FHA LOANS

Real estate loans come in many forms and from many sources. Loans like a 30 year or 15 year fixed rate mortgage can affect your interest rate and, therefore, your monthly payments. The type of loan you select can affect your interest rate and payments. The choice of your new home loan can affect the amount of your down payment and your closing costs - sometimes in a negative way!

With only a small amount of the purchase price available for a down payment, you could consider one of the three common type of loans, FHA, VA, or Conventional.

The federal government along with other state, local and private groups have developed lending programs to help you purchase a home with a low or no down payment. If you are a first time homebuyer or have low to moderate income, you may be eligible for a mortgage insured by the Department of Housing and Urban Development (HUD) through the Federal Housing Administration (FHA). The FHA does not make direct loans but will insure FHA loans to the lender so that if you default on the loan, the lender will get reimbursed. You may be able to get an FHA loan with a low down payment of only 3% of or less of the purchase price.. While there are limits to the size of FHA loans, the amounts are generous enough to handle moderately priced homes almost anywhere in the country.

Looking for a FHA mortgage try visiting the FHA Lending Guide and have all your FHA questions answered

If you are a veteran or qualify, FHA mortgage loan insurance can also be combined with a guarantee from the Department of Veteran's Administration. VA mortgages were created to help veterans purchase homes. VA loans offer the veteran low to no down payment on loans equal to conventional conforming loans.

Conventional loans consist of conforming loans, which are generally secured by government sponsored groups such as Fannie Mae and Freddie Mac, and jumbo loans, which are funded by private investors for loan amounts higher than the limits set by the government sponsored groups, currently up to $417,000. Conforming loans (loan amount not to exceed $417,000) are funded by Fannie Mae (FNMA) and Freddie Mac (FHLMC). These companies do not lend money directly to you, but work with lenders around the country to offer home loans to meet consumer needs. As a secondary market lender, they purchase mortgages from lenders and package them into securities that are sold to investors. If you are looking for a larger home loan to purchase or refinance your home, you might consider a jumbo loan for amounts that exceed $417,000. which has a higher loan amount limit than the limits set by Fannie Mae and Freddie Mac. Because jumbo loans cannot be funded by FNMA or FHLMC, they usually require a higher rate of interest.

Your Initial Meeting With a Mortgage Lender

•The loan approval process generally begins with an initial interview called the loan application where you and the mortgage professional meet to discuss the loan terms and conditions. You will need to bring information to verify your income and debts. This information will be verified by the lender and a credit report will be requested.

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Your Total Mortgage Payment

Your monthly mortgage payment typically is made up of four components: principal, interest, taxes and insurance, together known as PITI. The principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. The interest is the fee charged for borrowing money. You can determine the amount of principal and interest by using our Combs Mortgage Calc.

The taxes are property taxes your community levies which are generally based on a percentage of the value of your home. The lender usually collects 1/12th of the yearly property tax bill each month. The lender collects taxes in advance and places the money in an escrow fund.

Lenders won't let you close on your home loan if you don't have home insurance to cover your home and your personal property against losses from fire, theft, bad weather and other causes. The insurance amount is collected and paid much like the taxes. Each month 1/12th of the insurance bill is collected and stored in an escrow account until the bill is due.

Closing Costs Explained

Closing costs are the actual expenses that the lender incurs in the origination of a new home loan. Some of the costs are related to your loan application, such as the expense of a credit report on all applicants. Other fees are related to the house itself, such as the property appraisal of the property. Others are payment to the lender for processing your application, such as the loan origination fee. Unless the seller offers to pay them for you, these expenses are charged to the buyer, and is estimated to run between 2% - 5% of the amount being borrowed. Ask the lender for a good faith estimate of these costs and review the annual percentage rate -APR.

Common closing costs can include processing and underwriting fee, mortgage insurance premium, appraisal fee, the cost of a credit report, tax service fee, application, commitment, wire transfer fee, and others. Escrow accounts are often required for many loans for homeowners insurance, real estate taxes, and homeowners associations and require cash deposits at closing.

After your initial meeting with a mortgage professional, you should receive a Good Faith Estimate, that shows all of the closing costs associated with your mortgage application.

Your lender is required by the federal Real Estate Settlement Procedures Act to provide you with a good faith estimate of the fees due at closing within three days of applying for a loan.

These mortgage fees, also called settlement costs, cover every expense associated with your home loan: inspections, title insurance, taxes and other charges.

Here's a list of some of the fees you'll find listed on your good faith estimate:

Loan application and credit report
Title search and title insurance
Lender's attorney
Property appraisal
Inspection
Survey
Document recording
Transfer taxes
Buyer's attorney
Documentary stamps on new note
Points and origination
Condominium application
Escrow account balances/prepaids

Title insurance
This is a policy that insures against errors in the title search, essentially guaranteeing you and your lender's financial interest in the property. It checks for any defects, liens or encumbrances on the property that may affect the rights of ownership, possession or use of the property. It is issued after a complete examination of the public records. It also insures against such things as forgery, fraud, missing heirs or divorce actions. Keep in mind that the required title insurance protects the lender. You may want to take out an owner's title insurance to protect yourself.

Escrow
At closing you may have to put aside money into special escrow accounts to cover other costs associated with buying a home, such as private mortgage insurance (PMI), property taxes and homeowner's insurance. This will ensure that taxes and insurance premiums on the property are paid on time. Federal law limits the amount of "cushion" to two months of escrow payments. Be sure to ask the lender what escrow payments will be required at closing. Some mortgage companies may waive escrow requirements if you pay more points or a higher interest rate

It is important to review the estimate of closing costs and to ask questions about fees that seem unfamiliar. Lenders differ and can get creative when it comes to other types of charges.

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FHA LOANS

go to: VA Conventional

http://www.hud.gov

Looking for a FHA mortgage try visiting the FHA Lending Guide and have all your FHA questions answered

The Department of Housing and Urban Development sets the loan limits for FHA loans. Nueces, San Patricio counties have a maximum FHA loan limit as follows:

Single Family Duplex Tri-Plex Four-Plex

$271,050 $347,000 $419,400 $521,250

Mortgage maximums as of March 2008 Check other Counties

FHA provides mortgage insurance on loans made by approved lenders to borrowers who meet certain qualifications.

The agency requires a minimum of 3 percent down, including closing costs, and borrowers can use alternative forms of credit reporting, such as utility bills and cell phone bills.

FHA Lending Guide

Mortgage Insurance Premium

FHA loans require an up-front mortgage insurance premium on all loans, regardless of down payment (condominiums excluded). Additionally, FHA loans also require a monthly premium renewal. The amount of the premium and renewal are as follows:

Premium Renewal

20/25/30 Year Term 1.50% 0.50%

15 Year Term 1.50% 0.25%*

* If 90% or below loan-to-value, no renewal required.

Condos do not require up front MIP - only monthly MIP.

FHA Refunds & Distributive Shares

Who may be eligible for an FHA refund or share?

Premium Refund: You may be eligible for a refund of a portion of the insurance premium if you:

	acquired your loan after September 1, 1983
	paid an upfront mortgage insurance premium at closing and
	did not default on your mortgage payments.

Review your settlement papers or check with your mortgage company to determine if you paid an upfront premium.

Distributive Share: You may be eligible for a share of any excess earnings from the Mutual Mortgage Insurance Fund if you:

	originated your loan before September 1, 1983
	paid on your loan for more than seven years and
	had your FHA insurance terminated before November 5, 1990. To search your name click the link below: http://www.hud.gov/offices/hsg/comp/refunds/index.cfm
	For More Information: Phone: (800) 697-6967, 8:30 a.m. to 8:30 p.m. Eastern Standard Time, Monday through Friday. Mail: U.S. Department of Housing and Urban Development, P.O. Box 23699, Washington, DC 20026-3699.

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Calculating FHA Down Payment

0 Sales Price less than $50,000- Sales Price X .0125

Example: $49,500 X .0125=$ 618.75 Down payment

0 Sales Price more than $50,000 - Sales Price X .0225

Example: $75,500 X .0225=$1698.75 Down payment

TOTAL OF CLOSING COSTS AND DOWN PAYMENT PAID BY THE BUYER MUST BE AT LEAST 3% OF THE SALES PRICE FOR ALL LOANS:

Buyers must have a minimum of 3% total investment in property. This includes the down payment and closing cost (does not include prepaid items).

Any Amount OVER 3% can be paid by the Seller.

Exam example: $100,000 Sales Price

$100,000 X .03 = $3000

$3000 is the 3% minimum that the Buyer MUST pay.

Calculate the Down Payment:

$100,000 X .0225 = $2250 to be Paid by the Buyer.

w Therefore, $3000 - $2250 = $750 of Closing Cost

(Not Including Prepaids) MUST also be paid by the

Buyer to equal the 3% Investment. Any amounts over

this can be paid by the Seller.

Important Details about FHA Loans

Closing Cost, Reserves and Ratios:

o Origination fee is calculated on the case loan amount (before MIP).

o Discount points are calculated on the final loan amount (including MIP).

o Seller can pay prepaids for the Buyer.

o Seller or Buyer can pay the discount points.

o Gift funds for down payment, prepaids, or closing costs are allowed.

o Qualifying ratios can be exceeded with strong compensating factors.

Credit Issues:

o Installment debt with less than 6 months to payoff are not counted in ratios.

o Credit must be reasonably clean with no recent late payments.

o MCC credit will reduce the payment for qualifying purposes only.

o Chapter 7 Bankruptcy - must have been discharged 2 years ago or longer and

show sufficient re-establishment of credit history since that time.

o Chapter 13 Bankruptcy - must have a satisfactory 1 year payback performance,

and court approval for obtaining a mortgage loan.

o Foreclosure - generally, minimum time period is 3 years. However, there is an

exception if buyer has documentation that shows foreclosure was beyond their

control and good credit has been established.

o Consumer Credit Counseling Service - must have been in CCCS for at least a year and provide evidence from CCCS that payments have been made in a satisfactory manner.

Ken Combs Realtors Ask the FHA Expert

FHA Loan Ratios

•Payment Expense to Effective Income

Add up the total mortgage payment (principal and interest, escrow deposits for taxes, hazard insurance, mortgage insurance premium, homeowners' dues, etc.). Then, take that amount and divide it by the gross monthly income. The maximum ratio to qualify is 29%.

•Fixed Income to Effective Income

Add up the total mortgage payment (principal and interest, escrow deposits for taxes, hazard insurance, mortgage insurance premium, homeowners' dues, etc.) and all recurring monthly revolving and installment debt (car loans, personal loans, student loans, credit cards, etc.). Then, take that amount and divide it by the gross monthly income. The maximum ratio to qualify is 41%.

Veterans that are "Honorably Discharged” from active duty, veterans that are currently on active duty, and National Guard and Reservists for any branch of the military are eligible for a VA loan. However, the veteran must meet certain service date requirements (see below).

(a) are an unremarried spouse of a veteran who died while in service or from a service connected disability, or

(a) certain United States citizens who served in the armed forces of a government allied with the United States in WWII.

(b) individuals with service as members in certain organizations, such as Public Health Service officers, cadets at the United States Military, Air Force, or Coast Guard Academy, midshipmen at the United States Naval Academy, officers of National Oceanic & Atmospheric Administration, merchant seaman with WW II service, and others.

The Veterans Benefits Act of 2004, was signed by the President on December 10, 2004. The following provisions affect the VA Loan Guaranty Program. All provisions became effective upon the signing of the Act into law.

Maximum Guaranty Amount. The law changes the maximum guaranty amount of $60,000, for certain loans in excess of $144,000, to an amount equal to 25 percent of the Freddie Mac conforming loan limit determined under section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act for a single family residence, as adjusted for the year involved.

Loan amounts for VA loans are determined by the Veterans Administration and the eligibility of the veteran (entitlement to a loan). Entitlement for a veteran will appear on the veterans Certificate of Eligibility. The basic VA entitlement is $36,000. To find the maximum loan amount that the veteran qualifies for, simply multiply the amount of the Certificate of Eligibility by 4. For loans above $144,000, the entitlement is increased to 25% of the Freddie Mac loan limit. Loans in excess of this limit require a down payment.

VA requires a funding fee on all loans, regardless of down payment, unless the borrower is a disabled veteran. This fee can be paid in cash at the closing or financed into the loan. To determine the funding fee amount, multiply the following percentage points by the loan amount:

		Active Duty & Veterans		National Guard & Reservists
Loan Type	Down Payment	First Use of Eligibility	Multi-Use of Eligibility	First Use of Eligibility	Multi-Use of Eligibility
Purchase or Construction	0% 5.01-9.99% 10%	2.15% 1.50% 1.25%	3.30% 1.50% 1.25%	2.40% 1.75% 1.50%	3.30% 1.75% 1.50%
Regular Refinance	N/A	2.15%	3.30%	2.40%	3.30%
Streamline Refinance	N/A	0.50%	0.50%	0.50%	0.50%
Note: Veterans with disabilities of 10% or greater are usually exempt from the VA Funding Fee.

TVThese loans are available up to $325,000 using VA guidelines. Loan amounts up to $325,000 are available and can be underwritten using VA or conventional guidelines. Texas Vet loans can also be combined with a standard VA loan up to a combined loan amount of $417,000. And combined with a standard conventional loan you can go up to a combined loan amount of $657,000. Approval from TVLB is required in addition to the lenders normal approval. The standard VA Funding Fee applies. Texas Vet home loans are provided to eligible Texas Veterans by the Texas Veterans Land Board and approved lenders at reduced interest rates. Additional discounts are available through the Veterans with Disabilities program (veterans with a compensable VA disability rated at 50% or higher) and the Qualified Service Era program (served on active duty prior to 1/1/1977 and discharged for less than 30 yrs). A brief description is listed below. Complete details on eligibility, loan programs and discount programs are available on the TVLB website.

TeTexas Vet home loans are provided to eligible Texas Veterans by the Texas Veterans Land Board and approved lenders at reduced interest rates. Additional discounts on these already low interest rates are available through the Troops to Teachers program, Veterans with Disabilities program, Green Builder program and Qualified Service Era Program. With these programs the veteran can save up to an additional 0.75% off their interest rate. A brief description is listed below. Complete details on eligibility, loan programs and current interest rates are available on the TVLB website (http://www.glo.state.tx.us/vlb/vhap/index.html) or call 1-800-252-VETS (8387).