Where can I find information about Government first time home buyers programs?

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I’m looking into all of my mortgage options. I’ve already been approved for a loan with 100% financing, but not sure I want to go that route. My score is around 630 right now, and slowly getting better. I’ve been at the same job for over 9 years, and at the same residence for 4 years. I don’t have any money in savings, but if I waited a few years I could probably save a little. Would I qualify for a goverment FHA loan?

  1. Reply
    April 30, 2011 at 12:47 am
  2. Reply
    Darren Meade
    April 30, 2011 at 12:51 am

    Hello –

    I’d need more information to know if you truly qualify for an FHA loan.

    Here though is an overview of what involved in getting financed for an FHA loan:

    For some reason I’ve found that these nine documents listed below are enough to scare loan officers away from doing FHA loans. When I’m training loan officers who express fear about these FHA application documents, the first thing I ask them is, “Did you read them?” Honestly, in all my years of teaching loan officers, I don’t think anyone has ever answered yes to that question. So the first thing I’ll say to you is, take the time, on a Sunday morning when you don’t have a lot in your schedule, grab a cup of coffee, relax, and just read through every word of these documents. Do it twice if you have to. Do it until you develop a level of comfort and confidence, one that you can use in explaining these documents to your customers.

    The nine required FHA documents are as follows:

    The Good Faith Estimate
    The HUD Addendum, which is a four page document
    The Important Notice To Homebuyers
    The Home Inspection Disclosure
    The Informed Consumer Choice Disclosure
    The Assumption Notice
    The Amendatory Clause and Real Estate Certification
    The Lead-Based Paint Disclosure
    The FHA ARM Disclosure, if you are originating an adjustable rate mortgage for your customer.
    Let me briefly describe how I highlight the important aspects of these documents when I’m sitting with the customer at application. With the Good Faith Estimate, I never state the dollar amount verbally. I just circle the fees and show them all the amounts associated with that section of the good faith estimate. For example, I’ll point to the origination fee and the appraisal fee and say, “These are the items payable in connection with your loan,” and I’ll just go right down the good faith estimate. I follow the same pattern with the title charges, the government recording and transfer charges, and the reserves deposited with the lender for the tax escrow.

    There are a couple of additional items I would like to point out about the good faith estimate and FHA loans. The minimum amount of interest you need to quote for the borrower is fifteen days. Also, it’s a good idea to put in thirteen or sometimes fourteen months for the tax reserves, so that you won’t come up short at closing. In addition, if you’re indicating a seller contribution or down-payment assistance gift in the “total estimated funds needed to close” section, it’s important that you also record that same number in the “details of transaction” on page 3 of the 1003. This will ensure that the amount needed for closing comes out correctly in that section as well.

    Next is the HUD Addendum, also known as the 92-900-A. Make sure that you are using the one that’s dated “4 of 2004”. That’s the most recent version of this form. This is a four-page document that’s often overwhelming to loan officers because it is so long. Most of it only pertains to the lender, and I’m going to point out here the sections that actually pertain to the borrower.

    On page one of the HUD addendum, the borrower is only responding to box 18, which asks whether they’re a first-time home buyer or not, and box 20, which identifies the purpose of the loan. In most cases, it’s going to be “purchase existing home, previously occupied.” The bottom part, part two, is a lender certification. I do advise that you read it so that you know what you’re certifying. You will then need to sign that section.

    On page two, the borrower is really only certifying a couple things. In item twenty-two, they are answering whether they’ve had an FHA mortgage in the last sixty months or not. In item twenty-five, they’re acknowledging whether they know the value of the property as determined by an FHA appraiser. The borrower signs at the bottom of page two.

    Page three is solely for the direct-endorse underwriter, and you don’t have to have this document signed. At the top of page four, the borrower is certifying that they have not taken out any other mortgages in connection with this property and that they will occupy the property within 60 days of closing. Once again, the bottom is a lender’s certification and you should take the time to read that as well. The borrower should sign at the top, and the lender should sign at the bottom.

    The next document we will discuss is the Important Notice To Home Buyers, otherwise known as the HUD 92-900-B. This document was recently updated in December of 2004, so make sure that your company is using the current version of the form.

    There are four main things that this two-page document covers. The first page indicates that the FHA does not warrant the condition of the property. It also points out that HUD does not regulate the interest rate or the discount points and that the lender does. It further advises the borrower not to commit loan fraud and identifies the penalties for doing so. On the second page, information is provided about a possible refund of some of the monthly mortgage insurance premiums that are financed into the loan. Finally, page two should be signed by the borrower.

    Our next document is entitled “For Your Protection, Get A Home Inspection.” This form was updated in December of 2004 and is also known as the HUD 92 564-CN. This document is disclosing to the borrower that the FHA does not warrant the condition of the property and that they should obtain a home inspection on their own. The only update made to this document was the FHA states that not only do they not warrant the condition of the property, but they do not guarantee the value as well.

    We will now examine the Informed Consumer Choice Disclosure. What this item does is compare FHA financing to the closest conventional financing available. What I tell my borrowers is that this is the closest conventional product there is. However, it really doesn’t compare to the FHA program because the credit scores required are higher, the mortgage insurance monthly is much higher, and it requires a larger down payment.

    The next document is the Assumption Notice. This item explains to the borrower that if someone wants to take over their mortgage payments, this needs to be done in a formal manner. This will ensure that they are legally released from the liability of making those mortgage payments back to the lender. I express to my borrowers that if someone does want to take over their mortgage payments, they need to call the current lender to get instructions on how to legally perform this task.

    The two documents we will review now are normally combined into one in most loan origination software programs. The first is the FHA Amendatory Clause. This states that if the home does not appraise for the value on the purchase agreement, then all deposit moneys will be returned to the borrower, and they are not required to fulfill that purchase transaction. The next item is the Real Estate Certification. On this form, the borrower, seller, listing agent, and selling agent are all acknowledging that the terms and conditions of the sales contract are true to the best of their knowledge and that any other agreements have also been included in the purchase agreement as well.

    The next required document is the Lead-Based Paint Disclosure. Most often this item will come to you from the real estate agent, along with the contract and any other addendums. Any properties that were built prior to 1978 will require this disclosure.

    The last document on our list is the FHA Adjustable Rate Mortgage Disclosure. This is just like any other standard ARM disclosure. It includes the ARM loan terms, the initial interest rate, the margin, and discount points. It’s important that borrowers understand how this product works. Most first time home buyers are generally uneducated about mortgage loans, and they need to fully understand that their mortgage interest rate may increase in the future.

    In closing, I want to make you aware that FHA does put restrictions on the fees that can be charged to borrowers. In addition, there are certain state requirements. So please consult with your FHA underwriter for a list of FHA allowable closing costs. This will benefit you greatly when it comes to structuring your loan correctly.

    Please let me know if I can be of any further help.

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