If you are in the market for a Georgia USDA Rural Housing home purchase, then you will want to act fast.

Lenders just received this notice today:

This message is to notify you that program funding for the Single Family Housing Guaranteed Loan Program will likely be exhausted by the end of April, 2010.

Once funding is exhausted, the Agency will not issue Conditional Commitments “subject to receipt of appropriated funds.”  This is because it is not certain when additional funding will be available.

Limited funding may become available for disaster areas declared in 2008, or in disaster areas declared for Hurricanes Katrina and Rita.  Limited funding may also become available as prior Agency commitments are de-obligated, however, such funding will be very limited.

We apologize for any inconvenience this may cause you.

So, if you are in the market for a home that qualifies for rural housing, then now’s the time

A couple days ago a “Mortgagee Letter” finally came out from HUD clarifying how they would look at Atlanta FHA loan applications where a previous short sale was involved.

If the short sale was simply to take advantage of market conditions and get out of a house that was underwater, in order to purchase a similar or superior property at a reduced price, then the borrower is NOT eligible for an FHA insured loan. My understanding of the definition of that rule is that if the new property is within the same commuting distance as the previous property, then that is considered ineligible for FHA.

Therefore, the argument could be made that if there was a short sale, and then a transfer to the Atlanta market, then a new FHA loan could be made.

Yet that, only if the borrower was current on the mortgage for the previous 12 months prior to the short sale. If the borrower was in default at the time of the short sale, then HUD is viewing that the same as a foreclosure, and the borrower will need to wait 3 years from the date of the sale to qualify for FHA financing.

In summary, then, a short sale is fine to qualify for a new FHA loan so long as the borrower was current on the mortgage and all other installment debt for the previous 12 months, AND, they either relocate to another city or downsize in house.

Any other combination, and it looks like HUD will want any metro Atlanta buyers to wait 3 years to re-qualify for a new FHA loan.

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.

This is a fun, just a little extreme…but not too far off the mark, either.

I saw this post on Drudge this morning, one solitary post surrounded by a peppering of headlines about the World Bank running out of money and California being the first state to fail, etc.

All the other posts could be pointing to the catalysts for inflation coming our way, as I have written about here before.  Whether that comes to pass or not, only time will tell.  In the meantime, we are in one of the best buyers markets we have seen in a long, long time.

As noted in Ms. Beck’s article, especially big items - like cars and homes – are on sale right now.  We have not seen the likes of this in decades.

Just one example among many that I could list: Today I have a buyer closing on a town home that they are buying for $66,000.  It sold two years ago for $149,000, and is in move-in, very nice condition.  That’s a 56% discount.  Couple that with low FHA and conventional mortgage rates in Georgia, and if you have the means and income to buy, then the “Affordability Index” is the highest it’s been since that index began tracking, in 1970.

And I am seeing deals like that across every price point.  A 30-60% discount is one I would jump on, especially when you can finance the home with an Atlanta FHA loan.  Maybe you should, too?

We, as you know, are a direct lender.  We underwrite FHA and most other loans right in our office, and fund the new loans.  But, we do not “service” loans, or keep the loan and collect the monthly payments from each borrower.  We sell our loans to servicers.

Why is this important?  Because we have sold a lot of loans to the mortgage servicer, Taylor, Bean & Whitaker; especially our FHA loans.  TBW was the 3rd largest FHA mortgage servicer in the nation.  And, as you may have heard in the news, TBW closed their doors abruptly last Wednesday.  And, a lot of clients are wondering where they should be sending their monthly mortgage payment now.

HUD just came out with a fairly informative information page for loans that were serviced by TBW.  You can find it HERE.  The entire FHA portfolio has been transferred to Bank of America.

And, if I helped you in orginating your home loan, then feel free to call me and I will do what I can to help you sort out any questions that you have.

An FHA loan for a buyer around Atlanta, especially a first time home buyer, is one of the very best loans right now.  That’s because an FHA loan is one of the easiest to qualify for, covers all properties, and is not dependant on outside, third-party factors.

1. FHA loans for Atlanta area buyers are easy to qualify for:  With a minimum 620 credit score – at present – and no collections or significant late pays in the past year, the credit will be approved.  And, unlike conventional loans, there are no discount points for lower credit scores that are charged.  And, contrary to popular belief, the property qualifies pretty much the same as with a conventional appraisal.  Just enough verifiable income for the borrower needs to be there.
2. An FHA loan in metro Atlanta covers all properties:  Okay, at least all residential properties that are being purchased to be a Primary residence.  Properties in a “declining market” cannot be financed to the maximum Loan to Value (LTV).  FHA does not have the restriction.  And, Rural Housing loans are excellent, and offer 100% financing, but are only available to, well, rural homes.
3. Atlanta FHA loans are not dependant on outside, third-party restrictions: For example, if a borrower getting a conventional loan, as opposed to an FHA loan, puts less than 20% down payment, then they will need Private Mortgage Insurance (PMI).  The MI companies currently count metro Atlanta as a “declining market”, so even though conventional loans will lend up to 95% of the purchase price of the home, MI companies will only insure the loans up to 90% LTV.  So, that’s all we can lend.  Similarly, I can get an approval for a prospective home-owner with a 670 score – but MI companies will not issue PMI for any borrower with that low a credit score.

Source: Zillow.com

I just saw a short video that rang true with me.  It was not on YouTube, and I am no Tech Wizard, so the best I can do to share it with you is to link to it here.

The speaker asked the question, “What’s this housing crisis caused by?”

And the answers came, as many of us would list off – there are too many foreclosures, or housing prices are dropping too much, etc.

His answer was, “There was a liquidity crisis”.  If more homeowners were savers, and had some six months expenses saved in the bank, then with all the job losses that we have seen and other things hitting homeowners, many more of them would have had the staying power to keep paying their mortgages until the ship was righted.

And that struck a cord with me, because I have been councelling homeowners for years to follow the Four Step Priority of Cash Flow as they get into their home.  And that is very simple.

1. Have a Rainy Day fund: At least 3 months expenses in a very liquid form, 6 months if you are the only provider for the household.
2. Pay Off all non-preferred debt: meaning, anything that does not carry with it a tax deduction, including credit cards, car loans, student loans, etc.  Pretty much anything but the house for most folks.
3. Save significant reserves: Equal to or greater than one year’s income.  Invest this and do all the great things with it that  a financial planner would recommend, but have it.  Why?  Because good things happen; and because bad things happen.  If you have the cash, you will be ready to act of the good things and invest at the right time; and you will be ready to deal with the bad things life throws at you by making prudent decisions, without money dictating your decision for you.
4. Then, go ahead and pay off the house, and invite all your friends over to burn the mortgage note.

Housing starts, or the number of new residential properties that began construction, jumped 22.2% last month.  That is a big jump, especially in the midst of a housing crisis.  

So, could this spell the bottom of the housing crisis?  Well, it probably points to something close to a bottom.  However, the majority of the gain, 82.3% in fact, came in multi-family housing starts, not is single family construction.

It is still good, but indicates a rise in demand for rental properties as opposed to a rise in the demand for homes to purchase.  

So, good news comes where it will.  And we will take this bit of news as good for buyers around Atlanta and around the country, as the bottom of the housing market is in sight.