Wednesday, August 29, 2012

What Is an FHA Loan and What Are the Requirements?

You may be looking for a mortgage program which offers low down payments along with reduced closing costs. FHA loans are a government program offered by the Federal Housing Administration which provides borrowers with a better deal. The FHA, part of the U.S. Department of Housing and Urban Development (HUD), works with FHA approved lenders by insuring qualified borrower's loan. An FHA insured loan allows the lender to offer lower down payments, less closing costs and easier credit qualifications. However, the borrower must first qualify for a Federal Housing Administration loan based on certain requirements.
An FHA loan could be for first time home buyers, homeowners looking to repair or remodel their home, seniors over 62 years old that are in need of financial aid, and even homeowners of mobile or manufactured homes.
First Time Home Buyers
If you have never purchased a home before, the Federal Housing Administration offers down payments of 3.5% of the purchase price. One to four unit properties are eligible with many of the closing costs and fees included in the FHA loan.
Repairs and Remodeling
You may be looking to buy a home that is not in the best condition, the FHA can help. The Federal Housing Administration allows home buyers to bundle the costs of fixing up a home into their loan. For homeowners who would like to remodel their house, an FHA refinance will allow them to roll the costs into their loan.
Senior Financial Aid
Seniors, older than 62, are eligible for an FHA reverse mortgage if their home is paid off or has a low remaining balance. This loan pulls equity from the home but can be used as financial aid for senior living expenses or for recreational purposes.
Mobile and Manufactured Homes
There is an loan available for borrowers who would like to place a manufactured home on their property. Also, FHA loans are available for mobile homes which are, or will be, placed in a mobile home park.
What Are The FHA Loan Requirements?
Although the FHA insures millions of mortgages for single family and multi-family homes, there are certain FHA loan requirements that much be met first. Some requirements are defined by the borrower's local Federal Housing Administration office, which makes it important to speak with an approved lender for the most current requirements.
FHA Loan Requirements
Mortgage Insurance Required
Loan Amount Limits
Property Appraisal
Credit Report
Closing Costs
Debt to Income Ratio
Credit Check
Each requirement has different exceptions and FHA loan requirements often change, to keep up with the most current requirements you can visit the FHA website.
FHA loans are great for any buyer who can qualify for the government program. Qualifications do change so the best way to find out if you are eligible is by working with an FHA lender who is approved by the Federal Housing Administration. FHA approved lenders are current with government guidelines and work on assisting borrowers in receiving the right loan for their needs. Since 1934, millions of borrower have trusted FHA loans and utilize the government program to finance their home loans. This is why the Federal Housing Administration insures the most mortgages in the entire world.

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Sunday, August 26, 2012

FHA Streamline Refinance - An Easier Way For Homeowners to Refinance

The FHA Streamline refinance provides individuals with an easy way to refinance their home. Certain stipulations must be adhered to, but for those who qualify for this process, it is the best route to take. The streamline process allows for a mortgage to be refinanced quickly and with less expense than a traditional mortgage refinancing. The FHA has permitted the use of a streamline refinance on insured mortgages since the 1980's and yet today many people do not realize what this can offer to them.
What Is It?
In an FHA Streamline Refinance, the documentation and underwriting that is needed to refinance the loan is reduced significantly.
This allows the process to be faster and it allows people to move from one loan into another without the hassles usually attributed to the process. It is important to note that there are some costs involved in the process, but they are generally much lower than the costs traditionally attributed to the process of refinancing.
Basic Requirements:
In order to qualify for the FHA Streamline Refinance, individuals must meet specific criteria.
1. The mortgage you currently have must already be an FHA insured mortgages. If you are unsure of this, contact your lender directly and ask if your mortgage is an FHA loan. This simply means that the FHA is insuring the loan by the lender to reduce the amount of risk.
2. In order to use an FHA Streamline Refinance, the mortgage you currently have must be current. If your mortgage is currently delinquent, the lenders may offer solutions to help you to get caught up on the loan payments prior to agreeing to a refinance of this type.
3. No cash may be taken out of the mortgage that is refinanced. If you wish to pull equity out of your home loan, you will need to use another type of refinance loan to accomplish this.
4. The goal of this refinance should be to reduce your monthly principal and interest payments.
As you can see, the requirements for obtaining an FHA Streamline Refinance are quite low. Most lenders are happy to allow you to refinance, especially if it would make paying your loan easier for you.
Why Refinance?
There are several reasons to consider the benefit of using this refinance process. You may qualify for a loan with a lower interest rate or better terms. This may allow to have a much lower monthly payment. With interest rates as low as they currently are, it is a good time to consider refinancing if your interest rate is currently higher than what is being offered.
Individuals who are interested in an FHA Streamline Refinance can take full advantage of this service. The process of obtaining this type of loan is not difficult but it can save you thousands of dollars over the lifetime of your loan, even if you simply reduce your interest rate by a percent or less.

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Thursday, August 23, 2012

FHA Refinancing - Need a Home Improvement Loan?

You hear it almost everyday that getting a mortgage is getting harder. One of the hardest loans to get right now is a construction or home improvement loan. Once again FHA is helping borrowers with their home improvement needs.
FHA has a program call 203(k) streamline. This program can be used for refinancing a current mortgage, or to purchase a home and make upgrades or repairs to the property all under one single loan. Unlike conventional mortgages it is not re-qualified, as it is only underwritten one time, upfront. There is no minimum amount for the repair cost; however the maximum is $35,000.
The FHA 203(k) offers both fixed and adjustable rate options, and the interest is the same as a standard FHA loan. On a purchase the appraisal is completed as "subject to" meaning after the repairs and or improvements are completed. On a refinance two appraisals are required. The first appraisal will reflect the current as is value. The second appraisal will reflect the subject to completion value.
Eligible properties include one to four unit residences, including HUD REO properties. Manufactured homes, and spot approval for Condos are also allowed. The property must be 100% complete - no partially built homes.
Contractors and repair criteria

All repairs/work must be completed within three months of the closing date. Repairs must be completed by a licensed contractor unless the borrower can demonstrate the required expertise. The contractor making the repairs does not have to be a licensed general contractor; however, he or she must provide a resume along with two references.
Self Help (borrowers completing work)
The borrower is required to have the necessary expertise and experience to complete the work in a satisfactory manner (ie: borrower is a licensed plumber and will complete that portion of the work). The cost of labor is included in the repair / rehabilitation cost in case the borrower is unable to complete the work and a contractor needs to be hired. The borrower must provide written estimates of the repair / rehabilitation cost as well as written estimates from the suppliers of the materials.

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Monday, August 20, 2012

How Can I Use a FHA 203k Renovation Loan?

In a recent article I showed you how quick and easy the FHA 203K Loan process was and how it can benefit you and your family in their search for the perfect home. We talked about how you can purchase or refinance and get the money to buy or to pay off your current mortgage alongl with an escrow account for repairs all in one simple loan process at great FHA rates. Now I want to outline some of the common and not so common uses of FHA 203K Loans; from making a property handicapped-accessible to waterproofing a home to simply upgrading appiances in poor condition, the FHA 203K loan program gets the job done. So, how can you use the program?

1. New Freestanding Appliances

2. Complete Bathroom Remodel

3. Adding a New Master Bathroom

4. Upgrading Heating & Cooling Systems

5. Well & Septic

6. New Hardiplank Siding

7. Fresh Paint Inside or Out

8. Attic Build-Outs

9. Waterproofing the Basement

10. Finishing the Basement

11. Making the House Handicapped Accessible

12. Complete & Total Renovation

13. Adding a 2nd Floor

14. Adding a Bedroom

15. Moving a Historic House to New Location

16. New Deck & Outdoor Kitchen Area

17. Repairing Water Damage

18. New Hardwood Flooring or New Carpet

19. New Lighting Fixtures

20. New Windows & Doors

21. Upgrading Plumbing & Electrical Systems

22. New Fixtures for Tubs, Bathrooms and Kitchens

23. Opening Up a Floorplan

24. New Kitchen Counters

25. Vaulting Your Ceilings

26. Making Your House More Energy Efficient

27. Going Green with Solar Panels

28. Getting a Condo Ready for Your New College Student

29. Much, Much More

There are thousands of reason why people need to renovate and I couldn't possibly list them all here. FHA allows for nearly anything you can think of so long as the value of your renovation supports the new loan amount. I am getting more and more requests to help provide financing so green conscience homeowners can add new energy efficient features, including solar panels, to their homes and save on rapidly rising energy prices. Not to mention FHA will allow your debt to income ratios to be higher if you include energy efficient improvements to your renovation. So whether your renovation idea made the list or not, it is always good to check into FHA 203K Renovation loans before you finance your next home improvement or new home purchase.

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Friday, August 17, 2012

The FHA 203k Loan: Streamline Vs Full

The government came up with the FHA 203k Loan idea in the late 1970's. Then a few years ago lawmakers decided to change things up a bit and introduce something called the "Streamline 203k." To get a better idea in this program, we need to dive into what the 203k loan is all about.

HUD defines the 203k loan as its "primary program for the rehabilitation and repair of single family properties." This means the loan helps pay for improvements, renovations, repairs and rehabilitation. This covers that fixer-upper a lot of potential home buyers are finding in this era of short sales, foreclosures and bank-owned homes on the market. But not every home needs a ton of repairs. The Full 203k loan covers things like pouring a new foundation, or jacking up the home to replace a sill plate. These are major repairs. However, sometimes a buyer simply wants to replace carpet or repaint the home. Maybe the house has some mold that needs to be removed. This is where the Streamline comes in to play. The Streamline covers repairs up to $35,000.

Both loans take time and patience, but the horror stories of taking months to close should not happen. This happens when someone in the process may not be educated on the process. A 203k expert should know the ins and outs of the government requirements, and should have a network of licensed and trusted contractors to get the work done. Since HUD does not make direct loans to help people buy homes, buyers must find a lender who specializes in government-backed programs like the 203k.

The 203k loan, whether it's the Full or the Streamline, can help turn renters into first time home buyers. This program can also turn blighted neighborhoods into desirable places to live again. Take time to find a 203k specialist in your area and ask about this great option.

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Tuesday, August 14, 2012

Home Equity Loan Meltdown Causes A 203K Loan Rebirth

I was reading an article the other day that said the home equity loan market could lose over 65 billion dollars this year. It doesn't seem that long ago that if you didn't use a first and second mortgage combination loan to purchase your home that you could get a HELOC up to and even in some cases over 100% of the value of the home before the ink dried after you signed your final loan papers. This was the case with many a California real estate loan.

As long as you had decent credit, you were able to get a HELOC without a problem. In our existing economic climate many lenders are losing their entire HELOC balance. A typical foreclosure involving a California real estate loan simply doesn't have enough funds to payoff all the mortgages owed on the property.

The result has made it much more difficult to obtain a HELOC or second mortgage for homeowners in todays market. You need at least 20-30% equity before a bank will consider lending in second position. It's understandable but unfortunate.

The 203k loan which has been around for over 30 years is enjoying a rebirth of sorts with the home equity market on the brink of a meltdown. The 203k loan I'm referring to is the 203k streamline. The 203k streamline allows prospective applicants to purchase a home plus receive up to $35,000 in additional funds to fix minor cosmetic repairs on the home such as new carpet, cabinets, interior and exterior paint jobs, flooring, a new roof, HVAC unit, countertops, and even appliances just to name a few. You get half the funds upfront after escrow closes typically to cover materials and the other half after all the projects are deemed as finished.

This loan could be looked at as a $35,000 home improvement equity loan. It is an FHA loan so all that is needed is a 3.5% down payment and a 620 FICO score and you get to wrap up the purchase money loan along with the $35,000 all into one low fixed rate loan. Lenders may have additional guideline overlays for qualifying.

The 203k streamline is also used for refinances as well. Many people don't realize this, but if you are an existing homeowner and you don't have the 20-30 percent equity needed to obtain a cash out refinance loan, the 203k streamline may be available up to a 97.5 loan to value. If you are in need of some of the minor home improvements listed above and you lack equity the 203k streamline refinance loan is worth checking out.

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Saturday, August 11, 2012

Use the FHA Mortgage Specifically Created for Home Improvement

Almost everyone knows about FHA mortgages. They are tailor-made for first time homebuyers and others with less than perfect credit or other financial issues. You don't have to be low income or have bad credit to use FHA, but generally the loan limits prohibit high priced homes.

What you may not know about FHA is that there is a special loan program designed to provide the funds to buy or refinance your home PLUS additional funds to make repairs or improvements.

This FHA mortgage is called the 203K and the K is the operative part of the name. Not every lender participates in the rehab loan program, but the major national lenders do. If the loan officer you contact is unaware, then call the corporate office and ask them to direct you.

The FHA 203K loan program calls for an FHA inspector to go over the house, using the plans you gave him. Before you get to this inspection phase, you should be working with a general contractor who understands how to provide plans and specs for a project. Plans and specifications are standard in the contracting industry for anyone managing a project >$5000, which is the minimum rehab amount for this loan program.

The FHA inspector will decide if the project is feasible, depending on whether there is additional work required to bring the property up to code, and whether or not the property will appraise for enough to make the project "worth it". FHA is willing to lend based on the after-rehab value and will even stretch that value a little in order to get houses brought up to code.

Once the lender is happy with the valuations, the plans and specs, and the inspector's report, your loan file will be reviewed by an underwriter specially trained and certified in rehab loans. Your credit and finances do not have to be perfect to be approved, but the creditworthiness and qualifications are similar to a regular FHA loan.

One of the benefits of a 203K is that all costs can be added into the project. The fees, permits, closing costs, etc. are all added up and your downpayment on the purchase is calculated on the total. If you are refinancing instead of purchasing, the amounts are totaled the same way, but you might already have enough equity in the home to avoid coming up with any cash.

What's next? Once approved, the loan closes and the rehab portion of the money is escrowed by the lender. The contractor submits requests for payment and each phase is inspected. As soon as the work passes the inspection for completion, the contractor is paid. You can not go back to the well for more money, so your initial plan must be a good one. A contingency fund is usually added in during the total project calculation.

This contingency fund can only be used to fund hidden repairs that were not evident during the initial workup. Any remaining funds in the contingency are used to pay down the mortgage at the end of the project.

The FHA 203K mortgage is not a "piece of cake", but if you do not qualify for low cost money at the local home improvement equity loan bank, then it is very definitely worth looking into.

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Wednesday, August 8, 2012

Getting FHA Home Loans Can Be Easy!

Buying a home is a dream that many people share. However, for those without a lot of income who don't have great credit or a large amount of savings, it can be difficult to get the mortgage that makes home ownership a possibility. One thing that might make it easier to find a mortgage is to look into FHA Home Loans.
FHA Home Loans are loans that the Federal Housing Administration insures. There are a wide variety of lenders that have been approved to offer these loans. It is a good idea to shop around and find out the rates and conditions that a number of these loan providers are willing to offer you since there are no set terms required.
However, these FHA mortgages are available to people with lower down payments and lower credit ratings than conventional mortgages, so it is a good idea to check into them and see whether this type of mortgage would work for you.
For those who don't have enough money to make a large down payment, there are a couple different options available. If you qualify for a conventional mortgage, you can get private mortgage insurance (also known as PMI) that will allow you to still get a conventional mortgage. If you don't qualify for PMI or a conventional loan, then it is a good idea to look into FHA home loans. With these loans you usually need to be able to put down a down payment of at least 3.5%, but you don't need as high a credit rating as you would for a conventional mortgage with this low of a down payment.
What can you use FHA Home Loans For?
1. You can get FHA home loans to purchase one to four family homes.
2. You can even use them to purchase mobile homes or factory built housing.
3. If you are purchasing a home that needs to be fixed up, you can get a FHA 203K Loan that will include both the cost of the purchase and the cost of fixing the house.
4. For those who already own their own home, you can refinance your loan to include the cost of fixing up your home or making it more energy efficient. This makes home ownership a much more reachable goal for many people.
As you can see you can use a FHA Home Loan for about any type of home ownership you want. And the best advantage is you don't have to have perfect credit scores. Most Americans want to own their own home and with the help of FHA Home Loans that dream can come true for most Americans.

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Sunday, August 5, 2012

FHA Rehab Loan - The Key to the American Dream For First Time Homeowners!

Home ownership - its part of the American dream. A place to call your own, to raise your family, a sanctuary when the world gets to be too much; a home is all of these and so much more. Unfortunately, many people believe that home ownership is out of their reach. They believe that due to a lack of credit history, low income, or any other number of things, they won't be able to secure a mortgage with a reasonable, affordable interest rate. Fortunately for them, the Federal Housing Administration offers various home ownership programs, including the FHA rehab loan.

The FHA rehab loan is one of the FHA's programs designed to help first time homeowners secure affordable home loans, and is specifically designed for the potential homeowner looking to buy and rehab a home.

As they are searching the housing market for a place to call their own, many first time homeowners consider purchasing a "fixer-upper". A good source of "fixer-uppers" is HUD Homes for sale. Oftentimes, homes that could use remodeling are the least expensive ones on the market. This, combined with the opportunity to remodel to their own specifications, draws many first time homeowners to these "fixer-uppers".

It is for these people that the FHA rehab loan is especially helpful. Traditionally, a homeowner wanting to remodel a home would have to acquire two loans - one for the acquisition of the property, and a second for the rehab. Then, when the property has been finished, they must acquire a third, permanent mortgage to pay off the first two loans. With a FHA rehab loan however, potential homeowners are able to acquire one mortgage, both for the acquisition of the property and for the rehab of it.

It is important to note that the FHA itself does not loan money. An FHA rehab loan is a loan offered by a bank or mortgage company, and insured against default by the FHA. Through this program, lenders are able to offer lower down payments and smaller interest rates, something they wouldn't otherwise be able to do for first time homeowners.

Many first time homeowners qualify for these FHA insured loans. There are no income limits, and you don't have to have perfect credit. And the benefits of an FHA rehab loan over a traditional loan are clear: they are easier to qualify for, they have lower down payments and interest rates, and they are easier to qualify for.

So if you are one of the millions of Americans out there ready to own your own home, then contact an FHA-approved lender today. The dream of remodeling your first home is likely closer than you think because of the availability of a FHA rehab loan.

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Thursday, August 2, 2012

How Can I Get the Best Deal on a Foreclosed Home?

As the foreclosure inventory increases, more an more homes across America sit vacant and dilapidated. The longer they sit the harder it becomes to obtain traditional financing because lenders don't want to lend on collateral in disrepair. As they continue to sit the price continues to drop until an opportunistic investor, with cash in his pockets, usually ends up purchasing the home, renovating it and selling it to you at a huge mark-up. What I want to illustrate to you in this article is that investor, the MIDDLEMAN, and his eventual mark-up is unnecessary. YOU can do what he is doing and you can secure yourself a fortune in equity in the process and you can do it with almost NO MONEY DOWN.

What that investor doesn't want you to know is that renovation products for people wishing to renovate a primary residence are available at fantastic fixed rates through an American staple since 1965, the Federal Housing Administration (FHA). FHA offers a product designed for you to help rebuild American homes and revitalize neighborhoods across the USA, the FHA 203K program. In the process you get you get to create a home designed to your specifications and secure yourself thousands in equity in the process. Have you always wanted to sculpt a house into exactly what you wanted for you and your family? No problem, with FHA 203K loans you can create that dream home, you can buy it for next to nothing and YOU can reap the rewards that real estate investors have been reaping for years.

Here's how it works:

1.) Home Buyer contacts FHA approved 203K Lender for pre-approval. Always get pre-approval before searching for a home. Realtors are busy people too and it isn't fair to them to have them shuttle around unqualified home buyers. Now, FHA 203K lenders are hard to find, it isn't a very well-known program and it takes highly specialized knowledge so it may take some searching to find a lender who does them. I will assume since you found this article that you can make use of all your tools on the internet to locate someone qualified. If not call me and I will direct you.

2.) Home Buyer locates a distressed property priced well below value in a neighborhood they want to live. In other words look for the ugliest house in the best neighborhood. Remember, condition of the property is not important as the appraisal and the loan are based on AFTER REPAIR VALUE. HUD foreclosures are often some of the best deals, but any distressed property will do.

3.) Home Buyer contacts his Realtor (always use a Realtor when purchasing foreclosures) and gets them to make an offer 20%+ below list price. Please note that 20% is not the magic number, but it is a good starting point. Much of what you will offer will depend on time on the market and other factors. This is what the Realtor is for, use their talents to help guide you on the offer. Make sure that the contract states you will be getting FHA 203K or Fannie Mae Homestyle renovation loan. Also make sure it includes closing costs as these loans are slightly more expensive than traditional loans.

4.) Offer is accepted! Congratulations, you have a beat up dilapidated eyesore of a home. Don't worry though, this is where it gets fun.

5.) Home Inspection -- Always get a home inspection! I don't care if the property was built last year. Just do it! The home inspection is the first step because he will tell you what needs to be fixed to bring the house to code and to make it acceptable to the lender. Once he has told you what HAS to be fixed now you get to decide all your extras and upgrades.

5b.) Meeting with the FHA 203K Consultant -- Some FHA loans require a consultant to help with the draw requests and coordinate everything with the lender and the contractors. They are required for any renovation over $35,000 and some under. Talk to your lender to see if you need a consultant, but if you do need one then getting one involved at the same time as the home inspector is a good idea.

6.) Contractor Walkthrough -- This is the step where you get to begin painting the picture for the home you have always wanted to live in. Call three contractors and walk through the house letting each know what you want done. They will prepare bids so we know the scope and cost of the repair. Don't always go with the lowest bid. Go with the person you feel most comfortable with.

7.) Home buyer and lender will package loan for submission. This is the boring part, luckily your lender will handle most of the dirty work. Make sure you stick to their time lines and get documents when they request them.

8.) APPROVAL! You are know the proud owner of an ugly house. Again, don't worry because this ugly duckling will soon be a swan.

9.) Contractor begins work on the home. This is where you see the transformation from ugly home into dream home. Depending on the scope of the work expect this process to take anywhere from a week to 6 months. Draws will be issued to pay the contractor throughout the process and for his completed work.

10.) Final draw and loan close-out -- Appraiser reinspects the house to make sure it meets FHA 203K specifications and title is updated to reflect final close-out.

Now you have a custom home purchased at an amazing discount with thousands of dollars of built in equity from DAY ONE. How does it feel to have only put 3% down, but to own a home with 30% equity from the day you move in? I know for a fact that it feels great to accomplish a goal that could secure your future with minimal investment and minimal work. You could have let an investor do it for you, but instead you did it yourself and saved his mark-up. Congratulations, enjoy being the envy of the neighborhood.

Now get out there and find your ugly duckling!

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