Tuesday, February 24, 2009

FHA Quick Reference Guide

FHA loans are rapidly becoming the most popular loans. One reason is that mortgage insurance for FHA loans is provided by the US government, rather than a private mortgage insurance company. This means the loan does not have to be underwritten twice, as it does for conventional financing (once by the lender and again by the mortgage insurance company). The second big reason for FHA's popularity is that the down payment is only 3.5%.

Everyone should know about FHA financing.

We have a link to an FHA Loan Quick Reference Guide on the bottom of the home page of our web site. Click here for the link to our web site. As guidelines change, we will update the Quick Reference Guide, so you will always have the latest FHA info.

Saturday, February 21, 2009

$8,000 Tax Credit for First-Time Homebuyers

The American Recovery and Reinvestment Tax Act of 2009, which is the part of the stimulus law that deals with the first-time homebuyer tax credit, changes the tax credit that is currently in place. Here are the details:

  • The credit is for 10% of the purchase price, up to $8,000. (The old law was also for 10% of the purchase price, but only up to $7,500.)
  • The new law extends the period during which you can buy a house and get the credit until December 1, 2009. (It used to be July 1, 2009.)
  • The new credit does not have to be paid back if you keep the house for 3 years. (If the purchase date was before January 1, 2009, then the $7,500 credit has to be paid back over 15 years.)
  • The credit starts to get phased out for individuals who make more than $75,000 and for couples who make more than $150,000. (This is the same as the old law.)

Here's how a buyer with no money for a down payment can take advantage of the new credit:

New FHA regulations allow a buyer to borrow the down payment from a relative. The buyer can borrow the down payment and then pay it back to their relative when they get the tax credit. The down payment for an FHA loan is only 3.5%, so the $8,000 will cover the down payment for a house with a purchase price up to $228,500.

Monday, February 16, 2009

How Many Properties Can I Finance?

Fannie Mae just announced that they are no longer limiting the number of properties that can be financed to 4. Effective immediately, the new limit is 10 financed properties. Of course, there are a number of restrictions. Following are the main changes:

-- You can now finance up to 10 properties.
-- For second home or 1-unit investment property purchases, the minimum down payment is 25% and the minimum credit score is 720.
-- For second home or 1-unit investment property refinances, the owner must have 30% equity in the property and a 720 credit score.
-- For 2-4 unit investment property purchases, the minimum down payment is 30% and the minimum credit score is 720.
-- For 2-4 unit investment property refinances, the owner must have 30% equity in the property and a 720 credit score.
-- No bankruptcies or foreclosures in the last 7 years.
-- No late payments on any mortgages in the last 12 months.
-- If rental income will be used to qualify, it has to show on the previous 2 years tax returns.
-- The reserve requirements have been raised to 6 months for all properties the borrower owns (if they own 5 - 10 properties).
-- This is only for purchases and limited cash-out refinances ($2,000 max cash out, and the new loan must be refinancing a loan that was used to purchase the property, or that was used to earlier refinance a loan that was used to buy the property).

Saturday, February 14, 2009

New Class for Real Estate Agents - Automated Underwriting Systems

We've just been approved by the Division of Real Estate to teach another class to Colorado real estate agents. This one is called "Automated Underwriting Systems" and is approved for 2 hours of continuing education credit toward license renewal.

Automated underwriting systems are online tools that every real estate agent should be familiar with. In order to provide you with an accurate pre-approval, which is your only guarantee that the loan will actually close, a mortgage broker needs to use these systems. Not everyone does and that's the major reason loans fall apart. Learn for yourself what happens (or should happen) before a mortgage broker sends you a pre-approval letter.

Call us to schedule a class. There is no cost or minimum number of attendees. You'll get 2 CEUs and close more deals.

We also offer free CEU classes on FHA loans and VA loans.

Sunday, February 8, 2009

VA Loan Quick Reference Guide

VA loans are usually the best loans available for active and retired members of the military and their spouses. We have a link to a VA Loan Quick Reference Guide on the bottom of the home page of our web site. Click here for the link to our web site.

Tuesday, February 3, 2009

When Can I Cancel Mortgage Insurance?

We are often asked when a borrower is no longer required to pay mortgage insurance. For a conventional (non-government) loan, a borrower can request that the mortgage insurance (MI) premiums be cancelled when they have 20% equity in the property. If a borrower requests the cancellation, then they have to prove that they actually do have 20% equity. That means they will need to pay for an appraisal. They also need to have a good payment history (no 30-day late payments in the past 12 months, and no 60-day late payments in the past 24 months).

The lender is required to cancel the MI once the equity gets to 22%. They will use the amortization schedule for the loan to determine when the borrower has 22% equity.

If the borrower has purchased a house at a below-market price and has an appraisal showing that they have 20% equity, they will still probably have to pay MI for at least a year. That determination is up to the lender.

FHA rules are a little different. For an FHA loan, the MI gets cancelled once the borrower has 22% equity. However, regardless of the equity, a borrower must pay MI for a minimum of 5 years with an FHA loan. This is one reason it makes no sense for a borrower to get an FHA loan if they are making a large down payment (15% or more).