It’s been about a year since I shared some of the FHA changes with you, and there have been more changes, so I figured I’d update you!
• 3.5% down payment. Can come from savings, gift from a relative, employer or union, or a grant from a non-profit. (used to be 3%, and I still hear a lot of agents talking about 3%... it changed January 1, 2009)
• There is talk of some new programs that will advance loan them the $8,000 tax rebate, however it is not clear whether it will be allowed to count towards the 3.5% down. It will also be a very short window to use it before 12/01/09.
• "Seller Gift Charities" are still NOT OK for now. This is where the seller "gifts" 4% to a charity which in turn "grants" 3% to your buyer (Nehemiah, etc.)
• Who pays closing costs is now completely negotiable between buyer and seller except the $75-100 tax service that must be paid by seller (this is addressed in the FHA/VA Addendum to contract, see below)
• Property is no longer scrutinized under a microscope. Major health and safety issues will need to be repaired, but most cosmetic and minor issues will be ok to close, usually boils down to what the appraiser puts on the appraisal.
• Appraisals are NOT covered under the new HVCC appraisal system… your loan officer will be able to order their own appraisal (with some lender exceptions)
• No more mandatory well, septic, and flat roof inspections
• They've made the 203k Rehab loan easier to work with, so your buyer can roll repairs into their purchase loan. (ask your loan officer about the 203k “streamline” where you don’t need the engineer reports and inspections, up to $35,000, no structural repairs allowed)
• FHA has no minimum credit score requirement; however most lenders are requiring a 620 or higher. No score is OK too (must build alternate credit)
• 2 years out of bankruptcy, 3 years out of foreclosure (exceptions in rare circumstances)
• Loan limits: Standard is $271,050
o Central FL = $353,750
o Sarasota = 442,500
o St Lucie = 375,000
o Tampa area = 292,500
o Jacksonville = 387,500
o Melbourne = 291,250
o Complete list can be found at: www.Hud.gov
• Condos MAY be spot approved as long as it is under 50% rental occupied.
And here’s a few tips to make your FHA offers and contracts fly through the process:
• Make sure your buyer is pre-approved before you start showing them homes. Your lender should be able to run them through the automated underwriting system and get an answer within 15 minutes. This will make sure you’re not wasting your time or your client’s and your loan officer will also be able to tell you if you need to ask for the seller to pay closing costs and how much.
• When asking for closing costs, you can either ask for a percentage (ex. “up to x% of purchase price”) or a flat amount. Make sure you word it correctly to cover closing costs AND/OR prepaid items otherwise your client might not get full credit. By the way, 6% is the maximum seller contribution. Here’s a sample that you can use:
o Seller to contribute $4,000 towards buyers closing costs and/or prepaid items.
• Have the clients AND YOU sign the FHA/VA addendum right up front (there’s a place on it for both the listing agent and the selling agent to sign and date). There are many different versions of the form floating around, the correct one should have 2 sections:
o FHA Amendatory Clause:
A section that says the appraisal must come in at least at the purchase price (fill in the blank with the purchase price)
o Real Estate Certification:
“Certification” that all parties certify that this is the true and correct contract. It is estimated that 35% or more of all loans closed this year will be FHA, so it is absolutely CRITICAL that you know how to handle them as a real estate professional.
I get my up to date info by being married to a mortgage guy with over 10 years experience, so I get to hear all of his rantings when a realtor gives him a piece of garbage contract to work on with missing addendums and all kinds of problems. Hope you can use it! (or share it with someone in your office that can... you know who I'm talking about!)
Andy
p.s. If you'ld like to subscribe to my weekly e-zine, go to www.AndyTolbert.com
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