A Complete Guide to FHA Purchase Loans

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Information about A Complete Guide to FHA Purchase Loans
Education

Published on January 27, 2009

Author: porchlightscott

Source: slideshare.net

Description

This educational home buyer class explores basic FHA purchase guidelines.

Our mission to educate and empower homeowners extends beyond simple underwriting guidelines.

We also expose common marketing and sales tactics of illegal FHA branches, interest rate bait and switch.

Bonus Topic: We will review the basic guidelines for the $7,500 federal tax credit which expires later this year.

A Complete Guide to FHA Purchase Loan Options Thank You for Attending We Will Begin in a Moment Class will begin at 7:00pm Presented By: Broadview Mortgage Corporation Presenter: Scott Schang Contact Information: Phone: 866-667-6724 [email_address]

A Complete Guide to FHA Purchase Loan Options You should be able to hear me now If you chose the VOIP option, check your speakers If you are still having trouble hearing, call in: Phone: 000000000 Access: 00000000 Webinar ID: 0000000 Presented By: Broadview Mortgage Corporation Presenter: Scott Schang Contact Information: Phone: 866-667-6724 [email_address]

A Complete Guide to 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

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

A Complete Guide to FHA Purchase Loan Options 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

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

A Complete Guide to FHA Purchase Loan Options 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

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

A Complete Guide to FHA Purchase Loan Options 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%

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%

A Complete Guide to FHA Purchase Loan Options 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 4 th 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

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 4 th 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

A Complete Guide to FHA Purchase Loan Options Borrower Eligibility 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

Borrower Eligibility

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

A Complete Guide to FHA Purchase Loan Options Borrower Eligibility 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

Borrower Eligibility

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

A Complete Guide to FHA Purchase Loan Options Borrower Eligibility Income Qualifying Guidelines Converting Existing Homes into Rentals Bad Apples - Effective September 19 th , 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

Income Qualifying Guidelines

Converting Existing Homes into Rentals

Bad Apples - Effective September 19 th , 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

A Complete Guide to FHA Purchase Loan Options 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

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

A Complete Guide to FHA Purchase Loan Options 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

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

A Complete Guide to FHA Purchase Loan Options 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

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

A Complete Guide to FHA Purchase Loan Options 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

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

A Complete Guide to FHA Purchase Loan Options Down Payment and Closing Costs Seller Paid DPA Discontinued Oct. 1 st , 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

Down Payment and Closing Costs

Seller Paid DPA Discontinued Oct. 1 st , 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

A Complete Guide to FHA Purchase Loan Options Down Payment and Closing Costs 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

Down Payment and Closing Costs

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

A Complete Guide to FHA Purchase Loan Options 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

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

A Complete Guide to FHA Purchase Loan Options 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

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

A Complete Guide to FHA Purchase Loan Options “ 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.

“ 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.

A Complete Guide to FHA Purchase Loan Options 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

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!

A Complete Guide to FHA Purchase Loan Options 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!

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 1 st , 2009 Between April 8th, 2008 and July 1 st , 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

No-interest loan paid back over 15 years

Must purchase on or before July 1 st , 2009

Between April 8th, 2008 and July 1 st , 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

$7,500 Federal Tax Credit 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

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

$7,500 Federal Tax Credit 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

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

A Complete Guide to FHA Purchase Loan Options 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

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

A Complete Guide to FHA Purchase Loan Options 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

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

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

Thank you for Attending You input is Valuable Please complete 2 question survey when you log off Presented By: Broadview Mortgage Corp. Presenter: Scott Schang Contact Information: Phone: 866-667-6724 [email_address]

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