Franklin Advantage Mortgage Expert

When is a conventional loan better than a FHA loan?

noreply@blogger.com (Franklin Advantage) — Wed, 28 Dec 2011 20:45:00 +0000

Lakewood CA said:
We want to buy a home that may appraise for less with a FHA loan than the asking price.

With very good credit would it be wise to go with a Conventional loan, or just keep looking?

We like this house very much, but aren’t in a situation to pay cash for the difference of the asking price and what may be an appraisal that comes in less than the the seller is asking for. Anybody have a clue (I don’t).

Franklin Advantage:
A conventional loan is better than a FHA loan when:
   1.) You have 10% of the sales price for a down payment
Mortgage Insurance on conventional loans over 90% of the sales price/appraised value is almost or as high as Mortgage Insurance on an FHA loan.
   2.) You have a credit score of 700 or greater
Rates on conventional 30 year fixed rate loans have been higher than comparable rates on FHA loans for some time now. With the addition to rates and fees for credit scores below 700; FHA loans price out better for the borrower when the loan is over 90% of the sales price.
   3.) You can qualify for a conventional loan.
Conventional (and Mortgage Insurance) underwriting is much more stringent than FHA underwriting.

Regarding the appraisal:

Conventional loans require appraisals just like FHA loans. Appraisers have access to the same comparable sales for both conventional and FHA appraisals. A conventional appraisal and FHA appraisal done on the same house on the same day should appraise for the same value.

FHA appraisals are harder on the property by requiring all health and safety issues be addressed to meet minimum HUD standards but this does not affect the value; only the condition of the property when transferred.

I understand you really like THIS house but i’m sure the seller really wants to sell this house as well. If the appraisal comes in low; have your real estate agent talk to the seller’s agent or the seller. The seller may be able to accommodate you by adjusting the sales price down or offering to pay your loan costs thereby freeing up your funds to meet their higher sales price.

Also, if the value comes in low make sure your real estate agent makes the seller aware that an FHA appraisal “goes with the house” for six months. Any other FHA buyer who comes in after you, they will be obligated to use this appraisal.

http://www.f-advantage.com/fha.php

Why do FHA loans have less foreclosures than other loans?

noreply@blogger.com (Franklin Advantage) — Fri, 25 Nov 2011 21:07:00 +0000

Long Beach CA said:
I though FHA loans are more risky.

Franklin Advantage:
There are several reasons that FHA (and VA) loans have lower default rates than conventional loans.

1.) FHA and VA loans have always required the borrower(s) to fully document their income. Fannie Mae, Freddie Mac Alt A, and Sub Prime loans have accepted alternate and no income verification loans.

This policy has lead to a disproportionate ratio of self-employed and commissioned borrowers with Fannie Mae, Freddie Mac and other home financing vehicles. When the economy slows down (or stops dead in its tracks), the self-employed and commission borrowers see greater volatility in their income.

2.) FHA and VA loans (VA loans have an even lower default rate even though VA loans require no down-payment) are assumable. This allows borrowers who are in trouble to find a buyer for their home with little costs. FHA loans do require the new buyer to qualify for the loan but their flexible underwriting guidelines do not make this difficult.

3.) FHA and VA variable rate loans are more conservative.
   a.   FHA and VA variable rate loans have never offered deferred interest like Alt A and Sub Prime loans.
   b.   FHA and VA variable rate loans have an annual interest rate adjustment cap of 1% where Fannie and Freddie have a 2% cap.
   c. FHA and VA hybrid loans (loans that are fixed for the initial 3, 5, or 7 years then become variable rate loans) have a 1% adjustment cap after the initial fixed period where Fannie and Freddie had 5% caps and Alt A and Sub Prime loans had caps as high as 7%.

4.) FHA and VA loan limits were lower than Fannie Mae and Freddie Mac. The lower loan limits made FHA and VA loans less desirable during the height of the housing bubble.

There are several additional reasons but the 1st and 4th reasons offered above are probably the main reasons for FHA and VA's current health.

http://www.f-advantage.com/fha.php
http://www.f-advantage.com/va.php

Vesting worksheet question for mortgage ownership?

noreply@blogger.com (Franklin Advantage) — Wed, 02 Nov 2011 19:35:00 +0000

Los Angeles said:
I am purchasing a home with my parents and I'm not sure how to fill this out.

My dad, mom, and I will be on the mortgage loan and I need advice on how to distribute the ownership.

My dad is an engineer and will probably retire in 5-10 years(has the highest income), My mom owns a business and she might have to close it down and owe money(has the lowest income), and I am an accountant and will not retire any time soon because I'm only 25 years old. Based on our situation, could anyone give me a detailed advice?

What is the best way to fill this form out?

Do we do Joint Tenants, Community Property, Community Property WITH RIGHT OF SURVIVORSHIP, Tenants in Common, or Other?

Franklin Advantage:
Holding title as community property (or community property with right to survivorship) is only for the married. Since you are not married to your parents, these are not options.

Holding title as community property allows either partner to pass on their half of the property to their spouse (right of survivorship) or they can will their interest to another party.

Tenants in common allows title holders to own a separate, unequal interest in the property (Mom owns 50%, Dad owns 40% of the home and you own the remaining 10%). There is no right of survivorship. If any title holder passes away, his or her interest must go through probate if a will was not left.

Joint Tenants allows all title holders to hold an equal, undivided interest in the property with right of survivorship. In Joint Tenancy 3 individuals will each own an undivided 33.33% interest in the property. If any title holder passes away, his or her interest is left to the other title holders unless a will is left leaving their undivided interest to another party.

I would suggest you hold title as joint tenants. Your title should read:
Dad and Mom, husband and wife, and You, a single man (or woman), all as joint tenants.

This will give you all an equal right to the property with rights of survivorship.

Also, I always recommend that you hold title with your name as it appears on your passport, driver’s license or any government picture ID.

http://www.f-advantage.com/articles.php

How long must I hold a job for in order to qualify for a Mortgage?

noreply@blogger.com (Franklin Advantage) — Wed, 19 Oct 2011 19:39:00 +0000

Mission Viejo California said:

I want to buy a home and get a mortgage and was wondering generally how long does someone have to have a job for? I want to wait at least a year and a half, do you think this is viable? Any other tips on getting a mortgage sooner?

I'm interested in getting an FHA loan, are there different requirements?

Franklin Advantage:

Two years if employed, three years if self employed. I can't think of any other way of getting a home sooner unless 1) you can put down a sizable down payment or 2) your parents are willing to cosign on a mortgage with you — which I definitely wouldn't recommend.

FHA requires a 2 year history of employment but there are exceptions.

1.) If you just graduated from a university or trade school and have found work in your in your chosen profession.
2.) If you have had history of part time employment and you recently went to full time employment (for example: a substitute teacher that gets a full time position)

You only need to be self employed for two years but to approve your loan the underwriter will want to see your self-employed income reflected on your most recent two years tax returns.

http://www.f-advantage.com/fha.php

I’m buying my first home. The one I want needs a lot of work…whats a good loan to get?

noreply@blogger.com (Franklin Advantage) — Thu, 06 Oct 2011 19:29:00 +0000

Corona Said:
My boyfriend and I are going in on it together. he doesn't have a lot of credit and I do. His is A+ and mine has quite a few blemishes. What's the best loan for us to get?

Franklin Advantage:
Choosing the right loan can be very confusing; especially in this market. There are a lot of options and extraordinary opportunities today. FHA may be the program that can help you buy fixer-upper home.

FHA allows for blemished credit and low down payments. The Federal Housing Administration (FHA) was created by the National Housing Act of 1934. Its intent was to regulate the terms of mortgages that it insured and increase the number of people who could afford homeownership. With minimal down payments and affordable monthly mortgage payments, FHA accomplished its goal of increasing homeownership over its 75 year history.

FHA's 203k program allows you to buy a fixer home, fix it up and include the repair costs in one loan. This loan is based on the sales price but rather the future value once the repairs are complete.

Today, there are a lot of foreclosed homes for sale. These homes often need repairs. Conventional financing will not allow financing until the repairs are complete. This keeps many potential home buyers from buying these homes but with the FHA 203k program, homebuyers can finance the cost of the repairs into their FHA mortgage.

http://www.f-advantage.com/articles.php

When getting a mortgage loan, does the student loan affect my eligibility?

noreply@blogger.com (Franklin Advantage) — Wed, 21 Sep 2011 19:09:00 +0000

Irvine CA said:
I am planning to buy a house ($700,000 value), zip code 92618. how much should I expect to pay for down payment, in the current economy, and other fees?
The monthly amount (debt) will direct reduce the amount of monthly mortgage payments you can afford.
* To avoid PMI – put 20% down.
* Private Mortgage Insurance can cost thousands a year.
* It is not tax deductible, and does not go towards principal or interest.
* It's like throwing money away, year after year

Franklin Advantage:
A student loan monthly payment does affect your ability to qualify. It does not affect you any more or less than any other monthly payment (think car payment or minimum credit card payment). A student loan in default will preclude you from getting a FHA loan. A student loan in default will also negatively impact your credit and may hurt your ability to get any mortgage loan.

The lowering of maximum loan amounts on October 1st will directly affect your purchase of a home for $700,000 in Orange County, California. You best hurry!

FHA and Fannie/Freddie maximum loan amounts in LA and Orange Counties are dropping as of October 1st ot $625,500. If you choose to buy a home using FHA and can close before October 1st, 2011; you can buy your home with only $24,500 (3.5% down payment). But after, (because of the maximum loan amount) the minimum down payment for a $700,000 home will be $74,500.Conventional Fannie/Freddie loans are available to the best qualified borrowers at 90% of the sales price.

If you choose conventional financing and can close before October 1st, 2011; you can buy your home with $70,000. After October 1st you will need $74,500 again, because of the maximum loan amount change.What you can expect to pay for the loan depends on what loan program you choose and at what rate you choose. Talk to a Loan Officer about this.If you choose an FHA loan, taxes and insurance will be required to be part of your payment. The impound account will need to be set up and will probably cost you between $6,500 to $8,000 (depending on the first payment date of your new FHA loan). Again, talk to a Loan Officer about this.

In California, impound accounts are not required on conventional loans at and under 90% of the sales price/value.What you pay in escrow and title fees will depend on which escrow and title company are used. I estimate you will pay $2,250 in escrow fees and a $1,000 in title fees on a $700,000 sales price.There will be other fees. Recording, HOA transfer fees, etc. Again, please call a Loan Officer. A good Loan Officer can present you several options with an estimate of your costs.

http://www.thefranklinadvantage.com/Purchases.php

Can I buy a house in my name only? We married but I filed ch. 7 a year before we married.?

noreply@blogger.com (Franklin Advantage) — Thu, 08 Sep 2011 22:22:00 +0000

Azusa California Said:
After filing ch.7 I married 1 1/2 years later. My wife bought our current house in her name only, I did have to sign some paperwork that basically said that I am aware of the purchase. They were not able to include my income for approval, everything strictly in her name. My question is once I reach my two year mark from discharge I plan to buy a home. My wife will have our current mortgage as debt $975 monthly and probably 3k of consumer debt. I don't want her debt and deferred student loans to count against me being approved for 75k hopefully. Any thoughts or loan advisor input? Any help is greatly appreciated.

Franklin Advantage:
You should be fine as long and you are not living in or buying in a community property state.

If you are living in or buying in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin); there will be a problem.

In a community property state, FHA will count the debts of a spouse even if the spouse is not on the loan. (Only FHA, not Fannie Mae nor Freddie Mac will approve you for a new loan 2 years after a bankruptcy)

Again, this only applies if you're in a community property state.

http://www.thefranklinadvantage.com/Purchases.php

Mortgage refinancing?

noreply@blogger.com (Franklin Advantage) — Tue, 06 Sep 2011 18:57:00 +0000

San Bernardino CA said:
I own an 3 family rental property that’s i purchased 6yrs ago. I have always had steady rents coming in and have never been late. I have an interest rate of 7% and as with every-ones home i ended up upside down. Recently i spoke to a mortgage broker that said i have option and that it would be in my best interest to refinance even it being upside down. Because i have excellent credit that will work to my advantage. Now i have 24 yrs left. If i go to a lower interest rate back to 30yrs then i could have a positive income after all expenses of almost 650.00. Now if i did 20yrs at a lower rate my positive income is roughly 225.00. I’m torn because i would love to see that extra money but to go back to 30 kills me. What do you guys think? Just some quick info on me i’m 32yrs old married. I also own a single family residence. My future for the mutli unit was for income once it was paid off.

Franklin Advantage:
First of all, being upside down will not prevent you from refinancing (even if the loan is on a non-owner occupied triplex) if the current loan is owned by Fannie Mae or Freddie Mac. Fannie and Freddie both offer borrowers the ability to refinance their current Fannie or Freddie loans into new Fannie or Freddie loans with little, no or even negative equity. Also, since the new loan will be a Fannie or Freddie loan; there is no pre payment penalty.

Please check the links below in the sources to verify your loan is a Fannie or Freddie loan otherwise you could end up paying for an appraisal that serves no purpose.

Secondly, there are additional options you should ask your loan broker about.

Fannie and Freddie both offer 25 year fixed rate loans. The rate is the same as a 30 year fixed rate loan so there is little benefit other than forcing you to a shorter amortization schedule.

The other option is to take the 30 year fixed rate loan and make larger payments, in essence; self-amortize the loan for 25 or even 24 years. Check the link to Franklin Advantages Tools page in the source section for an amortization tool.

Self-amortization will give you flexibility. Flexibility to pay less when you depend on tenants for income is always a good idea.

http://f-advantage.com/Refinance.php

First Time Home Buyer?

noreply@blogger.com (Franklin Advantage) — Tue, 30 Aug 2011 16:48:00 +0000

Riverside CA Said:
Me and my husband are just starting out on our home search for the first time. I feel a little lost! Homes in our area of Hemet/San Jacinto/Menifee in Southern California area are a STEAL and we don’t want to miss out on the great prices out there.
Does anyone know what they offer for first time home buyer programs or incentives.
Do they still have the k tax credit?
Is there assistance for down payment?

Franklin Advantage:
A.) the $8,000 tax credit is gone.
B.) yes, there are down payment assistance programs available in California.

But first, are you or your husband veterans? If so, VA loans require no down-payment. A veteran can get a loan up to $417,000 in Hemet with no down payment.

FHA loans only require 3.5% down payment. FHA loan will lend to $500,000 in Hemet on a single family home: more on a duplex or a 3 and 4 unit home.

CalHFA offers second loans that with a concurrent FHA loan, only requires a ½% down payment in Hemet. CalHFA is a program offered through the state of California for future home owners who make less than 80% of the median income in Riverside County. Today that’s $54,600 for a single buyer and $62,400 for a couple per year (up to 6 borrowers can apply and with additional borrowers the maximum allowable income rises).

There is also a program called the WISH program. WISH offers $3 for every $1 in grant money toward your down payment and closing costs up to $15,000 in California. This program, like CalHFA has income limitations.

http://www.f-advantage.com/articles.php

Can i buy a house?

noreply@blogger.com (Franklin Advantage) — Mon, 08 Aug 2011 19:17:00 +0000

Arizona Said:
ok here is the info. i work in hudson mass. im transferring to chandler arizona. i am getting around 3,000 for relocation package. i am looking at a house for around 50,000 (maricopa very cheap) i am 21 years old i make about 44k a year 3,500 a month, i have been paying 400.00 a month for rent. i tried to get pre approved online the instant free site and i did not qualify. i know my credit isnt great its around 600. is there any way i can get a loan or mortgage on a home without having to have a co-signer?

Franklin Advantage:
Yes.

FHA underwriting will consider accept credit scores as low as 580. When your credit score is below 620, underwriters look for compensating factors. Based on your question you have two already.

Compensating factors when your credit is below 620 can include:
A.) A larger down payment of 10% of the sales price ($5,000 on a $50,000 home)
B.) Debt ratios below 41%

At $44,000 a year, your total monthly payments including your new housing expenses cannot exceed $1,503 to keep your debt ratio below 41%.
If you bought a home for $50,000 with a new FHA 30 year fixed rate loan at 4.5% your principle, interest and mortgage insurance payment would be $273.41. Add property taxes at 1.25% of the sales price and hazard insurance at $600 a year and your total housing payment would be $375.50. Unless you have monthly credit card, car and student loan payments of more than $1,127 a month; you should be fine.

http://www.thefranklinadvantage.com/Purchases.php