The first step in securing an FHA loan is to use a mortgage broker who deals with FHA loans. Not all do, but there are a number of brokers who are well versed in approaching lenders for this type of loan. They know the requirements and can often help to push a loan through for a new homebuyer fairly quickly providing all the conditions are met.

While an FHA loan is not for everyone, there are quite a few benefits that make it an ideal choice for many people who would like to own their own home but do not have the cash reserves, or a good enough financial score to qualify for a regular home loan. Perhaps one of the biggest obstacles to many people who would like to own their own home is that they simply do not have enough cash reserves for a down payment. A regular mortgage loan often requires a very minimal down payment, sometimes more depending on the person’s FICO score. You can usually apply for an FHA loan with as little as a three percent down payment. Coupled with this, is stipulation that the loan amount that is approved is relative to the cost of buying a home in your area. Thus the loan amount that is approved is usually not that high, just enough to buy a home similar to those where the person already resides. Consequently, the 3% down payment is usually quite a reasonable amount.

There are no actual income limits when applying for a loan, although you do need to have a regular source of income; it just does not need to be a lot. You also need to prove that you have a good debt to income ratio, in other words that you are not spending more than you are earning. While your credit score may be taken into account, it is not a major consideration when applying for an FHA loan. In fact, you can qualify for a loan as soon as two years after declaring bankruptcy.

There are also other programs associated with FHA loans that can help subsidize home repairs and improvements, as well as an easing of regulations such as pre-payment penalties. While an FHA loan may not be ideal, or even necessary, for everybody it does provide many people with the opportunity to own their own homes and thus better their own financial situation. If you are interested in applying for one and you have a regular source of income, your first step should be to find a suitable mortgage broker who can help you secure the loan and advise you on what requirements are needed.

Related posts from Indiana's USDA Home Loan Expert:

1. 5 Benefits to Using FHA
2. How To Use A FHA Loan To Refinance
3. What Goes On At Loan Closing

www.youtube.com/watch?v=dkRsFpQfros

Related posts from Indiana's USDA Home Loan Expert:

1. Items to Consider When Disputing Credit Information
2. 10 Credit Myths
3. Keeping Good Credit

This all comes before the hangover hits from the homebuyer tax credit, and all the pay option ARMs hit their maximum negative amortization forcing a payment recast and causing more loans to go delinquent.  Least we forget the shadow inventory.

Related posts from Indiana's USDA Home Loan Expert:

1. What’s a Credit Score Got to Do With It?
2. The Benefits of a USDA Guaranteed Loan to Purchase
3. The Ides of March: USDA Just About Out of Funds

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But how do you know which, if any, are legit?

As a consumer myself, I often find all the advertisements to be overwhelming and that is why today, I want to share a quick tip with you on the three reputable means to obtain your own copy of your credit report-take action and get a complete picture of your credit situation so that you can have financial freedom!

www.youtube.com/watch?v=nFSORAST3Ec

Related posts from Indiana's USDA Home Loan Expert:

1. Achieving a Goal Credit Score
2. Keeping Good Credit
3. So You Don’t Have Credit

USDA has Almost Exhausted Funds for the Year

In Indiana a USDA Home Loan is the best loan available, allowing buyers to purchase a home with no down payment, and no monthly mortgage insurance.  A USDA Home Loan is such a popular loan that it has been running out of funds quicker, and quicker each year.  Each year, new funds are appropriated to allow the USDA Home Loan program to continue to operate.  This year is no different.

USDA sent out an announcement on March 10, 2010:

Notice of Funding

This message is to notify you that program funding for the Single Family Housing Guaranteed Loan Program will likely be exhausted by the end of April, 2010.

Once funding is exhausted, the Agency will not issue Conditional Commitments “subject to receipt of appropriated funds.”  This is because it is not certain when additional funding will be available.

Limited funding may become available for disaster areas declared in 2008, or in disaster areas declared for Hurricanes Katrina and Rita.  Limited funding may also become available as prior Agency commitments are de-obligated, however, such funding will be very limited.

We apologize for any inconvenience this may cause you.  Should you have any questions, you may contact the Single Family Housing Guaranteed Loan Division at (202)720-1452.

So, what does this mean

First, in years past when similar announcements were delivered, USDA will NOT issue conditional commitments for loans, as the program awaits new appropriations from Washington.  This means that lenders will not continue to close USDA Home loans in anticipation of new appropriations.

This could potentially mean that the USDA Home Loan Program will not get new funds until after it’s 2010 Fiscal Year End, September 30, and then not have funds available until November or even December.  Because of how weak the housing market and economy is, this scenario is very unlikely, and since a large portion of the USDA Home loans are utilized by first time home buyers.  The first time home buyer market is a portion of the economy that the government is trying desperately to help.

If you do not presently have an accepted purchase offer, or are attempting to purchase a short sale, you must get the offer accepted quickly to get your loan closed and funded before funds run out.  I would expect funds to be depleted by the middle of April.  If you are unable to get closed in time you will need to put down 3.5% for an FHA loan, or 5% for a conventional loan.

What can you do

Contact your members of Congress regarding this funding crisis and reiterate the negative impact to low-and-moderate income rural families and to rural communities (Basically ALL of Indiana).  Let them know that we need funds to get the housing market back on track.  The Department of Agriculture is obviously attempting to get additional funding, and pursing changes to the program that could help or possibly completely eliminate future funding problems, but they need our help.  Your elected officials contact information.

Available Funding:

Fiscal Yr 2010 Congressional Appropriated Funds:          $13.5 Billion

Fiscal Yr 2010 USDA Rural Obligations:                                  $9.7 Billion (as of 3/22/10)

Available Funds: $3.8 Billion

Basically, in half of the USDA fiscal year they have depleted their entire funds for the year

I will update you as more information comes available.

Related posts from Indiana's USDA Home Loan Expert:

1. USDA Funding Update
2. Great News on USDA Home Loan Funds
3. The Benefits of a USDA Guaranteed Loan to Purchase

www.youtube.com/watch?v=30Po6dH1UV4

If you can’t view the above video please click to Relive the Stress.

Related posts from Indiana's USDA Home Loan Expert:

1. Using a USDA Loan to Purchase a Home After a Foreclosure
2. Increase Your Credit Score in 30 Days
3. The Benefits of a USDA Guaranteed Loan to Purchase

www.youtube.com/watch?v=CQyK0vWMYHQ

If you can’t view the above video, click to learn the 5 things to increase your credit score

Related posts from Indiana's USDA Home Loan Expert:

1. What’s a Credit Score Got to Do With It?
2. Achieving a Goal Credit Score
3. Who’s Your Accomplice on Your Path to Homeownership?

At loan closing the ownership in your newly purchased house is legally transferred to you.  The different parties that will typically be in attendance at the closing:  Mortgage Broker, Home Seller, Listing Agent, Selling Agent, Title Closing Agent.  Closing can take as little time as an hour to sign all the forms and transfer ownership or it can take several hours, depending on the contingency clauses in the purchase offer (and any escrow accounts that may need to be set up). You do not want to be rushed when closing on your new home.

Before you close on the house, you should walk-through, to make sure any repairs you requested have been made and that items which were to remain with the house (drapes, light fixtures) are still there. This is when you must call attention to any problems or issues you see with the home that should not be present

You’ll need to bring cashiers’ checks for any costs you must pay, if you need to bring more than $10,000 then it must be wired to the title company (Indiana Specific Law).  The title company will make all disbursements to the various parties involved in the purchase of your new home. The real estate agent or another representative of the title company will deliver the check to the seller and the house keys to you.

Closing Costs and Property Taxes

Statutory costs are expenses you would have to pay to state and local agencies even if you paid cash for the house and did not need to take out a mortgage. They vary by state and county. They include the following:

Recording fee for mortgage

Pay for the county clerk to record the warranty deed, mortgage, note and change the property tax billing so that it is updated. This is done for home purchase and refinance transactions

Pro-rated taxes

County taxes are paid in arrears in Indiana so you will receive a credit from the seller at closing the taxes up until the day of closing.  In the case of state taxes, if taxes are due in October and you close in August, you would owe taxes for 2 months while the seller would owe taxes for the other 10 months. Prorated taxes usually are paid based on the number of days (not months) of home ownership that has transpired.

Impound Account

Escrow or impound accounts are created to insure that insurance and tax bills are collected. Whether impound accounts are required or not is based on the requirements of the loan. Not all loans require them, but a rate change may take place if they are not taken. If your do not set up an escrow account, you may want to set up a special account on your own to make sure you have money set aside when “lump-sum” tax and insurance bills arrive.

Third-Party Closing Costs

Third-party closing costs are expenses paid to others such as appraisers, title insurance company, home inspector. These expenses are required even if you pay cash for the house. Examples of third-party costs are as follows:

Attorney fees:

Attorney requirements vary by state. Most states do not require attorneys. Attorneys usually charge a percentage of the selling price (three-fourths or 1 percent), but some may work for a flat fee or on an hourly basis. If attorneys are required in your state, your realtor should have information that will help you answer your questions.

Title search costs:

The title company or your attorney will arrange for the title search to make sure there are no obstacles or encumbrances (liens, lawsuits) on the property. This is how the owner of the property is verified. Nothing could be worse than buying a home from somebody that didn’t actually own it!

Home owner’s insurance:

Most lenders require that you prepay the first year’s premium for home owner’s insurance (sometimes called hazard insurance) when you purchase a home. This helps to insure that their investment will be secured, even if the house is destroyed. For purchases you can typically pay the first year premium at closing.  In addition to the first year premium there will be an additional two months escrowed as a cushion in case of future increases.

Real estate agent’s sales commission:

The seller pays the commission to the real estate agent. If one agent lists the property and another sells it, the commission usually is split between the two. The commission is negotiable between the seller and the agent, as a buyer this is not something you need to worry about.

Finance and Lender Charges

Most people associate closing costs with the finance charges levied by mortgage lenders. The charges you pay will vary among lenders, you may have to pay the following charges depending on your lender.

Origination or application fees:

These are fees for processing the mortgage application and may be a flat fee or a percentage of the mortgage. Lakewood Lending Group does not charge application fees. You will pay points only if you are buying down your rate.

Inspections (termite, water tests):

In most purchase scenarios, a termite inspection is required. In many rural areas, lenders will require a water test to make sure the well and water system will maintain an adequate supply of water to the house (this is usually a test for quantity, not a test for water quality).

Points:

A point is equal to 1% of the loan amount borrowed. Points can help you buy the rate down and get a lower rate. Points are typically tax deductible, but different deductibility rules apply to second homes. Your tax advisor can clarify these points for you.

Document preparation fees:

You will see an amazing array of papers, ranging from the application to the acceptance to the closing documents. This fee covers the cost of drawing docs.

Property Survey:

Some lenders will require that the property be surveyed to make sure that no one has encroached on it and to verify the buildings and improvements to the property. This is only used under special circumstances as an appraisal is usually enough for most lenders.

Appraisals:

This is how the value of the home is verified. Recent comparable sales from local homes are used to gauge your home’s value.

Credit report:

A credit report is required on all purchase and refinance transactions. This is how the lender gauges your creditworthiness.

Private Mortgage Insurance:

If your down payment is less than 20%, many lenders will require that you purchase private mortgage insurance (PMI) for the amount of the loan. This way, if you default on the loan, the lender will recover lost monies. These insurance premiums will continue until your principal payments plus down payment equal 20% of the selling price, but they may continue for the life of the loan. Lakewood Lending Group has many solutions that do not require private mortgage insurance, with the best being a USDA Home Loan!

Release fees:

If the seller has worked with a contractor who has put a lien on the house and who expects to be paid from the proceeds of the sale of the house, there may be some fees to release the lien. Although the seller usually pays these fees, they could be negotiated in the purchase offer.

Escrow account:

An escrow account or impound account is a fund into which you will make monthly payments for taxes, homeowner’s insurance, and PMI (mortgage insurance, if required). The money to fund the escrow account is collected on a monthly basis and will pay your insurance and tax bills when they come due, May and November for Property Taxes, month of your purchase for homeowners insurance. The goal is to have these money put aside in small amounts every month versus having a large lump sum bill come due.

Prepaid interest:

Your first regular mortgage payment is usually due about 6 to 8 weeks after you close (for example, if you close in March, your first regular payment will be in May; the May payment covers the cost of borrowing money for the month of April). Interest costs, however, start as soon as you close. The lender will calculate how much interest you owe for the fraction of the month in which you close (for example, if you close on March 25, you would owe interest for 6 days). The odd days interest is is due at closing. In a refinance transaction you will owe money to your old lender. In the previous example you would owe 25 days to your old lender. In a refinance you are typically paying about one month’s worth of interest in the transaction every time you refinance. This is offset by the first month gap in which you will NOT make a mortgage payment immediately after refinancing.

Related posts from Indiana's USDA Home Loan Expert:

1. The Benefits of a USDA Guaranteed Loan to Purchase
2. How Much Can I Afford
3. The Ides of March: USDA Just About Out of Funds

How much can you afford?

Deciding how much house you can afford is a personal decision.  Many factors come into play.  How much can I borrow?  How much can I put toward my down payment?  What size monthly payment can I afford?

There are no black and white answers to these questions.  Its a matter of give and take.  If you plan on a 30 year mortgage, you can probably make a lower down payment (or perhaps no down payment at all [as long as your using a USDA Loan]) and still manage the monthly payments.  If, on the other hand, you plan on a 15 year mortgage, you’ll probably want to make a larger down payment to keep your monthly payments in line with what you can afford.

How large a down payment can I make?

Many buyers look at their cash on hand as their only source for their down payment.  This simply is not the case.  One way to fund or partially fund a down payment is by using a gift.   Parents, grandparents and other family members are often eager to help by making a cash gift toward the purchase of your home.

If you are selling a home, the equity you’ve built up can be applied to your down payment.

Of course a USDA Home Loan still offers 100% financing, and if the home appraises for enough you can include all closing costs, or possibly get the closing costs covered from a seller closing cost concession.

What size monthly payment can I afford?

When determining what size monthly payment you can afford, you’ll want to consider what other monthly expenses you have.   Tangible expenses such as car payments, day care and utility bills, all play a role in how large a monthly payment you can afford.

There are also the intangible expenses or lifestyle expenses that you’ll want to consider.  Things such as dining out, travel and when you buy your next car can effect how much you can afford.  Are you willing to curtail or delay some of these expenses in order to afford a larger monthly payment?

This is a very important fact: what payment are you comfortable with, not what payment you can get qualified that may be much larger than what you are comfortable making.

How much can I borrow?

This is a question you’ll want to get answered before you begin your home search.   This is something that I’m here to help you with.  My mortgage calculators will help you see how your down payment, monthly payment and the amount you borrow are all interrelated.

I can answer any questions you may have about the mortgage process.  But the best I can help is by getting you pre-qualified for a mortgage loan.  To get started, simply complete the Quick Rate Request.  I look forward to helping you buy your dream home.

Related posts from Indiana's USDA Home Loan Expert:

1. What Goes On At Loan Closing
2. The Benefits of a USDA Guaranteed Loan to Purchase
3. The Ides of March: USDA Just About Out of Funds

www.youtube.com/watch?v=NME7MmpLX14

Now more than ever you need a competent professional.  Let’s talk so we can discuss your mortgage needs.

Related posts from Indiana's USDA Home Loan Expert:

1. Relieve the Stress of a Home Purchase
2. Increase Your Credit Score in 30 Days
3. How Much Can I Afford