More Changes for Phoenix Home Buyers
July 25th, 2008 categories: Mortgage and Lending, Real Estate News
As I wrote in my last post, with the Senate passing a new housing bill and the anticipation that the President will sign the bill, here are some of the ramifications of this new bill and the impact on home buyers in Phoenix as well as buyers across the country.
Included in the bill is the elimination of seller funded down payment assistance programs such as Ameridream, Nehemiah & Partners in Charity. FHA statistics show 
that Borrowers who take part in these arrangements go to foreclosure at nearly three times the rate of borrowers who put their own money down. If you are thinking of buying a home in Phoenix with a DPA program, act fast, buy now your time is limited.
FHA Loans-Up-front & Monthly MIP (Mortgage Insurance Premium)
All FHA loans used to be standardized with a 1.5% upfront MIP and a .50% factor for monthly mortgage insurance. Things are changing, now both upfront MIP and monthly rates are on a tier system based on down payment, loan term (15 or 30 years), credit score and use of traditional or non-traditional credit. Upfront MIP now ranges from 1.25% to 2%. The monthly factor now ranges from .25 - .55%. Remember, up-front MIP can be financed into the loan or paid in cash up front by buyer or seller. Monthly mortgage insurance is required on all FHA loans, regardless of down payment amount.
Here is more information that I received in an email today from Laura.A.Silvester from Wells Fargo:
Property Flipping - REO’s Exempt
FHA requires that the seller of the property being financined by an FHA loan be in title for a minimum of 90 days. Therefore, a new contract with FHA financing must be written no earlier than the 91st day. Due to the number of foreclosures, properties with a recent foreclosure are now exempt from the requirement. This is a temporary waiver that is in effect until June 8, 2009. The waiver applies only to the initial sale of a foreclosed property and does not extend to a subsequent sale of that property.
REO Appliances & Escrow Holdbacks
FHA no longer requires that a free-standing stove be in place in the property at the time of closing. However, built in ranges/appliances would still be required to be installed prior to closing. On a case-by-case basis, escrow holdbacks may be allowed for the installation of appliances or minor repair items in an FHA financed home. However, the buyer must deposit the full cost of the repair or appliance into escrow (cannot be financed), provide proof of contract to install or proof of purchase, be able to complete the work within 7-10 days and receive underwriter approval. This is limited to smaller items required for the functioning of the home and does not extend to cosmetic repairs. Pools are required to be filled and functioning. For larger rehab or repairs, and FHA buyer should consider the FHA 203K Streamline rehab loan.
Utilities
Utilities must be on and operating at the time of FHA appraisal. If the utilities are shut off, it is best to meet the appraiser at the home and turn them on during the appraisal process. If not, a reinspection will need to be done by the appraiser prior to funding to ensure working utilities.
Termite Reports
FHA no longer automatically requires a termite report on all loans. A clear termite will be required if
a) the contract calls for it,
b) buyer is using a DAP (down payment assistance program)
c) the appraiser comments on potential termite evidence.Credit Policies
FHA used to have a 12 month look back for credit accounts and not deny credit to any buyer with insufficient traditional or non-traditional credit. The look back period for credit accounts has increased to 24 months and new guidelines are established for the type of amount of credit required to be approved for an FHA loan. These guidelines are lengthy. The point is to make sure that all buyers using an FHA loan are either pre-approved or “fully underwritten” prior to contract. Many lenders will not fully underwrite a file prior to contract.
Additional Challenges when buying a Phoenix foreclosure or Short Sale.
There are some new problems emerging in the short sale and Phoenix REO market. Be very diligent when making an offer on short sales and REO properties to ensure clear title can be conveyed- make sure that the home you are looking to purchase is clear of any tax liens, credit charge off liens etc, most likely the bank will not clear these liens.
It is possible that by you as a buyer, may become aware of these liens, AFTER you have already paid for your appraisal, home inspection, given notice on a rental, even signed loan docs, so again, do your due diligence.
Actually, per the MBA breakdown, the new housing bill puts a one year stay on FHA risk based premiums.
Jonathan Blackwell
http://GoGreenWithFHA.com
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