25 Sep 08 
Buy and Bail and FHA’s Response
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So wouldn’t you know FHA found that the original rule for Buy and Bail was a little too steep and left many homeowners stuck in their home with no other course of action than to sell or head towards foreclosure.
If you are not quite sure what Buy and Bail means see my other articles on Buy and Bail Rules and Buy and Bail Part I and Part II
Now on to the new adjustments and how to work with this new rule to get what you want out of your Real Estate transaction.
- To be eligible to purchase a home using a FHA loan you would need to be relocating for a new job.
- The new home must reside outside a reasonable distance from your current residence and this is based upon underwriter’s discretion.
- Must have a full 1-year lease agreement from the closing date forward.
- You will need to show evidence of rental/lease by showing security deposit as cashed and/or first months rent.
- The adjusted equity position in your existing home is now 75% up from 70% but the appraisal can only be 6-months old or less. Now there is a small wrinkle in there that states you can show you put a 25% down payment based upon original purchase price but they may still require an appraisal to support the purchase price. Again the underwriter’s discretion.
Now the above rules are a good start but be prepared to have your potential rental income put under a microscope. FHA is extremely concerned about inflated rental agreements and has put in extra measures on the underwriting side of things to prevent fraud in this area.
Good news is that this amount of income that can be applied to your loan application for potential rents may be increased 15% in some cases and that will really help in qualifying for your new home.
Just in case you missed it, there are a couple ways to play the game:
- Add a non-occupying Co-borrower to you loan, must be a relative, to help you qualify.
- Make enough to cover both mortgage payments, current home and the new one.
- Short sale your home and buy before the negative reports on your credit report.
As always use a true Real Estate or Mortgage Professional because what you don’t know will hurt you in the end NOT the Realtor or Loan Officer.
Brent Lane
The Lane Group
Tags: buy and bail, closing date, co-borrower, existing home, fha, fha loan, home loan, Homes for Sale, lease agreement, loan eligibility, loan officer, loan qualifications, mortgage info, mortgage professional, Real Estate, rental agreements, rental income
01 Jul 08 FHA Purchase Loans: Don’t “Assume” You Know It All Till You Read This!
Guess who’s back, back again? (name that artist)
It’s FHA and they are here to stay! (Hey that rhymed)
It is funny how cyclical things really are and in the mortgage world we are no different. Lending practices have now repeated themselves with decreasing home prices and FHA loans becoming the save all loan that every mortgage company is making it’s new darling.
FHA loans have accounted for more that 60% of the loans I have closed over the past 9 months and in my office it’s 75% or more. So it is no secret that FHA is the loan to choose for a variety of reasons:
- Fist Time Home Buyers can achieve a 100% purchase.
- You don’t have to have perfect credit to qualify.
- Gift money from relatives is encouraged.
- Refinance your upside down mortgage. (Short-Refi)
- Cash the equity out of your home up to 95% of the value.
- A buyer can qualify with a non-occupant co-borrower. (allows co-signers)
- New higher loan amounts for higher priced areas. (FHA LOAN LIMITS)
- The loan is assumable when the buyer goes to sell their home. (Hang on here!!!)
ASSUMABLE….. Wait a minute here you mean to tell me that if I sold my home the new buyer is going to take over my payments? Well that is partially right!
Here is how Assumable FHA Loans work……
Say you buy a property today for $100,000 and you get a new loan at an interest rate of 6.5% on a 30 year fixed term. You plug along and 5 years later you want to sell your home that is now worth $150,000 and the new buyer is trying to qualify can only get a 9% interest rate for their new loan.
You can offer the buyer the opportunity to “assume” your loan and take over your payments.
Putting it all together, the balance of your loan could be around $85,000 or so after you made the payments for 5 years and the new buyer would have to come up with the difference or $85K (minus) $150K (equals) $65K difference.
The benefits to the buyer are two fold, they get an interest rate that is much lower than the current interest rate they could get from a bank AND they have an accelerated pay off schedule because there is only 25 years remaining on the note!
Now this isn’t such a big deal when it really comes down to it because most people won’t fully understand the benefits until you try to sell your home. The hard part will be remembering that you can allow the new buyer to assume your loan.
I will leave you with this, when it comes to loans the FHA mortgage is one of the most expensive when it comes to closing costs. (I hear you, the costs can be financed but that doesn’t mean it isn’t expensive) To counter that cost in your mind it might help you to remember that your FHA mortgage is assumable so when you go to sell your property you will have a competitive edge over your competition allowing you to sell your home at top dollar in a timely fashion.
Get my Free Report :
“The FHA Loan Secret to getting up to $10K for Home Improvements when you Purchase Your New Home.”
Email me for your free report at Brent@brentlane.net
Brent Lane
The Lane Group
http://thelanegroup.blogspot.com
Tags: co-borrower, co-signer, fha loan limits, fha loans, first time home buyers, gift money, home equity, loan payments, mortgage loans, perfect credit, refinance, sell a home
