Federal Housing Authority - What It Means to You

The Federal Housing Authority (FHA) has substantially increased the percentages of home mortgage loans that it ensures.  With the current market situation that has made obtaining financing difficult unless you have excellent credit scores, more and more borrowers have turned to FHA backed loans.  Generally, a FICO score of 620 is sufficient to receive an FHA insured loan.  It is imperative that you discuss your  options with a mortgage lender for guidance.  Incidentally, I always recommend that you talk to at least two to make certain that you are maximizing your loan potential.

Back at the end of July, 2208 President Busch enacted into law, a new program that will help improve the capability of potential home buyers to fulfill their dreams. This law will allow HUD'S Federal Housing Administration (FHA)  to continue providing targeted mortgage assistance to homeowners.  Known as the Hope for Homeowners program will allow the FHA to continue assisting homeowners who could be facing difficulties in paying their home mortgages.  Beginning on October 1, 2008, with this program, certain borrowers facing mortgage problems will be eligible to refinance into FHA-insured mortgages that they can afford. 

The Hope for Homeowners is aimed at assisting homeowners who are facing foreclosure but must fall into the following criteria.

• Their mortgage must have originated on or before January 1, 2008
• Their mortgage debt-to-income must be at least 31 percent
• They cannot afford their current loan
• They did not intentionally miss mortgage payments
• They do not own second homes

Those meeting the criteria will be eligible to considered for assistance by bringing them into a FHA loan.  The loan has the following aspects:

• 30-year, fixed rate mortgage
• Maximum 90 percent loan-to-value ratio
• No prepayment penalties
• $550,440 maximum mortgage amount
• Extinguishment of any subordinate liens
• New home appraisals from FHA-approved 
• Do not own a second home.

There has been some modifications to this program recently.  For one, the program will increase the loan-to-value ration (LTV) on the H4H loans to 96.5 for borrowers whose mortgage payments represents no more than 31% of their monthly gross income and household debt no more than 43 percent.  This change will greatly expand the number of eligible borrowers. Also, the program will continue to offer borrowers with higher debt loads a 90% loan-to-value ratio on their H4H loans.  In conjunction with the LTV change, H4H will eliminate the trial modification that was previously required. 

Also, H4H will offer subordinate lienholders an immediate payment in exchange for releasing their lien to permit more borrowers access to the program.  These lienholders may now receive an immediate payment at the time the H4H loan is originated.  The lienholders must waive all prepayment penalties and late payment fees.

Plus, H4H will permit lenders to extend the mortgage term from 30 to 40 years.  For borrowers with high mortgages and household debt loads, extending the amortizatin period will reduce their monthly payments enough to make it possible for them to qualify for this rescue product and save their homes.

For more information regard the Hope for Homeowners program, you can go to the following website for that information, click here  There you will find a chart that will answer many basic questions that affect this program.  

The Hope for Homeowners is similar to the program that had been in place called FHA SECURE.  This program encourages lenders to write-down the outstanding mortgage principle balance to 90% of the new value of the property.  This write-down will be beneficial to the borrower as well as the lender.  The reduction to the lender is probably less than the loss on a foreclosure.

There is an upfront premium of 3% of the original mortgage amount and an annual premium of 1.5% of the outstanding mortgage amount. 

For more information regarding usage of this new program please discuss your particular situation with your lender as each case is different.  Also, a web site that will be very helpful is the government's site.
 

Federal Housing Authority, commonly referred to as the FHA, does not finance home mortgages.  What it does is to insure the mortgage payments.  It guarantees the home loans which reduces the risk to lenders.  The FHA backed loan is particularly helpful for the potential home owner who has little or no money for a down payment but can afford the monthly mortgage payment. It is important that you check out your credit rating and get a list of lending limits for FHA loans in your area

The Federal Housing Tax Credit is another new program that is part of the new law. One aspect of the new program is that first-time buyers will be able to obtain a $8000 tax credit.  There are, obviously, parameters that must be met. 

• The tax credit is available for first-time home buyers only.
• The maximum credit amount is $8,000.
• The credit is available for homes purchased and closed before November 30,2009.lllll
• Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.
  

Another progam that could be very positive for some potential home buyes is the SF Rehabilitation Loan Program (203k).  This HUD program is designed for the purchase of a house that needs repair.  Financing this house could be difficult because banks generally won't lend the money to buy the home until the repairs have been made and the home appraises for the loan.  If the home buyer can afford the home but doesn't have sufficient funds to make the "upfront" repairs then the home buyer could be facing a real problem.  The 203(k) loan can help overcome this obstacle by rolling the cost of the repairs and the cost of purchasing the home into one loan.  This loan is for an owner-occupant home.

The downpayment requirement is approximately 3% of the acquisition and repair costs of the property.  And, there are several steps that need to be followed to obtain this loan.

• The potential buyer submits an offer on a home that is need of substantial repairs.  The offer is contingent upon the buyer being able to obtain a 203(k) loan based upon a loan approval to include both purchase of home and additional required repairs.
• The homebuyer selects an FHA-approved 203(k) lender.  The purchaser submits a detailed cost proposal to the lender.
• The appraisal is performed to determine the value of the home after renovation.
• Assuming the buyer passes the credit test of the lender, the loan closes for the amount of the home plus the cost of renovation.  There is also a contingency reserve of 10% to 20% of the total remodeling cost.  It is also used to cover any extra work not included in the original estimate.
• At closing the seller of the property is paid off and the remaining funds are placed in an escrow account.  The account will pay for the repairs and improvements during the rehab period.
• The mortgage payments and remodeling begin after the loan closes.  The borrower can decide to have up to six mortgage payments put into the cost of the rehabbing.  The completion length can not exceed the estimated time.
• Escrow  funds are released to the contractor during construction.  To ensure completion of the job, 10% of each draw is held back to ensure that there are no liens on the property.

Coldwell Banker Home Loan issued a flyer outlining 10 steps to a smoother government loan experience.  Those steps are:

1. Get a pre-approval decision that you can trust.
2. Sign and date all forms - that includes tax returns, bank statements (all pages dated/stamped in provided by a bank; online statements must come from a secure site and show the URL, customer name, account number, and bank name.
3. Payment of seller concessions - any seller concessions paid to the buyer must be toward closing costs, prepaid, discount points or paid directly to a third party vendor.  Personal property and/or money can not be included
4. Turn in the contract early - all parties must sign and date the contract.
5. Buyers must be able to document two-year history of earnings.
6. VA requires a Certificate of Eligibility (COE) - form can be obtained online or thru your mortgage representative
7. Provide an adequate paper trails for gifts - a gift letter must be signed and dated by all parties and include documentation.
8. Title checks must show the seller's compliance with FHA requirements.
9. Make all repairs recommended by inspectors - make certain that seller has completed the recommended repairs before closing.
10. Be prepared to provide all documentation - buyers need to respond promptly to all requests.

Ron Gorman, Realtor Coldwell Banker Gundaker St. Louis Office 4320 Hampton Ave  St. Louis, MO  63109 Office: (314) 351-6005 Cell: (314) 570-5125 Fax: (314) 667-3016 Contact Me