a complete guide to fha purchase loans

A Complete Guide to FHA Purchase Loan Options

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Presented By:Broadview Mortgage Corporation

Presenter:

Scott Schang

Contact Information:

Phone: [email protected]


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Presented By:Broadview Mortgage Corporation

Presenter:

Scott Schang




The Purpose and Goals of this Class

• To Create and Empower Home Owners

• Educate you about the FHA loan options available to purchase a home with minimum down payment

• Empower you with the ability to make educated decisions about your home financing options

• Encourage you to ask questions and get informed about the home buying process


Topics We Will Cover In This Class

• What’s new in 2009 with FHA financing

• A Complete Guide to FHA purchase loans

• “Red Flags” – What to watch out for

• Qualifying for the $7,500 Federal Tax Credit

• Wrap Up and Take Aways


Ask Questions throughout presentation

– You may type questions in at any time during the presentation – Questions box on your screen

– FHA loan specialists are standing by to answer your questions during the presentation

– This is an interactive learning environment. You will get the most value by having your specific questions answered

– The only dumb question is the one you don’t ask

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What’s New in 2009

• 2009 FHA Loan Limits– Based on MSA –up to $625,500– “FHA Jumbo” is anything above $417,000

• Results in slightly higher interest rates

• Down Payment Requirement– Increased from 3% to 3.5%

• Private Mortgage Insurance - PMI– Upfront PMI increased from 1.5% to 1.75%– Monthly PMI increased from .50% to .55%


Borrower Eligibility

• Credit Score Requirements– 580 Minimum Credit Score as a guideline– Can go lower on exception basis– 620 Minimum Credit Score – “FHA Jumbo”

• Loan amount over $417,000

• Non traditional credit lines temporarily suspended as of 4th quarter 2008– Lack of credit score or depth of credit

supplemented by alternative sources• Phone bills, utility bills, auto insurance…etc.

• Investors not accepting – Market Conditions



• Employment Requirements– Must have 2 year history of employment

• If in school or military provide transcripts or discharge papers

– Self Employed must have minimum 2 year history• Business license and tax returns

– Gaps in employment must be explained• Must be at new job for at least 6 months



• Income Qualifying Guidelines– TOTAL Scorecard automated approve/eligible

• Debt to income ratios approved

– FHA Manual Underwriting• Much more restrictive debt to income ratios

– Non Occupying Co-Mortgagors • Can use income of Co-Signer to help qualify• Income / Assets added to borrower’s

– All FHA Loans require full income documentation• Tax returns, W2’s, Pay Stubs



• Income Qualifying Guidelines– Converting Existing Homes into Rentals

• Bad Apples - Effective September 19th, 2008• Temporary exclusion of rental income from

vacated property– Must qualify for full PITI payments on both

homes.• Exception – Relocation with new employer or

transferred by the current employer– Must have executed 1 year lease – Copy of deposit check

• 75% Equity – Appraisal or balance vs. price


Borrower Eligibility Highlights

• Do not have to be first time home buyer

• No income limitations

• Flexible qualifying criteria

• Can own other properties

• Can use non occupying co-mortgagers to qualify


Property Eligibility

• 1-4 Units ok – Owner occupied only

• Loan limits increased for 2,3,4 units– Limits determined by MSA – See site for link

• No asset requirements for 1-2 unit homes– 3 months PITI required for 3-4 units

• Can buy any eligible property including short sales and foreclosures– Typically must be owned minimum of 90 days– Foreclosures are the exception


Property Eligibility

• Appraisal requirements are much more strict than conventional lender guidelines– Inspection is significantly more thorough– Property must be in “livable condition”

• Toilets work• Sinks work• Heating, electrical• Light switches, outlets

• Be cognizant of damage – especially to bank owned foreclosures


Down Payment and Closing Costs

• 3.5% Down payment required– 100% of down payment may be a gift

• Gift funds can be from relative, employer, government grant– No expectations of repayment– No liens against property

• Can use community seconds– City, State, Federal down payment assistance

programs ok– Will allow up to 100% of purchase price with

approved secondary financing



• Seller Paid DPA Discontinued Oct. 1st, 2008– Nehemiah– AmeriDream– HART

• Scramble to avoid discontinuation failed

• H.R. 600 introduced earlier this month– Reinstate seller paid DPA

• Earlier discussions of reinstatement – Higher mortgage insurance premiums



• May receive up to 6% of purchase price from seller– Can be used to cover closing costs– Can be used to “buy down” interest rate– Can not be used for down payment

• Buying down the interest rate– Ability to pay upfront fees to permanently reduce

interest rate– Significant long term savings

• May have challenges asking for max in competitive offer environments


Mortgage Insurance

• FHA Loans require 2 types of Mortgage Insurance Premiums - MIP

– Upfront Mortgage Insurance Premium• 1.75% of Loan Amount• Can be financed into loan amount

– Monthly Mortgage Insurance Premium• .55% of Loan Amount• Included in monthly payment• Included on mortgage statement

– MIP required for minimum 5 years• LTV must be 78% or less to remove


Mortgage Insurance

• Base Loan Amount = 96.5% of Purch Price– $200,000 Purchase Price– - 3.5% Down Payment– $193,000 Base Loan Amount

• Calculating your Up-Front MIP - Example– $193,000 Base Loan Amt. x 1.75% = $3,377.50

Added to Base Loan Amt = $196,377.50 Fin. Amt.• Payments based on this loan amount

• Calculating your MIP Payment - Example– $193,000 Base Loan Amt. x .55% = $1,061.50

Divided by 12 = $88.46 added to payment


“Red Flags” – What to watch out for

• Only use an FHA Approved lender!

• Many illegal “Branch” companies that are not approved to originate FHA loans

• Check official HUD website for approval status of lender - will provide link on site

• “Red Flags” include – a different company name and/or address on page 3 of loan application.


• The Dangers of Shopping for Interest Rate

– Interest rates are determined by the markets on a daily and sometimes hourly basis

– Your interest rate is not guaranteed until locked• Purchase – can not lock until you have a

property address

– There are many factors that go into determining your interest rate

• Credit scores, Loan amount, Loan to value, Loan purpose, condominium, occupancy

• Interest rate is the most abused loss leader in the mortgage industry!


• The Dangers of Shopping for Interest Rate

• The most common “excuse” that brokers, lenders and loan officers have for a change in rate is……………

– “Well, the interest rates change on a daily basis and that was the rate at the time, on that particular day”

• How can you argue with that, right?

You can now!

$7,500 Federal Tax Credit

• No-interest loan paid back over 15 years

• Must purchase on or before July 1st, 2009– Between April 8th, 2008 and July 1st , 2009

• Must be first time home buyer– Can not have owned in past 3 years

• 10% of purchase price up $7,500

• $7,500 - Married filing joint or Single taxpayer

• Married filing separate $3,750


• Home bought in 2008 can be claimed on 2008 returns

• Home bought in 2009 can be claimed on 2008 (or amended 2008) return

• Income limit is $150,000 for married couple– Phase out maximum is $170,000

• Income limit is $75,000 for single taxpayer– Phase out maximum is $95,000

• Loan is paid back in 15 equal installments– $7,500 credit – payment is $500 a year– Taken from tax refund or added to tax due


• You would be ineligible for Tax Credit if:– Your income exceed the phase-out range– You buy your home from a close relative. This

includes your spouse, parent, grandparent, child or grandchild

– You stop using your home as your main home– You sell your home before the end of the year– You are a nonresident alien– Your home financing comes from tax-exempt

mortgage revenue bonds - CalHFA– You owned another main at any time during the

three years prior to the date of purchase


Wrap up and Take Aways

– We are a direct Lender that specializes in FHA Refinance, Streamline and Purchase loans.

– We are a direct Lender that specializes in CalSTRS, CalPERS, CalHFA, VA, Conventional and Jumbo Loans

– We are more than happy to be your “second opinion” if you are already working with someone

– We are committed to educating and empowering homeowners - Join us for future classes


Wrap up and Take Aways

– You will receive a “Thank you” email with links to the information we’ve talked about here today

• Copy of power point presentation• Link to search HUD approved lenders• Link to search MSA Loan Limits• Dream Home Finder request• Secure on-line FHA loan application• Links to tools and resources we talk about in

all of our classes• A schedule of all upcoming classes

Upcoming Home Buyer Classes

• A Complete Guide to Buying Foreclosures and Short Sales

• A Complete Guide to Closing Costs and the Good Faith Estimate

• A Complete Guide to the CalSTRS 80/17 Home Purchase Program

• A First Time Home buyer’s Complete Guide to Credit and Qualifying

• A Complete Guide to the CalPERS Home Loan Program – No down option

• A First Time Home Buyer’s Complete Guide to Hiring a Real Estate Agent and Finding the Best Deals

Check back often for upcoming classes

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Presented By:Broadview Mortgage Corp.

Presenter:

Scott Schang



a complete guide to fha purchase loans

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