Monthly Archives: March 2013

What is an FHA Spot Loan?

Weaving through the myriad of guidelines along the road to an FHA loan for a condominium, you run into a roadblock that says the entire condo project must be FHA approved. You could ask the homeowners association to apply for FHA approval and change their bylaws, but if there is little or no chance of them making the effort, then you could try an FHA spot loan.

FHA created the spot loan provision specifically for such an occasion. Of course, there are still many guidelines that determine if a condominium project will qualify for an FHA spot loan:

  • 130882998The homeowners association cannot have a right of first refusal restriction on sales.
  • Condominiums must provide undivided ownership of common areas by unit owners.
  • The condominium project cannot be subject to additional phasing or annexation.
  • No special assessments or legal action can be pending against the association.
  • Common areas must be under the condo association’s control for at least one year.
  • At least 90 percent of the total units in the condo project have to be sold.
  • At least 51 percent of the total units in the project must be owner-occupied.
  • No adverse environmental factors affecting the project or units are allowed.
  • No single entity can own more than 10 percent of the total units in the condo project.
  • The units must be owned in fee simple or held under a lease hold acceptable to FHA.
  • For projects over 30 units, no more than 10 percent of the units can have FHA loans, and for projects of 30 units or less, no more than 20 percent of the units can have FHA loans.

The FHA spot loan program is designed to provide you with an opportunity to purchase a unit in a non-approved condominium project where FHA involvement is limited. It’s not to be used to try and circumvent the general requirement that a condominium project be approved before a mortgage on a unit can be insured for an FHA loan.

You are not expected to research all the items listed above for compliance. It’s the job of an FHA approved lender to make sure all the program requirements are satisfied to fund a spot loan.

How FHA 203(K) Loan Benefits 1st Home Buyers | Part 1

As a 1st home buyer, searching for the right home within Southern California market offers a long list of home characteristics to consider. For example, one such question is ‘are you looking to purchase a condo or single family residence?’ Another question many 1st home buyers are finding themselves considering is if they should buy a home that is in either in need of repairs or is in mint condition? The price for both can be a substantial difference.

During one’s search, home prices for ‘fixer uppers’ versus ‘turn key’ homes can be either make or break a 1st home buyers ability to qualify. Being open to purchase a home in need of repairs in any of the Orange County, Los images (42)Angeles, or Ventura areas has a lot of big benefits in financial gain, as long as you are willing to put in the time and care into the home. If you are, you can save a lot of money in various areas of the home’s long term expenses and be able to get ahead by building equity once the repairs are made.

As an FHA 1st time home buyer, one FHA loan program currently available and designed to help cover needed repairs in homes is a FHA 203(k) loan. The U.S Federal Housing Administration (FHA), a department operated by the Department of Housing and Urban Development (HUD), works to aid in buyers across the board by guaranteeing approved loans made by other lenders that fall within their set of FHA guidelines. Amongst many of the programs offered, FHA created the Section 203(k) program to provide home buyers and owners with a tool targeted to improve neighborhoods and community revitalization, as well as, open opportunities for homeownership to others in need of a purchasing opportunity.

To help further understand what a 203(k) loan is and how can help 1st home buyers through the opportunities it provides, here are a few key points to know about the FHA 203(k) loan program:

FHA 203(k) and 1st home buyers |
• Homes on the market and in need of repairs often are listed at a lower than their potential price.
• With large amounts of homes in foreclosure, the foreclosure process can often take some time. With no homeowner caring for the home, its’ condition often falls below its’ neighborhood worth.
• This provides opportunities for 1st home buyers to purchase a home below the market and qualifying for a 203(k) FHA loan to later make the repairs; thus bringing up the home value and equity for the new home owner

Types of properties available in FHA 203(k) loans in Orange County, Los Angeles, and Ventura |
• Condominiums
• Single-family residences
• One-to-four unit properties

FHA 203(k) includes wide range of repairs approved |
• Elimination of health and safety hazards
• Changes to aesthetic appeal and elimination of obsolescence
o New exterior siding
o Home additions (i.e. second story, covered porch, stair railings, attached garage/carport)
o Energy conservation
o Accessibility and home functionality for disabled people
o Labor, designs, and materials needed for damage improvements (i.e. water damage, fire, etc)
• Mortgage payment coverage up to 6 months during construction/home repairs

Overall, an FHA 203(k) loan allows 1st home buyers to benefit from qualifying for a FHA loan program which provides low interest rates, lower down payments, and higher mortgage home loan amounts, while providing aid in making home improvements that enhance home appearance and quality that puts equity back into the home. With many gains to be received by any FHA 1st time home buyer, before making an offer on a home, review this program with your lender and research the homes in your ideal market…you may find your diamond in the rough.
Visit next week’s post for Part 2 of How FHA 203(K) Loan Benefits 1st Home Buyers and learn more about this FHA loan program and steps for as a FHA 1st time home buyer on how to attain this type of loan for you and your family.

Is an FHA Loan Still a Good Deal?

The Federal Housing Administration (FHA) is an agency that aims to assist hopeful future homeowners to successfully gain ownership of a property. For one, FHA loans are widespread among those who have difficulty in financing. However, any borrower must see both sides of this loan so a profitable venture could be expected in the end.

130882668Basically, an FHA loan enables a buyer to give a small down payment upon purchasing a home. Say, he only has to pay 3 percent of the purchase price as the initial payment. Acquiring this type of loan may be helpful for current homeowners to finance remodeling a home, obtaining home repairs or home energy-efficient improvements. This could also be used to refinance current loans. This loan is also advantageous for sub-prime borrowers as there is no prepayment penalty involved.

All FHA insured mortgages are assumable, typically beneficial for sellers. For example, a financially capable buyer may claim responsibility of the seller’s mortgage. The buyer would take over the loan so the seller would be saved from scouting refinancing loans. Then again, there are certain restrictions on the assumability conditions of FHA loans. Only those mortgages that originated before December 1, 1986 are free from assumability limitations. The lender usually requires thorough report of the creditworthiness of the person (assumptor) assuming the loan. Private investors are not allowed to become assumptors of insured mortgages that were subjected to restrictions of the 1989 Act. To further learn about terms and conditions, the Housing and Urban Development online site has specific information about this matter.

Now here is the other side of the deal, there are some cases wherein this loan would not work for the home buyer’s benefit. Some sellers could not take the risk of receiving such loan. This is because the agency is not actually lending money to the buyer. Instead, the agency merely guarantees the lender to cover for the buyer in case delinquent payments occur. And processing the payment claims may take some time. Thus, there are fewer deals now that accept offers from buyers backed up with FHA loans.

Another disadvantage for the buyer is that there is a need to pay more for the private mortgage insurance (PMI) given that the down payment is much lower than conventional market rates. The situation here is that the buyer has to pay the one-time PMI fee and continue paying for monthly dues. The money saved from low down payment is then off set by the costly obligation every month.

The loan application process also poses some difficulties. There are a number of requirements the applicant has to accomplish for a limited period of time. There are also limitations on the type of housing units the loan might be used for and amount of money that could be borrowed. On the other hand, the limitations vary according to location.

So for the buyer, you firstly need to check out the application requirements and restrictions in your area. Weigh the pros and cons of getting this type of loan. The main advantage is that you could be given financial leniency. For the seller, you must screen your buyer if despite the attached FHA loan, you could still gain from the selling transaction. Or if you have this loan yourself, you need to evaluate whether the buyer is capable of assuming your mortgages.

There is no harm in trying out this type of loan. Both the buyers and sellers must take into consideration both the benefits and repercussions of acquiring such loan. In the end, both parties could look forward to satisfying deal.

FHA Loan Modifications – Now Possible

The Federal Housing Administration (FHA) has finally come into compliance with President Obama’s Home Stimulus Program! This means that millions of homeowners that previously could not get a loan modification, will now be able to! Effective August 2009 FHA borrowers will be able to reduce their monthly mortgage payments! This is great news for every FHA borrower out there!

130880727Previously only Fannie Mae and Freddie Mac borrowers were eligible for loan modifications. Now under the new guidelines there are now FHA loan modifications! Let’s look at how the FHA has changed to help American homeowners.

FHA borrowers will now be able to lower their monthly payments to something they can actually afford! The principle balance of your loan can be reduced by as much as 30%, thus allowing a recalculation of the monthly payment. However, that 30% reduction does not vanish, it is simply deferred. You are then required to repay that deferment once your initial mortgage is paid off. Basically this extends the usual FHA terms to more than 30 years.

Of course you will need to apply and get approved just like any other loan modification process. There is an application and multiple documents that must be submitted. You will need to contact your specific lender for their unique requirements. But at least now you have a chance even if you are a FHA borrower!

The application process for FHA loan modifications is just as complex and detailed as non FHA modifications. It can be confusing and overwhelming to face this application process while constantly worrying about saving your home. You are not alone! There is help available to you! There are experts that can facilitate the process for you.

They will contact your lender, insure that you have all of the documents required and help verify that everything is accurate and complete. They will also work to get you the best possible FHA loan modification available! Just make sure you do your homework and choose an expert only after checking them out! There are many scams out there right now, you don’t want to fall victim to them and end up losing your home anyway! Call the Better Business Bureau, call the Chamber of Commerce and verify that whomever you choose has a business license and a good rating!

To help you get started, I have done a bit of research for you. These loan modification experts [] can help you. You can find out if you would qualify for a modification loan for free! Don’t wait; your home could depend upon it! Take the first steps to saving your home today! You will be thankful tomorrow!

5 Risks With Making FHA Loans

FHA is the hottest niche. You are going to be making tons of money with FHA loans this year. FHA is the new sub-prime. This is the hype we are hearing. Now for a little reality check on FHA. Plainly stated, there is some risk with FHA loans. The money is there for the making, but if you are about to get involved in this great lending niche, you should be aware of the five risks of making FHA loans.

1308759121) Attempting to get into the business without knowing the FHA program can be a recipe for disaster. Sign up for an FHA Training Course or purchase a FHA Training Guide and read up on the program on your own time. There’s a lot of good training programs out there (and some bad ones too so be cautious in what your choose). Expect to pay $89.00 for training and up to $500.00 for some training programs.

2) There are significant licensing and ongoing compliance hurdles involved with FHA loans. You need to be properly licensed to offer FHA loan programs to your customers. You can be licensed as a loan correspondent (broker) or an a non-supervised mortgagee (lender). Also, you need to make sure you have the proper FHA disclosures ready to provide applicants for FHA loans regardless of which FHA licensing your obtain.

3) FHA loans must be perfectly originated and underwritten or they will be rejected when you apply for the FHA insurance to be placed on the loan. You have heard this before, all your “i’s” need to be dotted and your “t’s” crossed in the right place when you originate a FHA loan. You will need to be sure that your FHA submissions are being reviewed by an experience DE FHA underwriter who understands the FHA program who comes to the business with many years experience underwriting FHA loans.

4) Repeated violations of the FHA loan program may result in assessment of civil money penalties and forfeiture of your FHA license. The federal government monitors the performance of the FHA loans funded by your company. If your FHA loans show a pattern of problems or poor underwriting that results in significant defaults on these loans, you could be pushed out of the FHA program.

5) A significant requirement of having a FHA license is that you must follow an established Quality Control Plan. For the most part this means that you must review at least 10% of the FHA loans your originate for proper underwriting, disclosures, proper appraisals. Your Quality Control group should be issuing monthly reports to company management regarding any deficiencies found.

Bad Credit FHA Loans – How You Can Still Get a Home Loan With Bad Credit

Bad credit does not necessarily ruin your chances to qualify. This is a common misconception that has been erroneously accepted as fact. The FHA will look at other factors to determine if you qualify for bad credit FHA loans.

One Time Factors Can Be Overcome

130861538Common factors the FHA will consider include if you recently had a job loss, serious illness, or transfer of job. These factors indicate that the bad credit may have been caused by one time factors that are not truly indicative of your credit history. Their recognition of these factors can be very helpful for those who have had bad credit due to these type of issues.

The regular process is the loan officer or underwriter will generally review the last two years of your credit history. For any areas where there are signs of bad credit, you will want to illustrate and show the reasons for this bad credit. For example, if it was tied to a job loss, you can show how you had a dramatic reduction in income. The key here is to show the reasons why this bad credit took place through supporting documents and explanations.

Bankruptcy and Foreclosure Can Also Be Overcome With Time

Another thing to remember is that you can even qualify for a bad credit FHA loan if you have had a bankruptcy or foreclosure in the past. However, they will require you to share that some time has passed since the event. For instance, you must show these events have occurred at least 2 years in the past for bankruptcies and 3 years for foreclosures. In addition, you will need pay off before the closing any outstanding collection amounts, judgments or charge-offs.

Proactive Measures Can Be Taken To Improve Your Credit History

If you feel based on your credit history that you cannot show good reasons why you have had some bad credit, we suggest you hold off on applying until you have a shown a more steady record of credit history. Showing them you have built up a good credit history after one year can go a long way towards offsetting previous bad patches and help show the loan officer or underwriter that you are a better credit risk than your full record might suggest.

Another good idea is to pay down and/or close one or two credit cards. Reducing the amount of credit cards can help increase your credit score. Finally, if there are any errors in your credit report, challenge those errors in writing and have them resolved prior to applying for a bad credit FHA loan.

As you can see, bad credit is something that can be worked around in a number of ways to give you a better opportunity to qualify. Bad credit FHA loans have helped many people get their share of the American dream.