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USDA Loans: 5 Reasons You Will Love The USDA Loan Program

January 30, 2009 4 Comments

I am working with a client who is buying a house in Queen Creek and he asked me “why doesn’t everyone know about USDA loans?”

Good question.

Here are just a few of the reasons that USDA loans are quickly becoming a loan program that people love to use.

USDA Loans: A True 100% Home Loan

With the USDA loan program, no down payment is required and you are able to finance up to 102% of the property’s appraised value. With the elimination of the down payment assistance programs in late 2008, the USDA loan program is one of the only 100% loan programs available.

USDA Loans: No Up Front or Monthly Mortgage Insurance

With the USDA loan program, there is no up front or monthly mortgage insurance required. With the FHA loan program, you have both up front mortgage insurance premium and monthly mortgage insurance as well.

With no mortgage insurance required, the USDA loan program can save you hundreds (possibly even thousands) of dollars each year that mortgage insurance would cost with a different type of loan.

USDA Loans: No Credit Score Required

For the USDA loan program, officially, there is no credit score required… but unofficially, the minimum credit score that you will need to get approved by an investor is 620. This is relatively recent and may change back to the official answer — but for now, you need a 620 mid FICO score to qualify for the USDA loan program.

USDA Loans: No Loan Limit

The USDA loan program will allow you to finance “as much as you can afford”. There is no official loan limit with the USDA loan program, but the amount of money that you can borrow depends on your ability to repay the loan.

USDA Loans: Seller Concessions Are Allowed

With the USDA loan program, you can get the seller to pay as many of your closing costs as you can. There are no limits on “seller concessions” so negotiate the best deal that you can! Many loan programs limit the amount of seller concessions that you can have, but the USDA loan program doesn’t put a limit on them.

The USDA loan program is a great option for people who are looking to buy a house with little or no money down.  The only “bad” thing about the USDA loan program? The only thing that I can think of is that you will have to find a property that can qualify – and sometimes you may have to drive a ways to get there.

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Arizona Loan Modification: Ask These 5 Questions Before Hiring A Loan Modification Firm

January 30, 2009 2 Comments

I have spoken with quite a few people recently who have asked me the question “how do I know who to hire to help me get my loan modification done?”

If you are currently thinking of hiring an Arizona loan modification company or loan modification lawyer to help you with your loan modification, here are five simple questions designed to help you identify the “good” loan modification companies from the “bad” loan modification companies.

Arizona Loan Modification: How do you know if you can help me?

Before you say *anything* about your situation, ask this question. Most of the time, the person shopping for a loan modification will be so upset about their situation, they will look for someone to listen to them explain their situation first.

Resist the temptation.

Ask the loan modification company “how do you know if you can help me” first and let them do the talking. Let them explain how the identify how they know if they can help you or not, what they look for in order to know if they can help someone and what they have seen as far as results.

The more information that you can get from them up front, before you tell them about your situation, the more you will get a good idea if they really know what they are doing.

Arizona Loan Modification: Do you have three references of people who live in Arizona that you have helped get their loan modified?

Don’t miss this question and be sure to follow up and speak with their references first.

You will learn more from the three references they give you than you will from talking to anyone at the firm. You will learn what the process was like, how the company was to work with and what their overall impression of “was it worth it” was?

Arizona Loan Modification: Do you plan to use violations of law in my current loan as leverage up front or later on in the process?

In loan modification, there is an “easy way” to get it done and a “hard way”. The easy way is that the loan modification company starts talking with your lender and negotiates out a loan modification – just based on “what kind of monthly payment you can afford based on hardship”. Many times, the “easy” loan modifications are done in a matter of minutes and really don’t involve any kind of negotiation – because there is not a principal reduction involved – just a modification of payments.

For some situations, this type of loan modification is fine.

But for other situations – for example – for those people who are hundreds of thousands of dollars upside down in their home… “the hard way” may yield better results. “The hard way” involves the loan modification legal staff going through your documents that you signed when you got the loan and looking for violations of law. Many loans have these violations and “the hard way” involves using these violations as negotiation for a principal reduction or even a complete rescission – meaning your entire loan is rescinded and you will no longer even have a mortgage.

Arizona Loan Modification: How Much Do You Charge?

Note that this is not the first question to ask.

How much a company charges is an important consideration, but it is not the most important. The most important thing to consider is whether or not they can be successful at getting your loan modified and the question of “how much do you charge” tells you nothing about if they will be successful or not.

In general – expect a fee up front (generally ranging from zero to $3,000) and a fee if they are successful (generally 1-2% of your loan amount) and remember – if someone offers to do it for no money up front but doesn’t end up getting your loan modified, it is more expensive than if you paid $3,000 up front and a 2% of your loan amount as a success fee.

Arizona Loan Modification: Can you tell me what to expect in my situation when working with <insert your lender>?

Listening to the answer to this question will tell you something about their overall experience. If they say that they have never worked with your particular lender before… it is a sign that they probably don’t have a lot of experience yet.

If they tell you that they have a dedicated person to work with them at your lender – it is a sign that the “easy way” kind of modification will be easy – but “the hard way” is still going to be “the hard way” even if they have a dedicated person because it is going to involve attorneys fighting with other attorneys.

If you are currently looking into hiring a firm to help you get your Arizona loan modification done, by asking these 5 questions, you will be in a much better position to identify the “good” from the “bad”. And if you are in a situation where a loan modification is an option for you, you can’t afford not to invest the time to choose wisely.

Learn How To Do Your Own Loan Modification Without The Help of a Loan Modification Company

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Arizona FHA 95% Cash Out Rule Changes: Two Appraisals Now Required

January 29, 2009 1 Comment

If you are considering doing an FHA refinance and getting cash out, as of January 1, there are some new rules regarding FHA refinances where the borrower gets “cash out” and the loan-to-value ratio is greater than 85%.

These guideline changes apply to the FHA 95% cash out program and are effective for all FHA case numbers that are issued after January 1, 2009. If you are getting less than 85% of the value of your home, these guideline changes do not apply.

  • The property must have been owned by the borrower as his or her principal residence for at least 12 months preceding the date of the loan application.
  • If the property is encumbered by a mortgage, the borrower cannot have been more than 30 days late within the last 12 months and the borrower must be current on their mortgage payments.
  • The property must be either a 1or 2 unit property, 3 and 4 units are not eligible.
  • Second mortgages may remain in place, but must be in 2nd place behind the FHA insured first mortgage.
  • If another person is added to the loan in the refinance, the person must be an occupant of the property. You cant add someone who doesn’t live in the property to the loan in order to meet FHA’s credit underwriting guidelines for the mortgage.

Whenever you go up to 95% loan-to-value, you will now be required to get two appraisals done.

From Mortgagee Letter 2008-40:

In addition, FHA will now require a second appraisal for all cash-out refinances where the LTV, exclusive of the UFMIP, will exceed 85 percent of the appraiser’s estimate of value.  This second appraisal requirement applies regardless of the loan amount or the location of the property, i.e., whether the property is in a “declining area” or is not.  This second appraisal requirement for cash-out refinances is effective for all case number assignments on or after January 1, 2009 and is to adhere to the instructions set forth in ML 2008-09.  Please also note that cash-out refinances with LTVs exceeding 85 percent will be over-selected for post-endorsement technical reviews (PETR) to assure the quality of the underwriting.

Mortgagee Letter 2008-09 sets out the requirements for the 2nd appraisal. It must be done by an FHA approved appraiser engaged by the lender and the costs may be passed on to the borrower. If the second appraisal has an estimated value more than 5% below the first appraisal, the maximum mortgage must be determined based on the lower appraised value.

What this means in simple english is that if you want to get cash out of your home, it is going to be more difficult than it has been in the past.  Lenders are going to require two appraisals and lenders are going to be picking apart the appraisals more than ever. For people who are thinking of using the 95% cash out program, that means somewhere in the neighborhood of $700 in appraisal fees.

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Government Loan Programs: We Are Good.

January 28, 2009 Leave a Comment

Someone asked me today “what kind of loan programs are you good at?”

My answer?

Only a few.

No, really — only a few.

For some reason, for the entire time that I have been in the mortgage business I have only done a handful of different types of loans — and almost all of them are considered to be “Government loan programs”.

We are good at VA loans, FHA loans and FHA reverse mortgages.

Can we do other types of loans? Sure. We do them all the time. But what are we really good at?

Government loan programs.

After all… everyone has to be good at something.

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The FHA HECM Reverse Mortgage Program: What Is The HECM Reverse Mortgage Program?

January 27, 2009 Leave a Comment

HECM. Now there is a funny name for a mortgage program. Whoever names these things should come from a marketing background and be able to use 4 letters to spell something that doesn’t sound so… so… weird.

HECM stands for the FHA Home Equity Conversion Mortgage and this is the official title for the FHA reverse mortgage program. The FHA HECM program is becoming more popular as the baby boomer generation enters retirement and more people are needing to convert the equity in their homes into cash.

FHA HECM Program Highlights

The FHA HECM program is a federally-insured home loan that lets seniors convert a portion of their home’s equity into cash. The equity can be paid to directly to the borower any one of three ways:

  1. in one large lump sum
  2. in monthly term or lifetime payments
  3. in a line of credit held in an interest bearing account until the funds are needed

With an FHA HECM reverse mortgage, unlike a traditional home equity loan or second mortgage, NO REPAYMENT of the loan is necessary, as long as the senior lives in the home.

FHA HECM Requirements

  • Seniors must be Age 62 years or older
  • You must have equity in the home to qualify
  • You must occupy the home as your primary residence
  • You must attend an FHA HECM counseling session by an approved FHA HECM counselor
  • You must keep the home in good repair

    All money that a senior receives from the FHA HECM reverse mortgage program is tax-free – so it is a great source of tax-free retirement income. And with the way that the economy is today, I think more than just a few seniors could use more tax-free retirement income.

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    Arizona FHA Reverse Mortgage: Things To Know

    January 26, 2009 Leave a Comment

    The FHA reverse mortgage program has been gaining popularity with seniors all over the country and Arizona is no exception. More seniors that live in Arizona are looking into the FHA reverse mortgage program than ever before – whether they have recently had financial hardship or are just looking at a reverse mortgage as an estate planning tool.

    Arizona FHA Reverse Mortgage: What To Know

    Many seniors are looking for the basics of the FHA reverse mortgage program – stuff like how it works, how much it costs, do they have to pay it back, do they have to move, etc. Some of the highlights of the Arizona FHA reverse mortgage program include:

    • Make no mortgage payments as long as you live in the home
    • Get your money either in a line of credit, monthly installments or a lump sum
    • Interest rates for the program can be either fixed or variable
    • FHA reverse mortgage counseling can be done over the phone and costs $125 and is paid to the reverse mortgage counseling company
    • An Arizona FHA reverse mortgage appraisal is usually $350 and can be paid to the appraiser directly
    • All other fees and costs can be put into the reverse mortgage

    Arizona FHA Reverse Mortgage: The First Step

    If you are interested in learning if an Arizona FHA reverse mortgage is right for you, the first step is to be sure to speak with a loan officer who has experience in the FHA reverse mortgage program and can explain how FHA reverse mortgages work. An experienced loan officer can then point out what the other steps are in the FHA reverse mortgage process and help answer any questions that you have along the way.

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    Arizona Loan Modification: Refinance or Loan Modification?

    January 23, 2009 Leave a Comment

    Many times each day, I am asked the question of “does it make more sense to refinance my current loan or do a loan modification?

    My answer?

    “It depends.”

    If you are currently in a conventional loan and owe more than your house is worth, your refinance options don’t exist if you owe more than your house is worth.  You are pretty much stuck in the loan program that you are currently in and can’t take advantage of lower interest rates to get a lower payment.

    If you are in this situation, loan modification probably makes the most sense.

    When choosing a loan modification company to work with, realize that each loan modification company is different – even though they functionally all try to accomplish the same task – to “modify the terms of your loan” and hopefully leave you in a better position than what you started with.

    Each loan modification company has their own process. Each loan modification company charges different fees. Each loan modification company has different success rates. Each loan modification company will probably tell you that they are the “best in the business”.

    How do you pick one?

    Very carefully.

    If it were me, I would probably choose a loan modification with no up front fees and a success fee only if they are successful in modifying the terms of your loan. Do they exist? Yes.  But you have to know where to look!

    Learn How To Do Your Own Loan Modification Without The Help of a Loan Modification Company

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    Arizona FHA Refinance With No Appraisal Required

    January 23, 2009 3 Comments

    Is it possible to do an Arizona FHA refinance with no appraisal?

    Many people in Arizona want to take advantage of low interest rates, but currently owe more than their house is worth because property values have went down over the last couple of years. If you are currently in an FHA or VA loan, it may be possible for you to do an Arizona FHA refinance on your home – with no appraisal required.

    Which means that if you currently owe more than your house is worth, you can still take advantage of lower interest rates and refinance your current FHA or VA loan.

    The official program name is the FHA streamline refinance program and it is available to all FHA borrowers who have made their payments on time for the last 12 months.  The Arizona FHA refinance streamline program is designed to allow eligible borrowers to lower their interest rate without having to completely re-qualify for a new loan. There are no income or asset documentation requirements for the Arizona FHA refinance streamline program.

    When participating in the Arizona FHA refinance streamline program, in order for no appraisal to be required, you cannot exceed your old loan amount by more than 1.5% (the exact amount of Up Front Mortgage Insurance Premium that is required on your new loan) or an appraisal will be required. So to exactly answer the question of:

    “Is it possible to do an Arizona FHA refinance with no appraisal?”

    The answer is “Yes” – as long as your new total loan amount doesn’t exceed your old loan amount by more than 1.5%!

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    FHA Streamline Refinancing: Is A Local Arizona Loan Officer Better?

    January 21, 2009 2 Comments

    If you are reading this, the chances are high that you are investigating what the FHA streamline refinancing program is and whether or not it makes sense in your case. Even though the FHA streamline refinancing program is relatively easy to understand when compared to other FHA loan programs, chances are that you will learn even more about the program by speaking with a loan officer over the phone.

    Assuming that the loan officer knows what he or she is talking about! I am amazed at the number of people that I speak with that say “no one ever explained that to me before…” so I thought I would take a second to outline the “normal” choices that a consumer has when choosing a loan officer.

    First, let me begin by saying that there are great loan officers at almost every lender – just as there are not-so-great loan officers at every lender. In general, there are three different groups of lenders where loan officers work that can help you with the FHA streamline refinancing program.

    FHA Streamline Refinancing Lenders Groups

    1. Group #1 National Banks
    2. Group #2 Call-center based companies
    3. Group #3 Local Arizona loan officers

    In general, the FHA streamline refinancing lenders will all have similar interest rates and fees (they have to be competitive or they are no longer in business…) and the difference is how much of a local, personal touch you want to experience.

    If you don’t mind dealing with someone who is sitting 500 or 5,000 (India!) miles away working in a call center overseeing your loan, you may want to choose working with a call center based company.

    If you have a great relationship with the bank where you have your checking and savings account at – you may want to work with one of the large national banks.

    If you prefer to work with FHA Streamline refinancing experts who live and work in the community that you live… then you may want to opt to go with a local Arizona loan officer who is an expert in the FHA streamline refinancing programs.

    But… no matter what… you might want to hurry – before rates go back up!

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