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JMAC FHA Intro 20110720

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JMAC FHA Intro 20110720 Powered By Docstoc
					    Presents


FHA Introduction
   July 20, 2011
                FHA Features
 3.5% minimum down payment on purchase (96.5% LTV)
 Refinance rate and term max LTV is 97.75%
 Up to 85% LTV for cash out refinance. No $$ max for cash out.
 ALL down payment/cost can be gifted by family
 Can refinance from conventional to FHA
 FHA High Balance: max loan amount $729,750 subject to county limits.
 FHA to FHA refi (Streamline): no appraisal nor income qualification.
 **6% seller credit includes recurring and non-recurring closing costs.
 More lenient on foreclosure (3 year) or BK history (2 yr on CH 7, Chapter
  13 BK must be 1 yr from filing, can remain open).**
 No need to worry about qualifying for mortgage insurance separately
 Available for BOTH first time homebuyers and CURRENT homeowners
 Low credit score pricing adjustments more attractive than conventional
      A Perfect FHA Loan
 Borrower has limited funds for a down payment
 Loan has a high LTV
 Borrower has less than perfect credit
 Loan requires MI but borrower’s fico is too low for
  MI
 When DTI is over 41% (when MI is required)
 Source of down payment is a gift or community 2nd
  and borrower has less than 5% of own funds
 Non-occupying co-borrower qualifications are less
  restrictive than conventional
 85% cash out
      FHA may not be right when…


 Your loan is a second home or non-owner occupied
 Your condo is not FHA approved
 The LTV is below 80%
 The buyer already has an FHA loan (Unless met
  exceptions indicated in HUD Handbook)
 There is a non-borrowing spouse with a lot of debts
  (FHA requires debts be included in DTI in community
  property states)
         FHA vs. Conventional


 Lower minimum down-payment of 3.5%.
 No appraisal required for FHA to FHA
  streamline refinance
 FHA Loss Mitigation Options
 Student loan deferment
            FHA vs. Conventional


 High DTI compared to conventional loan. Fannie Mae
  now requires max DTI of 45% (back end). FHA can
  insure up to 45%(front)/55%(back) depending on AUS .
 Max DTI doesn’t change even on High Balance loans
  (may go up to 45%/50% depending on AUS).
 Family member can gift everything, including 3.5%
  down-payment requirement and ALL closing costs.
 Down-Payment Assistant Programs (DAP)
          FHA vs. Conventional


 Seller can credit up to 6%** of ALL closing cost
  (recurring and non-recurring). That means
  seller can pay hazard insurance and tax
  impounds.
 Non-occupying co-borrower transactions do
  not have separate LTV/DTI restrictions on the
  occupying borrowers. (Unless the borrower has
  no credit history)
Some Basic Credit
Guidelines You May
  Want To Know
                FHA Programs


• Fixed Rate/ARMs       HECM for Purchase
• Purchase              (Reverse Mortgage)
• Refinance             Energy Efficient
                        Mortgage
• Rehabilitation
                        HUD Homes
   Standard 203(k)
                          Good Neighbor Next
   Streamlined(k)
                          Door (GNND)
           STREAMLINED (k)

AKA “Fix Up Loan”
 Allows for finance of repairs after close of
  escrow
 No minimum repair amount
 Maximum repairs (up to $35,000) – items
  identified on appraisal must be repaired
  first
 Can be used for purchase (including HUD
  REO properties) or refinancing with
  rehabilitation
           Standard 203(k)

For more complicated, structural
     repairs/upgrades
Minimum of $5,000 in
     improvements
Health and safety issues first
Structural alterations
Modernize property
Handicap accessibility
        Standard 203(k) – Cont.


 Up to 6 months mortgage payments
      can be financed as part of the
      mortgage
 Lender escrows funds and pays to
  homeowner/contractor in up to 5 draws
 Requires 203(k) consultant
 As repaired appraisal must support
      loan amount for repaired property
 Social Security Number Requirements



 Borrower’s social security number will be verified
 & validated through FHAC - No T.I.N’s allowed.
 Verify social security number on paystubs / W-2’s
 / 1040’s match.
 Credit obtained must be under SSN that the Social
 Security Administration has on record for
 borrower
               Employment

 No time requirement for current job
 2 year inclusive history required on 1003

 Less than 2 years is acceptable if borrower can
  document recently graduated student
 Acceptable explanations are required if sporadic job
  history and changes in profession - must make
  sense - decision based on verifying capacity to repay
 Probability of continued employment is very
  important
 Recently returned to work - requires current job for
  6 mos + and document min 2 year work history
  prior to the gap of employment
         DOWNPAYMENT SOURCES

▪ Savings                 ▪ Sale of personal property
                          (must document value and sale)
▪ Secured funds
                          ▪ Sale proceeds
▪ Gifts - from relative
  or significant other    ▪ 401K (use 60% of value)-
                          must provide evidence the
                          funds can be accessed.
▪ Cash - if borrower
  meets profile
                          ▪ Investments

                          ▪ Community Seconds
                      Bankruptcies

   Chapter 7
    Must document the BK was caused by extenuating circumstances
    beyond the borrowers control and must document financial
    responsibility for exception if underwriter recommends approval
     Must be discharged for at least 2 years (AUS)


   Chapter 13
       Must be discharged for at least 2 years (AUS)
    For both - Provide full BK docs and discharge papers.
Foreclosure & Del. Federal Debts


 Foreclosure - must to be more than 3
 years from end of foreclosure to date of
 application
 Delinquent Federal Debts
    Delinquent student loans and unpaid federal tax
     liens will be verified through FHA Connection
    Borrower not eligible unless account is current,
     paid or otherwise satisfied prior to close of
     escrow
                            Liabilities

•   Recurring obligations
     • Revolving Credit
     • Installment Debt - include student loans unless deferred > 12 mos
     • Check the paystubs! Check for Credit Union payments, other
     payments not reflected on credit. Note: 401K payments are not
     counted as debt.
     • Child Support/Alimony payments
     • “Buy and Bail” policy in effect , similar to Agency. To use rental
     income on departure property requires minimum 25% equity
     evidenced by a FNMA appraisal (2055 for SFR, Full appraisal 1073 for
     condos)
     • In community property states, any debt of the non-borrowing
     spouse must be included in debt ratio!!
Citizenship and Immigration Status

 U.S. Citizenship not required
 Lawful Permanent Resident Aliens are acceptable - document with
  copy of entire valid Resident Alien Card
 Document evidence of permanent residency issued by Bureau of
  Citizenship and Immigration Services (BCIS)- part of Dept of
  Homeland Security
 Non-permanent Resident Aliens acceptable with the following
  stipulations: property being purchased is the borrower’s principal
  residence. Will require:
   * Valid Social Security number
   * Borrower must have Employment Authorization Document
     issued by the BCIS
   * Temporary residency status that expires within one
     year AND there is a history of residency status
     renewals- assume the continuation will be granted
           Eligible Properties


▪   1-4 Units

▪   Townhouses

▪   FHA approved Condos

▪   PUDs
  Required Disclosures and Forms


 FHA Addendum & Real Estate Cert -(Amendatory
 Clause) signed at time of purchase contract by all
 borrower(s), seller(s), realtor(s).
 92900A- FHA Addendum to Loan Application-
 Borrower(s) to sign page 2 at application- then
 sign page 4 at closing
 Informed Consumer Choice - to be signed within
 3 days of application
 For Your Protection Get a Home Inspection
 (form 92564-CN)
 Standard State and Federal required disclosures -
 signed & dated within compliance
         FHA Refinance Options



    Streamline Refinance without an Appraisal
    - FHA to FHA refinance - No cash out

 No Cash Out Refinance - max cash to
    borrower $500

 Cash Out Refinance - up to 85% LTV
        STREAMLINE REFINANCE
                     w/out appraisal


• FHA to FHA refinance
•Take Advantage of Lower Interest Rates
• Income not required to be listed on 1003.
• Employment info is required to be listed
• Payoff needs to reflect loan is current; a 12mos mortgage history
         is required.
• No Appraisal required
•Must show a Net Tangible Benefit to the borrower:
        Reduction in mortgage payment by 5%, or
        Fixed to ARM: reduction in rate by at least 2%, or
        ARM to Fixed: Increase in rate by no more than 2%
      STREAMLINE REFINANCE w/out appraisal
                  Continued




 Same borrowers must be on new FHA loan as were
  on previous FHA loan
 Must have made at least 6 pmts on previous loan
 210 days from the closing date of previous loan
 New loan amount equals the outstanding principal
  balance minus the refund of UFMIP plus the new
  UFMIP on the refinance.
      NO CASH OUT REFINANCE


 Conventional to FHA refinance

 Appraisal Required

 Borrower must credit qualify and occupy the
  property as a primary residence
 For lien consolidation, the liens must be one
  year old or used for improvements
 May buy out ex-spouse’s Equity
 Loan amount to 97.75% LTV’s

 Maximum $500 cash out at closing
          CASH OUT REFINANCE

 Borrow up to 85%of appraised value
 Home must be owned for at least one year

 Owner Occupied 1-2 units Only

 All borrowers must be on title 12 mos or inherited. Trust NOT
  allowed.
 0 x 30 days late - 12 mos mortgage history

 Full Document Refinance

 Appraisal required
 Pull cash out of free and clear properties

 Debt Consolidation ok

 Repairs required if noted on appraisal or safety issue
Minimum Submission Requirements

   92900A – FHA Addendum to 1003 executed by borrower on page 2
   GFE/TIL
   Social Security card and drivers license for all borrowers
   Borrower Authorization
   LOANS IN COMMUNITY PROPERTY STATES: non-borrowing spouse: provide spouse’s
    individual credit report .
   CASE # evidence from FHA Connect - to include CAIVRS checked
   Purchase Contract if applicable and Amendatory Clause signed same date
   Credit report
   2 Mos Complete Bank Statements to support assets needed to close
   If gift used to close, provide gift letter and proof of donor ability and gift transfer
   Paystub(s) including 30 days year to date income for each borrower (30 days consecutive)
   Income:
              Salaried: Min 2 yr W-2
              Self-Employed, >25% commission or rental income: 2 yrs complete 1040’s + YTD P&L
   Mortgage statements for all properties owned. If impounds not shown, need tax bills and hazard
    insurance declaration pages
   Appraisal and/or Title if a purchase.
   Signed 4506T at time of application
   Signed disclosures
             Mortgage Insurance



 All FHA loans have mortgage insurance
 FHA loan approval also approves the insurance. No
  separate approval required.
 Insurance is paid both up front (UFMIP) and
  monthly (MIP).
 Insurance is in effect until LTV reaches 78%
 Upfront MIP and Annual MIP
               Current Upfront MIP Requirements
                                                                                Upfront Premium
                                                  Mortgage Type
                                                                                  Requirement
                                             Purchase Money Mortgages
                                             and Full-Credit Qualifying              100 BPS
                                                     Refinances
                                              Streamline Refinances (all
                                                                                     100 BPS
                                                       Types)


          Current Annual Premium Requirements
                       Annual Premiums for                                 Annual Premiums for
      LTV                                                LTV
                        Loans > 15 Years                                   Loans = or < 15 years
= or < 95 percent           110 BPS                = or < 90 percent              25 BPS

        > 95 percent        115 BPS                        > 90 percent           50 BPS
           Online Resources


■   HUD: http://www.hud.gov/
■   Limited Denial Participation Lists:
     www.hud.gov/Ecpcis/main/ECPCIS_List
■   GSA (General Services Administration
     Lists: www.epls.gov
■   HUD Lender page:
     www.hud.gov/groups/lenders.cfm

				
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