Orange County FHA, VA & First Time Buyer Loan Information

What Orange County, CA FHA and VA Home Buyers Need to Know about the Tax Impound Account

Tim Storm, Orange County FHA and VA Expert (Trust One Mortgage Corp) — Mon, 16 Aug 2010 02:04:47 -0400

Home buyers in Orange County, CA need to know how a property taxes and insurance impound account works on an FHA loan. An impound account for property taxes and home owners insurance is required on FHA and VA loans. An impound account, also known as an “escrow account”, is essentially a forced savings account held by the lender on the FHA or VA borrowers behalf.

The Amount Collected for Property Taxes Depends on the Month the FHA Loan Closes

Property taxes in California are paid twice a year, in 2 six month installments. The first half taxes are due on February 1 of each year and cover July 1 through December 31. Second half taxes are due February 1 and cover January 1 through June 30. The amount collected at closing to set up the new impound account is dependent on the First Payment date shown on the loan documents. For example, a loan closing in the month of August, lets say August 30, would have a First Payment date of October 1. According to the chart shown below, loans with a First Payment on October 1 should have 8 months taxes deposited into the impound account.

Since the purpose of the impound account is to make sure property taxes are paid in a timely manner, the lender needs to make sure there is enough money in the account when taxes are due. If we assume a loan closes on August 30 and will have an October 1 first payment, then the lender needs to make sure there is enough money in the account only 30 days after the first payment to cover the first half tax installment, due November 1. But the lender will also need to make sure enough funds will be in the account three months later to cover the second half installment. Impound accounts are regulated by law and lenders are allowed to have up to a two month “cushion” to help prevent a shortage of funds in the account.

This all sounds confusing, but is necessary in order to keep the borrower from getting a surprise when property taxes are due. (The surprise may still come in the way of “supplemental property taxes” in the first year after a purchase.)

Home Owners Insurance is also deposited to the impound account. At closing a one year premium is paid, but the equivalent of two months property taxes is also deposited into the impound account. This ensures there will, or should, be enough money in the account 1 year later to renew the insurance.

Orange County FHA Buyers Need to Budget for the Impound Account

Orange County home buyers using FHA or VA financing need to budget for the funds required for the impound account. Both FHA and VA guidelines allow for the seller to pay for the set up of the impound account, which can be the best solution for Orange County home buyers who have saved for the down payment but not closing costs.

It is important to contact an Orange County FHA or VA lender who can prepare customized loan scenarios which will show estimates for not only the amount of funds required to buy a home, but also will give a full breakdown of the purchase price, loan amount, and payment.

Authored by Tim Storm, an Orange County, CA FHA and VA Loan Officer – Please contact my office at Trust One Mortgage Corporation for more information about an Orange County, CA home loan. 877-786-4243 x 7.

www.OCFHALoans.com

Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com

*Trust One Mortgage Corporation is licensed and supervised by the California Department of Real Estate (“DRE”), License # 01087829

Increase to FHA Mortgage Insurance will Effect Orange County FHA Streamline Refinances

Tim Storm, Orange County FHA and VA Expert (Trust One Mortgage Corp) — Sat, 07 Aug 2010 18:55:22 -0400

Orange County FHA borrowers who are considering an FHA Streamline Refinance due to the recent drop in interest rates should move quickly to figure out whether a Streamline will benefit them or not. Because changes are coming. On August 5 FHA announced it's intention to increase the Monthly Mortgage Insurance percentage from .55% to .9% for loans over 95% loan to value. The Up Front Mortgage Insurance Premium (UFMIP) will decrease from 2.25% to 1%. This is to go into effect on September 7, 2010.

How Does The MMI Increase Effect FHA Streamline Borrowers?

Let's assume a typical $400,000 FHA loan on a home in Irvine, CA. If the borrower has a current rate of 5.25%, they're principal, interest, and mortgage insurance payment would be approximately $2,392. If this borrower is being offered Streamline rate of 4.5%, the new payment (after taking into consideration a loan amount increase due to the UFMIP adjustment) would be approximately $2,232. That's an easy $160 monthly savings. But now, assuming the new monthly Mortgage Insurance will be .9%, the payment (and assuming a lower loan amount since the UPMIP will be less) would be approximately $2,315, or only a $77 payment drop. FHA actually requires that the payment, including taxes, insurance, and HOA, must drop by 5% for the borrower to be eligible for an FHA Streamline. This example would not qualify for a Streamline using the new Mortgage Insurance percentage. . Not even close.

Currently, for an Orange County FHA borrower to be eligible for an FHA Streamline they will need to drop their interest rate by at least .625%. This can vary depending on when they initially got their loan, along with other factors such as whether or not they have a Home Owners Association payment and how much it is. With the new calculation, FHA borrowers will most likely need to drop their rate by 1.125% to 1.25% to qualify for the 5% drop.

What is so Good About the FHA Streamline Refinance Program?

The FHA Streamline Refinance program makes it easy for Orange County FHA borrowers to take advantage of a drop in FHA interest rates without needing to fully qualify for the loan again. Streamlines can be done with no appraisal and no income documentation. This makes it a much easier, or "streamlined" loan process than when they borrower initially purchased their home. A Streamline is not for everyone. Because of an adjustment in the UPMIP, which is financed into the loan, a "break even" analysis does need to be reviewed before jumping into a Streamline Refi. It can quite often take 24 to 30 months to break even after considering the loan amount increase.

Orange County FHA borrowers should at least check if an FHA Streamline is right for them before September 7, which is when the changes are set to occur. An Orange County FHA Streamline lender can provide a detailed analysis which can help to make the right decision.

Authored by Tim Storm, an Orange County, CA Home Loan Officer - Please contact my office at Trust One Mortgage for more information about an Orange County home loan. 877-786-4243 x 7.

www.OCFHALoans.com

Contact us for your Orange County FHA Home Mortgage:

Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com

*Trust One Mortgage Corporation is licensed and supervised by the California Department of Real Estate ("DRE"), License # 01087829

VA Loan Information for Orange County Home Buyers

Tim Storm, Orange County FHA and VA Expert (Trust One Mortgage Corp) — Sat, 15 Aug 2009 13:55:12 -0400

The VA loan program is being heavily utilized by Orange County residents for the first time in several years. There are several reasons for this.

The increase in the Orange County, CA VA loan limit for $0 Down financing to $593,750 in 2010.
The drop in property values in Orange County, CA. (And the rest of the US)
The lack of other high loan to value programs.

VA 100% Financing for Orange County, CA Homes to $737,500 *updated for 2010 $593,750 is limit in Orange and LA counties

The VA loan program is a great program for those that are eligible. Fannie Mae/Freddie Mac require a minimum of 10% down payment for a home in Orange County. Even FHA, which is a great program, requires a 3.5% down payment. To make the comparison even better, while FHA has Monthly Mortgage Insurance equal to .55% (essentially adding .55% to the interest rate) VA has no monthly mortgage insurance. This can save thousands of dollars a year for VA eligible home buyers.

How Do I Find Out if I am Eligible for a VA Loan in Orange County?

To obtain VA home loan veteran benefits you must have served on active duty in the Air Force, Army, Coast Guard Navy or Marine Corps and have been honorably discharged. You may still be entitled to benefits if you were discharged under other than honorable circumstances. This requires further research by the VA. In the end the VA makes the final determination.

The first thing you need to obtain in order to use your VA Entitlement is a VA Certificate of Eligibility. If you do not have one already we would be happy to assist you in getting one. The process is quick and easy. Just call our office and we will be glad to send out to you a VA Form 26-1880 or request for COE. Simply fill it out and return it to the VA and you should have your COE within a couple of weeks. If you are in a hurry, you may visit your local VA Office and have your COE in as little as one day.

If you are looking to purchase a condo, you must first check to make sure the condo project is on the VA Approved Condo List.

What is the First Step in Getting PreApproved for a VA Loan in Orange County?

VA loans, like FHA and Conventional Fannie Mae and Freddie Mac loans, require full income documentation to qualify. Really, all mortgage loans are full doc these days. This means that to qualify for a VA loan, besides having the property, VA Entitlements, and supplying a DD214 and then Certificate of Eligibility, the Veteran will need to provide the following items:

Paystubs for the most recent 30 days. These need to show a consistent income, whether it be an hourly wage or salary. Overtime will be averaged out over the past 2 years, as long as it is continuing at present. The lender will be looking at the Gross income, before taxes and other deductions.
Tax Returns and W2's for 2007 and 2008, or the most recent 2 years. Again, the lender is looking for some consistency. There are situations where the lender can look at other factors if consistency is not apparent. Compensating factors are important in any loan file. A compensating factor can be any of the following: time on the job, good cash reserves, high FICO scores (over 740), low debt to income ratio's.
2 months most recent bank statements. Although VA does not require cash reserves, it can help the loan file if other areas are weak. Also, a VA underwriter will look for NSF's on the bank statements, which would require a letter of explanation.

One of the best things about a VA loan for Orange County home buyers is the VA Streamline Refinance program, or IRRRL, which allows VA borrowers to quickly and easily take advantage of low rates with having to appraise the property or even provide all the income documentation that is needed during the initial purchase.

It is important to know that there is a difference between the VA loan program and the CalVet loan program. Learn as much as possible about these two programs before choosing one or the other.

Who Actually Funds Orange County VA Loans?

You just need to find an Orange County VA Lender. A Direct VA Lender will process, underwrite, and fund your VA loan, rather than just originate and then "broker" to another lender. You will also want to find a loan officer who has experience with VA loans and can provide you with a loan scenario showing a complete break down of the purchase price, loan amount, payment, and closing costs involved with a VA loan. It is important to get as educated as you can on all that goes into getting a VA loan before you actually begin making offers on homes.

Authored by Tim Storm, an Orange County, CA Loan Officer - Please contact my office at Trust One Mortgage for more information about an Orange County, CA home loan. 877-786-4243 x 7. Ask for Tim Storm.

www.OCFHALoans.com

Contact us for your Orange County VA Mortgage:

Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com

*Trust One Mortgage Corporation is licensed and supervised by the California Department of Real Estate (“DRE”), License # 01087829

FHA Streamline Refinance | The Easiest Home Loan in Orange County

Tim Storm, Orange County FHA and VA Expert (Trust One Mortgage Corp) — Sun, 27 Jun 2010 21:14:56 -0400

The FHA Streamline Refinance is by far the easiest loan program available for Orange County, CA home owners. Of course, the catch is, in order to take advantage of this program you must already have an FHA loan. This is strictly an FHA to FHA refinance program.

What Makes the FHA Streamline Refinance so Easy?

No Appraisal required (not kidding about this)
No income documentation required, meaning there are no "debt to income" calculations run on this program.
Very little paperwork (obvious just by the fact that there is no income documentation)
Little or no closing costs. Most lenders will waive their typical lender fees and issue a credit to the FHA borrower to cover escrow, title, recording and other closing costs.

While the Streamline program is very easy, there are a few requirements that must be met. Below are a few of the conditions that must be met.

The Orange County FHA home loan payment, including principle, interest, taxes, and insurance, must drop by a minimum of 5%. For example, if an FHA home owner in Placentia has a total PITI payment of $2,000 per month, then the new payment must be $1,900 or less.
The FHA home loan borrower must currently have a job. This will be verified. Debt to income ratios are not calculated, but the Orange County FHA loan company must make sure the FHA borrower at least has a job.
Assets used to close need to be verified. Closing costs cannot be added to the new loan, unless an appraisal is being used to verify the property value. It is typically more beneficial for the FHA borrower to not finance closing costs into their loan over the next 30 years. Take a slightly higher rate and have the lender credit the closing costs. While 30 days interest can be financed into the loan (some lenders like to call this "skipping a payment", but the more appropriate description is to "finance a payment"), some money will still be needed to close to cover the new impound account for taxes and insurance. Even this is a "wash" since the old, or current, impound account will be refunded back to the borrower a few weeks after the close.
The FHA borrower cannot be late on their mortgage.
The FHA loan being refinanced must already have 6 payments made. In reality, 6 Mortgage Insurance payments must be received by FHA. Typically, the 6th Mortgage Insurance payment will not be received until about 30 days after the 6th payment is made.

The purpose of this program is to allow FHA borrowers to take advantage of low rates without needing to jump through the hoops they had to when they first bought their home. FHA makes sure borrowers are not taken advantage of by requiring the 5% payment drop, along with not allowing closing to be added to the loan if no appraisal is being used. With mortgage rates are current all time low's, there has not been a better time to do a Streamline Refinance in years. To meet the 5% requirement, an FHA borrower's current rate probably needs to be 5.5% or higher.

Authored by Tim Storm, an Orange County, CA Home Loan Officer - Please contact my office at Trust One Mortgage for more information about an Orange County home loan. 877-786-4243 x 7.

www.OCFHALoans.com

Contact us for your Orange County FHA Home Mortgage:

Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com

*Trust One Mortgage Corporation is licensed and supervised by the California Department of Real Estate ("DRE"), License # 01087829

Guidelines for FHA Streamline in Orange County, CA

Tim Storm, Orange County FHA and VA Expert (Trust One Mortgage Corp) — Sun, 13 Jun 2010 12:20:48 -0400

Orange County homeowners with an FHA loan have been able to lower their interest rates by taking advantage of the FHA Streamline Refinance program. With mortgage rates near all times lows, there has never been a better time to at least research whether a FHA Streamline with help your financial position.

What is an FHA Streamline?

The borrower must currently have an FHA loan, because the Streamline program "Streamlines" the refinance process for people who already have been approved by FHA. The lower rate must provide a true benefit for the borrower. FHA guidelines require that the borrowers total PITI payment must drop by at least 5%. For example, if your total PITI (Principle, interest, taxes, and insurance) is 2,000 per month then the new payment must drop the payment to at least $1,900. While there are several factors that have an effect on this calculation, a rate drop of .5% at a minimum is typically needed to meet this threshold.

FHA updated several guidelines at the end of 2009 which were meant to protect FHA borrowers. The borrower must have had their loan for at least 6 months. Typically it will need to be a little longer, because FHA needs to have received at least the 6th Monthly Mortgage Insurance payment from the lender. So if you are making your payment 15 days after the due date, and it takes the lender two or three weeks to forward the MI to FHA, you may need to be in your loan for 7 months before having access to an FHA Streamline Refinance.

No Appraisal, No Credit, No Income

The FHA Streamline is fairly "painless" compared to the loan process when you bought your home. No appraisal is required, unless you are choosing to add closing costs to your loan. Most Streamlines are closed with all closing costs credited by the lender, so why go through the effort and expense of having an appraisal? While technically no credit report is required, most lenders require a minimum FICO score of 620, so a credit report will be run. Also, the lender will use the credit to verify the mortgage rating. Multiple 30 day late's are not acceptable. But don't worry about collection accounts or other items on the credit report, because they will not be on the loan application and are not used in the underwriting process. Also, debt to income ratios are not calculated. No tax returns, W2's, or paystub's. The new lender will need to verify that you "have a job", but will not review the income.

The First Step for Orange County FHA Loan Borrowers

The first step for current Orange County FHA borrowers is to find a local Orange County FHA Expert who can help them determine whether a Streamline Refinance makes sense. Even though all closing costs are credited by the lender, there are other things to consider. The UpFront Mortgage Insurance Premium will be adjusted up, which does factor into the "breakeven analysis". Also, how long will you remain in the home? Maybe a 5 year adjustable rate mortgage with a lower rate will provide more benefit. Finding an Orange County Loan Officer you can trust will help you make an informed decision.

Authored by Tim Storm, an Orange County, CA Loan Officer - Please contact my office at Trust One Mortgage for more information about an Orange County, CA home loan. 877-786-4243 x 7.

www.OCFHALoans.com

Contact us for your Orange County VA Mortgage:

Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com

*Trust One Mortgage Corporation is licensed and supervised by the California Department of Real Estate ("DRE"), License # 01087829

Orange County VA Loan Update | VA Will Fund on FHA Approved Condo's

Tim Storm, Orange County FHA and VA Expert (Trust One Mortgage Corp) — Sat, 22 May 2010 13:27:23 -0400

This week VA made an important announcement regarding Condo Approval's that will have a positive effect for Orange County, CA VA loan borrowers. Although the VA is calling this a "clarification", it seems to be an actual rule change for the better. In a nutshell, VA financing is allowed on FHA approved condo projects. For those who have not kept up with the recent condo approval guidelines set forth by FHA, and how VA felt about it, this may not seem like anything.

www.wordle.net

What Orange County Condo Projects are VA Approved

Prior to the recent FHA condo approval guidelines changes, VA had allowed financing on condo projects even if they were not on the VA approved list. This changed when FHA changed their condo approval guidelines. VA, while not being very clear about their position on this, said they no longer would accept FHA approved condo's. This meant the project had to be on the VA Condo approved list, which in Orange County is fairly limited.

How VA Circular Letter 26-09-19 - (5-17-10) Affects VA Loans in Orange County

This latest VA Circular (a VA Circular is similar to an FHA Mortgagee Letter) announced, or "clarified" their position on FHA approved condo projects.

VA can accept HUD/FHA/USDA condominium approvals if the project approval was dated prior to December 7, 2009.
VA cannot accept HUD/FHA/USDA condominium approvals if the project approval was dated on or after December 7, 2009.
VA cannot accept phases annexed into the project approved by HUD/FHA/USDA if the annexation occurred on or after December 7, 2009...If this is the case, a full review of the legal documents for the entire project must be performed by VA.

This really opens the door for Orange County Veterans looking for condo's who are planning to use the VA loan eligibility. The VA loan program, which does not require a down payment up to a purchase price of $593,750, and has no Monthly Mortgage Insurance like FHA does, is a great program that helps those who served our country.

How to Find FHA and VA Approved Condo Projects in Orange County.

Both FHA and VA have websites that allow for searching for approved condo projects. Unfortunately it is not as easy as typing an address in and getting a result. And the condo names shown on the VA and FHA websites do not list the address. But it is fairly easy type in a zip code and get a list of the approved projects within that zip code. This is where the help of an experienced Orange County real estate agent and/or Orange County VA lender can really come in handy.

Orange County VA loan eligible home buyers should talk to an Orange County VA loan expert before looking for a home. The lender can get the VA loan home buyer Prequalified and PreApproved (including help with obtaining the Certificate of Eligibility). Once PreApproved, the home buyer can confidently know they are ready to make an offer on a home.

Authored by Tim Storm, an Orange County, CA Loan Officer - Please contact my office at Trust One Mortgage for more information about an Orange County, CA home loan. 877-786-4243 x 7.

www.OCFHALoans.com

Contact us for your Orange County VA Mortgage:

Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com

*Trust One Mortgage Corporation is licensed and supervised by the California Department of Real Estate ("DRE"), License # 01087829

4 Things an Orange County Home Buyer Should Not Do During the Loan Process

Tim Storm, Orange County FHA and VA Expert (Trust One Mortgage Corp) — Thu, 20 May 2010 12:08:55 -0400

Orange County first time home buyers need to be aware of what things they can and cannot do once they have an accepted offer on a home. Even when someone is "PreApproved" by an Orange County Lender, the approval can fall apart quickly if the home buyer is not careful.

4 Things Orange County Home Buyers Should Not Do While in Escrow

Do not make any large purchases. Do not purchase a car or boat. Don't even buy furniture or appliances for your new home.
Don't apply for new credit cards or installment loans. Inquiries during the loan process could lower the FICO score, which could cause problems if credit is run prior to closing.
Do not make any large or unusual deposits into your checking or savings account that can't be properly documented. Even a $500 deposit may be questioned by an undewriter if it didn't come from an employer or obviously verifiable source. Cash deposits cannot be documented and will cause problems if deposited into an account the lender is using to document funds to close.
Don't go on vacation or leave town during escrow closing period. While this is not a deal killer, it can cause delays. It typically takes 30 to 45 days to close a transaction, sometimes even longer. If the borrower is not available to get needed documentation or sign disclosures, the resulting delays could cause problems at the closing.

And of course, don't get laid off from your job! That, of course is out of your control but it does happen from time to time.

Fannie Mae will Soon Require a Second Credit Report Be Pulled At Closing

Fannie Mae has announced that effective June 1, 2010, lenders will be required to pull a second credit report at funding. The lender needs to make sure no new payments are appearing on the credit that would increase the debt to income ratios beyond an approvable level. They will be looking for new inquiries that did not appear on the initial credit report. While this could lead to deals falling out at the last minute, what is still unclear is whether lenders will adjust loan pricing at the last minute based on a drop in FICO score. For example, a borrower with less than 40% down payment and a 720 FICO score could end up with an additional .5 point fee ($2,000 on a $400,000 loan) if there FICO drops 1 point, to 719. There should be more clarity on this issue in the next week.

It is more important than ever that Orange County home buyers be very careful with their spending and credit while in escrow to purchase a home. Make sure to ask your local Orange County loan lender is what things to be careful about and don't keep any secrets.

Authored by Tim Storm, an Orange County, CA Loan Officer - Please contact my office at Trust One Mortgage for more information about an Orange County, CA home loan. 877-786-4243 x 7.

www.OCFHALoans.com

Contact us for your Orange County FHA Mortgage:

Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com

*Trust One Mortgage Corporation is licensed and supervised by the California Department of Real Estate ("DRE"), License # 01087829

FHA Financing on Detached Condos and Attached Homes's in Orange County

Tim Storm, Orange County FHA and VA Expert (Trust One Mortgage Corp) — Mon, 26 Apr 2010 19:05:42 -0400

FHA financing on condo's is not as difficult as some believe, as long as the project is on the FHA approved list. But what many Orange County homebuyers and their agents don't realize is not all attached homes are considered a condo.

When looking at an attached home, most people will automatically assume that if the project is not on the FHA approved list for condo's, then an FHA loan will not be possible. At least not until the project gets approved. However, if the property is not legally considered a condo, then FHA will allow financing without the project being approved.

FHA Financing on Planned Unit Development's

A Planned Unit Development, or PUD, encompasses not only Single Family Residences, but also single family attached homes, commonly referred to as townhomes or rowhomes. With a little research, it can be determined whether or not a property was built is listed as a condo or Single Family Residence.

http://www.wordle.net/.

FHA Financing on Site Condo's

There are also detached homes within Condo projects. Even if the project is not FHA approved, FHA financing can be done on a detached home within the project. A detached condo is typically referred to as a Site Condo. Although project approval is not required, a Condo Rider is still required for the loan. Below is a quick excerpt from a recent FHA Mortgagee Letter regarding Site Condo's.

"Site Condominiums are single family detached dwellings encumbered by a declaration of condominium covenants or condominium form of ownership. Condominium Project approval is not required for Site Condominiums; however, the Condominium Rider (Attachment D) must be included in the FHA case binder submitted for insurance endorsement."

Orange County has quite a few attached home projects which are not "condo's" There are also quite a few detached condo's that will qualify for FHA financing even if the project is not approved. It is important to understand the in's and out's of property eligibility for FHA financing before making an offer on a home. If a property is a condo, then check the FHA website to see if the project is approved. If the property doesn't show up on the list, check to make sure it is a condo at all.

Orange County VA loan eligible home buyers who are shopping for a condo need to check with the VA condo approval website.

Contacting an Orange County FHA Loan Expert is an important step in helping to determine whether a property is eligible for FHA financing.

Authored by Tim Storm, an Orange County, CA Loan Officer - Please contact my office at Trust One Mortgage for more information about an Orange County, CA home loan. 877-786-4243 x 7.

www.OCFHALoans.com

Contact us for your Orange County FHA Mortgage:

Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com

*Trust One Mortgage Corporation is licensed and supervised by the California Department of Real Estate ("DRE"), License # 01087829

FHA Allows Lending on Flipped Properties, But Do Orange County FHA Lenders?

Tim Storm, Orange County FHA and VA Expert (Trust One Mortgage Corp) — Thu, 01 Apr 2010 11:17:18 -0400

FHA began allowing financing on flipped properties on February 1, 2010, but as been the case, FHA lenders, including those in Orange County, were not quick to follow suit. However, within the past few weeks, several Orange County FHA lenders have begun to allow financing on flipped properties.

FHA Announcement on January 15, 2010 Regarding Flipped Properties

On January 15, 2010, FHA announced in a press release that it would be temporarily lifting the "90 day no flipping rule", effective February 1, 2010 through February 1, 2011. However, there are a few guidelines that need to be met.

The seller and buyer cannot be related.
If the new purchase price is 20% above the sellers acquisition price (within the last 90 days), then the lender may require a second appraisal. Also, the appraisal should have specific notations justifying the increase in value.
If the property is being purchased for more than 20% of the sellers acquisition price, then the lender will require a home inspection report, which can be paid for by the buyer.

Orange County FHA LendersWill Allow Financing on Flip's, But with Major Caveat

Most lenders are now allowing FHA financing on flipped properties, but not if the property is being sold for 20% more than the sellers acquisition cost within the last 90 days. Unfortunately, this effects most flipped homes. For example, if an investor purchases a property at auction for $300,000, then he would not be able to sell it for more than $360,000 (and have an FHA buyer). The lender is not looking at the investors profit, just the acquisition cost versus sales price. While there will be some cases where FHA financing will work, it is important to know what financing is available before making an offer on a home with FHA financing. If a property is being sold for more than 20% of the recently acquired price, make sure the lender handling the financing can still do the loan.

Before even making an offer, it is important that Orange County first time buyers talk with a local Orange County Direct Lenderwho can walk them through the initial Prequal and PreApproval process.

Authored by Tim Storm, an Orange County, CA Loan Officer - Please contact my office at Trust One Mortgage for more information about an Orange County, CA home loan. 877-786-4243 x 7.

www.OCFHALoans.com

Contact us for your Orange County FHA Mortgage:

Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com

*Trust One Mortgage Corporation is licensed and supervised by the California Department of Real Estate ("DRE"), License # 01087829

New Appraisal Ordering Process for FHA Loans and its Effect on Orange County Home Buyers

Tim Storm, Orange County FHA and VA Expert (Trust One Mortgage Corp) — Mon, 15 Feb 2010 14:14:56 -0500

The new appraisal ordering process for FHA loans will have some affect on Orange County home buyers using FHA financing. The details of the new FHA appraisal ordering process were issued in Mortgagee Letter 2909-28.

FHA's Version of HVCC

in mid 2009 HVCC went into effect for conventional Fannie Mae and Freddie Mac appraisals. HVCC stands for Home Valuation Code of Conduct. While not a popular decision, the HVCC policy took the appraisal ordering process out of the hands of the loan officer. AMC's, or Appraisal Management Companies, are now how appraisals are ordered. The loan officer is not allowed to talk to the appraiser, especially about an expected property value.

FHA appraisals have always been ordered through FHA Connection. The lender has been allowed to choose an appraiser who is familiar with certain cities or neighborhoods, and typically an appraiser who can be trusted to complete the appraisal quickly. The new process will take the appraisal ordering out of the lenders hands, much like the HVCC process.

Key Points for the new Policy

Prohibition of commission based lender staff from the appraisal process
Prevention of improper influences on the appraiser
Appraiser independence safeguards

Effective Date for Mortgagee Letter 2009-28

The initial effective date was January 1, 2010. The date was delayed and is now February 15, 2010. All FHA case numbers issued after February 15 ,2010, will need to have the appraisal ordered using this new process. Many lenders have already made the transition.

How Will This Effect Orange County FHA Borrowers?

Hopefully this will not have a negative effect for Orange County home buyers, who most likely won't even know the difference. FHA approved appraisers will still be doing the appraisals, the properties will still need to appraise at the purchase price in order to be eligible for maximum FHA financing. While HVCC has had many complaints, FHA has tried to make sure that appraisers will still be compensated by stating that "FHA appraisers are compensated at a rate that is customary and reasonable for the market area." This should keep appraisers motivated to do a good job. (Appraiser compensation has been a big issue under HVCC.) Also, FHA has made it clear that appraisals are to be assigned to appraisers who have a knowledge of the market area and geographic competency. This has been another bone of contention with HVCC.

Bottom line is the property should appraise at its true value. On a purchase transaction, the appraiser will have a copy of the purchase contract and will know the purchase price and concessions. Time will tell how this pans out. VA loans in Orange County have dealt with a similar appraisal ordering system for many years with few problems.

Authored by Tim Storm, an Orange County, CA Loan Officer - Please contact my office at Frost Mortgage Lending Group for more information about an Orange County, CA home loan. 877-786-4243 x 7.

www.OCFHALoans.com

Contact us for your Orange County FHA Mortgage:

Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com

*Licensed by Department of Corporations under the California Residential Mortgage Lending Act. PRMI Branch License 813F487.

Orange County First Time Home Buyers and FHA Financing on Condo's

Tim Storm, Orange County FHA and VA Expert (Trust One Mortgage Corp) — Sat, 06 Feb 2010 21:37:27 -0500

With the recently changed FHA rules for condo financing, it has become a little more difficult for Orange County first time home buyers wanting to buy a condo. FHA recently made big changes to the condo approval process while at the same time eliminating the Spot Approval program.

First, a little background information on FHA financing and condo's. FHA has, for many years, required that condo projects be "approved" before allowing financing within the project. In the 70's and 80's, and even the early 90's, when a project was being built, the builder pay the expense of getting the new project approved, thus making it easier to sell the finished condo's to homebuyers wanting to use FHA financing. Most condo projects in Orange County were approved and it was rarely a concern that a project would not be approved. In the late 90's and for most of the last 10 years up until 2008, the Orange County FHA loan limits failed to keep up with property values, and alternative loan products allowing high loan to values and very easy qualifying took the place of the FHA loan program. In 2007, along with the collapse of the Mortgage Backed Securities market and the elimination of the easy qualifying program, the FHA program suddenly became viable again.

The only problem was that most newer condo projects had never been FHA approved, and even some of the older projects that had been approved and lost their approvals as a result of either a lawsuit against the Homeowners Association, high investor ownerships percentages, among other reason.

The Spot Approval Program

The FHA Spot Approval program did become popular in Orange County, CA in 2008 once FHA increased the loan limits from $362,790 to $729,750. Suddenly, almost every condo in Orange County fit within the FHA loan limits. The Spot Approval program allowed an individual unit to be financed even if the project was not FHA approved, provided certain conditions were met. Now, effective February 1, 2010, the Spot Approval program has been eliminated. This means that projects that are not FHA approved will lose out on a large segment of home buyers (almost anyone with less than 20% down, except for VA buyers, based on current lending guidelines), which will surely affect the projects property value.

New FHA Condo Approval Guidelines for 2010

On June 12, 2009, FHA issued Mortgagee Letter 2009-19, which gave the new guidelines for approval along with the method's used for approval, called DELRAP and HRAP. The guidelines were supposed to go into effect on October 1, 2009, but FHA delayed it until Dec 7. DELRAP (Direct Endorsement Lender Review and Approval Process) and HRAP (HUD Review & Approval Process) are now the method used for getting projects approved. The DELRAP process allows for a Direct Endorsed FHA lender to approve a condo project. However, there is a huge liability for the lender if it ever turns out that the project should not have been approved. For this reason, HRAP will most likely be the most commonly used condo approval process. A complete condo package will need to be put together and sent to HUD for approval. The length of time required to get a project approved will vary from region to region, but plan for 15 to 30 days from the day the condo package is sent to HUD.

How To Find FHA Approved Condo Projects in Orange County

The quickest way to find out if a condo project is FHA approved is to go to the HUD website and use the condo lookup tool. Choose the HRAP/DELRAP Approval method, and then narrow down the search by choosing state, city, and/or zip code. Projects that were approved prior to October 1, 2008, which will be nearly all projects in Orange County, will need to be "recertified", most likely through the HRAP method.

**Interesting thing going on right now. Orange County VA loan home buyerscan still use the VA approved list without having to deal with recertification. VA continues to have their own list.

Orange County real estate agents with listings in condo projects should contact the Homeowners Association to have them work on getting their project either recertified or approved. There are companies that specialize in helping association management companies take care of the approval and/or recertification process that should be consulted at the very least.

These changes will lengthen escrow closings, but shouldn't keep first time home buyers from purchasing a condo. Of course, the first thing a prospective Orange County home buyer should do is get prequalified for a mortgage. A loan officer can provide loan scenarios that will take into account a home buyers qualification, payment comfort level, and estimated HOA dues if they are thinking of purchasing a condo.

Authored by Tim Storm, an Orange County, CA Loan Officer - Please contact my office at Frost Mortgage Lending Group for more information about an Orange County, CA home loan. 877-786-4243 x 7.

www.OCFHALoans.com

Contact us for your Orange County FHA Mortgage:

Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com

*Licensed by Department of Corporations under the California Residential Mortgage Lending Act. PRMI Branch License 813F487.

Sources for Down Payment on an FHA Loan for Orange County First Time Home Buyers

Tim Storm, Orange County FHA and VA Expert (Trust One Mortgage Corp) — Sun, 31 Jan 2010 00:48:53 -0500

The down payment is nearly always the biggest hurdle an Orange County First Time Home Buyer has to over come. The down payment can come from several different sources, but buyers need to be careful because there are also sources that are not allowed. Besides actually saving the down payment over a period of time, below is a list of a few of the acceptable down payment sources.

Sources of Down Payment for an FHA Loan

IRA's, 401K, retirement funds

Gift Funds

Sale of Personal Property

Commission From Home Sale

Rent Credit

Bridal Registry Account

The important thing to remember, as mentioned above, is that everything about a loan is going to need to be heavily documented. This is where home buyers can sometimes run into trouble. For example, while "cash" is technically an acceptable source of down payment, it is so difficult to document cash, that buyers who don't like saving their money in a bank account will have a difficult time getting a lender allow it. Also, don't even begin to think you can get away with a credit card advance. The lender will review bank statements and need verification of any unusual deposits shown on the most recent 2 months bank statements.

First time buyers should talk with an Orange County FHA loan officer before even looking at homes. It is important to get Prequalified for a mortgage in order to know what price range to shop for. Payments are different for single family homes versus condo's because of the the Home Owners Dues associated with a condo. By getting your prequalified for an FHA loan ahead of time, you will be well prepared when the time comes to make an offer on a property.

Authored by Tim Storm, an Orange County, CA Loan Officer - Please contact my office at Frost Mortgage Lending Group for more information about an Orange County, CA home loan. 877-786-4243 x 7.

www.OCFHALoans.com

Contact us for your Orange County FHA Mortgage:

Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com

*Licensed by Department of Corporations under the California Residential Mortgage Lending Act. PRMI Branch License 813F487.

Changes to HUD's 90 Day Anti Flipping Rule will Help Orange County First Time Buyers

Tim Storm, Orange County FHA and VA Expert (Trust One Mortgage Corp) — Wed, 20 Jan 2010 14:09:54 -0500

On January 15, 2010, HUD issued a news release which dramatically changes its 90 day anti flipping rule, which will help Orange County first time home buyers using FHA financing. The 90 day no flipping rule has prevented Orange County home buyers from purchasing a property that had been recently purchased by an investor for profit.

What was the Purpose of the No Flipping Rule?

In 2003 HUD came up with the No Flip rule in order to prevent investors from artificially inflating prices, thus ripping off unsuspecting home buyers. But in the current market the rule has been seen as a road block to the housing recovery. With all of the new consumer protection rules that have gone into place in the past 12 months including HVCC, which takes the appraisal ordering out of the hands of the lender, it would be difficult for a property to be sold for more than it can appraise.

The No Flip rule did allow for homes to be sold in less than 90 days if they had been foreclosed on and then sold by the foreclosing bank. But if an investor bought the property in order to resell for profit, then a contract to purchase could not be signed until the 91st day after the seller acquired the property.

Why Has FHA Decided to Lift the Ban on Flips?

FHA has found that in todays market, properties are being purchased, fixed up, and resold in less than 90 days. The No Flip rule prevented sellers from accepting offers from FHA borrowers. Because of the restriction, FHA borrowers have been unable to purchase many affordable homes. The waiver of the No Flip rule will take effect on February 1, 2010 and remain in place for 12 months. There will still be certain rules in place to protect home buyers.

What Conditions Need to be Met?

There are conditions that need to be met in order for FHA financing to be possible on a recently flipped property.

All transactions must be arms-length, with no identity of interest bewteen the buyer and seller or other parties participating in the sale. This means the lender will need to make sure the seller holds title to the property. The lender will need to make sure that an LLC or Corporation which holds title to the property was established and is operated lawfully. The lender will verify that there is no previous pattern of flipping activity over the previous 12 months by checking the chain of title. The lender will also need to verify the property was marketed openly, such as on MLS, or For Sale by Owner. A red flag would be if the wording "assignment of contract of sale" appears in the purchase contract.
The new sales price cannot be more than 20% above the price the seller/investor paid for the property. If it is, then additional conditions will need to be met.
The waiver is only for forward mortgages. This does not apply to the HECM, or Reverse Mortgage.

What if the Property is Sold for More than 20% of the Sellers Cost?

If a property is sold for more than 20% of the sellers cost, additional conditions need to be met. The lender will need additional documentation, and may require a second appraisal, which verifies the seller has completed legitimate renovation or repair on the property which will support the increase in value. In situations where there was no rehab work, the appraiser will need to explain the increase in property value since the previous title transfer. Also, the lender will need to order a Property Inspection and provide a copy of the report to the new home buyer prior to closing. The Property Inspection need to be ordered by the lender, and paid for by the lender, although the cost can be passed on to the buyer.

Who Will Benefit from This in Orange County?

Both real estate investors and home buyers will benefit. Homebuyers, especially Orange County first time home buyers who tend to use FHA financing because of the low down payment requirements, have had limited housing inventory to choose from over the past 12 months. This rule waiver will open up a segment of the market that was previously unavailable to them.

Of course, the first thing an Orange County First Time buyer needs to do is check into how much of a loan they will qualify for. They need to contact an Orange County FHA Lender who can walk them through the initial steps of getting Prequalified and/or PreApproved for an FHA loan. Knowing how much home they can afford based on their income, or payment comfort level, is important in order to prevent wasting time by looking at homes that are out their price range.

Authored by Tim Storm, an Orange County, CA Loan Officer - Please contact my office at Frost Mortgage Lending Group for more information about an Orange County, CA home loan. 877-786-4243 x 7.

www.OCFHALoans.com

Contact us for your Orange County FHA Mortgage:

Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com

*Licensed by Department of Corporations under the California Residential Mortgage Lending Act. PRMI Branch License 813F487.

How the High Balance FHA Program Can Benefit Orange County Homeowners on a Refinance

Tim Storm, Orange County FHA and VA Expert (Trust One Mortgage Corp) — Wed, 13 Jan 2010 19:49:31 -0500

The High Balance FHA Loan program, also known as the Jumbo FHA Loan program, is currently the best way for Orange County home owners with combined loan balances over $417,000 but under $729,750 to refinance with cash out. Keep in mind that per Fannie Mae guidelines, if a borrower is combining a 1st mortgage with a 2nd (or HELOC) that was not used for the initial purchase, then the resulting refinance would be considered a "cash out" refinance even if the borrower was not pulling additional cash out.

Why FHA is the Best Way to Refinance a Cashout Loan Over $417,000

FHA guidelines allow for "cash out" refinancing up to 85% of the properties value, even if the new loan amount is over $417,000. Fannie Mae will not allow a "cash out" refinance over 60% of the properties value if the new loan amount will be over $417,000. To make matters worse, combining a 1st and 2nd mortgage (or Equity Line) that was not used to purchase the home is automatically considered a cash out refinance. 60% loan to value leaves a lot of Orange County home ownerswho have a 1st and 2nd mortgage in a lurch. Also, FHA allows FICO scores to be lower than the Fannie Mae "Agency Jumbo" program. Most Orange County FHA Lenders can refinance a homeowner with a FICO score as low is 620.

**For Orange County VA loan program eligible homeowners, the VA program would be even better than FHA. VA will go to 90% of the properties value, and has no monthly Mortgage Insurance.

FHA Cash out Jumbo Refinance Example

Lets assume a home owner in Orange County has a 1st mortgage of $400,000 with a 5 year fixed interest rate of 6.5%. (For those of you with interest rates under 5%, believe me, there are plenty of home owners who haven't been able to take advantage of low rates.) The payment on the 1st is $2,623. They also have a 2nd mortgage of $100,000 with a fixed rate of 6.25%, yielding a payment of $615. The 2nd has a balloon payment in 3 more years. The property value is $650,000. This homeowner would not be able to refinance under Fannie Mae guidelines. But with an FHA loan, they can. Assuming an FHA interest rate of 5.5% on a new loan amount if $510,000, the payment would be $3,129 for the principal, interest, and mortgage insurance. By going with an FHA program, the homeowner is able to combine their 1st and 2nd into a fixed rate FHA loan, eliminating the looming rate change on the 1st mortgage and the balloon payment on the 2nd mortgage.

If the homeowner also had additional cash needs (home improvements, debt consolidation, etc), it would be possible to refinance up to a loan amount of $552,500, or 85% of the $650,000 proeprty value.

What Does it Take to Qualify for an FHA Loan?

Well, Stated Income is out of the question. FHA is a Full Doc program, meaning the lender will need to see tax returns for the most recent 2 years, paystubs for the most recent 2 months, bank statements for 2 months, and first born. Well, maybe not first born, but you get the picture. Although everything will be closely reviewed, FHA is fairly flexible with the debt to income ratios. FHA is also very flexible with the FICO score.

What Programs Does FHA Offer?

The two basic FHA programs are the 30 year fixed and the 15 year fixed. The 30 year fixed tends to be the more popular program, but there are advantages to the FHA 15 year fixed program. Beside the fact that your home will be paid off in only 15 years, FHA also does not have Monthly Mortgage Insurance on the 15 year fixed program when the loan to value is less than 90%, which will be automatic on a cash out refinance.

The first step in finding out if an FHA Jumbo Refinance will work for your situation is to contact an Orange County FHA Lender (with 20 year experience) who can answer all your questions and prepare scenarios based on your qualifications.

Authored by Tim Storm, an Orange County, CA Loan Officer - Please contact my office at Frost Mortgage Lending Group for more information about an Orange County, CA home loan. 877-786-4243 x 7.

www.OCFHALoans.com

Contact us for your Orange County FHA Mortgage:

Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com

*Licensed by Department of Corporations under the California Residential Mortgage Lending Act. PRMI Branch License 813F487.

FHA Will Be the Loan of Choice for First Time Buyers in 2010

Tim Storm, Orange County FHA and VA Expert (Trust One Mortgage Corp) — Mon, 11 Jan 2010 01:08:25 -0500

Just like in 2009, 2010 will be a big year for the FHA loan program and Orange County First Time Buyers. There are several reasons for this, one of them being that there just aren't many competing loan programs.

4 Reasons FHA will Continue to be Preferred by Orange County First Time Buyers

Only 3.5% down payment requirement. Other Conventional programs require at least 10% down, as long as the borrowers FICO scores are 740. There are a few niche programs, such as the Fannie Mae Homepath program which is for specific Fannie Mae owned properties, or the VA loan program which allows for 100% financing but is only for VA eligible borrowers.
The FHA credit guidelines are more flexible than Conventional financing. Although technically FHA does not require a minimum FICO score, most lenders want the borrower to have at least a 620 FICO. Even if a Conventional buyer has 20% down down payment, they would most likely get a lower interest rate by choosing FHA rather than Fannie Mae/Freddie Mac.
Down payment can be a gift with FHA. Not only is the minimum down payment only 3.5%, but the down payment can be a gift from a relative. It can also come from a 401K loan without needing the count loan payment in the debt to income ratios. With Conventional financing, if the down payment can be gift if there is 20% down. If the down payment will be less than 20%, than at least 5% of the purchase price must come from the buyer.
FHA allows for higher debt to income ratios. the guideline total debt ratio for FHA is 43%, but for borrowers with just "decent" credit, it is not unusual to get an approval with a ratio as high as 55%. Fannie Mae recently lowered the debt to income ratio they will accept to 45%. With solid compensating factors, such as reserves and perfect credit, Fannie Mae may allow the ratio to be 50%, but again we are assuming 20% down, not the 3.5% the FHA is looking for.

First Time Buyer Tax Credit offers Incentive to Act Fast

With the extension of the $8,000 First Time Buyer Tax Credit, Orange County First Time Buyers have until April 30, 2010 to have a signed accepted contract to buy a home, and then until June 30, 2010 to close the transaction. With property values down to affordable levels not seen in many years, first time buyers are finding they can buy a home for a payment similar to their rent payment. This, combined with the $8,000 "gift" from the government, should result in a lot of Orange County first time buyer activity in the first quarter of 2010.

The First Step is FHA PreApproval

Actually, the first step should be to talk to an Orange County Direct Lender who is an FHA expert. Your lender should be able to prepare loan scenarios based on your qualification and goals which will give you a good idea of what it will take to buy a home. It is important to know how much of a payment you are comfortable with, along with how much money you will need to buy a home. The initial prequalification process can be quick, but the search for the perfect home can take some time. Orange County First Time Buyers who want to take advantage of the $8,000 First Time Buyer Tax Credit need to act quickly.

Authored by Tim Storm, an Orange County, CA Loan Officer - Please contact my office at Frost Mortgage Lending Group for more information about an Orange County, CA home loan. 877-786-4243 x 7.

www.OCFHALoans.com

Contact us for your Orange County FHA Mortgage:

Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com

*Licensed by Department of Corporations under the California Residential Mortgage Lending Act. PRMI Branch License 813F487.