The FHA, who lately has originated almost a third of all home loans, is overhauling its system come April 5th of this year.  Why would this be done when its loan program is so successful, so popular?  Mostly this is being done in an effort to bolster it’s balance sheet and falling capital reserves.  In other words, the FHA is attempting to position itself better to ”manage its risk while continuing to support the nation’s housing market”.

Unfortunately this also means that it will become increasingly more difficult to secure an FHA loan.  Ugh.  So without further ado, here are the changes:

 The good news is that the biggest expected change (the proposed increase for the FHA minimum downpayment) didn’t make the final cut.  Luckily this means you can still get into a home with 3.5% down.  Whew. 

Also, the FHA’S NEW GUIDELINES institute a minimum FICO score of 580 to make this 3.5% downpayment, while requiring 10 percent down for any applicant whose credit score falls lower than this.  That being said, just because they say they will accept a score of 580 doesnt mean the lenders will too.  Individual underwriters, who are often more strict, will probably look to your file with much more favor if your FICO score is at least 620.  Just FYI. 

Overall, the trick to securing a solid FHA loan will be finding the perfect bank or lender for your particular situation.  As always, you can CONTACT US and we will review your requirements and find the best loan for you.  One of the benefits of working with us (as Brokers) is that we work with over 70 banks, and we can often find the best lender for your case!

Online mortgage calculators will help you in planning and acquiring a home loan for your dream home.  These loan mortgage calculators are user-friendly tools which will help you in knowing your monthly payments, interest rates, pay-off dates, amortization schedule, etc.  Have a look at the top 5 mortgage calculators:

• Home affordability calculator: This loan mortgage calculator will give you an idea about the loan amount that you can afford to buy a house. You’ll have to mention the required loan amount, interest rate, time period, etc to determine your monthly payments and required income.

• APR calculator: You will be able to calculate the annual percentage rate on your mortgage and get an amortization sheet of your monthly payments by using this calculator. You need to enter your interest rate, loan term, mortgage amount and additional costs to calculate APR. The additional costs would include the fees that you pay at the closing.    

• Refinance calculator: You can use this calculator to find out how much you can save by refinancing your mortgage at a lower rate. This calculator will let you know your payment after refinance, break-even period, interest that you save, etc. Thus, you’ll be able to know the minimum time-period that you need to stay in the property to recover the closing costs.

• Bi-weekly monthly payment calculator: This calculator will let you know the amount that you’ll save on interest if you make bi-weekly payments and not monthly payment. You’ll have to enter the loan amount, monthly payment and mortgage rates to get a comparison of the two.

• Qualifying loan calculator:  If you want to know the maximum amount for which you can qualify, check out this calculator. Here, you’ll get an amortization sheet showing your entire payment schedule. It will help you know the qualifying loan amount, property tax payments, private mortgage insurance, etc.

Using the online loan mortgage calculators will help you make the right decision regarding your home loan. These calculators will make it easier for you to calculate your payments thereby helping you know whether or not you can afford a loan. You can use the following for some of the calculation.

By Mortgagefit Community

Before we get into this too deep, lets first get an idea of what this seasoning requirement originally entailed.  Basically, since 2003, the FHA has required that a house is “seasoned” on the market for 90 days before it is allowed to be resold.  This means that an investor or any other person who purchased a property had to wait for approximately 3 months before they were allowed to sell the house to an FHA insured buyer. 

More than anything, this was done to prevent people from buying a house and immediately selling it at an inflated price to a naive or uninformed buyer.  Luckily, over the past several years, most of the riff raff has been weeded out of the market, and this type of practice isn’t as widespread, or even really possible (as you will see from the rest of this article). 

So, this is obviously good news for investors, but why is it good for home buyers?  Well, per the official waiver:

“…the 90-day resale restriction often hinders community stablization and revitalization.”  They also said:

“FHA borrower, because of the restrictions we are now lifting, have often been shut out from buying affordable properties.  This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity.” 

Basically what this means is that more houses will be put on the market that were otherwise just sitting there collecting dust.  Consequentally, this presents more options for people looking for the perfect house!

BUUUUUUT……before you get too excited, it should be noted that there are several specific nuances to the waiver that investors and homebuyers alike should both be aware of. 

4 IMPORTANT POINTS TO CONSIDER

1.  Seller MUST Hold Title

In other words, the person who is selling the house must legally and officially own the property, and thus, be on title.  In fact, FHA will expect to see the investor/seller as the owner of record as of the date the contract to sell to the FHA buyer is executed.  Long story short, no more back to back, same day closes to FHA end buyers.  Sorry. 

2.  You Still Need Short Term Funding

Basically what this means is that if the property doesnt sell immediately you need to be financially able to make the payments.  Be prepared to come up with short term funding for however long it takes to sell the house.  Luckily, in most cases, it is easier to find 30-60 day financing compared to 90. 

3.  Is There A Flipping Pattern?

This is an easy step.  FHA mainly wants to know that the subject property doesn’t display a history or pattern of previous flipping activity.  You can go and check the title from last year to see if the property has changed hands very often.  Best case scenario would be not at all. 

4.  The 20% Rule

If the sales price exceeds 20% of the previous purchase price, you will have to show proof that you actually made repairs making the property worth that much more.  This is done to ensure the sale is legitimate, and can include a full FHA inspection, or even a second appraisal.  The best way to combat this is to simply take accurate records as proof of what you did to enhance the value of the property.  Take plenty of before/after pictures, document the entire process, and you should be fine. 

Other Important Points:

 - All transactions must be arms-length

 - Assignments of a contract for sale will trigger a red flag.  No taking over deeds for people. 

LONG STORY SHORT, KEEP IT CLEAN AND STRAIGHTFORWARD! 

The better documented your case, the better chance you have of the process going smoothly.  As always, if you have any questions please don’t hesitate to CONTACT US and we will reply to your query as soon as possible.  I also urge you to read the original waiver from the FHA regarding the subject matter:

FHA WAIVER

Fortunately though, there is a new program available from the United States Department of Agriculture that offers 100% financing for people that live (or are looking to live) in rural areas.

Why would they do this?  Is it too good to be true?  Well, long story short, the government offers the option of “zero money down” so that people who live in rural areas (who may have always been renters) can finally have access to affordable mortgages. Consequently, this type of loan is often the best scenario for people who live in the country and want to find a place they can call home. 

Another amazing feature of this loan is that 100% of repairs that need to be made to the property can actually be finance into the loan based on “after repair value.”  What this means is that the USDA Rural Development Loan can also be considered a renovation loan as well.  Because of all these qualities, these loans are quite possibly the best option on the market today. 

So you may be asking, what features does this type of financing entail?  What can I do to make this work for ME?  Well, here are some of the benefits of the USDA Rural Development Loan:

- NOT ONLY FOR FIRST TIME HOME BUYERS - This isn’t like the tax credit!

- LOW INTEREST RATES – Just because you are getting a good deal doesn’t mean you will pay more over the long run.  Rates on these loans are generally better than VA and similar to FHA.

- NO PMI (MORTGAGE INSURANCE) - This makes your monthly payment even lower.

- NO LIMIT ON PURCHASE PRICE - Buy what you want!  (Property must still be reasonable for your income)

- NO MINIMUM FICO SCORE- People that have zero credit history may even qualify.  Those with a credit histoty should have a reasonably good score.  Call for more details.

- SELLER CONCESSIONS UP TO 6% - What this means is that the person selling the house can pay for all or some of your closing costs, which saves you even more money.

- NO CASH RESERVES REQUIRED - Most loan programs require you to have a certain amount of money saved up before you can purchase a home.  This is not the case with the USDA Rural Development Loan.

- 100% FINANCING!!! - NO DOWN PAYMENT IS REQUIRED.  That’s right. NO DOWN PAYMENT.

So next is the issue of actually qualifying for the loan.  Here’s what you need to do, and some of the main requirements involved:

 - You must be a legal US citizen or legal permanent resident.

 - Your income must qualify for the house or property you desire.  As a point of reference, your mortgage payment should not exceed 29% of your gross monthly income.

 - The property must be used as a residence (no farms or commerical deals).

 - You can’t already own a suitable residence in the same area as your proposed new property.

 - Your total family income should not be more than 115% of the median United States income.

Probably the biggest requirement for this type of loan is that the property MUST be in a qualified rural area.  What constitutes a qualified rural area? Well, mostly this has to do with Income and Population Density restrictions, but you may be surprised to find out just how many areas around Dallas and Fort Worth in fact qualify.  As always, you can call or CONTACT US and we will review your situation and see if you (or a house you desire) qualifies.  (free of charge too!) 

But the government didn’t stop there.  Not even close.  The new bill even makes more homeowners eligible to claim the credit on their taxes.  First-time homebuyers (those who haven’t owned a a home in the past 3 years) still qualify for the existing credit of $8000, but now those who have owned (and lived in) a residence for at least 5 years can claim a credit in the amount of $6500!

“The new version of the tax credit has the potential to stimulate the housing market even more than the old version due to the fact that more people will qualify under the new rules,” said Gibran Nicholas, chairman of the CMPS Institute, an organization that certifies mortgage bankers and brokers.

You might be asking “how does this crazy tax credit work?”  Well, the tax credit is applied in relation to the taxes you actually owe. For example, if you owe $8750 in taxes and then apply your $8000 credit, your new tax bill will be reduced to only $750!  If you only owe $500 you will get a credit back in the amount of $7500.  It’s that easy.  As always, you can still amend your 2008 return and take the deduction in 2008, as long as you closed on a home before November 6, 2009.

ONE IMPORTANT THING TO CONSIDER:

If you purchase a home and take advantage of the tax credit, you can’t sell your home within the first 3 years of ownership without the entire amount of the tax credit being recaptured. This means you will be required to give that money back to the I.R.S.  So, if you take advantage of the tax credit, plan to stay put for 3 years.  After that you won’t owe anything!

As always, if you have any questions about the tax credit, don’t hesitate to CONTACT US and we will get back to you blazing fast!  You can’t even imagine how fast we will get back to you!  Just try it!  I dare you!

Here are some of the basic guidelines to see if you might qualify for the tax credit.  First of all, a “first time home buyer” is considered to be someone who has not owned a home for the past three years.  As for the limit you can receive, just look at the purchase price of the home and take 10%.  The max is  capped at $8,000, and is subject to income limitations, meaning that if you are single you would need a modified adjusted gross income of $75,000 or less to qualify for the full credit.  Married couples need a gross income of $150,000. If you happen to make more than that, you may in fact be eligible for reduced credits.  The last main requirement is that you must live in the house as your primary residence for at least 3 years.

Honestly it would be a big mistake to miss out on this opportunity.  I don’t care who you are, but $8000 is a good chunk of change to get for buying a house.  We may never see something like this come about again.

To see a video explaining the tax credit in further detail, please CLICK HERE.

And if you don’t feel like doing the research yourself just CONTACT US and we will find out if you qualify.  Here at dfwmortgageguide.com we will do everything we can to get you in a new house and out of the rent race.

Getting yourself pre-qualified for a mortgage is a relatively simple process. It can be achieved as easily as contacting a loan officer and having them take down some general questions about your income, employment, and monthly expenses.

Once the loan officer has this information from you they will run your credit and and make an estimate of approximately home much money you can afford to borrow at the current interest rates.

After this is done you will get a “prequal letter” that will have this amount indicated on it.  Prequal letters are often given to realtors as a a form of good faith because they show that a borrower can in fact afford a house payment of a certain amount.

This way a realtor will know what price range of houses to show a borrower, and they also know that the borrower is working with a loan officer, and thus serious about finding a home.

Another benefit of getting pre-qualified is that it makes you much more desirable to someone who is selling their home. When there are multiple offers on a particular property, a seller will be much more inclined to go with a buyer who has already been pre-qualified, because by having already proved your creditworthiness you are a lesser risk than someone who has not!  It makes perfect sense!

So if you are interested in getting prequalified, or if you have any questions about finding a home in the DFW area don’t hesitate to CONTACT US and we will do everything we can to make it happen.

The truth is, a reverse mortgage can offer extremely beneficial assistance (monetarily) to a senior who may be out of options or who is just strapped for cash. But what exactly is a Reverse Mortgage?  How do they work?  What are the requirements for obtaining one?  All of these questions will be answered in the following guide.

In the most basic sense, a reverse mortgage is a special type of loan that lets you convert a portion of the equity in your home into cash. What this means is, the money you have built up over the years by making home mortgage payments can essentially be paid back to you. This is different than a traditional cash-out refinance or home equity loan because there is no repayment required until you no longer use the home as your primary residence. You can even choose whether to be paid all at once, in regular monthly advances, or in increments and amounts that you choose! Yippee!

To further explain, here are some of the most frequently asked questions and answers about Reverse Mortgages.

• Who can qualify for a reverse mortgage?

Seniors 62 years of age or older may qualify. There are virtually no income limits or qualifications you need to meet (even in regard to your credit).

• What kind of houses are eligible for a reverse mortgage?

The main establishing criteria for a reverse mortgage is making sure that the home in question is the borrowers primary residence (where you live most of the year). Primarily, reverse mortgages are taken on single family, one-unit homes. Some programs will also accept two-to-four unit buildings, as long as they are owner-occupied. Other programs even offer reverse mortgages on condominiums and manufactured homes, as long as they are built after June of 1976. Typically, mobile homes and cooperatives are not eligible for a reverse mortgage. Feel free to CONTACT US if you are interested in seeing if your home qualifies for a reverse mortgage.

• What fees will I run into if I decide to get a reverse mortgage?

Typically a reverse mortgage will have an origination fee, third party closing costs (such as an appraisal, escrow fees, and title insurance), and a monthly servicing fee. Whats good, though, is that these charges can be paid from the proceeds you receive from the reverse mortgage, which results in no immediate burden to you as a borrower (the costs are added to the principal and paid with interest when the loan becomes due).

• Is it true that if I got a reverse mortgage then the lender would end up owning my home?

This is definitely not true. Being as the borrower, you will still automatically retain the title to the property. The reverse mortgage lender is merely extending a loan to you. That being said, because you still retain title as a homeowner, you will remain responsible for paying such things as the hazard insurance, property taxes, and any maintenance required to keep the home in a livable condition.

• Does how much money I make (or don’t make) influence my ability to obtain a reverse mortgage?

No way! Since you won’t be required to make a monthly mortgage payment, there are (hence) no income qualifications!

• Can the bank take my home away if I outlive my reverse mortgage?

Absolutely not.  Your loan isn’t even due at that time either.  In fact, as long as you or another borrower (ie spouse) continue to live in the house as your primary residence (and you keep current on your taxes and insurance), you won’t need to repay the loan.

• Are there any stipulations or requirements in regard to how I use the money I receive from a reverse mortgage?

Nope.  You can you the money you receive for virtually anything under the sun (as long as you can afford it). This includes home improvements, health care expenses, vacations, groceries, etc, etc, etc. For many people, the funds received from a reverse mortgage are used to provide somewhat of a security blanket in case unexpected expenses arise.

• I still owe money on my existing mortgage.  Can I still get a reverse?

Of course.  You may be eligible to receive a reverse mortgage even if you still owe money on a first or second mortgage.  Actually, the funds you receive from the reverse can even be used to pay off whatever existing mortage you have!

• What are the main advantages of getting a reverse mortgage?

There are many actually, but here are some of the most significant:

1. A reverse mortgage lets you keep your independence by allowing you to remain in your home and retain home ownership.
2. There are NO monthly mortgage payments required. You are not required to pay back the loan or make any monthly mortgage payments until you permanently move out of the home.
3. Tax-free money. Because the money you receive from a reverse mortgage is not considered income, it is tax free and will not affect your Social Security or the benefits you receive from Medicare.
4. Freedom and flexibility. You are free to use the money from a reverse mortgage in any way you choose or deem necessary.

Do you have a question or comment for us about Reverse Mortgages?  Feel free to comment below or CONTACT US if you want to ask anything specific!

- Pate

Well, the reason for this is Private Mortgage Insurance, or PMI, and if it ends up that you are unable to make a down payment of at least 20% of the sale price, you’ll be required to obtain private mortgage insurance from your lender. But what is PMI, and why are you paying for it?

In the most basic sense, PMI protects the lender in the event that you default on your mortgage. Unfortunately though, it doesn’t protect you from anything. How much you will pay in PMI charges will vary depending on the size of your loan, the size of your down payment, and even the lender you use. Generally, the charge is equal to about one-half of one percent.

For example, let’s say you bought a home for $100,000 and were only able to put down a total of ten% ($10,000).  The loan amount would be $90,000 and the lender would calculate you monthly PMI by multiplying $90,000 by 0.005.  The end result would be an annual PMI charge of $450, which would add an additional $38 (approximately) to your monthly bill. But that’s enough math.  Let’s talk about how long you actually have to pay for PMI.  This is where the 20% comes in.

Luckily for you, PMI isn’t charged forever.  In most all cases, PMI is automatically dropped from your loan once you have paid down you principle balance by 20%. If you’re close to reaching this figure, it is worth calling your loan servicer and making sure your PMI is removed at this point. Also, luckily for you, if your home appreciates to the point where  your equity is over twenty percent, you can have the PMI charges dropped too. Obviously you will need a new appraisal to get this accomplished (which will run you a few hundred dollars) but you will quickly make that back by having your monthly payment reduced, if you do in fact proved that your home’s value has increased.

You should also be aware that, while the interest you pay on your mortgage is usually tax-deductible, PMI is not.

So what happens if you simply cannot afford to put 20% down on your mortgage and you really just don’t want to pay PMI? Well, fortunately there are a couple of options at your disposal.

TIPS FOR AVOIDING PMI

The main way to avoid paying for PMI to take out an “80-10-10″ loan, which involves getting two mortgages rolled into one.  The main loan would be 80% of the total sales price, the second mortgage would be 10%, and the last 10% would be your down payment.  It is likely that your second mortgage would have a slightly higher interest rate, but since the amount you are borrowing is much less, it would still be lower than paying one single mortgage with PMI.  You also could see additional savings because all of your interest would be tax deductible.  Yay!

Another way to get around paying for PMI is to take out a loan with a higher interest rate. Most lenders will agree to waive this charge if you pay the higher rate until your equity gets to 20%.  Once you reach that mark, your interest rate would be lowered.

The rate increase you would see will typically range anywhere from 0.5 to 1 percentage point.  Usually the higher your down payment, the lower the increase.  Again, the advantage to doing this is that the added interest is tax-deductible.

So in conclusion, PMI is just one of those things you are probably going to have to deal with if you are taking out a home loan and don’t have enough cash on hand to make a down payment of at least 20%. But don’t worry, probably anyone you know that has a house has had to deal with it.  And like I said, it automatically goes away when you pay down your mortgage enough.

As always, if you have any questions about PMI, don’t hesitate to CONTACT US and we will get back to you as soon as possible!

- Pate

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Believe me, all the different types of loans can be quite intimidating to someone uneducated on the subject.  In fact, most people in America don’t know hardly anything about their financing options.  But don’t worry. That’s to be expected.

BASIC LOAN TYPES

The type of mortgage that the majority of people today will get is know as the traditional fixed rate mortgage, or FRM. Over 70% of homeowners this year will get this type of financing for their new home. The main reason for this is that the FRM offers a much stronger sense of stability over the other types of financing. Whether the life of your loan spans 15 or 30 years, the interest rate of this loan is locked in at origination and will not change, no matter what happens to the economy or the mortgage market.

The other main type of loan is called an Adjustable Rate Mortgage, or ARM loan.  This type has an interest rate that is tied to an index, and can rise or fall depending on the current mortgage market.  In general, if the prevailing market increased during one adjustment period (which is specified when you close the loan) then your interest rate will rise, along with your payment.  Adversely, your payment amount will drop if the market drops.

The main reason some people decide to go with an ARM loan is that it will initially offer you a much lower interest rate, which means your monthly payment will be significantly cheaper.  That dark side is that your interest rate can sky rocket, leaving you with a mortgage payment that can be hard to pay every month.  Luckily, though, when you go to your closing, caps are usually set on how high your rate can go.  Be careful though. Make sure you know what you’re doing before you get setup in one of these loans.

OTHER LOAN TYPES

Payment Option ARMs. You may hear this type of mortgage referred to as a “flexible payment ARM.”  These loans have an interest rate that adjusts every month (like a regular ARM loan) but with no adjustment caps, meaning the sky is the limit.  The draw of these loans is that they allow homeowners to make a very low initial monthly payment, but unfortunately the amount will often jump up over time, and usually quite steeply.

Interest Only Mortgages. This type of loan allows borrowers to pay only the interest portion of their payment for a certain amount of time.  This is a good type of financing for the short term, because the principle of the loan is not paid down, and the outcome  is a lower monthly payment for the homeowner.  That being said, the interest only period doesn’t last forever, and once it expires you can expect your payment to increase due to the fact that you are repaying all of your principle over a shorter period of time.  Basically, the longer your setup your interest only period, the higher your monthly payment will be once it expires.

Balloon Mortgages. At first glance, these types of loans will very much resemble a traditional 30 year fixed rate loan.  The difference being that the term of the loan is almost always much shorter, usually around 5-7 years.  After this time limit is over, the remaining balance must be paid in one single lump sum.  In most cases a borrower will refinance once this point is met, or else pay the entire amount.

Biweekly Mortgages. CLICK HERE to read more about these types of loans.  They can take years off the life of your loan if done correctly.

As always, if you have any questions about the different types of loans, please don’t hesitate to CONTACT US and we will get back to you with an answer ASAP.

- Pate

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