My industry colleague, Dustin Hughes, made this video for first time home buyers for his market, Portland.  It is applicable here in Atlanta, so I hope you enjoy it.

Now, if you are an Atlanta first time home buyer, call me for Atlanta’s best FHA loan – or any other loan that may work well for your circumstance. The important thing is – to not be a dave . Call me, let’s explore options.

As of this writing, there are 2,244 HUD owned properties for sale in Georgia.  And, they are generally all affordable.

A HUD home for sale in Gwinnett County

But you know the great thing about considering buying a HUD home?  If you finance the property with a new FHA loan, then a buyer only needs $100 down payment.  Right.  Just a Benjamin!  Of course, there are closing costs as well.  When making an offer to buy a HUD home, one can always ask HUD to pay some portion of the closing costs, but plan on needing a bit more than just a hundred bucks to get into the home.

The other great thing about HUD homes is that, although some need some repairs to the home, often times HUD will pay for the necessary repairs as well.

They have each of their properties inspected, and if the inspector notes needed repairs, he will also note an estimated dollar amount to complete the repairs.  And that is the amount that HUD will generally escrow for the repairs, so that you, the buyer, move into a very well-kept home by the time you close and are ready to move.

Certainly Georgia USDA Rural Housing loans are also good loans, which require no down payment.  The reason to consider a HUD home with an FHA loan around metro Atlanta is that USDA requires that the property be in a rural area to qualify, as well as limiting the income of the buyer with ceilings.  So, some properties would not qualify for a USDA loan, and some buyers would not either.

Those limitations do not exist with an FHA loan to purchase a HUD home.  So, if you are in the market and want to consider a HUD home, let me know and I will be happy to direct you to a real estate agent who is well-versed in the negotiating and buying process surrounding HUD homes.

This is a post first put here.  I thought it so important for you to know that I have reposted it.

Reports that FHA may be the next ’sub-prime’ implosion have been swirling for some time now.  The reason is that an FHA loan is simply a mortgage that is insured by HUD against default, to protect the lender, and the reserve insurance funds are dwindling.  And if HUD were to run out of money to insure these loans, then FHA lending would die.

That scenario is unlikely to happen, which was attested to by HUD Secretary Shaun Donovan yesterday before the House Committee on Financial Services.  However, what it does mean is changes, and possibly BIG changes are in the works for FHA lenders.

Nothing has been decided yet, but HUD has floated out there several changes that are likely to be implemented in the coming few months.  An overview of the changes that affect Georgia FHA loans the most are:

• Increased minimum FICO scores for home buyers:  Currently, HUD does not mandate a minimum credit score to qualify for FHA financing.  However, nearly all lenders have instituted their own minimums, ranging from 620 to 660.  HUD has not indicated what the minimum will be; but my guess is to look for it to be in the 620-640 range.
• Seller concessions will be lowered: Currently the sellers can contribute up to 6% of the sales price to pay closing costs, pre-paids and any points to buy down the interest rate.  That will likely be lowered to 3% maximum.  Now, 3% covers the closing costs and pre-paids in the vast majority of circumstances – but this will stop sellers from ’sweetening’ the deal by offering to pay for a permanently lowered interest rate by offering to pay points to buy the rate down – a practice that has been catching on somewhat, and is very attractive to a potential buyer.
• Cash required from the buyer will increase:  This one is unclear at present what form it will take.  Currently an FHA buyer needs to bring a down payment of  at least 3.5% of the purchase price.  There has been talk of raising the minimum required down payment to 5%.  However, it is not clear if this will be the outcome or not.  What is clear, is HUD wants its FHA buyers to have more “skin in the game”.
• MIP Premiums to increase:  Conventional loans with lower down payments are insured by private companies with the PMI payment.  Similarly, FHA loans have an Up Front Mortgage Insurance Premium, which is what replenishes HUD’s insurance pool so that they can insure against default, and of course the monthly MIP payment.  Currently on an FHA purchase HUD collects 1.75% of the loan amount as the Up Front MIP, and .55% of the loan amount annually, as part of the monthly mortgage payment.  Not sure how much, but it looks likely that the Up Front MIP amount will increase.  And from my reading of the Secretary’s comments, the monthly premium amount may remain the same.

Changes are coming fast and furious.  So, on top of all the other reasons you have to buy a home financed with an FHA mortgage now, i.e. historically low mortgage rates, a tax credit for most buyers and historically low housing prices, now you have yet another reason to act now and buy.  FHA financing will become more costly and more difficult to qualify for in the near future.

Well, almost.  They are still around, but much harder to get and you will leave a lot more equity in your home than in years past.

Home equity lines of credit (HELOCs) were the easiest and most common ways to tap into the equity in your home; and going to 90-100% of the home’s value was not uncommon.  Now, it’s unheard of.  Most banks will still offer a home equity line of credit, but only to 75% of your home’s value.  The reason: as home values fall, the HELOC is in second position to the first mortgage, so in case of default, the second mortgage holder gets little or nothing of their principle back.  And banks don’t like to lose.

Take a look at this chart, showing the falling equity in our homes, then let’s talk about the options for a cash out refinance.

But if you are looking to do a cash out refinance of your home, the best options are

1. A conventional loan – and you can borrow up to 80% of the value of the home.  Why not higher?  Well, because over 80% LTV you would need Mortgage Insurance, or PMI.  And no MI companies will insure a cash out refinance.  So you’re capped at 80%.
2. An FHA Loan – Which is probably your best option.  You can do a cash out refinance up to 85% of the value of your home.  And in Atlanta, that means a max loan of $346,250.  And at 85% LTV, that would put your home value at about $407K.

With so much talk in the news about the ‘credit crisis’ and the mortgage meltdown, I understandably am asked frequently, “How can anyone qualify for a loan nowadays?” And, most folks asking would like to buy a home, but just figure that they cannot qualify.

So, let’s look at what it takes to qualify for a home today. It’s not as daunting as you would think. Oh, and in this case I am going to focus on FHA loans. Much of the same applies to other mortgage types, with some differences.  You will need:

• A minimum 620 credit score.  That is your middle credit score, ignoring both the high and the low scores. Hint:  If you don’t have a 620 currently, raising a credit score is often very quick and painless.
• No unpaid Judgments.  Generally, those need to be paid.
• A relatively clean credit history for the past 12 months.  Few or no late payments, and no collections.  The most common exception to that rule involves medical collections.
• Chapter 7 bankruptcies must be discharged for 2 years, with some very difficult to qualify for exceptions.
• Chapter 13 bankruptcies must have been paid on for at least 1 year, and you will need court approval to buy a home.
• And, three years past a foreclosure.

Getting approved for an FHA loan around Atlanta is easy, for now. Buy your home now, and you get 8,000 free smacks from the Government. And, Atlanta real estate is on sale.
Now is a great time to buy. But FHA lending guidelines could get much tighter in a hurry. Here’s why:

1. A bill has been introduced in Congress that would increase the minimum down payment for an FHA loan from 3.5% to 5%. And a precedent has been set for making FHA lending more restrictive.  Last year Congress raised the required down payment from 3% to 3.5%. Just think what that proposed increase would mean to you. That $200,000 home in Suwanee would increase your down payment from $7,000 to $10,000. Can you scrape together an extra three grand?
2. Another reason to act quickly and buy your Atlanta area home with an FHA mortgage is a little more difficult to pinpoint. You see, a LOT of news is filling media outlets about the losses – or threat of losses, that the FHA program and HUD are likely to face. So, Congress reacts with regulation and tightening.  For example, this article appeared today on Bloomberg, saying FHA potentially will need a $54 billion bailout withing 24 to 36 months. Changes are afoot. Act decisively and secure the best FHA home loan for your Atlanta home.
3. And, the news that you as a reader of this blog know already – the $8000 tax credit for first time home buyers will expire on November 30. There is talk of extending the tax credit beyondNov. 30, but thus far that is only talk. And with the political tide turning against bailouts and subsidies and spending, it may not be extended.

Three reasons to move quickly, if you are considering becoming an Atlanta first time home buyer.

I gave a first time home buyer seminar in Gwinnett County last week, and one of the stats that got the most attention was the fact that home affordability is at all-time highs – making right now the optimal time to buy a home anywhere around metro Atlanta, but primarily optimal for first time home buyers.  Click the link for the first time home buyer affordability index from the National Association of Realtors.

How do we measure housing affordability?  Simple.  Three benchmarks that measure against one another:

1. The median home price for the area.
2. The median income for the area. (not the average income. Median income is 50% are above that, and 50% are below)
3. Mortgage interest rates to purchase that home and finance it.

A lot of people used to use their homes as ATM machines, cashing out every so often to consolidate the debt that they used to finance their lifestyles – which demanded more money than their incomes provided. 

Those days, thankfully, are over.  Yet, I am meeting a lot of people around Atlanta who, for whatever reason, have credit card and other debt that is holding them back from getting ahead.  They want to move forward and start saving, but the minimum payments due are not allowing them.  So, they look to consolidate that consumer debt into a new, low interest mortgage to help the household cash-flow.

Deadline: March 31

Conforming loans have been more and more difficult to do high Loan-to-Value debt consolidation loans.  First, because the days of adding a Home Equity Line of Credit (HELOC) were over.  Then, because Fannie Mae and Freddie Mac cut back debt consolidation mortgage loans to 85% of the appraised value of the property.  Then, because Mortgage Insurance Companies (read: PMI) refused to insure those loans in markets they considered “declining markets”.

So, for the average homeowner around Atlanta, the only option for a debt consolidation refinance was and FHA Mortgage Loan.  FHA would go to 95% of the appraised value of the home in a cash-out refinance.  But even FHA got tougher.  If you were to exceed 85% of your property’s value, then you would now need two appraisals.

And now, things are getting even more difficult.  For mortgage applications taken on or after April 1, 2009, the max cash-out refinance for even FHA mortgages will be limited to 85% of the home’s value – and then only if you have owned the home for 12+ months.

So, if you have been considering a cash-out refinance, and you will need a high loan-to-value, act this week to make sure that we can do it for you.  Call me if you have been considering an FHA debt consolidation refinance, and your home is in Georgia.

In the midst of a continuing tightening of loan standards, we received some bit of good news, on FHA mortgage loan limits for metro Atlanta.

As you may or may not know, the max. loan limit for FHA loans in metro Atlanta was lowered from $346,250 to $320,850 beginning January 1, 2009.  Well, not HUD has reversed that decision, and the maximum loan limit for FHA loans in metro Atlanta has returned to $346,250.

A Real Life Example

That is good news for home buyers, and a brief story will tell you why.  Anectdotally, I have a friend who works for a large, national lender who called me back in December, the day before Christmas Eve.  He was frustrated, saying he had a borrower using FHA financing who needed the max loan amount of $346,250.  But, his national company had implemented the new lower loan limit immediately, just to preempt the national deadline of lowering the limit of Jan.1.

So, he had a borrower approved, but could not close the loan.  A desperate situation for he and for the borrower, who potentially would not be able to get into the home.  So, he asked me if I would take the deal, structure and close it at the higher loan amount.  But, we would have to close it before the end of the year!

Long story with a lot of work on my part, but more impressively on the part of the staff here – we took the deal.  I met the borrower and he re-signed out docs on Christmas Eve, then left town, while we did the work to approve the loan (my friend had, of course, paved the way nicely on the steps needed for approval).  We closed the loan on December 29, and saved the home for that borrower.

And now the higher FHA loan limits are back for metro Atlanta.  Now, will Down Payment Assistance come back?

(Hint:  Don’t count on it)

A lot of talk has swirled around the $15K tax credit for all home buyers in 2009 that was proposed as part of the stimulus package.  

Then, reports were that the credit was paired back to $7500, but still all home buyers would receive the tax credit.  And, in committee, that morphed to an $8000 tax credit for first time home buyers only (i.e. anyone who has not owned a home in the past 3 years), who buy in 2009.

Still great for all the first time home buyers around metro Atlanta, where there are some excellent deals to be had.  But, just not what most real estate professionals were hoping for to jump-start the housing market.

But think of it this way:  if a buyer comes into the market, and has not filed their 2008 taxes as yet, then here’s what that buyer could do.  Find that perfect home in, say, Cobb county, with a purchase price of $228,500.  Come up with the necessary down payment of 3.5% to go with the very attractive FHA financing.  3.5% down payment on a home priced at $228,500 is, you guessed it, $8000.

Then, file their taxes and receive the tax credit of $8000, and the government will have subsidized their down payment for the home.  Not a bad deal at all, especially considering that homes are prices so attractively compared to just 2 years ago.