Do Offers With FHA or VA Mortgages Cost Sellers Money?

I pre-approved a buyer with a VA home loan last summer and she’s been having a tough time getting an offer accepted.  Many Southern California sellers are banks or upside-down sellers who need bank approval for a short sale.  There is a strong bias against accepting offers with government financing among asset managers, lender loss mitigation departments, and even equity sellers because of the myths associated with “mandatory seller-paid costs”.

I’ve been encouraging buyer’s agents to ask the listing agent to call me before presenting the an offer with government financing so that we can discuss the financial implications of the loan to the seller.  In some cases, I attach a copy of How To Get An Offer Accepted With An FHA or VA Mortgage with the pre-approval letter so that we can debunk the most common myths associated with government financing:

• The low down payment requirement means less skin in the game
• The (misguided) perception that the seller must pay for some or all of the buyer’s closing costs
• The (false) belief that VA and FHA appraisers are (a) less generous in their valuations and (b) more restrictive in the remarks about property condition.

The key phrase a buyers’ agent can insert into the residential purchase offer that addresses the financial responsibility of the seller is:

Seller not responsible for any buyer closing costs, regardless of the selected loan program.  All agency-related “non-allowable” costs to be borne by lender.

This language addresses the non-allowable closing costs issue pretty well with sellers.  When they realize that their financial responsibility is nil, they are more open to the offer.

If you’re having problems getting an offer accepted, with government financing, use that phrase in your offer and ask your agent to highlight it with a bold marker.  That seems to be working here in Southern California.

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Surge in USDA Home Loans Means Borrowers Who Wait May Miss Out

USDA Rural Development home loans came out from the shadows in 2009. What was once a little-known loan program is now an emerging powerhouse for thousands of prospective homeowners with moderate incomes and solid credit.

And that’s all the more reason why consumers considering a USDA home loan should act sooner rather than later in 2010.

In all, the USDA provided nearly 128,000 direct and guaranteed loans last year, about double the total for 2008. A good chunk of that increase was covered by funds from the American Recovery and Reinvestment Act.

USDA loans are usually tougher to qualify for than other government loans, but qualified borrowers can purchase homes in areas that meet the agency’s definition of “rural” without a down payment. Homeowners also don’t have to pay for private mortgage insurance.

Increased demand for these flexible loans put significant strain on the USDA’s 800 field offices, which, in turn, has triggered delays in agency approvals and closings for buyers nationwide, according to Real Estate Economy Watch.

At the same time, there’s currently no extra stimulus funding in the works for 2010. Real Estate Economy Watch’s Steve Cook expects the USDA to burn through most of its loan funding by the end of the first quarter.

If you’ve been considering a USDA loan or looking at homes that might meet the agency’s rural requirements, now’s the time to contact your local USDA field office. Prospective buyers can also check with their local office to determine whether a property meets the program’s requirements.

While the program targets more rural and open areas, there are exceptions that allow qualified borrowers to purchase homes in cities with fewer than 25,000 residents.

Image: ***j9***

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What is a “streamline” mortgage?

Regardless of the industry there are certain buzzwords or words that seem like they are created simply to confuse the outsider. Near the bottom of the list for business goals should be confusing customers. Unfortunately it does happen and the one who stands the highest chance for damage is the most valuable of all; the customer.

Mortgage professionals throw around terms like an alphabet soup that would frighten even Vanna White. Words like ten oh three (1003) and respa (RESPA – Real Estate Settlement and Procedures Act) fall out of their mouths like jelly beans out of a pinata.

Making it even a little more confusing for you different agencies use the same term to apply to different meanings and vice versa. Streamline and streamlined for example.

The Federal Housing Administration (FHA) makes available a couple of different “streamline” loans. Freddie Mac (FHLMC) has their “streamlined” loan.  Essentially they are the same product and if you phone an FHA lender and ask for a “streamlined” loan they will neither laugh at you nor hang up on you.

For all practical purposes streamline loans, whether a streamline refinance or otherwise, indicate something less is required or they go faster than a standard loan. For the FHA streamline refinance a little less documentation is required and sometimes less evidence of value is required.

Streamline refinances from FHA are available in two distinct offerings. One version of the FHA streamlinerefinance does not require an appraisal to be performed and requires more documentation about the borrower while another version of the FHA streamline refinance does require an appraisal on the property but less documentation on the borrower. Lender rules may overlap or augment FHA insurance requirements.

Offered also from FHA is the FHA 203k streamline loan for properties being purchased or refinanced and the loan including rehab or upgrade costs. The FHA 203k streamline loan does require all of the normal borrower and property documentation but because the upgrade or rehab costs are limited to thirty-five thousand dollars the loan process itself is less complicated than for a full FHA 203k which allows a higher amount of rehab.

Veterans can take advantage of the Veterans Administration’s Interest Rate Reduction Loan (IRRL). Like most other streamline loan types the VA IRRL require less documentation and can, usually, be closed a little more quickly than other types of loans.

The best way to find out about the streamline loan which is best for your needs, if you and your property qualify for a streamline loan and any other particular questions to be answered about a streamline loan for you the best way to get answers is to contact a seasoned mortgage professional in your area.

* Alphabet soup image created at RedKid.Net

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Important Changes Coming to Goverment Loan Modification Program

If you haven’t already applied for a loan modification via the federal government’s Home Affordable Modification Program (HAMP), but plan on doing so, look out for the following changes announced today.

For all HAMP trial period plans with effective dates on or after June 1, loan servicers will only be able to evaluate borrowers for eligibility if they submit evidence of income beforehand.

In the past, borrowers were able to verbally state income to get the ball rolling with a trial loan modification, and later verify income in writing to obtain a permanent loan modification.

But of the more than 900,000 trial loan modifications initiated, only 100,000 have been moved to permanent status, partially because borrowers didn’t provide the necessary paperwork to verify the stated income figures.

Once these changes are implemented (potentially immediately at the discretion of individual loan servicers), borrowers will need to provide the following upfront “Initial Package” to qualify:

- Request for Modification and Affidavit (RMA) form
- IRS Form 4506-T or 4506-EZ and
- Evidence of Income

The RMA form provides the servicer with borrower/co-borrower financial information and cause of hardship.

The IRS 4506-T/4506T-EZ forms are requests for transcripts of tax returns in case borrowers decide to fudge the numbers.

Evidence of income documentation will vary based upon employment type.

Within 10 business days of receiving the initial package, the servicer must acknowledge in writing the borrower’s request for HAMP participation by sending confirmation it was received.

Within 30 calendar days, the servicer must review the documentation and determine if the package is either incomplete, eligible for a HAMP trial mod, or ineligible, whereby the borrower must be considered for alternative loss mitigation options.

*The changes outlined above apply to loans not owned or guaranteed by Fannie Mae or Freddie Mac.

The aim is to streamline the process and ensure more borrowers are eligible (and eventually granted permanent loan mods) before going through all the legwork only to find that borrowers misrepresented themselves.

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The FreeDownPayment.com Launches website to connect home buyers with Down Payment Assistance

TheFreeDownPayment.com (thefreedownpayment.com) officially launched a new website where area residents can locate down payment assistance programs in Maryland, DC, and Virginia.
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First time Home Buyer- Homes in Toronto West, Brampton, Etobicoke, Oakville

A4dablehomes provides Homes in Toronto West, Brampton, Mississauga, Etobicoke, Oakville for first time home buyer on affordable prices.
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Lennar Unveils New Community To Be Built On The Carriage Hills Golf Course In Eagan Minnesota

The Minnesota division of Lennar is proud to announce their intent to purchase nearly 114 acres of the property previously occupied by the Carriage Hills Golf Course in Eagan, Minnesota.
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