FHA Too Expensive for Home Buyers. There Are Other Options.

FHA says they should have done less business in the past and (to pay for their sins) they should do less business in the future. To help that process along, they drastically increased the Up Front Mortgage Insurance Premium (UFMIP), doubled the cost of the Monthly Insurance Premium (MIP), and will require the MIP to be paid for the life of the loan.

FHA MIGuess what? Their wish is coming true!  The Government Agency created in 1934 to “assist in providing housing opportunities” for American families saw their application volume drop by 50% in June. At a time when mortgage rates were near all time lows, FHA priced them self out of the market. Great help they are!

Many features of a FHA Mortgage make it an attractive mortgage option for First Home Buyers. However, the cost of the mortgage insurance makes the monthly obligation too expensive. I’m working on two transactions now. Each has challenges that could have been addressed with a FHA loan in the past.  One will be done as a conventional mortgage with a higher rate but lower MI for a savings of $60/month; the other, luckily, as a USDA Loan with a similar rate and MI that is 1/3 the cost of FHA premiums.

I don’t think I’ll recommend a FHA Insured Mortgage to my clients unless that’s the only way to get them in a new home.

Investors Need Help Getting a Mortgage

Obtaining mortgages for Investors that own numerous properties has become a challenge. Most of the time it’s their tax returns that present the biggest obstacle. Like all small business persons, Investors take advantage of legitimate tax laws to minimize their tax liability and maximize the return on their investments.

Now I’ve been analyzing tax returns from a lending view point for some 30 years and have a pretty good Income Tax returnhandle on how this creative tax accounting (and I don’t mean that in a bad way) works. Most tax returns show losses on these investment properties such that bottom line income does not show the income lenders need to qualify them for a mortgage on the next property. It’s a matter of ripping apart the returns and adding certain items back into income, such as depreciation. These depreciation numbers can be some serious dollars. They can take someone from not being able to get a mortgage to someone that qualifies with very little difficulty. 

In addition, most lenders have guidelines that prevent them from doing a new mortgage for anyone thatinvestment property owns more than 4 properties. I get referrals from business partners all the time seeking help. They know that I am fortunate to work with a number of lenders that will do mortgages for folks that own 10 properties.

It’s this combination of experience and resources that have helped many investors expand their real estate portfolio.

I Like Mortgage Puzzles

In the past month, I have received 3 First Home Buyer referrals from a mortgage officer at a small savings bank. Over the years, he has referredreferral numerous bank customers to me when the applicant’s situation didn’t quite fit the bank’s mortgage parameters. Rather than just saying “no” to his customers, we have worked together to preserve the bank’s small town reputation by offering alternative mortgage solutions that really work.

During our last conversation, the loan officer apologized for only referring the tougher transactions to me. He hoped I understood why he couldn’t send me some easier ones. My answer was “Yes! I like Puzzles!”I told him I was flattered that the bank thought so much of my experience, empathy and resources as to share his customers with me for help. “I don’t mind being challenged,” I told him.

house puzzleEvery mortgage application is a puzzle. My clients are real people, with real concerns and busy lives. They need help putting the pieces of the puzzle together. I focus on finding those solutions. And when the pieces do come together to form a pretty picture, they are happy and I get a warm fuzzy feeling knowing I did a good job.

Mortgage Approved

I think one of the best compliments you can give someone is a problem; that just means they think enough of you to help them solve it.

NAR Supports Obama’s Housing Finance Reform Policy

National Association of RealtorsHere are excepts from a National Association of REALTOR® statement  on President Obama’s recent housing policy speech.

“NAR believes the principles of comprehensive housing finance reform outlined by President Obama will contribute to the long-term stability of our nation’s housing market and provide consumers with access to affordable mortgage credit, even during economic downturns.

“Realtors® remain steadfast in our efforts to preserve the government guarantee in any restructured secondary mortgage market to ensure the continued availability of safe, reliable mortgages.”

“Realtors® urge continued support for the Federal Housing Administration’s mortgage insurance programsFirst Home Buyer. Many First Home Buyers rely on FHA-insured loans to purchase a home. It is important that we preserve access to FHA for all qualified middle class families.

“NAR is ready and willing to work with President Obama and Congress to develop policies that ensure mortgage credit is always available at reasonable costs so that everyone who is willing and able to afford a home can do so.”


Get Pre-Approved

Always Get a Home Inspection

A client was referred to me by her attorney as she was in the process of buying the family home froFirst Homem her mother’s estate. She had been caring for her mother, and after her passing, she and her 5 siblings agree that she would buy the home. The price had been agreed upon and the final piece was the mortgage. We met to begin the mortgage process. As it was her First Home, she had a lot of questions and so did I. As part of her “home buyer education,” I asked if she had a Home Inspection done?

Home InspectionShe felt that one wasn’t necessary since she had lived in the “homestead” all her life and was buying the house from her 5 brothers and sisters. I explained that it really was for her protection and peace of mind to know what might be the physical limitations of the old house. After some encouragement, she finally agreed that it was a good idea and I for a local inspector to meet with her to check out the house.

 A Home Inspection is a visual inspection condition of the structure and to identify components that aLostre not performing correctly or items that are unsafe. After seeing the results of her home inspection, my client wasn’t sure what to do as there were numerous issues. I gave her the name of a local home improvement contractor to get an estimate of what the repairs would be. The estimate she got was just over $10,000. OK, now what do we do? I suggested that she speak to her attorney and share a copy of the home inspection and estimate with the other 5 siblings.

Long sHappy New Hometory short the purchase price was reduced and we were able to move forward with the purchase. Everyone was happy,  

The moral of the story …  Always get a home inspection done by a licensed inspector, no matter who is the seller!

P.S. FHA does not require a home inspection unless the appraiser notes a glaring deficiency in the property. However, FHA requires the buyer to sign a document “For Your Protection: Get a Home Inspection” encouraging the buyer to be sure that the home they are buying is satisfactory in every respect.

Jobs Report Math Doesn’t Add Up

The stock market was in turmoil last week trying to make sense out of the Obama Administration’s euphoria over the latest employment report. Now I’m just a mortgage broker trying to “help families live comfortably and financially secure in their own home.” but the Jobs Report Math Doesn’t Add Up.Unemployment Line Here’s is the math as I see it, just over 160,000 found jobs in July, that’s a plus; but 250,000 stopped looking for jobs; a net loss of 110,000 jobs! Plus … more people are working part-time due to lack of work or are being employed part-obamacaretime so that employers will not be forced to pay for their health insurance because of the ObamaCare laws that go into effect next year. And this is good for the economy?

The Jobs Report signals when Federal Reserve might reduce its bond-buying efforts that have kept a lid on interest rates. But when the Fed reduces it stimulus and interest rates edge up, and the pent up demand for scarce inventory pushes home prices up, there is concern that the real estate market may cool down.

Ben Bernanke says the Fed will know when the economy is back to normal once the unemployment rate goes below 6.5%. I guess that if enough Americans leave the work force or have to settle for being under-employed, we’ll be back to normal(!?)

The only math that adds up is that the policies of this Administration have been a total disaster when it comes to economic recovery.

Identity Theft Victims Must File Police Report

First Home Buyer was referred to me by a local realtor to be Pre-Approved for a mortgage. To make a long story short, the buyer came to America a ID Theftseveral years ago. He worked hard, saved his money, established a small credit history and then went back to the old country to get married. While he was gone, his roommate cleaned out his savings and ran up his credit cards to take off for parts unknown. Although the buyer tried to do what he thought was right, the accounts were turned over to collection agencies. He was the Victim of Identity Theft
Today, the borrower is self-employed with tax returns that show good income,  a growing family, enough in savings to put a 20% down payment on a $200,000 home, and a low credit score.

The credit repair company I work with tells me that even if he makes a settlement with these creditors for debts he did not incur,  history of these derogatory accounts will show up on his report for 7 years.
Federal Trade CommissionAccording to the  Federal Trade Commission  Victims of identity theft need to file a  comprehensive police report to assert their federal rights and recover from the crime. In my client’s case, this is the only way he can remove these accounts from his credit report. 

Why Victims Need To File a Police Report
Under the Fair Credit Reporting Act (FCRA), a detailed police report is requiredpolice officer before victims can claim certain rights under federal law. By law, the report must specify which accounts and information on the credit report resulted from the identity theft. A detailed police report:

  • Helps victims clear their credit reports of any negative information that resulted from identity theft — such as bad debts — and avoid the long-term effects of a poor credit score, such as being refused new credit or insurance or paying higher interest rates.
  • Helps victims keep fraudulent debts from reappearing on their credit reports or ending up in the hands of a new debt collector.

Identifying the accounts resulting from identity theft is necessary to set in motion a chain of events:good-credit-vs-bad-credit

  • the credit reporting agency removes all fraudulent debts from appearing on the credit report, and the credit score is restored;
  • the credit reporting company notifies any businesses holding those fraudulent accounts that the accounts result from identity theft.
  • The business cannot continue to report them to the credit reporting company. 

Writing the Report the Easy Way
The Federal Trade Commission Identity Theft website makes it easier for victims to gather all  the required information for their police report. The FTC’s On-Line ID Theft Affidavit gathers all of the victim’s information that the law requires. The form can be attached to the police report. Victims can then send copies to the credit reporting companies and businesses involved to take advantage of their FCRA rights.

Identity Theft is a serious crime that can wreak havoc with your finances, credit history, and reputation — and can take time, money, and patience to resolve. My client has been approved for a mortgage, but it’s going to more expensive than we thought. It’s now his choice to buy the house before the school year starts, or make the effort to restore his good name. Whatever he decides to do, I’m here to help.