FHA Underwriting Guidelines for NC

November 21, 2011 by Leave a Comment

fha mortgage loanWe talk to people everyday who have questions about qualifying for a FHA Mortgage Loan in NC.  FHA Underwriting Guidelines, are actually pretty straightforward. 

Unlike qualifying for a VA Mortgage loan (where you must be a qualifying Veteran) or a USDA Home Loan (that requires that you meet income limits for your county and the property must fit within the USDA RD Loan Footprint) – FHA has far fewer restrictions!  They do have Maximum Loan Amounts, which vary per county – but other than that, just about anyone who wants to purchase an Owner Occupied Home can do so!

  • Maximum Loan Amounts:  Maximum FHA Loan Limits Vary per County, and are subject to change each October.  Congress has said that they will be  lowering the High Cost Area FHA loans that are currently available in areas like Washington, DC and San Francisco in October of 2012. It looks like the maximum FHA Loan Limit for Homes in Raleigh will change at that time too. The 2010 FHA Maximum Loan limit for Wake County is $295,000 – the 2012 limit could go down to $271,050. [Read more...]

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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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USDA Home Loans and Deferred Student Payments

March 13, 2011 by Leave a Comment

People are moving to Raleigh, and staying in the Triangle because we have jobs. Folks who are considering putting down roots here, and getting a North Carolina Home Loan need to learn more about how their Student Loans will be viewed by Underwriting Guidelines.

Whether it is a USDA Home Loan, an FHA Loan, or a VA Mortgage Loan – if you have have existing student loans, first off they need to be current. If you are past due – call TODAY and see what can be done to create a payment plan.   Once you’ve made 6 to 7 payments on the new plan – you will be closer to being able to buy a home in NC.

The USDA Loan Program is very popular among recent graduates, and a couple reasons are because there’s not a down payment requirement and it is the simplest home loan to get with credit scores of 620 being used to qualify.

Because you don’t need to fork out a ton of cash to get into the USDA Home Loan Program it has gotten VERY popular over the last few years… and it’s our understanding that Johnston County, NC is one of the HIGHEST Counties in the Country when it comes to people who buy a house using the USDA Rural Development Loan!

Student loans come in two classes: deferred and not deferred.  And one thing to keep in mind when looking at the USDA Loan Program is that it does treat student loans differently than the other loan programs available.  At first glance you would intuitively think that a deferred student loan would not be considered in qualifying for your new home loan.

The rule changed slightly with the publication of Administrative Notice 4543.  Now, any student loan whether it is in repayment or deferred must be included in the qualifying calculations.

So, Even though the payment may be deferred, USDA Home Loan Underwriters in NC will still consider this to be a long term debt. This means that if you have 6 payments or more left on a student loan – we will calculate that payment in qualifying you for a mortgage loan.

The maximum total debt payment ratio for USDA is 41%.  This means that your credit card payments, student loans, car payments (etc) plus your mortgage, taxes and insurance on the house should not represent more than 41% of your GROSS (before taxes) monthly income.  We have seen a few cases where this was bent by an underwriter… but not often.

If you do have student loans that are in deferred status and plan on getting a USDA Loan, be sure you know exactly how much the monthly payment will be once the loan is back in repayment status.  If you do not have that information, the USDA Underwriters will use 1% of the loan balance as the monthly payment.

See what part of your county qualifies for USDA Mortgage Loans!

To find out if you qualify for a USDA Home Loan in NC call Steve Thorne (919) 649-5058.  We work with hundreds of families using this program each year here in NC!

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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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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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