Many are surprised to find out that you can use a FHA 203k loan to refinance or purchase a property and roll in the cost of rehabilitation and renovation. This is one of the great ideas behind the FHA 203k loan. Frequently, I receive calls from customers stating they don’t have enough equity in their home to get a line of credit or enough cash on hand to do the improvements that they would like to in their new home purchase. In a search for a company to meet their needs, they stumble onto my web-site. This is when they realize that they do have options, and the program that will fit their needs is the FHA 203k loan.
There are solutions to your home improvement problems. The answer is the FHA 203k Refinance.
You’re ready to make that big step into home ownership, which can be exciting, but if you’ve never gone through the process? It’s easy to get overwhelmed but when you have a better understanding of what to expect from the process of obtaining a mortgage, you will feel much more confident about every decision you make no matter what comes your way. While we can’t cover everything that you may experience when you apply for a mortgage, here are a few things you can surely expect!
1. Discuss your needs and your finances with your mortgage professional – While this is not a step that you are required to take, even before you begin shopping for a house or a mortgage, it’s a good idea to go over your finances with a mortgage representative that can provide further advice on saving for your down payment or which debts you may want to pay off in order to qualify for the mortgage amount you’re hoping for.
2. Get Pre-Approved – Before you begin shopping for a house, you want to get pre-approved so you know what your lender will allow you to spend. In order to do this, you will need to need to complete a basic mortgage application and provide information about your income, debts and expenses. Your mortgage professional will look at all of this information and will advise you on the best mortgages for your needs, and provide a guideline as to how much you can spend on your home.
3. Commit To a Mortgage – The specific process depends upon your lender, but typically once you’ve made an offer on your home, you will have to provide a few further details about you that way your mortgage application can be formally processed. You will receive a mortgage commitment, but there may be some conditions attached.
4. Fulfilling Your Mortgage Conditions – It depends upon your state and lender, but often you will be asked to prove that you have your down payment and even some of your closing costs in place 30 days before you’re set to close on your home. If some of your down payment will be coming from a family member as a gift, you may also be asked to provide a gift letter. Your lender wants to ensure that you aren’t borrowing your cash assets that you’re using for your home purchase.
5. Sign Your Closing Papers – This may happen before your closing date or on your closing date depending upon your lender and where you live. You will then confirm the frequency of your mortgage payments and arrange a payment method for your mortgage premiums.
The above outlines some of the main components of the mortgage application process, though some of the finer details will depend upon your lender and the state you live in!
This week was marked by several indexes showing similar gains in housing prices, a change that every home owner has been waiting for and a sign that the summer housing market is moving in a positive direction.
The Case-Schiller index, which is a measure of of home-value is calculated from repeat sales of single-family homes (as opposed to relying on median home prices) showed that home values rose 0.8 percent for the 10-city index and 0.7 percent for the 20-city measure when compared with March.
Similarly, the Federal Housing Finance Agency’s monthly House Price Index (FHFA Index) shows U.S. home prices rose 0.8 percent on a seasonally-adjusted basis from March to April. The FHFA monthly index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac.
Finally, the National Association of Realtors Pending Home Sales Index (PHSI) showed growth of 8.2% month over month, which is 13.4% higher than May 2010. It is also worth noting that this is the single largest gain since November 2010.
About the NAR Pending Home Sales Index:
NAR’s Pending Home Sales Index (PHSI) is released during the first week of each month. It is designed to be a leading indicator of housing activity.
The index measures housing contract activity. It is based on signed real estate contracts for existing single-family homes, condos and co-ops. A signed contract is not counted as a sale until the transaction closes. Modeling for the PHSI looks at the monthly relationship between existing-home sale contracts and transaction closings over the last four years.
If you are considering purchasing a new home but aren’t sure how much you qualify for, we can help. Now is a great time to take advantage of historically low rates, waiting may result in having to pay more for a higher rate, so don’t hesitate with any questions you might have. Have a happy and safe 4th of July!
You’ve probably heard of CarFax, a service that enables you to get vehicle history reports before you purchase a car to make sure that you aren’t buying a car with otherwise undetectable problems or history that may cost you money in the future. Now BuildFax, based in Austin, Texas is offering a similar service for prospective home buyers that want to do further due diligence prior to purchasing a home.
BuildFax bills itself as a “a one-stop shop for building, remodel, and repair information for over 70 million U.S. properties”.
From the BuildFax Website:
BuildFax collects and organizes construction records on millions of properties from cities and counties across the United States. Once in our system, we analyze, mine and compare the data so that it becomes like a “background check” on a property. We have data on new construction, major systems repair, additions, renovations, roofs, pools, demolitions, contractors and more.”
BuildFax’s database of permit information from building departments covers in excess of 4,000 cities and counties. BuildFax provides summary reports showing major renovations or repairs done on properties including additions, plumbing, air conditioning, roof replacements, etc. BuildFax reports also including contractor and dates of work completed.
BuildFax reports are usually $39.99 per report, but you can sign up for a FREE REPORT until July 31, 2011.
We start the week off in a positive direction for mortgage rates stemming from multiple positive economic events last week. The first event was good news regarding Greece’s debt issues as the country looks to pass an act that will lay out a plan for remaining solvent and keep other European nations and the IMF happy.
The second positive event was that the Federal Open Market Committee left the Fed Funds Rate (interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions) unchanged at .000% – .250% while lowering it expectations of growth in the future for the US economy. While the expectations growth outlook was not positive news for the economy as a whole, it is good for mortgage rates, which move lower in times of economic uncertainty or turmoil.
Economic Calendar for Week of June 27, 2011
Not sure if you are in the best mortgage for your needs? We can give you the information you need to decide which options make the most sense for your current or future mortgage. Mortgage rates have continued to maintained low levels for months, creating a great opportunity to lock in a low rate on new home purchases or refinances, now is a great time to take advantage of low rates before they inevitably begin to move higher.
With mortgage rates at some of the lowest levels in decades, many borrowers are considering whether a fixed rate or adjustable rate mortgage is better suited for their needs. We are going to walk you through the two main mortgage options that you can select from, along with the core benefits and some of the negatives associated with each.
With adjustable rate mortgages, your payment amount is determined by the initial mortgage rate fixed for a 3, 5, 7 or 10 year term, which presents some interesting pros and cons:
Still have questions about whether an adjustable rate or fixed rate mortgage is best for your needs? We can help walk you through any questions you have to find the loan that best fits your needs.
When you’re ready to purchase home, it’s necessary to have some cash assets ready to cover the expenses that cannot be added to your mortgage. A portion of these expenses that you’ll need to pay in cash are the closing costs. While many first time home buyers may expect from watching real estate shows that they can convince the seller to cover the out-of-pocket costs, this is not always the case. It’s essential that all buyers have a general understanding of what the various closing costs are so they can be prepared. Typically, it’s a good idea for buyers to save at least 1.5% to 2.5% of the purchase price of a home for closing. Below, we’ve outlined some of the typical closing costs you’ll be responsible for paying only once, when you close on your house.
Non-recurring closing costs are those that you will pay once when you close upon your home, but you will not have to worry about them again until you choose to make another purchase.
Non-recurring closing costs can include the following:
If you are either looking to purchase a home or possible rehab your existing home, it is important to know the repairs you can do with an FHA 203k loan. It is not breaking news to hear that the market is flooded with homes that need work. The difficulty that potential home buyers are having is looking past the existing state of the property. Knowing the eligible repairs before you go out to see the homes will help you visualize the home in its future state. Also there are a lot of existing home owners who lost equity in their home over the past few years and by knowing the repairs that be be financed in with an FHA 203K loan will help them re-gain their lost equity.
FHA 203K Streamline Eligible repairs ( $35,000 in total repair cost )
Here are some examples of Ineligible Improvements with FHA 203K
When you’ve gotten a pre-approval from your mortgage lender, you’re ready to start shopping for a home. While your pre-approval tells you how much the bank thinks you can afford, many first time buyers in particular wonder if they should actually spend as much as they’ve been approved for.
The first thing to note is that a bank takes your Gross Debt Ratio and Total Debt Ratio into consideration when determining how much money they will lend you.
Theoretically, you can afford to spend what you’ve been pre-approved for, but there are some other things you should think about when determining if you want to spend it all.
While you may be tempted to spend your full pre-approval amount to get the best home available to you, there are some other things that you should consider when you take a look at your total expenses:
1. Would you need to make cutbacks? – Even if your full mortgage amount is under 40% in your total debt ratio, there are many other expenses not calculated by the bank. Take a look at all of your other fixed and variable expenses and determine if you’d need to make cutbacks to live comfortably with that mortgage amount. Remember, your expenses can include things like your grocery bill, the cost of children’s activities, and eating out.
2. Are you willing to change your lifestyle? – If you would need to make cutbacks to spend the full mortgage amount, take a look at what you would be willing to give up, if anything. For some, it may be worth the sacrifice to get a “better” home. For others, it may be preferable to spend less on the home and maintain status quo in other aspects of life.
3. Are your expenses likely to change? – Remember, your pre-approval amount is based on your current income level and debts. It might be affordable today, but if you have intentions to leave your job or take on new expenses, the affordability may change quickly.
Once you’ve considered all of the above factors, it’s up to you to determine how much you’re comfortable spending. Don’t feel pressure to spend it all, but if that number is a comfortable one, then getting shopping for a property of that value!
Temporary loan limits were enacted as part of the economic stimulus package in 2008 to help homeowners in high-cost areas that were unable to get loans for more than $417,000 under the standard conforming loan limits regardless of their payment history, credit and income. Homeowners in areas such San Francisco, New York and Los Angeles routinely faced higher priced homes, which meant they were required to bring in substantially larger down payments when purchasing their home.
For loans originated on or before September 30, 2011, the “temporary” high-cost area loan limits will apply and will be the same as the 2010 high-cost area loan limits, up to a maximum of $729,750 for a 1-unit property in the continental U.S. Loans originated on or after October 1, 2011, will use the “permanent” high-cost area loan limits established by FHFA under a formula of 115% of the 2010 median home price, up to a maximum of $625,500 for a 1-unit property in the continental U.S.
High-cost area loan limits gave prospective home owners the ability to finance up to $729,750 on their new home, which brought relief to many that would have otherwise not have been able to purchase a home.
These temporary conforming loan limits are set to expire on September 30, 2011. Upon expiration (October 1, 2011), these high-cost areas will be subject to standard conforming borrowing loan limits as shown below.
|Maximum Original Principal Balance for 2011|
|Units||Contiguous States, District of Columbia, and Puerto Rico||Alaska, Guam, Hawaii, and the U.S. Virgin Islands|
If you live in a high-cost area, remember that regardless of where rates are, you may have trouble getting the loan size you need. Be sure to speak with us regarding your options as far in advance of the expiration as possible. We can help you understand the options you have so that you can make an informed decision before these higher loan amounts are no longer available.