FHA Streamlines are NOT Dead

There is some confusion out there regarding the new guidelines for FHA Streamlines. The new guidelines have been out since November of 2009. We didn’t know how some investors would interpret some of the new guidelines but those concerns are now gone. Some borrowers think they have missed the boat which is not true. Streamlines are still around and interest rates are still at all time lows. The FHA 30 year fixed rate is currently around 5.0%.

There are more changes to the streamline process than listed below but these are the biggest changes that will most likely affect you.

1. Net tangible benefit – FHA wants to see that you at least have a 5% reduction in your mortgage payment be refinancing. For example, if your principal and interest is $1,000 per month your new mortgage payment must be at least $950 or less. Pretty simple.
2. Verification of Income – The new guidelines require that you are “employed and have an income.” This was one of the grey areas that we did not know how it would be interpreted. All we require at Academy Mortgage is that you are employed though a verbal verification of employment. No paystub or other income verification documents are typically required.
3. Maximum Loan Amount – This is probably the biggest change. The new maximum loan amount for a streamline refinance without an appraisal is the current principal balance – UFMIP refund + the new upfront mortgage insurance premium. What this means to the borrower is that they cannot roll any closings or pre-paids/escrows into the loan. Having out of pocket expenses can be tough for some to come up with at closing. Keep in mind, there will not be a mortgage payment due for the month after your closing so this will help offset some of those out of pocket expenses. You will also get a check back from your current lender for your escrow account once they are paid in full. In summary, even though there will be some out of pocket expenses, you can reimburse yourself for those funds.
4. No Appraisal required – This is nothing new but I wanted to reiterate that there are still no appraisals required on FHA streamlines. This is one of the biggest benefits of the streamline loan and they did not take this one away.

If you have an FHA loan and currently have an interest over 5.5% it probably makes sense for you to do a streamline. If you have a $300,000 loan and save 1% off your note rate by refinancing you can save over $60,000 in interest!

Welcome to the Arizona Mortgage Guru blog, a great resource for all your home financing needs. If you're new here and like the content, you can subscribe to my RSS feed to get regular updates on all things related to mortgages. Thanks for visiting.

This blog is approaching its five year anniversary on Feb 1st, 2010. As I think about the coming milestone I wanted to share with you some changes that have been occurring on the back end recently.

At one point I used to update this blog on a daily basis.  There was a time when I used to be on the cutting edge of breaking news, information and home financing tips. However, I’ve slowed down a bit over the past few years. For starters I haven’t been even been in the industry since 2008, so you can understand why I haven’t been around. Aimee has been the primary blogger and for all intent and purpose was the “Arizona Mortgage Guru”.  She’s fantastic as a blogger, broker and everything else. However, things have not worked as we had hoped. In fact I’ve already made a few changes around here if you haven’t already noticed.

The first big change is this blog is no longer Aimee’s. It is now back in my (Shailesh’s) hands. So, I guess you can call me the “Arizona Mortgage Guru” again (but you don’t have to if you don’t want to). There are a number of reasons for this but I really can’t go into the details here right now. If you really want to know lets have coffee and I can tell you in person.

The other change to this blog is that I am blogging as a mortgage commentator not  a mortgage professional or broker. Since I was in the mortgage industry for a while and have intimate knowledge of the industry I can still share a lot about the industry. In fact I continue to follow the changes and events in the industry so I have expertise that I can share. Most importantly though, for better or for worse, I’m not tied to the industry. Hence am able to voice my personal opinions and thoughts freely.

There are more changes coming. I will be sure to update you as I make them. In the mean time continue to use this blog as a resource for all your home financing needs.

photo credit: Omer Wazir

Recently, I have had the opportunity to become familiar with Casas del Oso, a custom luxury home builder in Scottsdale, Arizona. They build the most beautiful homes based upon the romantic architecture of Spain, Italy & Mexico. Most of their homes are located predominantly in golf communities in the greater Phoenix area.

I had the chance to tour one of their homes, and I must tell you, the craftsmanship, care and passion is very impressive and nothing but stellar. Over the past few months, I have also had the opportunity to speak with Barry and Christy Smith, the owners of Casas del Oso. Barry is the architect of the homes they build. He has a deep passion for building the client’s life experiences and lifestyles into their homes. He takes great pride in the close relationships they build with clients and the authenticity and craftsmanship these homes bring to the neighborhoods. These homes are truly a work of art.

Barry explained to me how when meeting with clients, he takes their passion, heart and soul and creates an authentic home that meets their needs, wants and desires. As no two clients are ever the same, Casas prides itself on its innovative design. Barry feels that every home they build is custom designed and calculated to meet each homeowner’s specifications.

Don’t take my word for it; head on over their website and take a look at the slideshow under “the details” section. It is truly amazing!

For those of you who are looking to purchase your first home in 2010…with a little extra work, you could find yourself with $15,000 in down payment assistance. Newtown Community Development Corporation (CDC) is a nonprofit corporation begun in the 90s to address concerns about housing, neighborhood preservation and sustainable development. The vision of CDC is to increase affordable housing and support homebuyers through innovative programs.

Today I want to hone in on the down payment assistance CDC has to offer. It is called an Individual Development Account. Essentially, eligible homebuyers can receive $15,000 toward the purchase of a home, matching up to $3 for each $1 saved by the participants.

Now…the key with this program, as with any assistance program, is to read the fine print. To know if you should even consider applying, you must know the specific requirements of the program.

So, with that said…here are the guidelines:

•You must be a first-time homebuyer! (Remember, this means that you haven’t owned a home in the past 3 years)

•You must earn 80% or less of the HUD Area Median Income (1 person family: $36,900; 2 person: $42,150; 3 person: $47,450; 4 person: $52,700; 5 person:$56,900; 6 person:$61,150)

•As a part of the program, you must complete an approved homebuyer education and counseling program.

•Funds may only be used toward down payment or closing costs on a primary residence. (So…this means funds can’t be used for remodeling or for an investment home.)

•Your debt-to-income ratio cannot go above 43%. (This means that the total payment on the mortgage…principal, interest, taxes and insurance and home owners association fees…cannot exceed 43% of your total income)

•The funds are not a grant, but a forgivable loan. You must live in the home for 5 years. If you live in the home less than 5 years, the repayment will be prorated.

•The assistance money can be used for any property in Maricopa County.

•Your mortgage must come from a participating financial institution.

•There is a $435 administration fee, a $35 enrollment fee and a $400 closing fee.

•In order to receive matched funds, you must open an IDA savings account with a participating bank, make regular monthly deposits of $20 for a minimum of 10 months and you must open escrow on a home purchase within five years of enrolling in this program.

Since its inception, the IDA Program has provided more than $1.8 million in IDA match funds to first time homebuyers. There is, however, one issue! This money runs out fast! According to a Newtown representative I spoke with on the phone recently, in 2009 the money didn’t actually get released until about April and completely dried up by August. If you want these funds, you have to be on the ball! This means you apply for the program now , begin saving now , get pre-qualified now, find a realtor asap and be ready to put in offers come next April when the money is hot off the press. This program is for the diligent, for the planner, for the go-getter!! And if that is what you are, I have no doubt that you will be the recipient of these funds in 2010.

It has been a while since I last provided an interest rate chart on this blog. Plus I was curious to see what the graph would look like. I knew rates were lower than earlier this year, but it’s always nice to see it plotted out.

As you can see in the chart below, after peaking at about 5.60% in the first week of June this year, the 30 year fixed rate has been hovering very close to 5.00%. The 15 year mortgage is also on a similar trend but at a slightly lower rate.

The good news is rates remain at historically low levels. The graph above is based on an average weekly mortgage rates provided by Freddie Mac. Of course the exact rate you receive is dependent on many factors.

Now that subprime loans are a faint memory of the past, we often look to the FHA loans to fill in the void. Not that we miss those ugly sub primes all that much. But alas, FHA does provide a hearty loan for those who may have had a shaky credit past.  So, here are a few fun facts and figures on the famous FHA loan.

1)  You do not have to have perfect credit to qualify for an FHA loan! Yes, this is great news. In fact, even with a bankruptcy or a mortgage late, it is easier for you to qualify for an FHA loan than a conventional loan.

2)  FHA loans have a low 3.5% down payment. This money can come from a family member, an employer or even from a charitable organization as a gift. Most other loan programs do not allow this unless you have a much larger down payment or 5% of your own money invested.

3)  FHA rates are competitive! Believe it or not, because the Federal government insures these loans, they offer comparable rates. Your rate won’t be sky high if you opt for FHA instead of a conventional mortgage. The government makes sure of this!

4)  FHA helps you stay in your home. This may have sounded funny a few years ago. But today this is extremely relevant! The FHA has been in place since 1934. They want to protect the folks who have bought. FHA has various options to help keep you in your home should you run into difficulties and to help you avoid foreclosure in the long-run.

5)  You can buy or refinance various types of new or existing homes on an FHA loan: A one-unit, single family home; a duplex, triplex or four-plex; a condominium unit or even a manufactured home (provided the manufactured unit is on a permanent foundation). Sorry, no houseboats as of yet!

6)  Finally, for qualified buyers FHA mortgages are assumable!  This means a buyer of your home may take over your existing mortgage if they qualify.  This may help you sell a home with an FHA mortgage down the road if interest rates have gone up.

So, there you go. A few little details on the famous FHA loan.  Most likely tidbits you have heard before, but worth remembering for the day you may choose to use an FHA loan.

HUD’s internet site provides plenty of additional information. I also suggest talking to your realtor about their experience with FHA clients.  And, if you want to see if you qualify for the FHA loan, just give Mike or me a call. We can let you know in no time!

photo credit: Kamal H.

Time is a runnin’ out! Here is one last call to all you FIRST-TIME HOME BUYERS! Don’t delay. Get those offers in ASAP.  As I am sure you have heard you are eligible for up to an $8000 tax credit on your 2009 tax return.  And when they say tax credit that is what it is. It is a dollar for dollar reduction of what you owe the government. Very often this will mean cash back to you!! $8000 could be a new car.  $8000 is one heck of a vacation! Or for those prudent among us…$8000 is a mighty fine cushion in one’s bank account, come that rainy day.

Now here’s the rub. If you want to be able to take advantage of this fantastic opportunity, you need get qualified now, have your realtor write the offer, get it accepted and get that home into escrow immediately! No pressure here!  In order for you to close on this by the November 30th, 2009 deadline you will want to get an offer accepted in the next few weeks!

Now, to take off the pressure just a bit there may be a chance this tax credit will be extended into 2010. But, we don’t know this for sure. If you wait, it is a gamble. So, I suggest you do your absolute best to find that home now!

Now, let’s talk detail. What exactly does it mean to be a first-time homebuyer? Well, technically you can have owned previously. However, you may not have owned in the full three years prior to the purchase of this home. So, if you sold a home 2.9 years ago…sorry! But, if you sold a home four years ago, and rented in the meantime, you are eligible!

You are probably wondering how much you will really receive. Yes, that is an excellent question. If you were to purchase an $80,000 home you could receive the maximum tax credit of $8000. Essentially, your tax credit is 10% of the purchase price of the home. If you happen to be buying a home that is less than that price your tax credit will be less than the max allowed.  Simply calculate 10% of the home value and you have your amount.

Now let’s talk a bit about what types of homes qualify for this tax credit. Thankfully, any home that would be considered a principal residence works! This includes single-family homes that are detached, attached homes like townhouses and condominiums, manufactured homes and even houseboats! Do keep in mind that this program does not allow you to purchase a home from your parents, grandparents, children, grandchildren or spouse.

So…get out there, one and all! Let’s take advantage of this fantastic program and pray that the government finds it in their heart to extend this ever-so-useful credit into 2010! Please contact us for further questions and go to the tax credit site for more detailed information!

photo credit: wilhei55

The much coveted, desired and advertised $8,000 first time homebuyer tax credit may be extended after all.  Here is the latest:

WASHINGTON (Reuters) – The U.S. Senate should act later this week to extend a $8,000 tax credit for first-time home buyers that is scheduled to expire soon, Democratic Sen. Bill Nelson said on Monday.

“We should be able to extend that later this week,” Nelson, a member of the Senate Finance Committee, told reporters before joining President Barack Obama on an Air Force One flight to Florida.

“The existing law ceases to exist on November 1. This would be an extension for a limited period of time,” Nelson said.

We’ll keep you posted.

The $8,000 firs time homebuyer tax credit won’t last forever.

It’s set to expire by the end of the year.

Made me think of this video:

Now read this overview on why you need to get moving to take advantage of this money.

In an era of the credit crunch a common belief among borrowers is that they can no longer get zero down payment loans. While the free wheeling days of yesterday is certainly past us, there is still one loan program available that has a zero down feature. This zero down mortgage is available with a USDA Guarantee Rural Housing Mortgage.

This loan is not available to everyone and there are restrictions, but there are plenty of borrowers out there for whom this can be a great fit. The USDA Guarantee Rural Housing program is available to homebuyers purchasing a home in a rural area. The area must be defined as rural by USDA Rural Development and eligible properties cannot produce income (so no investment properties allowed). To determine if a property is within an approved area the USDA website has tools to help you identify them. So, if you have a property in mind, go ahead and enter it in and see if the property is located in an eligible area.

There are many advantages to the program. Such as:

1. 100% financing for first-time and repeating homebuyers.
2. No limit on seller contributions of gift funds from acceptable family, friends or non-profit organization.
3. No Maximum loan amount.
4. 30 year Fixed Rate.
5. No monthly mortgage insurance.
6. No reserve requirement (you do not need to show you have sufficient money to cover a mortgage payment for 2-3 months)

Keep in mind that even if you do meet the property requirement there are other requirements specific to your situation. So for borrowers to qualify they must be purchasing a primary residence, not own any other real estate and must meet income limitation requirements. Additionally, income from all household members over the age of 18 must be counted in household income. This household income may not exceed the moderate income levels set by the USDA for the area. Again the USDA website has the details to see if you meet this income limitation.

The USDA Guarantee Rural Housing program has become to mortgage of choice for most borrowers who qualify for the program and want to put a minimal amount down. Arizona homebuyers purchasing a home in the towns of Maricopa, Buckeye, Queen Creek and many other communities will find this mortgage to be a very attractive option.