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100% financing is back AND 2nd Chance financing for people with recent foreclosures

By Jed Wunderli

Mortgage and Lending with Alterra Home Loans

February 03, 2011 01:25 AM

100% financing is back AND we have a new 2nd Chance program for people who have had a recent foreclosure or short-sale. We have set aside $30,000,000 to fund these programs. They are available in Nevada only.

Borrowers with a credit score of 720 or higher can qualify for 100% financing if they have income that will allow their debt ratio to be at 45% or below. Basic FNMA / FHLMC guidelines apply to this manually underwritten loan. The first is fixed at 5.5% and the 2nd is a 30/15 at 9%. The blended rate is 6.2%. This is a great FHA alternative for borrowers with little money for a down payment (closing costs are a bit higher than for FHA loans). The other benefit is that the payment may be lower than an FHA loan since there is no mortgage insurance.

Borrowers with a foreclosure or short sale may benefit from teh 2nd Chance program which allows financing for borrowers just 1 year out of a foreclosure (minimum credit score of 620, 580 on a case-by-case exception). The program will consider buyers who short-sold a house just three months ago. FHA's guideline is 3 years!! There is a 20% down payment requirement of which 15% can be gifted. This loan is for buyers who have good credit other than their foreclosure or short-sale. It will also consider buyers one year out of bankruptcy. The rate is fixed for 30 years at 5.5%.

We are also having great success with our FHA 203(k) Streamline program for which we have a dedicated general contractor. He just finished a home for us on Monday and it looked and smelled like a brand new home and the home owner was happy as could be. The work was done in 20 business days (new paint in every room, new lighting fixtures, refinished cabinets throughout the house, new granite countertops in the kitchen, new tile flooring in the kitchen, bathrooms, and family room, and new countertops in the bathroom along with new bath and shower surrounds). Can you imagine the referrals we'll get from this extremely happy borrower? To think that we closed this FHA 203(k) Streamline 9 days early!!

What are your thoughts on these new programs and the FHA 203(k) Streamline?

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Kathy Denworth

BHHS Keys Real Estate - Islamorada, FL

Realtor in the Florida Keys, Islamorada, Key Largo

Wow, isn't this the kind of thing that got banks in trouble in the first place? Lending money to people with a track record of NOT paying is just plain wrong.

Feb 03, 2011 01:27 AM

Jed Wunderli

Alterra Home Loans - Las Vegas, NV

The 2nd Chance program is more for people who have had to short-sale or foreclose for reasons such as their income dropped and they could no longer afford the payment on a mortgage that is much higher than what they could currently get based on much lower housing prices. Banks got into trouble by not only lending to people who didn't have good credit histories (this program requires good credit other than the foreclosure or short sale and it requires a year since the foreclosure to show a good rental history) but also by accepting stated income that wasn't commensuarate with their credit score or assets. Very little made sense on some of the loan programs back in the day; this makes a lot of sense for hard-hit homeowners who otherwise pay their bills.

Feb 03, 2011 01:34 AM

John Benson

RE/MAX Home Experts - Philadelphia, PA

Broker/Owner - Philadelphia Real Estate

I do like to see more financing options, I agree that 100% financing is too high of a risk for banks. We need Americans to save some money to purchase a home. Where banks need to change the guidelines is on stated loans for individuals that are self-employed. I believe most of the stated loans during the first decade of the 2000s were people actually on fixed incomes an "stating" somehting different. THe self-employed got hurt the most and likely were not the root of the problem (underwriters were resoponsible for this). Good info though on those programs!

Feb 03, 2011 01:35 AM

Not a real person

San Diego, CA

I believe that the real estate market and the general economy would be better, and better served, if everyone – no exceptions – was required to put 10% down and were never allowed to take that 10% out unless they sell the house. It would create a more stable market because people wouldn't be trying to use their homes as cash machines. They'd also have a little better pride of ownership since they would always own at least 10% of their homes.

Feb 07, 2011 12:23 PM

100% financing is back AND 2nd Chance financing for people with recent foreclosures

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