Federal Housing Administration

•·       FHA is a division of HUD and was established in 1934.  The Federal Government created FHA loan programs to encourage homeownership throughout the country.  FHA doesn't actually make the loan, they simply insure the loan to limit the risk to the approved lender.

•·       FHA loan guidelines are more relaxed than conventional and other types of loan programs making it easier for potential borrowers to qualify.

•·       FHA loans are limited to owner occupied / primary residences only.  Property types include the following:

            * SFR

            * Town Home & Condominiums - FHA

               Approved Projects

            * Multifamily dwellings - 1-4 units

            * Manufactured Homes - HUD guidelines apply

GUIDELINE REMINDERS

•·       Debt Ratios:   31 / 43%

           * Borrower must be qualified at the Note Rate! 

           * 30 year fixed, 15 year fixed, 5 / 1/, 1 year arm

•·       Credit Score is NOT the only factor!

           * Married Borrowers (need to run both credits)

           * 585 or lower can affect the rate

•·       Alternate Credit:   3 trades on company letterhead, minimum 1 year history

•·       (CAIVRS)  Federal information regarding delinquent or defaulted federal loans

•·       Judgments & Liens need to be satisfied

           * Not always shown on credit report

•·       3% minimum Buyer Contributions (down payment)

•·       6% maximum Seller paid closing costs

           * Pre-paids can be paid with premium pricing

•·       Compensating factors regarding higher ratios

           * 3 months reserves (401k, etc.)

           * Ability to save money & conservative attitude toward

              credit use

           * Minimal increase in housing expense - less than 10%

           * Borrower makes a large down payment - 10% or more

           * Borrower has additional income not calculated in

              effective income

SAMPLE LOAN AMOUNT CALCULATIONS

SINGLE FAMILY                                                CONDO

Sales Price        $350,000.00                             $350,000.00

3% Down =      $  10,500.00                             $  10,500.00

                          __________                             __________

Base Loan

Amount            $339,500.00         

Upfront                        x 1.5                       NO UPFRONT

MIP 1.5%        __________                           MIP FOR

                          $   5,092.50                            CONDOS

Total Loan

Amount            $344,592.50                             $339,500.00

Rate:                  5.75%                                      5.75%

30 Year

Fixed P&I         $2,010.95                                    $1,981.23

Insurance          $     60.00                        HOA   $  200.00

Taxes                 $   364.58                                    $  364.58

Monthly MIP    $   143.58                                    $  141.46

0.5%                  ________                                    ________

Total PITI         $2,579.11                                    $2,687.27

CO-SIGNOR FLEXIBILITY

•·       Occupant Co-Signors - No limit as long as the file makes sense and the property warrants number of people residing in home (number of bedrooms and bathrooms, etc.)

•·       Non-Occupant Co-Signors - Income and debts are blended and still considered owner occupied.

*  Example - Son in college and parents want to help buy a condo near campus.  Parents can co-sign and qualify based on their income, assets and credit and the son is primary occupant with no job.  Explain and must make sense.  Owner Occupied transaction under FHA guidelines.

RECENT FHA UPDATES

•·       FHA allows as-is appraisals if property has minor deficiencies:

          * Cracked or Peeling Paint on homes built after

             1978

          * Cracked Windows

          * Debris in yard

          * Missing Handrails

          * Damaged Drywall - Example - Previous leak

             (Water stains)

•·       Appraisers must be FHA approved through HUD

•·       Inspections that HUD no longer requires:

  * Termite Report & Clearance - Unless called for

     by appraiser/lender

  * Roof Certification for flat roofs

  * Septic Certification

FHA WRAP UP

•·       Complete Full Doc loan package - Power of 2's

•·       No minimum Fico or trade line requirement

•·       Debt ratios 31/43 unless good compensating factors or automated approval

•·       Gifts OK / Loans from family

•·       Co-Signors OK

•·       Condo Spot Approvals available

•·       No PMI Approval required

•·       Seller Concession's up to 6%

•·       No VOR

•·       Cash-out to 95% LTV 1-2 Units

(Refinance's Appreciated)

RATES/RESERVES/ETC.

•·       Loan Amount: $362,790 or higher, rates average 6.5% as of 3/26/2008

•·       Loan Amount: $362,790 or below, rates average 5.500% as of 4/7/2008

•·       SFR & 2 Units: No Reserves Required

•·       3 & 4 Units: 3 Months Required on all Purchase Transactions  (401k ok)

•·       Reserves can not come from a gift

•·       No prepayment penalty on any FHA

•·       Monthly MI: to be paid a minimum of 5 years    Also needs to have 22% equity!

CalHFA

(CHAP)

•·       The CalHFA Housing Assistance Program (CHAP) is designed to provide up to 2% of the down payment assistance needs of eligible homebuyers purchasing a home in a CHAP-designated area anywhere in California.

•·       CHAP is a deferred-payment second loan for down payment assistance.

(CHDAP)

•·       The California Homebuyer's Downpayment Assistance Program (CHDAP) is designed to provide a deferred payment, simple interest rate junior loan of an amount up to 3% of the sales price or appraised value, whichever is less.  The junior loan may be used for down payment or closing costs and may be combined with a CalHFA or non-CalHFA conventional or government first mortgage loan.

(ECTP)

•·       The Extra Credit Teacher Program (ECTP) is designed to make homeownership a possibility for eligible teachers, administrators, classified employees and staff members working in high priority schools in California.

•·       The program provides a deferred payment, junior mortgage loan for down payment assistance of an amount not to exceed the greater of $7,500 or 3% of the sales price, or; of an amount not to exceed the greater of $15,000 or 3% of the sales price in CalHFA-defined high cost areas.

These are some significant changes effective for reservations made on and after March 25, 2008

•·       Max LTV for 30, 35 IO and 40 year terms is 95% and the max CLTV is 102%

•·       MI premiums are increasing

•·       HiCAP cannot be combined with CHAP

•·       HiCAP cannot be used with FHA first liens

•·       HiCAP max loan has been changed from $7,500 to 4% of the lesser of the sales price or appraised value

•·       CHAP reduced from 3% to 2%

Kevin Hottmann

Realtor

800 N Harbor Blvd

La Habra Ca 90631

 (714)988-1725