What is FHA?

What is FHA?
The National Housing Act of 1934 established the Federal Housing Administration (FHA). In 1965, the FHA becomes part of the US Department of Housing and Urban Development(HUD). Since 1934, the FHA and HUD have insured over 34 million mortgages.

The FHA has also been active in financing the development of multi-family housing. The FHA loan process requires borrowers to have no foreclosures in the past three years and no bankruptcies in the past two years. FHA current down payment requirement is 3.5%. For many years FHA rules require every borrower to put down a minimum of 3.5 present to qualify for a loan. However, this year the organization raised that minimum that amount to 10% for borrowers who had a FICO score (credit score) lower then 580 in order to protect its financial reserves.

What is the limit for the amount of an FHA loan?
It depends on the market of the property being purchased. FHA limits are set on the basis of local area median home price. In low-cost areas, the limit is $271,050, but it could go as high as $729,750 in high cost areas. You can find the FHA's loan limits for your market at http://www.fha.com/lending_limits_state.cfm?state=MARYLAND

If you decide to seek an FHA loan there are certain guidelines that Agency loan counselors will want you to meet. Two of the most important are the relative amounts of your mortgage and your household income, and the monthly mortgage payment in relation to your total monthly debt obligations.

Generally, the FHA will want your mortgage payment (generally meaning principal, interest, property taxes and property insurance — PITI) to be no more than 31% of your gross monthly income. Further, your total monthly debt obligation including the mortgage; credit cards; auto loans; student loans; etc. should come to no more than 43% of your monthly income. These ratios are more generous than many that you will find for non-FHA loans being offered today. Even higher ratios are available if you are purchasing an energy-efficient home. The so-called “stretch” ratio is 33/45 — 33 percent for PITI and 45 percent for all ongoing monthly payments. The FHA requires an appraisal of the property. Beyond physical inspection, the applicant must disclose all “sales concessions” to the appraiser. Those may include loan discount points, origination fees, interest rate buy downs, closing cost assistance, payment of condominium fees, builder incentives, down payment assistance or monetary gifts. The FHA has a list of closing costs which it considers reasonable and customary. Those include:

•Lender’s origination fee (one percent maximum)
•Attorney’s fees
•Appraisal fee
•Inspection fee
•Title insurance and title examination fee
•Property survey
•Credit reports (actual cost)
•Transfer taxes and recording fees

If you are looking to buy condo from condo building - half of the units must be occupied by their owners. The condo must also be thre borrower's primary residence. Additionally, the building must meet FHA and HUD standards. To find out if the development has been approved, go to: https://entp.hud.gov/idapp/html/condlook.cfm

If you still have questions about FHA,
please call Tatyana: 443-527-4375

3 must-knows before backing out of purchase contract

By Tara-Nicholle Nelson
Inman News®

Question: I have a contract on a home to purchase, but I have changed my mind. Can I back out prior to the closing without any penalty or repercussions?

A: That, as it so often does, depends. First: the formalities. Depending on your state, it's highly likely that the real estate purchase contract you signed offers some sort of an out, with conditions. In some states, these are known as contingencies -- basically, contractual provisions that allow the buyer to back out of the deal within a set number of days.

These provisions usually also give the buyer the access and opportunity to have the property inspected and appraised, to have her loan underwritten, and to undo the deal, without penalty, if her loan is not approved or the property condition does not meet her standards within the agreed-upon contingency period (usually around two weeks, plus or minus a couple of days, by default, but the time period itself is fully negotiable between buyer and seller).

In other states, the relevant provisions provide an objection period in which the buyer must voice her objections or intent to back out, or forever hold her peace.

At the end of an objection period, a buyer usually retains the right to back out, but will forfeit any earnest money deposit she placed on the property if she bails. At the end of a contingency period, the buyer must either:

•remove the contingency, signaling that she plans to close the deal, and rendering her deposit nonrefundable if she doesn't;
•exercise the contingency, killing the deal; or
•request an extension of the contingency until her outstanding due diligence is complete.
Those are the basics, but there are two important caveats if you happen to be buying a distressed property. If you're in contract on a short sale, your contingency or objection period likely doesn't even begin to elapse until you've received the bank's approval of the deal.

If you change your mind before that happens, chances are good that you can back out, penalty-free.

On the flip side, if you're in contract to buy a bank-owned property and you're in a contingency state, chances are good that the bank has effectively converted the contingency period into an objection period, so that your deposit becomes instantly nonrefundable if you haven't backed out of the deal by the end of your contingency period.

Hopefully, you know where your own contract falls within the above schemes. If not, check with your agent or attorney to understand whether you can actually back out, under the terms of your contract with the seller, without penalty.

With that said, just because you can back out doesn't mean you should. Buying a home is sort of like getting married in that anyone who takes it seriously will have a moment (or day, or week!) of doubt.

If the fact that a few thousand dollars' penalty would sway your decision in favor of moving forward with the transaction, that might be a sign that your desire to back out is just buyer's remorse.

Alternatively, if you're in contract on a short sale you're not sure actually can or will close and you happen to have found another property you like better, at the right price, that is more certain to close (i.e., is not a short sale), your change of mind might make more sense.

The inevitability of buyer's remorse at the prospect of such a major commitment as a mortgage is why I suggest buyers-to-be actually write down their "visions of home," getting clear on what they want their lives to look like on a daily basis once they own the home they envision, and determining what characteristics, features and amenities a home would need to have to facilitate that vision.

When buyer's remorse rears its head, it can be a useful exercise to revisit any written documentation you have of your original wants, needs, priorities or vision; compare the home against that; and use the comparison to quell any emotional freak-outs that might incline you to back out irrationally, or supply logic and reason to a rational decision to cancel the contract.

Finally, if a serious problem with your job, loan, health or life is what's making you want to back out, it might make sense to cancel the contract even if you will incur a penalty for doing so.

I've personally worked with buyers whose marriages broke up or jobs were lost during escrow, but after removing their contingencies they were happy to leave the transaction and forfeit their deposit knowing that doing so allowed them to escape the greater evil of being stuck with a home and a mortgage that is simply not going to work with their changed circumstances.

Howard County Land Records

http://www.courts.state.md.us/courtrecords.html

6 Keys to Ensure an Approved Home Mortgage

Qualifying for a mortgage might have been easier just a few years ago, but today’s tight lending standards help ensure borrowers have the financial ability to keep the homes they buy as long as they want to. If you’re applying for a mortgage today, here’s what you can do to ensure you quality:

1. Boost your credit score to 740 or higher. Though loans are available to borrowers with lower scores, with a FICIO score of 740 or higher you’ll get best interest rates and lowest down-payment requirement.
2. Provide your income. Lenders like to see consistent income over a period of two to five years. Of course, you’ll also need enough predictable income to handle your monthly loan payment, along with property taxes and insurance.
3. Flash the cash. The more down payment you invest in your home, the better risk you are considered by lenders. Lenders consider a 20% to 30% down payment ideal, with a solid emergency fund of four to six times monthly income. You may get a loan with less, but why not to go for the gold?
4. Minimize debt. Pay down credit cards and retire car loans debt, etc. to improve your debt-to-income ratio, leaving more room in your budget for mortgage debt.
5. Tell the truth. Your loan application information will be verified through the underwriting process. Remember, incomplete or false disclosures will simply derail lender confidence in you.
6. Avoid last-minute gaffes. Lenders will calculate your debt-to-income ratio at the beginning of the loan process. They’ll also pull your credit report justr before the settlement. Don’t change the picture by depleting cash resources, increasing debt or opening new credit accounts.

Call me if you have any questions: 443-527-4375