ACHL Blog

Written by Richard Garcia, Mortgage Advisor

Written by Tony Robison, Mortgage Advisor

Did you know that FHA has changed its mortgage insurance costs?

For case numbers assigned on or after April 1, 2012, the upfront MIP will increase by 0.75% and the monthly MIP will increase by 0.1%.

Here are the specific changes:

For case numbers assigned on or after April 1, 2012:15-year loan terms with loan-to-value over 90% : 0.60 percent annual MIP (up from 0.50 percent)
15-year loan terms with loan-t0-value under 90% : 0.35 percent annual MIP (up from 0.25 percent)
30-year loan terms with loan-to-value over 95% : 1.25 percent annual MIP (up from 1.15 percent)
30-year loan terms with loan-to-value under 95% : 1.20 percent annual MIP (up from 1.10 percent)

Finally, for case numbers assigned on or after June 1, 2012, there will also be a Jumbo premium added to the monthly MIPs shown above. This is only for loan sizes of $625,000 and up.

Another change to FHA guidelines also occurred that could change how you look at your credit. Here is a portion of the article published in the San Diego Union.

NEW RULES ON DEBTS COULD BITE SEEKERS OF FHA LOANS

By Union-Tribune

Originally published April 8, 2012 at 12:01 a.m., updated April 6, 2012 at 3:23 p.m.

A little-noticed mortgage rule change that took effect April 1 could create hassles for significant numbers of homebuyers who plan to use low-down-payment FHA financing this spring.

The change affects anyone with one or more “collection” accounts buried away in national credit bureau files. These include medical, student loan, retail and other debts reported as unpaid — correctly or incorrectly — by creditors and subsequently sent to collection agencies.

In a reversal of its previous policy, the Federal Housing Administration says it will no longer approve applications where the borrowers have outstanding collections or disputed accounts with an aggregate of $1,000 or more of unpaid bills. Previously, the agency took a more lenient approach, allowing lenders to review borrowers’ overall credit situation and approve applications despite the presence of such accounts.

Under its new rule, when collection items total $1,000 or more, the accounts will need to be paid off over a period of several months or be paid in full at or before the closing. In cases where the collections or disputed debts are attributable to identity theft, credit-card theft or unauthorized use of the applicant’s credit — or when collection accounts total less than $1,000 and are at least two years old — the new rule may be waived.

If you can put a 5% down payment on a home it may be time to look at a Conventional loan program to compare.  Please give one of our knowledgable mortgage advisors a call to see what programs are available to best suit your mortgage needs.

Written by Constance "Cia" Knapp, Administration

Did you know that you can obtain mortgage financing for your college bound children, disabled adult children, or elderly parents without the expense associated with purchasing an investment property? It’s true! American Capital Home Loans has a program to help consumers purchase a home for loved ones with financial limitations. Without this program, these home purchases would be considered "investment properties" with higher interest rates and closing costs. With it, the transaction can be classified as a principle residence mortgage. In this way you reap the benefits of investing in another home, while sheltering loved ones who occupy the property as their primary residence.

For parents wanting to provide housing for a college bound child:

•The child must be enrolled in college.

•The property must be located in close proximity to the college.

•Property must be a reasonable distance from the parent’s home.

•Property cannot be rented and the child must occupy the property for a minimum of one year.

•Parents cannot own another second/vacation home in the same location as the student's home.

For parents wanting to provide housing for a physically handicapped or developmentally disabled adult child:

•Disabled adult child must have insufficient income to qualify for a mortgage.

•There are no distance requirements.

•Disabled adult child occupies the property as their primary residence.

Children seeking to assist their elderly parents:

•The elderly parent(s) must have insufficient income to qualify for a mortgage on their own

•There are no distance requirements.

•The elderly parents occupy the property as their primary residence.

For more information on this or any of our other highly competitive programs, please contact one of our friendly mortgage advisors at American Capital Home Loans.

Written by Paul Donovan, Mortgage Advisor

Did you know you can buy a home with nothing down and no mortgage insurance with a USDA Guaranteed Rural Housing Loan Program? Two requirements that distinguish USDA loans from FHA or VA loans are (1) location and (2) income limits.

The home must be located in a California designated rural area: http://www.rurdev.usda.gov/ca/pdf%20files%20and%20documents/grh%20calif%20eligible%20areas.pdf

Also, the income limits are 115% of the median income for your area: http://www.rurdev.usda.gov/HSF-Guar_Income_Limits.html

It is possible to finance some of the closing costs into the loan, provided the property appraises high enough. Otherwise, the closing costs can be a gift. Only primary residents (no rentals/ investments).

You do not need to be a first time homebuyer but you can’t currently own a home. Here’s a weird stipulation: no in-ground pools.

A common misconception is that USDA loans are farm land loans but eligible areas include parts of Valley Center, Ramona, Fallbrook, Bonsall, Temecula (Redhawk) and Menifee.

Of course, there are more nuances to the program and each property specifically. Feel free to call or email with questions about USDA loans.

If you've been passing up buying a home that requires cosmetic repairs for lack of funds to fix it up, FHA has a program for you.  Not to be confused with FHA's much more complicated 203(k) program, a Streamlined 203(k) loan eliminates much of the paperwork and simplifies the process to obtain rehab funds.

First-time home buyers should get all the help they can.  They are often turned off by fixers or overwhelmed and 8ill-prepared to deal with the work required to bring some homes up to today's standards.  A Streamlined 203(k) loan might be the answer.

How Does a Streamlined 203(k) Loan Work?

It used to be that you bought a home and then applied for a home equity loan to fix it up, resulting in two loans.  But many lenders won't make rehab loans anymore.

A Streamlined 203(k) loan is figured into the original loan balance, resulting in one loan.

It can be an adjustable-rate or fixed-rate mortgage.

The mortgage balance can exceed the purchase price of the property.

Borrowers are not required to hire professional consultants, licensed engineers or architects.

The appraiser or home inspector can put together a list of recommended repairs/improvements.

Special Conditions & Terms

• No minimum loan balance required.
• Borrowers must occupy the property.
• Work must commence within 30 days from closing.
• Property cannot be vacant for more than 30 days.
• Work must be completed within six months.
• Work must meet professional standards.

Eligible Repairs & Improvements

The Streamlined 203(k) loan allows for simple repairs that can be easily estimated and completed.  Many are considered light cosmetic repairs, but some will require hiring a licensed contractor if it falls out of the borrower's area of expertise.  Here is an approved list of repairs/improvements from HUD:

• Repair/Replacement of roofs, gutters and downspouts
• Repair/Replacement/Upgrade of existing HVAC systems
• Repair/Replacement/Upgrade of plumbing and electrical systems
• Repair/Replacement of flooring
• Minor remodeling, such as kitchen, which does not involve structural repairs
• Painting, both exterior and interior
• Weatherization, including storm windows and doors, insulation, weather stripping, etc.
• Purchase and installation of appliances including freestanding range, refrigerator, washer/dryer, dishwasher and microwave oven
• Accessibility improvements for persons with disabilities
• Lead-based paint stabilization or abatement of lead-based paint hazards
• Repair/Replace/Add exterior decks, patios, porches
• Basement finishing and remodeling, which does not involve structural repairs
• Basement waterproofing
• Window and door replacements and exterior wall re-siding
• Septic system and/or well repair or replacement

What are the minimum and maximum amounts for repair costs under this program?

Given the need for homeowners to make minor repairs without exhausting personal savings, and in consideration of the increasing cost of materials, the minimum repair costs of $5,000 has been eliminated and the ceiling is now raised to $35,000.  This revised maximum repair/rehabilitation amount recognizes the cost of making older homes more energy efficient.

What items remain ineligible for the Streamlined 203(k) program?

Properties that require the following work items are NOT eligible for financing under the Streamlined 203(k):

• Major rehabilitation or major remodeling, such as the relocation of a load bearing wall
• New construction (including room additions)
• Repairs of structural damage
• Repairs requiring detailed drawings or architectural exhibits
• Landscaping or similar site amenity improvements
• Any repair or improvement requiring a work schedule longer than six (6) months
• Rehabilitation activities that require more than two (2) payments per specialized contractor

Requirements to Perform the Work

• Borrowers can select among licensed contractors.
• The lender will review the contractor's experience, background and referrals.
• The lender will want a copy of the contractor's estimate and the agreement between the contractor and borrower.
• Borrowers can also arrange to do some or all of the work under a "self-help" arrangement.
• Do-it-yourself projects require providing the lender with documentation supporting the borrower's knowledge, experience and ability to perform the necessary work.

Disbursement of Payments

• Maximum of two payments to each contractor, including the borrower providing the borrower works under a "self-help" plan.
• No more than a 50% advance is allowed.
• Do-it-yourself allowances do not include labor, only materials costs are allowed
• Final payment is paid after submission of evidence of payment to subcontractors/suppliers or other possible lien claimants.

For more details about a Streamlined FHA 203(k) loan, please give one of our experienced mortgage advisors a call and decide if this type of loan is just right for you.

CONVENTIONAL                                                   (DETERMINED BY DATE OF APPLICATION)  *MUST RECEIVE AN AUS APPROVE/ELIGIBLE INCLUDING THOSE WITH EXTENUATING CIRCUMSTANCES.

FHA                                                                          (DETERMINED BY DATE OF CREDIT APPROVAL)

Derogatory Item	Waiting Periods
Foreclosure Deed in Lieu of Foreclosure	Foreclosure: Home was given back to the bank – No owner participation Deed in Lieu: Home returned to lender in exchange for canceling loan 3 years from date foreclosure completed and transferred back to bank Less than 2 years, but not less than 12 months from date foreclosure completed and transferred back to bank may be acceptable if the result of acceptable extenuating circumstances2
Short Sale	Short Sale: Home sold but sales price didn’t cover amount owed 3 years from date sale closed and transferred to new owner No waiting period if borrower had no late payments on any mortgages and consumer debts within the 12 month period preceding the short sale AND they are not taking advantage of declining market conditions
Bankruptcy Chapter 7	Debts are discharged through BK, client does not pay any debts owing 2 years from date of discharge with reestablished credit paid as agreed or no new credit obligations incurred Less than 2 years, but not less than 12 months from date of discharge may be acceptable if the bankruptcy was caused by acceptable extenuating circumstance2 and borrower has since exhibited a documented ability to manage financial affairs in a responsible manner
Bankruptcy Chapter 13	Debts are paid back on a monthly scheduled payment plan by client 1 year payout period under bankruptcy has elapsed and the borrower’s payment performance has been satisfactory and all required payments made on time

VA                                                                           (DETERMINED BY DATE OF CREDIT APPROVAL)

Derogatory Item	Waiting Periods
Foreclosure Deed in Lieu of Foreclosure	Foreclosure: Home was given back to the bank – No owner participation Deed in Lieu: Home returned to lender in exchange for canceling loan 2 years from date foreclosure completed and transferred back to bank 12-23 months from date foreclosure completed and transferred back to bank if credit reestablished and paid as agreed and was caused by of acceptable extenuating circumstances3
Short Sale	Short Sale: Home sold but sales price didn’t cover amount owed 2 years from date sale closed and transferred to new owner No waiting period if borrower had no late payments on any mortgages and consumer debts within the 12 month period preceding the short sale AND they are not taking advantage of declining market conditions
Bankruptcy Chapter 7	Debts are discharged through BK, client does not pay any debts owing 2 years from date of discharge 12-23 months from date of discharge if credit reestablished and paid as agreed and was caused by acceptable extenuating circumstance3
Bankruptcy Chapter 13	Debts are paid back on a monthly scheduled payment plan by client 1 year payout period under bankruptcy has elapsed and the borrower’s payment performance has been satisfactory and all required payments made on time

USDA                                            (DETERMINED BY DATE OF CREDIT APPROVAL)

Derogatory Item	Waiting Periods
Foreclosure Deed in Lieu of Foreclosure Short Sale	Foreclosure: Home was given back to the bank – No owner participation Deed in Lieu: Home returned to lender in exchange for canceling loan Short Sale: Home sold but sales price didn’t cover amount owed 3 years from date foreclosure completed and transferred back to bank Less than 3 years from date foreclosure completed and transferred back to bank may be considered with acceptable extenuating circumstances4
Bankruptcy Chapter 7	Debts are discharged through BK, client does not pay any debts owing 3 years from date of discharge Less than 3 years from date of discharge may be considered with acceptable extenuating circumstance4
Bankruptcy Chapter 13	Debts are paid back on a monthly scheduled payment plan by client 1 year from the date repayment was completed and bankruptcy discharged Less than 1 year from the date of discharge may be considered with acceptable extenuating circumstances4

Written by Constance Knapp, Administration

While a bankruptcy may remain on your credit report for ten years, it doesn’t mean you’ll have to wait that long to buy a home. It is possible to apply for and obtain a new mortgage in as little as two years from the discharge date (not to be confused with the petition filing date) of a bankruptcy. In other words, the existence of a bankruptcy on your credit report does not doom you to long-term credit rejection. It should, however, challenge you to reduce your debt obligations as much as possible, and to take steps to strengthen your credit worthiness. Here are a few of those steps:

Order copies of your credit reports (Experian, Equifax and Transunion) and check them for accuracy. Each of your discharged accounts should indicate a zero balance. Dispute any entries that report an amount owing. Remember, creditors who have been discharged in bankruptcy are not going to make correcting your credit report a priority, so you’ll need to take an active role in making this happen.

Obtain and wisely use a secured credit card. A secured card requires a cash collateral deposit that becomes the credit line for that account. For example, if you put $500 in the account, you can charge up to $500. Keep any credit card balances at or below 35% of your available limit, and make ALL payments on time.

Start a home-buying fund and save as much money as possible. This may be difficult, but it's well worth the effort. When buying a home after bankruptcy, you may face additional requirements for cash reserves; not to mention you’ll need sufficient funds to cover your down payment and closing costs.

Remember, everyone is different. Depending on the nature of a personal bankruptcy filing, and the type of new mortgage loan used, the vast majority of borrowers are able to purchase a home in two to four years. If you can document extenuating circumstances, the waiting period may be shorter. Likewise, you may shorten the waiting period by implementing these and other steps aimed at restoring your credit and proving your financial responsibility.

At American Capital Home Loans, our friendly and knowledgeable mortgage advisors are here to help you realize your home ownership goals and dreams. Don’t hesitate to contact our office if you’re considering a home purchase following a bankruptcy.

Written by Jim Auten, Mortgage Advisor

Actually, it does if you financed your property prior to March 2009. What this allows homeowners to do is refinance those loans up to 125% of the current value of their home without incurring mortgage insurance. Typically, on a conventional loan, if your loan to value ratio is greater than 80% you will have mortgage insurance added to your payment. This is a guarantee for the lender in case of a default by the homeowner.

These new programs by Fannie Mae (DU Refi Plus) and Freddie Mac (LP Refi) allow homeowners an opportunity to refinance to market rates. Before they would have only been able to refinance up to 95% loan to value but would have the added expense of the monthly mortgage insurance.

There are many restrictions that can come into play so be sure to contact one of our mortgage advisors to find out if your mortgage qualifies. Expected in March 2012 however, the government is planning to release revisions to these programs removing a lot of the barriers including the 125% limit. It will be interesting to see how many homeowner’s can be assisted by these revised programs.

Written by Steve Chizmadia, Mortgage Advisor

With all of the talk and advertisements about "flipping" homes on the radio, late night infomercial's and in the media, it is important to know that while flipping a home can be a profitable endeavor for the seller and buyer's can like the turn key aspects of appropriately flipped homes, there can be numerous obstacles in obtaining the financing on a "flipped" home.  The properties considered flips will vary from lender to lender, some require a seller to own a home for a year, some require 6 months, but most lenders that follow Fannie Mae and Freddie Mac guidelines consider a "flip" property one being owned for less than 90 days when placed into new contract to be resold. 

While financing is available on these transactions on all major loan types (Conventional/FHA/VA), some lenders may not allow it and some lenders may allow it with additional requirements based on the loan type and how long the home has been owned since being resold.

It was not until 2010 that you could even obtain FHA financing on property flips, and to this day FHA financing may have the most additional requirements on homes being resold in less than 90 days.  Every investor will look at these transactions differently and it is important to be prepared and knowledable about what may or may not be required when looking to obtain financing on one of these homes.  Will a second appraisal be required?, Will a home inspections be required?, Will invoices for upgrades on the home being resold to justify the increase from what was previously paid be required?  Is the seller a non-profit or the foreclosing lender?  These questions and many more are what the lender should be aware of and prepared for as the answer to all of them may lead to different circumstances that you as the buyer/seller may need to be prepared for. 

As a specialist in financing on "flipped" properties and with a vast amount of knowledge and experiance on what to do with each respective loan program to avoid delays in the financing, I would be happy to help and discuss this further with all of your tenative buyers looking at one of these home's or with you as the agent representing a client selling one of these homes. 

Written by Alyssa Davis, Mortgage Advisor

Going through a foreclosure can be a disheartening and painful process. For many, it can feel like the pride of homeownership may be a dream that’s lost. But thankfully, it’s not a permanent mark on one’s credit record and homeownership can be attained again – perhaps even sooner than some might think. A foreclosure will stay on a consumer’s credit report for seven years from the date of filing. However, the length of time a buyer will have to wait after a foreclosure is recorded depends largely on the new loan program they intend to use and the circumstances surrounding the foreclosure.

Government loan programs, such as FHA or VA, are the most forgiving when it comes to how soon a previously foreclosed upon borrower can obtain financing again. FHA guidelines dictate that a borrower is generally not eligible for financing within the first three years after foreclosure or deed-in-lieu of foreclosure. However, an exception to the three year requirement may be given by the lender when there are extenuating circumstances surrounding the foreclosure beyond the borrower’s control such as serious illness or death of a wage earner. FHA does not consider divorce or inability to sell a property due to job transfer/relocation an extenuating circumstance. The other important aspect of getting an exception to the three year requirement is that the borrower must have re-established good credit after the foreclosure.

Conventional financing has stricter time requirements. Foreclosures that occurred due to financial mismanagement require a full seven years to have elapsed, or three years with extenuating circumstances. But even if an exception has been granted, there are additional restrictions with regards to loan-to-value and occupancy types that will be allowed if less than seven years has passed.

Probably the most important aspect of getting back in a position to buy a home is to diligently protect one’s credit after a major derogatory incident such as foreclosure. Any minor negative credit item such as a collection or late payment is scrutinized more than if foreclosure or bankruptcy had not occurred. Remember, a lender will be looking for good credit to be re-established after a foreclosure. That means that the prospective borrower who hopes to get loan approval after foreclosure – especially if requesting an exception for extenuating circumstances – will need to have current credit accounts (e.g. auto loan or credit cards) with a clean payment history, with no collections, judgments, or other negative credit items.

If you’ve gone through a foreclosure and unsure about when or how you might qualify to buy a new home again, the best thing to do is start talking to a lender and putting a plan in place. Give American Capital Home Loans a call and speak to any of our seasoned Mortgage Advisors to help put you back on the path to homeownership!