FHA 203k and 203ks rehab loans
Interested in rehabing a home? Possibly interested in new appliances, flooring, paint, upgrading a property but don't have the additonal money needed after the loan closes? Then you're probably a great candidate for the FHA 203k or 203ks. FHA will allow you to buy and home and get the money you need to fix it up like a dream without the nightmares of the additional after close debt. You'll need 3.5% downpayment through savings or a family gift. We can talk details if you need more counseling after you see the presentation.
The 203k and 203ks are two great loans for home buyers that want to buy a true fixer upper and use the banks money to fix up the new home just they way they want it.
Here's a link to a presentation I've created to help you learn about what a 203k and 203ks from FHA is. If you have any questions, please call me direct. Whether you are in Illinois or not, I would be more than happy to discuss the loan. I love talking about these loans, they're terrific for consumers and its a great time to use them.
FHA 203ks presentation by Gil Kerbashian
Mortgage Rate Locks, A Busy Week
This last week, by all lender accounts, has been an extraordinary week for loan application mortgage rate locks. Obviously, this is good news for consumers readjusting their mortgage payments and reconfiguring their cash flow. I'm also glad that many of the loan officers locking the files have decided to be so proactive on behalf of their clients.
Some of my clients called me Tuesday asking about rates and letting me know that they've received numerous calls from lenders. Some of the stories the lenders are telling these homeowners are a bit obnoxious i.e. "You qualify for the new government program", "rates are 5.5%" (without knowing the borrowers fico), "He told me he could get my house appraised for $250k" (a michigan lender not familiar with Illinois). There is probably a lot of Hail Mary rate locking going on right now.
Its not just the cold call pitches that are interesting. Its also the sheer volume of loans being locked that I can't believe have an application at the brokers office. Its hard for me to believe that these loans were sitting in que ready to be locked. I have to imagine that most of these locks, probably about 70% of them were advance locks on cold calls prior to receiving a loan application. Now the paperwork chase starts.
I'm a little skeptical at the activity and the effect of this inefficiency. The direct lenders may see a great deal of lock fallout due to issues such as appraised values or "rates that suddenly change" for the borrower due to the new loan level pricing adjustments. Stay tuned...
Bank of America's "Paperless Loan" More of the Same
Bank of America is still accepting stated income loans with a slight product terminology change, the loans are called "paperless" in order to give them a Greenwashing. I spoke to a builders representative from Bank of America that converted 31 of about 54 files to paperless to circumvent the automated declines. Per the retail rep, she reconfigured the income and assets in order to get the files approved.
Seems like these are the express loans from either Fannie or Freddie. If banks are still making these loans through their retail channel it really confirms that the problems still exist and that its not the broker channels that are corrupt- its the management of the direct lenders that are promoting unit volume over quality.
Mortgage brokers get a bad wrap for the activities of the past but brokers don't create the underwriting guidelines or develop the products that are offered to the public. If a bank wants to offer paperless/stated loans then the bank should do so through their own portfolio and stop dumping them on the GSE's and the taxpayer. There is an obvious need for the stated loans, I just think these types of loans need to be kept in-house in all cases as they used to be in the 90's.
A bank will rarely do a QC of their own files but can easily pull the 4506 and require use of approved appraisers which would weed out 90% of bad deals that any broker might submit.
Solution To Housing Crisis: FHA Temporary Buydowns
Six months ago I commenced a campaign here in Illinois to get Realtors and Loan Officers to print and fax a canned letter I had drafted to then Senator Obama, Senator McCain and Senator Durbin. All of these Senators received from us a multitude of letters suggesting this practical solution to our housing and mortgage market...
Commence a government sponsored temporary buydown program for first time buyers (between you and me its a no brainer). The secondary markets are set up for it, the servicers are set up for it, the lenders are set up... everyone could transition into this program seemlessly.
The first time buyers would qualify in a normal fashion at the note rate but receive a 2-1 buydown with FHA. How easy huh, maybe too simple? I believe we need to work on demand for housing. The current owners I'm sure would rather get out than work through complicated and uncertain workouts or refi's. How many first time buyer do you think would jump at the chance for this one time bargain? TONS.
The program would have a sunset of one year to put the heat on people to get moving- use it or lose it. We could get the dregs out of homes they can't or won't pay for and get honest qualified first time buyers into homes of their dreams.
But hey what do I know? I just do this for a living day in and day out and the Senators are much more intelligent than me on this topic. So what did the taxpayer get after all? A whole stream of money going into directions that only cover the symptoms and not the root problem which is HOUSING demand.
Pray for commonsense and pray God gives us good leadership.
Gil Kerbashian Lake in the Hills Illinois FHA
What Is FHA?
FHA is an acronym for the Federal Housing Administration. This agency is overseen by the Housing and Urban Development department. HUD is directly and indirectly involved in many of the countries housing related entities such as FHA, VA, FmHa, Section 8, Fannie Mae, Freddie Mac, RESPA and more. Though HUD does not always directly regulate these entities, they have the authority to intervene when necessary.
The FHA loan program was designed initially as an alternative to conventional 20% down payment programs that banks were offering back in the day. Most people were not able to save the needed 20% down payment, and private mortgage insurance wasn't on the scene yet, so HUD stepped in to create a friendly low down payment program. Much of the intent was to increase home ownership in rural parts of the country.
People often call it a first time buyer program but it really can be used multiple times, as long as the borrower can show that they are not using the favorable terms for investment purposes, and that the home is the only one they have with an FHA loan- there are exceptions not often granted.
FHA, Like a VA mortgage loan, is not the funding entity. FHA only insures loans against default. FHA provides security insurance to those home mortgage refinancing lenders that offer home mortgage loans to the public. The lender will lend the money for the home refinance or purchase and FHA will make sure that if the borrower walks away from the property, a portion of the loan is paid back to the lender on the borrower's behalf.
The loan program can be used to purchase a home or refinance a home mortgage. The FHA program has some wonderful features including: Low down payment- as low as 3.5%, allows for some credit dings, fairly safe variable/adjustable terms, possibility of non-occupant co-borrowers, seller paid closing costs and more.
FHA home loans terms are very favorable. The rates are decent and the fee's are not excessive if you are working with a reputable lender. Please compare rates and fee's, and always work with an ethical lender. The downside to FHA home loans, as with VA home loans, is that they require the borrower to purchase and/or finance FHA's own mortgage insurance. The FHA mortgage insurance is a little different than the VA Funding Fee, in that FHA requires a one time upfront lump sum ( financed ) and monthly payments towards the insurance plan. This insurance program, like VA, is also designed to pool reserves for defaults.
FHA loans are notoriously susceptible to high foreclosure rates. In tough economic times, these loans surpass any other in default rates. This nice thing about FHA is that its not like subprime where you must show income and savings.
The qualification process is essentially the same as a conventional home purchase loan or home refinance mortgage. Income documentation, credit, savings, career stability and property requirements must be met. The primary reason FHA and Sub-Prime loans have had such high default rates, is that the programs allow for lower credit scores.
FHA's underwriting guidelines call for not placing a heavy underwriting burden on credit scores, though some banks still do. FHA has not placed a minimum credit score on the program but some lenders have. 570-600 is where some lenders draw the line. FHA promotes home ownership with an eye on getting everyone into their own housing: This underwriting openness results in a two edged sword due to the positive effects of expanded home ownership, and the negative effects of low equity accountability on the part of borrowers. Visit www.fha.gov for more information or call me today.
Gil Kerbashian FHA Home Loans Illinois
Downey Savings Finally Closed - Thank Goodness
In 2003 I was doing a lot of purchase transactions while every other newbie in the business was funding refinance business. I grew up in the home purchase transaction market with family, managers, friends as Realtors so that was my area of expertise. As anyone knows Realtors can be very sensitive to service. I like many of the ones I work with but some of the group don't understand the lending hornets nest. Some don't care about the difference between financing a TV and a home.
I was doing a lot of purchase home loans - 90% of my pipeline. Very few lenders, most of which are thankfully out of business now didn't understand purchase transactions. Downey savings was notoriously arrogant, notoriously arrogant ( double emphasis intended ).
I had just met an intense agent that was wound up tighter than a tightrope walkers tightrope. She was a top producer with 1st team realty in Orange County California and nice enough to request a funding for a client through me. The home buyer was top tier! The deal was great, nothing wrong at all...
Here's where Downey Savings comes in. They sat on the file for two weeks and didn't say anything. Long turn times back then so I'm thinking they are choking on the pipeline of loans. I finally get a hold of someone that would give me a straight answer... apparently the file was in auditing because the 1st Team Realty office she was originally out of had a problem with another agent pulling a scam-; NOW ANY DEALS COMING FROM THAT OFFICE WERE REDFLAGGED. The problem was that they were convicting the whole office because of one agent. More than that, she wasn't with that office anymore, she had transfered to one closer to her farm in the interim.
Worse than that, they kept the audit a secret and killed the purchase transaction timeline and made a mess of the transaction and NEW relationship. They were mean, arrogant and didn't give a hoot about purchase transactions because they were making so much money on refinances. They ruined the new home experience for a home buyer that didn't have anything to do with the nonsense.
Good ridance to Downey Savings and Washington Mutual two of the most unkind group of managers in the mortgage business.
Shades of Helmsley
What's FHA UFMIP - Up Front Mortgage Insurance Premium
When borrowers use FHA to obtain a home loan, FHA will charge a mortgage insurance premium to insure against default. Remember that FHA does not make the loan, they only insure the loan against default.
A lender will make the loan and will obtain a mortgage insurance certificate from FHA to secure the mortgage. FHA applys two types of mortgage insurance premium. One is a monthly mortgage insurance cost called "MI" the other is up front mortgage insurance premium which is a one time charge that is placed on top of the loan amount. On top of the loan amount means that the client doesn't have to come up with the money but that it goes on top of the new loan.
Currently at this date, the up front mortgage insurance premium is 1.75% of the loan amount for "normal" purchase or refinance transactions. HUD/FHA also offers various "bailout" loans that require a higher premium.
Risk based UFMIP for FHA was slated to start in 2008 but was held back for a little bit. I expect once the market settles down, the new risk based premiums will commence. Look for more changes in 2009. Email or call if I can help.
Gil
FHA Downpayment
Starting January 1, lenders will be converting to a 3.5% downpayment for FHA home loans. Along with this change you can expect other changes which I will chronicle in upcoming blog articles.
The 3.5% has been implemented by many lenders already but is not a mandate until January 1, 2009. Still with the increase in the FHA downpayment, FHA is the best alternative for most buyers in this market. The reason is that conventional loans are very difficult to obtain in declining markets and the PMI - private mortgage insurance payments are sometimes prohibitive. In most cases, the FHA loan would be a better choice than even a conventional loan with 10% down simply due to the increase in loan level pricing adjustments with conventional loans and the increasing cost of private mortgage insurance.
Gil, your FHA expert
