HUD Approves First Time Home Buyers Using Tax Credit Advance for FHA Loans

May 30, 2009 by 1 Comment

There's been a lot of rumbling about whether or not first time home buyers would be able to access the tax credit created by The American Recovery and Reinvestment Act of 2009 towards the purchase of their new home.  From HUD's announcement yesterday:

Current law does not permit approved lenders to monetize the tax credit to meet the required 3.5 percent minimum down payment, but, under the terms of today's announcement, lenders can now monetize the tax credit for use as additional down payment, or for other closing costs, which can help achieve a lower interest rate. Buyers financing through state Housing Finance Agencies and certain non-profits will be able to use the tax credit for their downpayments via secondary financing provided by the HFA or non-profit. In addition to the borrower's own cash investment, FHA allows parents, employers and other governmental entities to contribute towards the downpayment. Today's action permits the first-time homebuyer's anticipated tax credit under the Recovery Act to be applied toward the family's home purchase right away.

Here are some important points for you to know regarding using the tax credit towards a home purchase:

  • The tax credit advance loan cannot be used towards the mandetory 3.5% down payment.  (Update: unless it is through a State Housing Financing Agency).
  • The tax credit advance loan may not exceed the anticipated tax credit due to the home buyer based on the computations of form IRS 5405. 
  • The borrower will need to provide a copy of their tax refund and/or form IRS 5405.
  • Borrower cannot have unsettled obligations with the IRS.
  • If the tax advance is in the form of a loan with payments, the borrower must qualify with that payment (unless the payments are deferred for at least 36 months).

Reminders about the First Time Home Buyer Tax Credit…

You can claim the tax credit if:

  • You purchased your main home after April 8, 2008 (who picked that day?) and before December 1, 2009.
  • You (and your spouse, if married) did not own any other main home during the 3 year period ending on the date of purchase.

The IRS defines "main home" as the one you live in most of the time.  It can be a house, hosueboat, housetrailer, cooperative apartment, condominium, or other type of residence.

You cannot claim the tax credit if:

  • Your modified adjusted gross income is $95,000 or more ($170,000 or more if married filed jointly).
  • Your home financing comes from tax-exempt mortgage revenue bonds.
  • You are a nonresident alien.
  • You aquired your home by gift or inheritance.
  • You acquired your home from a related person.

You must repay the tax credit if your home ceases to be your main home within the 36 month period beginning on the purchase date.  

HUD warns that homebuyers should beware of mortgage scams and carefullly compare benefits and costs when seeking out tax credit monetization services.

Don't forget, Mortgage Master is a direct endorsed HUD lender.  If you're buying a home in Washington State and are interested in an FHA loan, I'm happy to help you.

Filed Under: FHA, First Time Home Buyer, Residential Purchase

Mortgage Master now has Streamlined FHA 203(k) Loans!

May 13, 2009 by 1 Comment

May 2010 UPDATE:  Mortgage Master Service Corporation will no longer do "streamlined" refinances–however we WILL do full 203k rehab mortgages.

Streamlined FHA 203(k) mortgages are intended for "lighter" repairs or improvements to a home.  The rehab amount is limited to a maximum of $35,000 and the minimum repair cost is $5,000.   Here is an example of eligible improvements:

  • Repair or replacement of roofs, gutters and downspouts.
  • Repair or replacement of existing heating, ventilation and/or air conditioning system.
  • Repair or replacement of plumbing and electrical systems.
  • Repair or replacement of flooring.
  • Minor remodeling that does not involve structural repairs.
  • Exterior and interior painting.
  • Weatherization, including storm windows and doors, insulation, weather stripping, etc.
  • Purchase and installation of appliances.
  • Improvements for people with disabilities.
  • Lead-based paint stabilization.
  • Repair, replacement or addition of exterior decks, patios, porches.
  • Basement finishing and remodeling that does not involve structural repairs.
  • Basement waterproofing.
  • Replacement of windows and doors and exterior wall re-siding.

The loan amounts are based on current FHA loan limits.  In King, Pierce and  Snohomish counties, the current FHA loan limit is $567,500.  This program is available for purchase and refi's.

If you're interested in a FHA Streamlined 203(k) mortgage for your home located in Washington State, please contact me.

Filed Under: FHA

FHA Appraisals Tougher starting April 1st – No Foolin’

March 26, 2009 by Leave a Comment

HUD is adopting Fannie and Freddie's reporting requirements for declining markets.  Per Mortgagee Letter 2009-09, as of April 1, 2009 appraisals for all FHA insured mortgages must include the Market Conditions Addendum.   Be preparared for second appraisals and limits to cash-out refinances if your property is determined to be in a declining market.   From HUD's letter:

"a declining market is considered to be any neighborhood, market area, or region that demonstrates a decline in prices or deterioration in other market conditions as evidenced by an oversupply of existing inventory or extended marketing times."

In addition to providing three recent comparables (properties similar to home being appraised that have recently closed in the area); appraisers are required to:

  • At least two of the three recent sales (comparables/comps) must be within the last 90 days of the effective date of the appraisal.
  • Include a minimum of two active listings or pending sales.  The appraiser must insure the active listings and pending sales "have reasonable market exposure to avoid the use of over priced properties as comparables."
  • Include the original list price, any revised prices and total days on the market.
  • Adjust active listings to reflect list to sale price ratios for the market.
  • Adjust pending sales to reflect the contract purchase price whenever possible or adjust pending sales to reflect list to sales price ratios.
  • Include an absorption rate analysis to determine market trends.
  • Known or reported incentives or sales concessions must be noted for any comp that's used on the appraisal.

To read the entire Mortgagee Letter, click here. 

Filed Under: Appraisals, FHA

New FHA Limits on Cash-Out Refi’s

March 17, 2009 by Leave a Comment

If you're considering refinancing and you're interested in taking cash-out to pay off debts, make home improvements or to eliminate a second mortgage that you did not obtain when you purchased your home; you have more reason than ever to start now.

Effective on FHA case numbers issued on or after April 1, 2009; FHA will only insure cash-out refinances when the loan to value is 85% or lower than the appraised value.  Your appraised value is not based on what you feel your home is worth — it's based on what your neighbor's have sold their homes for in the past few months.

If you have owned your home for less than 12 months, FHA is limiting cash out refinances to which ever is lower: 85% of the appraised value or 85% of the original sales price. 

According to HUD's Mortgagee Letter 2009-08, this is currently a temporary requirement:

"Given the continued deterioration in the housing market, and FHA's need to limit its exposure to undue risk, this reduction to the maximum LTV for cash-out refinances is being instituted on a temporary basis while FHA further analyzes the housing and mortgage industry as well as its own portfolio to determine whether permanent measures should be taken."

Well, what are you waiting for?  You have two weeks as of today for FHA's expanded cash out guidelines of 95% loan-to-value with loan amounts up to $567,500 in King, Pierce and Snohomish counties.   If your home is located in the State of Washington, and you're interested in refinancing, you can apply on line (under Favorite Links).  By the way, I have been originating FHA mortgages for nine years and we have in-house FHA underwriters at Mortgage Master…as I mentioned, I can only help you if your home is in Washington.

Filed Under: Debt Restructuring, FHA, Refinance, Underwriting and Qualifying

Revised FHA Loan Limits for 2009

February 25, 2009 by Leave a Comment

King, Pierce and Snohmish Counties

1 Unit – $567,500

2 Unit – $726,500

3 Unit – $878,150

4 Unit – $1,091,350

San Juan County

1 Unit – $593,750

2 Unit – $760,100

3 Unit – $918,800

4 Unit – $1,141,850

Kitsap County

1 Unit – $475,000

2 Unit – $608,100

3 Unit – $733,050

4 Unit – $913,050

Clark and Skamania Counties

1 Unit – $418,750

2 Unit – $536,050

3 Unit – $648,000

4 Unit – $805,300

Jefferson County

1 Unit – $437,500

2 Unit – $560,050

3 Unit – $677,000

4 Unit – $841,350

Clallam County

1 Unit – $383,750

2 Unit – $491,250

3 Unit – $593,800

4 Unit – $738,000

Island County

1 Unit – $381,250

2 Unit – $488,050

3 Unit – $589,950

4 Unit – $733,150

Whatcom County

1 Unit – $375,000

2 Unit – $480,050

3 Unit – $580,300

4 Unit – $721,150

Skagit County

1 Unit – $373,750

2 Unit – $478,450

3 Unit – $578,350

4 Unit – $718,750

Thurston County

1 Unit – $361,250

2 Unit – $462,450

3 Unit – $559,000

4 Unit – $694,700

Mason County

1 Unit – $310,000

2 Unit – $396,850

3 Unit – $479,700

4 Unit – $596,150

Kittitas County

1 Unit – $328,750

2 Unit – $420,850

3 Unit – $508,700

4 Unit – $632,200

Benton, Franklin Counties

1 Unit – $275,000

2 Unit – $352,050

3 Unit – $425,550

4 Unit – $528,850

No FHA loan limit revisions to the following Washington State counties:

Chelan and Douglas Counties

1 Unit – $342,700

2 Unit – $438,700

3 Unit – $530,300

4 Unit – $659,050

Adams, Asotin, Columbia, Cowlitz, Ferry, Garfield, Grant, Grays Harbor, Klickitat, Lewis, Lincoln, Okanogan, Pacific, Pend Oreille, Spokane, Stevens, Wahkiakum, Whitman and Yakima Counties:

1 Unit – $271,050

2 Unit – $347,000

3 Unit – $419,425

4 Unit – $529,250

Filed Under: FHA

Got Stimulus?

February 19, 2009 by Leave a Comment

Earlier this week, President Obama signed H.R. 1, The American Recovery and Reinvestment Act of 2009, to the tune of $787,000,000,000. This is roughly the same as giving every American man, woman and child $2,500.  President Obama announced that we can see how the funds are being spent by visiting www.recovery.gov.

Here are a few items designed to help the housing markets:

Loan Limits to be Reversed 2008.  At the end of 2008, the conforming jumbo limits were replaced with conforming high balance.  In the Seattle area, this meant that the fine line between a jumbo and conforming mortgage went from $567,500 to $506,000 for a single family dwelling.  Watch for Fannie, Freddie and FHA to implement the higher loan limits soon through December 31, 2009.

2009 Tax Credit for First Time Homebuyers. A tax credit up to $8000 is available to first time home buyers (someone who has not owned a home in the past 36 months) who close on a home between January 1, 2009 – November 30, 2009.  Unlike the 2008 plan, this tax credit does not have to be paid back.

NOTE:  If you are a qualified first time home buyer who bought a home from April 9, 2008 – December 31, 2008; you're still under the original plan with the $7,500 credit which requires you to pay it back (interest free loan).  

More to follow….much more.

Filed Under: Fannie, Freddie and FHFA, FHA, Legislation

The FHA Streamlined Refinance

February 5, 2009 by 3 Comments

EDITORS NOTE August 23, 2009:  With any mortgage information that you find on the internet, whether it's from a blog or website, be mindful that guidelines are changing constantly in this current climate and information may not be totally up-to-date. 

September 29, 2009:  HUD has issued revisions to FHA Streamlined refi's which will be effective mid-November.

If your existing mortgage is FHA, you may qualify for a streamline refinance to take advantage of today's lower rates.  "Streamline" means that there is less documentation involved for the borrower which allows the transaction to close quicker than a typical refinance.  With a FHA streamline refi there is:

  • no income documentation or verification. UPDATE 8/23/2009:  Many lenders are now requiring proof of income/employment to show ability to make the mortgage payment.
  • no minimum credit score requirements. 620 minimum credit score required by most lenders. UPDATE 8/23/2009: Many lenders are now requiring a 660 minimum credit score. 
  • no verification or documentation of assets (like bank statements, retirement accounts, etc).
  • an appraisal may not be required.   When an appraisal is used for an FHA Streamline, the loan to value is limited to 97.75% (this is also true for refinancing a non-FHA loan to a FHA insured loan).  When an appraisal is not used, there is no "loan to value" ratio and closing costs may not be financed. (Updated).
  • upfront mortgage insurance is reduced to 1.5% of the base loan amount (instead of 1.75% for a non-streamline FHA refi) ). 2.25% (and proposed to be changed soon). 
  • cash back to the borrower is limited to $500. 

The following are some of the requirements for a home owner to qualify for a FHA refinance:

  • the existing mortgage that is being paid off must be an FHA insured mortgage.
  • the borrower may not have been late (30 days or more) on their mortgage payment in the past 12 months.
  • the new loan amount is subject to FHA loan limits.  Note: if you have an FHA mortgage that was acquired in 2008 where your geographical loan limit was higher than the current 2009 limit, you may still qualify for the streamline refi as long as your new loan amount does not exceed the original loan amount and the loan to value is 97.75% or less.

If a property has been converted to an investment property with a FHA insured underlying mortgage, it may also qualify for a FHA Streamline refi with no appraisal and only for the outstanding principal balance.

Last but no least, make sure that your Mortgage Originator works for a company who is HUD approved.  Some loan originators are not and may try to illegally broker your loan to a company that is.  I have been helping Washington State families with FHA financing since 2000 and Mortgage Master is a Direct Endorsed HUD approved lender with our own "in-house" FHA underwriters.  They've been helping home owners in the Pacific Northwest since 1976!

If you're interested in obtaining a FHA Streamline refinance for your home located in the State of Washington, please email me with the following information: 

  • Property address (estimated property taxes and home owners insurance is a plus).
  • Original FHA mortgage balance from when the mortgage was obtained.
  • Original amount of UFMIP (upfront mortgage insurance premium) and when you obtained the FHA insured loan.
  • Current FHA mortgage balance.
  • Estimated home value (appraisal may not be required).
Filed Under: FHA, Refinance Tagged With:

Question about the 2009 Lower FHA High Balance Loan Amounts

December 13, 2008 by Leave a Comment

Here's a question from a Mortgage Porter subscriber (not from King, Pierce or Snohomish counties, which is why the loan amounts are lower):

"My husband and I are presently in the process of buying a home. The closing is scheduled for Jan. 31st 2009. We have been approved for 302,500. We understand that the new FHA guidelines are changing to 271,050 as of Jan. 1st. 

We want to wait until the last minute to lock in our interest rate. Our mortgage banker wants us to lock in because "We may need to lock the rate to ensure that we have met all of the FHA requirements before year end, as the mortgage limits are changing on Jan 1.  The is only $271,050, so we must make sure that we are guaranteed the stimulus loan limit of $302,500."   Our loan commitment letter that we signed says we can lock in within 5 days of closing.

What do you think about this?"

HUD's guidelines state that the new FHA loan limits "are effective for those loans which have credit approval on or after January 1, 2009".  This sounds like you can continue to originate an FHA mortgage at the higher 2008 limits as long as the loan is fully credit approved by December 31, 2008.  However, it's just not that simple.  Various lenders will have their own guidelines to determine how long they'll accept the loans with the higher 2008 loan limits in order to stay compliant with HUDs guidelines and to have the ability to package or sell the mortgage.  The lower 2009 "high balance or FHA jumbo" loan limits has caused borrowers caught between the two loan amounts to be in an awkward position.

The cut-off time for accepting the 2008 loan limit may vary from lender to lender.  If your lender is telling you that you need to lock now and that it will guarantee the funding of your 2008 loan amount in 2009, I recommend you listen to her.    One lender we work with is requiring that all 2008 FHA loans over the 2009 limit be funded/closed and delivered to them by December 19, 2008.  Yet another lender will allow 2008 FHA Jumbo loan limits for credit approved loans locked by December 31, 2008 as long as they are purchased by February 13, 2009.  No lender or mortgage company wants to have a loan in their system that is above the loan limit. 

The loan commitment letter is probably a template that was not created considering that we might be dealing with lower loan limits in a new year.  Dealing with a higher loan limit is a much easier transition.

Filed Under: FHA
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