Register Real Estate Advisors

Thought this might be useful information for investors.

The Federal Housing Administration is extending its “anti-flipping” waiver through the end of 2012, which allows buyers to purchase homes that have already been sold in the last 90 days.

The waiver, which was soon set to expire, is “intended to accelerate the resale of foreclosed properties in neighborhoods struggling to overcome the possible effects of abandonment and blight,” Carol J. Galante, the acting Federal Housing Administration commissioner, said in a statement. “FHA remains a critical source of mortgage financing and stability and we must make every effort to promote recovery in every responsible way we can.”

An anti-flipping rule originally took effect in 2003 to stop a spike in home flipping that was being blamed on driving up home prices during the housing boom. The rule prevented FHA-backed loans from being used to purchase homes that had been owned by a seller for less than 90 days. But the U.S. Department of Housing and Urban Development decided to reconsider the 90-day limit in 2010 after skyrocketing foreclosures and abandoned homes were causing blight in neighborhoods across the country and hampering nearby property values.

The temporary waiver to the anti-flipping rule will allow buyers and investors to quickly resell refurbished homes and not have to wait 90 days to do so. Since the waiver took place in 2010, FHA has insured nearly 42,000 mortgages worth more than $7 billion on homes resold within 90 days of the last purchase, according to HUD.

“It’s certainly an inducement to move real estate and reduce inventories,” says Don Cameron, a real estate investor who owns a franchise of We Buy Ugly Houses in South Florida. “Why wait 90 days before you can close on a home?”

The waiver, however, still prevents predatory flipping, and sellers must justify any increases in value if the sales price of the property is 20 percent more than what the seller had recently purchased it for (such as by providing extra documentation on renovation expenses). Sales also must be in “arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.”

Source: “Government Extends Waiver of Anti-Flipping Law, Allowing Homes to be Bought and then Sold in 90 Days,” McClatchy-Tribune Regional News (Dec. 29, 2011) and HUD.gov

It’s that time of the week again… White Board Monday! This week’s episode answers the question, “What is the FHA?”

If you have any housing questions or are interested in purchasing a home, feel free to call or email me any time at 281.288.3500 or jay@rrea.com .

Remember, we have an in-house lender to get you qualified today. You can get that started at http://rrea.com/mortgage/ .

Qualifications for an FHA/Hud foreclosure are very similar to the requirements for a short sale, but there are some differences.
Eligibility requirements include:

• Property must me owner occupied (you must still live in the home unless you provide a verifiable reason why you have already vacated (ie job loss, job transfer, divorce).
• The property must be your primary residence (no investment properties)
• The homeowner must be 31 days or more delinquent on their mortgage at the time of closing.

If you find yourself in a hardship situation that requires a short sale or Pre-foreclosure sale, and need help I can you get through the process as a Certified Distressed Property Expert I have the the tools and knowledge to help get the deal closed.

Following is some excellent information and Q&As provided by HUD:
Question 1: When submitting a PFS Variance for approval, what items need to be attached to a PFS Variance?
Answer: Depending on the type of Variance, the Mortgagee may need to submit the HUD-1 Settlement Sheet, the first three (3) pages of the FHA “As Is” Appraisal, and/or Hardship Letter.

Question 2: Previous HUD-1 Settlement Sheets have been submitted to NSC, only for NSC to deny the Variance due to buyer or seller receiving cash at the PFS closing. Please provide guidance.
Answer: The HUD-1 Settlement Sheet is to be “completely” filled out, providing both the buyer’s and seller’s costs and fees. Neither the buyer nor seller is to walk away from the PFS closing with “cash.” The seller, if applicable, may be eligible for the Seller Incentive, but even the Incentive is “not” to be reflected as a payment of cash on the HUD-1.
(more…)

FHA rules are changing on October 4th, 2010. This change is regarding the upfront collection of Mortgage Insurance Premiums (MIP) and the monthly rate amount. To illustrate how these changes will affect buyers, I will use a scenario of a $100,000 30-year home loan and the minimum of 3.5% down, no other factors included.

The first change is a reduction in the up-front MIP that can be financed into the loan. This reduction will result in a drop of 2.25% to 1%. Let’s take a look at how this change will affect your up-front MIP. The current FHA calculation for MIP is to multiply the loan amount by the percentage of the up-front MIP (2.25%).

100,000 Sales Price – 3,500 Down Payment = 96,500 Loan Amount
96,500 x .0225 = $2,171.25

The up-front MIP with the current FHA rules is $2,171.25. After October 4th, 2010, the FHA calculation will change the percentage of 2.25% to 1%.

96,500 x .01 = $965

The up-front MIP with the new rules is $965. This first change results in an up-front savings of $1,206.25. Looks great doesn’t it? However, we have not taken a look at monthly premium that you will pay which gets us to the second change. The second change increases the monthly insurance to .09% from .50% of the current loan.

96,500 x .0055 / 12 = $44.22 monthly MIP under current FHA rules
96,500 x .009 / 12 = $72.38 monthly MIP under new FHA rules

This results in an increase of $28.16 per month even after the up-front reduction from the first change.

Mortgage insurance must be carried until the loan-to-value (LTV) reaches 78%. This means monthly MIP payments for about 10 years on average.

$44.22 x 120 months = $5,306.40 under current FHA rules
$72.38 x 120 months = $8,685.60 under new FHA rules

This second change results in $3,379.20 of extra costs to the buyer.

So how do these rule changes affect the buyer? The affect is a decrease in the amount of buying power. Because the new rules result in a higher monthly payment, the amount the buyer can qualify to borrow will drop.

Purchasing a home with a low down payment is important for a number of reasons, including the buyer’s ability to have extra cash left over for closing costs, decorating expenses, upgrades and/or other essentials needed to turn their new house into a home. Thanks to the level of competition between mortgage lenders, it’s now easier than ever to buy a home with a low down payment.

First-Time Homebuyers

There are a lot of perks to being a first-time homebuyer, including the ability to get in the door with a low down payment. Many lenders will ask for a down payment as low as five percent (three percent for FHA loans) to those looking to purchase their first home.

A first-time homebuyer is someone who has rented their previous home(s) or has never purchased a house on a permanent foundation. Individuals who have owned manufactured homes may also be eligible for a first-time homebuyer loan, but the final decision is up to each individual lender.

FHA Loan

This type of loan is guaranteed by the Federal Housing Authority (FHA) and allows for a smaller down payment than many conventional loans. In addition to offering down payments as low as three percent of the total purchase price, FHA loans often carry lower interest rates and are easier to qualify for. This type of loan is ideal for first-time homebuyers, individuals with past credit problems or even those who wish to purchase a second home.

Provide Your Land As Collateral

If you own the land that you intend to build on, many lenders will use the land in place of a down payment. In other words, you build a house on the land that you already own, and the lender gets both if you default. This is why individuals who own land often choose to build, while using the lot in place of a big down payment. In addition, many lenders are more willing to approve a loan if the land is already owned by the buyer.

Owner Financing

When a seller lists their home, they have the option of considering owner financing. In this situation, a buyer provides a down payment to the seller and signs an agreement to pay for the home (plus interest) over a preset number of years. Owner financing typically requires a lower down payment, which can be any amount that the buyer and seller agree to. Because there is no bank qualifying and no credit check, a seller can extend the offer on any terms that they wish.

ANN ARBOR, Mich. (CMPS Institute) – The Federal Housing Administration (FHA) is giving homeowners and buyers until Oct. 4 to lock in a low monthly insurance premium on FHA loans, according to Gibran Nicholas of the CMPS Institute, which trains and certifies mortgage bankers and brokers.
After that, the monthly insurance premiums on FHA loans will increase by over 63 percent.
A homebuyer purchasing a $200,000 home using a $193,000 FHA mortgage before Oct. 4 would pay an insurance premium of $88.46 per month. If the same homebuyer waits until after, the insurance premium would jump to $148.01.
Although the upfront mortgage insurance premium is going down, “the real impact to the homebuyer is actually a net increase in their out-of-pocket costs because the monthly premium is going up by 63 percent,” Nicholas said.
“Remember, sellers can pay the upfront premium or it can be financed into the loan amount, so homebuyers rarely pay the upfront premium out of pocket,” he said. “On the other hand, the increase in the monthly premiums will be paid right out of the homebuyer’s pocket with their mortgage payment each month.”

Ever wanted to understand the difference between an FHA Loan and a Conventional Loan? Watch this video from the Houston Association of Realtors for more details. If you need help finding a reliable mortgage lender, please call me for a referral.

Although FHA is the most common loan today, you will want to be sure to find a loan that fits your needs. Use these comprehensive questions to help you determine which loan is right for you.

1. What are the most popular mortgage loans you offer?
2. Which type of mortgage plan do you think would be best for us? Why?
3. Are your rates, terms, fees, and closing costs negotiable?
4. Will I have to buy private mortgage insurance? If so, how much will it cost and how long will it be required? NOTE: Private mortgage insurance usually is required if you make less than a 20% down payment, but most lenders will let you discontinue the policy when you’ve acquired a certain amount of equity by paying down the loan.
5. Who will service the loan? Your bank or another company?
6. What escrow requirements do you have?
7. How long is your loan lock-in period (the time that the quoted interest rate will be honored?) Will I be able to obtain a lower rate if they drop during this period?
8. How long will the loan approval process take?
9. How long will it take to close the loan?
10. Are there any charges or penalties for prepaying the loan?

This information is used with permission from Real Estate Checklists & Systems ( http://www.realestatechecklists.com ) . Reprinted from REALTOR Magazine Online by permission of the National Association of REALTORS, Copyright 2005, All rights reserved.

WASHINGTON, D.C. (Realtor.org) – The Federal Housing Administration (FHA) yesterday relaxed what is known as the “anti-flipping rule.”  FHA now provides mortgage insurance for some purchases in which the seller bought the property and held it for fewer than 90 days.  The change was made to speed up sales of renovated homes in communities with too many bank-owned and foreclosed homes, said FHA Commissioner David H. Stevens.