What Are the FHA Appraisal Requirements?

Over the past couple of years, I have heard numerous real estate agents steer people away from FHA mortgages. Some have stated in their MLS listings that the seller will not accept a buyer with FHA financing and others have told buyers that it isn’t a good idea to get an FHA loan.  All of this because they think that FHA appraisal requirements are too tough.

They’re wrong!

Yes, this used to be quite true. FHA is the first to admit that historically their appraisal requirement heavily stressed the repair of minor property deficiencies.

However, this has changed.

FHA now permits an “as-is” appraisal for homes being financed with FHA loans that have minor property deficiencies resulting from deferred maintenance and normal wear and tear. In fact, the current FHA appraisal requirements have been in place since January 1, 2006

FHA Appraisal Requirements – General Rules to Remember

For an easy reference to FHA Appraisal Requirements, think of the two S’s.

Safety and Soundness.

Safety – FHA underwriting guidelines require that lenders review the appraisal to see if the appraiser has made note of property conditions that will affect the health and safety of the occupants.

Soundness – FHA underwriting guidelines require that lenders review the appraisal to see if the appraiser has made note of property conditions that jeopardize the soundness and structural integrity of the property.

When an FHA appraisal is done on a home, they are looking to make sure that their aren’t any safety hazards and that the house is structurally sound.

In Mortgagee Letter 05-48, FHA provides the following examples of minor property conditions that do not require automatic repair for existing properties:

• Missing handrails
• Cracked or damaged exit doors that are otherwise operable
• Cracked window glass
• Defective paint surfaces in homes constructed post 1978
• Minor plumbing leaks (such as leaky faucets)
• Defective floor finish or covering (worn through the finish, badly soiled carpeting)
• Evidence of previous (non-active) Wood Destroying Insect/Organism damage where there is no evidence of unrepaired structural damage
• Rotten or worn out counter tops
• Damaged plaster, sheetrock or other wall and ceiling materials in homes constructed post- 1978
• Poor workmanship
• Trip hazards (cracked or partially heaving sidewalks, poorly installed carpeting)
• Crawl space with debris and trash
• Lack of an all weather driveway surface

FHA also provided the following list of conditions that will require automatic repair for existing properties:

• Inadequate access/egress from bedrooms to exterior of home
• Leaking or worn out roofs (if 3 or more layers of shingles on leaking or worn out roof, all existing shingles must be removed before re-roofing)
• Evidence of structural problems (such as foundation damage caused by excessive settlement)
• Defective paint surfaces in homes constructed pre-1978
• Defective exterior paint surfaces in home constructed post-1978 where the finish is otherwise unprotected.

These lists are not meant to be all inclusive, but they give clear guidance on the issues that are and are not a concern to FHA.

If you are interested in buying a house and you want to use an FHA loan for financing, don’t let common misconceptions about FHA Appraisal Requirements misguide you.

Start your path to FHA Home Ownership today.

FHA loans are a great option for people searching for Payson AZ homes for sale.

Here is a quick list of why you should use an FHA loan to buy your Payson AZ home.

• FHA loans are a great program for first time homebuyers in Payson AZ.
• FHA loans are good for borrowers with low credit scores
• FHA loans are great if you need down payment assistance.
• FHA interest rates are very competitive.
• FHA loans are assumable.

Payson AZ, located in Rim Country, is a popular place to live because of its temperate mountain climate and its relatively close location to the Phoenix metropolitan area. It is almost exactly in the geographic center of Arizona and sits at the base of the majestic Mogollon Rim – a 7,000-foot high, 200-mile long escarpment in the world’s largest Ponderosa Pine forest. The 5,000 foot elevation gives Payson its pleasant climate and four mild seasons.

Neighboring communities that, with Payson, make up the Rim Country Community include Star Valley, Christopher Creek, Pine and Strawberry.

So, if you are thinking of buying a home in Payson AZ, you should consider an FHA loan. Their interest rates are competitive and compare reasonably to conventional loans. They do require mortgage insurance, but so do conventional loans if you don’t put 20% down.

FHA loans have been around for over 75 years. However, there are common misconceptions that exist about them. You may have heard that they take too long or that they require too much paperwork. This is not true. But, many misconceptions about FHA loans still exist. Finally, if for some reason you fall on hard times, FHA loans offer different options to help you avoid foreclosure and keep your home.

Call or contact me today if you would like to get prequalified for an FHA loan and you can start searching for your Payson AZ homes for sale.

Steve Lines
480-344-3662

Sunstreet Mortgage in Mesa AZ

Sunstreet Mortgage, a Tucson-based mortgage banker, has announced the opening of their new office in Mesa AZ.

One of the best loan officers and bloggers that is in the Valley of the Sun, Christoph Schweiger, recently announced that he will be working from this office.

I am happy for Christoph.  I have just recently had the opportunity to meet him while he attended one of the NMLS pre-licensing classes that I was teaching.  Since then we have run into each other in real life and in social media.  His real estate knowledge and life experience help him to be a great loan officer in Mesa AZ.

According to their website, Sunstreet Mortgage in Arizona has 30 loan officers and two in house underwriters for a total of over 200 years of combined mortgage experience. That is an amazing average of a little over 6 years experience for their loan originating staff. They have been licensed as a mortgage banker with the Arizona Department of Financial Institutions since August 2005.

Sunstreet Mortgage boldly proclaims that they offer service that is unparralled in the industry.  This is a strong statement from a company especially considering the high ethical advertising standards of their Branch Manager, Gary Miljour.  He is a strong advocate again online advertising that could be inferred as over-promising and under-delivering and isn’t afraid to share his opinion on real estate and mortgage companies and professionals that “Need a Trophy Case for Their Meaningless Accolades”.

Christoph believes that the most unique aspect of Sunstreet Mortgage in Mesa AZ is “that there is one layer of management and decisions are made fast and locally”.  I look forward to observing his success and I would gladly recommend him to my clients if their are any AZ FHA loan programs that I am not able to do.

It is important to find the right company and loan officer before you get a loan. At Best FHA Lender, we strive to provide the necessary information about getting a loan. With professionals researching loans, you can be sure the information is accurate and helpful. Honesty, professionalism and customer service are our main goals.

FHA make it easy to obtain your goal of home-ownership by offering low interest and low down payment requirements and allowing gift programs. FHA loans also help home buyers with less than perfect credit and allow for non-occupant co-signers.

FHA Loan Options in Phoenix AZ

Home buyers in Phoenix AZ are taking advantage of the low rates and flexible features offered by our Phoenix AZ FHA loans.

Flexible Features of AZ FHA Loans

• Low FHA interest rates in Arizona
• Buy a house with little to no money
  • Low down payment requirement
  • Take advantage of gift programs
• Helps home buyers with less than perfect credit
• Allows for non-occupant co-signers
• FHA loans do not have prepayment penalties
• Your Phoenix AZ FHA loan may be assumable

Some people and real estate agents in the Phoenix area mistakenly avoid FHA loans because of common misconceptions such as:

• Takes too long. Wrong – see our ten day close guarantee.
• Too much paperwork. FHA does have a few more disclosures that you will have to sign at application, but the extra 5 minutes is worth it.
• Requires restrictive repairs. FHA appraisals are much easier than they were in the past. They just want to make sure that there aren’t any safety concerns.

There are several Phoenix FHA loan programs to promote home ownership. If you are an Arizona first time home buyer, you can use an FHA loan to easily qualify for your mortgage.

Remember, because FHA insures your Phoenix AZ mortgage, lenders are more willing to give Arizona FHA loans with lower qualifying requirements. That’s why its easier for you to qualify.

Phoenix AZ FHA loans have been around since 1934. They are a great mortgage option to help you buy your home. Also, even if you happen to encounter hard-times after buying your home, a Phoenix AZ FHA loan has many options to help keep you in your home and avoid foreclosure.

To get the most out of your Phoenix AZ FHA loan, you should pick the best FHA lender. We’ll help you buy your home with a Phoenix AZ FHA loan for all the reasons above.

Call today to find out if a Phoenix AZ FHA loan is right for you.

I’m going to erase this when i’m done, but I’m using it now.

The strangest thing happened today.  I was teaching my Agency and the Use of Social Media at the Arizona School of Real Estate & Business and as part of the class, I wrote this quick and dirty post to demonstrate how you can write a blog post and have it broadcast to Twitter, facebook and LinkedIn all at the same time.

I had every intention of erasing the post — as you can see above —  but while I was driving home I received a notice that this post had been indexed by google.

To be honest, I have no clue why google chose to index this page so quickly when other posts take days before they are indexed.  When I received the alert, I had not added any SEO components either on page or off page.

So, I decided to not erase it and add this explanation of why I have such a lame post on my website.

The New 2010 GFE

I had an awesome Geometry teacher in high school, Pete Hayes at Westwood High School in Mesa, AZ. He was the kind of teacher that earned your respect and inspired you to do as your very best.

One of lessons that he taught has stuck with me for the past 20 years. During his class he described a scenario where a man from Boston flew into Phoenix for one day. It was raining the day that he was in Phoenix. When he flew back to Boston and told everybody that he knew that it rains everyday in Phoenix.

As he predicted, we let him know that the man’s conclusion was laughable. At that point, he taught us that the man had used inductive reasoning and went on to teach us about the two basic kinds of reasoning — inductive and deductive.

Inductive reasoning involves moving from a specific to a general. Many times the person applying inductive reasoning in drawing their general conclusion based on a specific observation.

Deductive reasoning begins with the general and ends with a specific. Arguments using deductive reasoning are typically based on laws, rules or other widely accepted principles.

In the example given by my Geometry teacher, the man used inductive reasoning and draws upon his specific observation (rained in Phoenix while he was there) to reach a general conclusion (it rains everyday in Phoenix).

If the man has used deductive reasoning, he probably would have come to a different conclusion. If he had noted the predominant desert vegetation in Phoenix he could have reasoned that they result from an arid climate. Therefore, even though it was raining the day that he was there, by rule an arid climate typically experience less than 10 inches of rainfall a year and as such, it does not rain everyday in Phoenix.

Although inductive reasoning can allow a person to reach a probably outcome, it does not require it to be right. In fact, as in the example above, conclusions drawn by use of inductive reasoning can result in overgeneralizations.

Inductive Reasoning in Mortgage Lending

I’ve found that a great number of the problems that exist in the mortgage industry are a result of the use of inductive reasoning. These problems have often resulting in harm to the public. HUD, through the enforcement of RESPA and the new GFE, looks to reduce this public exposure as much as possible.

Sometimes HUD needs to protect the public from itself. Consider the following conclusions that a homebuyer might make as a result of using inductive reasoning:

• Since that is the mortgage loan officer that my real estate agent referred to me, she must be experienced and trustworthy.
• My loan officer told me that based on my loan application I qualify for an FHA loan at 5.25%. That must be the best program and rate that I can obtain.
• The listing agent on the house that I want to submit an offer on recommends that I use XYZ Title Company. I guess they’re as good as any.
• I’ve signed the GFE so now I’m bound to it.
• At closing: My closing costs are $600 higher than what my loan officer quoted me. This must be typical … I’m stuck.

So, What’s the Point of the New 2010 GFE?

At the beginning of 2010, the new GFE was put into effect. This was done to help RESPA fulfill one of its main purposes – to help consumers become better shoppers for settlement services. The new GFE goes a long way to help “protect the public from itself” by forcing them to NOT draw general conclusions from their observations (inductive reasoning) and actually apply rules and regulations (deductive reasoning).

At the top of page 1 it has a section that says Shopping for Your Loan and says:

“Only you can shop for the best loan for you. Compare this GFE with other loan offers, so you can find the best loan.”

It goes on to provide an entire related section on page 3 called the Shopping Chart. The shopping cart instructs the borrower to

“Use this chart to compare GFEs from different loan originators … By comparing loan offers, you can shop for the best loan.

Further, the new GFE provides detailed information that attempts to ensure that the borrower has a clear understanding of rules and regulations guiding the lending process. Here are some examples:

“The interest rate for this GFE is available through _____.”

“This estimate for all other settlement charges is available through _____.”

“Can your interest rate rise? Y or N”

“These charges are for other services that are required to complete your settlement. We can identify providers of these services or you can shop for them yourself.”

“These charges cannot increase at settlement”

“The total of these charges can increase up to 10% at settlement

Title services and lender’s title insurance (if we select them or you use companies we identify)”

Finally, notice that the new GFE does not have a signature line for the borrower. HUD doesn’t want the borrower to sign it so that they don’t think they are bound to it.

I have heard a number of loan officers complaining that “the new GFE is too confusing” or saying things like “leave it to HUD to make a one-page disclosure into a three-page document … that sure helps”. Get over it! The new GFE was not designed for you, it was designed for the borrower.

Note that all of the language in the new GFE is written in a form that is directly speaking to the consumer.

The new GFE is attempting to help protect the consumer from the dishonest loan officers that are still out there …

and from themselves.

By providing clear explanations of the guiding rules and regulations as well as precise instructions that counsel borrowers to compare loan programs, the new 2010 GFE makes a strong attempt to guide the borrower to use deductive reasoning as opposed to inductive reasoning when obtaining financing.

FHA Interest Rates

Many believe that there will be an increase in interest rates in 2010.  The question that most have isn’t “if”, but “when”.  A number of economists and news sources have predicted that a significant increase in FHA interest rates will happen within the next few months, while others suggest that it will not happen until the fall.

What Are Interest Rates Going To Do?

Aside from the general agreement that “they’ll probably go up”, no one seems to know for sure.  We are now into the fourth year of the housing crisis and it is hard to see an end.  In his recent news article, Trey Bowden said it best:

The questions on most homeowners’ minds are: “When will we see an end to the current housing crisis?” “How much longer will lenders remain skeptical?” “What are interest rates going to do?” “Is the housing market going to show signs of loosening up this year?” “Even with the federal tax credit, is it time to buy a new home?”

How Does The Interest Rate Affect My Loan?

Simply put, the higher the interest rate, the higher your monthly payment will be.  Therefore, the amount that you can qualify for to buy a house will be lower.

FHA considers a borrower’s income adequate for a loan if the proposed total mortgage payment does not exceed 31% of gross stable monthly income.

With that being said, consider the following example:

Assume that the average household income is about $50,000 per year (or 4,166.67 per month) and the total amount of your other debt does not affect the 31% FHA housing ratio.

To fall within traditional FHA debt-to-income guidelines (31%), your total monthly payment can not exceed $1,291.67 (4,166.67 * 31%).

For the purposes of this example (using current mortgage insurance premium requirements), we’ll say that you are putting 3.5% down and your total monthly taxes, insurance payments are $150.00.

Under these circumstances the approximate results are:

• 5.0% FHA Interest Rate = $200,000 purchase price
• 5.5% FHA Interest Rate = $190,000 purchase price
• 6.0% FHA Interest Rate = $181,000 purchase price
• 6.5% FHA Interest Rate = $171,000 purchase price

FHA Interest Rate for Today

In the top, right corner of this site you’ll find the current US average mortgage rates.
You can use this tool to see what are the current interest rates and to see what the recent interest rate trend has been.

If you are planning on buying a home in 2010, I recommend that you frequently visit the site to check on current interest rates.

Are you a loan officer wandering around out there wondering why it takes so long to close a loan?

Are you a Realtors frustrated at how long it takes to close a loan?

Are you doing real estate investing and wondering what programs are actually done in-house?

Are you someone who is trying to get a home loan and feeling frustrated with how long it takes to get a loan closed?

I feel your pain.

I have been working in the mortgage business for about 6 or 7 years now and it was always amazing to me how long things took to get done. It seemed that every little step was another hurry up and wait step in the miles-long process of getting a loan done.

But I am happy to report that it isn’t that way everywhere.

Academy Mortgage in Mesa can get your loan closed in ten days and they back it up with their ten day close guarantee.

What does it take to get a loan closed in 10 days?

• You must first start with a clean loan application. This means that everything must be in the file such as supporting income documentation, bank statements, tax returns, etc.
• You must have in-house processing that sits close to the loan officer.
• You must have in-house underwriting that sits close to the processor.
• You must have the ability to draw closing documents in house – usually a full time closer.

And last but not least, you must have an operations management team that is dedicated to an abnormally high level of customer service.

Don’t have all of these where you currently work?

You probably don’t stand a chance at getting a loan closed in 10 days and it is my personal mission to alert your customer that they don’t have to wait on your slow turn times and that there are better options available.

So if your management team isn’t dedicated to the high level of customer service, this is my formal invitation to join us.

But only if you are up to the task.

Closing loans this fast ain’t easy you know.

Still need more proof?

See you soon.

Yuma AZ Homes

Are you one of the many people that are making the decision to move to Yuma Arizona? The Yuma area is attracting more and more people for a variety of reasons. People buy Yuma AZ homes either because of job opportunities, the location (close to Phoenix, San Diego and Mexico), the winter weather or to take advantage of the many interesting things to do.

There are a number of surrounding communities to consider when searching for Yuma homes for sale such as Somerton, Gadsden, San Luis and Yuma Foothills.

Yuma Mortgage Information

If you need a Yuma Mortgage, you have many financing options.

There are many Yuma mortgage programs have been designed to suit your needs.

FHA Purchase loan information in Yuma, Arizona
Information on Downpayment Assistance in Yuma, Arizona
FHA Refinance information in Yuma, Arizona

Many of our Yuma mortgage customers are taking advantage of the 100% financing that is currently offered through USDA. Here are some of the highlights:

• Low interest rates
• 102% Financing based on appraised value, if appraised value exceeds sales price, borrower can finance closing costs and repairs
• 30 Year fixed term
• No monthly mortgage insurance
• No downpayment requirement.
• No Yuma AZ First Time Homebuyer restrictions.

We also specialize in VA loans in Yuma AZ.

Need a loan closed fast by a local Yuma mortgage professional who is the best in the business? Try Derek Egeberg and ask him how he guarantees your home loan will close on time.

The big secret to always close your Yuma mortgage on time?

In no particular order:

• Have a loan officer who knows what they are doing.
• Have processing in house.
• Have underwriting in house.
• Have doc drawing in house.
• Have a way to get appraisals done, even with the HVCC guidelines in place.
• Have senior management that will accept nothing less than excellence and hold each person accountable for achieving the goal of a ten day close each and every time.

Please contact me with questions. I would love to help you with your Yuma FHA mortgage today.

Steve Lines

Best FHA Lender in Arizona

FHA Mortgagee Letters

With all of the recent changes in the mortgage industry and the departure of subprime and other non-traditional mortgage products, the market share of FHA insured loans has swelled to 30% of all purchase mortgages. Politicians, advocacy groups and a sizeable percentage of the American public are afraid that Federal Housing Administration has become “the new subprime”.

HUD leaders have recently announced major initiatives to mitigate risk that include additional oversight of underwriting standards, increasing the required amount of mortgage insurance premiums and reviewing poor-performing, FHA-approved mortgage lenders.

It is important for mortgage and real estate professionals to keep abreast of the material changes to the Federal Housing Administration’s policies. To do so, I recommend that they read the HUD issued FHA Mortgagee Letters as they are released.

HUD issues FHA Mortgagee Letters to inform lenders about operations, policies, procedures, and changes. Between 1989 and 2009, they have issued an average of 42 a year. Last year, HUD issued 53. All of the Mortgagee Letters can be found on HUD’s website.

Here is a short list of some of the most recent relevant FHA Mortgagee Letters:

FHA Mortgagee Letters
10-02     Increase in Upfront Premiums for FHA Mortgage Insurance
09-53     Real Estate Settlement Procedures Act (RESPA) and FHA Related Policies
09-50     2010 FHA Max Loan Limits
09-46a   Temporary Guidance for Condominium Policy
09-46b  Condominium Approval Process for Single Family Housing
09-32     Revised Streamline Refinance Transactions
09-29     Appraisal Portability
09-28     Appraiser Independence
09-19     Condominium Approval Process – Single Family Housing
09-15     Using First Time Home Buyer Credits for Downpayment
09-08    Limits on Cash-Out Refinances

Mortgagee letters are informational memos issued by HUD for clarification of new and existing HUD policies.

The goals of the Federal Housing Administration are: to improve housing standards and conditions; to provide an adequate home financing system through insurance of mortgage loans and to stabilize the mortgage market.