Real Estate

The cost of mortgage insurance

Lots of home buyers get a FHA loan especially first time home buyers with limited credit history. This is a good loan product that is backed by Housing and Urban development.  This loan allows buyers to buy with a minimum of 3-1/2% down payment. This down payment may be gifted, or come from a grant or down payment assistance such as the bond program. This helps lower income buyers participate in the home buying process.

Since FHA allows buyers to buy with a low down payment and often have little to no money of their own invested in the property, the risk of foreclosure is higher. Therefore mortgage insurance is required. Mortgage insurance protects the bank incase the borrower defaults. Unless a borrower puts a minimum of 10% down on a FHA loan, the mortgage insurance remains on the loan for the life of the loan. Consequently, a borrower with a strong credit history and a high credit score may decide to use a conventional loan where the mortgage insurance will fall off after the value reaches a 78% loan to value or the borrower requests it at an 80% loan to value.

FHA charges an upfront fee, currently 1.75% of the loan amount as well as a monthly fee.  Recently the government lowered this fee from 1.35% per month per annum to .85% per month. This is a huge savings for buyers using a FHA loan.

How this equates.   I will use a 100,000 loan for ease of numbers. Note the savings on a $200,000 loan are double.

100,000 loan with a 1.35% per month per annum fee is $112.50 added to the loan each month.

100,000 loan with .85% per month per annum fee is $70.83 added to the loan each month.

This makes the monthly mortgage payment more affordable. This is a substantial savings over the life of the loan.

If you are looking for an experience realtor to help you buy a home, sell a home or invest in real estate, please call me at 405-213-2992 or visit my website at http://www.sandiwalker.com

Real Estate

Short Sale…with a VA or FHA loan.

Can I buy a Short sale with a VA or a FHA loan? Maybe is the best answer. It depends upon the condition of the house.
All real estate transactions where a buyer is obtaining a FHA or VA loan will require an appraisal to determine the value and whether the condition of the property is safe, sound and secure. If a property has appraisal repairs, then this may be a problem.
A seller is selling a property short because they are typically behind on their mortgage, have a negative equity situation, and cannot to afford to bring the mortgage current. Consequently the seller does not typically have money to correct defects in the property. The property may or may not be in good condition. But I always want to ask, if the home owner could not make the mortgage could he afford to maintain the property. The majority of the time I find that the short sale properties have repair issues.
In addition, these loan products require a clear termite certificate. What if the property needs to be treated for termites.
Who will pay? If the seller doesn’t have the money to pay for the repairs; can the buyer pay for the repairs. Well I would strongly council any buyer to not repair any house that is not their property. They could treat for termites or spend money on the house and it not close for many reasons. In real estate, we always say it isn’t closed until it is closed.
When submitting a short sale offer, the seller’s lender is required to participate in the transaction. It is possible that there is more than one lien holder on the property. If so, all lien holders will have to participate. This can take time and negotiation. If the lender refuses to sign off on the offer, there is no deal. This can take a long time—generally 4-6 months. After the seller’s lender has agreed to the transaction then the buyer should perform their inspections and appraisal. Noting that the sale is “as is”. Consequently the VA or FHA buyer may have waited a long period of time for a house that will not appraise without repairs.
If you have other questions about real estate, please feel free to call me at 405-213-2992 or visit my website http://www.sandiwalker.net