Category: For Professionals

American’s are working deeper and deeper into their lives.

Posted on by Evan in For Professionals, Investing, Miscellaneous, Personal Finance

I came across this article in the Huffington Post and was reminded that the virtue of “delaying gratification” coupled with compound interest can make a big difference when it comes time to decide whether or not a person can retire.

According to this article more and more American’s are having to work past the age when we’ve gotten to retire in the past.  My guess is that this trend will continue into the future especially if/ when the Federal Government is forced to alter or eliminate entitlement programs.

What can you do to avoid having to work into your 70s?  Work with competent financial advisors (including mortgage professionals) who can help you plan. 

 

Capital Gains Exclusion for Sale of Primary Residence

Posted on by Evan in For Professionals, Housing & Real Estate, Personal Finance, Taxes

One of the best tax breaks available to homeowners is the capital gains exclusion on the sale of a primary residence.  This important tax benefit is fairly simple yet often misunderstood so I thought I would provide a summary of what the average homeowner should know about.

What is the capital gains exclusion?

The tax code allows home sellers to exclude the first $250,000 for individuals ($500,000 for joint filers) from any capital gain tax liability.

How is a capital gain calculated?

Simply put, a capital gain is equal to the difference between the price a home seller paid for a home and what they sold it for.  For example, a home that was bought for $300,000 and sold for $400,000 would have a $100,000 capital gain.

There are additional items which can go into this calculation such as improvements made to the property during the term of ownership, closing costs, real estate commissions, etc.

Are there any conditions which must be met to qualify for the exclusion?

Yes, a home seller must have lived in the subject property as their primary residence for at least 2 years of the previous 5 years from the date of sale.  For example, if a home seller closes on their home on January 1, 2008 and realizes a $250,000 gain, they must be able to prove that they lived in the property for at least 24 months during the time-frame January 1, 2003-January 1, 2008 in order to qualify for the exclusion.

The tax code only allows tax filers to take advantage of this exclusion once every two years.  For home sales after 2008, there are some additional provisions that impact homeowner’s who used a home as a primary residence AND a rental property within the 5 years of the date of sale.  It is best to check with a tax professional in these instances.

Does a home seller need to “reinvest” the capital gain into a new home in order to qualify for the exclusion?

NO!  This is a commonly held myth that many homeowners believe is the case.  This myth is rooted in the previous tax code which allowed home sellers to exclude their capital gains from tax liability so long as the gain was reinvested into a new home.  This rule was changed with the Taxpayer Relief Act of 1997.  Now homeowners may do whatever they please with their gains.

Can a capital loss from the sale of a primary residence be deducted from a home seller’s taxable income?

Unfortunately not.

Where can I get more information on this topic?

For complete details on this topic I would recommend downloading and reading the IRS publication 523 which deals with selling your home.  You may download this document by clicking this link.

Was this post helpful & informational for you?  Did you find any facts in the article which were incorrect?  Either way please write a comment below so that I can continue to expand “My Mind”.

What home buyers need to know when entering a short sale

Posted on by Evan in For Professionals, General Mortgage Info., Housing & Real Estate

A colleague of mine here at Mortgage Trust put together the following guide for home buyers who are entering into a short sale purchase.  The content appears to have come from standard Oregon earnest money agreement addendums but I still think it is an excellent summary of all the considerations a home buyer should be made aware of at the outset of an offer.

 

If you think it is helpful please feel free to pass this link on to others and/ or write a comment below! 

 

If you’d like the download the document you may do so by clicking on this link- short-sale-guide-for-home-buyers. 

 

WHAT YOU NEED TO KNOW ABOUT BUYING A SHORT SALE

 

The following summary is intended to address some of the practical and legal issues that can arise in a Short Sale transaction. This summary is not intended to be a complete explanation, does not constitute legal advice, and should not be relied upon in lieu of securing competent legal, tax and consumer credit advice.

 

Short sales can be a markedly different buying experience from previous home purchases, and many of the assumptions that apply under 2 party transactions may not apply in a short sale, which will have typically 3 but possibly 4 parties involved. It is important you understand the potential issues that can arise and have realistic expectations about what can and may occur on a short sale.

 

 1. DEFINITION. The term “Short Sale” is used to refer to those real estate transactions in which the agreed-upon purchase price is insufficient to pay off all of the secured debt on the property (such as mortgages, trust deeds, state/federal income taxes, liens, property taxes or other local assessments) including the costs of closing, such as escrow and recording fees, title insurance premiums, real estate commissions, etc. If the seller is in bankruptcy, a trustee for the seller’s creditors will take control of the sale. In most Short Sales, the seller must secure an agreement from one or more third-party creditors to accept from the closing proceeds something less than the remaining amount of the debt due them. In other words, the debt is “shorted” or reduced. The one thing common to all Short Sales is that the final decision on price and terms of the transaction, as well as the identity of the ultimate buyer, will be in the control of third parties, usually creditors, whose consent to the transaction is required in order for the seller to convey clear title to a buyer. This one issue alone is what can and does create all of the potential issues and pitfalls addressed in this document.

 

2. TRANSACTION CONTINGENT ON THIRD-PARTY CREDITOR CONSENT. Since a Short Sale requires approval from one or more creditors who are not parties to the pending real estate sale transaction, the seller’s agreement to sell must be made subject to (or “contingent upon”) third-party consent. This generally means that if the seller is unable to secure the necessary consent (e.g. because the creditor refuses to give consent or it cannot be obtained by the closing date), the transaction fails and all earnest money is to be promptly refunded to the buyer.

 

3. TRANSACTIONAL CHANGES REQUIRED BY THIRD-PARTY CREDITORS. In Short Sales it is not unusual for a creditor whose consent is sought to insist that other creditors who would be paid from the closing also share some of the cost. They may also insist that the sale price be increased, or require removal of provisions for the seller to pay for certain repairs, etc. Some creditors may require an appraisal or independent broker’s price opinion (“BPO”) of the property before making any decision. Thus, in Short Sale transactions, seller and buyer must be prepared for delays resulting from changes to the price, terms and conditions agreed upon in the original transaction, responses from third-party creditors, as well as other events outside of the seller’s and buyer’s control. As a result it is not uncommon to wait a couple to several months before getting final confirmation on the price and closing date. Extreme patience is required on all short sale transactions.

 

4. BUYER DUE DILIGENCE CONTINGENCIES. In Short Sale transactions, the deadlines for completion of buyer contingencies may need to be suspended pending third-party creditor consent. However, if consent is slow in coming and the buyer wishes to proceed anyway, buyers must understand that there is a risk they could expend their funds only to later learn that the necessary creditor’s consent to the Short Sale cannot be obtained. Normally, buyers have no recourse for recovery of these expenditures in a short sale. For example, it may be necessary to spend money on a home inspection to feel comfortable that the property meets your standards, only to find the bank rejects your offer. This is not the case in a normal 2 party purchase transaction between buyer and seller. There is also a possibility you may need to get an appraisal completed and paid for prior to final agreement from the third party, especially if they give their consent but a very short time frame to close the transaction. The bank may make you wait 3 months for an answer but want the transaction concluded in a week. Since a multitude of different parties must cooperate to get a transaction completed (buyer and seller, both sets of realtors, creditors, escrow company, insurance company, the lender, the broker AND the bank finally) it may be necessary to have everything completed BEFORE the bank signs off on it, allowing it to be concluded in an abnormally short time frame. Any out of pocket costs that are incurred by the buyer will not be refunded in the event the bank denies the sales price. Not being able to meet a very short bank deadline could mean the price is no longer offered after the set closing date or otherwise a substantial day by day charge is assessed by the bank. This charge will not be paid by the lender or broker but will be passed on to you, the buyer, in the event we are given a time frame insufficient for all parties to due their due diligence.

 

5. ADDITIONAL OFFERS. Since most third-party creditors will want to secure the highest and best offer for the property, they may insist that it remain on the market, notwithstanding a pending transaction. As a result, a creditor may withhold final consent until they have had an opportunity to compare one offer with other potential offers that may come in the future. In some Short Sales, a creditor may refuse to give consent to a pending transaction because they want the seller to accept another offer, or potential offer, with a better price or terms. As a result, the entire Short Sale process may involve a significant risk of delay or failure.

 

6. USE OF EXPERTS. Short Sale transactions are often complicated and time consuming. They raise important issues, especially for sellers, including income tax implications, liability issues for unpaid mortgage indebtedness, credit rating issues, bankruptcy and other legal issues, all of which can affect the ultimate success of the transaction. Your real estate broker and mortgage lender are not expert in these areas. Buyers are strongly encouraged to secure additional competent professional advice before entering into a Short Sale transaction and are represented by their own real estate professional.

 

7. LENDING GUIDELINES AND INTEREST RATE ISSUES. This past year has seen lending become more restrictive at all levels and guidelines are changing very rapidly. It is possible that a buyer could qualify for the loan at the time the offer is presented, only to find that several months later the loan program no longer exists or has become more restrictive. There is also the issue of what happens if a new credit report is required (these are good for only 120 days) and the credit profile has changed for the worse since the offer was made or accepted. With a change in credit for the worse, possible outcomes could be an increase in interest rate for the higher risk or at worse, no longer qualifying for this particular loan program. Also, when qualifying, the lender/broker needs to insure the interest rate used to calculate the housing payment is high enough to account for potential fluctuations in the market, especially if the buyer is just barely able to qualify for the loan amount. Note that INTEREST RATES WILL NOT BE LOCKED UNTIL THE SELLER FIRMLY AGREES ON A CLOSING DATE AND PRICE regardless of what date and price were on the original presented offer. The consequence is this delay by the 3rd or 4th party is that interest rates could have climbed substantially. In the worst case the buyer may no longer qualify for this loan due to the higher rate and higher monthly payment. It could also negate much of the benefit of buying this property at below market value if the monthly payment ends up being much higher than was originally expected. Of course, it is also possible that rates could have improved by the time the offer is accepted. The point is that there is no guaranty and neither your lender nor realtor have a crystal ball to accurately predict the future direction of the market. Another thing a buyer needs to consider is what implications, if any, will occur if a substantial amount of cash is held up in earnest money waiting for an answer from the bank. If you have say $5000 down as earnest money and you have no access to this and are not earning interest on it, will this have a negative impact on your ability to conduct your everyday transactions?

 

8. SHORT SALES ARE NOT NECESSARILY A BARGAIN. There is a common perception that a short sale is a bargain, however this is not necessarily the case. Just because the bank is willing to accept less than is owed does not automatically mean the price is a “steal”. It is possible the home is being sold at fair market value, and similar such homes in the neighborhood could be purchased much more quickly and easily at a similar price. Check with your realtor to confirm that similar properties are not readily available at the same price point, especially given the large amount of inventory currently on the market. You have many more properties to choose from than a year ago and you and your realtor should explore all possibilities. If it is indeed a real bargain, then proceed with caution now you have an awareness of the potential pitfalls ahead. If it is not much lower than other properties in the area, discuss the possible ramifications with your realtor and your lender.

 

9. SELLER CONCESSIONS. In a normal 2 party transaction, if the seller agrees to pay all or some of the buyer’s allowable closing costs, the seller calculates this as a reduction in the proceeds, or profit they will walk away with when the transaction is concluded. In a short sale on the other hand, there is no profit, only losses. It is highly unlikely the seller has the cash in order to be able to pay the buyers costs at closing as they probably wouldn’t be in a short sale if they could. This means that an offer to buy requesting a certain sales price and say 3% toward closing costs is seen by the bank as just a lower price offer and thus a bigger loss for them. For example, if the offer is $200,000 with 3% toward closing costs, the bank or banks see this as basically an offer of $194,000 net as they and not the seller have to agree to accept this even bigger loss. 

 

 

Credit crunch has “no end in sight”

Posted on by Evan in Economics & Interest Rates, For Professionals, General Mortgage Info., Housing & Real Estate, The Fed

According to this article on bloomberg.com banks continue to tighten their lending standards. 

The measurement in which this article focuses on are derivatives which are priced to reflect the market’s expectation of future spreads between the Fed’s daily effective Federal Funds Rate and the rate at which banks are actually lending money.  When spreads increase it is a sign that banks are reluctant to lend and therefore demand a higher return on their loans to pursuade them to lend.

According to the article:

* Banks are charging each other a premium of about 78 basis points…The spread is up from about 24 basis points in January, and may widen to 85 basis points, or 0.85 percentage point, by mid-December, prices in the forwards market show.

* “Things are going to get worse before they get better.”

*  The crisis is “not over and I’m not exactly sure when it’s going to end,” Nobel Prize-winning economist Myron Scholes.

Mortgage-backed bonds still attract investors

Posted on by Evan in Economics & Interest Rates, For Professionals, General Mortgage Info., Rate Update

I often reference “mortgage-backed bonds” (AKA MBS’s) in my daily rate updates.  If you follow rate update consistently then you know that when MBS prices fall interest rates rise and vice versa. 

The WSJ published a story today regarding investor confidence in high-quality MBS’s and how they remain attractive for bond investor guru Bill Gross & PIMCO. 

Here are a few good takeaways and what it may mean for interest rates in the near term:

* “Freddie’s mortgage bonds were trading at a risk premium of around 2.64 percentage points over the 10-year Treasury note’s yield, which was quoted late Thursday at 3.837%.” -A ‘risk premium’ is the spread that an investment earns above and beyond the 10-year US Treasury note (considered to be an extremely safe investment).  The idea is that the larger the spread the more risky the market perceives that investment.  The current spread between MBS’s & 10-year Treasury notes is relatively high compared to historical standards.  The good news is that in all likelihood we will see the spreads shrink in the future which means mortgage rates will have to come down or Treasury yields will have to move higher (or some combination of the two). 

* “Even though Congress passed legislation last month allowing the Treasury Department to provide liquidity to Fannie and Freddie, the Treasury has stopped short of announcing any immediate bailout plans. The uncertainty about the government’s plans have fueled sharp price swings in the companies’ stocks, bonds and mortgage bonds” -This helps to explain why mortgage rates have been as volatile as they have been over the past couple weeks.  This will likely persist for a few months.

* “Fannie and Freddie guarantee or own nearly half of the total $12 trillion U.S. mortgages outstanding. They have long been the mortgage-bond market’s backstop, stepping in to buy when other investors have failed to materialize. With their finances under pressure, however — both companies have reported losses as the housing market has weakened sharply — they have been curtailing their mortgage purchases.” -This is not terribly encouraging.  The housing market needs the two GSE’s to stabilize the secondary market for mortgages.

‘Tis the season to include tax holdbacks!

Posted on by Evan in For Professionals, General Mortgage Info., Mortgage Qualification

It’s that time of year again in Oregon where lenders will begin collecting real estate tax holdbacks for transactions closing in September & October where the first payment of the new mortgage is in November or December.  Every year tax holdbacks end up being the source of frustration for many homebuyers who end up having to bring in much more money than they had anticipated for closing.  Why? 

Typically because their lender “forgot” to include the escrow holdback on their initial good faith estimates (GFE’s).  It’s important to know that tax holdbacks are required by all lenders and apply to all loans even if the buyer has elected to pay their taxes and insurance separate from their monthly mortgage payment.  If an applicant does not see it on their GFE it is probably because the lender has neglected to include it.  Don’t get burned by an inexperienced mortgage professional!

Here are some answers to some FAQ’s about tax holdbacks:

What is a tax holdback?

A tax holdback is when the escrow company collects a lump sum of money from the homebuyer & seller as a part of the settlement charges at closing in order to hold the money in an escrow account until they can satisfy the annual property tax bill when it is released for the subject property (usually near the end of October or beginning of November).

Who determines if a tax holdback is required for a specific transaction? 

It’s the lender’s decision.  They will instruct the escrow company to conduct an escrow holdback for all loans originated from early September until the property tax bills are released near the end of October when the first payment date on the new loan is in November or December.

Who determines how much is collected for the tax holdback?

The escrow company is the entity that determines how much is collected.  Most escrow companies that we’ve worked with will collect 110%-120% of the previous year’s property tax bill.  For example, if the previous year’s tax bill was $3,000 and the escrow company’s policy is to collect 115% then they will set aside $3,450 ($3,000 * 115%).  In addition, they will also have a one-time escrow holdback fee of $50-$150. 

If the subject property is new construction and there is no history of property taxes then typically the escrow company will use the mileage rate and apply it to the purchase price then take 110-120% of that figure.

Who pays for the tax holdback?

The escrow company will prorate the amount collected from the homebuyer and seller based on the number of days each will own the property in the current tax year.  For example, if the close date for a home purchase is October 1st then the seller will be responsible for paying for the first 3 months of the real estate tax year (July 1-September 30 or 25%) and the homebuyer will be charged for the last 9 months (October 1-June 30 or 75%).  However, it’s important to note here that the seller’s contribution (25% in the aforementioned example) is based on last year’s tax bill only without the 110%-120% cushion. 

What if there is an overpayment into the tax holdback?

Typically 110-120% of the previous year’s tax bill is more than enough to cover the amount shown on the new tax assessment.  If that is the case then any difference between the amount collected in the escrow holdback and the actual amount needed to pay the tax bill will be refunded to the homebuyer.

Did you find this posting helpful?  Please feel free to pass this link to another person you know who might benefit.  In addition, comments are always appreciated.  Simply click the ‘comments’ buttom below to post a comment!

Fannie & Freddie insolvent?

Posted on by Evan in Credit Crisis, For Professionals, General Mortgage Info., Housing & Real Estate

Back on July 15th I posted this blog entry regarding Fannie Mae & Freddie Mac in which I outlined the crucial role they play in our nation’s housing industry.  Here is an update to this saga:

This weekend Barron’s is reporting that the two mortgage giants are essentially insolvent and that government intervention is inevitable.  The main concern surrounding Fannie & Freddie has been their capitalization ratios.  This measure of liquid capital relative to obligations outstanding was as low as 1.58% when reported back on July 15th.

However, the author of the Barron’s story took a deeper look into Fannie & Freddie’s balance sheet and determined that instead of having positive capitalization of $84 billion they are actually more like $50 billion upside down which is why government intervention is inevitable.

According to the author government intervention is certain to mean that the two companies will be nationalized and gradually sold off in pieces to the private sector.  Depending on who is in the oval office at the time of this procedure the outcomes will likely differ.

However, one thing is for certain, a nationalized Fannie & Freddie is not likely to operate as aggressively as the private entities have over the past decade and therefore mortgage funding will likely become more expensive and difficult to obtain.

The nationalization of Fannie & Freddie will also create opportunities for new forms of mortgage funding to hit the marketplace such as the covered-bond solution which I reported on July 30th.

Don’t forget about fiscal literacy

Posted on by Evan in For Professionals, Housing & Real Estate, Miscellaneous, Personal Finance, The Fed

The NY Times published a good article today outlining the presidential hopeful’s views on financial regulation (click this link to view).  By the sounds of it we can expect greater governmental oversight over the financial markets in the coming years.

It is no surprise that a reaction for greater financial regulation has resulted following the third financial collapse in as many decades.  In the 1980s the savings and loan crisis forced 747 financial institutions to fail.  In the 1990s it was the dot-com bubble that burst wiping out approximately $5,000,000,000,000 ($5 trillion) in market capitalization in only 2 years.  Currently, we find ourselves in the largest credit & housing expansion and downturn in US history (the extent of the housing cycle is creatively displayed in this video by John Burns).

In each instance the pattern of activity tends to be similar.  At first a small group of people begin to acquire an asset (i.e. stock, house, mortgage-security) and that asset class performs extremely well over a short period of time.  Word spreads that this particular asset class is a great investment and more and more people get involved.  So on and so forth until rationality has left the marketplace and folks are buying up the asset left and right without any regard to the actual fundamentals behind the investment.  Along the way enterprising and dishonest salesman find ways to “help” less educated and less sophisticated buyers get into the game.  Around this time is typically when the music stops and those left holding the asset are the ones who lose huge.

To a degree this explains how each of the aforementioned economic bubbles have occurred.  Many people have blamed the period of deregulation in the financial markets from 1970-2000 for allowing so many people to get into financial trouble.  If this is indeed the cause then it would only make sense to have the government tighten down on the financial markets.  It is no surprise then that the two presidential hopefuls are proponents of this approach as is Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson. 

Although I do agree with these people that some additional governmental regulation would be helpful (so long as it is actually enforced) I think the greater preventive measure lies in our education system.  For me this period in our history is only partially about lack of government oversight and is more about lack of fiscal literacy among consumers.

The Economist wrote an excellent article about fiscal literacy which I posted on my blog back in April (view it by clicking this link).  My hope is that the presidential nominees will spend time this fall talking about ways to improve our national education system so that in the future consumers will be able to ask informed questions, properly analyze their options, and make quality decisions regarding their financial matters.  Otherwise we may find ourselves in this position again next decade. 

FHA Loans- What Real Estate Professionals Needs to Know

Posted on by Evan in FHA, For Professionals, General Mortgage Info., Housing & Real Estate, Low Down-Payment, Mortgage Programs

History

In 1934, the Federal Housing Administration (FHA) was formed as a part of the National Housing Act.  The objective of the FHA was to increase home construction, reduce unemployment, and operate various loan insurance programs.  (It’s important to note here that the FHA DOES NOT directly lend money for FHA loans.  They only provide the insurance that protects lenders against losses from making FHA loans.  The FHA’s insurance makes the origination of FHA loans more attractive for lenders and reduces the rate of interest which is charged on these loans.)

 

Since its inception the rules and regulations that guide FHA loans have been modified several times however the main purpose has remained relatively consistent- to enable low to moderate income Americans to buy homes that they would unlikely qualify for under conventional loan programs.

 

FHA loans have become more prominently used in the recent few months because of the various underwriting flexibilities that conventional loans do not have.  Many of these flexibilities used to be found in ALT-A & subprime mortgage programs but because of the credit collapse these loans are no longer available.  

 

FHA Loan Limits- (As of August 7, 2008 for Portland/ Metro area)

 

1-unit: $418,750

2-unit: $536,050

3-unit: $648,000

4-unit: $805,300

5-unit+: not available

*Loan amounts above $362,790 will likely carry interest rates that are .25%-.50% higher than FHA loan amounts below this level.

*Click here to be taken to the HUD webpage to see other areas.

 

Down Payments

Traditionally FHA loans have required a minimum down payment of 3% on the part of a home-buyer.  Here are a few facts about the down payment you would want to be aware of:

 

→2008 Housing Bill: As a part of the 2008 housing bill that recently passed into law FHA minimum down payment requirements will increase from 3.00% to 3.50% (effective January 1, 2009). 

→Gifts: The home-buyer may receive a gift from a relative or non-profit organization to satisfy their down payment requirement (most conventional programs require at least 5% to come from the borrower’s own funds).

→Seller Financed Down Payment Assistance:  Up until October 1, 2008 home buyers were able to have the seller indirectly “gift” the minimum 3% down payment to the buyer using a loophole in the FHA underwriting guidelines which effectively created 0% down financing (the “non-profit” organizations behind this loophole were Ameri-dream, Nehemiah, etc.).  However, do to the poor performance of these loans the 2008 housing bill eliminated this loophole.  (At the current time a group of congressman are trying to reinstate seller financed “DPA”s through HR Bill 6694 but according to my sources passage of this bill is doubtfull.)

 

FHA Modernization

Over the last year significant improvements have been made to the “usability” of FHA loans.  Here are a few of the highlights that real estate professionals should be aware of:

→Inspections: It used to be that bank underwriters would require pest & dry rot reports, well-flow tests (when applicable), and septic reports (when applicable) for ALL FHA loans.  However, these are no long needed UNLESS the earnest money agreement specifically states that these inspections will be done during the inspection process.

→Appraisals:  FHA loans used to have their own appraisal format which was much more detailed and cumbersome than conventional appraisal requirements.  For example, under the old appraisal guidelines plants and shrubs had to be trimmed back from the dwelling by 6 inches or more.  However, bank underwriters now only require the standard appraisal (AKA “1004” or “form 70”) with a little bit more information. 

→“Junk Fees”: It used to be that there were certain standard closing costs that the FHA deemed “junk fees” and would not allow the home buyer to pay.  These requirements have been eliminated however the loan originator may not charge more than 1% origination fee.

 

Miscellaneous Benefits & Features of FHA loans

→Seller concessions: With FHA loans the seller may pay up to 6% of the sales price towards the home-buyers settlement charges (conventional programs where the buyer is putting <10% down only allow for 3%).  The additional contribution can be used to by down the home-buyer’s interest rate among other items.

→Minimum down payment on multi-family:  FHA is one of the only programs I am aware of that will allow for up to 97% financing on 2,3, and 4 unit properties so long as the home-buyer is going to occupy one of the units as their primary residence.  (Conventional loan programs typically require 25% down on owner-occupied 3 & 4-unit properties.)

→Non-occupying co-borrower: Even with the relatively flexible underwriting guidelines that FHA allows many borrowers will not qualify.  In this case a home-buyer may call upon a “co-signer” to apply for the loan so long as the person is a relative.

→No credit history: Even borrowers with no credit history MAY still qualify for FHA financing through the creation of a “non-traditional” credit report.

 

Paperwork

Even though the FHA loan program has improved significantly over the past few months there is still an overwhelming amount of time-sensitive disclosure paperwork which needs to signed by various parties in the transaction.  It’s important that you work with an experienced loan originator who has a handle on all the disclosures and when they need to be signed to avoid any pesky delays in the funding of the loan.

 

The real estate professional really needs only to be aware of one FHA disclosure.  This is the Amendatory Clause & Real Estate Certification which MUST be signed by the buyer(s), seller(s), listing agent, and selling agent ON THE SAME DATE as the earnest money agreement is signed. 

 

For a copy of a blank Amendatory Clause & Real Estate Certification form email myself or google the term and you will likely find one.

 

I hope you found this informattional useful.  I would invite you to post any comment you may have regarding this article below.  Furthermore, if you know of other profeesionals that would benefit from this posting please pass it along!