FHA Downpayment Going to 5% ??

The US Congress is busy trying to figure out how to regulate the Mortgage Banking Industry so that another Subprime Meltdown never happens, and that is a good thing.

But, they are the Government, so how do you see this working out?  Yeah, me neither.

US Congressman Scott Garrett (R-NJ) recently introduced the “FHA Taxpayer Protection Act of 2009.” In his bill, borrowers would be required to make a 5% downpayment on FHA loans, as opposed to the 3.5% downpayment in the current guidelines.

In a Press Release Garrett states:

“Homeownership is a noble goal.  However the benefits of Homeownership using government subsidies must be balanced against the potential risk of insuring less creditworthy borrowers and exposing the American taxpayer to that risk. As we have learned repeatedly throughout the mortgage crisis, the amount of equity a homeowner has in their home directly correlates to the credit risk associated to their mortgage.

I know there are those in this area who believe that Congressman Garrett is on the right track with his Bill… I strongly disagree with you. In the Triangle (RDU area) we are sitting in the middle of 21 Universities and Colleges.  We are a mecca for Research and Technology jobs.  We are attracting young, hard working, EDUCATED first time homebuyers.  And this particular segment of the market is helping us keep our home values in place – because they are buying.

ANYTHING we do to disrupt this current, qualified buyer is a mistake – for ALL of us. We have too much inventory, banks are taking homes back everyday (contributing to that Housing Inventory), we should be ENCOURAGING them to purchase homes – especially now!

If you are interested in purchasing a home in Wake County, Durham County, Orange County or Johnston County, and want more information on qualifying for FHA loans - please call Steve and Eleanor Thorne, 919-649-5058.  We are Professional Mortgage Planners with more than 20 years experience and the lowest mortgage interest rates!






Basics to Qualifying for a FHA Mortgage Loan

Buy Baby A New Home!FHA mortgage loans offers some of the most flexible financing available for today’s home buyers!  With FHA, you can purchase a property that’s located almost anywhere, (unlike USDA that has a “footprint” of where you can purchase) and you don’t have to be a Veteran (a requirement for VA home loans ).  AND you can use a GIFT for your downpayment!  

Here are the Basic Guidelines:

  • You can Own property somewhere else…. meaning if you move to NC from Ohio (for instance) and you own a property there, you can still qualify for a FHA mortgage loan in NC! (but there are some details you need to remember about using rental income so click here to learn more!)
  • You can get a Gift for the Downpayment!
  • We can use income from a Second Job if you’ve had that job for at least 18 months, and/or you have a history of working 2 jobs!
  • Minimum Credit Scores are more difficult to pin down.  In GENERAL – you need at least 12 months of “clean credit,” and no collections or judgements in the last 12 months.  I you are new to the credit “game” it’s going to be tough to get a loan, but we do have some investors that will help with “non-tradtional credit.”
  • Debt To Income Ratios are “loosly” 33/43.  This means that based upon your GROSS income, you can have 33% of your monthly income going to your housing expense (which includes Principal and Interest, Taxes, Insurances and HomeOwner Dues, if you have them!).  Then you take your Gross Monthly Income and only 43% of your income can be gong to TOTAL debt – which includes the Housing expense above, but it also includes the items which report to the credit report (car payments, credit cards, etc.)
  • Downpayment is 3.5%!
  • You do not have to count child care payments!  (WHEW!)
  • You can use a non-occupying co-borrower.  This means that if your parents want to help you by being on the mortgage loan, you can use their income and assets to qualify.  BIG, BIG, B-U-T here… you can not have sorry credit, and overcome that with a co-borrower. 
  • The maximum loan amount for Wake County and Johnston County in NC is $271,050.  The maximum loan amount in Orange and Durham Counties is over $330,000!
  • You can STREAMLINE refinance to a lower rate FHA Mortgage with minimal costs!

If you are considering a purchase or refinance and have questions about FHA mortgage financing – please call us!

Are You A Waitress? Wanna Buy a House!?

I just wrote about a waitress in Garner, NC who was able to purchase a home, with a new roof, new windows, carpet, and HVAC system!  It cost her less than $3000 – and her total monthly payments are LESS than $500!

Best of all… she also qualifies for a $7500 Tax Credit from Uncle Sam!

We used a FHA 203K loan for her – which can be complicated – but it’s a GREAT program!

WOW! If you want to purchase, don’t let anything stand in your way!  Give me a call!

Fix Up A Foreclosed Property – $100 Downpayment?

I wrote recently (click here) that we could not do $100 downpayment with the 203k loan program… well, now I have a lender who claims he can do it.

HUD has long had a program that encourages folks who want to purchase a HUD Foreclosure, allowing them to purchase the property with $100 downpayment.  Problem is, non of the lenders wanted to offer the program.

In addition, if you COULD find a lender who would take the $100 downpayment program, you couldn’t find anyone who would ALSO lend you the money on a 203k program so that you could fix the house up!

I’ve heard of houses where the homeowner was so sad, or mad, or crazy that they tore out the heating and air conditioner units, took out all of the appliances (which I can understand that) AND THEN poured motor oil all over the carpets??  No why would you do that???

Anyway, if you are considering a purchase of one of these homes, you would need at least 3.5% out of your pocket… up until this “new guy” says (swears!) his company will do them!  I hate being the first guy in my office to try a new program – but we need to get these houses off the market…

Sooooo, if you’re considering a purchase, and you want to buy a foreclosed property – give me a call.  I might have just the program for you!

FHA Loan Limits Change 1/1/09

We're Not KiddingAccording to the Mortgagee Letter Published this week, HUD is changing the Maximum Loan Limit for Wake, Johnston, Franklin and Harnett Counties.  The change is based upon our average sales price, which has dropped a bit per National Association of Realtors, on Page 48 of their 88 page report – the Triangle will be in for this change at the beginning of the year. (access the report here)

Because our median sales price is lower – our FHA loan limit will go to $271,050 on January 1, 2009.  This means that at the end of the year, the maximum loan in Wake County, Franklin, Harnett or Johnston is $271,050 – down from the current maximum loan of $295,000.  These calculations are based on the Housing Bill that passed Congress in August.  Orange, Person and Durham Counties stay at their current limit of over $336,000!

UPDATE:  In February of 2009 – the FHA raised the limits back to the $295,000 limit!  Talk about CONFUSING!

The downpayment requirements for FHA also change at the end of the year, and if you’re buying that means you will be putting 3.5% starting on January 1st.

If you have questions about qualifying for a mortgage loan, or you want to check rates and see if we can beat what your loan officer is quoting you – call us!

What is a 2-1 Buydown?

Many lenders are shouting about “Fixed Rate Mortgages starting at 4.5%”

I’ve even gotten calls from Real Estate Agents asking how they are doing this! Some of these offers are NOT good deals.  For more information about MISLEADING Ads involving this program click here.

However, in the right situation, it’s a good loan.  So let’s do some math – and I’ll try to make this as simple as possible.

The 2-1 Buydown is usually used with a FHA loan, although you can also do this with other loan types.  Fixed rate FHA loans, today are around 6.5%  So let’s work on that number… A fixed rate mortgage for 30 years with an interest rate of 6.5%.

If you have a FHA loan of $250,000 (for instance) then your principal and interest payment at 6.5% is $1,580.17 – and that payment, along with your taxes and insurance (and mortgage insurance) will be used when we are qualifying you for a mortgage.

So where did the 4.5% come in?

Well, in an effort to help folks feel more comfortable with homeownership, lenders are offering a FIRST year rate of 4.5% on the loan and a SECOND year rate of 5.5% – and then for the rest of the life of the loan, the payments will be made at 6.5%… this is why it’s called a 2-1 buydown.  The interest rate is “bought down” 2% (from 6.5 to 4.5) the first year, and 1% the next year (from 6.5 to 5.5).

So the next question might be what does “Bought Down” mean – and this is where you might need a calculator.

In basic terms, the difference between the 6.5 rate on the the mortgage – and the payment rate of 4.5 for the first 12 months is put into an escrow account.

So the $250,000 loan at 6.5% has a P&I (Principal and Interest) payment of $1,580.17.  For that same $250,000 loan, the P&I at 4.5% is $1,266.71.  The difference in the payment is $313.46.

On the $250,000 loan at 5.5%, the P&I is $1,419.47.  The difference between the 6.5% payment and the 5.5% payment is $160.70.

To establish the escrow account (and make this program work) a seller must contribute an amount equal to 12 months of $313.46 (or $3,761.52) and 12 months of $160.70 (or $1928.40) – a total of $5,689.92.

Then, when you make your payment for the first year at $1,266.71, and your mortgage is accruing interest at a payment rate of $1580.17, the bank is pulling out $313.46 every month from the escrow account and applying it to the mortgage!

See??  That wasn’t so hard to understand!  My husband and I purchased our house under this program – only we had a 3-2-1 buydown!

And here’s the BEST part… folks who have not owned a home in the last 3 years are already eligable for a $7500 tax credit from Uncle Sam… with this program (I’m not a tax accountant so please check with your professional), as I understand it, even though the Seller is paying this money on your behalf…. you can still WRITE OFF $5689.92 (the amount of the escrow) on your taxes in your first year???  HOW COOL IS THAT!?!

USDA Western Wake County

I We found this VERY cool map that shows exactly where you can purchase a home in Western Wake County using the 100% USDA program!  As you can see, if you are on the “left side” of Ten Ten, in Holly Springs, or Fuquay – or parts of Apex, you qualify for this 100% program! 

The “mortgage insurance” for USDA is considered a “funding fee” and is 2%.  So if you purchased this home that’s currently for sale at $136900 – you would have your P&I calculated on $139,638.  TODAY (and depending on when you’re reading all of this the house and the rates might be different) the P&I (principal and interest payment) for a 100%, no money down loan on this house, with no origination fee would be…

$860.00

Can you beleive that??  All the bad news on the airwaves, and you can buy this GREAT home at that price per month!  WOW!

If you need more information about qualifying for a USDA home loan, or buying a home in Western Wake County, please call Steve and Eleanor Thorne, Meridian Residential, 919-649-5058