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 Loan Credit Qualifications in NC

April 15, 2011 by 1 Comment

Good News!  You do NOT need perfect credit to qualify for a USDA Home Loan!  Whew!  This 100% no money down program requires a MINIMUM credit score of 580 – but folks, just because you have a 580 score, doesn’t mean you can purchase. These days – we normally need a score above 620 to get the loan approved by Underwriters.

If you are NEW to the Credit game, meaning you are recently out of school and don’t have any BAD credit, you just don’t have a TON of credit – we can probably get a 620 score approved. In general, you need 3 different trade lines with 12 months of payment history.  Equifax will verify your rental payments (assuming the lease was in your name) and calculate that as a trade line, the other 2 credit repositories will not.

Here are some guidelines on what USDA Home Loan Underwriters will NOT take:

  • Foreclosure within the last 36 months.
  • Bankruptcy within the last 36 months
  • More than one 30 day late in the past 12 months
  • Outstanding Judgments in the past 12 months
  • Two or More missed rent payments within the last 24 months
  • Chapter 13 Bankruptcy – Case by Case review
  • Delinquent tax liens
  • Delinquent student loans

If you are in the market for a new home, and you want to know if your credit will qualify you for a 100%, no money down mortgage loan with USDA Rural Development Mortgage Loan, call Steve and Eleanor Thorne – 919-694-5058 we are NC’s USDA Home Loan Experts!

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USDA Home Loan PMI Will Change 10/1/11

April 14, 2011 by Leave a Comment

If you are looking for a USDA Home Loan in North Carolina – you might want to do it before the end of September!  More Rule Changes! Okay, so you don’t HAVE to buy before October 1st.  It’s not like the 100% no money down program is going away – it’s just changing the way the PMI (which they call Guarantee Fee) is being charged.  Starting at the end of September, the  USDA Rural Guaranteed Loans will have an annual fee that is collected on a monthly basis. The upfront fee will be coming down as the guarantee fee is changed.

Currently, the guarantee fee for this loan is 3.5% of the loan amount which includes the guarantee fee, so it actually works out to about 3.63% of the net loan. If you are into algebra, the equation for that would be purchase price/.965-purchase price=guarantee fee.

The new PMI/guarantee fee will be 1% of the total loan amount plus a .3% annual fee. The calculations on this fee are a lot more complicated because it is calculated on the average yearly principal balance.   So, to do a simple back of the napkin calculation of what it will cost think about this:

$100,000 loan amount – add 1% for the upfront PMI fee.  So your monthly Principal and Interest payments are based upon $101,000.

On a monthly basis, you will be paying $25 a month for that original $100,000 loan during the first year… as your balance goes down, the amount you will be paying will diminish as well!

This will put USDA mortgage loans more in line with other low down payment programs.  However,  USDA Home Loans will still compare much better than FHA or Conventional loans due to the fact that the annual guarantee amount (the monthly payment) will be so low, and will be diminishing each year. In comparison,  FHA loans require a 3.5% down payment, and have an annual PMI (mortgage insurance) rate of .9%, three times what the guarantee fee will be with USDA home loans on a 100% down program.

If you have questions about USDA Home Loan Qualifications, Credit Score Requirements, or want to know what Counties Qualify for this program in North Carolina, Call Steve and Eleanor Thorne, NC’s USDA Home Loan Experts!  919-649-5058

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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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Proving Housing Expense When Landlord is Foreclosed Upon

January 18, 2011 by Leave a Comment

Qualifications for a USDA Home Loan in North Carolina

Rental Payments / Housing Expense

We just sent a letter to a consumer applying for a USDA mortgage loan about a problem with the approval…

“I completely agree with you that it’s not your fault that the owner of the property was foreclosed against and due to the massive amount of foreclosures it took the bank almost a year to get around to doing something with the property.  It really is a catch 22. They want to see how you paid your existing housing expense and we cannot provide it due to no fault of your own.” *please see note at end of this post

I CAN TELL YOU that many people are having problems in their mortgage applications right now not because THEY missed rent or mortgage payments… but because the home they were renting was foreclosed on, and no one would take their payments!

USDA Home Loan Underwriters, especially – are looking at how you paid your current housing obligation to determine if they are going to lend you money for a new home. If you can’t PROVE you paid rent during the last 12 months you could have a problem.

Our best advise is this:

  1. Make sure you are setting your rent payment aside each month in a savings account. We need to prove that you CAN manage a monthly housing expense, and if you have been saving $750 or paying that towards a rent – then it’s pretty easy to show the underwriter that you won’t have any payment shock.
  2. Keep all documentation you get from the Landlord, the courts, the sheriff’s office the bank.  We need to document that you TRIED to make the payments and they were returned.

Remember also that the HIGHEST debt ratio allowed on a USDA Home Loan is 42%. We do have borrowers who are approved with higher back ratios – but this is considered an Underwriting Exception.

If we are asking that evidence of on time payments for the Housing Expense to be an exception (because the home went into foreclosure) then we can’t ALSO ask for an exception on the total back ratio.   We only get ONE exception per loan.

I’m not trying to make you a mortgage loan officer with all of this… I’m just pointing out that if you are in a situation that is beyond your control, and you are not being forced to make a rental payment… I wouldn’t “blow” that money. Talk to a loan officer NOW. It’s difficult to get a mortgage in 2011 if you don’t have a rental history – and you should have one (meaning if you have been living with family, that’s a little different).

If you need more information about Qualifying for a mortgage loan in NC, please call Steve and Eleanor Thorne, 919-649-5058 NC’s USDA Home Loan Experts.

*By the way we were able to make this customer a loan, it was just a longer process than anyone wanted, and it was frustrating… that’s why I’m suggesting you call NOW!

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Profile of 2009 – 2010 First Time Home Buyer

November 9, 2010 by Leave a Comment

The National Association of Realtors released information about First Time Home Buyers last week that showed some interesting trends!

  • 93 percent of those surveyed in 2009 – 2010 reported that they purchased using one of the first-time buyer tax credits. (Who’s surprised??? Nope, we’re not surprised either!)
  • Ninety-five percent chose a fixed-rate mortgage.
  • The median age of first-time buyers was 30 and the median income was $59,900. (This part was a little surprising!) The typical first-time buyer purchased a 1,540 square foot home costing $152,000 (bet they were keeping their total payments under the $1000 mark)
  • First-time buyers who made a downpayment used a variety of sources: 74 percent used savings, 38 percent received a gift (or a loan) from a friend or relative, (READ:  their parents) Eight percent tapped into a 401(k) fund, and 6 percent sold stocks or bonds.
  • Women accounted for 1 in 5 purchases, and single Males made the largest leap in the survey ever – which was attributed to the tax [Read more...]

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New Survey of Home Buyers by the National Association of Realtors

November 8, 2010 by Leave a Comment

There have been a couple of survey’s released recently by the National Association of REALTORS® that highlight long term (like over 8 year) patterns and shorter term (last 12 to 18 month) patterns in buyers.  If you are considering a home SALE or purchase, these trends are important.

  • Typical sellers had been in their previous home for eight years. This is up from the 2009 survey that showed home sellers in their home for only seven years.  The survey also showed that repeat buyers plan to stay in their home for 15 years… so we are all thinking a little more long term!
  • First Time Home Buyers plan to stay in their home for at least 10 years. This says (to me) that SCHOOLS are going to be an even bigger issue in the future.

Even with several years of price declines, the typical seller who purchased a home eight years ago experienced a median equity gain of $33,000, a 24 percent increase, while sellers who were in their homes for 11 to 15 years saw a median gain of 40 percent.

“Sellers who purchased at the top of the market and had to sell in a short time frame were hurt by the price correction, but the vast majority who are able to stay for a normal period of home ownership generally built enough equity to make a trade-up purchase,” NAR President, Ms. Golder of Arizona said. “Despite swings in the housing market in recent years, the fact is most long-term owners see healthy gains in the value of their property.”

Homeownership, despite all of the problems in the last few years, still appears to be an American Dream according to this survey.   NAR economists state in the survey that, “Eighty-five percent of recent home buyers see their home as a good investment, and nearly half think that investment is better than stocks.”  What are some of the OTHER reasons they are buying?

  • “Honey We Need A Bigger House!” A desire for a larger home influenced almost 10% of all buyers.
  • A change in their families’ situation (like divorce or death) influenced just under 10% of buyers
  • The Whopping $7500 and $8000 First Time Home buyer tax credit was cited by 8 percent of buyers
  • A job-related move (which we thought would be much higher) influenced 7 percent of buyers
  • Affordability Issues (meaning can’t afford your house anymore) only figured into just over 5% of those responding (which was surprising).

Another NAR Survey released details the massive numbers of First Time Home Buyers entering the market.  For more on that, click here.

If you have questions about purchasing a home, how long you need to wait after a short sale or modification – or special ways for First Time Home Buyers to qualify in NC, please call Steve Thorne 919-649-5057. We have the best mortgage interest rates, and the lowest Fees Available!

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USDA Home Loans and Home Inspections Don’t Mesh

October 4, 2010 by 2 Comments

Many home buyers get a home inspection prior to purchasing. We think that’s a great idea, but recently, we’ve run into some last minute problems that you should be aware of if you are using USDA Home Loan Financing!

A monster problem that we are starting to run into is that if the investor, Chase for example, knows that there is a home inspection, they want to see it and they want all issues on the report fixed.  Even simple stuff.

We are sometimes advising clients to avoid putting the home inspection on the HUD. Granted, this is a PROBLEM, because it means that if the borrower was going to pay for the inspection at closing or the seller was reimbursing the buyer at closing the buyer has to absorb the cost outside of closing.

But that’s a better scenario than having to do a bunch of insignificant repairs that is discovered by the investor the day of closing. Or worse repairs that the buyer was going to do himself after the fact.

If you have questions about USDA Home Loans, and purchasing a home in NC – please call Steve and Eleanor Thorne, USDA Home Loan Experts in NC 919-649-5058

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USDA Home Loans Near Greenville NC Pitt County

September 21, 2010 by Leave a Comment

USDA Home Loans are 100%, no money down loans available for “less urban / more rural areas.”  North Carolina has more areas available for this financing than most states. Pitt County, and the area around ECU, and Greenville has a TON of the county that qualifies for this great program.

The property must be located in the USDA “footprint” (so in the lighter shaded area), and the borrower’s household income can not exceed $74,050.  This income limit for a household of 1-4 people varies from county to county.  To see what the requirements are for your area, click here.

Here is a map of the areas that qualify for USDA Home Loan financing in Pitt County NC

Looking at the little “triangle” that I pointed the arrow to looks like this:

If you are looking for a no money down payment loan in Pitt County, NC – or anywhere else in NC for that matter, Call Steve and Eleanor Thorne, Mortgage Banker in Cary 919-649-5058 We are USDA Home Loan experts! We have great rates, we can help you with your credit challenges, and we know what WILL work for USDA… and what won’t.  So don’t waste your time!  Call Steve at 919-649-5058

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Are Mobile Homes Back on the Radar?

September 3, 2010 by Leave a Comment

FHFA is the Government body that is in charge of just about everything when it comes to regulating FNMA and Freddie Mac. They set out new guidelines and goals for the Agencies this week.

One of the suggestions on the table is for FNMA and FHLMC to offer more financing choices for Mobile Homes in as a way that they can meet their “goals” set by the overseeing agency.

The benchmark goals established could be seen as “production goals” your boss or company sets for you. FHFA  expressed these benchmarks as “minimum goal-qualifying mortgage”  percentages  of each type of home purchase or refinance mortgages acquired by the Enterprises.  They are:

  • 27 percent for the low-income home purchase goal;
  • 8 percent for the very low-income family home purchase goal;
  • A percentage to be set annually by FHFA for the low-income/high minority/disaster areas home purchase goal (with a sub-goal of 13 percent to measure acquisitions in low-income/high minority areas only); and
  • 21 percent for the low-income family refinance goal.

HERA requires that FHFA consider seven factors in setting the single-family housing goals:

  • national housing needs;
  • economic, housing and demographic conditions including expected market developments;
  • the performance and effort of the Enterprises toward achieving the housing goals in previous years;
  • the ability of the Enterprise to lead the industry in making mortgage credit available;
  • such other reliable mortgage data as may be available;
  • the size of the purchase money conventional mortgage market or refinance market serving each of the types of families described, relative to the size of the overall purchase and refinance markets;
  • The need to maintain the sound financial condition of the Enterprises.

Now when you look at HOW FNMA and Freddie are going to achieve this – Mobile Homes pop into my mind! It is very difficult to get a USDA Home Loan or FHA Mortgage Loan on a manufactured home.

If you are considering a home purchase, or want to know if you qualify for a new home, call Steve and Eleanor Thorne, 919-649-5058 we know the market, we know the products and we have the best rates!

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