FHA Guidelines to Qualify “Rent to Own” in NC

May 5, 2011 by 1 Comment

Rent-to-own agreements and or sales that take place between a tenant and landlord have special FHA Guidelines. Often times, when someone moves to our area with a short sale, or previous forced foreclosure in their past – they will rent a home here until their “waiting period” is over.

If you are in this situation, and plan on buying a home under a rent to own scenario, there are different rules for different types of loans. All Government loans are popular, because of their low downpayment requirements.  VA has no “formal” guidelines for this scenario, and neither does USDA- however, most Underwriters follow the FHA Guidelines for all Government loans in a lease to own scenario.

The appraiser will determine the fair market rent for the property.  Any money paid ABOVE the fair market rent will be used as a credit towards a future downpayment. So, if the appraiser says the fair value rent for the home is $1000, and you pay $1500 a month – $500 for each month you paid that could be paid by the Seller as Downpayment for you at closing!

The rent to own agreement must be approved by the lender. There also is a loan to value restriction (85% LTV) if the parties are related and they haven’t rented for a long enough period of time-usually at least 6 months.  For NON related sales agreements, you can currently go up to 96.5% and not have to have a minimum rental period. Rules and underwriting are OF COURSE always subject to change at any time and any additional lender overlay.

If you are purchasing a home in NC, and want more information about FHA Guidelines and Rent to Own contracts – please call Steve and Eleanor Thorne, 919-649-5058 we are the NC FHA Experts!  We also have the LOWEST mortgage interest rates! :-)

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FHA PMI Changes 4/18/2011 – Again

February 16, 2011 by 1 Comment

FHA Announced that they will be changing their Mortgage Insurance Premiums (sometimes called MIP or PMI) again effective April 18, 2011. This change, like so many others is not going to make the program any cheaper!

FHA does not underwrite mortgages - they insure them against default, just like Private Mortgage Insurance Companies.  Because of this, they set their own guidelines for underwriting the file, and they set their own rates.

There are currently two types of Mortgage Insurance or PMI associated with every FHA loan we make.

Up Front Mortgage Insurance Premium (sometimes referred to as UFMIP):  The current rate on this premium is currently 1 percent of the loan amount.  At THIS TIME, if you sell the property or refinance it – you will NOT get a refund of the fee as you did in year’s past.

Annual or MONTHLY Mortgage Insurance (I’ve seen it referred to both ways because pay for it MONTHLY – but it’s calculated on an annual basis):  The NEW rate for this FHA Mortgage Insurance Premium varies depending upon your downpayment – and the length of your loan

Annual Premiums for Loans Longer than 15 Years

(So 20 and 30 year mortgage loans)
If you borrow 95.000% of the value of the home or Less                               110 BPS
If you borrow MORE than 95 percent of the value of the home                 115 BPS

Annual Premiums for Loans 15 Years or Less

If you borrow 95.000% of the value of the home or Less                                 25 BPS

If you borrow MORE than 95 percent of the value of the home                  50 BPS

How do I know what the BPS means to my monthly payment??

In the simplest of terms (for these purposes) here’s how you calculate it:

Sales Price is $300,000

3.5% Downpayment makes your Loan Amount $289,500

Multiply $289,500 by 1.15% which equals $3,329.25 per month.  Divide that by 12 months – and your Mortgage Insurance payment is roughly $277 a month.

If you apply for a mortgage PRIOR to April 17, 2011 (meaning the CURRENT rate), your monthly Mortgage Insurance payment is $229 on that mortgage. Here’s the letter from FHA about all of this.

My personal feeling is that these premiums are too high… but that is what the government is aiming for.  They want more Banks and PRIVATE Mortgage Insurance Companies to be in the mortgage arena.  The good news is that house prices are SOOOO low – that even with the higher mortgage insurance premiums – there’s good value available!

If you have questions about purchasing a home and qualifying for a FHA mortgage loan in NC – please call Steve and Eleanor Thorne!  919-649-5058

 

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FHA Guidelines About Using Rental Income in NC

December 8, 2010 by Leave a Comment

If you are moving to North Carolina, and you are going to rent your current home, there are a couple of things you should know about qualifying for an FHA Mortgage Loan for your new house. If you qualify for both payments – then it’s a pretty easy deal. If you need to count some of the income from your current residence it gets a little more tricky.

FHA Guidelines state that the rental income can not be counted, unless we can prove that you have at least a 25% equity stake in the home you are going to rent out. Too many people are buying a new home, and simply walking away from the one they couldn’t sell.

There is an EXCEPTION however:

If the borrower is relocating with a new employer, or being transferred by the current employer to an area not within reasonable and locally recognized commuting distance…

AND a properly executed lease agreement (that is, a lease signed by the borrower and the lessee) of at least one year’s duration after the loan is closed, and we have a copy of a cancelled check for the security deposit, evidence of the first month’s rent

THEN we can count the rental income. ALL mortgage programs (not just FHA) only give you 75% of the rental income as credit… So, if you rent the property out for $1000 we will only be giving you $750 of income to use to qualify for your new home.

So let’s say that your “old” home has a TOTAL payment (taxes, ins, everything) of $1500. You are able to rent it for $1000. In this case, we would be counting $750 as a monthly debt for you.

If you are relocating, and getting a new job, please read these FHA Guidelines about documenting your income.  If you have questions about purchasing a home in NC using FHA financing, please call Steve and Eleanor Thorne Mortgage Banker in Cary , 919-649-5058.

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FHA and VA Mortgage Loan Guidelines Waiting Periods

October 25, 2010 by 2 Comments

If you’re like millions of American’s the last couple of years have been tough.  People who have lost their jobs, or their houses, or their business didn’t just wake up one morning and say, “Oh, instead of making my payments, I think I’ll take a trip to Belize!” They never imagined they would be one of “those people” with bill collectors and “dings” on their credit.

Well, the good news is that your credit score is really just a snap shot of the last 24 months. Yes, missed payments will stay on your credit file for 7 years – but their IMPACT on your credit is greatly diminished after 24 months. (If one person on the loan has good credit, and one person has “poor” credit click here).

So if the bad credit, foreclosure, bankruptcy is behind you… how long do FHA and VA make you wait before you can purchase a home again? Below you will find a chart with the Waiting Period and/or guideline for each Program.  Note that there’s another column that says “With Extenuating Circumstances.” That could mean, you were in Florida, lost your job, had to Short Sale, and move to North Carolina to get a new job… you would need to PROVE that the reason you did a Short Sale in Florida was due to the job loss, and you would need to prove that the company that had the Short Sale is not going to come back after you for the deficiency balance (some banks do – some banks do not).

If the chart says “UW Discretion” that means that the UnderWriter needs to make the call… these days, it is our experience that UnderWriting is TOUGH. We MUST make a strong “case” to get any exceptions, we must DOCUMENT the file, and we MUST know what our UnderWriter is looking for.  

n these situations – you need a GREAT loan officer who will WORK FOR YOU!

DerogatoryEvent FHA VA
Waiting Period and/or Guideline Waiting Period and/or Guidelinew/extenuating circumstances Waiting Period and/or Guideline Waiting Period and/or Guidelinew/extenuating circumstances
Bankruptcy Ch 7 or 11 2 years 1 year 2 years 1 year
Bankruptcy Ch 13 1 year with 12 months satisfactory payments to trustee.  Must have court permission (not trustee) to incur new debt.   If not fully discharged for 2 years loan must be manual UW. Same 1 year with 12 months satisfactory payments to trustee and trustee permission to incur new debt. Same
Foreclosure Deed-in-Lieu 3 years UW discretion 2 years 1-year w/current satisfactory credit.
Short Sale Borrower current attime of short sale:

No wait if all mtg and installment debts pd on time for 12 months preceding short sale.

Borrower delinquent

at time of short sale:

3 years from date of sale.

If previous mortgage was FHA, 3 years from date CAIVRS claim was paid.

 Same No guidance.Typically treated as foreclosure but is at UW discretion. Same

If you have questions about FHA mortgages or VA mortgage loans, and how your particular situation will be viewed in North Carolina with our Underwriting Guidelines (because the State of North Carolina has it’s own set of Mortgage Underwriting Guidelines ON TOP of what FHA and VA set out) please call Steve and Eleanor Thorne, 919-649-5058.

We are truly FHA Home Loan and VA mortgage Loan Experts, and we will give you solid advice!  We offer the best interest rates and fees available.

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Raleigh One of the Smartest Cities in America!

October 4, 2010 by Leave a Comment

We keep getting good news about Raleigh / Cary! In the past month we’ve been named as the first place to most likely see appreciation in Real Estate, one of the best places to Retire, One of the best areas for Single Rich folks and now… one of the BRAINIEST Cities in America!

According to new Census Bureau data, the national average for cities with people 25 years or older who have bachelor’s, master’s, professional school or doctorate degrees is less than 25%… In Raleigh, that concentration is at 42.4% putting us at number 4 on the list!

“There’s a very high correlation between earnings and educational attainment,” said Todd Gabe, an economics professor at the University of Maine.

Cary currently trends at number 13 on the fastest area in the country for Job Growth!

According to CNN Money, Wake  County is one of the nation’s leader in a high-tech and biotech jobs.

Wake County is home to Research Triangle Park, the country’s largest industrial park, where IBM has extensive operations, employing 11,000, along with GlaxoSmithKline, Cisco Systems, and SAS Institute.

Even though there are more than 160 companies in RTP, the lion’s share of Wake County’s jobs come from the public sector. The lion’s share of local jobs are with the state government or the public school system. North Carolina State University and the county are also major players.

If you are considering a home purchase in Raleigh or Cary NC – call Steve and Eleanor Thorne, 919-649-5058.  Professional Mortgage Planners with over 20 years experience. We have the best FHA, VA and Conventional mortgage rates and the lowest fees available!

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FHA Adding Capital Fast Enough?

September 27, 2010 by Leave a Comment

David Stevens, the head of FHA answered questions last week about weather or not his agency would need a “Bailout” from taxpayers. FHA doesn”t make loans, but they insure them, and with so many people without jobs, and properties being foreclosed on… that insurance fund has been tapped into pretty hard.

That’s one of the reasons FHA requested a change in the way MIP is charged.  Those latest, changes go into effect next week.

“If the fund has not gone negative and continues to remain positive it will be thanks to the quick actions of this committee and Congress giving us more authority and actions of this administration,” Commissioner David Stevens said in response to a question at a hearing of the House of Representatives Financial Services Committee.

He went on to tell the Committee:

The FHA is “running on its own. It is financially sound. It is below the minimum capital requirement, so we need to increase that capital but it is not (now) requiring a bailout. We will know more when the actuarial study is complete,” later this fall.

If you are considering a FHA Mortgage Loan in NC, call Steve and Eleanor Thorne, NC FHA Experts 919-649-5058  These changes could definitely make a little less attractive for some folks considering a FHA Streamline Refinance

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Is It Time To Refinance?

September 18, 2010 by Leave a Comment

Many of the people we are talking with WANT to refinance – but they figure it’s probably not worth it. Generally those sentiments run from two different camps, either the homeowner is concerned that they have no equity in the home to refinance (and don’t want to pay closing costs out of pocket), or they just figure they have a pretty good rate now, and don’t see a big difference from 5.75 to “whatever the mortgage rates are down to now.”

So let’s talk about what you SHOULD consider with a refinance…

The most fundamental consideration in whether a homeowner should refinance an existing mortgage is the break-even point, which means how soon the cost of the refinance will be recaptured through lower monthly payments. In general, most homeowners are looking for a three year recapture period.  If you are not going to recouperate in that time period… it might not make sense. [Read more...]

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Property Requirements on FHA

August 26, 2010 by Leave a Comment

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. (Click here for more on 2010 Appraisal Requirements)

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

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One Borrower Has Income One Borrower Has Credit Score

August 18, 2010 by 1 Comment

When one borrower has most of the income… the other borrower has good credit scores… there ARE options for purchasing a home. Look at the question we had yesterday:

“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. [Read more...]

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FHA Home Loans for Single Parents

August 14, 2010 by 2 Comments

With the Economy in a “slump” statistics show more and more families have a single parent.  If you are in this situation, and want to purchase a home, there are some very specific details you should know:

  • 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!

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