FHA LOANS Category
Know An FHA Borrower Struggling With Mortgage Payments?
FHA LOANS, REAL ESTATE LEGISLATION, TIPS FOR SELLERS
President Obama signed into law a program to assist FHA borrowers experiencing financial hardship before they fall behind in payments. The Helping Families Save Their Home ACT of 2009 grants FHA broader authority to hopefully prevent FHA borrowers from slipping into foreclosure. Prior to this law taking effect, borrowers had to be behind in payments before seeking loss mitigation assistance. Late payments usually cause an immediate drop in credit scores which then can trigger credit card issuers to raise interest rates.
FHA sees this new program as a win-win for borrowers who get to keep their home and FHA protects their insurance fund from unnecessary losses. Here are some additional details:
- A borrower considered “facing imminent default” is one that is current on payments or less than 30 days late but has experienced a significant reduction in income or some other hardship that will prevent making future payments in a timely fashion
- Allows for a forbearance agreement to be created that allows the loan servicer to postpone, reduce or suspend payments due on a loan for a specific amount of time
- Allows qualified borrowers to reduce their payments permanently through an interest rate reduction or loan reamortization to an affordable level by using a portion of their insurance with a loan modification. Principal deferred becomes an interest free subordinate loan which is repaid once the first loan is paid off
The hardship must be documented by the borrower to the loan servicers satisfaction. The cause of hardship may include one or more of the following:
- Unemployment, reduced job hours, reduced pay, or a decline in business for self-employed would all be considered as reasons for loan modification. A scheduled temporary shutdown of the employer would not be reason enough to qualify for a loan modification
- Death in the family, permanent or short term disability or serious illness qualify as hardships
The loan servicer makes the final decision. If you know someone struggling to make house payments, ask them if they have an FHA loan. If so, direct them to HUD’s website or contact me for further information.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL LIVING REAL ESTATE PROFESSIONALS
CORNER OF COURT AND PLACER IN REDDING
MORE THAN A QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Inventory Of Bank Repo’s On The Rise
FHA LOANS, HOME LOANS, SHASTA COUNTY, TIPS FOR BUYERS, TIPS FOR SELLERS
Shasta County has thus far absorbed the onslaught of bank foreclosed homes until just recently. I’ve tracked the number of REO’s (real estate owned), as they are called in real estate jargon, for the past year and the number of these avaiable homes has been relatively stable until Halloween. November marked the beginnining of a steady rise in the number of properties classified as REO’s. Today, 156 properties are listed as active (available) compared to most of the year when that number ranged from 110-120. That represents an increase of about 1/3rd!
First-time buyers and investors have been snapping up these properties soon after they hit the market. In some cases, bidding wars pushed the final selling price above the asking price! Buyers are attracted to these properties like flies to you know what believing they are capitalizing on someone’s loss. Low down or no down payment loans such as FHA and USDA have been used to leverage buyer’s limited cash resources to facilitate a purchase. Out-of-area buyers that largely fueled the run-up in real estate prices during the boom are all but gone. Today’s market is dominated by local Shasta County residents taking advantage of low prices and interest rates.
I wonder though if we have hit a saturation point looking at this significant uptick in available REO inventory. Speculation that banks are sitting on more than a million foreclosed homes could explain this increase. Perhaps banks are lowering the flood gates allowing more foreclosed inventory to hit the market. Banks must closely monitor the impact of listing REO’s for sale as a flood of distressed priced homes in one geographic area will only undermine values of other homes which these same banks hold loans on in these neighborhoods.
Shasta County’s higher than average unemployment rate only exacerbates the problem. Lenders aren’t approving loans for all but the most creditworthy borrowers. Additionally, prospective buyers must have stable and verifiable income to be granted loan approval. There’s talk of upping down payment requirements for the very popular FHA loan program from 3.5% to 5%. Credit score thresholds have been raised a couple of times this year by Fannie Mae to the point those with credit scores below 650 may not qualify for any loan. A local mortgage broker told me this will have a major impact locally where, according to him, the avearge credit scores of borrowers he sees is just over 600.
Indications are 2010 will be another challenging year for all who work in the housing sector. Real estate agents, lenders, appraisers, escrow officers, home inspectors and contractors need to plan for another rough year as our nation nurses the hangover caused by lax oversight of the lending industry.
Many parts of California and the nation are reporting increases in home prices. Don’t expect that to happen here in the Redding/ Shasta County area until foreclosure activity subsides and REO listing inventory decreases to double-digit levels. I predict this will not happen here until 2011-at the earliest!
530-224-6767 or 530-941-7492
BRAD GARBUTT
RELTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS REAL LIVING
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL SALES EXPERIENCE
Buy A Home With Nearly Nothing Down, Again!
FHA LOANS, HOME LOANS, INDUSTRY NEWS, TIPS FOR BUYERS
Lenders are always searching for ways to help buyers leverage their good credit to buy homes. Wayne Barni, local loan broker with ChoiceOne, reviewed a loan program dubbed CHF Access. This program uses an FHA first mortgage which requires a 3.5% downpayment and a 3% second mortgage that can be used toward the downpayment or closing costs. Essentially, the borrower can get in for 0.5% downpayment. Here are some details:
- Downpayment can be a gift from a family member
- 2nd mortgage has a 15 year term at 8.25%
- Seller may contribute up to 6% of purchase price for closing costs
- Both first and second are fixed-rate loans
- No prepayment penalty on either loan
- Maximum loan amount is $417,000
- Maximum income for Shasta County residents is $66,840
- Loan for primary residence only
- Loan can be used for FHA approved condos, manufactured housing and single family homes
- Not limited to first-time buyers
- Buyers OK 2 years after bankruptcy or 3 years after foreclosure
- Buyers must take online homebuyer education course
Credit scores play a role so not everyone will qualify. Buyers should have credit scores at or above 620. Some lenders will raise the bar further to 640. Borrowers may be able to make some adjustments to their credit score by following the advice of a good loan officer.
For more details, give me a call or drop me an email. Wayne can be reached at 530-224-6707.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL SALES EXPERIENCE
Realtors Publish Home Financing Guide For Buyers
FHA LOANS, HOME LOANS, INDUSTRY NEWS, TIPS FOR BUYERS
Jim-Liptak-CAR President
The California Association of Realtors recently published a guide aimed at informing buyers of the variety of financing options available today. Jim Liptak, President of the California Association of Realtors, wants interested home buyers to check out this new guide. The guide also helps prospective home buyers conduct a rent vs. buy analysis, details state and federal tax credits, and downpayment assistance programs.
The following link will take you to a pdf of the guide: http://www.car.org/tools/smart/clients/Financing_Programs_Guide_v21.pdfur
Be sure to contact your local real estate professional for information regarding other loan programs in use in this area. For example, Redding, Anderson, Shasta Lake and Shasta County all have downpayment assistance programs. Some are out of money and others have allocated their available funds. Some of these programs are hoping to replenish their funds later this year or early next year.
USDA loans are popular for buyers purchasing outside the city limits of Redding. This is one of the only 100% loan programs available besides eligible veterans using a VA loan. FHA loans are also quite popular today because of the low downpayment requirements and more liberal credit and underwriting standards.
Time is running out to take advantage of the federal tax credit which expires in November. Buyers hoping to take advantage of this program need to buy a home this month to allow time for escrow to close before the loan program expires. There is talk that the tax credit program may be extended and possibly expanded but nothing has been passed yet. Check back for updates.
Contact me if I can be of assistance:
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Redding Home Prices Show Continued Stability
FHA LOANS, INDUSTRY NEWS, TIPS FOR BUYERS
After falling roughly 40%over three years, home values in Redding appear to be stabilizing. A local appraiser that monitors home prices monthly released the most recent statistics for Redding and surrounding communities indicating the average cost per square foot is $131. That is down slightly from June’s $133/square foot.
January 2009 saw the Redding average at $138. The average sales price began the year at $244,803 compared to July 2009 of $230,553. Anderson and Shasta Lake City home prices average $157,763 or $112/square foot, down from $164,644 and $117/square foot in January 2009. One reason the averages are lower for Anderson and Shasta Lake has to do with sample size. Smaller numbers of units sold lead to more variations.
At the peak of the market, the average home price in Redding hovered around $300,000. One could get a rough idea of their home’s value by multiplying their square footage by 200. Some homes are selling for half that today! What appears to be bad news for home sellers is good news for home buyers. Combine depressed prices with low interest rates and you have a window of opportunity for first-time buyers and investors.
Investors are finding that buying rentals in the current market makes sense. Low prices and interest rates make these properties pencil out assuming a reasonable downpayment of 25-30%. Rents have not fallenwith home prices. Investors can purchase a home in good condition around $200,000 and break even after paying interest, taxes and insurance on their mortgage. Rents in Redding for a three bedroom avearage $1,100/month.
First-time buyers are jumping into the market after years of waiting out the market. FHA loans remain popular for those buying their first home. These loans require only 3.5% down and have less stringent underwriting guidelines than conventional loans. The seller can assist buyers utilizing FHA loans with closing costs. This allows buyers to leverage their available cash to buy their first home. Move-up buyers also find FHA loans attractive if they don’t have enough cash to move forward after selling their smaller home.
The number of home sales pending has nearly doubled since January. Home buyers in Shasta County have gotten the message about low home prices and interest rates and have stepped up and made the plunge into home ownership. I expect an influx of retirees once the recovery takes hold in the larger metro areas of California. Sales of upper end homes remain sluggish in Shasta County with more than 80% of sales occurring below the $300,000 price point.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL SALES EXPERIENCE
California Real Estate Market Update
My last post highlighted some of the points made by California Association of Realtors executive Joel Singer at last week’s trade association conference. Besides sharing his thoughts on the cause of the financial and housing markets collapse, he gave some statistics that shed light on the current state of the California housing market:
- 82% of sales in California are for homes priced below $500,000
- At the height of the boom, buyers were buying homes priced up to 10x their annual income
- Units sold are up, but dollar volume is down 53% due to price contractions
- Unsold inventory averages 4.6 months for all price ranges
- Unsold inventory for homes over $1,000,000 - 17.2 month supply
- Unsold inventory for homes priced below $300,000 - 2.5 month supply
- Distress sales are lowest in Marin County- 1 in 3
- Distress sales are highest in Solano County- 4 out of 5
- 22% of homes sold today at a net loss
- 94% of home buyers are fluent with web and utilize internet for house hunting
- 9 out of 10 home sellers utilize the services of a real estate agent
Some other interesting points about where the housing market is headed:
- The soaring popularity of the FHA loan program will cause the program to go in the red next year-a first! The Mortgage Insurance Premium (MIP) has, to this point, offset any expense to the government (taxpayers!) to administer the insurance program. FHA loans were barely used during the bubble period 2003-2007.
- Second wave of foreclosures on horizon due to rising unemployment
- The market bottom is still forming for high end homes
Financially induced economic downturn has resulted in a rapid, unprecedented decline in housing prices statewide. In the past, when home prices rose rapidly in California, they were sticky coming down. The unparalleled breakdown in our financial systems has resulted in rapid price deflation.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Federal Tax Credit Can Be Used Now Toward Home Purchase
FHA LOANS, INDUSTRY NEWS, TIPS FOR BUYERS
It’s official! Qualified first-time homebuyers can now use their tax credit for a portion of the downpayment for the purchase of a home or closing costs using FHA financing. The U.S.Department of Housing and Urban Development (HUD) announced recently this news about monetizing the first-time buyer tax credit. President Obama has been pushing for this change even though the IRS was opposed to the idea.
FHA loans require a 3.5% minimum downpayment. The prospective home buyer must still tender the minimum downpayment but can use an advance on the tax credit to lower their loan amount or pay for closing costs. This will help the borrower preserve cash on hand or lower the monthly payment if used to supplement their down payment. The advance on the tax credit is referred to as a bridge loan that is to be repaid when the borrower receives their tax refund. Failure to repay the advance would result in the advance becoming a loan secured as a second against the property payable over 10 years at an interest rate slightly higher than the rate on the first mortgage.
I spoke with a HUD representative recently at a real estate conference in Sacramento and she pointed out a disturbing trend. Lenders that offer FHA loans, which are insured by the government, are underwriting the loans more stringently than required by FHA. Apparently, lenders are over-reacting due to the blame being directed their way as a result of the housing market meltdown. FHA loans have more liberal credit guidelines than most loans offered in the mortgage marketplace.
Contact me with any questions.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
IRS and HUD Lock Horns Over Tax Credit
FHA LOANS, HOME LOANS, INDUSTRY NEWS, SHASTA COUNTY, TIPS FOR BUYERS
Over the past week or so, the Department of Urban and Housing Development (HUD) has been working on a plan to allow buyers to use the $8,000 tax credit immediately to pay for their downpayment and closing costs. The Internal Revenue Service (IRS) has said not so fast.
Now HUD is pushing forward with their program and wants the IRS to step aside and allow the rule change to move forward. Details are skectchy, but it appears the program will allow buyers to borrow against the tax credit then repay the loan when they receive their tax refund. This resembles a “bridge loan” in real estate jargon.
Other states that have already implemented similar programs include Colorado, Missouri, New Jersey, Pennsylvania, 
Tennessee and Washington. The impetus for these programs was to infuse cash quickly into their housing markets by creating additional options for first-time homebuyers short on cash.
In the event the borrower fails to repay the bridge loan, the debt morphs into a 10-year-fixed-rate mortgage with an interest rate 1/2 % higher than the primary mortgage. Thus far, most of the buyers that have used this program in other states have repaid the loan upon receipt of their tax refund. Some states do not allow the buyer to use the entire $8,000 tax credit in case they have some tax liability.
This could be a big help for homebuyers who, according to the National Association of Realtors, typically have only 4% of the loan amount they qualify for saved. In Redding/Shasta County, where the current median price is $180,000, having access to $8,000 would make the difference between buying a home or being locked out of the housing market for many first-time homebuyers.
Prospective buyers that have good credit and a stable job but little or no savings could benefit from this rule change if adopted. Buyers would only be able to utilize FHA financing to take advantage of this program.
Contact me if I can be of assistance.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
CORNER OF COURT AND PLACER
Obama Expanding Efforts to Stem Foreclosures
FHA LOANS, HOME LOANS, INDUSTRY NEWS
The Obama administration announced this week additional measures to help homeowners keep their homes off the 
auction block. They include incentives to lenders and borrowers to cut payments on second mortgages, write down principal balances on homes that are upside down and repay loans in a timely fashion.
Details are as follows:
- Decrease 2nd mortgage interest to as low as 1% for five years for some borrowers
- Revive FHA effort to convince lenders to reduce loan balances so homeowners have equity in their homes
- $50 billion of funding will come from previously authorized bailout monies
- Cash incentives to loan officers and borrowers that complete second loan modifications-$500 up front to loan officers and $250/year for three years as long as the loan remains current. Borrowers would receive $250/year for making timely payments for up to 5 years.
Borrowers struggling to make their mortgage payments should contact their mortgage holder to determine if they will participate in this program.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
HECM’s Help Seniors Buy Homes, Save Cash
FHA LOANS, HOME LOANS, TIPS FOR SENIORS
Reverse mortgages have traditionally been used by seniors to tap equity in
their home. Sandra Castrogiovanni, of Security 1 Lending, specializes in Home Equity Conversion Mortgages (HECM) for seniors. She addressed Realtors Wednesday touting new uses for this loan product. Seniors, age 62 or older, may want to consider a HECM if they want:
- To preserve their cash
- No monthly payment
- To qualify for a loan without any income verification
- To get a loan despite bad credit
To preserve cash, a senior may want to secure a reverse mortgage instead of paying off their new home with the cash proceeds from the sale of their previous home. The amount seniors can borrow depends on their age(s) and the appraised value of the home being purchased.
Reverse mortgages have no monthly payments-ever. In fact, the homeowner may receive a monthly payment from the homes equity. The net equity in the home is pledged to repay the HECM when the home is sold after the owner passes away. However, an extended absence for medical treatments or assisted living stay could trigger a forced sale of the home.
Since the home’s equity will be used to repay the loan, there is no requirement the borrower provide proof of income. In the event the senior is receiving monthly payments from their homes equity, the size of the payments is determined by the projected life span of the borrower(s) and equity available as security. Bad credit is not an obstacle either because the eventual sale of the property, not the seniors creditworthiness, is how the lender expects to recover their loan disbursements.
The senior can also receive a lump sum of cash to help pay for the home purchase and not receive any monthly payments. Again, the loans are set up so the senior can reside in the home for the remainder of their life. These loans are insured by FHA. Prospective borrowers will be thoroughly counseled on the ins and outs of this unusual loan. The loan fees for HECM’s are very high-over $15,000.
Here’s a few other details:
- Property must be owner occupied primary residence of borrower
- Mortgage insurance premium (MIP) required
- No seller concessions or credits
- Buyer must pay normal closing costs and seller must pay for all repairs
- No gift funds allowed to borrower
- Loan limit is $625,000 through 2009
Most importantly, use a local lender. Contact me if you have any questions.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
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