Arizona FHA 203k Highlights

The FHA 203k loan program has become fashionable with the recession in the housing market. When a property is owned by the bank, chances are that the property may be in need of a little work and the FHA 203k streamline program is a great option. Some of the frequently asked questions we see about the FHA 203k include:

What exactly is an FHA 203k loan?

The FHA 203k mortgage is a rehab loan that works much like a development loan. The buyer of the home is able to acquire a home that is in need of repairs and is able to finance the repair work in the mortgage to correct items in the house. The FHA 203k consists of the purchase price of the home plus the construction costs for the work to be performed after close.

An FHA 203k Example:

• $100,000 purchase price of home
• $20,000 Repairs Needed (see a list of the most common FHA 203k repairs)
• $120,000 Total Loan Amount

How much are you supposed to write the contract for? With FHA 203k loans, the offer is the purchase price of the home only. Be sure not to include the cost of repairs anywhere in the sales contract or offer. In the above example, the purchase price on the sales agreement or offer would be $100,000.

Is the FHA 203k loan harder to qualify for than a traditional FHA loan?

Getting an FHA 203k loan is roughly the same as getting a regular FHA loan. What does it take to qualify for an FHA loan? Generally speaking, a credit score above 620, a good job and a down payment of 3.5%. Of course there are more details to being approved, but those are the general highlights.

How do I go about finding the right contractor for the work?

It is highly recommended that you work with a general contractor that can perform all needed repair work. Your loan officer can easily help recommend one – they should know at least one good contractor. It is also valuable that the contractor be experienced in FHA guidelines so that they can include any FHA required items in their contract.

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.

What are seller concessions on FHA loans?

Seller concessions are things that the seller agrees to do if you purchase their home. Seller contributions are limited to 6% of the purchase price. Seller contributions exceeding the 6% limitation must result in a dollar-for-dollar reduction in sales price when calculating the maximum mortgage amount.

Perhaps it is easier to identify what seller concessions *are not* – because these items involve something that is *not* considered a seller concession — rather an “inducement to buy” which is not allowed.

Certain expenses paid by the seller and/or an interested 3rd party to the transaction, on behalf of the borrower, are considered “inducements to purchase” and result in a dollar-for-dollar reduction to the sales price of the property before applying the maximum LTV factor. These expenses include:

• Seller Contributions exceeding 6% of the sales price;
• Contributions exceeding the actual cost of prepaids, discounts, and other financing concessions;
• Decorating allowances;
• Repair allowances;
• Moving costs;
• Personal property inducements (not considered part of the real estate for the area (i.e., car, boat, riding lawn mower, furniture, television, etc); and Other costs determined inappropriate by HUD. Sales commissions paid by an interested 3rd party on a borrower’s current residence can be considered an inducement to purchase, and should be subtracted from the sales price before applying the maximum LTV factor.

Have questions about seller concessions with an FHA loan here in Arizona? Be sure to speak with one of our loan officers who can help you understand what seller concessions are and aren’t.

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.

• The first is capacity. Are you making enough money to pay for the new loan without difficulty? In order to qualify for an FHA loan the combined gross monthly income of borrowers should normally be at least three times greater than the projected monthly mortgage payment (including taxes and insurance).
• The second is collateral. Do you have equity in your home to get a traditional FHA loan? Through the traditional FHA program one can refinance up to 97% of the current appraised value of a home. Through the new Homeowner Affordability and Stability Plan you can finance up to 105% of of the current value of the home.
• The final is character. This is the credit score required for traditional FHA loans. Your credit history comes into play with any home loan application. Lenders insist that borrowers show that they are accountable and that they assiduously seek to meet their financial obligations. The minimum credit score needed for an FHA loan is now 640.

If you feel that you would qualify based on the above requirements then you need to ask yourself whether you would be able to deal with the fees involved.

• Bank fees can range anywhere from about $1100 to $5000 depending on the size of the loan and the terms worked out. There are fixed fees that usually amount to about $1100 and then it is common for there to be a loan origination fee of at least 1% of the loan amount. 
• Title and escrow fees are fees charged by the title company and vary from state to state. It is common for these fees to tally $1000-2000. The larger the loan, the larger the title and escrow fees.
• Another cost are pre-paid items which are pre-payments on property taxes and homeowners insurance. FHA insists that taxes and insurance be included in the escrow account and paid monthly. While these aren’t fees (since you are simply paying ahead on taxes and insurance) they do need to be added to the loan amount or otherwise paid in advance.
• Finally, there is a 1.75% mortgage insurance premium that Uncle Sam requires in exchange for essentially co-signing on your FHA loan. This mortgage insurance premium (along with the mandatory monthly mortgage insurance fees) helps keep the FHA solvent and able to pay the banks back when FHA borrowers default on their loans. This fee does not apply to conforming loans refinanced under the Homeowner Affordability and Stability Plan.

Some other items you will need as you go through the process include: your last two years W2′s and recent pay stubs for income verification, plus two months of recent bank statements for asset verification. Other verifications are occasionally needed as well.

What to do next? Contact someone who can help you get started in the process and can get FHA loans done in as little as Ten Days!

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.

1. Bank Fees: These are fixed fees that can range anywhere from $1100-5000 depending on the size of the loan. It is also normal for there to be a loan origination fee equivalent to about 1% of the loan amount.
2. There will be title and escrow fees which are charged by the title company. They typically range between $1000-2000. The larger the loan, the larger the fee will be.
3. There is the cost of pre-payment on property taxes and homeowners insurance. FHA insists that taxes and insurance be included in the escrow account and paid monthly. While these aren’t fees (since you are simply paying ahead on taxes and insurance) they do need to be added to the loan amount or otherwise paid in advance.
4. There is a 1.75% mortgage insurance premium that is required by the government. This is what helps keep the FHA solvent and allows the government to be able to pay the banks back when FHA borrowers default on their loans. This fee does not apply to conforming loans refinanced under the Homeowner Affordability and Stability Plan.

So, after discovering how much it will cost you are you wondering what the benefits are?

Having government backing on a loan also means that borrowers can get up to 97% of the appraised value of a home with traditional FHA loans rather than the 80-90% limit most banks impose on conventional loans. FHA loans also allow you to get the rates of those with excellent credit. However, be aware that currently the requirement even for FHA loans is a credit score of at least 640.  FHA loans are often the best or only solution for people with not much equity or less than stellar credit.

The pros of refinancing into a fixed-rate FHA loan often far outweigh the cons of a slightly higher mortgage balance. If you are in an adjustable rate mortgage (ARM) that is about to go up or just in a bad loan in general you can often lower your monthly payments by hundreds of dollars. Not only does a lower monthly payment ease your month to month burden but you will usually save a lot of money in the long run in spite of the refinance fees discussed here. As a general rule, the longer you plan to stay in your home the more sense getting a refinance makes.

What to do next? Contact someone who can help you get started in the process and can get FHA loans done in as little as Ten Days!

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.

The FHA officially has no minimum FICO score requirement but the banks who lend the actual money have. Currently it is 640. There are ways to increase your score if you trying to qualify for an FHA loan.

The easiest way to raise your score quickly is to pay down your credit card balances. If you can bring them down to less than 30% of the credit limit your scores will shoot right up. Credit reports often have incorrect information. If you can document that a reported outstanding collection has already been paid or that other derogatory line items are incorrect you can often get the information deleted or ignored. In many cases debt collectors will accept 40% of an outstanding debt as payment in full.

When the number and size of collections aren’t overwhelming simply settling with the collector and getting paperwork to prove it is often the best approach. When someone’s credit history is especially beat up with old late payments, collections, bankruptcies, etc. being reported, the fastest way to get qualified for an FHA loan is often to work with a credit optimization specialist. There will be a monthly charge for this service, but working with a credit optimization specialist is often the only route to take for people with hammered credit histories but who need to refinance in the next six months.

Keep in mind that using such a service only works if you are able to make all of your current payments over the period you are working on your credit. If you are dealing with a loss in income and are currently behind on your monthly mortgage or other obligations sometimes a credit counseling company is the best bet. Working with such a firm can be a great way to get back on one’s feet financially. Typically they charge something between $40-50 per month. Be aware that going this route means that borrowers must make the credit counseling payments on time for a full year before qualifying for an FHA loan.

A credit score is also known as a FICO score. When you are applying for a home loan the banks that fund FHA loans require a credit check and they use what is called your “middle score” when determining your credit worthiness. There are three major credit bureaus in the US — Experian, Equifax, and TransUnion — and lenders require that your credit report be pulled at all three bureaus when you apply for a loan. A credit report that includes all three bureaus is called a tri-merge credit report. Determining your middle score is simpler than you might imagine; it simply means discarding the high score and the low score and using the middle score on a tri-merge credit report.

Besides your score there are some other credit issues that will disqualify you from getting a regular FHA Loan. If you have any of the following chances are a FHA loan is not for you.

• A chapter 7 bankruptcy in the last two years
• A foreclosure in the last three years
• A chapter 13 bankruptcy in the last 12 months
• Unpaid tax liens, judgments, or non-medical collections (Some medical collections are acceptable but non-medical collections must be settled/paid off)
• Recent 30-day+ late payments on mortgages, credit cards, or other obligations (if it looks like you are living beyond your means currently you likely won’t qualify for an FHA loan until you can get 6+ months of on time payments on your obligations).

If you would like to find out more about your qualifying for an FHA loan please contact us – we get documents to title in 10 days – Guaranteed!

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.

And if you live in Arizona and have bought your house in the last couple of years, chances are that you owe more on the mortgage than your house is currently worth.

Can you still take advantage of lower interest rates and refinance even if you owe more on your mortgage than your house is now worth?

You can with the FHA streamline without appraisal refinance program.

Last fall, HUD changed the guidelines on the FHA streamline no appraisal program and now if you are going to do an FHA streamline without appraisal, you can’t finance your closing costs into the loan. I thought this meant that FHA streamlines were pretty much dead — until interest rates went lower than I thought possible.

These changes now mean that anyone who wants to do a FHA streamline is going to be bringing in money to close your FHA loan under the FHA streamline no appraisal program — unless — interest rates drop significantly.

And interest rates have dropped to historic low levels.

Which means that you can now do a FHA streamline refinance without an appraisal and have it still make sense financially.

So if you are in the situation where you want to lower your interest rate and monthly payment but are worried that you can’t refinance because you owe more on your mortgage than your home is worth – don’t worry.

Just ask your loan officer about the FHA streamline without appraisal program.

More information about the Arizona FHA streamline refinance program

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.

There is more than one person right now who is frustrated with how difficult it can be to get financing for jumbo loans in today’s market.

Some lenders are doing them but have high down payment requirements and/or pristine credit score requirements – and the truth is that many lenders are not even doing jumbo loans at all.

But there is a program that may make sense to look more into if you are in the market for jumbo financing – the FHA jumbo loan program.

It is somewhat new – and it is even possible that it won’t be around very long.  The FHA jumbo loan program is that it was part of the legislation passed which was created by HUD. It is actually at risk of going away at any time.

But while it is available, the FHA jumbo loan program is great for people who are in the market for jumbo financing — the rates are low and depending on where you live in the country, FHA will allow you to finance up to $729,000 with just 3.5% down.

So for all of those houses that only a few years ago were $1m + and are now $500k? They might be a perfect candidate for FHA jumbo loans.

FHA Jumbo Loan Guidelines (The Highlights):

• Up to $729,000 financed. (based on the county loan limits published by HUD)
• 660 FICO score required
• 3.5% down payment
• 30 year fixed rates around 5%

Heck, there are even lenders who can get your FHA jumbo loan closed in ten days.

So if you are one of those people who have been frustrated by the process of getting “regular” jumbo loan financing, you might want to ask your loan officer about the FHA jumbo loan financing options and whether or not it is right for your situation.

Before it is too late and the program goes away!

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.

Top Five Benefits of an FHA Mortgage in Phoenix AZ

1. FHA Mortgages Have Low Fixed Rates – In the past, if you needed a mortgage with a low down payment or if you had bad credit, it is likely that you would have obtained a subprime mortgage with a high variable interest rate. But FHA loans offer low, fixed mortgage rates and help you stay in your home.
2. FHA Mortgages Help You Qualify if You Have Had Bad Credit – Truth be told, FHA has no minimum credit score requirement, but most FHA lenders in Phoenix now require that you have a 620 score or higher. Also, you also won’t be automatically disqualified if you have a foreclosure, bankruptcy, or short sale in your past.
3. FHA Mortgages Have Flexible Qualifying Criteria – FHA guidelines offer greater flexibility for evaluating borrowers. For example, FHA has a higher debt-to-income ratio tolerance than conventional mortgages, allow for gift programs, and allow for non-occupant co-signers.
4. Low Down Payment Requirement – FHA currently only requires a 3.5% down payment making it easier to qualify.
5. The Seller of the Home You Are Buying Can Pay Your Closing Costs – FHA currently allows the seller to contribute up to 6% of the purchase price toward closing costs.

FHA loans have been around for over 75 years. However, there are common misconceptions that exist about them. You may have heard that FHA mortgages in Arizona take too long or that they require too much paperwork. This is not true. But, many misconceptions about FHA mortgages in Phoenix still exist.

Applying for an FHA mortgage to buy a house in Phoenix is easy. You’ll save a good deal of time if you have:

1. your social security numbers for everybody applying for the mortgage;
2. a list of the addresses where you have lived for the last 2 years;
3. the name and number of your employer(s) for the past 2 years;
4. copies of your checking and savings account statements for the past 2 months;
5. and your last two recent paycheck stubs detailing your earnings.

We have had the opportunity to help numerous home buyers with their Phoenix AZ FHA mortgage. If you have questions and would like to find out more information, contact us today.

Steve Lines – 480-344-3662

Corbin Olsen – 480-580-1400

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.

Thinking about real estate investing? The FHA flip rules are something that you can’t afford to ignore.

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.