I don't want to sound like a broken record, but with the current status of the economy, job losses, rising gas prices, shaking real estate market, and lots of financing institutions going belly up, it bears repeating the benefits of FHA financing.
As realtors, we cannot complete a sale without finding financing for our buyers (I don't know about the rest of you, but I haven't had anyone show up with a big bag of cash to purchase a house lately :-) A lot of buyers are still looking to find 100% financing or loans with very little downpayment. As a military town, we can still do a lot of 100% financing thru VA loans, but that only applies to active or retired military. What about the rest of our customers that are not military? 100% conventional loans went extinct; and in many cases we can't even find a 95% conventional loan for our customers (not everybody looking for a house has high enough credit to qualify for it.) So that leaves FHA loans. Here are a few things to know about FHA loans compare to conventional financing:
CREDIT
- Your customer can get FHA financing even if they've filed Chapter 13 as long as it has been at least 12 months since it happened and they have proof of 12 monthly payments made on time. For Chapter 7 it is required 24 month period and payment record.
- Your customer can get financing after a foreclosure, as long as it was at least 3 years prior to the new acquisition.
- If your customer is young in age and does not have enough credit history affecting the credit score, the customer can use alternative credit references, such as utility and rent payments.
- The borrower can have a parent or sibling co-sign with them as a Non-Occupant Co-borrower and their combined income will be considered as one when judging the income to debt ratios.
DOWN PAYMENT
- FHA requires a down payment of 3%. However a portion of the closings paid by the borrower can be considered toward the down payment.
- The entire down payment can be in the form of a gift: gift letter and proof of funds transferred required, no seasoning necessary. (holding period for the funds)
- Down payment assistance programs like Ameridream can be a source of funds for the down payment. We have a similar, local program to help our local residents. The program is called "No Place Like Home" and it's provided thru the City of Clarksville. It provides $5,000 toward down payment and a percentage of the closing costs if the borrowers meet the income requirements. For more information on the "No Place Like Home", please, contact City of Clarksville, TN, Office of Housing and Community Development. (I'm sure other cities around the country are offering similar programs.)
OTHER
- For your first time home buyers or for customers who have not owned a house in the past 3 years, consider THDA loans with programs that offer help toward down payment and / or closing costs.
- FHA will provide financing on double wide manufactured homes on permanent foundations with the right documentation.
- Minor items of deficiency such as cosmetic items (i.e. paint, carpet and such) are not an issue with FHA loans.
I hope you have found some of this information helpful. If you want to check out more details go to: http://www.hud.gov/offices/hsg/sfh/talk/addr_atl.cfm
Happy selling! ... And remember, if you have the right lender to work with, you're half way to closing the deal! So, make sure you have a good, reliable, and knowledgeable lender, and always have a back-up for him/her too!
***Limits for FHA loans have been temporarily increased until the end of 2008 as part of the Economic Stimulus package. For Montgomery County, TN the maximum FHA mortgage limit is currently at $271,050
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