The FHA $100 HUD Repo program is a purchase-money loan offered in the Atlanta, Georgia area to purchasers of a home owned by the Department of Housing and Urban
Development. Buyers are only required to make a $100 downpayment and may be eligible for sales incentives provided by HUD.’
Requirements:
- Find a HUD home at this site.
- Minimum middle credit score of 620
- Property must be your primary residence
- Product is available without restriction in the entire state of Georgia
Features:
- Borrower is only required to bring $100 to the transaction
- Borrower can finance up to 110% of the sales amount to include closing costs as well as minor repairs up to $5000.
- Max loan amount in the Atlanta Metro is $346,250 through the end of 2009
- Program is temporary and is subject to end at any time
The S&P/Case-Shiller Home Price Indices was just published for the month of January 2009. On the chart you can see the precipitous decline over the past few months - particularly going back to Sept 2008. The decline is so steep that we can only hope that this is a precursor to a market bottom. What we can see from the chart is that we are now back to price levels not seen since June of 2001 in the Atlanta market.
One important note to make is that there is no sharp increase in home prices in the 2001 to 2007 time frame as we saw in markets such as Florida and California. One could infer from this that much of the punishment we have taken over the past couple of years has a lot more to do with the overall perception of the housing market than a bubble in the Atlanta market. Hopefully, when the foreclosure situation corrects itself, we will recapture many of the losses sustained.
Overall we are down right at 20% from the peak in July of 2007.
Investors have been shut out of the huge opportunites that are available today due to the 4 property rule. Recently Fannie Mae has reverted back to a maximum of 10 properties financed. There are some very stringent requirements, but for the right borrower, this is a fantastic opportunity. Here are the highlights:
Restrictions for borrowers with 5 to 10 properties:
- The borrower cannot have any history of bankruptcy or foreclosure within the past 7 years.
- The borrower cannot have any delinquencies (30-day or greater) within the past 12 months on any mortgage loans.
- Rental income on the subject investment property must be fully documented. Rental income from other properties owned by the borrower must be supported by 2 years’ federal income tax returns.
- Federal Income Tax Returns must be verified by transcripts obtained from the IRS
- The borrower must have reserves for the subject property and for other properties currently owned by the borrower (no other financed second home and investment properties).
Reserve Requirements
When the borrower will own 1-4 financed properties (including the subject property) the minimum reserve requirements are:
- 2 months of reserves on the subject property if it is a second home,
- 6 months of reserves on the subject property if it is an investment property, and 2 months of reserves on each other financed second home or investment property.
When the borrower will own 5 - 10 financed properties (including the subject property) the minimum reserve requirements are:
- 2 months of reserves on the subject property if it is a second home,
- 6 months of reserves on the subject property if it is an investment property, and
- 6 months of reserves on each other financed second home or investment property.
Multiple Properties and the Fannie Mae Homepath Mortgage
Homepath financing is available for borrowers with 5 to 10 properties, however, the 90% financing option is not available. Even on Homepath the limit will be 75%. Given the additional cost of the Homepath option, in this case, the borrower would be better served with the standard conventional option.
See our previous post regarding the Homepath Mortgage.
Can closing costs be rolled into the new loan? – Yes, as long as the new first mortgage loan will not exceed 105% of the appraised value.
What about my existing second mortgage? — If there is a second mortgage or Home Equity Line of Credit, it can be subordinated, and remain in place behind the new first mortgage. Big if here. IF the 2nd lender will allow the 2nd mortgage to be subordinated. At the current time, that is unlikely.
What if the combination of the first mortgage, existing second or HELOC, and closing costs [these three together are the Combined Loan-To-Value - “CLTV”] will exceed 105%? – That is OK, there is no cap on the CLTV. Again, it is currently difficult to get your 2nd lender to agree to the subordination.
What about Mortgage Insurance? – If the loan currently has private mortgage insurance (MI), that MI policy will simply carry through the refi, and will stay in place. If there is no MI on the current loan, then MI is not necessary for the new loan, regardless of the new LTV.
What properties are eligible? – Owner-occupied primary homes (detached and condos).
What payment history is required on the existing mortgage? – One 30-day late payment is allowed.
It was nice while it lasted. Up to this point, FHA insured mortgages were immune to the many problems we’re seeing with appraisals in declining markets (like Atlanta). Unfortunately, new rules are in place for appraisals done after April 1st.
Highlights of new requirements for FHA appraisals:
- Requires a Market Conditions Addendum
- At least 2 comparable sales within 90 days of appraisal date
- A minimum of 2 active listings or pending sales in addition to the 3 closed comparables
- Various new adjustments for active listings and pending sales
- Must include original list price and any revised list prices
- Various others
What does it mean? We’ll have to see. We could see more difficulty for the appraisers to justify the price on the sales contract. So watch your contingency periods, give your lender enough time to get an appraisal AND have it reviewed by an underwriter, and be ready to come back to the listing agent to renegotiate if the value is not supported.
This plan was announced by the Treasury Department in Feburary and additional details were released in March. The refinance program allows borrowers to refinance up to 105% of their home’s value using a streamlined refinance option through Fannie or Freddie.
The first step is to determine whether either Fannie or Freddie guarantees your mortgage. To do that, visit these sites:
Freddie:
https://ww3.freddiemac.com/corporate/
Fannie:
http://loanlookup.fanniemae.com/loanlookup/
Once you determine that your mortgage is held by one of those two, you must also ensure that you have not been more than 30 days late on your mortgage during the past 12 months. If you meet both of those criteria, then you are eligible to apply for the program. Please call us to proceed. Remember that just meeting these criteria do not guarantee that you will be able to participate in the program as there are a number of other restrictions in place.
Here is a quick overview:
This update from Mortgagee Letter 2009-08 establishes temporary cash-out refinance guidelines.
1. This is a temporary change, and effective as of April 1st, 2009
2. When adding a simultaneous 2nd lien, there will be a max CLTV of 85%
3. Existing 2nd liens can be re-subordinated with no max CLTV
4. When existing 2nd liens are modified to accommodate the new 1st, there is no max CLTV
5. Must have 12 months seasoning as primary residence to get max cash-out of 85%
6. Less than 12 months seasoning as primary residence, loan amount will be capped at 85% of the appraised value or sales price, whichever is lower
7. Existing loan must be current and not delinquent or in arrears
8. A second appraisal is required for all cash-out refinances above $417,000
9. Non-owner occupants cannot be added to qualify for cash-out refinances
If you are considering a cash out refinance, you have 2 weeks to get your loan application in so that we can assign a case number to your file prior to April 1st.
I’m pleased to announce that we are now able to offer the Fannie HomePath product. The Fannie Mae HomePath program is specifically for borrowers purchasing REOs directly from Fannie Mae. It Includes a number of features which make it the strongest mortgage product available today. Additionally, it is a fantastic marketing tool that you can use with those borrowers looking to purchase REO property (there are 420 Fannie owned properties currently in the city of Atlanta). By narrowing your property search to those properties on the HomePath site, your buyer will be able to enjoy the following features of the HomePath loan:
- 3% Down payment and NO MORTGAGE INSURANCE
- No upfront MIP as required by FHA loans
- Down payment (at least 3 percent) can be funded by your own savings; a gift; a grant; or a loan from a nonprofit organization, state or local government, or employer
- NO APPRAISAL. No appraisal fees and no need to deal with the appraisal issues that we are all fighting today. This part is huge in the current market.
- 6% Seller contributions (we are limited to 3% above 80% LTV on a standard conventional product)
- 2nd Homes and Investors allowed. Still no MI but a 10% down payment is required.
- Remember: For investors, we are going back to a 10 property limit from the current 4. So when you combine that change with this product, there is a huge opportunity.
Search for properties here: http://www.homepath.com
First time home buyers can claim a credit of up to $8,000 on their 2009 taxes for a primary residence purchased between January 1st, 2009 and December 1st , 2009. This program replaces the old $7,500 tax credit and unlike the old credit, this is a true credit that does not have to be repaid as long as the buyer remains in the home for 3 years.
Here are the highlights:
- Credit amount: 10% of the sales price of the home up to $8000. Any home purchased for $80,000 or more qualifies for the full $8,000 credit.
- Qualified homebuyers: Purchaser (and purchaser’s spouse) may not have owned a principal residence in 3 years previous to purchase.
- Eligible purchases: Any primary residence purchased between 1/1/2009 and 12/1/2009.
- When: The credit will be available when you file your 2009 taxes (still some debate over whether it can be applied when you file your 2008 taxes). This credit will first offset any taxes you have due, and any remaining credit will be issued to you as a tax refund.
- Income limits: Anyone under $75,000 AGI (individual) and $150,000 AGI (joint) gets the full credit. The credit phases out between $75k and $95k individual and $150k and $175k joint.
- Recapture: If home is sold within three years of purchase, entire amount of credit is recaptured on sale.
FHA is back in vogue today with the extreme tightening of underwriting guidelines for conventional financing. FHA is much more liberal on credit score restrictions and generally provides a much lower monthly payment for those borrowers who are below a 700 middle credit score. Additionally, FHA provides a number of features which are simply not available on conventional loans such as allowing borrowers with a fairly recent bankruptcy to obtain financing as well as to allow a non-occupant co-borrower to be added to the loan.
Today, the area where FHA probably shines the most though is in condo financing. With a conventional loan, both Fannie Mae and Freddie Mac have made condo financing extremely difficult to obtain. Additionally, just this month they began charging 0.75 points for any 20 or 30 year condominium loan where the borrower does not put down at least 25%.
Please note that not every condominium will qualify for FHA financing. In the best case, the condo project that you are purchasing in will already be on the FHA approved projects list. How can you determine this? Simply follow the link below and slowly narrow down the search to determine if the condo you are looking at is on the list.
https://entp.hud.gov/idapp/html/condlook.cfm
If you find that your condo project is on that list, then you can stop there as you are in great shape. If, however, the condo project you are looking at is not on the list, you do still have the possibility that the unit you are purchasing can receive a “spot approval”. In order to make that happen, the FHA lender must certify that the condo project meets the eligibility criteria set forth by HUD. Using this checklist: https://www.franklinamerican.com/wiki/_media/public_extranet/wholesale_forms_general/condo_fha_spot_approval_checklist.pdf?id=public_extranet%3Awholesale_forms_-_ma&cache=cache the lender will perform an investigation on the unit in question. If the lender determines that the condo does meet the criteria, the unit will then be eligible for FHA financing.
Here are a few of the major restrictions to obtaining a “spot approval”.
- At least 90% of the units must have been sold
- At least 51% are owner occupied
- No single entity may own more than 10% of the units
- If there are more than 30 total units, then no more than 10% of the units may have FHA financing
- If there are 30 or fewer total units, then no more than 30% of the units may have FHA financing
In addition to the above, the unit in question must also meet the FHA requirements that are placed on any property - whether it be a single family, 2-4 family, or a condo. The appraiser will make this determination when he inspects the property.
Feel free to call us if you have any questions at all about FHA financing, or any other financing needs.
