FHA loans cheaper... you buying?

North Center Chicago (Photo Eric Rojas, Broker, Kale Realty)

We have personally seen less FHA loans used by our buyers and those buying our listings over the last few years.  Tighter credit restrictions and cheaper conventional loans made FHA less attractive.  We also had a larger average transaction price over the past few years.  Bloomberg is reporting first time buyers and those with past credit issues (short sales) are being helped by FHA loans again in increasing numbers. 

Renters Buying Again as U.S. Starter-Home Financing Gets Cheaper

In 2010 we chose an FHA loan to hold on to more cash for immediate home renovations.  We have since refinanced into a conventional. I have worked on all my loans with Steve Dunnet of Blueleaf Lending SDUNNETT@BLUELEAFLENDING.COM

First time buyer: Meeting HUD consultant for FHA 203k loans

Our clients are interested in purchasing a house that needs renovations.  They'd like to use an FHA 203k renovation loan and sought the services of a 203k consultant.

Sorry, this has got to go!

 Last week we met at the prospective house with Dominic Valenti an FHA HUD Consultant & 203k certified contractor.  The consultant felt the scope of the renovation needed and the construction budget the buyers could borrow using the FHA 203k loan were compatible. He helps the client manage the process of working with a certified contractor and the FHA lender (preparing the required documentation to each party and process involved).

 My role was to basically gauge what renovations would make sense for this particular market considering their budget.  The first time home buyers have a very realistic view of what would be in store should they move ahead with a purchasing the home using a 203k renovation loan.

Mold Stops FHA Mortgage! (and Man Bites Dog!)*

A "younger" Steve Dunnett

Steve Dunnett, Mortgage Loan Professional weighs in: 

 We recently had a client who was purchasing a home with an FHA mortgage. He ran into trouble right before the closing due to mold!  Why?

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Real photo, unfortunately, by Eric Rojas

FHA mortgages are insured by the US Government; therefore, the property requirements are more stringent than loans obtained without government approval requirements. If you’ve ever bought a home before you may be wondering how it’s possible to make the process more stringent or convoluted... but alas, our government has found a way.  Of course, the government does this with intentions of protecting the people buying homes, and ya know, protecting their own assets. 

If you are obtaining an FHA loan... the government’s assets are also your assets. The one item that is most important to the government in these transactions is whether or not mold is present in the home. If mold is there, the government insists that it is removed before they will agree to insure the loan on the property.  This means two things to you:

(1) If you are ever obtaining an FHA mortgage, you need to make sure that any mold is removed before an appraiser is sent into the property. Otherwise, the appraiser will require a professional to come in to remove it...increasing costs and delaying a closing.

(2) Make sure that the home inspector is looking at these items AND that the inspector is working with your best interests. In the case of our client at the closing table, we had an appraisal completed with a report that stated that there was a questionable substance that could be mold. The home inspector provided a report stating that the substance was not mold... so we scheduled a final FHA inspection on the property to confirm this. 

Unfortunately, the final appraiser confirmed that the substance was definitely mold - it turned out that the original home inspector was found through the seller's attorney and he didn’t provide the correct information (NOTE: hire your own property inspector). In the end we closed the loan - BUT - only after the buyer and seller split a bill of $2500.00 to remove the mold.

If anyone has any questions about FHA mortgages, requirements, or processes; please give me a call. I’d be happy to help anyone out there utilize the FHA program that helps home ownership with low down payments.

Steve Dunnett

708-289-3408

Steve.dunnett@gmail.com

*No dogs were bitten

Introducing FHA 203 Construction Loan: Seminar this May 12th, 2011

Guest blogger Steve Dunnett, Senior Mortgage Consultant introduces FHA 203(k) construction loans.

How many times have you considered the perfect house in your ideal neighborhood but the kitchen or bathrooms needed to be updated? Maybe you found a foreclosed property but were intimidated by the repairs needed. If you are like most buyers you would pass on these houses because you either don’t have the money for construction after your down payment or you do not have experience with renovations.

There are many properties like this in this market, however investors are the ones buying them, doing the work, and putting them right back on the market for a much higher price. These renovated properties are selling quickly because now they are great houses in great locations. However, they would have made a great primary home for you with just a little work and money.

FHA has a construction loan that makes it easy for you to purchase and fix up your new home. There are two versions of the FHA 203(k) loan: a streamline and full. A streamlined 203k is limited to $35,000. A full is only limited by the FHA maximum loan limit, which changes depending on where you live. In the Chicagoland area that limit ranges from $410,000 for one unit up to $788,450 for a 4 unit.

The process of getting a 203k loan is very similar to getting other mortgage products. You will work with an FHA consultant who will help you with the construction portion of the loan. There are a few key things to know about the loan and we offer monthly seminars where you can speak directly with an FHA consultant.

*Our next seminar is this Thursday May 12th, 2011 from 11:00AM - 12:30PM at Marcello's 645 W North Ave Chicago. Please contact me, Steve Dunnett, Senior Mortgage Consultant at 1-708-289-3408 so we can reserve a spot for you.

FHA Approval and your Condo Association

Is your condo building FHA approved? Should it be?

Federal Housing Authority backed loans (FHA loans) are a popular product among home buyers. The loans allow lower down payments and lower credit scores than conforming loans and still offer the benefit of today's low mortgage interest rates. But FHA loans can only be used in FHA approved condo buildings. There are basic criteria a building must meet to be approved.
Click HERE to view the checklist for condo association FHA approval

This year already my partner Bob and I have helped several buildings become FHA approved so our buyers and sellers could put a deal together. In other cases, we have seen buyers pass on some of our listings because the building was not FHA approved and they did not want to wait for the approval. The buyer initiated approval process can add an extra month to the length of time from acceptance to closing. There are two basic ways your condo building can become FHA approved:

1. Your condo Board and owners initiate FHA approval through a reputable lender.
   
2. A buyer, upon making an offer, may have their lender initiate FHA approval.

Please feel free to call or email us if you are considering FHA approval for your building.We will provide reputable lenders that can answer questions and are willing to initiate the approval process. FHA has limits on how many FHA backed loans may be currently active in a building, so this caps any "over leverage" a condo association may face. We look at it as a very marketable positive to first time buyers especially when selling a condo.

Are there any FHA eligible condos out there?

Love the terrace... but is the condo FHA eligible?

It's Saturday night 10PM... new baby is sleeping (for now) and I'm trying to find my first time buyers FHA loan eligible condo units before the first time buyer's tax credit goes away November 30th. Par-Tay! I'm barley hanging on tonight while staring at the MLS and every other property outlet I can think of. It's been a very busy month, let alone the new addition to the family.

I'm suggesting clients have an accepted deal by the second week of October at the latest to close by the second week of November. The end of November could be a nightmare to try and close a deal due to Thanksgiving and the crunch of deals pending.

It's needle in the haystack time. The right condo, priced well and FHA eligible with two weeks left on the clock. Geez.

FHA eligible condos and two flats in Chicago

I have several listings that are FHA eligible. The "Golden Trilogy " for buyers right now is Federal Housing Administration loan eligibility, low interest rates and the first time buyers tax credit.
The trick is finding a condo building that will conform to FHA guidelines.
Lucky you... I have several condos and a two flat for sale that should qualify without issue.

$179,000 at 1140 W Morse, Unit GE: Rogers Park on the lake and close to the Brown Line. Two beds, two baths, parking and steps to Loyola Beach.

$229,900 at 3303 W Ainslie #3E: Albany Park two beds, one bath with parking and a private full basement... for real! Great deck and huge sideyard.

$289,900 at 4110 N Southport #2: Graceland West, Southport Corridor two bedrooms with one bath, huge dining room, eat-in kitchen and awesome deck.

$389,900 at 522 W Oakdale #2W: lakeview East, two bedrooms, two bathrooms, parking deck, huge storage. East Lakeview man!

$474,900 at 4735 N Whipple: Albany Park, Ravenswood Manor two flat building. Renovated and move-in ready. Huge finsihed space for the money.

Can $8,000 Tax Credit Be Used For Your Down Payment?

News that matters...

Yes. The rules seem to change everyday in lending... sometimes for the positive. “We all want to enable FHA consumers to access the home buyer tax credit funds when they close on their home loans so that the cash can be used as a down payment,” FHA lenders will now be able to permit their clients to use the credit as a down payment rather than waiting to take the credit at tax time.

Please contact your lender or my Wells Fargo loan officer at www.ChicagoLender.com

Is Your Condo FHA Approved?

FHA loans are really popular right now. The qualifications are very attractive in this changing mortgage lending market. The rates are good and meeting the terms as a buyer are pretty clear cut.

I just received an offer contingent on an FHA loan being approved.

However, is your condo building FHA approved so these elusive buyers use the loan? Can an FHA loan product be used to buy your condo? As a condo association and individual owner, you can find this out.
With a potential listing coming on in my own building this spring, we want to know if the unit will qualify for an FHA loan. I also like to find this out when listing other units... it's a great way to market the property.

Read more about FHA loans here:

I suggest working with your lender to determine if your condo unit is FHA approved. If you need an expert, feel free to visit www.ChicagoLender.com to speak with Brian Cumpton.

Condo Associations Should Do Homework for FHA Loans

FHA mortgage financing has become a popular first time buyer option (although, you don't have to be a first time home buyer to qualify). The loan allows buyers to put down 3.5% and receive favorable mortgage interest rates.

You can read more about FHA Loans here.

Not all condo associations will be approved for FHA financing. Do you know if a buyer may use the loan to purchase your condo? You should. If your condo building would not conform to the standards of an FHA, there may be things your association could do to change that.

For instance, Mark Pearlstein addresses a common snag that may hang up a sale in today's Chicago Tribune real estate section (it's still the real estate section to me despite all the cutesy names they come up with each month).

FHA Loans for Chicago Buyers: What's in it for you?

Ryne takes a call from his mortgage broker...

I asked one of our in house mortgage guys Brian Cumpton at RWF Mortgage (a joint venture of Rubloff and Wells-Fargo) to explain FHA financing to my readers. Brian can be reached at brian.cumpton@wellsfargo.com. Since he sits near my office and is bugging me all the time, I figured I'd put him to work for you. Here's his concise description of the FHA loan option:

As the market keeps changing, we are constantly challenged with buyers obtaining financing. FHA (Federal Housing Administrator) is a government insured financing, financed by Local and National Lenders, that allows home buyers to purchase a 2 Flat for little down in today’s market. The financing is not provided by the government, as the Government only insures the Financings. Today, 11% of all Home Financing is secured by FHA Programs.

There are many advantages of FHA Financing over Conventional Financing. Conventional Financing is the financing typically regulated by the Fannie Mae and Freddie Mac Association, while being insured by Private/Public Companies. With FHA, this program is regulated by FHA & HUD and is insured by the Government. Their mission is: To increase homeownership, support community development and increase access to affordable housing free from discrimination. FHA is the oldest program created by Congress back in 1934.

Some of the advantages of FHA Financing over other conventional financing are as follows.

- 3.5% down payment required towards the purchase price or closing cost
- The Down payment can come from a Gift from a relative
- The seller of the property can give up to a 6% credit to the buyer towards closing cost, prepaid items, association dues, or taxes
- A Non Occupying Borrower can be on the Financing to help Qualify (Parents, relatives, etc…)
- Rental Income for additional Unit/Units is used in qualifying the buyer – which will offset the monthly payment
- No minimum Credit Score required
- No past history of credit required – only 1 source of a 12 month payment history
- The Loan is Assumable by a new buyer – therefore they can assume the current terms of the mortgage at the time of assumption.
- No Income restrictions – you can have as much or as little income as long as the buyer qualifies
- Not limited to a 1st Time Home Buyer – you can be a 5th time buyer and use the program
- 2 years from the Discharge on Bankruptcy’s – Conventional financing requires 4 years
- 3 years from the Discharge of a Foreclosure – Conventional Financing requires 4 years.
- There is no Geographic restriction on where you can buy
- Fixed & Adjustable Rate Programs
- Interest Rates are not set by your Credit Score – unlike Conventional Financing, the Interest Rate is the same for everyone regardless of Credit Score.

My associate at Rubloff, Connie Engle also wrote a good post about FHA financing from an agent's perspective at our Rubloff Luxury blog

I know its a plug for our blog http://www.guidemehome2chicagoluxury.com but they are doing a good job, I enjoy reading it and I should have some contributions on the site soon... as soon as I write something professional enough!