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FHA CE Class


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Performance School of Real Estate FHA CA Class

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FHA CE Class

  1. 1. Conventional vs. FHA Loans Conventional FHA No reserve requirement Two months reserves Minimum 10% down 3.5% Down Payment Heavy restrictions on Gifts Gift funds allowed No non-occupant Co-borrowers Non-occupant co-borrowers allowed (kiddie condo) Tiered pricing based on FICO Pricing same regardless of FICO score No Unpaid Collections allowed Up to $5k medical collections can be unpaid ARMS with caps of 2%/6% ARMS with caps of 1%/5% ARMS qualify at note rate ARMS qualify at initial rate if LTV is <95%
  2. 2. Conventional vs. FHA Loans Conventional FHA Private MI required (over 80% LTV) Government insured Must have DU/LP approval Loan can be manually approved 2 years after Chapter 7 4 years out of Chapter 7 2 yrs. after payoff on Chapter 13 1 yr. of on-time payments after Chapter 13 7 yrs. after Foreclosure 3 yrs. After Foreclosure
  3. 3. <ul><li>Borrower must make a 3.5% cash investment* </li></ul><ul><li>Borrower’s documented liquid assets (IRA’s or 401K) </li></ul><ul><li>Gift from Relative </li></ul><ul><li>Gift from Charitable organization, union, public agency, employer or public entity </li></ul><ul><li>Secured Loan </li></ul>Down Payment Sources
  4. 4. FHA Flexible Credit Guidelines Minimum FICO score is 640 * Minimum time after a Chapter 7 Bankruptcy is 2 years (12 Mos minimum with extenuating circumstances-see below) Minimum time period after a Chapter 13 bankruptcy is one year from creditor settlement date with proof of on time payments for that year On Short Sale, it is possible to purchase a home one day after closing* If little credit history is available, alternative credit can be used. Payments on items such a car insurance, Utility bills or Cell phones can be used to create the credit required Minimum time period after a foreclosure is 3 years, unless extenuating circumstances: Death of wage earner Serious Illness Consumer Credit Counseling –must have paid payments on time for 12 mo. *In some exceptional cases, a score lower than 640 may be acceptable
  5. 5. Condominiums 234 (c ) Subdivision must be FHA approved Spot approval no longer available Do NOT trust MLS data-verify approval with Amerifirst LO
  6. 6. <ul><li>2 Years employment/self employment </li></ul><ul><li>Must be stable </li></ul><ul><li>Must continue for at least 3 years (Alien Visa) </li></ul><ul><li>Other verified income may be considered if more than 2 year history, if not, can be used as a comp factor </li></ul><ul><li>Condominiums must be FHA approved </li></ul><ul><li>FHA’s viewpoint on flipping </li></ul>Qualifying Notes
  7. 7. Appraisal Valuation Conditions These Valuation Conditions and protocol help the appraiser evaluate the standards required by the General Acceptability Criteria. The criteria are described below. It is helpful & facilitates the process if the following items are addressed prior to the appraiser viewing the property.
  8. 8. <ul><li>Known as Rehabilitation/Renovation Mortgage. Less Common – Much more comprehensive construction project </li></ul><ul><li>$5k minimum for repairs, but allows for all but one foot of the foundation to be torn down. </li></ul><ul><li>Requires a consultant </li></ul><ul><li>Maximum mortgage is lesser of: </li></ul><ul><li>Maximum FHA limit, or; </li></ul><ul><li>As-Is Value plus cost of rehab, or: </li></ul><ul><li>110% of “after improved” appraised value </li></ul>Most common Intended to facilitate uncomplicated improvements Allows up to $35,000 to be used after closing for repairs, which can be part of the improved value (no minimum threshold) No General Contractor or drawings required Does not allow for structural improvements and must use licensed and bonded Sub-contractors* Streamlined 2 Types of 203(k) Loans Standard Controlling the elements of the 203(k) process leads to a successful closing.
  9. 9. <ul><li>Roofs, gutters, downspouts </li></ul><ul><li>Heating, ventilation </li></ul><ul><li>Plumbing, electrical systems </li></ul><ul><li>Flooring </li></ul><ul><li>Minor non-structural remodel </li></ul><ul><li>Painting </li></ul><ul><li>Appliances </li></ul><ul><li>Windows, doors, existing siding </li></ul><ul><li>Well, septic systems </li></ul>203(k) Streamline Examples of eligible work under 203(k) streamline: Repair/Replace:
  10. 10. 203(k) Streamline <ul><li>Pool & equipment </li></ul><ul><li>Structural improvements requiring drawings, a general contractor or layered work </li></ul><ul><li>Relocation of a load bearing wall </li></ul><ul><li>New construction </li></ul><ul><li>Room additions </li></ul><ul><li>Repair of structural damage </li></ul><ul><li>Work not deemed easily completed in 6 months </li></ul><ul><li>Additional living units (if allowed by zoning) </li></ul>Examples of ineligible work under 203(k) streamline: For more information on the 203(k) program visit:
  11. 11. VA Loans <ul><li>Lender's appraisals (reviews) </li></ul><ul><li>Lender's inspections, except in construction loan cases </li></ul><ul><li>Loan closing or settlement fees </li></ul><ul><li>Document preparation fees </li></ul><ul><li>Preparing loan papers or conveyance fees </li></ul><ul><li>Attorney's services other than for title work </li></ul><ul><li>Photographs </li></ul><ul><li>Interest rate lock-in fees </li></ul><ul><li>Postage and other mailing charges, stationery, telephone calls, and other overhead </li></ul><ul><li>Amortization schedules, pass books, and membership or entrance fees </li></ul><ul><li>Escrow fees or charges a.k.a. Loan closing or settlement fees </li></ul><ul><li>Notary fees </li></ul><ul><li>Commitment fees or marketing fees of any secondary purchaser of the mortgage and preparation and recording of assignment of mortgage to such purchaser </li></ul><ul><li>Trustee's fees or charges </li></ul><ul><li>Loan application or processing fees </li></ul><ul><li>Fees for preparation of truth in lending disclosure statement </li></ul><ul><li>Fees charged by loan brokers, finders or other third parties whether affiliated with the lender or not </li></ul><ul><li>Tax service fees </li></ul><ul><li>The veteran cannot pay for appraisals requested by parties other than the veteran or lender. </li></ul>What Fees can the Veteran NOT pay? The following list provides examples of items that cannot be charged to the veteran as &quot;itemized fees and charges.&quot;