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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Walking Away From Your Mortgage

May 11, 2010 by 1 Comment

60 Minutes did a piece this weekend on people walking away from their mortgage - and I guess they are trying to “justify” it.  Recent numbers indicate that 4 million households are currently 60 days delinquent or more – up 30% from last year. I suspect part of that is because mortgage companies are TELLING them to go delinquent so that they can use the HAMP “tools” the Government put in place – meaning if you are delinquent, then you qualify for a HOST of other “perks” like below market mortgage rates and “streamlined” Short Sale negotiations.

IF you’ve missed a couple of payments -but you are not going to have a Foreclosure on your credit report – then we believe you will have a MUCH better chance of getting a mortgage in the future. We currently have at least TWO programs that will do 90% mortgage loans (so 10% down) with 1 late payment in the last 12 months – this is a sign that as time passes, we’ll have the programs that will allow people to get a new mortgage!

Anyway – I thought this short clip from 60 Minutes was interesting and wanted to share it.

If you are facing a “hit” on your credit report – and you want a compassionate, REAL answer on how to increase your score – Call Steve Thorne, 919-649-5058 Credit Repair Specialist.  Money Back Guarantee, and a full spectrum of resources to give you “What If Scenarios.”  You CAN have a good credit score within 6 months or LESS.  Let us help!

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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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FHA and Short Sales – The New Ruling

December 28, 2009 by 1 Comment

Okay – so maybe it’s not a “Ruling” but FHA announced on December 16, 2009 what they think about homeowner’s filing Short Sales .  Basically, FHA sees short sale homeowners falling into one of two camps:

  • Those who are current on their mortgage leading up to the short sale.
  • Those who have delinquencies leading up to the short sale.

If you fall into that SECOND Camp (and you were filing the Short because you are BEHIND on mortgage payments) – well – sorry to say this, but you are toast.  You can’t get another FHA mortgage for 3 years.

There are a FEW exceptions to this… Exceptions would be due to circumstances beyond the borrowers control i.e. death of primary wage earner or a long-term uninsured illness. However the credit report must indicate borrower had satisfactory credit leading up to circumstances beyond the borrower’s control.

If you are in that FIRST Camp (and you didn’t miss any payments) then you CAN get FHA financing.  The tough part will be that the with homeowners who are current on their mortgage leading up to the short sale are in a real tough place with their current mortgage holder actually agreeing to the Short Sale… they just don’t have as much incentive! 

Our experience is that Servicers looking at borrowers who are current on their mortgage take a long time granting a short sale. This affects borrowers who move due to job  re-location and the current market hasn’t recovered enough yet to reflect equity.

Here’s the OTHER problem… some mortgages that are Short Sales actually reflect on the Credit Report kinda’ like a “Repossed Car” (foreclosure) because of the DEFICIENCY balance the bank reports.  Because there is NO STANDARD way for the Banks to report Short Sales, some are reporting them simply as paid off loans, and others are reporting “paid with balance still owing.”

If you are a homeowner and you were current on your mortgage payments, and you were in a Short Sale – BUT your lender shows the information to the Credit Bureau with a Deficiency Balance, you will likely have a problem finding a lender who will do the mortgage.  FHA says they will insure the loan – but that does not mean the banks will make you a loan, unfortunately.  

OUR BEST ADVICE is for you to call a lender approximately 60 days BEFORE you close on a Short Sale… and then again after you close on the Short Sale.  Talk to them about your credit, and the situation and see if you can qualify for a FHA Mortgage Loan or USDA Home Loan  financing.  We have been able to do loans for couples who quick deeded a spouse who was on the Deed of Trust, but not the NOTE – and then made a loan to THAT spouse (who was not on the Short Sale / Foreclosure note to the bank) … There are some options, so talking to a lender to find out what your options are is the smart way to do this!

 If you are in NC, SC, Virginia – we would be glad to help!  Please call Steve and Eleanor Thorne, First Financal Services 919-649-5058

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