We’ve talked to several people in the last couple of days who want to purchase homes using FHA’s 3.5% down payment program… and they are trying to purchase some “unusual” properties.

Here are some GENERAL notes:

• FHA 203K loans: These loans are “construction loans” that FHA makes.  If you have a $100,000 property… and you make $30,000 in repairs, you need to make a downpayment of 3.5% of $130,000.  Now there’s more to the program – but the main thing to remember is that FHA IS FOR OWNER OCCUPIED LOANS ONLY.  If you are not going to live in the property – it’s not going to work.
• TRI-PLEX:  An FHA loan on a TriPlex means that there are 3 units TOGETHER on one foundation… not 40 acres with 3 buildings on it.  I know that’s confusing, but that’s the way FHA rules on what a Tri-Plex is.
• Property with more value in the LAND than the house. This probably isn’t going to work.  FHA is in the business of making HOME loans.  They don’t really like deals with more value in the LAND (then they consider it a LAND loan).  I personally refer those folks to their local USDA Home Loan office, to see if they can help them.
• Underground Homes, Log Cabins, Geodesic Domes, Mobile Homes, and Tree Houses:  It’s really hard to get FHA to make loans on these properties.  If you have a NEWER Manufactured Home, in NC BB&T might be a good place to start… if it’s older, and on a permanent foundation – we recommend starting with Wells Fargo.  That’s not to say that you can’t finance any of these kinds of property with FHA… just that you need to be in an AREA where there are recently sold, similar properties for comparable sales.

If you are considering a home loan in NC, and you want to get a FHA Mortgage Loan, Call Steve and Eleanor Thorne, FHA Experts 919-649-5058

The Single Family Housing Origination Department of the USDA Home Loan Program announced yesterday that they should have their computer systems up and running to accommodate the changes required by Congress in their fees.

Since the end of May, USDA has been issuing “Conditional” approvals… and because of that, Wells Fargo, Bank of America (and many, many others) are not doing USDA Home Loans.

We are still closing these loans... here’s what the directive says:

Rural Development also is working on a more complete system upgrade to accommodate all provisions of the new law. We expect this full enhancement to be completed as early as possible next fiscal year. While the 3.5 percent up-front fee is sufficient at the current subsidy rate, we must be prepared to make adjustments in later years using the new authority for an annual fee to maintain a zero cost program. We appreciate your role as a lender in responsibly servicing loans in the SFHGLP portfolio and helping us maintain a successful program.

So here’s the headline folks… USDA has the authority to give a lower guarantee fee to “poorer families.”  They also have the authority to charge an ANNUAL (monthly) Mortgage Insurance Fee... they are NOT doing it right now, but reserve the right to do so in the future.

Almost all parts of our state qualify for the USDA Home Loan Program, which offers 100% no money down financing. You will need to meet the income requirements (which vary by county) and you need to have a credit score of at least 620.

If you are considering a USDA Home Loan, Call Steve and Eleanor Thorne, FFSi, 919-694-5058.

In general (and you could probably figure this out) Carrboro and Chapel Hill do not qualify for this 100%, no money down mortgage loan.  MOST of the rest of the county DOES qualify.

Here’s a close up of  the Northern portion of the Orange County NC USDA Home Loan Eligibility map near 70 West

Here’s a closer look at the area directly above Highway 54 in the first map (looks kinda like an > on the map).

The sections marked in “darker orangy” do not qualify for USDA Home Loans. The lighter areas on these maps DO qualify.  If you want to look up a specific home address, please click here.

If you want to know more about qualifying for USDA Home Loans in NC please read the guidelines here.  There are income requirements that vary per county, and the credit requirements are pretty liberal – you need to have (in general) 12 months of clean credit and a credit score above 620.  If you want information on other counties that qualify for USDA Mortgage loans in North Carolina, you will find a map here.

If you are considering a mortgage loan and want to know more about the USDA Home Loan program, please call Steve and Eleanor Thorne, 919-649-5058

“Yep, just another reason to move to Raleigh!” is what one friend wrote on Facebook after seeing that Raleigh was named the Top Public School System for Large Populations over 300,000 by Great Schools.

We live in this school district. While the report correctly states that:

[Wake County Public School System is ]home to three high schools that offer the demanding, well-respected International Baccalaureate program. In fact, the entire district is focused on college prep; more than 90% of students plan to continue some form of higher education, with well more than half heading off to four-year colleges.

The competitive Academic environment can not be overstated at some schools.  Our daughter attends Green Home High School, where a grade point average of 3.5 is in the middle to lower half for the class!

Having great schools, with dedicated teachers, and parents who truly care about education will continue to help Raleigh / Cary be top destinations for businesses looking to expand.  As noted in the report:

Overall, Raleigh has survived the economic recession and real estate crash and is already growing again. Many families point to the wide cultural diversity — museums, sports, extracurricular offerings and camps, options in education and worship, dining, and more — that makes it a great place to live.

We Agree! We”grew up” in the Triangle, live in the Cary / Raleigh area, and enjoy sharing information with folks relocating here!

If you are considering a home purchase in Raleigh or Cary, NC call Steve and Eleanor Thorne 919-649-5058. We have programs specifically for those who are relocating, and we have the best mortgage rates available.

When one borrower has most of the income… the other borrower has good credit scores… there ARE options for purchasing a home.

“We want to purchase a home, and I want to know if we can get it.  My husband currently has a mid credit score of 538,  and mine is 678.   He makes about 52,000 and I make 25,000.  I’m still in graduate school full time.  We saved  $4,000 for closing cost so far.  We want the house by the end of October 2010 Can we get a loan?”

Option 1:

Purchase a home using FHA, and have a non-owner occupied co-borrower on the loan with the borrower who has good credit scores. If you know that you can make the payments on your own, then having a parent, or other family member, on the loan will not be a burden to them.  After you’ve made 12 months of payments (and by all account mortgage interest rates will still be low a year from now) you can refinance the loan and take the family member(s) off.

FHA requires a 3.5% down payment. The good news is that in this environment, in our area, we are seeing sellers pay closing costs.  FHA allows sellers to make a 3% contribution towards closing costs.

FHA also allows you to get a gift for your downpayment! (for more information on downpayments, click here).

Option 2:

You can make an appointment to see a mortgage loan officer, and discuss your credit options. We are NOT credit counselors (like the ones you would see if you were considering Bankruptcy) but we “counsel” people ALL THE TIME on how to improve their credit scores.  Often times it can be done in 90 days!

If the borrower has a 538 credit score , and they’ve had 12 months of making all payments on time – the thing most likely keeping their scores down (barring bankruptcy, short sale or foreclosure) is the gap between the balance owed on credit cards and the high credit limit.  Taking the $4000 saved (in the example above) and paying down the balances MIGHT get the scores up 60 points or more immediately!

That’s why I’m suggesting that you meet with a loan officer.  Most of us have a “simulator” available to us that tells us what will happen if you close an account, or pay down a balance, or pay off a collection.  Again, I don’t suggest that you try and do this on your own… because a credit score is like a snow flake, each one is different, and each one is fragile.

So let’s say you take your savings, and work to get your credit scores higher… now you don’t have money for a downpayment! What do you do then?

• FHA Mortgage Loans allow a gift for the down payment.
• Veterans don’t have to make a down payment.  It’s part of your VA Mortgage Loan Benefits!
• USDA Home Loan Program does not require a down payment at all! USDA requires that you live in a “more rural” area.  In North Carolina, we get rural fast, and in many cases, the whole county qualifies for USDA Home Loans!  For a list of those areas where the whole county qualifies for USDA Home Loans, click here.

If you or your family or friends are considering purchasing your first home - please call Steve and Eleanor Thorne 919-649-5058.  We pre-qualify, and counsel borrowers everyday, and we can help you purchase a home!  If you have more questions about Credit Repair, click here.

For information on qualifying for USDA Home Loans in NC, Click Here

For information on where you can purchase USDA Home Loans in other parts of the Triangle, click here.

Many of our competitors are NOT doing USDA Mortgage Loans – but we are closing them every week! Here’s a list of counties in NC where you can get this 100%, no money down loan.

If this is an area you are considering for a home, Call us 919-649-5058!  We work with TOP Real Estate Agents in this area who are familiar with the market, how to negotiate for the Seller to Pay Closing Costs, and how to get you the best price!

Call Steve Thorne 919-649-5058 USDA Home Loan Expert if you have questions on Qualifying for a USDA Home Loan in Wake Forest NC and Rolesville NC. We have the best mortgage rates available in North Carolina

The Urban Land Institute recently did a huge study on Housing and the Next Decade.

John McIllwin, the author of the study, acknowledges that home “values” have dropped significantly – and that the impact of negative equity in homes is unprecedented. By the end of 2010, the report suggests that almost 40% of all homes will have negative equity (be upside down on their mortgage) and this is significant since most other figures “floating out there” suggest a number closer to 25%.

The report emphasizes the need for next phase of Financial Reform, which must include Fannie and Freddie – and conflicts in Mortgage Servicing. Because people are more likely to walk away from a mortgage when they are underwater (even if they can afford the payment), the cycle simple perpetuates itself forcing home prices even lower.  The study concludes that:

• Demographics will favor housing demand but at lower home ownership rates than at the peak or even currently. Rental markets will rejuvenate.
• Families with moderate or limited income will struggle as increases in household income will be “constrained” and house prices, despite their recent declines, will continue to be too expensive for many potential buyers. Such buyers will consider moving to distant suburbs but be faced with significantly higher commuting costs.
• New homes will reflect sustainable development objectives and over time, will become very energy efficient.

Here’s where I strongly agree with the report and think that communities, like Johnston County NC should pay attention... In order to “fix” the long term Gulf mess – we will have a higher Gasoline Tax.  The Federal Tax is currently .09 cents.  When the initial “Gulf Oil Slickonomic” reports came out, some economists and ecologist suggested that tax could go as high as .99 cents.

Those that attended the Conference last week in Louisiana by David Kotok of Cumberland Advisors, came away with a sense that the Gulf Oil Slick is not as bad ecologically (it’s a disaster – just not as bad a disaster) as initially feared. This is significant, if only to emphasize that the impending change in the Federal Gas Tax might not come in the next 6 months… but in order to dramatically cut our dependance on gas, balance our budget and fix the trade deficts – that tax will necessarily be increased.

Austin Jaffe, PhD at Penn State says:

The age of suburbanization and growing homeownership is over. The demographics of the next decade indicate that the market for urban living will continue to grow. There will be regional winners and losers as markets recover, and the strongest markets will be found in places that provide a vibrant 24/7 lifestyle. Many central cities will experience strong demand for housing. People who want an urban lifestyle but either do not want to live in a “big city” or cannot afford to will look to live in the many suburban town centers that have been emerging in metropolitan regions across the country.

Herein is the optimism: the changes which have been foisted upon households, financial institutions and the real estate industry since 2006 will result in new opportunities in the markets of the future.  Metropolitan areas throughout the land will be altered by these changes in many fundamental ways.

Think the home buyers of the future are going to be able to pay $4 dollars a gallon for gas, or more to commute 40 minutes from Raleigh to Franklin County, or Clayton?  I think it’s “less likely.” If I were in those communities, I would be trying to get my hands on Federal Grants (that apparently available if they create jobs) to hook up some sort of mass transit system … express lanes with people who carpool?  Light Rail Connections to what is proposed between Raleigh and the RTP? What do those communities outside DC do?

Do I think everyone is going to hustle off to a condo in downtown Raleigh – no… but there’s a much larger group of Gen Y kids who will find that lifestyle appealing for many many reasons those of us who are “older” would never consider.

For more about Eleanor Thorne, click here.

1. I’m paying $1250 a month in Rent, can I keep my house payments at that same dollar amount? Great News!  When you buy a house, you can get a raise!  (for more info click here).
2. Can I buy a house if I’ve had some credit Boo-Boos? Okay this is tricky – but the answer is YES!  It’s just a matter of how long it will take to get your scores up to 620.  We have a TON of information on Credit Scores, and how to get them higher!  Click here!
3. Do I have to have 5% downpayment plus all of the money for closing costs saved? No.  If you are a Veteran, you qualify for a 100% mortgage.  If you are willing to live in more Rural Areas of our state (like Holly Springs or Johnston County), then you might want to consider USDA Home Loans, which is also a 100% mortgage loan program. If you purchase using FHA as your mortgage program – you can make a 3.5% downpayment.  The down payment for FHA can be a Gift, it can come from 401K money, you can sell an asset (like your husband’s Bass Boat)… lots of options!  Click here for more details!
4. Can the Seller pay all of my closing costs? If you are asking me, can I purchase a home with NO MONEY out of my pocket – the answer for ME is… why would you put yourself in that position?  If you have NO MONEY for an Inspection, or an appraisal, or an earnest money check?  Would it be better to wait a couple of more months and save some money up?  Okay – if you are asking if the Seller can pay MOST of your closing costs yes.  FHA recently made an announcement that Sellers can only pay up to 3%.  USDA and VA still allow Sellers to pay up to 6%.
5. Should I lock my mortgage interest rate in? Mortgage interest rates change daily… actually, they are traded just like a stock, so they REALLY change every few minutes.  If you are SHOPPING for a home, there are programs that allow you to lock in an interest rate while you are shopping.  Most lenders, including us, have a FLOAT DOWN policy.  This means that if you lock in an interest rate with us for 30 days – and 10 days later, rates drop through the FLOOR, and you want to take advantage of that WAY lower rate – you can.  Ask about this policy UP FRONT.
6. Should I let 5 different Mortgage People pull my credit while I’m trying to decide who I want to work with? Here’s some basic info on Credit Inquiries. In general, I would talk to the lenders, figure out who you “relate to” let them pull your credit… then get a COPY Of that report and send it to other lenders for quotes.

Here are some other basic questions to ask your lender.  It’s NOT just about the mortgage interest rate… it’s about how much it’s going to cost you, is this person going to really work on your behalf to get your loan approved (these days, it’s almost like hiring an attorney!  It’s NOT easy for a loan officer to just slam a loan through!), can you talk to this person, do you understand how their process works?  This is going to be an amazing journey – being able to communicate with your loan officer is going to make that journey EASIER!

Please call Steve Thorne, FFSi 919-649-5058.  We like working with First Time Home Buyers in NC.  We have the best mortgage interest rates!

• FHA requires a 3.5% Investment into the Property, which is lower than the 5% charged on most Conventional Loans.
• The down payment for a FHA loan can be a gift (for more info about FHA Down Payment requirements click here).
• FHA loans, in today’s lending environment generally require 12 months of clean credit, and a credit score of at least 620.
• FHA will consider part time jobs if you’ve only had that part time job for 18 months – most other underwriting requires you to have a 24 month history of working 2 jobs. (and let me just say, if you are a single parent working 2 jobs – God Bless you! WOW! Talked to a Dad today who is doing that!)

CHILD SUPPORT or Alimony

You have to have evidence that you have received child support, on time, for a year for it to count as income. One of the most common problems we see is when a mom will get a child support check, cash it, and deposit part of the check into their account.  In order to have EVIDENCE that you are receiving that income, we need to have bank statements that reflect the entire “check.”  We suggest that mom’s deposit the child support check into their account at the same time each month.  DITTO with Alimony.

We must have evidence that you will receive Child Support or Alimony for at least 3 full years after the date of closing.  Let’s say you receive $300 for each of your 2 children until they are 18.  So if you have a child who is 12 and a child who is 16 – we would only count the 12 year old’s portion of your support in qualifying you for the mortgage.

If you PAY Child Support or Alimony… we are only going to count that payment against you (like a car loan) if you have more than 9 months of payments left per your agreement.  If you are behind on Child Support or Alimony, and the court is garnishing wages for those payments, we would need 12 months history of that “work out” being made on time.  You will need a credit score of at least 620.

Non-Occupying Co-Borrower

You can purchase a home without being married to the other borrower. You could buy the home with your parents (for instance), and they would not have to live in the home. We would take all of their income, all of your qualifying income, all of their debts and all of your debts, and see what the ratios look like.  Having someone purchase the home with you helps from an Income Qualifying standpoint.  Having someone else purchase with you will not help a single parent with CREDIT issues.

Purchasing a home with someone who is NOT a family member would require that the other person live in the property with you. Again, you take all of their income, all of their debts and add it to yours… and their credit needs to be at least as good as no late payments in the last 12 months and at least a 620 credit score. (Don’t have a 620 score yet?  Click here for tips you can start doing today to improve your credit score! 8o))

RoomMates

We are seeing a ton of single parents who are living with OTHER single parents.  If you HAVE a roommate, or if you are GOING to have a roommate – it is very very difficult for us to count that income.  If the roommate is not going on the mortgage loan with you, 99% of the time we can not count that rental income.

Previous Mortgage

If you and your Ex owned a home, and the mortgage was NOT in your name – there’s nothing to worry about.

If you owned a home, and the mortgage was in BOTH names, and you Quick Claim Deeded the Property over to your Spouse… you are STILL responsible for the mortgage.

If the Seperation Agreement says that the SPOUSE is responsible for the mortgage payment -and you were ON the mortgage loan… you are STILL responsible for the mortgage. Unless you have been TAKEN OFF of the mortgage – let’s say the other person refinanced the mortgage and took your name off, or if you sold the home, you are still responsible for the mortgage.

If there was a Short Sale, or Foreclosure on that home, and you were on the mortgage, (even if you did not live there at the time and you the separation agreement said you were not responsible for the mortgage) click here for more details and time lines.

HERE’S THE GOOD NEWS!

Less income, in today’s real estate market – buys MORE home. With Interest rates in the 4% range, and home prices coming so far down – a parent who makes $38,000 with no more than $350 a month in debt can purchase a home in Raleigh with 4 bedrooms, a 2 car garage, in a NICE neighborhood for around $200,000.  The TOTAL payment, Taxes, Insurance, Mortgage Insurance, Homeowner dues and ALL on one we looked at for a mom yesterday was $1050 a MONTH!

So, if you make $35,000 – and receive $300 a month in child support… you could purchase a nice home, and you could GET a room mate to help you make your payments!  NOW really is a great time to purchase a home!

If you are a Single Parent, interested in buying a home, call Steve and Eleanor Thorne at 919-694-5058.  Each situation is different.  Let us help you with a plan that will mean you can purchase a home! We know the FHA guildelines in NC and we love helping people buy a home for their family!

For about the 5th time in the last 36 months FHA is changing the way it charges Mortgage Insurance.  While this is a pretty major shift in the Way Mortgage Insurance is calculated for FHA, it’s only about a net $20 per $100K borrowed difference.

HISTORY of FHA’s PMI (Mortgage Insurance)

First off, it’s not called PMI. FHA doesn’t MAKE mortgage loans, they insure them.  The mortgage insurance that they charge is referred to as MIP (cleaver I know, Mortgage Insurance Premium).  I refer to it in my blog posts as FHA’s PMI... well because from a Consumer’s standpoint it works just like PMI, and most people are familiar with that term.

MIP has been charged TWICE to borrowers for YEARS. FHA collects an UpFront Mortgage Insurance Premium that’s gone from 1.5 to 1.75 t 2.25 to 1% of the loan amount.  In years past they’ve refunded part of this UpFront Premium… so if you took out a loan in say 2002, and then you paid that loan off through a refinance in 2004… you received a substantial chunk of that premium back.

Then the Economy went south, and with the changes they made in 2008, they did completely away with the refund…

The other way FHA collects the premium, is in the MONTHLY MIP premium.  In year’s past, that MIP collected on a monthly basis for loans with less than a 5% downpayment was.55%.  For loans where the borrower made more than a 5% downpayment, the MIP was .50%.

How These Changes Compare to the new October 2010 MIP Rates

Okay, because I can pretty easily do the math in my head, let’s compare the “old” rates for FHA Mortgage Insurance to the “new” rates based upon a $100,000 sales price with a “fictitious” mortgage interest rate of 4.25%.

These numbers, at $100,000 Sales Price don’t look that dramatic…  Let’s take the same format, and change the Sales Price so that we can take advantage of the maximum Loan Amount for Wake County, NC $295,000.

So with a Sales Price of $305,000 the numbers look like this…

Well… what do you know?  It’s STILL not that dramatic a difference.  I know my peers are on Facebook, and sending around video saying that this is a “Tax” on home owners.  It’s not.  It’s a way for FHA to get the cash flow they need, while mortgage loans are defaulting.

HERE’s what I think is interesting! You can buy a house with 2723 square feet, in Raleigh, 4 bedrooms, with a 2 car garage built in 2009 for $219,000. With these new FHA calculations, and with today’s interest rates, your down payment is $7,665 (this can be a GIFT) and your TOTAL monthly payment, including Homeowner dues, and taxes and insurance and EVERYTHING is still less than $1050 a month!

If you have pretty good credit (scores above 620) and not more than $350 a month in debt – a family making only $38,000 a year qualifies for this house! Now THAT my friends, is something to get excited about!

If you are considering a FHA mortgage loan in NC, and you want more information about qualifying for a FHA mortgage loan in Cary or Raleigh NC  - please call Steve and Eleanor Thorne, FFSi 919-649-5057.  We know FHA Mortgage Programs, and we have the best Mortgage Rates available!