Fix Up A Foreclosed Property – $100 Downpayment?

December 11, 2008 by 1 Comment

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!

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FHA Loan Limits Change 1/1/09

November 10, 2008 by 2 Comments

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!

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What is a 2-1 Buydown?

November 7, 2008 by 1 Comment

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!?!

Filed Under: FHA Mortgage Loans, First Time Home Buyer Tagged With: , , , , , , , ,

Documents You Need 4 A Loan

July 22, 2008 by 1 Comment

A customer who is quickly becoming a friend of mine asked me recently what she needed to gather for a loan application - she’s moving to a new area (the company is relocating them) and before she packed everything up and moved into corporate housing (“Hey,” she said, “Maid Service and it’s free! Are you kidding?  I’m taking every day we get in Corporate Housing!”)!  Here’s my advice to her:

Great News!  The documents needed for a FHA loan are VERY similar to those you would need when applying for most other types of financing these days!  Here’s our “Scavenger Hunt” list!

  • Most Recent pay stubs for 1 full month.
  • The name, address and telephone number of someone who can verify employment.  (We will be sending them a form to complete)  We will be verifying your income for the last 2 years.
  • If either of you are now, or have been self-employed, or earned income OTHER THAN W-2 income in the last two years, we will need full copies of your tax returns.  If you ONLY earned W-2 income, we will need a copy of the W-2s for the last 2 years.
  • Any data regarding the relocation package, and specifically what NASA is covering.
  • If you owned property, and you’ve sold it, we’ll need a copy of the HUD-1 Settlement Statement.  If you own a property that is leased, then we will need a copy of the lease agreement.  We need to document 2 full years of residence.
    If you’ve been renting during the last 2 years, we will need the name, address and telephone number of the landlord.
  • We need copies of bank statements for the last 2 months.  If you are changing banks, remember that we will need to verify the money going out of one account and into another! (PLEASE try not to have any NSFs!)  We will need ALL pages of the bank statements.
  • If you are receiving a gift for the your down payment – we will provide you with a gift letter to have completed.  We will also need to verify that the person giving you the gift has the money in their account.  In the event that you, or the donor, do not keep money in a bank – we do have other options, so you will need to speak with us directly about that situation.
  • In the event that you do not have sufficient “lines” of credit, we can look at “alternative lines.”  This means that if you have only 1 credit card, and no other credit, we will likely need to use your cell phone, and your insurance (for instance) to establish that you pay your bills on time.  If you think you might be in this situation, please have the last statement available for us.

In every single loan file, there are other items that we might also request… it’s difficult for me to anticipate every different situation… for instance, if you sold a car before moving, and deposited $5000 from that sale – we are going to ask for evidence of the sale… but for the most part… this should be a VERY complete list.

Congratulations on your move, and your new opportunities!  I know this is an exciting time!

If you are considering a home purchase in Garner, or your buying a home in Cary, please call Steve and Eleanor Thorne, Corporate Investors Mortgage Group, 919-649-5058

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