FHA Mortgage Expert - Tri-State Area - New Jersey/PA/Delaware

No matter what the general consenus has been that we are in a bad housing market, that buyers can be picky choosers, and houses have dropped in value..... if you need to sell, you sometimes need to be creative. You need to keep an open mind.

I am not here to knock realtors, but you need a real estate agent that is open-minded to all financing options and who is very knowledgable and creative.

I wrote a blog the other day, Nehemiah/AmeriDream Down Payment Assistance Programs (DPA's) - Are they that bad?, where some realtors came out openly and stated that some offers have been turned down because of the financing that was being provided by that buyer's lender. Don't you want to sell your home?  If it's legal and proven, why fight it?  Just because a realtor says that they are professional and great at their job, doesn't always mean that they will get the job done in a timely manner.

Has a realtor mentioned to you that you can offer seller assistance or a seller concession to help a buyer buy your home?  That this could move your house off the market much quicker. I have heard realtors advise their clients not to accept such an offer when it comes to down payment assistance programs.  Why?  They are legal.  They are approved by HUD and FHA. Or is because the realtor doesn't understand them that well, that they don't have a better understanding of how they work?  Or maybe they had a transaction that went bad because a buyer using one of these programs was later turned down. And that the lender blamed it on the program. Maybe the fault was really of that lender. I have been using the down payment assiatnce programs, preferably Nehemiah, since 1997. I have never had a problem with them. As a seller or a listing agent, we need to know the basics.

Are you leaving potential money on the table if you refuse a buyers offer, one who is using a down payment assisatance program, because of the advice of your realtor? I wouldn't consider that smart money. Not in today's market. Who cares if there are plenty of buyers in the market. If you get what you wanted or just because you need to sell, why take that chance.

I would say on an average, that many homes are sold for about 4 to 6 percent less than the original asking price. As long as it was priced accordingly. FHA loans allow the seller to pay for 6% of the buyers closing costs. Most other loan programs only allow for 3%, depending on the down payment. In many cases, you won't have closing costs that total 6%.  FHA's guidelines state that the buyer needs to have 3% of their own money which can also be the form of a gift.  They can get 100% of their gift monies from a realtive or a non-profit organization. The non-profit company offering one of these down payment assistance programs, such as Nehemiah or AmeriDream. This money from the non-profit can be used for the buyers down payment or closing costs.

So, how does this program work? It's very easy to comprehend. Let's say you have listed your home for $100,000 (to keep numbers simple). Let's say you would accept nothing less than $92,000 because you owe $75,000 and you need to pay the realtor and have some walking away money to buy your next home. The offer is made at $93,000, but they are asking for $7,000 in seller help.  That is 7% of the purchase price. This is where a down payment assistance program is most helpful, especially when it comes to FHA loans. You now sell the house for $100,000 and your buyer is now getting $7,000 to help the sale of your home.

Let's take this a step further. Let's say they need $9,000 instead and you can't really go below the $93,000 offer to give them more money back. They could buy the house from you for $102,000 and still get the $9,000 that they need. This only works if your house is truly worth $102,000 and an ethical and honest appraisal is done in accordance to the guidelines set forth for appraisers. In either scenario, both parties are happy.

Food for thought.....

• You can negotiate with your realtor to where they would only take commisson on the original offer, since that is what you could have sold it for. Makes sense, right?
• Yes, if you live in a state to where you have to pay a transfer tax, you will have to pay it on the amount sold. But we are talking about pennies here. Okay, dollars, but time on the market could cost you more than what you ended up paying.
  
• And if you want to understand more about these down payment assistance programs, please read : Creative FHA financing -- No money out of pocket from the buyer!!! -- Part 1
• If you hear people say that FHA mortgages are worse than convnetional loans, please read this for some claification :  FHA loans, why can they be better than conventional loans
• Lastly, FHA appraisals are no different than conventional appraisals. This use to be true over 5 years ago, but HUD changed this and made it simpler.  There are no FHA VC sheets anymore.
  

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For more information on FHA loans, please go to this link. The FHA Expert

For more information on how you can obtain your dream home, please click here : Mortgage Financing Options

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!!

Copyright © 2008 by Jeff Belonger

Nehemiah programs are just one form of a down payment assistance program. You can use these in conjunction with FHA loans. There are other down payment assistance programs such as AmeriDream, Genesis, and a few others.

Lately I have been reading a few blogs that state that these down payment assistance programs are like laundering money. Okay....  I'll talk about this in a few. Other blogs have talked about how bad the Nehemiah program in itself is bad. The reason why is because it's more expensive than other DPA programs. Okay?  I'll talk about this soon also.

So, what about those that say these DPA's are like money laundering. Well, HUD says that you, the borrower, can get 100% of your monies gifted to you. These gifts can come from a family member or a non-profit organization. Okay, sounds good. Believe it or not, the DPA companies are non-profit. So, why is it labeled as illegal? Someone's opinion? One argument that I have heard is that these non-profit companies are making money off of the borrower. A small measly $500?  Then Mr. Borrower, save the money to put down on the house. Me?  I think it's a great program if used correctly.

Which gets us to the second part, that the Nehemiah program is more expensive than AmeriDream, Genesis, and a few others. Okay?  What, an extra $100 to $200?  I have had much success with Nehemiah and I have learned in life...."don't fix it if it's not broken".  Right?  Or do you take that risk for a $200 savings. Sure, some of you have had some success with the other programs. I just won't risk it.

As it stands, the Down Payment Assistance programs have helped over 600,000 families since 1997. I will agree that some institutions have abused this type of program.  To continue this thought, please read this to find out why.  Nehemiah programs and what's behind the numbers (opens in a new window)

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For more information on FHA loans, please go to this link. The FHA Expert

For more information on how you can obtain your dream home, please click here : Mortgage Financing Options

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!!

Copyright © 2008 by Jeff Belonger

FHA loans have been the choice of mortgages as of lately in many parts of the country for numerous reasons. What I do hate hearing is that they have taken the spot of the subprime loans. This is not true by any part of the imagination. This statement is from those that are inexperienced in both the mortgage industry and the real estate industry.

The subprime loan for many years could go down to a 500 credit score, as long as you had more money down. But your rate was usually higher. The better your score, the less you needed to put down, the lower your rate. Sounds good, right?  Wrong, because the subprime rate was always higher than the FHA rates.

To compound this, so many thought just because you had a conventional loan, that you had the better loan. This was not always true when putting zero percent down or 3 percent down. In most cases, you were told this, because that particular lender was not FHA approved. Now?  Even with 10% down and credit scores less than 680, FHA loans in most cases, will be the best mortgage for you.

Okay, you could argue the fact that this is just my opinion. True, even though I have almost 16 years of experience as a loan officer in the mortgage industry. But numbers don't lie. Let me show you.....

The example below is based on a $300,000 purchase price with 10% down. One reason why conventional rates are a little higher in this scenario as in FHA rates is because Fannie Mae and Freddie Mac have added penalties per se. If you are putting down less than 30% and your credit score is less than 680, certain fee penalties would apply to you, which would increase your rate.  The FICO (credit score) that I am going to use is 659, which is above the average credit score and I will still show in this example that FHA loans are cheaper, even with 10% down.  

***And keep in mind, some lenders have penalties on FHA mortgages with credit scores under 620. It all comes down to the investor. We don't have penalties on any credit score above 580. And I can still do credit scores down to 500 with a manual underwrite. Many lenders can't go below 580.***

Disclaimer :  These rates are examples, but the spread shown in the example is real. To compare this scenario apples to apples, the fees would are the same and with zero points. The conventional rate also includes the penalty for the 659 credit score.

Some of you might be saying that you will be adding $4,275 onto your principal balance if you did the FHA mortgage because of the FHA one-time mortgage insurance premium. This is correct and I don't want to confuse you with more numbers and charts. But here is a quick breakdown. If you kept your house for 5 years, which most people sell in a 6 year period, you would have saved $5,420.50 in payments in 5 years. This is a difference of $1,145.50 that you have saved!!!   And one other thing that is very small, but still makes a difference. You will be subtracting a few more dollars per month from your principal because your interest is lower, which would offset the interest that you would write off on the 6.625% rate. Just something else to remember, but consult your tax consultant or CPA. 

FYI --  If you sold your house in less than 3 years, you are entitled to a refund of the upfront mortgage insurance premium (UFMIP) of $4,275.

How dto I find an FHA approved lender?    You want to make sure who you are dealing with is FHA approved.

Why do I say this?  Not all lenders are approved FHA and some may tell you that you don't qualify FHA because in reality, they aren't FHA approved. 

You can find a HUD approved lender in your area by going to the following HUD website: http://www.hud.gov/ll/code/llplcrit.html     DISCLOSURE (just be careful of the spelling of the lender. If I put in my company's full name, Infinity Home Mortgage Company, Inc, it tells me that there is no such company. If I put in Infinity Home Mortgage, it shows my company as being FHA approved. Just keep this in mind. You can always call HUD also. (202) 708-1112

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For more information on FHA loans, please go to this link. The FHA Expert

For more information on how you can obtain your dream home, please click here : Mortgage Financing Options

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!!

Copyright © 2008 by Jeff Belonger