FHA loan advantages

THE POWER IS NOW MORTGAGE UPDATE Eric Lawrence Frazier MBA

Niki De Marco-Nevarez

President of The Power Is Now, Inc. NMLS 461807 | CAL BRE 01148434 The Power Is Now, Inc. NMLS 1435243 | CALBRE 1980407

RVP of Operations Mountain West Financial, Inc.

WHAT EVERYONE SHOULD KNOW ABOUT FHA Presented by Niki De Marco-Nevarez, RVP of Operations at Mountain West Financial, Inc.

Making Homeownership a Reality

INTRODUCTION • The Federal Housing Administration, commonly referred to as FHA, was setup in 1934 as a way to offer a method of lending that would allow more Americans into homes than ever before • Today we are going to talk about the flexible options that FHA allows borrowers of all sorts

OVERVIEW • FHA loans are for more than First Time Homebuyers • FHA loans allow for all different residential property types • You can qualify for more home using an FHA loan • Down payment assistance is available behind FHA • FHA loans can be refinanced with very little documentation

OVERVIEW • More immigrant Americans can get financing with FHA • There is shorter recovery time from major credit problems using FHA financing • With FHA you can use a non-occupant as a coborrower • With FHA you can renovate homes on both purchase and refinance transactions

MYTHS ASSOCIATED WITH FHA LOANS

MYTH FHA is just another branch of the government set on using taxpayer money

FACT • FHA is a government agency that operates entirely from its selfgenerated income and costs the taxpayers nothing. Proceeds from the program are used only to perpetuate the program and offer opportunities to homeowners

MYTH Mortgage insurance is just another way to charge a borrower to get a loan

MORTGAGE INSURANCE EXPLAINED • Mortgage insurance is for Lenders, not borrowers – When a lender follows the guidelines set out by FHA, and a borrower is not able to make the mortgage payments creating the need for a home to fall into foreclosure, FHA will pay a “claim” on the insurance to offset the lenders loss

MORTGAGE INSURANCE EXPLAINED • This is why it’s so important that every single guideline is strictly adhered to – It helps make more loan products available to more people – Allows lenders an insurance policy to support their ability to lend to borrowers that might otherwise be higher risk such as those with less savings, or higher debt in relation to their income

MYTH Only citizens or permanent residents can obtain financing

IMMIGRANT AMERICANS CAN GET FINANCING • If a borrower is legally in the country, has valid immigration documentation, and has a valid Social Security Number, they are an eligible borrower

IMMIGRANT AMERICANS CAN GET FINANCING • If the current immigration documents are due to expire, and a previous history in the country exists (2 years), a copy of the application for renewal must be in the file, and must be validated with the USCIS website • Immigrant borrowers are qualified the same as any other borrower

MYTH FHA is only used for buyers wanting to purchase their first home

FHA LOANS ARE FOR MORE THAN JUST FIRST TIME HOME BUYERS • With an FHA loan you can purchase a home or refinance your existing loan • Cashing-out is also an option if you owe less than 85% of the value of your home • You can even purchase another home as you transition away from the home you currently own

MYTH FHA loans are just for single family homes

FHA LOANS ALLOW FOR ALL DIFFERENT OWNEROCCUPIED PROPERTY TYPES • Single family homes (suburban tract homes) • Condominiums • Manufactured homes can be financed • Multiple units up to 4 units can be financed

MYTH Only people with good credit can get loans

SHORTER RECOVERY TIME FROM MAJOR CREDIT PROBLEMS • FHA loans have 3 years to wait after a Foreclosure – Conventional is 7 years

• FHA loans have a 3 year wait after a Short Sale – Conventional is 4 years

• FHA loans have a 2 year wait after a Bankruptcy – Conventional is 4 years

MYTH A buyer needs 5% to 20% of the purchase price saved to get into a home

YOU CAN QUALIFY FOR MORE HOUSE USING FHA • FHA will lend up to 96.5% of the home’s value for a purchase transaction • Being able to finance more allows for less time to save up • Credits from the seller can also be used to pay for closing costs • Gifts from family members, and non-profit organizations can be used to cover the down payment • Grants and Loans from government programs can be used to cover the down payment and closing costs

MYTH A buyer needs excellent credit and very low debt to buy a home

YOU CAN QUALIFY MORE EASILY USING FHA • FHA financing allows for borrowers with FICO scores as low as 550 (Lenders may have other restrictions) • FHA financing allows a borrower’s total payments to be a much higher percentage of their current total income

MYTH Only people who live in the home can go on the loan

CAN USE NON-OCCUPANT AS A CO-BORROWER • Family members that want to help out, can qualify along with the occupying borrower to help use their extra income to offset part of the expense – Their assets can also be used as down payment – They are equally responsible for the loan payments

MYTH Down payment assistance is always a 2nd mortgage with payments that I must also include in my budget

DOWN PAYMENT ASSISTANCE IS AVAILABLE BEHIND FHA • Down Payment Assistance programs are commonly 2nd mortgages but..

– Not all require payments that must also be included in a budget

• Down Payment assistance can also come from – Non Profit Grants – City and State Grants – Lender/Agency sponsored programs

MYTH I must fully requalify each and every time I apply for financing

FHA LOANS CAN BE REFINANCED WITHOUT MUCH DOCUMENTATION • Streamline refinances can be done without appraisals, with very limited credit qualification – Only the mortgage payments must be verified as made on time – At least 6 payments must have been made, and 210 days must have passed – No Income Verification is required

FHA LOANS CAN BE REFINANCED WITHOUT MUCH DOCUMENTATION • For a Streamlined Refinance, some restrictions apply…

– The same borrowers must be on the refinance as the original loan – The borrower must receive a total savings on the payment of at least 5%

MYTH The house has to be in perfect condition to obtain financing

CAN USE RENOVATION PROGRAMS FOR PURCHASE AND REFINANCE • FHA offers one of the most robust and extensive renovation programs offered in the industry, the 203K.

– Property qualified on after-improved value – Can finance repairs up to and including adding square footage – Can refinance and add in the cost of upgrades and appliances

SUMMARY • FHA offers more choices to more borrowers • There is an enormous amount of flexibility involved in the program parameters • If you are looking at an owner-occupied home, and you don’t have a lot of savings for down payment, FHA financing is a great way to go!

UNDERWRITING FAQ • • • • • • •

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