Colorado Green Real Estate

 

FHA loans seem to be one of the main choice of mortgages in the last 24 months or so. There are many reasons for this. What I hate hearing is that FHA mortgages have taken the spot of the subprime loans. This is not true by any part of the imagination. This statement is from those that are inexperienced in both the mortgage and the real estate industries. The realization has been that 30% of the subprime mortgages from 2002 to 2006, should have been FHA mortgages, not subprime. But why are FHA loans getting bad press now, stating that they are the most defaulted loans recently?  Read this : We should ABOLISH FHA loans...

 

To compound this, so many said just because you had a conventional loan, you had the better loan. This was not always true when putting 3% or even 5% down. In most cases, you were told this, because that particular lender was not FHA approved. Now?  Even with 10% to 20% down and credit scores less than 680, FHA loans in many cases, will be the best mortgage for you. You want to see a shocking example?  Please continue...

 

 

The example below is based on a $300,000 purchase price with 20% down. One reason why conventional rates are a little higher in this scenario as in FHA rates is because Fannie Mae and Freddie Mac have added penalties per se. If you are putting down less than 30% and your credit score is less than 720, certain fee penalties would apply to you, which would increase your rate and or points.  The FICO (credit score) that I am going to use is 659 and I will still show in this example that FHA loans are cheaper, even with 20% down.  Keep in mind... Don't ever be fooled by that loan officer that says, don't worry, you can refinance later.  This is a bad statement for many reasons that I will write about another time.

 

 

***And keep in mind, some lenders have penalties on FHA mortgages with credit scores under 660. And many lenders can't do FHA loans under 620. At Infinity Home Mortgage, I can do credit scores down to 600 now. Just beware of those that promise you a mortgage with scores under 620. It can happen, but they aren't as easy as advertised. Please read - Credit scores/FICO scores - I need a 700 credit score? ***

 

 

 

 

 

 

 

 

 

 

 

Disclaimer :  These rates are examples of today's pricing, and the spread shown in the example is real with the same profit margin for both sides. To compare this scenario apples to apples, there are no lender fees and with a half of a point. The conventional rate also includes the penalty for the 659 credit score, hence why there is a half of a point charge, because of the large pricing penalty for the credit score.

 

 

**Some of you might be saying that you will be adding $4,200.00 onto your principal balance if you did the FHA mortgage because of the FHA one-time mortgage insurance premium. This is correct and I don't want to confuse you with more numbers and charts. But here is a quick breakdown. If you kept your house for 5 years, you would have spent $621.00 more in payments in 5 years on the FHA loan. Does this mean that the FHA loan is still worse for you? No, it all comes down to your goals. Read on... In 5 years, your principal balance on the 5% would be $1,574  more than the 5.75% rate.

Here is the kicker and why you need a trusted loan officer to educate you. One important fact to remember.... The FHA monthly mortgage insurance in this scenario will fall off automatically in 5 years. Which means an extra savings of $100 per month. So just in another 15.74 months, you break even basically. Yes, there are smaller numbers to review. What if you stayed in your house for 10 years? How many of you move out of your house in less than 5 years, especially in today's economy. Just food for thought.

 

 

This information basically states you don't automatically do a conventional mortgage with 20% down over a FHA mortgage. Numbers don't lie, but not being educated about such numbers do mislead.

 

 

Lastly, keep in mind, depending on the area that you are buying or refinancing in, that you might not be able to get a conventional loan unless you have 10% down or a 90% LTV. The reason being is the mortgage insurance companies and how they view certain geographical areas and declining market areas.

Which leads me to the issues about Condos. Not only are there restrictions from the MI companies (Mortgage Insurance companies) in regards to what area you live in, but that many lenders won't go above 80% LTV's now on conventional mortgages. On a FHA mortgage for condos, you can still go up to 96.5%, depending on the state, but you still have to make sure that the condo association has been FHA approved. There has been a major change on FHA condo spot approvals.  Please read : FHA condo changes for spot approvals - The spot approval has been extended to 2/1/10.

 

 

Make sure you know about the NEW FHA loan changes : FHA loan changes for 2010 & why they changed. Reasons for these FHA changes and when they go into effect.

 

 

 

For more FHA loans vs conventional loans comparisons :

• FHA loans vs Conventional loans - A true numbers comparison with 5% down -  12-20-08 -Using a 710 credit score
  

• FHA loans vs Conventional loans - A real comparison with 5% down - 11-15-08 - Using a 659 credit score
  

• FHA Loans vs Conventional Loans - 20% down - A Rude Reality Check -  04-03-09  - Would you believe that FHA loans could be cheaper even with 20% down?  Come see why and how.

• FHA Loans vs Conventional Loans - 5% - 4 comparisons that you need to know - 05-02-09 -Comparing a FHA loan against 3 types of conventional loans with different types of monthly mortgage insurance. Guess who won while still using a 679 credit score.....

• FHA loans vs Conventional loans - Knowing the true comparisons - 07-10-09  - A great comparison with a 679 credit score and 5% down.  This example will still show that even with a better than average credit score, that FHA loans are still better in many cases.

• FHA loans vs Conventional loans - Things you need to know with 10% down, especially in regards to Condos - 09-19-09 -

 

Donw Payment Series - A Must Read -

• FHA loans vs Conventional loans - A real comparison with 20% down - Part 1 of 3 - 01-28-10 - Not much of a difference, unless you stay in the house for more than 5 years. Hence why a loan officer should be talking about your goals. So very important, yet many dont ask.

• FHA loans vs Conventional loans - Don't be cash poor!! - Part 2 of 3 - 01-29-10  I want to show even a bigger difference if you put less down. And even if you decided to put less than 10% down, because cash is king now. You can't predict even next week. And keeping in mind of some misleading rumors, that you need more than 10% down to buy a house.
  

• FHA loans vs Conventional loans - Get a bang for your buck - Large down payments aren't always the best way - Part 3 of 3 - 02-01-10 - Some great examples of having cash left over and not really affecting your monthly mortgage payment. And that you will have cash left over for emergencies. Keeping in mind that cash is king.

 

 

 

• And sellers, don't listen to your agents on how bad FHA loans are.

 

 

 

                    

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For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

 

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

Home Buyer TIPS On Purchasing A Distressed Property: Pre-Foreclosure, Short Sale, Foreclosure or REO

 

Did You Know That Foreclosures and Short Sales Can Actually Cost A Buyer More?

So many buyers think the best deals out there are foreclosures and short sales, but they can actually cost MORE! 

One important thing for home buyers to keep in mind is that since we are in such a strong buyer’s market now,  there are many motivated sellers out there that have great homes priced to compete with the short sales, pre-foreclosures, foreclosures and REO’s and a buyer can usually purchase one of these homes with a less stress, money and risk factors than when buying a distressed property.

Here are just some of the additional costs you may incur with a

bank foreclosure / distressed sale:

 

Survey: Approximately 150.-300. (Usually a seller cost, except when a bank sale)

 

No Tax pro-ration: (usually 105% of the last tax bill in this area, banks only will usually give the buyer 100% of the last known tax bill)

 

Usually no negotiation on repairs, so if you do your inspection and it is not satisfactory to you, you talk with your attorney regarding canceling the contract if it is within the contingency dates, but no one will give you back the 300. or so you may have spend on a home inspection, or any fees that were paid to your lender.  You may also be putting out your hard earned dollars for radon, lead paint, or mold inspections if you feel they are important to you.

 

Not closing on time can also cost you a Per Diem, as banks usually have this in their contract addendums. This is more of a risk now with underwriting and appraisals taking longer and daily changes in the banking industry.  The addendums usually have a charge that the buyer will have to pay for each day after the original closing date if they can not close on time for any reason.  I have seen this Per Diem charge being anywhere from 25-100 dollars per day.

 

By the way....*****I love working with buyers*****  :-)

 

Appliances: Banks usually say there is “no bill of sale on personal property”, so what you see when you write an offer may not be what you see before closing.  Make sure you have some extra money put aside in case you have to purchase appliances.

 

Well/Septic Issues: If a property is on a private well or septic, you will also have to pay for your own inspections and this is usually a seller’s expense in this area.  Another thing to keep in mind is that if you have an FHA loan, a vacant property that has a private septic system will not work since FHA now requires a copy of the septic test and if vacant, the inspector will usually put something on the report like “property is vacant and a re-test is recommended 30 days after normal use”.   If the well test does not come back with the water being safe, the buyer will usually have to correct the situation since it is an “as is” contract.

 

De-Winterization and re-winterizing the property for inspections and final walk-through.  In most cases this is a buyer’s expense.  Even if you are not doing a home inspection, the appraiser usually will want the water on when they come by to do the appraisal, especially if it is an FHA mortgage.

 

No disclosures: Since they have never lived in or in most cases, have never even seen the property, they are exempt from having to do the usual disclosures.   Your due diligence is even more important in foreclosures and any distressed sales.

 

Deferred maintenance: When someone can no longer pay their mortgage, many times they also have not been able to properly keep up with maintaining and updating their home so more repairs are usually necessary than on a home where the seller has been able to afford to keep up with updates and maintenance/repair issues.

 

Timing: Many times there is a very long wait to get a response on an offer, and it is usually worse with short sales than REO’s, which are properties that have already been foreclosed upon. You could be risking closing on time to be able to take advantage of the first time home buyers credit, which expires at the end of June 2010.  Remember, you will have to have an accepted contract by the end of April 2010.  I would recommend not waiting until the end of April to have a home under contract if you are a first time buyer or otherwise principal residence buyer who qualifies for the up to 6500. expanded home buyer tax credit.   If that contract falls through so will your  home buyer’s tax credit of up to 8000 or 6500!

Furthermore, in a short sale situation, in Northern Illinois the trend is becoming that once a seller signs a contract, contingent upon bank approval, the buyer usually needs to move forward with their inspections and mortgage approval right away,  even though the bank has not yet made a decision if they will approve the short sale or not.  Usually once the bank gives an approval, they do not give the buyer too long to close and most of the time it is not enough time to do this after approval.  The other reason for this is that if a seller only sends one offer into the bank (which is usually how it is done because any time a new offer is presented to them they go back to square one and the waiting time starts all over!), the seller really does not want to risk that the buyer cancels the contract after they have waited so long for an answer and the clock is ticking for them when they are facing foreclosure so usually do not want to be tied up with a buyer who will not wait.  In the Short Sales and Foreclosures Resource class I just took last week, the consensus seemed to be that buyers and sellers were waiting an average of 3-4 months for the bank to decide if they approve the short sale or not.

These are just some things to keep in mind when considering your options. Foreclosures and distressed sales can be excellent opportunities for the right buyer who is not trying to closely watch their costs, who has a lot of time and patience, who has some money to “gamble” with if contracts are not approved, who does not have to close by a certain date (like to get the first time buyer tax credit!) and the ability not to get too attached to or emotional about the property.  Do not get me wrong, there are many great fantastic deals out there to be had right now, but do not make the mistake of thinking that the only good deals are distressed sales. Sometimes, a truly motivated seller with equity in their home can also offer a wonderful buy with less cost, less waiting and less hassles and a property in better condition as well!

 

 

It is a GREAT TIME TO BUY REAL ESTATE in McHenry County, Cook County , Kane and Lake Counties in Northern Illinois.  There are fabulous homes for sale at great prices!

***especially for first time buyers, investors and move up buyers. *** Rates are fantastic, too!

We are having a "HUGE sale" on our large inventory of VERY well priced HOMES!

To Search Homes For Sale, Please Contact Me Directly Or Feel Free To Search On My Website!

My Direct Number at the Office is 847.516.6760

 

If I can help you or someone you know purchase or sell a home, I’d love to help.

 

If I can be of assistance to you, or, if you just have a question please do not hesitate to call or email me.  It will be my pleasure!  By the way, if you know of someone that could benefit from my high level of service, please call or email me with their name and daytime phone number and I will make sure to follow up and take great care of them.  My business keeps growing from your referrals.

 

There are fabulous buys on the market....now is a GREAT time to buy real estate in IL, especially for MOVE UP Buyers, Waterfront Buyers, Vacation and Second Home Buyers, Investors and First Time Buyers!

 

 

 

 

 

Federal Tax Credit Extended - What You as a Buyer Need to Know

Tax Credits are available for both first time home buyers as well as those purchasing primary residences who have owned a home for 5 of the last 10 years. Condos, townhomes and single family homes apply and the maximum purchase price is $800,000.  Two income caps have been set:

• If an individual makes $125,000 or higher, they will not be eligible.
• If a couple's joint income is $225,000 or higher, they will not be eligible.

The federal tax credit application form can be found here (IRS form 5405).  

Here's a quick video version of the new federal tax credit explanation as well. (Scroll to the bottom of the web page to view the video).

This new bill is going to cost $10 billion just for the home buyer tax credit.  Here's a more detailed version of the explanation of the extended $8,000 and $6,500 federal tax credit:

 

 

   

         

   

Disclosure of material contained within.