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! [Read more...]

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Bankruptcy and VA Home Loans

April 29, 2011 by Leave a Comment

We are talking to folks every week who lost a job in the last several years, lost medical insurance – or had some other tragedy that made it necessary for them to take steps they never thought they would have to.  The reality is that in today’s economic conditions, unfortunately, bankruptcy has been the only way a family could get a fresh start. As a Veteran, considering a home purchase in North Carolina, you need to know a few things about how Bankruptcy can effect your ability to buy a home.

So, can you get a VA Guaranteed Home Loan if you have a bankruptcy?  The short answer is YES!

The good news is that as of today, the VA underwriting guidelines are far more relaxed than the guidelines for other mortgage loan types (USDA, for instance, makes you wait 3 full years before you are eligible for a mortgage).  The rules for applying for a VA Mortgage Loan after Bankruptcy are different based upon what type of Bankruptcy you took and weather you were able to KEEP your home, or if it was included in the bankruptcy.

Chapter 7 Bankruptcy

Chapter 7 bankruptcies are essentially when the borrower is freed of all liability from creditors. VA loan guidelines typically call for a 2 year waiting period after a Chapter 7 bankruptcy before you can receive VA financing again.

There are rare circumstances in which the 2 year waiting period will be reduced to 1 instead. You would have to be able to show that circumstances beyond your control were the driving force behind your financial hardship.   For instance, we’ve seen this done when a spouse died… we also had a situation where a couple had a children that were less than 12 months apart in age, and the wife could not afford childcare and had to quit her job.  If you can prove the extreme circumstance – then we might be able to make it work after the 12 month waiting period.

As mentioned earlier, USDA Home Loan guidelines call for a 3 year waiting period, and conventional loans require a 4 year waiting period.  IF you had a home that was included in the Chapter 7 Bankruptcy, and it was foreclosed upon – then VA Underwriters also require a three year waiting period.

Chapter 13 Bankruptcy

Chapter 13 bankruptcies involve the establishment of a repayment plan instead of being cleared of liability immediately.

Veterans and military personnel can qualify for a VA mortgage loan, based upon current guidelines,  even when they are still in Chapter 13 bankruptcy. However, you will have to show that you have made a minimum of 12 payments on-time and be approved by the court trustee for the new mortgage loan.  This is VERY, VERY RARE… but again, we saw this happen with a couple who had a restaurant, field Chapter 13, they closed their restaurant and went to manage a National Chain Restaurant.  That was approved… it just takes the right circumstances.

Once you complete a Chapter 13 Bankrutpcy, VA Mortgage Loan Guidelines allow you to immediately apply for a mortgage! Yippee! Conventional Loan guidelines, for instance require a 2 year waiting period!

Don’ Forget About Your Credit Score

All of this talk about being able to qualify for a VA mortgage Loan after (or while) you have a Bankruptcy, assumes that you have a credit score that’s recovered from this event, and is high enough for the Underwriters to approve.  The Veteran’s Administration does not make these mortgage loans – they only insure them.  The VA does not have a minimum credit score that they will insure… however, Underwriters have a minimum Credit Score that they will APPROVE… and these days, that number is a MINIMUM of 620… and some underwriters will only allow loans for those Veterans with scores of at least 640.  So, even after you have finished the bankruptcy process, there are still actions you need to take to get your credit scores up and increase your likelihood of qualifying for a VA loan after bankruptcy.

For example:

  • Re-establish your credit as soon as possible if you do not have any creditors after the bankruptcy process. Remember, approving a potential borrower with no credit is almost impossible!  We NEED a credit history that’s Clean For At Least 12 Months, with 3 Tradelines! You can re-establish credit using secured credit cards, apply for credit with FingerHut, or you might be able to be added to a credit card with a family member.
  • Once you re-establish credit, be sure to always make payments on time... and be sure that the folks who are extending credit to you are reporting those payments to all three credit repositories!  If you are paying for a car over time, and making payments to the dealer – he’s probably not reporting those on time payments to the credit bureaus!  Credit Unions often will not report to all three repositories either, because each submission costs them money!
  • Get in the habit of checking your credit at a minimum of once a year. This will give you an idea of where you stand, especially when you begin shopping for a VA mortgage loan.
  • Upon the discharge of your bankruptcy, send a copy of all your discharge paperwork (including all applicable schedules) to the three credit bureaus: Equifax, Experian, and TransUnion. This is important… it’s also important to KEEP the paperwork for at least 7 years.

We do TONS of VA Mortgage Loans in NC.  We have bases at Fort Bragg, Pope Airforce Base and Camp Lejuene… plus, there are TONS of Veterans who live in Johnston County, Wake, Harnett and Pinehurst!  If you qualify for a VA mortgage loan in NC call Steve Thorne, 919-649-5058.  We have BEST Mortgage Loan Rates Available!

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Housing Prices and Bank Regulation

September 13, 2010 by Leave a Comment

The Basel III (Bank Regulation) requirements were discussed in exhausted terms this weekend, and there are many questions left unanswered. These details are important as we know that Banks are being forced to write off billions of dollars in loans to properties that are now vacant due to foreclosures.

An article in the WSJ today highlights this point:

Even though mortgage defaults kept mounting, housing markets began to stabilize early last year as low prices and government interventions broke the downward spiral. Policy makers spurred demand for homes by holding down mortgage rates, offering tax credits for buyers, and extending low-down-payment loans through the Federal Housing Administration.

The government also attacked the supply problem. Regulators relaxed mark-to-market accounting rules, giving banks more flexibility in valuing certain real-estate assets and removing some of the impetus for banks to quickly foreclose.

How BIG is the next “wave” of foreclosures?  Well, Moody’s believes that U.S. banks have already written off about two-thirds of the bad loans they’re likely to face through 2011, and that bank asset quality issues are past the peak. The agency estimated that 68 percent of residential mortgage losses have been taken, but only 49 percent of commercial real estate losses. Banks have already been setting aside less each month in reserves, indicating that they think they are ready for next round.

The BASEL III requirements that came out this weekend seem to be in favor of Big Banks – which I guess makes sense if you are betting that BofA (for instance) will be one of the banks that has to write off more as they liquidate property.  The regulators seem to be (JMHO)  on a see-saw unable to decide which way to pressure ”influence” bank action.

We are watching how banks manage the foreclosed homes they own because, unlike home owners, banks often are much quicker to slash prices to unload properties as quickly as possible.

In the Triangle, we don’t have a market with prices already way too high – and we  don’t have a HUGE number of foreclosure that other areas have. Charlotte, though, is one of the markets that could be hurt according to the WSJ.

By those metrics, prices are actually undervalued in markets that have already seen huge declines, such as Las Vegas, Phoenix and Los Angeles. But Moody’s data show that prices remain “significantly overvalued” elsewhere, including Boston; New York; Seattle; Orange County, Calif., and Charlotte, N.C. Markets in both camps face supply imbalances that will pressure prices for years.

As Housing Markets are seen falling, this will also effect mortgage lending practices… meaning that “falling markets” generally have a tougher set of rules and restrictions than those that are stable.

As for mortgage interest rates – we believe we’ve seen the bottom of this cycle. Mortgage rates are up almost a quarter of a percent in interest from 10 days ago – but still really, really, really CHEAP.

If you are considering a home purchase – you need the advice of people who are watching the market! We work with some of the most talented Real Estate Agents in the Country!  Call Steve and Eleanor Thorne, 919-649-5058 for more information!

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It’s Still A Buyer’s Market

May 25, 2010 by Leave a Comment

New National Association of Realtors numbers on the health of housing, were released this morning.  Over all, the number of Existing Homes that sold in April rose, probably because of the $8000 home buyer tax credit that expired at the end of the month… the fact that mortgage rates are also exceptionally low probably helped too! 8o)

According to the National Association of Realtors®, not only did the number of homes sold in April move higher,  so did the supply of existing homes for sale… anybody else thinkin’ maybe the foreclosures are starting to hit the market?

As compared to March, April’s Existing Home Sales rose by 410,000 units nationwide — the second straight month of large gains. An “existing home” is a home resold by a prior owner (i.e. not new construction).

Although it’s a solid report for housing overall (rising sales suggests that the real estate market’s recovery is ongoing), however, we are still in a Buyer’s Market as the number of homes on the market continues to climb… This puts downward pressure on home prices in some markets – around here that “market” would be Foreclosed Homes that generally don’t fetch the best prices.

Furthermore, because 49% of April’s buyers were first time home buyers (and the tax credit has now ended), we can expect that sellers will continue to outweigh buyers in the months ahead… meaning again that in certain sectors of the markets (like foreclosed homes)  sellers/banks may have to lower their prices.

It presents a great opportunity for June’s home buyers. Mortgage rates are still at their lowest levels of the year — despite expert predictions to the contrary — and homes remain affordable.

Fortunately for the folks in the Triangle – we have J-O-B-S.  This means that in OUR market, rates are at ALL TIME lows, and the housing market is stable. Bank Foreclosures are still available for a deal (if you’re into all of that DIY stuff) and “regular” housing is as affordable as I’ve seen it!

There’s good values and good rates but neither should last long. For the next few weeks, real estate may be in its 2010 sweet spot. If you were thinking of moving in September of this year or later, you might want to consider moving up your time frame!

If you need help getting your credit scores up so you can buy sooner, we can help!  If you want to see how much you can qualify for – call us!  Steve and Eleanor Thorne, Mortgage Banker in Cary , 919-649-5058 Mortgage Lenders in NC

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First Time Home Buyer Purchasing Plan

March 8, 2010 by Leave a Comment

Are you trying to purchase a home and take advantage of the new Tax Credit??  Well, you’re not alone, and as a First Time Home Buyer… the task is now even more overwhelming because of the number of foreclosures, short sales, and standard sales available. Each of these types of sale have widely varying terms and conditions! Home buyers need to watch for a variety of factors including time, conditions of the home, and stringent inspections.  So, if you’re looking for a house, or plan to in the near future, here are some tips every home buyer should know:

  1. Short sales that have not been pre-approved generally take much longer than foreclosures or standard sales to close… This is where your agent will be hugely helpful!
  2. You should look at several houses before choosing one.  So don’t feel bad if you haven’t found the right one yet.
  3. Before deciding against the house, make sure it’s because of large factors and not cosmetic issues such as the wall being dirty.
  4. Don’t be turned off by paint colors – this is such an easy fix that it shouldn’t deter you from a great bargain.
  5. If you need to buy appliances for the house, consider buying Energy Star certified ones to get the tax credit and be green.
  6. Don’t shy away from homes that are not in move-in condition.  If a few weekends of work will increase the value by $20k – it might just be worth the work.
  7. Compare homes in terms of how much you’re paying per square foot in homes that have similar features, your realtor will give you the comparables before bidding.
  8. Don’t place all damages on the same comparison level, for example a broken tile is far less serious than a leaking roof.
  9. Drive by the neighborhood at different times to understand the community and noise level.
  10. Try to choose an area with good schools – this will come in handy even if you don’t have kids in terms of reselling.
  11. Be flexible about your wants. Limiting your search to a set amount of features can prevent you from seeing other comparable properties.
  12. Get pre-approved first (not pre-qualified), so that when you’re ready to buy, the underwriting process is already underway
  13. Always check out the comparables for an idea of how much to bid.  Your realtor can hook you up with info about how much similar homes have sold for in that neighborhood in the past 6 months.
  14. Keep in mind, in this market, many homes are being bought up with the incentive of the first-time home buyer tax credit,  so just because you write an offer – doesn’t mean you are going to win.
  15. Take your digital camera along when you go to look at houses.  Look at teh Google Walking Tour to find your favorite spots.

Remember – if you had a $200,000 IRS lien -you would hire a CPA.  If you had a $200,000 Law Suit – you would hire an attorney.  You are making a HUGE Investment… hire a Real Estate Agent! Seller’s normally pay their fees!  We have GREAT Realtors that we work with, and would be glad to offer recommendations!

Call Steve and Eleanor Thorne, First Financial Services, 919-649-5058.

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HUD Makes It Easier To Purchase Foreclosed Property

January 19, 2010 by Leave a Comment

HUD announced a change in the way it handles property that has changed ownership in the last 90 days.  In an attempt to prevent people from “flipping” property (which is FRAUDULENT), HUD required a 90 day “cooling off” period before property could change hands.

This meant that if an Investor purchased property on January 1 at the Courthouse, had contractors in, did the work that was needed – they couldn’t sell it to a new buyer until the end of March.

Effective February 1, 2010 (and lasting for 12 months there after) HUD is making a change!

In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan today announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties. The announcement is part of the Obama administration commitment to addressing foreclosure. Just yesterday, Secretary Donovan announced $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers to combat the effects of vacant and abandoned homes.

“As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers,” said Donovan. “FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization.”

To read more about their policy – click here!

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FHA Has Problems According to CBS Report

November 30, 2009 by Leave a Comment

This news report last night on CBS about FHA was interesting!

FHA / HUD does not make loans, they only insure them. It’s one of the BEST programs available to first time home buyers!  Yes, there are people who are defaulting on loans… at a rate of around 9%… But that’s roughly what Un-employment is right now.

This is not an underwriting problem, meaning just tightening the underwriting guidelines will not make the default rate for FHA Mortgages go down!  We need more jobs!

If you want to learn more about FHA Mortgage Loans – please call Eleanor and Steve Thorne, Connect With Us on Facebook, 919-649-5058

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With All of the Risk Do We Still Need FHA?

November 1, 2009 by 1 Comment

It's hard to read the marketWith the continued talk of extending the Tax Credit for Homebuyers, there’s another group of Economist/Strategist discussing the “need” for the FHA Loan Program.

With the increase in loan production for this product comes additional defaults and late payments.

The US Citizens are paying for the program, because we guarantee the loans, so should we really be in the business of mortgage lending?

Brian Montgomery work as a Consultant for HUD and the FHA Commissioner, he has this to say:

“FHA has saved close to one million sub-prime/Alt-A borrowers from possible financial ruin by allowing them to refinance into a safe and secure 30-year fixed rate mortgage.  Another 2 million qualified borrowers (80% of them first-time homebuyers) have taken advantage of the declining house prices and historically low interest rates to purchase a home using FHA.  FHA’s role has grown substantially from three percent of lending activity by dollar volume in 2006 to nearly 25 percent of all mortgages originated today. That massive uptick in volume occurred almost overnight beginning in spring 2008.

Through it all…. FHA has helped pump more than $400 billion of mortgage activity and liquidity into the market since 2008, while still managing to deliver a higher credit quality borrower whose average FICO score is 700.”

I find that last part really interesting, because we are not seeing a TON of FHA homebuyers with 700 credit scores!  Our average FHA buyer profile has a score of @640.

Brian also notes, regarding the looming delinquencies that we should consider this:

“For FHA, the primary reason for continued defaults and foreclosures will be macro-economic problems that go beyond the scope of underwriting. For instance, continued job losses and the further decline of home values and equity.

Absent a massive economic downturn, I don’t believe FHA will face the same type of catastrophic losses we saw in the subprime sector. The reasons for FHA’s problems are very different from the ones experienced in the subprime sector where unsafe loan features and poor underwriting made investing in non-agency mortgages risky from the start.”

I think this is good news, because others are calling for massive tightening… and I think we need every eligible buyer to buy!  Forcing credit score requirements up to 680, or 700 is NOT going to help the housing market (because it turns so many folks away who can’t make that score) and it’s not going to keep the defaults from happening when people lose their jobs!

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USDA Appraisal Requirement Change July 1, 2009

June 26, 2009 by Leave a Comment

Beginning July 1, 2009 USDA is requiring the updated Freddie Mac/ Fannie Mae appraisal in their packages.  As with any change, there are some potential drawbacks.

USDA home loans are made in genearlly rural areas.  The new Freddie/Fannie appraisal is designed specifically to identify for the underwriter any recent changes (read DECLINING changes) identified in a particular subdivision or small locality… well, in a mostly rural area, you don’t always have consistantly priced homes, so if you are asking about a small local geographic area, it’s very possible that the property values will look as if they are declining.  That’s why it is important, now more than ever, to work with a HIGHLY skilled Appriaser who can competently and carefully give the FULL details regarding the area in the additional comments sections provided.

Here’s the news:
New Appraisal Requirements for Single Family Housing Guaranteed Loans

For new application packages submitted to the Agency on or after July 1, 2009, Rural Development will require the Fannie Mae/Freddie Mac form 1004MC “Market Conditions Addendum to the Appraisal Report” be included in the appraisal.  Beginning July 1, 2009, Lenders should order appraisals to include the Fannie Mae/Freddie Mac form 1004MC.  For loans already in process, the Agency will continue to accept appraisals without the Fannie Mae/Freddie Mac form 1004MC until July 31, 2009.  The form is not required if an application package has already been submitted to the Agency, or if an appraisal has already been conducted that did not include the form.  This applies to all guaranteed loan requests, including those manually underwritten or submitted through GUS.  An Administrative Notice on this topic is forthcoming.

If you are considering purchasing a home, and using the USDA home loan mortgage program, please contact us!  We specialize in these (and other) government loan programs!  Steve and Eleanor Thorne,  919-649-5058.  Connect With Us on Google Plus

There are MANY areas in Wake County that qualify for USDA financing, and ALL of Johnston County Qualifies for USDA mortgage loans!  Click here to see maps of specific areas qualifying for USDA mortgages!

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FHA Cashout Refinance Changes

March 17, 2009 by Leave a Comment

You have 2 weeks to make application if you want to take cash out of your home using a FHA refinance.

The technical explination of “cash out refinance” is when more than the balance of the mortgage and closing costs are included in the new loan amount. This could be in the form of cash to the borrower, or payment of secondary liens against the property, or the payment of any other borrower indebtness (like credit cards).

This is a significant change from the current 95% maximum loan to value for a cash out refinance. Borrowers have until March 31 to start their application if they would like to receive more than 85% loan to value.

If you have questions about this program, please call Steve and Eleanor Thorne with Connect With Us on Facebook in Cary, NC  at 919-649-5058.

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