The National Association of Home Builders and National Association of Realtors have joined the National Association of Mortgage Brokers in panning the new appraisal code implemented by Fannie Mae and Freddie Mac two months ago...
The National Association of Realtors chief economist Lawrence Yun said that a 2.4% increase in existing homes in May "is less than expected because poor appraisals are stalling transactions." Further, he claimed contracts fall through due to "faulty valuations" that prevent buyers from obtaining the loan.
The feelings are running so high that the petition circulating to end the practice has over 35,000 signatures according to HousingWire. It sounds like Congress is listening. Now The National Mortgage News reports that two Congressmen introduced a bill last week to place an 18-month moratorium on the rules.
Monday, June 29, 2009
Wednesday, June 24, 2009
What you Need to Understand About FHA loans
What You Need to Understand About FHA Loans
The Federal Housing Administration, commonly known as, FHA, provides mortgage insurance on loans made by FHA approved lenders. It is the largest insurer of mortgages in the world, with well over 34,000,000 insured properties. FHA simply provides this insurance to protect lenders against losses due to foreclosure. FHA is a government agency and the only one that costs the tax payers nothing and is completely self-funded.Unlike a conventional loan, this insurance requires very little cash investment, because the loan itself is well insured. Since the loan is so well insured, the underwriting guidelines, income requirements, credit score and payment ratios are a bit more flexible than conventional loans offering itself as an excellent alternative in today's market place.
More information is available online: www.hud.gov/groups/lenders.cfm
What FHA Isn't
FHA insured loans are not sub-prime loans.
These are prime loans and do require a 620 credit score and full documentation of income and down payment. In order to get FHA insurance, guidelines have been established to insure homeowners can afford the investment. I think FHA loans have been deemed in the marketplace as a sub-prime loan and these origins stem from the 1930's when FHA loans first hit the mortgage world to help the millions of Americans without jobs afford homes.
Mortgage Insurance
Home Buyers will pay an UFMIP (Up Front Mortgage Insurance Premium) of 1.75% of the loan amount. This fee typically financed into the loan. In addition, a monthly premium of .55% of the loan amount will be paid monthly, this premium generally lasts a term of 5 years or when the loan to value reaches 78%, whichever is longer.
Appraisal Standards
In order to obtain FHA Insurance, the home must be deemed in good operating condition. A few key areas of concern are chipping and peeling paint, loose railings systems, poor roof conditions or anything else which can affect the safety of the home owner.
Rates
Rates on FHA loans generally mirror conventional financing and are often times much better because they: 1) do not have credit score adjustments or if they do, they are very slight, and 2) do not have the 75% condo adjustment currently in place for all Fannie/Freddie loans with loan to values greater than 75%.
Loan Costs
FHA underwriting fees are no more or less expensive than conventional financing. On average, the fees range from $400 - $700 plus appraisal, title, attorney, and points can be paid up to 1%. UFMIP is added to the loan amount and not generally considered an underwriting cost but is a closing cost.
Condominiums
FHA requires that all condos are approved. Check if a project is approved online: https://entp.hud.gov/idapp/html/condlook.cfm Generally these are larger developments greater than 4 Units.If a condominium development is not FHA approved, a Spot Approval can be obtained by your lender. In order to obtain a Spot Approval I suggest the following basic guidelines:The legal documents do not contain the right of First Refusal - The project is not a cooperative - The HOA has been turned over for at least 1 year - The common elements are complete - not subject to add'l phasing - No Special Assessments are pending - No legal action is pending against the Association - 90% of the units are sold - 51% of the total units are owner occupied - No single entity owns greater than 10% of the total units - The Association has a reserve fund for deferred maintenance = 3 months operating budget - Other restrictions apply:Smaller Condominium Projects (4-10 Units) can meet the Spot Approval Guidelines. I see the common area of concern being the reserve fund for deferred maintenance. I suggest you contact us to review each non-FHA approved condominium and we can email you a Spot Approval form to be completed for review.
Any questinos regarding FHA financing please contact me: 515.233.5046 or lisa@globalstatemortgage.com
The Federal Housing Administration, commonly known as, FHA, provides mortgage insurance on loans made by FHA approved lenders. It is the largest insurer of mortgages in the world, with well over 34,000,000 insured properties. FHA simply provides this insurance to protect lenders against losses due to foreclosure. FHA is a government agency and the only one that costs the tax payers nothing and is completely self-funded.Unlike a conventional loan, this insurance requires very little cash investment, because the loan itself is well insured. Since the loan is so well insured, the underwriting guidelines, income requirements, credit score and payment ratios are a bit more flexible than conventional loans offering itself as an excellent alternative in today's market place.
More information is available online: www.hud.gov/groups/lenders.cfm
What FHA Isn't
FHA insured loans are not sub-prime loans.
These are prime loans and do require a 620 credit score and full documentation of income and down payment. In order to get FHA insurance, guidelines have been established to insure homeowners can afford the investment. I think FHA loans have been deemed in the marketplace as a sub-prime loan and these origins stem from the 1930's when FHA loans first hit the mortgage world to help the millions of Americans without jobs afford homes.
Mortgage Insurance
Home Buyers will pay an UFMIP (Up Front Mortgage Insurance Premium) of 1.75% of the loan amount. This fee typically financed into the loan. In addition, a monthly premium of .55% of the loan amount will be paid monthly, this premium generally lasts a term of 5 years or when the loan to value reaches 78%, whichever is longer.
Appraisal Standards
In order to obtain FHA Insurance, the home must be deemed in good operating condition. A few key areas of concern are chipping and peeling paint, loose railings systems, poor roof conditions or anything else which can affect the safety of the home owner.
Rates
Rates on FHA loans generally mirror conventional financing and are often times much better because they: 1) do not have credit score adjustments or if they do, they are very slight, and 2) do not have the 75% condo adjustment currently in place for all Fannie/Freddie loans with loan to values greater than 75%.
Loan Costs
FHA underwriting fees are no more or less expensive than conventional financing. On average, the fees range from $400 - $700 plus appraisal, title, attorney, and points can be paid up to 1%. UFMIP is added to the loan amount and not generally considered an underwriting cost but is a closing cost.
Condominiums
FHA requires that all condos are approved. Check if a project is approved online: https://entp.hud.gov/idapp/html/condlook.cfm Generally these are larger developments greater than 4 Units.If a condominium development is not FHA approved, a Spot Approval can be obtained by your lender. In order to obtain a Spot Approval I suggest the following basic guidelines:The legal documents do not contain the right of First Refusal - The project is not a cooperative - The HOA has been turned over for at least 1 year - The common elements are complete - not subject to add'l phasing - No Special Assessments are pending - No legal action is pending against the Association - 90% of the units are sold - 51% of the total units are owner occupied - No single entity owns greater than 10% of the total units - The Association has a reserve fund for deferred maintenance = 3 months operating budget - Other restrictions apply:Smaller Condominium Projects (4-10 Units) can meet the Spot Approval Guidelines. I see the common area of concern being the reserve fund for deferred maintenance. I suggest you contact us to review each non-FHA approved condominium and we can email you a Spot Approval form to be completed for review.
Any questinos regarding FHA financing please contact me: 515.233.5046 or lisa@globalstatemortgage.com
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