01 Jul 08 
FHA Purchase Loans: Don’t “Assume” You Know It All Till You Read This!
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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
03 Oct 07 The Real Solution is In the Supply
One-way to rebuild a healthy real estate market is to decrease the amount of homes available for sale. Our recent efforts have been geared towards increasing the demand to buy homes. It’s pretty obvious that several experts, and the media, aren’t going to stop highlighting every negative aspect in the real estate market, so it might be a little difficult to increase demand. It’s their job to report the news, but why can’t they report positive news as well? When you want to know about something don’t you turn to the news or a well known expert?
What if a program, or several programs, were developed that encouraged owning a rental property or keeping your home off the market? If there were a few programs, homeowners could choose which works best for their situation.
The government could give tax incentives to sellers that agreed to keep their property off the market for X-amount of years? This might entice investors or homeowners because their payoff, if they agreed to hold onto their investment, would be greater.
The government, or lenders, could offer an annuity type of loan to homeowners. The loan would slowly tack onto the principle of the home loan each month. Homeowners wouldn’t receive a large lump sum of money, but their mortgage payment would decrease by X-amount each month and would slowly increase over the years. The lender and borrower would determine how much of a loan was suitable based on the homeowner’s needs and the lenders ability. The lender could stop paying the annuity at anytime if a borrower failed to meet their payment obligations.
Lenders could offer locked or lower interest rates to homeowners that agree not to refinance or sell their homes for X-amount of years (same concept as a pre-payment penalty). They could set the homeowners up on steadily increasing payment plan giving them lower payments initially, similar to an ARM, but instead of giving these incentives to new customers, lenders will be trying to avoid costly foreclosures.
Hopefully, these programs would keep homes off the market and help regulate when homes are placed back on the market. Programs like these would interest some sellers because many of them can’t sell their homes right now; in many cases, if they do, they’ll take a loss. I think most sellers would love to hold if they could cover or minimize their negative monthly cash-flow and others will be happy with keeping more of their money from the eventual sale of their home(s). Not everyone would qualify or benefit from programs like these but it could be a nice way to decrease the supply of homes for sale and improve the health of the real estate market.
I am pretty sure that we’ll need to develop several solutions to fix some of the mistakes or oversights that helped fuel this “over” correction. I know real estate is cyclical, but feel that some decisions have lead to a rougher market. There are some possible downsides to this solution such as the probable increase in new home cancellations, possibility of homeowners defaulting on new agreements and difficulty in implementing these plans, but there definitely could be a viable solution found in focusing on our supply of homes for sale as opposed to trying to increase the demand. Many of our markets have great potential and with a little help, we could be back on track!
Just a thought…
Tags: homeowners, housing information, housing programs, interest rates, lenders, property, Real Estate, refinance, rental property, sell a home
