FHA Mortgage Loans Today for readers of Dan Deutsch' Active Rain Blog

FHA loans were made for times like this.

by Brandon Laughridge Online Content Director brandon@mortgageloanplace.com tel: (573) 445-3426

The Federal Housing Administration is backing mortgages at a record rate in light of the lingering recession. FHA loans have been attractive to first-time homebuyers and low- to middle-income families for more than 70 years. Today, they�re more popular than ever, as prospective homeowners are turning to FHA loans because of their flexibility and minimal costs.

One of the biggest advantages FHA loans have over conventional mortgages revolves around qualification and credit. The national economic climate has only tightened the credit market and forced mortgage lenders to re-evaluate their underwriting practices.

FHA loans make home ownership possible for scores of Americans who might not otherwise qualify.

The FHA does not use a credit score as a program qualifier. But the agency also does not issue loans � it backs them. That ultimately means that the lenders who work with the FHA may take an applicant�s financial history into account.

Prospective buyers without sterling credit can still qualify for FHA loans in this climate. Buyers with scores as low as 620 can obtain favorable mortgage rates on an FHA loan. Many traditional residential lenders now won�t consider applicants with credit scores below 680.

Credit score, overall financial health and down payment can all impact the mortgage rate on an FHA loan. These minimal-cost loans require only a 3.5 percent down payment, but prospective buyers with good credit and a double-digit down payment would only help to improve loan terms. But buyers with spotty credit can still obtain a home loan with slightly above-average rates through the FHA.

Homebuyers should keep in mind that the FHA has mandatory loan limits depending on where your home is located.

With a conventional loan, some prospective buyers with excellent credit can obtain lower rates than an FHA loan can provide. In general, conventional applicants need a score of at least 640 to be considered for a traditional conforming loan. But those looking for the best rate available on a conventional mortgage should expect to have a credit score of at least 740.

It seems less and less possible to estimate a payment anymore.   My favorite lender emails me a list of rates daily - nice little chart with VA FHA and Conventional.  5% Conv seemed awesome compared to what I expected.  So I called Nate and asked who gets 5%....?   It turns out that 5% goes to a single guywith perfect credit, huge down pmt, and a 30 day lock in.  What about 60 day lock... that's 3/8 of a point more.  What about 90 day lock....that's  1.125 points more.  What about 15% down pmt...that's a higher rate.... What about 10%, 5%, 3%....more more more.   What about 800 credit score?  Well that depends.... are there two borrowers?   There are 3 scores for each borrower.  They take the lower middle score of the two.   The rates go higher every drop of 20 points.   And higher.   And higher.  Well what about FHA.   Well that follows the same trends but with different assignments of rates and a different criteria.  What if my lock expires?  What if the appraisal is low?  What if I switch lenders or switch locks in mid stream?  Are rates higher or lower if I live in Peoria? Or not.

What is a "special assessment"? A Brief Description: A special assessment is a charge for the cost of infrastructure and public improvements such as streets, sewers, curbs, gutters, sidewalks, bridges, and waterlines.  The costs are assessed to properties that will benefit from an improvement project. So in some ways these misunderstood and barely disclosed surprise assessments aren't special....they are horrible. New homes are built on lots which have all new infrastructure.... those costs are in addition to, on top of, the price of the house.  In the FM area lots are usually assessed about $300 per running front footage of the adjacent street.  It varies based on the bids, interest rates,  and FRONTAGE width of the lot - not the SIDE length on corners.  Corner lots are NOT usually hit for extra. Other areas of the country often require the developers to pay the cost in advance and recover it by raising the cost of the lot.   This is a better way to disclose the price of a house.  But if developers were not able to afford to put in streets and sewers then there would be LESS development, FEWER homes, and a resulting higher demand.  Homes would become even more expensive!!!  (And that would be really, really, horrible...!!) The List Price of a house in FM area does not include the cost of the Special Assessments.  This is a BIG surprise if you are not aware of it.  It is in the listing details, however, so read to find what is quoted.   However since the amount may not be available until after a year there may be a '1' in the space to indicate there WILL be future assessments when the estimate or numbers are available.  A rough method of Guestimating what the cost will be is to figure about $200 a month on top of the property tax*. The NUTS and BOLTS Description of Special Assessments: The fee consists of principal and interest and is usually paid over 20 years. The interest rate paid by the property owner coincides with the interest rate and the maturity date for the bonds which are sold to finance the project. The process starts when the City conducts a public hearing regarding the advisability of a proposed improvement project. A public hearing process addresses the issues of estimated cost, method of assessing costs, the apportionment of costs between the city-at-large and the benefit district, and the boundary of the "improvement district".   If the petition is approved or the governing body acts on the advisability of an improvement project, the benefit district is established by the Commission through a resolution. The City then enters into a contract for construction and borrows money to finance the project construction costs. Once the project is complete and all project costs are known, a special assessment amount is calculated to find each property owner´s share of the specials. The City first calculates the total actual cost.  The total cost is then apportioned to each lot in the benefit district based on the method included in the petition or resolution from the public hearing. The most typical method assigning street costs based on the width of the lot which the street is running past.... another is to bill an equal share per lot. For example, the total project cost is $100,000, and there are 100 lots. Each lot´s share will be $1,000. Alternate Solutions:  If a property owner wants to pay off the special assessments in the price of the house purchase it can be paid with MORTGAGE Interest, which is tax deductable and spread out over 30 years.   The payment of the special assessment is not tax deductable.  Check with your accountant since I am not an accountant.   Would you rather spread the payments over a 30 year amortization which has deductible interest or a 20 year spread which has no deductible interest?  On a 20,000 assessment it would reduce the payment about $23 per month.   The monthly interest on a 6% loan would be $100 at the beginning.  If there was a tax deduction at 15% or 28% that could be another $15 to $28 to save. If you meet with us we'll talk more about how best to deal with "special assessments". *Property TAXES: In the Fargo and West Fargo locations property taxes are roughly about 2% of the property value per year.  So a $200,000 house might be taxed at $4000 per year (or $333 per month).  The last I checked with my accountant, property taxes were also deductable, but you should ask your accountant.

Equal Opportunity Housing.

Lida and I are back at it today with 5 more first homebuyers coming in for classes today, to learn about the $8000 tax credit and other things.   We took the morning to attend a Seminar put on by Wells Fargo Bank.   Free donuts and juice!!  There were so many great ideas discussed.  Here is one that sticks in our mind... Rich Casto who is an Internationally famous real estate negotiator consultant, said that it should be ILLEGAL for any qualified person, who is renting, to fail to buy a home by Dec 1, this year, and get the $8000 stimulus refund. (Tongue in cheek, I think) And furthermore he said any Realtor who knows eligible tax payers, who are renting and does not encourage them to purchase a home before the $8000 offer expires this fall, should lose their license.  I don't think he was kidding about that.  We can lose our license for a lot less trivial things than $8000.

I'm going the NAR Convention in Las Vegas in a couple weeks..... Well how many of you are going to be there? Am interested with the latest technology for mobile computing.  I'd like to be able to drive about town and have a computer, printer, internet, fax capability, blackberry/phone/email.  I'd like to be able to keep this as efficient and uncomplicated as possible.  So I'm thinking about have good workability between hardware - it all talks to eachother. Cost is not my primary concern.  My first question is what do you like about what you are using?  Any suggestions on what to avoid.

I recently got this request from a soldier in Germany reading my MLS listings: 

Hello Dan,   Can you describe the acronyms for the different types of heating systems in the area...for example listing 07-4963, EHW?

Hi Alan... nice to hear from you!.....  EBB --Elec Base Bd, EFA - Elec Forced Air - GFA(gas...) OFA(oil....) BB - baseboard, HW -hot water/a boiler of some sort), Elec is either baseboard radiant or hotwater.
EHW - elec hot water baseboard.....FA is always preceded by O E or G(gas)  Some you just guess... for example what would you guess S stands for...???? maybe Solar??? Here's one I someday hope to see, WGEFA (wind generator electric forced air)... and this one which my kid would understand - HCG - (hamster cage generator).

What is the cost of my free advice to prospective home buyers? All my advice is not right for everyone all the time.  Here's a true story.  Peter Jacobsen, a PGA golfer, tells this story about himself.  After 20 plus years of grinding away in obscurity and mediocrity on the PGA Tour, he decided to see if anything remained of his once great promise.  Instead of being a winner he became known as a fan favorite, a quick wit, and ultimately a TV golf commentator.  But as a golfer he was rarely a factor.  So, nearing his 40's, Peter Jacobsen began to get a desire to try again to be what he always thought he could be - a great golfer.  So back to his original teacher, mentor, coach, he went.  "Could you help me get back" to what was once a promising career? , he asked.  He was told plainly that he was wasting his time.  Why?  It turns out that Peter was a glutton for advice.  He enjoyed getting advice from all the experts.  And he got advice from the other players....and books....    He discovered that other players made a joke of it that he was trying so many different things.  One said that if a fly came up and offered Peter Jacobsen a putting tip that Peter would go out and give it a try.  Peter realized finally that maybe he should make a firm commitment to one way and follow through.  The result:  with dedication and hard work he won 2 PGA tournaments in 1995 at an age most golfers were washed up.....and just 3 years ago Peter Jacobsen won the US Senior Open Championship.   APPLYING THIS TO REAL ESTATE :  There is also NO shortage of advice for either Buyers or Sellers.  You can easily overwhelm yourself with options and choices.... and in the end you are always worse off.  Find yourself a KNOWLEDGEABLE Realtor and trust him/her.   It does not work to try and piece together advice from multiple sources.  Your Realtor knows what you should do - knows you - and knows what is best for you.  If you do not YET have a Realtor, you should get one....

Most people looking for a home believe themselves to be in Browse mode.  As time passes they begin to seek advice from many sources, read the ads, go to open houses, and before long "end up" working with an agent who found them - and not the other way around.... They don't realize they are carrying a big sign "I AM A PROPSPECT, SOLICIT ME" This blog gives you, as a future home buyer, a chance to turn the tables.  You are not anyone's prospective customer, here.  As a thoughtful reader, you are in control. Instead, an agent like myself is your prospective job applicant.

$100.  If you are thinking of taking a home buyers class here in ND,  then today you can save/earn $100.  http://www.ndhfa.org/Default.asp?nMenu=0348 

Homebuyer Education
If you are interested in homeownership, attend The Village Homebuyer Education Program to learn about purchasing and owning a home. Call 701-235-3328 or 1-800-450-4019 for information or to register.

I'd like to encourage anyone who is thinking of buying a home, in the Fargo Moorhead area, to take that class through the Village.  If you do not yet have a Realtor working for you,  please feel welcome to contact me without obligation at 701-306-6632.  

Homebuyers who come into contact with me the first time are interested in property.  They are not looking for a relationship.  Like me or anyone, they are not looking to hand out personal information to A SALESMAN!.

It helps to understand what they dread...how to beat the fear ...fix the dread....then give them the help they need...

We are all wired the same way.  People dread the outcome of talking to a stranger who may hurt them....
Maybe they are feeling iNSECURE....FEELING EMBARRASSed...SHAME - about a PERSONAL SITUATION

Maybe they don't have their financing in order.  downpayment....debts....credit..... feel bad about that?

Maybe they don't want anyone to know they are thinking of a move.   So
they need to know the answer to the question....   IS MY INFORMATION CONFIDENTIAL?

Maybe they tend to feel completely exposed talking about personal matters....
Will I be JUDGED

Maybe they have an inordinate fear of sales people..... Maybe they think they could be pressed or bothered or judged.... WILL YOU ASK ME TOO MANY QUESTIONS.... MAKE ME FEEL DEFENSIVE?

Maybe they already have an agent...Maybe they want to buy without an agent.......
Maybe they want to find an agent in the yellow pages or some other source...
DOES TALKING TO YOU OBLIGATE ME TO YOU?

Maybe they just like to postpone a more serious search until they do some research on their own.....

Without evidence to the contrary, they owe it to themselves and their family
to be on the defensive.  And we have no more than 30 seconds disarm their fears.

Do it with honesty...

The conversation begins..... What is the address of that property so I can drive by it.... and I will call you back?           or
I looked on your website and didn't want anyone to call me - I was just browsing.

I appreciate that....most of the homebuyers and browsers use Fargohomes.com to find their home.  So you're certainly welcome.....I try to get the word out.... Do you mind if I ask.....How did you come to find my web site - Fargohomes.com... do you recall?

Let me honestly tell you that most of those properties are not my listings and I am not representing those sellers. In fact I am a Buyers' Broker?  Have you ever heard of that and that the fees for the buyer are paid by the seller?

Most people who browse on our site have personal or confidential reasons to be there related to Family, Finances, Employment, or Normal Curiousity.  I believe in fairness and honesty.

How about you.....?

Here's my pledge.... anything you discuss is confidential.... I will never judge you, push you, or obligate you..... As a person with feelings I owe that to anyone.

OK I've been in this business awhile... how is it that I can help you?