Tim Bradford - AMMCorp.net

 

 

FHA Loans – FHA Mortgages

Non Occupanying Co-Borrower loans - Kiddie Condo loans

 

 

 

FHA loans have many features that still aren't talked about as much as one would think, because they are still fairly new to more than have of the loan originators out there. Now, some might argue half is very extreme, even though this is my opinion, I will still stick to this statement for many reasons.

As a loan officer with more than 17 years of mortgage experience, the non-occupant co-borrower program is very simple to understand.

FHA will allow a co-signer that is not living in the house to actually be on the mortgage and co-sign for the loan. Keep one important thing in mind, they must be a family member/relative. And this can be great for first time homebuyers. One thing that so many get confused no matter what type of loan they are applying for is that a co-signer with good credit can't overcome the bad credit of the primary borrower. Meaning that the co-signer with good credit can't get you a better priced loan. If the primary borrower still has lower credit scores that don't qualify, then the loan won't happen.

 

 

 

 

Now keep in mind that this is a lot different when doing a non-occupant co-borrower loan with a conventional mortgage. Unlike the FHA non-occupant co-borrower loans, which the primary doesn't actually need a job, on a conventional program such as this, that primary borrower still needs to qualify with some type of income ratios. And this usually doesn't help. Besides, in most cases, with the pricing hits on a conventional loan, it would be much cheaper doing a FHA loan.  Keep this in mind also, back in April of 2008, HUD allowed this on refinances also.  A family could help you refinance your property and not live in the property.

 

 

 

 

Now, for those of you who remember John Belushi in Animal House, what I consider an American Classic back then, this next part my be very important if you have kids about ready to attend college or are attending college.

The FHA non-occupant co-borrower program can also be known as the Kiddie Condo loan.  This basically mirrors the same guidelines as what I explained above. It's just another term and another way to help keep your kids college expenses lower. First off, you don't have to buy a condo. It could be a single family dwelling, or a duplex. One thing that I didn't mention above is that you can't have a co-signer on 3 units or 4 units, not unless they are going to live in the property as their primary. 

 

What's appealing about the FHA Kiddie Condo loan is that you could have other students live in the property and that you could receive rent. A great example :

Duplex : Each unit has 3 bedrooms. Rent goes for about $500 a month. Your total mortgage payment, to include mortgage insurance, taxes, and homeowners insurance is $2,250/month.

You have one son in the property who won't be charged rent. That leaves you 5 other tenants at $500/month. That is $2,500/month. That basically covers your mortgage payment and leaves you a little extra for repairs and such. Your son pays less for attending college, and you get a tax right off, and that you are building equity. Please speak to a tax accountant/CPA for details on this.

 

 

 

 

Key Point to Remember -

Even though a lot of this sounds easy, you still need to work with a loan officer that is up to date on this kind of financing and on FHA loans in general. A good example : you use to be able to have non-occupant co-borrowers even on 3 units and 4 units, up until about a year ago. One more thing to keep in mind, even though these are HUD's guidelines on FHA mortgages, many lenders have lender overlays. That some lenders might not be able to do what I described above. I know one borrower that already ran into this, after many promises upfront.

 

 

 

 

                    

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- FHA Loans - USDA Loans - VA Loans -

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_________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!

Copyright © 2009 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

As many of us know in the real estate market, FHA loans are being used more than ever before.  With the disappearance of the subprime market of 2 years ago and in several cases, that conventional loans can be more expensive, more FHA loans are being utilized.  I just wanted to point out some basics, because I am still hearing some misleading information that makes me cringe from time to time.

 

FHA loans are more expensive than conventional loans.  - FALSE

This one is always a favorite of mine. Right now, forget about the pricing hits on the credit scores when comparing the 2 types of loans.  In reality, a lender can make a little more on the FHA loan because of the SRP's, which are the service release premiums. This is basically what the investors on Wall Street are paying to buy the loan.

 

 

 

 

Why would a loan officer state that FHA mortgages are more expensive?  Or the fees might seem higher?

Here are a few reasons why you might hear this.....

• It went through the rumor mill. If it came from a realtor, the consumer, or the loan officer, it just circulated and either was twisted information or someone didn't know what they were talking about.

• Some people get the upfront mortgage insurance premiums confused with the general costs of the loan. If this is not explained correctly, it's very easy to assume that FHA mortgages are more expensive.

• Here is a good reason.... because the loan officer wanted to make more money, since the borrower didn't have perfect credit and or the credit scores were in the low 620's. I have known loan officers in the past that gave higher rates and or fees, telling the borrower that they were being placed in a FHA B minus loan.

• One false rumor - FHA loans are said to have higher costs. This might take place if the lender or loan officer decides that they can capitalize on FHA mortgages. But in reality, no matter what company that I worked for, my costs were the same no matter if it was a FHA loan or a conventional loan. And as I mentioned, sometimes people included the upfront mortgage insurance and associated it with the costs. Now, this is an extra cost, but you need a very good loan officer to break down these costs and compare apples to apples. I have written a series on comparing FHA loans and conventional loans. I take into consideration the LTV (loan to value) and the borrower's credit scores. (there will be 5 different blogs below, that will show you the differences between FHA loans and conventional loans.)
  

 

 

 

 

Other rumors out on the street?

 

• FHA loans now require a 3.5% down payment, not 3.0%. (this was announced in 9/08 and was effective January 1st, 2009.)  Besides, back then, it was 2.25% as a down payment and .75% used for closing costs).  I bring this up, because a friend of mine who is a loan officer in Florida was told in a class that it's 3.0%.  And keep this in mind, this was coming from an instructor.

• FHA loans aren't just for First Time Homebuyers.  You can use FHA loans over and over.

• You can have 2 FHA loans at once, but there are major requirements.

• Monthly Mortgage Insurance is not there for the life of the loan. It will fall off when you hit the 78% LTV mark. And if you put 20% or more down, the monthly mortgage insurance is only there for 5 years. On a conventional, this is called PMI, private mortgage insurance.

• FHA loans take longer to close !!! -  This is 110% incorrect. They take just as long as a conventional loan.  It comes down to how hard the deal itself is, and how good the loan officer and the mortgage company.
  

 

 

 

 

For more FHA loans vs conventional loans comparisons :

• FHA loans vs Conventional loans - A true numbers comparison with 5% down - Using a 710 credit score
  

• FHA loans vs Conventional loans - A real comparison with 5% down - Using a 659 credit score
  

• FHA Loans vs Conventional Loans - 20% down - A Rude Reality Check - Would you believe that FHA loans could be cheaper even with 20% down?  Come see why and how.

• FHA Loans vs Conventional Loans - 5% - 4 comparisons that you need to know - Comparing a FHA loan against 3 types of conventional loans with different types of monthly mortgage insurance. Guess who won while still using a 679 credit score.....

• FHA loans vs Conventional loans - Knowing the true comparisons - A great comparison with a 679 credit score and 5% down.  This example will still show that even with a better than average credit score, that FHA loans are still better in many cases.

 

 

 

 

 

                    

                                                                                               FOLLOW ME ON FACEBOOK

 

 

- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- Mortgages -

 

Experience & Knowledge at its BEST !!!

 

_________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!

Copyright © 2009 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

DISCLAIMER : This topic might tick off some of those that do play both roles, who are a loan officer and a realtor. Sorry, but I have a problem with this. Just hard core mortgage related facts.

 

So, how many hats do you wear?  Sure, I wear many hats as a loan officer, but in my opinion, it's all part of my job. What about those that are actually a loan officer and a realtor though? How many more hats do they need to wear?  Sure, if you are one of those that do both, I am sure you think you do a good job for your clients. But is this just your opinion? And is good good enough?  I try for excellent and feel that it's hard to hit that mark if you are both. And keep in mind, this is just my opinion.

 

 

 

I GUARANTEE !!!!

 

I am sure that these same people that are both a loan officer and a realtor will say that they have your best interests at hand. Their reasons would be :

• I am not charging you as much, since I am your realtor and loan officer. But define not as much.  And could it cost you more in the long run?

• I have been doing mortgages and real estate for 10 years.  Okay, is this together, combined in years?  Have you been a realtor for 9 years and a loan officer for just one year? More on this later.

• "I will guarantee you satisfaction." Well, anyone that knows me, I hate such words and phrases as :  "I guarantee" "I promise" "no problem," "Don't worry" "trust me" "I have your best interest at hand" etc, etc. Even though I know I am very good at what I do and know that I can get you a mortgage, I don't like using these phrases. Yes, they calm the borrowers nerves, but I view it usually as a good sales tactic.
  

 

 

 

Here is how come I can make my opinions. I can base them on past examples and on comments from other individuals that say they are both a realtor and a loan officer.

I wrote this blog a while back. FHA loans vs Conventional Loans, a real comparison with 5% down  I was attacked by like 3 loan officers in this blog, telling me that I was way off on my conventional rate example. They either told me that they were both a realtor and a loan officer or I found out after doing some research. What was ironic was that I asked each one of them if they knew how to read a rate sheet and see that there is a major pricing hit for lower credit scores. And that this is not a lender hit, but a FANNIE MAE pricing hit. Only one got back to me and said that he spoke to another loan officer and still told me that I was wrong.Just because someone else confirmed your thoughts, doesn't always mean that it's correct. Hence why I ended up writing about this. Two wrongs don't make a right, or do they?

And the funny thing, yet a sad thing, these same people that tell me that I am wrong are usually both a loan officer and a realtor.

 

 

 

I will say this....   no matter how good you are in the beginning, you do usually become better with more years of experience. But just because you have been doing something for 10 years, doesn't always make that person very good or better. Example - I closed a loan last year that another loan officer had for 30 days, yet he couldn't make the settlement date. He was still working on it when we closed it in 5 business days. There were credit issues that needed to be taken care of. But this was a loan officer that told the borrower that he had been doing mortgages for 30 years. See my point?  Age doesn't always make it better or you better.

Passion and having a large heart. - Now, I know many of us have a large heart and passion for what we do. I know I do...  but just because you are nice, doesn't mean that you are good at what you do. Sorry, but it's just a fact of life.

 

 

Conclusion : Let me pose one question to you.  Would you want a heart surgeon who specializes in this, to operate on your brain, just because they are a "surgeon" and or went to medical school? What about a realtor who says, well, "I was trained as a loan officer also." The better loan officers and realtors that I know and respect, wouldn't do both. Sure, conflict of interest in my opinion. But it's hard to stay on top of just the mortgage industry alone.  Just food for thought and based on my opinions.

 

PS....  I know we are in a very tough economy. I know many loan officers and realtors that have gotten second jobs. But as a realtor and a loan officer?  In my opinion, this is like mixing gasoline with fire. You could just be waiting for an explosion and that explosion could be your mortgage not closing or closing on time.

 

 

 

                    

                                                                                               FOLLOW ME ON FACEBOOK

 

 

- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- Mortgages -

 

Experience & Knowledge at its BEST !!!

 

_________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!

Copyright © 2009 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

 

BEWARE – A very boring topic below, but important to understand. (please read the whole thing before you assume what I meant by the title of my blog, about FHA loans.)

 

 

What first comes to mind when you hear the word junk? 

  --  Crap?

  --  Old?

  --  Trash?

What about the term, junk fees? Closing cost junk fees? Answer dot com gives you a definition of this and an example. - Junk Fees - Many people, even realtors and loan officers, assume that fees other than points charged by the lender are junk fees.  Back in the day, this might have been partially true. But there is a cost of doing business and in today's market, it's not cheap. It all comes down to how it's explained and how it's shown on your good faith estimate.

 

 

So, how does a mortgage work?  A mortgage company, the processiing, and it's fees?  It really hasn't changed since I got into the mortgage business in 1992. Well, the profit margin and fee structure of a mortgage company hasn't really changed. The cost of doing business has a little. 

Your typical fees are generally :

• $500 commitment fee

• $82 transfer tax fee

• Credit report fee

 

Other fees that you will see :

• Processing fee

• Warehouse fee

• Doc Prep Fee

• Attorney Fee

• Administration fee

 

 

Now, here is what disgusts me when so many realtors or borrowers scream junk closing fees. Until you understand on how a normal mortgage company operates, you won't truly know what is a junk fee or not.  And another thing to understand, it also comes down to the rate and points that one is charging. All mortgage companies and banks have fees associated with doing a mortgage.  Even your bank down the street or Bank of America or Wells Fargo charge closing costs.  It just comes down to where they place these fees. Here are some real examples....

 

It generally costs about $1,000 for the processing of a mortgage. This is to include fees associated with the lenders warehouse line, underwriting, and closing of the loan. You might say that the lender can get this in the points and or rate. Yes, this can take place and this is how I generally do it. Why?  Because you can write of a percentage of your points and interest on the loan. The fees, aka junk fees, can't be deducted on your tax returns. Please consult a CPA or an accountant when talking about this. Overall,  it comes down to understanding the process and costs of a mortgage; not what you assume.

 

 

My whole point to this is that the fees have to be collected one way or another. Yes, some loan officers or lenders beef up their fees, adding to them, which gives them the name  'junk fees'. I have seen some weird names for some of these fees. But every lender has a profit margin. I have worked for large lenders and small ones, and it usually is close enough. When you borrower money, it costs money. It basically comes down to how large the profit one is willing to make. But keep in mind, it's more than just about the rate and fees. What about service?  What about communication? What about timely responses?  What about your loan officer educating you about the process? I'll be honest, I would be the cheapest one out there every time, that's if I didn't have to return a phone call or an e-mail or explain anything.  And this happens more often once you say yes to a specific lender, in starting the application process. I know this because I hear it from borrowers all of the time. Good news or bad news, that loan officer should be somewhat easy to reach until you are finally closed on your loan.

 

 

 

Important Key Point to remember -

 

Each borrower is different.  Each loan is different. Remember that I said most lenders have a specific profit margin in mind?  Let's say it's $4,000 per loan. If I am borrowing $400,000, it would cost me 1 point in fees, points, or in the rate. Meaning that I could charge you no points and no fees, yet charge you a higher rate to still make my profit margin. If I am borrowing $100,000, it will now cost me a total of 4 points, no matter how this is spread out within the fees or the rate.

My whole point is that you can't compare your friends cost of a loan or sometimes the rate. Not if the lender is charging you accordingly. I just had a borrower e-mail me their HUD settlement sheet and yes, they charged $2,083 in fees. But if I look at my profit margin, I was about $2,100 cheaper than this company and a 1/4 percent lower in rate. I agree that you need to shop for your mortgage, but you should not over-shop or shop for the lowest. Just my opinion on this.

Please read : I want the same deal that my friend received on their mortgage.

 

 

 

Pet Peeve -

 

FHA loans are more expensive!! - No, they are actually cheaper in costs. I just did a cost scenario for a borrower, as I always do, and it was costing him $9,000 less on a FHA loan and the payment was $3.00 more a month. Yes, it was because I had him put 3.5% down instead of 5% down. But it was also because the points for that same rate were actually a 1/2 point less on the FHA loan, which in this case was $1,930 cheaper. Why?  Because most investors and major lenders get a larger SRP (service release premium) back from those that buy these on Wall Street. The fact that many say FHA mortgages are more expensive in costs, just don't know what they are talking about in most cases.

 

 

 

                    

                                                                                               FOLLOW ME ON FACEBOOK

 

 

- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- Mortgages -

 

Experience & Knowledge at its BEST !!!

 

_________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!

Copyright © 2009 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

 

It's time to have a quick class on FHA loans, the fees for FHA mortgages, and just a basic understanding on how all of this works. This is truly frustration on my part from some loan officers blatantly lying to borrowers, just to justify their fees and such. It's total BS and it needs to be talked about.

Just today, I spoke to a borrower that is having a concern with their 2nd lender, after the first lender failed them miserably.  This lender is charging them 6.00% with 1 1/2 points as an origination fee.  His credit scores are above 670 and the purchase price is $272,000 with the minimum down. And they are being charged a $495 commitment fee.  With this scenario, they should be getting at least a 5.50% interest rate.  Here is what they are being told..... 

 

 

 

So here is the story of one borrower after speaking to their current loan officer. They were told that they are getting 6.00% and not 5.75%, because of his credit score of 670.  Well, I don't know one investor as of 6/13/09 that would charge you 1/4% percent, let alone, a 1/4 point, for credit scores above 670. He was told it was because he didn't have a credit score of 700.

Secondly, he was told that out of the 1 1/2 points of the FHA origination fee, that a 1/2 a point goes to FHA and the other 1 pt goes to the lender that they are selling this too. Even if the other lender was collecting something, FHA or HUD doesn't collect origination fees. Sadly, this is the 3rd time just this year that I have heard a loan officer tell a borrower that part of the origination fee goes to FHA.  Rut Row...  see Pinocchio's nose on the loan officer?  His nose should be much longer, because this is one of the biggest lies that I have heard.  The commitment fee being charged?  Very average in most csses.

 

 

 

So, let's define FHA origination fee or just origination fee.  It is explained to be a fee charged for the processing of the loan application. This is even the same definition in the HUD buying handbook. The fee is often expressed as a percentage of the loan amount, which does vary among lenders. The basics behind this, no matter who gives what definition?  It is a point to pay for your rate. Either the lender is buying your rate down, or using it for extra profit. In my example above, it is being used for a larger profit. 

So, what does HUD/FHA collect on all FHA loans? Just the Upfront Mortgage Insurance Premium (MIP) and the monthly mortgage insurance MMI.  The lender gets all other lender related closing costs. I hate saying this, but if a loan officer tells you that part of the origination fee goes to FHA, don't walk, run very quickly and far away. This is not my opinion, but a real cold hard fact.

 

 

 

                    

                                                                                               FOLLOW ME ON FACEBOOK

 

 

- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- Mortgages -

 

Experience & Knowledge at its BEST !!!

 

_________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!

Copyright © 2009 by Jeff Belonger