FHA Mortgages Advantanges and Disadvantages

FHA Loan Advantages

• Lower down payment requirements 3.5% of sale price
• Lower credit score requirements 640, More lenient credit requirements
• Lower mortgage rates compared to a Conventional Mortgage
• It is easier to qualify for and FHA loan than a conventional loan
• No prepayment penalty for early payoff
• Non-occupying co-borrower allowed
• Seller can pay up to 6% of buyers closing costs Allows higher debt to income ratios
• Bankruptcy accepted after 24 months allowed
• Foreclosure accepted after 36 months after deed is transferred
• Government backed loan
• No reserve requirement
• 100% of closing costs and down payment can be a gift
• A streamline FHA refinances can be fast, and inexpensive, down the road

FHA Loan Disadvantages

• Upfront Mortgage Insurance (MI), extra fees added to your loan amount.
• Monthly Mortgage insurance for the life of the loan, which makes FHA expensive
• Fewer loan term options compared to conventional loans
• Only available on owner-occupied properties
• Many Condo developments are not approved for FHA financing
• Loan limit up to: Single $393,300 Duplex $503,500
• Generally a borrower is only allowed to have one FHA loan

Dawn Kornovich

Picture of the Day

  

Shell Island, FL 

Real Estate Terms – From Easements to Good Title

When buying or selling a property, it always helps to have a basic understanding of real estate terms. In this on going series of articles, we take a look at definitions starting with “easements.” 

 1) Easement – permission given to (or acquired by) someone who does not own a parcel of real property enabling that person (or entity) to use that parcel for a specific purpose.  It may add or detract value.  It may be neutral so far as the value of the property is concerned.  Examples include easements to utility companies for the purpose of running power lines, easements to municipalities for running sewer lines, and an easement to a neighbor to use your driveway for ingress and egress to his property. 

 2) Encroachment – a building, fence, wall, driveway, etc. which is intended to be part of one property and is found to be on, or partially on, another property. 

 3) Escrow – money and other items of value held by a third party for the benefit of the buyer and seller of real property.  In California, items are accumulated in escrow for a stated period of time until all items needed to finalize the sale are in the hands of the escrow agent and properly processed.  In Virginia, the items are accumulated but are not signed until everyone meets at the settlement table.  Then the deed is signed, the lender releases funds, and so on.  It is usually the next day before the change of ownership can be recorded at the courthouse, so while it isn’t customarily referred to that way, the settlement agent is usually an escrow agent for about 24 hours in Virginia. 

 4) Equity – The wealth value of a property for the owner. The equity in a property is equal to the fair market value minus any debts such as mortgages and taxes. 

 5) Good Title – title to the real property being clear and clean enough that a title insurance company will insure it and a lender will make a loan with it as collateral.

As you can image, there are many real estate terms for which you have a general understanding. – Dawn



A great pic I took on Bono U2, Nashville TN  

Fannie Mae – Supporting Homeownership Through Mortgages

The federal national mortgage association, better known as Fannie Mae, is an integral part of the mortgage industry. Here’s an overview on Fannie Mae and what it does.

Fannie Mae – Providing A Little Help

Throughout the history of the United States, federal and state governments have used financial programs to modify our behavior. While it sounds draconian, it is actually a fairly bland concept. To stop us from undertaking bad or unhealthy behavior, taxes are levied on things such as cigarettes to motivate us to stop smoking. On the positive side, similar financial incentives are create to promote positive things such as homeownership.

Homeownership is often referred to as the American Dream. In truth, it is one of the key factors in maintaining a middle class in our country. Homeownership is, more or less, an involuntary savings plan for most Americans. Property appreciates over time which means you are gaining wealth regardless of what you are doing with your credit cards.

Today, more of us own homes than at any point in history. This is due to a number of factors, one of which is the broad availability of mortgages in which we can borrow large sums of money over long periods of time. The federal government through Fannie Mae among other institutions promotes this opportunity.

A common mistake is to assume Fannie Mae is a government entity. It is not. The company is a publicly traded entity just like Microsoft, Google or your favorite stock.

A second misconception is that Fannie Mae provides mortgages directly to borrowers. Again, it does not. Instead, the company provides liquidity to mortgage lenders so they can continue to provide you with home loans.

Fannie Mae was created in 1938 by the federal government. Its purpose was to provide liquidity [money] to a secondary mortgage market.  If you’ve ever had a mortgage, you probably have experienced the odd event where your mortgage is sold to another lender. These secondary lenders rarely work directly with the public. Instead, they buy mortgages after the application process and collect the payments.  In creating Fannie Mae, the government desired to make sure there was enough money in the secondary market to keep the mortgage industry operating smoothly. To this end, Fannie Mae was specifically charged with the task of buying mortgages insured by the Federal Housing Administration, better known as FHA.

In 1968, Fannie Mae went private and expanded the secondary mortgage operation by purchasing both FHA loans and non-FHA instruments. This evolution made Fannie Mae a major player in the mortgage industry. Since going public, it has purchased millions of mortgages, which has helped put a families in homes.

While Fannie Mae is a publicly traded company, it is still tied to the federal government through a congressional charter. The charter allows Congress to oversee Fannie Mae and make sure it is following its initial purpose. – Dawn Kornovich



Panama City Beach FL



Picture of the Day



“Why Yacht? ” St. Thomas USVI 

FHA Loan Qualifications

What is an FHA loan and do I qualify?

In 1934, Congress established the federal housing administration. This agency built the foundation for more affordable loans, enabling many Americans to buy a home with little money down and low interest rates. The government insures lenders against borrower default on FHA loans, which reduces the risk to lenders and allows them to offer lower interest rates. Additionally, the FHA has set fairly liberal underwriting guidelines that make FHA loans available to a large group of people. This high demand also helps keep the interest rates low.

If you are looking to buy a home with little money down, an FHA loan may me right for you. To help you know if you could qualify for this type of loan, consider the following guidelines:

Income Qualifications

The past two years of complete income tax returns with schedules and W-2s as well as the past two months of pay stubs are used to establish your income. Your monthly gross income (before taxes) is used to determine the loan amount you can qualify for.

Your housing ratio should not exceed 29% of your monthly gross income. This means that the amount you pay each month to cover the principal, interest, taxes, and insurance for your home divided by your monthly income should not be greater than 0.29.

Your total debt ratio should not exceed 41% of your monthly gross income. This means that your mortgage payment, auto payment, and any other debt lasting more than 10 months divided by your monthly income should not be greater than 0.41.

If you have filed a chapter 7 bankruptcy, you must be at least two years from discharge date before you can qualify for an FHA loan.

Down Payment

Most FHA loans require a down payment of 3.5% of the cost of the home. Unlike some other types of loans, this does not have to come from your savings or reserves. The down payment can come as a gift from a family member or from a down payment assistance program.  -Dawn Kornovich   



Shell Island FL 

Key Documents For A New Home Mortgage

Obtaining a new home mortgage these days is difficult enough without the added hassle of paper work. In most cases, however, paperwork is exactly what will happen when a mortgage is given.

Trying to have all the particulars lined up is a key to a smooth transition into your new home.

Income

Your income and employment history are a key aspect in receiving a new home mortgage. Current paystubs and the last two years of W-2’s are required. In most cases your tax returns are also needed. Processing will verify employment. Make sure your spouse or significant others records are available if their names are going to be even remotely associated with the new home mortgage. In many cases these records are not needed but having them available will reduce stress.

Savings

After the recent issues of sub-prime mortgages, lenders are more concerned with how much savings you have in reserve. A home mortgage now requires a look at how many payments you can make if all potential income was lost. In most instances two payments are required. If your particular circumstance has be less-then-perfect, you may be required to demonstrate even more for your new home mortgage.

Down payment

The power of a good sized down payment is often underestimated in mortgage deliberations. The more you can demonstrate you are willing to put on the mortgage, the more clout you have as the lender goes about talking new home mortgage conditions.

Inspections, insurance and title

Making sure that the history of the home is documented is up to you. Having a home inspection can often be set up though your Realtor but the ultimate responsibility is yours. Making sure the title search is complete is perhaps one of those items that should be paid the most attention to in a new home mortgage situation. In-of-itself the title search is really no big deal. If, however, there is an issue that pops up at the very last minute that you didn’t see coming can effect your ability to place a mortgage on the property.

If you are still in doubts, do not hesitate to ask questions.



Near Fountain Hills AZ

Picture of the Day

  

Boaters on Old Hickory Lake, TN

What Is A Veteran’s Affair (VA) Loan?

A VA home loan is actually a guarantee rather than a loan. The VA does not actually lend the money to the borrower, but promises to make good to the lender should the borrower default on the loan. This promise from the government helps many people get loans that they might not otherwise be able to get.

A VA loan also comes with some very helpful and cost saving aspects. Many veterans may not know that a VA loan carries with it caps for closing costs which can save the borrower a lot of money at closing time. The VA also allows for some leniency to qualified VA borrowers who are having temporary financial problems.

Some of the other benefits that a VA home loan offers include such things no private mortgage insurance, no down payment for certain cases, higher cash out refinances, and accurate assessments of the property value for the planned home.

There are some issues that VA loan borrowers should be aware of as they go through the process of buying a home. For example, when you buy a home through a VA home loan, the VA does not offer any type of guarantee that the house is free from defects. The VA will certainly do an appraisal of the property, but this should not be taken as an official inspection of the property.

In addition, the VA does not require or even order builders to correct problems or defects that they (the VA) or you may find during the building of a property. That is your responsibility. In fact, you should always get an expert to inspect the house in an official capacity as it is being built (in new home construction projects) or as is with standing homes.

The VA will not be able to offer legal advice either. You, as the buyer, must use your own attorney for those matters. It is your responsibility to be aware of the laws that govern your deal and your property. Even with these restrictions, the VA still offers a great deal for many veterans.

A VA loan can also be a flexible loan. In addition to helping secure loans for standing homes and for building new homes.

In order to qualify for a VA home loan, the borrower must be within a certain debt ratio and credit score. As you might imagine there are many other factors that will also be used to measure your creditworthiness and the more issues you can resolve before applying the better.

I offer $500 as a lender credit for all active and retired milatary – Dawn Kornovich

Finding The Best Fit In A Home Owner’s Insurance Policy

Everyone with a mortgage is required to purchase a homeowners’ insurance policy. Being a long-time homeowner doesn’t make you exempt. Just because disaster hasn’t struck in 20 years doesn’t mean that it won’t strike in the years to come or even tomorrow. Read and understand the tips in this article if you want to find a great policy.

 

Shop for insurance companies selling health, life, car and home owner’s insurance. Multiple policy discounts can save you hundreds of dollars in lower yearly insurance premiums. Managing your policies is also easier as usually one agent can answer all your questions and you can pay your premiums at the same location.

 

If you have worries about people being injured on your property – although I cannot imagine why, unless you own a swimming pool – you do have coverage under your home owner’s insurance for personal liability. This coverage is typically $100,000, but you can have it raised if you feel that is insufficient coverage for your home.

 

Consider raising the deductible on your home insurance policy. A higher deductible on your insurance policy can significantly lower your annual home insurance premiums. Unfortunately, by raising the deductible, your home insurance company will no longer pay for small claims, such as broken window repair, leaky pipe repair and minor wind and storm damage repairs.

 

When you buy real estate you have the option to purchase title insurance. It is a form of insurance which insures against financial losses due to defects in the title. The insurance company will defend the title in a possible lawsuit or reimburse the owner for his monetary loss. The insurance policy costs less than a hundred dollars when the lender requires a title policy. In case of a lawsuit the policy can provide you with the protection you need. It will be an extremely rare case that you will need title insurance; however you can’t pick up the phone and call an attorney for under $100.

 

The home you have just bought is probably the largest investment in your life. It is a natural instinct to protect the value of your property. The way to do that is to purchase a home owner insurance policy, which is basically a contract between an insurance company and the home owner. As long as the home owner keeps paying the monthly premiums, the insurance company pays for certain losses such as damage caused by human actions or natural disasters.

 

To help lower your annual homeowner’s insurance premiums, you may want to consider raising your deductible. You will want to do your homework on this, however, as smaller claims such as broken windows or damage from a leaky pipe may end up costing you, as you will be required to pay them. Ask your agent questions about what happens if…. Or I’m I covered for …. I once had a policy that would not cover sewer back up or broken pipes. I cancelled that policy after I was informed of the lack of coverage! I thought my agent should have better educated me on lack of coverage. Luckily we never had damage with that sub standard policy! Ask questions and educate yourself about insurance. You don’t know the coverage you have until you have a claim. I personally shop my insurance yearly to save money. I use several insurance companies since some offer better prices on certain policies. – Dawn Kornovich

 

Sunset From the Boat Dock
Gallatin TN