deliquency and foreclosure study. In this article they talk about the different types of real estate markets and where they see foreclosures most.

 

 

 

Real Estate SOLUTIONS ???

 

So how can we help correct this real estate market and keep foreclosures from happening?  There will be many that will say more money down, because that is how it was done 20-30 years ago. 2 things on that blind statement. First off, this is 2009, not 1970 or even 1990. The cost of living is more expensive now. Secondly, FHA still allowed for less money down than your conventional loans in the 70's and 80's.  So how come there weren't tons of foreclosures then? Is it the down payment?  I don't think so, just an excuse.

Solutions?

  --  Maybe lower debt to income ratios a little?

  --  Possibly qualify borrowers just as we do for VA loans?  In the calculations, we have to find out family size and to use utility/electric costs also.

  --  Esko Kiuru wrote this article : Mortgage Lenders now more inclined to lower principal. Please read this, because this can be a good solution.

  --  Claudette Millette shares this article with us : New Housing bill will force loan modifications. At least the lenders will have to explain specific options. Claudette states - "All lenders will be required to perform what the bill terms as a "net present value" test for all seriously delinquent borrowers." - Bravo... it's a start.

  --  I wrote this article 3 months ago, Call To Action - We must fix this real estate market ourselves. I made a pledge and I am still working on this. We need to put our heads together and make the gov't realize more issues and not the common sense approaches.

 

 

 

Food for thought to a main solution….

Did we ever come to realization that a lot of these messes are because of unemployment?  The loss of jobs and income?  Our government spending habits?  And that we need to focus on small businesses, which are a large part of America's work force....  Besides, if we ask for 1.5% more upfront, doesn't that deplete the savings of a borrower that could use that extra money for fixing up the house?  For moving?  For emergencies?

My main reason for writing this blog?  Please read this, which was mentioned above : Who's most likely to walk away from their mortgage?

 

 

Lenn Harley wrote this :  Raising the downpayment for FHA insurred loans to 5% is ok?

Lenn adds some good insight to this with some good discussion.  People, we need to stand up and fight this, letting the gov't know not only how we feel, but what they could possibly do to the real estate market.

 

 

All pictures from www.istockphoto.com

 

 

                    

                                                                                               FOLLOW ME ON FACEBOOK

 

 

- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

_________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

 

 

Copyright © 2009 by Jeff Belonger of Infinity Home Mortgage Company, Inc