FHA loan guidelines and tips

Learn more about the FHA guidelines and tips for obtaining a loan to purchase a property in Las Vegas Nevada. For more info call Felipe Crook 1-866-589-1646

One of my trusted mortgage bankers sent me an email last week with some wonderful guidelines for FHA loans. FHA stands for Federal Housing Administration and they are probably the most used loan product currently in our market. FHA loans are government backed loans for properties, and one of the only with small down payment requirements. To learn more about the history of FHA click here. Guy Sheets works with Cornerstone Home Mortgage which is a direct lender which translates to am easier, less expensive loan for you. I personally have used Guy on my home and he's a wonderful lender. If you call Guy Sheets, please tell him Felipe Crook sent you and he'll take special care of you. Here are his tips for FHA:

FHA limits Clark County now $400,000; this is a temporary housing program started 3/1. Bush did the same thing 4/19-12/31 and Obama just started it and it is set to expire at the end of this year.
Conventional/Conforming (NON-Jumbo): $417,000
FHA is 3.5% down and can be a gift.
Conventional is usually 0-5% down (Fannie Mae Flex and Freddie Mac) as some government-sponsored entities for first time buyers used to have a zero down program, BUT now cannot get mortgage insurance AND we are in a declining market <a few bullets down> so short answer is 10% down for owner-occupied (hard to get mortgage insurance and it is pricey), 15% down for second/vacation homes (harder even still to get mortgage insurance) and 20% down for investment properties
Jumbo loans (aka Non-conforming; called that because the amount does not "conform" to local limits of Freddie and Fannie per county): 25% down at least, strong FICOs and reserves needed. Generally, add .75 to a non-jumbo/conforming conventional rate and also costs the buyer 1.0-1.75 points extra as of 1/1/09.
Declining Market: ALL loan to value percentages reduced by at least 5%. NV is on the list, with CA, AZ, FL, MI, and many others. If prices flatten out for 3-6 months, we can be taken off this list. Until we do, conventional loans require at least 5% down extra on top of regular guideline requirements. Government loans (FHA and VA) do NOT have declining market reductions in loan to value percentages. Mortgage insurance (on conventional loans) is almost impossible to get. Even if we can get a program to take 5% down (say Fannie Mae Flex for example which used to be 0% down, but now takes 5%), we cannot get mortgage insurance until we are out of the declining market.
FHA minimum FICO: one investor we use will take a 600 or higher. The remaining banks require a 620. For joint buyers, we take the middle score of three bureaus AND the lowest of the middle scores of all borrowers. For example, if wifes scores are 605, 598, 580 and husbands 610, 602, 565, the representative scores would be 598 and 602. FHA must take husband and wife so they would not qualify. VA moving in the same direction
Non-traditional credit: the old way was to show power bills, SW Gas, cable, layaway, insurance, health club, etc. as alternative lines of credit. ONLY ONE investor will now take this and that wont likely last. Borrowers need three trade lines, at least 12 months old in rating/reporting.
FHA: there are NO seller-mandatory costs. In English, seller pays the same closing costs on an FHA loan as they do on a conventional loan. Seller can contribute up to 6% of purchase price towards buyers recurring and non-recurring closing costs.
VA: the ONLY seller-mandated closing costs are Pest/termite inspection <required on EVERY VA deal> and tax service, which we dont charge anyway. Just make sure you check the box of "seller" on the purchase agreement and maybe note that it is part of sellers contributions towards buyers closing costs
Appraisal costs: conventional: $350, VA/FHA: $400; investment properties: $500 (they do a profit and loss statement and rent schedule to give buyer some income on their loan to offset the new mortgage). ADD $50 for a re-inspection to correct repairs and take new photos.
Turn times for appraisals: FHA and conventional: after we order, 5 business days until we get a report and hope that there are no appraisal conditions/repairs needed. VA: goodness only knows. They have 10 calendar days (excluding federal holidays) to get to the property then 3 more days to get us the report so just think 2 weeks!
What we need before we order an appraisal: FULL purchase agreement, signed by all parties (sometimes, they will let us slide on a bank-owned, depending on the addenda and counters), all addenda, and all counter offers. We cannot order an appraisal without this.
Who pays for the appraisal: depends on how you write the contract. You cannot ask a seller on FHA to pay 6% of the purchase price towards closing costs AND reimburse the appraisal fee, as that exceeds the limits. We read what you write in the comments. Most agents write something to the effect of buyer or buyers lender to pay for the appraisal upfront and be reimbursed at close of escrow as part of sellers contributions toward closing costs.
FHA and VA appraisal requirements: "health and safety:" no broken windows, no bare floors, no drywall holes (FHA more lenient than VA), if no stove-OK but need the hookups, AC and heat must be working, and ALL UTILITIES must be on and water running/working, no leaks, hot water heater operational, no exposed wiring, stair rails attached, just to name a few.
Condos: community MUST be approved. Here is a link for FHA/VA: https://entp.hud.gov/idapp/html/condlook.cfm and you just type in the name of the complex and see the latest results. Also, link to check for FNMA (Fannie Mae) for conventional financing is: https://www.efanniemae.com/sf/refmaterials/approvedprojects/ Then, just know on ANY condo (not town home), we have to send a questionnaire to the community at our upfront cost that we bill to the buyer at close of escrow. The questionnaire will ask if there is litigation (if any pending, NO loan will go) and the owner occupancy percentage. We need 51% to be owner occupied.

Does this help?

Here is another tip on closing costs needed when you are having seller pay for them. Remember, taxes are very high right now in proportion to closing costs. Typically, the buyer has to pay 6 months up front at closing. Years ago when prices were soaring, the yearly taxes only represented about .87% of the total purchase price. Now, they are around 1.5%. Also, appraisal and flat title and closing costs used to represent a small proportion in relation to the purchase price, but now with prices so low, closing costs on a percentage basis have risen. Yet another problem on the bank-owned homes is a new trend by the title companies that seems to add a lot of extra junk fees to the buyers side. I think they bid so low to get an REO account, they have to make up the difference in buyers added fees. Here is a guide with parameters if it helps:

FHA: Seller can pay up to 6% towards closing costs. For home prices, if buyer is looking for ZERO move-in or around $500-$1000, 1 pt. origination and NO rate buy down, agent includes appraisal reimbursement and HOA membership fees in the closing cost assistance and if the agent has a transaction fee, and they close middle to end of the month:

House Price Closing cost % needed

$50-$100,000 5.5%

$100,000-$130,000 5.0%

$130,000-$160,000 4.5%

$160,000-$200,000 4.0%

$200,000-$250,000 3.5%

$250,000-$300,000 3.25%

$300,000-$350,000 3.0%

$350,000-$400,000 2.75%

Guy Sheets

Certified Mortgage Planner

Cornerstone Home Lending