Category Archives: Home Loans
Just received this from our corporate office…
“We sent our East Coast Regional and a corporate secondary person to a HARP 2.0 seminar in Washington DC yesterday. I expect to start to see some direction in the next week or two. DU won’t be ready until mid –March so we have some time. There are still a lot of unknowns around reps and warrants, warehouse covenants on over 100 % LTVs, and who will be doing these loans as investors. People are starting to solicit the business but don’t have the product. I saw a WJ Bradley solicitation for apps, but they don’t even offer the product yet – nobody can close one until after the DU release. Keep sharing anything you see in the field. Thanks.”
I know there is a lot of technical jargon here but the point is, you may already be hearing from companies advertising this program. It is not rolled out just yet. Beware of false promises.
The Phoenix, Arizona market has seen some unique challenges over the past few months. Now, before you e-mail me and say “what are you talking about? The last few months?!” I know. I know. We’ve been experiencing challenges since 2007. But what I mean when I say the last few months is this.
There is now and always is a pool of first time home buyers in any market. With severely depressed prices there is no middle market here. Those who are not forced to sell are sitting tight and not moving. So there really have become only three viable buyers in this market, the first time home buyer, the relocation buyer and the investor. (One could also include the government in this discussion but we’ll leave that for another day).
The first time home buyer and the relocation buyer are competing against cash paying investors for the best properties on the market. One year ago these investors were doing “fix and flips’. That is, buying the property for a deep discount at foreclosure auction, and fixing them up and selling to first time home buyers at fair market prices. The home buyer was getting a newly remodeled house and it was good business for everyone. But then the “buy and rent” crowd moved in. The “buy and rent” investor is willing to pay a higher price for the house then the “fix and flip” investor because they don’t have to worry about reselling the house right away. Demand for rentals has risen and with it so have rental rates. The fix and flip investor is now being squeezed out of the market. There is less inventory available for fix and flip investor and the first time home buyer to buy. What is the answer then?
Many home buyers are now going back to new builder homes. Although the new builder home prices are seemingly still a bit too high in most parts of town.. Another idea is to buy the bank REO that is in disrepair and use the 203(k) program to remodel the house.
Consider this example using simple math. Let’s say a home is priced at $80,000 but it needs $20,000 worth of work. If that home were completely fixed up and on the market today it could be sold for $100,000. The fix and flip investor does not want to buy this house. There is no immediate profit in it. The buy and rent investor is also going to be hesitant because even though rents are high they are still not wanting to buy a house at 100% of market value. Cash buyers want a discount. Enter the first time home buyer and the 203(k) program. The home buyer can buy the house, use the money to do all the renovation work and have a home that cost them exactly what is worth today.
If a Buyer’s Agent wants to dramatically increase the pool of available homes for their client to look at then consider the fixer-upper house and utilize the 203(k) loan. If a Listing Agent wants to increase the pool of buyers and command a higher price for the listing then he/she should also employ this strategy. First hire a HUD qualified 203(k) consultant to examine the home and make recommendations for repairs. Then hire a General Contractor that is HUD trained and knows how to work with the product. The end result is a remodeled house with all the appointments picked out by the home buyer and a happy customer.
For more information on how to qualify for the FHA 203(k) program and how this loan can work for you contact Duckworth Lending Group at (480) 359-5682. We are ready to guide you through this process.
The Short Sale offers a tremendous challenge for all parties involved. It is an emotional strain on the home owner. It is an extraordinary amount of work for the home owner’s realtor. And it is taxing on the eventual buyer and his/her agent (and lender) as all wait and wait and wait, unsure of the outcome. Meanwhile all are left wondering if other, perhaps better, opportunities are being ignored. These are not pleasant for anyone involved.
Worse yet though has been the aftermath of this new phenomenon. A strategy the banks have now decided is the desired course of action, for them.
Perhaps HUD (the Department of Housing and Urban Development) had a hand in this from the beginning. In 2009 HUD issued one of their mortgagee letter as it pertains to new financing through the FHA loan program. HUD ML 09-52 states:
Definition of Short Sale:
FHA Guidance on Short Sales:
Borrowers are not eligible for a new FHA mortgage if they pursued a short sale agreement on his or her principal residence simply to;
- take advantage of declining market conditions, and
- purchase, at a reduced price, a similar or superior property within a reasonable commuting distance.
However, there was acknowledgement that everyone who went through a Short Sale was not a credit risk and should be given the opportunity to buy again.
Guidance on Borrowers current at the time of Short Sale:
Borrowers are considered eligible for a new FHA-insured mortgage if;
- they were current on their mortgage and other installment debts at the time of the short sale of their previously owned property, and
- the proceeds from the short sale serve as payment in full.
And, the final word was on those in a default and/or pre-foreclosure status at the time of the Short Sale;
- Borrowers in default on their mortgage at the time of the short sale (or pre-foreclosure sale) are not eligible for a new FHA-insured mortgage for three years from the date of the pre-foreclosure sale. Lenders may make exceptions to this rule under certain circumstances.
HUD does acknowledge that some may have been forced into Short Sale due to extenuating circumstances and offers the following;
- default was due to circumstances beyond the borrower’s control, such as death of primary wage earner or long-term uninsured illness, and
- a review of the credit report indicates satisfactory credit prior to the circumstances beyond the borrower’s control that caused the default
What this all means is that if you did sell your house under a Short Sale then you may be eligible for financing right away if;
- You made all of your payments on time during the process, including your other credit accounts and,
- You did not sell your house just in order to take advantage of the market conditions and get out from under a big mortgage that you no longer wanted to pay.
What are generally considered acceptable reasons are forced company relocation or a loss of one income in the household due to layoff, death, extended uninsured illness or divorce.
Otherwise, if you fell behind on your payments then the three-year rules applies.
If you or someone you know sold a house as a Short Sale we can help. Now is the time to start working on your finances and credit to get yourself ready to buy a new home. Contact Duckworth Lending Group at (480) 359-5682 for professional help.
There are many myths surrounding bankruptcy. One of the most serious myths is that an individual with a history of bankruptcy cannot qualify for a home loan. This myth can prevent someone deep in debt from obtaining needed relief.
The truth is that while lenders hate bankruptcy, they love federal guarantees. The Federal Housing Administration (FHA) is a government agency that insures certain home loans, and its policy for qualifying for a home loan is very flexible. The FHA will guarantee a home loan after a bankruptcy when:
- Twenty four months have passed since the bankruptcy has been discharged;
FHA-insured home mortgages are also available to Chapter 13 debtors during bankruptcy. The debtor must (1) have completed one year of payments as required while under Chapter 13 and (2) must obtain a letter from the Trustee of the court, stating the dollar amount the applicant can borrow.
In addition to the above, individuals must meet the mortgage lender’s criteria. This usually means showing a stable employment history, a manageable debt to income ratio, and a good credit score. Surprisingly, most debtors are able to improve their credit scores quickly after a bankruptcy discharge. Your credit score is weighted heavily on recent events, so when you file bankruptcy your score will immediate plummets. However, the farther you are from your bankruptcy discharge, the better your score will become. Additionally, an absence of credit delinquencies and a solid history of on-time payments after your bankruptcy case will boost your credit score.
Any person who has filed for bankruptcy protection and has the desire to buy a new home should start preparing themselves six months in advance. I say six months because unless you have been monitoring your credit report you will probably need some work done to get the credit score to an acceptable number. Making corrections on the credit report can take anywhere from one week to two months depending on the circumstances. The sooner you start working on it the better your chances of buying at the 2 year anniversary date. Other things to consider to make the jump back into home ownership smoother are; Be prepared with paperwork. Make sure you have all of the required documents in a place easy to find and you are ready to go. These include, but are not limited to:
- Complete Federal tax returns (1040s plus all schedules) for two years
- Complete set of Bankruptcy papers including Discharge and all Schedules of Debtors
- A letter explaining the circumstances around bankruptcy filing (your loan officer will review this with you so you know it’s explained together properly and completely)
- Paycheck stubs for one full month
- Bank statements for two full months
You may find a need for more documentation depending on your circumstances but these are items most everyone must supply.
If you or someone you know had a bankruptcy that was discharged on or before June 2010 now is the time to start working on your finances and credit to get yourself ready to buy a new home. Contact Duckworth Lending Group at (480) 359-5682 for help with your personal situation.