FHA MADE FHA MADE EASYEASY

Presented by Presented by

WHY FHA?WHY FHA?

FHA loansFHA loans Have no prepayment penaltiesHave no prepayment penalties Have no income limits (except Utah Have no income limits (except Utah

Housing)Housing) Do not have to be a first time homebuyerDo not have to be a first time homebuyer Easy process with an experienced Loan Easy process with an experienced Loan

OfficerOfficer Allow up to a 6% seller contributionAllow up to a 6% seller contribution Are able to streamline refinance for Are able to streamline refinance for

minimal or no costminimal or no cost Cash out refinance at 95% Cash out refinance at 95%

MORTGAGE INSURANCEMORTGAGE INSURANCE

Mortgage Mortgage insurance is now insurance is now tax deductible as tax deductible as of January 1, of January 1, 20072007

((Less than $100K AGILess than $100K AGI))

CH...CH…CHANGES!CH...CH…CHANGES! For case number assignments on or after For case number assignments on or after 10/1/0810/1/08, ,

FHA will no longer base mortgage insurance FHA will no longer base mortgage insurance premiums on credit score and LTV ratios.premiums on credit score and LTV ratios.

Upfront premiums:Upfront premiums: Purchase money & full credit qualifying refinances Purchase money & full credit qualifying refinances

= 1.75%= 1.75% Streamline refinances = 1.50%Streamline refinances = 1.50% FHA Secure (delinquent mortgagors) = 3.00%FHA Secure (delinquent mortgagors) = 3.00% Annual premiums:Annual premiums:

FHA Secure with LTV FHA Secure with LTV << 95 annual MIP = .50, loans 95 annual MIP = .50, loans with LTV > 95 have annual MIP = .55with LTV > 95 have annual MIP = .55

LTVLTV >15 YRS>15 YRS LTVLTV << 15 YRS 15 YRS

< < 95 95 5050 << 90 90 NONENONE

> 95 5555 > 90> 90 2525

MORTGAGE INSURANCEMORTGAGE INSURANCE

If the loan has an up If the loan has an up front mortgage front mortgage insurance premium of insurance premium of 1.5% of the loan 1.5% of the loan amount. amount.

Example: If the loan Example: If the loan amount is $100,000 the amount is $100,000 the up front fee would be up front fee would be $1,500.$1,500.

Total loan amount = Total loan amount = 101,500101,500

If the loan also has a If the loan also has a monthly mortgage monthly mortgage insurance premium insurance premium of .50% of loan amount of .50% of loan amount divided by 12.divided by 12.

Example: If the loan amount is Example: If the loan amount is $100,000 X .005 / 12 = $100,000 X .005 / 12 = $41.67 monthly fee.$41.67 monthly fee.

DOWN PAYMENT REQUIREMENTSDOWN PAYMENT REQUIREMENTS

3% down payment is required. Sources 3% down payment is required. Sources include:include:

Gift from relativeGift from relative SecuredSecured borrowed funds – including borrowed funds – including

401k loan401k loan Sales proceeds (real estate or personal Sales proceeds (real estate or personal

property with supporting documentation)property with supporting documentation) Utah Housing seconds (additional Utah Housing seconds (additional

requirements apply)requirements apply)

CREDITCREDIT REQUIREMENTSREQUIREMENTS

Chapter 7 bankruptcy – Chapter 7 bankruptcy – 2 years from discharge2 years from discharge

Chapter 13 bankruptcy Chapter 13 bankruptcy – can still be in – can still be in repayment process with repayment process with 12 months on-time 12 months on-time paymentspayments

Foreclosure – 3 yearsForeclosure – 3 years Consumer Credit Consumer Credit

counseling – 12 months counseling – 12 months on-time payments on-time payments (Treated the same as a (Treated the same as a Chapter 13 bankruptcy)Chapter 13 bankruptcy)

CREDIT CREDIT REQUIREMENTSREQUIREMENTS

If the borrower has no traditional credit, three If the borrower has no traditional credit, three alternative trade lines can be obtained. At least one must alternative trade lines can be obtained. At least one must be from Group I and covering the most recent 12 months.be from Group I and covering the most recent 12 months.

GROUP IGROUP I GROUP II GROUP II Utility ratingUtility rating child care child care

paymentspayments Rental rating auto Rental rating auto

paymentpayment Cable TV cell Cable TV cell

phonesphones

Ratings must be verified through a credit bureau. If Ratings must be verified through a credit bureau. If rental rating is through family, verification must be done rental rating is through family, verification must be done with 12 months of cancelled checks with 12 months of cancelled checks

EMPLOYMENT EMPLOYMENT REQUIREMENTSREQUIREMENTS

The borrower must have a two year work The borrower must have a two year work history.history.

Income that varies from month to month Income that varies from month to month such as tips, commissions, overtime, self-such as tips, commissions, overtime, self-employment, bonus, etc. must have received employment, bonus, etc. must have received for 2 years. Income will be averaged.for 2 years. Income will be averaged.

Declining income is generally not acceptableDeclining income is generally not acceptable

EMPLOYMENT EMPLOYMENT REQUIREMENTSREQUIREMENTS

To use second job income, the buyer To use second job income, the buyer must verify they have worked both a must verify they have worked both a full time job and a part time job, full time job and a part time job, consecutively, for the last two years, consecutively, for the last two years, and the income has the probability to and the income has the probability to continue.continue.

Non-employment sources of income, Non-employment sources of income, such as child support, social security, such as child support, social security, etc., can be used as long as it will etc., can be used as long as it will continue for no less than 3 years.continue for no less than 3 years.

APPRAISAL APPRAISAL REQUIREMENTSREQUIREMENTS

The appraiser must be an FHA approved The appraiser must be an FHA approved appraiserappraiser

CONDITIONS THAT ARE CONDITIONS THAT ARE STILL REQUIRED BY FHASTILL REQUIRED BY FHA

Inadequate access Inadequate access from bedrooms to from bedrooms to exterior of home exterior of home

Leaking roofLeaking roof Defective paint Defective paint

surfaces in home surfaces in home constructed post-1978 constructed post-1978 when finish is when finish is otherwise unprotectedotherwise unprotected

Any items that are a Any items that are a health and/or safety health and/or safety issueissue

INSPECTIONS THAT ARE INSPECTIONS THAT ARE STILL REQUIREDSTILL REQUIRED

Standing water against the foundation Standing water against the foundation and/or excessively damp basementand/or excessively damp basement

Hazardous materials on the site or within Hazardous materials on the site or within the improvementsthe improvements

Faulty or defective mechanical systems Faulty or defective mechanical systems (electrical, plumbing or heating)(electrical, plumbing or heating)

Evidence of possible structural failures Evidence of possible structural failures (settlement of or bulging foundation (settlement of or bulging foundation wall) wall)

CONDITIONS THAT NO CONDITIONS THAT NO LONGER ARE REQUIRED BY LONGER ARE REQUIRED BY

FHA:FHA:

Missing handrailsMissing handrails Cracked or damaged exit doors that are otherwise Cracked or damaged exit doors that are otherwise

operableoperable Cracked window glassCracked window glass Defective paint surfaces in homes constructed post 1978Defective paint surfaces in homes constructed post 1978 Minor plumbing leaks (such as leaky faucets)Minor plumbing leaks (such as leaky faucets) Defective floor finish or covering (worn through the Defective floor finish or covering (worn through the

finish, badly worn carpet)finish, badly worn carpet) Rotten or worn out countertopsRotten or worn out countertops ““Cosmetic” repairsCosmetic” repairs

CONDITIONS THAT NO CONDITIONS THAT NO LONGER ARE REQUIRED BY LONGER ARE REQUIRED BY

FHA:FHA:

Termite inspections (unless appraiser notes an Termite inspections (unless appraiser notes an issue)issue)

Damaged plaster, sheetrock or other wall and Damaged plaster, sheetrock or other wall and ceiling materials post 1978ceiling materials post 1978

Poor workmanshipPoor workmanship Trip hazards (cracked or partially heaving Trip hazards (cracked or partially heaving

sidewalks, poorly installed carpet)sidewalks, poorly installed carpet) Crawl space with debris and trashCrawl space with debris and trash Lack of an all-weather driveway surfaceLack of an all-weather driveway surface

PROPERTY FLIPPINGPROPERTY FLIPPING

Properties resold Properties resold under 90 days are under 90 days are ineligible.ineligible.

Properties resold Properties resold between 91-180 days between 91-180 days and sold for 100% and sold for 100% more than original list more than original list price, requires two price, requires two appraisals supporting appraisals supporting valuevalue

UTAH HOUSINGUTAH HOUSING Requires a minimum fico score of 660Requires a minimum fico score of 660 Low interest rate, 30 year fixed loanLow interest rate, 30 year fixed loan Acquisition costs limits (SL Co. and Summit Co. = Acquisition costs limits (SL Co. and Summit Co. =

$362,790)$362,790) Stimulus package to $729,750Stimulus package to $729,750 Income limits (based on family size and targeted/non-Income limits (based on family size and targeted/non-

targeted areas)targeted areas) Must be a first time homebuyer Must be a first time homebuyer Tax returns are no longer requiredTax returns are no longer required Applicants can borrow up to 6% of the first mortgage Applicants can borrow up to 6% of the first mortgage

amount using a Utah Housing subordinate secondamount using a Utah Housing subordinate second Underwritten per FHA guidelinesUnderwritten per FHA guidelines

Temporary loan limits increased Temporary loan limits increased until 12/31/08until 12/31/08

Salt Lake County and Summit Co: Salt Lake County and Summit Co: $729,750$729,750

Fixed rate and ARMs are availableFixed rate and ARMs are available Additional credit overlays for loans Additional credit overlays for loans

above $417,000above $417,000 Cash out maximum LTV of 85%Cash out maximum LTV of 85%

What YOU should know!What YOU should know! An FHA/VA addendum to the sales contract An FHA/VA addendum to the sales contract

signed by all parties, is required. This form signed by all parties, is required. This form incorporates the Real Estate certification incorporates the Real Estate certification and the Amendatory clause.and the Amendatory clause.

There are maximum mortgage limits based There are maximum mortgage limits based on the county in which the property is on the county in which the property is located. located.

There are requirements for loans on new There are requirements for loans on new construction properties, but the builder is construction properties, but the builder is no longer required to be FHA approvedno longer required to be FHA approved..

NOTICE!NOTICE!

Effective January 1, 2009Effective January 1, 2009

Revised down-payment requirement to Revised down-payment requirement to 3.5%3.5%

Closing costs may not be used to help Closing costs may not be used to help meet the minimum 3.5% down-payment meet the minimum 3.5% down-payment requirementrequirement