UPDATE-Today, November 5th the House voted for the Act with no changes to the Senate Amendments. Once the President signs it, this is what we will have as law.
This afternoon at 5:28pm the Senate overwhelmingly approved the Unemployment Compensation Act of 2009 (H.R. 3548 as amended)which includes provisions extending AND expanding the Homebuyer Tax Credit. Now do understand the bill must be reconciled with the House of Representatives and then signed into law by the President, so there are provisions that can change. What it says right now is basically
•· First Time Buyers have what they had before, expiring May 1, 2010. If a buyer is in a binding contract before May 1, then they shall have until June 30, 2010 to close the deal.
•· Buyers will still be able to treat the purchase as if it occurred on December 31st of the prior year. This means buyers that close in December should still be able to amend their 2008 taxes and get their funds sooner!
•· An exception has been created to allow individuals or married couples that have "owned and used the same residence as such individual's principal residence for any 5-consecutive-year period during the 8-year period ending on the date of the purchase of a subsequent principal residence" be categorized as First Time Buyers under this act. The big question I've been asked is do they have to sell old home or can they keep and rent it and thus far the act is silent on that.
•· Long Term Residents as they are called, are limited to $6,500 or $3,250 depending on how they qualify.
•· Income guidelines have been increased to $150,000 for individuals and $225,000 for couples and the purchase price is limited to no more than $800,000.
•· Members of the uniformed services, Foreign Services of the US, or the intelligence community who are forced to no longer occupy their homes as primary residences due to Government orders are exempted from the recapture and don't have to pay the funds back.
•· Persons on extended duty outside the US for at least 90 days may have an extra year to qualify for the program.
•· You must be at least 18 years old to claim the credit and will have to attach a copy of your settlement statement as proof the deal has closed.
There is a lot more fine print to digest but again I can't overemphasize WE MAY STILL SEE SOME CHANGES, so don't quote this as law! Do feel free to share the info as an up to date picture of what is being considered and chances are pretty good we will see it pass essentially as is.
One thing that's for sure is with as long as some short sales are taking to approve, even with the extension there will be no time to waste. Hopefully consumers have realized this and we can avoid some of the last minute rush we are seeing now!
What an awesome post by a buddy of mine Steve Kappre that effectively sums up why you can't shop for a mortgage rate without ALL of the facts. That's why it's best to have a relationship with a mortgage professional you can trust! Thanks for the great blog Steve!
Rates - APR - Points - Fees: How the Playing Field is Still "Crooked"
I talked to a client today who was shopping me against some other lenders. I don't blame people, and frankly if I think someone else has a better offer and they are legit, I advise "my client" so and have no hard feelings.
In the scenario today, said client was offered 4.5% with no points. I told him it wasn't possible, but lest I be ignorant, I dropped by this other lender's website. Indeed, the lenders website quoted 4.5% with no points and an APR of 4.878%. The website gave the assumed loan amount and purchase price. So I went and did the math. What did I find out? To make the rate and APR accurate, I had to add 2.25% in points ON TOP OF all of the regular fees (title, appraisal, etc.).
In other words, even though the quote was 4.5% with zero points, the TRUE cost was 4.5%, plus typical closing costs, PLUS 2.25% in additional fees/costs.
Please send me your Goofy Good Fake Faith Estimate!
There are several issues with this scenario
APR is supposed to HELP consumers, not confuse them. Clearly this bank (a large bank at that) is charging hefty fees instead of points. This brings us to our next point ...
Points are tax deductible costs - most other fees are not. Charging high fees in lieu of points is an injustice to the consumer. We see rates quoted with NO POINTS to make them look better to consumers. However the total cost is ultimately higher than a lender that is straight forward, charging the same dollar amount but in the form of points. A loan with the same cost in points (versus fees) is a far better deal, saving a consumer hundreds or thousands in tax deductible costs.
APR is "pliable" - Certain fees are calculated into the APR calculation, others are not. Do not assume lenders don't play with the "names" of fees to artificially lower their APR's. That doesn't seem to be the case in the above example, nonetheless keep this in mind.
Lastly, said bank WOULD NOT give the buyer a good faith estimate without having him apply for a mortgage. OK, not so crazy, but the good faith estimate would not be given for 3 days. And if the bank charged an application fee? That would just be another deceptive way to lure a consumer in and tie them to the bank.
Any lender should be able to offer you a good faith estimate (GFE) in a fairly short amount of time, 24 hours or less, allowing some time for when a lender is very busy. Assuming the lender is honest and accurate with their fees, you should be able to see the true cost of their offered rate. You should be able to see, as in the above scenario, that their rate of 4.5% with no points really has a lender fee of $4,119 (Actual additional cost based on their APR). This same week I had another rate shopper send me a goof good faith estimate with 1% in points and $2,100 in application fees. THIS IS NOT NORMAL or fair to you as a consumer, especially on a purchase loan.
I am not angry for losing business, because I didn't lose business. I am however angry because of the lenders and loan officers that mislead and decieve consumers who are just looking out for themselves by rate shopping. What we often see, is that many consumers that search the world over for the lowest rate, actually end up paying much higher costs via deceptive lenders. Consumers can be blinded by a low rate, not allowing them to see the true cost.
Steve Kappre is a Mortgage Planner with Treasury Mortgage. Steve specializes in;
There is a lot of talk about whether THE Tax Credit will be extended or even expanded these days. I wrote a post that explained the state of affairs a few days ago but since then I've heard everything imaginable on the topic, so it's time for an update.
Again, let's start with the facts. We still have a bunch bills although a new one was introduced in the Senate (see text here) and is beginning its quest to become law. Essentially little else has happened on the forefront of the Tax Credit battle.
A blog just a few days ago by Joy Goushaw , Will the $8,000 First Time Home Buyer Tax Credit Be Extended? Links an article that argues the credit will be extended based on an interview with Senate Majority Leader Reid, a powerful, influential man; but a lone individual nonetheless. He says we "will be extending that" referring to the $8000 Tax Credit, but makes no specific promises. Of course he can't make any specific promises, in the end he is just one vote.
So those are the facts, as they stand at this time. Now let's talk opinion...
First off I want to make clear, I'm no D.C. insider or Lobbyist (although I used to play the latter on TV- if you want a synopsis of that just email or call me) but I am very much starting to agree with Senator Reid. I do believe (this is MY opinion folks, that's all) the Tax Credit will be extended and that there may be enough support to make it applicable to ALL primary purchases. So what the hell does that mean?
It means if you are a first time homebuyer (FTHB), instead of just competing against all the other FTHB that have the incentive to buy now you will be placing bids against everybody that's looking to buy the best deals available. What do you think happens when a limited supply is met with increased demand?
With that said, and the reasonable certainty that the tax credit would not be increased, for what reason wouldn't a first time buyer that can qualify now choose not to buy? Beats the heck out of me...
Last Friday the USDA formally announced it was entering its annual "roll over" of funding as of its new fiscal year October 1st. This mainly administrative action results in USDA's funding being delayed until it's made available through the General Accounting Office (GAO). This by no means indicates the USDA is out of funds! What it does do is delay funding for loans and guarantees. While there are still a number of lenders that can and do close and fund loans during this period, the vast majority of lenders do not. This doesn't mean your loan won't close, it just means you may have to wait a bit. How long? Last year the funds were made available by October 17 and this year they expect funds allocated within three weeks.
This means you may have to wait that long to close your loan, or take your loan to a lender that does fund in anticipation of the new allocation. Do note, by the time you can get an appraisal recertified, docs transferred, loan re-underwritten, etc. it's rarely worth it so you're likely best off to sit tight with your lender and wait for a late October close.
The great news is that in spite of crushing volume the USDA actually has $2 billion in funds to carryover from last year! In Florida we went from 2084 loans to over 7000 last year. The increased volume has increased the time it takes to get approvals from the USDA so depending on your area you may need to add from 3 days to two weeks to the process. This will become very critical as we near the deadline for the Tax Credit and the desperate scramble to close by November 30, so plan in advance and plan accordingly.
Lastly for those lenders interested in learning more about the program, consider signing up for the WebEx training offered nationally. This link will take you to the registration page for more information.
Realtors and lenders, if you haven't familiarized yourselves with this incredibly successful 100% financing program you are missing the boat. Home buyers, if you haven't spoken to your lenders and Realtors about the program you may be missing out on the least expensive low down payment program available.
Although the program has income and geographic limitations, all of Lake County, FL is RD eligible and the income limits are very liberal. If you are looking to buy a new home in Lake County, FL you need to know about this loan!
Last Friday the USDA formally announced it was entering its annual "roll over" of funding as of its new fiscal year October 1st. This mainly administrative action results in USDA's funding being delayed until it's made available through the General Accounting Office (GAO). This by no means indicates the USDA is out of funds! What it does do is delay funding for loans and guarantees. While there are still a number of lenders that can and do close and fund loans during this period, the vast majority of lenders do not. This doesn't mean your loan won't close, it just means you may have to wait a bit. How long? Last year the funds were made available by October 17 and this year they expect funds allocated within three weeks.
This means you may have to wait that long to close your loan, or take your loan to a lender that does fund in anticipation of the new allocation. Do note, by the time you can get an appraisal recertified, docs transferred, loan re-underwritten, etc. it's rarely worth it so you're likely best off to sit tight with your lender and wait for a late October close.
The great news is that in spite of crushing volume the USDA actually has $2 billion in funds to carryover from last year! In Florida we went from 2084 loans to over 7000 last year. The increased volume has increased the time it takes to get approvals from the USDA so depending on your area you may need to add from 3 days to two weeks to the process. This will become very critical as we near the deadline for the Tax Credit and the desperate scramble to close by November 30, so plan in advance and plan accordingly.
Lastly for those lenders interested in learning more about the program, consider signing up for the WebEx training offered nationally. This link will take you to the registration page for more information.
Realtors and lenders, if you haven't familiarized yourselves with this incredibly successful 100% financing program you are missing the boat. Home buyers, if you haven't spoken to your lenders and Realtors about the program you may be missing out on the least expensive low down payment program available.
You hear plenty of talk from NAR (National Association of Realtors) and the NAHB (National Association of Home Builders) regarding the push to extend the First Time Buyer Tax Credit, but what is really going on with it? There is little argument the program has been successful in spurring sales and I can say from experience it's doing great things for many a first time buyer. Will it be continued? Will it be expanded or increased? Will it be forgotten?
Those of you who follow my blogs know I prefer to stay in the realm of fact as opposed to opinion. Much is written about all this legislation that qualifies as "spin", but where do we really sit? A pretty thorough review of the Library of Congress website actually lists 15 different House Bills that have been submitted since the last Tax Credit was signed into law. Unfortunately NONE of those bills has had ANY formal action since mid June 2009 with the exception of a bill that would waive the recapture requirements for members of our uniformed service, Foreign Service or intelligence community required to relocate. It's also important to mention that of the bills that do extend the credit, the one with the most recent action and greatest support currently has eight cosponsors (that isn't much).
Looking at the Senate we find a grand total of two bills regarding the subject. To their credit though S. 1678 was just introduced September 16 and has been referred to the Finance Committee. That bill simply extends what we currently have until June 1, 2010 and has four cosponsors.
OK, now for the opinion part- In a legislative session that is hell bent on changing the way healthcare is paid for in this country are our legislators really going to tackle the tax credit issue now? Truth is an extension of the tax credit could end up imbedded in the healthcare bill but it doesn't seem likely. When you couple that with a Fed that is openly proclaiming the end of the recession and looking at ways to reduce the cost of all this stimulus, you have some strong arguments against any extension. However, it cannot be denied that NAR and NAHB are two very powerful lobbies, and they are pushing full bore to make an extension happen.
What will happen is anyone's guess right now, so if you want assurances you better be entering into a contract to purchase as soon as possible. From a loan perspective underwriting times are already being impacted and it's expected to get worse which means it should take longer to close a loan. Most importantly be sure to work with a lender who is trusted and can deliver. Many buyers will chase the absolute lowest rate posted on an internet website only to find out they don't deliver on time. That can cost you $8000, so don't play around! Most first time buyers need government backed loan programs like FHA, VA and USDA. Your lender will need to be on top of their game or you will pay the price!
By the way, I just had a customer get her tax credit check by mail in only 5 weeks! Her life is changed as a result of this and she is one of many!
A great friend and colleague in NJ wrote this, and it so needs to be shared. With so much talk about the First Time Buyer Tax Credit, and if it may be extended or not, it's good to know what's at stake if you decide to wait.
As for myself, I agree with Jeff Belonger below that waiting is foolish. Our local market here in Central Florida has seen severe price reductions and some very good deals are out there. Though multiple offers are being submitted on the better deals, the fact that sellers are taking offers for $0 down financing and paying all closing costs says volumes about the type of offers they are getting. Buyers certainly continue to have the upper hand, and buyers working with knowledgeable and experienced Realtors are really winning in this market.
Lastly with continued tightening of lending standards, and the spector of higher rates it's just not prudent to roll the dice on buying a home now. If you are interested in buying a home in Central Florida, and can qualify now, you are best served to try to close before November 30th and get your tax credit dollars.
Just another opinion from somebody with enough experience to take seriously...
How smart do you think you are? Do you think you can outsmart people, just because you read some good advice, yet it failed to share with you the opposite side of things. That has been one of my biggest fears and pet peeves when it comes to blogging. And another? That many blogs are opinions, not facts, yet they sound like facts.
Janet Guilbault wrote this interesting post that makes a good point : Outsmart the crowd : Skip the $8,000 tax credit & wait to buy - She talks about skipping the first time homebuyers tax credit in hopes that you could get the house of your choice for $20,000 less. She adds that winter is around the corner and the market should be slower, which could get you that price reduction. Again, some good food for thought, yet forgetting some very key points to her opinion. And just for the fact, in my opinion, this is a risk. Are you willing to chance your $8,000 tax credit? Let's look at this further....
RISK – CHANCE – HOPE – LUCK – FALSE HOPE
Again, Janet states that you should skip the $8,000 tax credit, because you could get a better deal on a house in the winter months. And because there wouldn't be as many buyers in the market, because of the first time homebuyers tax credit of $8,000 would not be available. Overall, I feel really strongly against this kind of advice.
Here are my thoughts on why you should be careful of such advice :
Reduced property values - You got the house for $20,000 cheaper, and based on a $250,000 mortgage, that would save you $120 a month. So you didn't get the $8,000 tax credit. It would take you 5.5 years to save that tax credit with your monthly savings.
Interest Rates - Do you have a crystal ball? Do you know where mortgage rates will be in December? You get that new house for $230,000, yet the rate increased .375 of a percent. Your new savings will now only be $64 a month. That means that it would take you 10.4 years to save that $8,000.
Real Estate Market - Do you know how appraisals truly work? Do you understand that an appraisal is an opinion from a certified appraiser? Not one house is the same and in many cases, not all appraisals of that same house are the same. I could give you many examples of specific homes in recent months, having a few different appraisals that could vary from $3,000 to $20,000 in value.
$8,000 tax credit in your pocket - You now have the $8,000 in your pocket 2 months after settlement. What could you do with that monies?
- Use the money to fix up the house.
- Use the money to pay off some credit cards, which could save you more money in the long run.
- Possibly pay back some debt to those that helped you get into your new home.
- Save for any housing emergencies that could happen at any moment.
- Ryan Shaughnessy, in comment # 11, states that you could use the tax credit to pay for 12 months of your mortgage payments. Imagine that, no mortgage payments for a year.
Waiting for a possible increase to the tax credit, possibly a $15,000 tax credit - So you take Janet's advice and say to yourself, maybe they will extend the tax credit or raise it to $15,000. Ouch, in my opinion, that is a huge risk. If you are actually in the market now, why play the market? If you come across your home now, but it now, don't roll the dice.
Real Estate Market - Each real estate market is different. In my opinion, even the experts can't truly predict what the housing market will do. Some have said that we have hit bottom. Some say it could be a year. But then again, in some markets, prices have increased already. In Janet's post and in a few of the comments, some people have stated that there will be a correction to this. Again, it's an opinion, not a fact.
$20,000 reduced value - You don't physically see this money. You don't get 20k in hand. And what happens if the house was over-priced to begin with? What happens if values don't increase in 5 years? The only equity is that equity that you build yourself. In 5 years, you knocked your principal balance down by $16,000.
Conclusion : Janet ended her post with this ... "If you save $20,000 on your house, do you care if you sacrifice an $8000 tax credit? Probably not. (But don't expect anyone in the real estate industry to talk about this until AFTER the rebate ends)."
Well, I will still be talking about it, no matter if the tax credit continues or ends. I am all about educating the consumer, sharing both perspectives on real estate and mortgage issues. And yes, I would care if I sacrificed the tax credit, especially based on what I stated above. Especially if interest rates went up a half of a percent by December. In my opinion, I can go to Vegas and or Atlantic City to gamble. But why gamble on free money, money that you don't have to pay back. We are in a very tight economy now. I don't think many of you have money to gamble with as you did several years ago. (I don't want to get into the statement of free money, because yes, as tax payers, we are paying for that)
Lastly, excellent time for first time homebuyers. Home values are lowest in the last 5 years, with interests being close to the lowest in several decades, and $8,000 given to you if you qualify.
IMPORTANT REMINDER – The $8,000 first time homebuyers tax credit ends on November 30th, 2009
On July 30, 2009 the rules changed- are you ready?
The MDIA is effective for mortgage loan applications taken 07/30/09 and thereafter and places many additional restrictions on how we lenders will have to comply with disclosing loan terms to our borrowers. The effort is laudable- to give customers the information they need to properly shop for a mortgage, when they need it; however it represents an awesome example of how badly government can screw something up.
My vantage point for this fuster cluck is that of a Mortgage Banker. I get to see the Bank and Broker side of this and have seen the many conflicting memos indicating how various lenders are making sure to comply. If you think this act will not impact you, think again.
The document that's causing all this grief is the Truth in Lending disclosure or TIL. Heretofore the TIL has always been one of those many disclosures no consumer ever really pays attention to. It attempts to convert the interest rate and fees associated with getting a mortgage into one, easy to read Annual Percentage Rate or APR. Again, great intention- shitty delivery. The most memorable part of this form is that is DOES NOT have your actual interest rate (what did you expect from the government- and now they want to manage our health care?). Truth is (pun intended) the form does disclose very pertinent information about pre-payment penalties, insurance requirements and late charges, as well as interest costs over the life of the loan but in my many years of working with it I've actually had customers call it the "Not in Truth in Lending" form.
So now we are being challenged to provide an accurate TIL within very strict timelines or we simply cannot proceed with the loan. As mentioned earlier, what's worse is some lenders are interpreting the rules differently. For the most part what I'm seeing is:
All are not allowing the collection of any upfront fees (except for credit reports) until three business days have elapsed from your having sent the TIL to your customer, but many have conflicting definitions of when the disclosure is actually provided. Look for this to slow down appraisals even more.
All are not allowing any loan to actually close within 7 days the original disclosure, but many are defining that disclosure differently too.
Some are requiring additional precise wording be added to the TIL (though all of them should be).
Some are requiring the borrower sign additional disclosures saying all this is actually happening when it should (and you wonder why we kill so many trees in this business).
I think you get the drift by now. Different rules in different places so be prepared to hear conflicting information depending on who you ask.
The real big deal with this act is that it will not allow us to close a loan until our borrower has had a correct (to within .125% in interest) TIL for three days. This means any change that would trigger a new TIL will delay your closing at least 3 days. If the new TIL must be mailed it is considered to be received by the borrower 3 days later so that would delay your closing 6 days. Some lenders say it's only if the APR goes up by .125% but if your read the Act it applies for any change, up or down. See where I'm going with this?
OK- so you want to know some specific instances that could make the TIL wrong at the last minute. Considering that $125 is enough to throw a $100,000 loan out of compliance it doesn't take much. Regulation Z tells us what is considered a finance charge and some of the easiest to trip over are:
fees charged by the title company or closing agent when required by the lender
rate lock extension fees
prepaid interest that changes daily (although typically it should take about 8 days before you get into trouble)
up front private mortgage insurance premiums (how many lenders do you know that can accurately calculate the guarantee fee on a USDA Rural Development loan? Hint- there's not many.)
By now I hope you've realized how vital it will be to use a knowledgeable lender if you want to avoid unnecessary delays. I know this info is boring; it's the nature of our business folks. Paying attention to this boring stuff is what you need your lender for. The devil is hiding in the details more than ever before so make sure your lender is on the ball or you may find yourself behind the eight ball.
The typically busy spring home buying season has sprung in Lake County which surpassed the 300 unit per month threshold topping out at 317 for the month of June, '09 as reported by the National Association of Realtors. Prior to this April had seen the best sales so far this year with 288 and the June sales blow away January's total of 187 sales. Sales are clearly trending upward with price and rate affordability playing a big role, coupled with the first time buyer tax credit incentive.
While sales of single family homes under $50k took a sharp jump it was sales ranging from $140k to $200k that saw the biggest increase. This reverses earlier trends showing the most activity from $120-$140k and suggests inventory at the lower levels is becoming scarcer.
Speaking of inventory, that's the real shocker! With only 4084 units listed for sale we now have the lowest inventory levels since January, '07 and with the increase rate of sales that reflects a 15.53 month supply, the lowest level since December, '06! Put in perspective as of January, '09- a scant five months ago- we had over 700 MORE homes listed for sale that represented an over 31 month supply!
The trend is now clear folks and if you are looking to buy, all indications are you missed the bottom. It's still a buyer's market and good deals can be found, although the best deals are seeing multiple offers and selling quickly.
So buyers need to be ready to move fast on a good deal and have financing arranged in advance of any offers to negotiate the best price. Speedy closings can also help tip the odds in your favor so having a strong team has never been more important. Government loan programs have become ever more popular as regulations continue to hamstring conventional financing. Appraisal and private mortgage insurance restrictions make FHA/VA/USDA loans the go to sources of financing, especially for first time buyers.
Lastly it is worth mentioning the pace of sales is likely to increase as the deadline for the tax credit nears. Although some buyers may be holding out for an extension or even an increase in the tax credit, it seems unlikely given the excessive levels of government spending that any increases or extensions will make it thru Congress. Once that is made clear look for all the "fence sitters" to jump into the market and further strain demand on what is fast becoming limited inventory. If you don't believe me just look at the numbers- as of June there are only 267 homes listed in the ever popular $100k-120k price range which represents an 8.1 month supply. Someone looking for a home in that price range is already seeing a lot of competition!
This post by my associate Colleen Craig from way out in the west coast was too good not to share. Although the 203k is much more like a construction to perm loan and does carry more costs as such, it's a super program for bank REO's.
And don't forget the streamline 203k is much easier and allows for a considerable amount in repairs too! For questions regarding any of these loan programs call Colleen if you're in California, or call me if you are in Florida
Ok, maybe not, but I will attempt to make it as simple as possible for the client to understand and want to read on. For many of us in the business who are " in the know" we forget that we need to go back to the basics and spell it out in simple terms for others to understand. So I've compiled some information based on my most recent commonly asked questions just this week.
In Southern California, FHA loans were just not utilized over the past 10 or so years because of the FHA Maximum Mortgage limits But now that the limits have been increased and the prices have decreased, FHA loans have become the most utilized loan in recent months. HOWEVER, because it was not a popluar loan, you would be amazed at how many lenders/brokers do not know what they are doing. Especially when it comes to the 203k loan. I spoke to a client today that was given such mis information it made me cringe.
Apparently they told the client that 203k loans were no longer being done (Gee, you think it was after realizing that they had no idea what they were doing?) and they tried to flip them into another loan. This was after telling my client that their loan amount would be for the contract price and the extra money would just be separate and sit in an impound account to be disbursed over the next 6 months. Ok partially true, the extra amount would be in escrow to be disbursed as the remodel progressed, but for free? Who pays for the extra 50,000 dollars you just borrowed for repairs? Your loan amount is for the entire amount you are borrowing. Makes sense right?
So what is a 203k loan and why use one?
When a buyer wants to buy a home that needs repairs utilizing FHA financing, normally the repairs would have to be completed prior to the close of escrow. The repairs would normally fall on the responsiblity of the seller. With so many foreclosures in today's market, the bank is the seller. And many times the home in need of repair is listed "as is". Which in the past would require a cash buyer or conventional financing. This is another reason that people in the business decided to shy away from FHA loans. I believe it was pure ignorance of the programs that were available by the brokers and the realtors couldn't properly prepare their seller for what to expect that gave FHA loans a bitter taste.
* 203k loans allow you to FINANCE the cost of the repairs in the new loan amount. (Not to exceed 110% of the after improved value determined by the appraiser and 203k consultant) What does this mean? I buy a house for 200,000 that needs 50,000 in repairs and I can borrow the extra 50,000? Too good to be true? NOPE. That's it in a nutshell....
ok details please.........
* Down payment is basesd on the sale price PLUS the final cost of the repairs x 3.5% so for example:
Sale price is 200,000 (DO not calculate 3.5% on this) PLUS 50,000 in repairs/costs (which includes certain costs and reservesthe lender will require) 250,000 x 3.5%. Down payment is $8750.00 (closing costs are separate as usual)
* Buyer will hire (lender can recommend) a HUD approved FHA 203k Consultant to go to the property with the buyer to determine the required repairs and wish list repairs.
The fee charged by the consultant can be included in the mortgage. The fee can range anywhere between $ 400 to $1200 depending on the repairs required. Please check with the consultant prior to scheduling your appointment.
*Buyer will obtain estimates from several licensed contractors for the work to be completed depending on how extensive the repairs.
Three estimates are recommended for each contractor but not necessary. The buyer can act as their own general contractor only if experienced and licensed. (FHA says experienced, but most investors require the buyer to be licensed) The contractors must provide documentation to be approved by the lender prior to approval.
The consultant will determine the "required" repairs versus the "wish list repairs". You must start with the required repairs and then move on from there for you wish list. This is an important step for the consultant and appraiser so that you don't over improve the home and exceed the comparable properties in the area.
* Once the consultant completes his report of required and wish list repairs, the lender will forward it to the appraiser for an "After Improved Value". This is where you may run into problems with OVER improving the property based on current values. Between the consultant, appraiser and buyer - the FINAL FINAL report will be tweeked to come up with a final report that the contractors will be hired to do.
* So now the file is submitted to underwriting and approved ( you need to qualify at the full amount you are borrowing of course, which may include your current mortgage payment for the home you will live in during the rehab period) and the normal steps for closing will occur.
(BIG PLUS - you can include 6 months of mortgage payments in the new loan amount since it's assumed that you will have TWO housing payments during the rehabiliation of the new home. This money will be deducted each month during the reahab process) This is optional.
* Closing occurs, and the work begins within 30 days of closing/funding. (This is when your mortgage payments start since this is when you started borrowing the money - however, if you included the 6 mths mtg payments, they will be deducted from escrow starting when your first payment is due)
* Disbursments are made throughout the following 6 months from the escrow account (normally 4 draws with one final inspection, but this can be increased for higher repair amounts) as the work is completed.
Remember you paid the seller for the price of the home, and then you borrowed an additional amount of X which is sitting in an escrow account to pay the contractors (your total loan is the total amount you borrowed)
Once the last disbursement is made and the final inspection showing COMPLETED AS PER THE CONTRACT........you are done! Simple ast 1 2 3 - okay maybe not, but that's why having an experienced lender on your side is crucial!
There are specific properties and repair requirements for this type of loan, so please call me for specific details if this sounds like the right loan for your new home.
Please send me your before and after pics! I would love to see them and maybe even post them for people to see what can be done with this awesome program! Or contact Colleen Craig FHA 203k Specialist for more details
Local information regarding Mortgage lending in Lake County, Florida including Mount Dora, Eustis, Tavares, Leesburg and the surrounding areas. Also providing up to date information on HUD and government loan programs, and first time buyer programs.
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In the scenario today, said client was offered 4.5% with no points. I told him it wasn't possible, but lest I be ignorant, I dropped by this other lender's website. Indeed, the lenders website quoted 4.5% with no points and an APR of 4.878%. The website gave the assumed loan amount and purchase price. So I went and did the math. What did I find out? To make the rate and APR accurate, I had to add 2.25% in points ON TOP OF all of the regular fees (title, appraisal, etc.).
Any lender should be able to offer you a good faith estimate (GFE) in a fairly short amount of time, 24 hours or less, allowing some time for when a lender is very busy. Assuming the lender is honest and accurate with their fees, you should be able to see the true cost of their offered rate. You should be able to see, as in the above scenario, that their rate of 4.5% with no points really has a lender fee of $4,119 (Actual additional cost based on their APR). This same week I had another rate shopper send me a 
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You hear plenty of talk from NAR (National Association of Realtors) and the NAHB (National Association of Home Builders) regarding the push to extend the First Time Buyer Tax Credit, but what is really going on with it? There is little argument the program has been successful in spurring sales and I can say from experience it's doing great things for many a first time buyer. Will it be continued? Will it be expanded or increased? Will it be forgotten?
What will happen is anyone's guess right now, so if you want assurances you better be entering into a contract to purchase as soon as possible. From a loan perspective underwriting times are already being impacted and it's expected to get worse which means it should take longer to close a loan. Most importantly be sure to work with a lender who is trusted and can deliver. Many buyers will chase the absolute lowest rate posted on an internet website only to find out they don't deliver on time. That can cost you $8000, so don't play around! Most first time buyers need government backed loan programs like FHA, VA and USDA. Your lender will need to be on top of their game or you will pay the price!
The trend is now clear folks and if you are looking to buy, all indications are you missed the bottom. It's still a buyer's market and good deals can be found, although the best deals are seeing multiple offers and selling quickly.
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