Posts Tagged FHA loan

FHA allows “flipping” through 2011

Until last year FHA would not insure loans on homes that had been owned less than 90 days in an effort to thwart property inflation through flipping schemes.  However, last year in an effort to stimulate home sales and reduce the inventory of foreclosed homes on the market HUD waived the 90 day rule, allowing real estate investors to be able to sell homes that they had owned for less than 3 months to buyers utilizing FHA insured loans with only a 3.5% down payment.

HUD has announced that they are extending this waiver through 2011.  The following conditions apply to the sale of these homes:

  • It must be an arms-length transaction with no identity of interest between the buyer and seller.
  • The seller holds title to the property.
  • There are no sales of the property or multiple transfers of title within the previous 12 months.
  • The property has been marketed openly and fairly.
  • If the selling price of the property is more than 20% above the purchase price the seller must provide proof of repairs, rehabilitation and renovation costs and/or a second appraisal to substantiate the increase in value.
  • A property inspection is done and the report is provided to the buyer before they close on their loan.

This is great news for anyone looking to take advantage of the current marketplace and either looking to get a great deal on a home or for real estate investors looking to pick-up more properties this year.

As always, feel free to contact me with any questions you may have.

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Wall Street is upside-down, but Main Street Salt Lake is rightside-up

Sure Wall Street can’t figure itself out, but in reality little has changed here on Main Street

1. Salt Lake City
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You wouldn’t know it by the news, but yes, banks are still lending money. After all, that is how they stay in business and right now that is their number one priority. So although W

all Street is upside down and can’t quite figure itself out, here on Main Street Salt Lake City, UT it’s really business as usual.

Sure, there are a few changes, such as Stated Income loans are harder to come by, and when you do find them they require bigger down payments than before. But for the most part not much else has changed. People can still buy houses, people can still refinance, and banks are still loaning money to do both. And historically good rates.

What we have seen here on Main Street is a return to the old system of lending based on “The Three C’s”: Credit, Capacity and Collateral.

Credit refers to a borrower’s FICO or credit score. The minimum credit score requirement has been raised. But even with that, FHA will still loan down to a 580 FICO.

Capacity refers to a borrower’s ability to afford the monthly payment. This hasn’t changed a whole lot as far as the debt-to-income ratios allowed by lenders, but what has changed is as I stated above, Stated Income loan products are not common anymore. So a borrower has to be able to prove their income through paycheck stubs, tax returns, or both.

Collateral refers to savings: how much does the borrower have as a down payment and how many months of additional mortgage payments would the borrower have left over after making the down payment. Lender guidelines vary, but FHA is still the best for the smallest down payment and little or no additional reserves needed.

This down payment can also come from a number of sources, such as family, friends, employer, city, county or state grant, etc. What has changed is the elimination (hopefully temporarily) of seller assisted down payment. This is where a third party, such as Nehemiah, funds the down payment in cash in behalf of the seller who is gifting the down payment to the buyer from the equity in the home. At closing Nehemiah (or other down payment assistance program) get’s their money back from the proceeds of the loan.

I feel this is a great program that not only helps people buy homes, but is also a great tool that helps sellers sell their home quickly without having to make a bunch of concessions in price, etc. Many Utah homeowners have used this program to buy homes, so I urge you to support H.R. 6694 which will lift the ban on seller-assisted down payments. It could help you or a family member buy a home, or help you or a family member sell one.

So now is still a good time to buy a home. Rates are still great, inventory levels are high in Salt Lake City and throughout Utah, sellers are willing to negotiate a deal, and short-sales and foreclosures (though not as numerous in Salt Lake as in other areas of the nation) can be a bargain for a home buyer and offer instant equity.

Just be sure to have me get you pre-approved for a home before you go looking. Cash is king right now, and having a pre-approval letter (not a pre-qualification letter) is huge leverage when negotiating with a seller or a bank on a short-sale.  You can apply online on my website .  There are also a number of calculators you can use to figure affordibility or payments on a new mortgage loan.

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