A Complete Guide To FHA Purchase Loans


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A Complete Guide To FHA Purchase Loans

  1. 1. A Complete Guide to FHA Purchase Loan Options <ul><li>Sponsored by </li></ul><ul><li>Broadview Mortgage Corporation </li></ul><ul><li>1-866-667-6724 </li></ul>
  2. 2. FHA Purchase Loan Options <ul><li>The Purpose and Goals of this Class </li></ul><ul><li>To Create and Empower Home Owners </li></ul><ul><li>Educate you about the FHA loan options available to purchase a home with minimum down payment </li></ul><ul><li>Empower you with the ability to make educated decisions about your home financing options </li></ul><ul><li>Encourage you to ask questions and get informed about the home buying process </li></ul>
  3. 3. FHA Purchase Loan Options <ul><li>Topics We Will Cover In This Class </li></ul><ul><li>What’s new in 2009 with FHA financing </li></ul><ul><li>A Complete Guide to FHA purchase loans </li></ul><ul><li>“ Red Flags” – What to watch out for </li></ul><ul><li>Wrap Up and Take Aways </li></ul>
  4. 4. FHA Purchase Loan Options <ul><li>Ask Questions throughout presentation </li></ul><ul><li>You may type questions in at any time during the presentation – Questions box on your screen </li></ul><ul><li>FHA loan specialists are standing by to answer your questions during the presentation </li></ul><ul><li>This is an interactive learning environment. You will get the most value by having your specific questions answered </li></ul><ul><li>The only dumb question is the one you don’t ask </li></ul><ul><li>Write number down now in case you get disconnected </li></ul><ul><ul><li>1-866-667-6724 </li></ul></ul>
  5. 5. FHA Purchase Loan Options <ul><li>What’s New in 2009 </li></ul><ul><li>2009 FHA Loan Limits </li></ul><ul><ul><li>Based on MSA –up to $729,750 </li></ul></ul><ul><ul><li>“ FHA Jumbo” is anything above $417,000 </li></ul></ul><ul><ul><ul><li>Results in slightly higher interest rates </li></ul></ul></ul><ul><li>Down Payment Requirement </li></ul><ul><ul><li>Increased from 3% to 3.5% </li></ul></ul><ul><li>Private Mortgage Insurance - PMI </li></ul><ul><ul><li>Upfront PMI increased from 1.5% to 1.75% </li></ul></ul><ul><ul><li>Monthly PMI increased from .50% to .55% </li></ul></ul>
  6. 6. FHA Purchase Loan Options <ul><li>Borrower Eligibility </li></ul><ul><li>Credit Score Requirements </li></ul><ul><ul><li>620 Minimum Credit Score – as of </li></ul></ul><ul><ul><li>660 Minimum Credit Score – “FHA Jumbo” </li></ul></ul><ul><ul><ul><li>Loan amount over $417,000 </li></ul></ul></ul><ul><li>Non traditional credit lines temporarily suspended as of 4 th quarter 2008 </li></ul><ul><ul><li>Lack of credit score or depth of credit supplemented by alternative sources </li></ul></ul><ul><ul><ul><li>Phone bills, utility bills, auto insurance…etc. </li></ul></ul></ul><ul><li>Investors not accepting – Market Conditions </li></ul>
  7. 7. FHA Purchase Loan Options <ul><li>Borrower Eligibility </li></ul><ul><li>Employment Requirements </li></ul><ul><ul><li>Must have 2 year history of employment </li></ul></ul><ul><ul><ul><li>If in school or military provide transcripts or discharge papers </li></ul></ul></ul><ul><ul><li>Self Employed must have minimum 2 year history </li></ul></ul><ul><ul><ul><li>Business license and tax returns </li></ul></ul></ul><ul><ul><li>Gaps in employment must be explained </li></ul></ul><ul><ul><ul><li>Must be at new job for at least 6 months </li></ul></ul></ul>
  8. 8. FHA Purchase Loan Options <ul><li>Borrower Eligibility </li></ul><ul><li>Income Qualifying Guidelines </li></ul><ul><ul><li>TOTAL Scorecard automated approve/eligible </li></ul></ul><ul><ul><ul><li>Debt to income ratios approved </li></ul></ul></ul><ul><ul><li>FHA Manual Underwriting </li></ul></ul><ul><ul><ul><li>Much more restrictive debt to income ratios </li></ul></ul></ul><ul><ul><li>Non Occupying Co-Mortgagors </li></ul></ul><ul><ul><ul><li>Can use income of Co-Signer to help qualify </li></ul></ul></ul><ul><ul><ul><li>Income / Assets added to borrower’s </li></ul></ul></ul><ul><ul><li>All FHA Loans require full income documentation </li></ul></ul><ul><ul><ul><li>Tax returns, W2’s, Pay Stubs </li></ul></ul></ul>
  9. 9. FHA Purchase Loan Options <ul><li>Borrower Eligibility </li></ul><ul><li>Income Qualifying Guidelines </li></ul><ul><ul><li>Converting Existing Homes into Rentals </li></ul></ul><ul><ul><ul><li>Bad Apples - Effective September 19 th , 2008 </li></ul></ul></ul><ul><ul><ul><li>Temporary exclusion of rental income from vacated property </li></ul></ul></ul><ul><ul><ul><ul><li>Must qualify for full PITI payments on both homes </li></ul></ul></ul></ul><ul><ul><ul><li>Must have 6 months reserves – Exceptions </li></ul></ul></ul><ul><ul><ul><li>Exception – Relocation with new employer or transferred by the current employer </li></ul></ul></ul><ul><ul><ul><ul><li>Must have executed 1 year lease </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Copy of deposit check </li></ul></ul></ul></ul><ul><ul><ul><li>75% LTV – Min. 25% Equity </li></ul></ul></ul>
  10. 10. FHA Purchase Loan Options <ul><li>Borrower Eligibility Highlights </li></ul><ul><li>Do not have to be first time home buyer </li></ul><ul><li>No income limitations </li></ul><ul><li>Flexible qualifying criteria </li></ul><ul><li>Can own other properties </li></ul><ul><li>Can use non occupying co-mortgagers to qualify </li></ul>
  11. 11. FHA Purchase Loan Options <ul><li>Property Eligibility </li></ul><ul><li>1-4 Units ok – Owner occupied only </li></ul><ul><li>Loan limits increased for 2,3,4 units </li></ul><ul><ul><li>Limits determined by MSA – See site for link </li></ul></ul><ul><li>No asset requirements for 1-2 unit homes </li></ul><ul><ul><li>3 months PITI required for 3-4 units </li></ul></ul><ul><li>Can buy any eligible property including short sales and foreclosures </li></ul><ul><ul><li>Typically must be owned minimum of 90 days </li></ul></ul><ul><ul><li>Foreclosures are the exception </li></ul></ul>
  12. 12. FHA Purchase Loan Options <ul><li>Property Eligibility </li></ul><ul><li>Appraisal requirements are much more strict than conventional lender guidelines </li></ul><ul><ul><li>Inspection is significantly more thorough </li></ul></ul><ul><ul><li>Property must be in “livable condition” </li></ul></ul><ul><ul><ul><li>Toilets work </li></ul></ul></ul><ul><ul><ul><li>Sinks work </li></ul></ul></ul><ul><ul><ul><li>Heating, electrical </li></ul></ul></ul><ul><ul><ul><li>Light switches, outlets </li></ul></ul></ul><ul><li>Be cognizant of damage – especially to bank owned foreclosures </li></ul>
  13. 13. FHA Purchase Loan Options <ul><li>Down Payment and Closing Costs </li></ul><ul><li>3.5% Down payment required </li></ul><ul><ul><li>100% of down payment may be a gift </li></ul></ul><ul><li>Gift funds can be from relative, employer, government grant </li></ul><ul><ul><li>No expectations of repayment </li></ul></ul><ul><ul><li>No liens against property </li></ul></ul><ul><li>Can use community seconds </li></ul><ul><ul><li>City, State, Federal down payment assistance programs ok </li></ul></ul><ul><ul><li>Will allow up to 100% of purchase price with approved secondary financing </li></ul></ul>
  14. 14. FHA Purchase Loan Options <ul><li>Down Payment and Closing Costs </li></ul><ul><li>Seller Paid DPA Discontinued Oct. 1 st , 2008 </li></ul><ul><ul><li>Nehemiah </li></ul></ul><ul><ul><li>AmeriDream </li></ul></ul><ul><ul><li>HART </li></ul></ul><ul><li>Scramble to avoid discontinuation failed </li></ul><ul><li>H.R. 600 introduced earlier this month </li></ul><ul><ul><li>Reinstate seller paid DPA </li></ul></ul><ul><li>Earlier discussions of reinstatement </li></ul><ul><ul><li>Higher mortgage insurance premiums </li></ul></ul>
  15. 15. FHA Purchase Loan Options <ul><li>Down Payment and Closing Costs </li></ul><ul><li>May receive up to 6% of purchase price from seller </li></ul><ul><ul><li>Can be used to cover closing costs </li></ul></ul><ul><ul><li>Can be used to “buy down” interest rate </li></ul></ul><ul><ul><li>Can not be used for down payment </li></ul></ul><ul><li>Buying down the interest rate </li></ul><ul><ul><li>Ability to pay upfront fees to permanently reduce interest rate </li></ul></ul><ul><ul><li>Significant long term savings </li></ul></ul><ul><li>May have challenges asking for max in competitive offer environments </li></ul>
  16. 16. FHA Purchase Loan Options <ul><li>Mortgage Insurance </li></ul><ul><li>FHA Loans require 2 types of Mortgage Insurance Premiums - MIP </li></ul><ul><ul><li>Upfront Mortgage Insurance Premium </li></ul></ul><ul><ul><ul><li>1.75% of Loan Amount </li></ul></ul></ul><ul><ul><ul><li>Can be financed into loan amount </li></ul></ul></ul><ul><ul><li>Monthly Mortgage Insurance Premium </li></ul></ul><ul><ul><ul><li>.55% of Loan Amount </li></ul></ul></ul><ul><ul><ul><li>Included in monthly payment </li></ul></ul></ul><ul><ul><ul><li>Included on mortgage statement </li></ul></ul></ul><ul><ul><li>MIP required for minimum 5 years </li></ul></ul><ul><ul><ul><li>LTV must be 78% or less to remove </li></ul></ul></ul>
  17. 17. FHA Purchase Loan Options <ul><li>Mortgage Insurance </li></ul><ul><li>Base Loan Amount = 96.5% of Purch Price </li></ul><ul><ul><li>$200,000 Purchase Price </li></ul></ul><ul><ul><li>- 3.5% Down Payment </li></ul></ul><ul><ul><li>$193,000 Base Loan Amount </li></ul></ul><ul><li>Calculating your Up-Front MIP - Example </li></ul><ul><ul><li>$193,000 Base Loan Amt. x 1.75% = $3,377.50 </li></ul></ul><ul><ul><li>Added to Base Loan Amt = $196,377.50 Fin. Amt. </li></ul></ul><ul><ul><ul><li>Payments based on this loan amount </li></ul></ul></ul><ul><li>Calculating your MIP Payment - Example </li></ul><ul><ul><li>$193,000 Base Loan Amt. x .55% = $1,061.50 </li></ul></ul><ul><ul><li>Divided by 12 = $88.46 added to payment </li></ul></ul>
  18. 18. FHA Purchase Loan Options <ul><li>“ Red Flags” – What to watch out for </li></ul><ul><li>Only use an FHA Approved lender! </li></ul><ul><li>Many illegal “Branch” companies that are not approved to originate FHA loans </li></ul><ul><li>Check official HUD website for approval status of lender - will provide link on site </li></ul><ul><li>“ Red Flags” include – a different company name and/or address on page 3 of loan application. </li></ul>
  19. 19. FHA Purchase Loan Options <ul><li>The Dangers of Shopping for Interest Rate </li></ul><ul><ul><li>Interest rates are determined by the markets on a daily and sometimes hourly basis </li></ul></ul><ul><ul><li>Your interest rate is not guaranteed until locked </li></ul></ul><ul><ul><ul><li>Purchase – can not lock until you have a property address </li></ul></ul></ul><ul><ul><li>There are many factors that go into determining your interest rate </li></ul></ul><ul><ul><ul><li>Credit scores, Loan amount, Loan to value, Loan purpose, condominium, occupancy </li></ul></ul></ul><ul><li>Interest rate is the most abused loss leader in the mortgage industry! </li></ul>
  20. 20. FHA Purchase Loan Options <ul><li>The Dangers of Shopping for Interest Rate </li></ul><ul><li>The most common “excuse” that brokers, lenders and loan officers have for a change in rate is…………… </li></ul><ul><ul><li>“ Well, the interest rates change on a daily basis and that was the rate at the time, on that particular day” </li></ul></ul><ul><li>How can you argue with that, right? </li></ul><ul><li>You can now! </li></ul>
  21. 21. Five 100% Financing Loans <ul><li>Wrap up and Take Aways </li></ul><ul><li>We are a direct Lender that specializes in CalSTRS, CalPERS, CalHFA, FHA, VA, USDA, Community seconds programs, MCC programs and homeownership education </li></ul><ul><li>We are more than happy to be your “second opinion” if you are already working with someone </li></ul><ul><li>We are more than happy to refer you to a qualified Real Estate Agent that shares our values for education and empowerment </li></ul><ul><li>We are committed to educating and empowering homeowners - Join us for future classes </li></ul>
  22. 22. Five 100% Financing Loans <ul><li>Wrap up and Take Aways </li></ul><ul><li>You will receive a “Thank you” email with links to the information we’ve talked about here today including </li></ul><ul><ul><li>Copy of power point presentation </li></ul></ul><ul><ul><li>Secure on-line loan application </li></ul></ul><ul><ul><li>Links to all the topics we discussed in class </li></ul></ul><ul><ul><li>Dream Home Finder request </li></ul></ul><ul><ul><li>Link to more information about Tax Credit </li></ul></ul><ul><ul><li>A schedule of all upcoming classes </li></ul></ul>
  23. 23. Upcoming Homebuyer Classes <ul><li>Hiring a Real Estate Agent and Finding the Best Deals </li></ul><ul><li>A Complete Guide to Closing Costs and the Good Faith Estimate </li></ul><ul><li>A Complete Guide to Buying Foreclosures and Short Sales </li></ul><ul><li>A Complete Guide to FHA Purchase Loans </li></ul><ul><li>A Complete Guide to the CalPERS Home Loan Program </li></ul><ul><li>Five 100% Financing Loans You Should Know About </li></ul><ul><li>Working to record and archive all classes for viewing anytime – I will keep you updated </li></ul><ul><li>Check back often for upcoming classes </li></ul>
  24. 24. Thank You for Attending If you enjoyed this class – Tell a friend  <ul><li>For more information </li></ul><ul><li>1-866-667-6724 </li></ul><ul><li>Presented by </li></ul><ul><li>Scott Schang </li></ul><ul><li>Sponsored by </li></ul><ul><li>Broadview Mortgage Corporation </li></ul>