Why use FHA?
Buyers need to have a better understanding of FHA financing solution and
confidently see it as a viable option. First time home buyers especially can
use FHA financing to their advantage because of the flexibility and
accessibility of it. So, what is FHA financing? How can you inform yourself
about it?
A few tips on FHA:
- FHA has been around since 1934
- FHA was created to stabilize the US economy during the Great Depression
- Millions of home buyers have used FHA loans in every state
Is FHA still relevant in 2009?
- FHA will likely be used on more homes in 2009 than any other loan
solution.
- FHA has been used in every market - soft or not.
- FHA is buyer and seller friendly.
High Points: Buyer Perspective
- Investment Requirement is low (only 3.5% down payment)
- May use gift for entire investment
- Gift income from family, employer, or other sources
- Generous qualifying ratios
- 33 Housing (Newer Home)
- 45 Total Debt (Newer Home)
- 31 Housing (Older Home
- 43 Total Debt (Older Home)
- Expanded ratios with an AUS approval
- Minimum 620 Credit Score
- Properties built before 1978 must have lead based paint disclosure
- Investor driven (FHA supported)
- Credit and Bankruptcy
- Approval Chapter 7 Bankruptcy in 24 months with re-established credit.
- Approval Chapter 13 Bankruptcy in 12 months with re-established
credit.
- Non Occupying Co-Borrower can help
- Occupying borrower does not need income, employment or assets.
- This is often used by parents helping their children buy first
home.
- Certain repairs/improvements can be financed into purchase (203K
Streamline)
- Energy efficient items may be financed into the purchase transaction.
- Eligible on 1-4 family home purchases
- Eligible on condominium purchases
- 51% Owner Occupancy Required
- Great interest rates available
- 15 year and 30 year terms available
- ARMS with caps:
- Temporary interest rate buy downs
- Lowers payments in first few years
- Must qualify at note rate however
- Refinancing
- Borrower may be able to refinance to a lower interest rate without credit or
appraisal
- FHA may help homeowner in financial distress
- Loss Mitigation
- Partial Claims
- Pre-foreclosure sale
- Deed in lieu of foreclosure
High Points: Seller Perspective
- Increased the number of buyer prospects.
- No requirements for the seller to pay any special closing costs (same as
conventional).
- Takes no additional time for appraisal or processing.
- No additional paperwork.
- Properties built before 1978 must have lead based paint disclosure
- Seller can contribute to buyer's transaction costs and reduce total cost for
buyer.
- Seller can fund a temporary interest rate buy down.
- This helps reduce the monthly payment making the purchase more affordable
during the first few years.
- Repairs can be financed
- Some repairs can be taken care of after closing.
- This helps sellers that can't afford to repair the property before
closing.
- FHA appraisers are selected rather than assigned.
- This helps keep the appraisal process competitive
- Cosmetic repairs are no longer required.
- Repairs concerning health and safety are required.
- FHA appraisals are now like conventional appraisals.
Take advantage of FHA when making your offers
•· 203B for Single Family Homes
•· 234C for Condos
•· 203K Rehab (Streamline)
Seller Contributions
- Seller may contribute up to 6% (higher contributions are possible but
generally not practical)
- Contract should state the contribution will be applied to buyer's closing
costs in the following order:
- Recurring transaction cots (escrow items like home owner's insurance,
property taxes)
- Discount points and buy down funds
- Non-recurring transaction (appraisal, credit report, processing fee and
related title work)
Personal Property
- The sales contract should not reflect the sale of the personal property.
- If contract reflects personal property, the impact can be mitigated by
including it in a separate addendum for Non-Realty Items.
Additional Forms
- FHA Real Estate Certification
- HUD Amendatory Clause
- HUD Inspection Disclosure
A special thanks to:
Roger Ryman
Certifed Mortgage Planner
Prime Lending
550 Post Oak
Blvd Ste. 350
Houston, TX 77027
713-446-9666
Cell
rryman@primelending.com
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Sincerely,
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Realtor, ABR, e-Pro
Keller
Williams Houston Metropolitan
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Online at www.HoustonHeritage.com
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