Download - A Complete Guide To FHA Purchase Loans

Where homeownership education takes flight!

A Complete Guide to FHA Purchase Loan Options

Sponsored by

Broadview Mortgage Corporation

1-866-667-6724


FHA Purchase Loan Options

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

• 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

Write number down now in case you get disconnected

1-866-667-6724



What’s New in 2009

• 2009 FHA Loan Limits– Based on MSA –up to $729,750– “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– 620 Minimum Credit Score – as of – 660 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• Must have 6 months reserves – Exceptions• Exception – Relocation with new employer or

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

• 75% LTV – Min. 25% Equity



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!


Five 100% Financing LoansWrap up and Take Aways

• We are a direct Lender that specializes in CalSTRS, CalPERS, CalHFA, FHA, VA, USDA, Community seconds programs, MCC programs and homeownership education

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

• We are more than happy to refer you to a qualified Real Estate Agent that shares our values for education and empowerment

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


Five 100% Financing LoansWrap up and Take Aways

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

– Copy of power point presentation– Secure on-line loan application– Links to all the topics we discussed in class– Dream Home Finder request– Link to more information about Tax Credit– A schedule of all upcoming classes


Upcoming Homebuyer Classes

• Hiring a Real Estate Agent and Finding the Best Deals

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

• A Complete Guide to Buying Foreclosures and Short Sales

• A Complete Guide to FHA Purchase Loans

• A Complete Guide to the CalPERS Home Loan Program

• Five 100% Financing Loans You Should Know About

• Working to record and archive all classes for viewing anytime – I will keep you updated

Check back often for upcoming classes


Thank You for AttendingIf you enjoyed this class – Tell a friend

For more information

1-866-667-6724Presented by

Scott SchangSponsored by

Broadview Mortgage Corporation

Download - A Complete Guide To FHA Purchase Loans

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