FHA Flipping Rule & VA Loan Amount Updates

Just received this great loan update from Peggy Valley of Summit Funding:

 

FHA

Here is some additional information on the new FHA rule out this week. If there are more changes, I will be letting you know.

 

1)      FLIPPED property owned less than 90 days – no FHA loan availability

2)      Flipped property owned 91-180 days – 2 appraisals required

a)      If the property value is more than 5% above the acquisition price the seller will need to justify the increase. This can include receipts, list of improvements, etc.

b)      The underwriter will have discretion as to how they look at the improvements and may ask for more detail.

c)       Also, they added another caveat – a flipped within a year of acquisition will be under extra scrutiny per FHA guidelines. If the property has been sold more than once they will  look at the history and the lowest price for the property.

So bottomline, FHA must have been having some issues with flipped properties over the past few years to make the above changes. Extra work will be required.

 

VA

VA loan limits:

1)      The VA loan limit for Alameda and Contra Costa County has been reduced from $1,050,000 to $625,500 effective midnight December 31, 2014.

2)      In order to meet and use the current guidelines the borrower MUST a) be in a ratified contract, b) have a loan application issued, and c) a VA case number pulled.

3)      So what makes for an application in today’s day and age you might ask? Ratified contract, fees from the title company, and the application electronically signed or manually signed, case number is a number being pulling by the bank so that means during regular business hours, no midnight work.

4)      The impact is that the borrower will have to come in with more funds. For example, currently if the borrower is purchasing $1,050,000 there would be zero down. With the new guidelines, same  sales price, the borrower would have to come in with $106,125 or 10.12% for downpayment.

5)      You may ask, then why use VA loans. Great question and here are the awesome answers:

a)      On a recently priced loan the borrower got a rate of 3.875% for 30 yrs AND $3300 in credits. Can’t get that anywhere else on a loan over $1M

b)      There is no mortgage insurance

c)       There is no second with an index that moves.

d)      Higher ratios are allowed

e)      AND a veteran can pay  up to 1% of the loan amount toward termite/non-allowables, etc. as long as they didn’t pay an origination fee.  None of my clients do.

f)       So the loan is a win-win for all parties

 

Peggy is a very experienced and dedicated loan agent with awesome follow-up and competitive loan products. You can reach her at peggy.valley@summitfunding.net or by calling 925-890-5255. She is very approachable,  but I would be happy to make the introduction for you if you want, just let me know. 

 

 

FHA Changes Effective January 1, 2014

Effective January 1, 2015, FHA will have let their 90 day waiver on flipped properties lapse. This means that after January 1, 2015, a borrower wanting to purchase a flip will have to wait 6 mos + 1 day to purchase.

I suspect this is going to bring an uproar in the real estate industry. I will keep you updated as things change.

So what does this mean for borrowers – for those wanting to purchase a flip they will need to be in a ratified contract, have a loan application in process AND have a case number pulled by 12/31/14. This will be difficult since everyone will be pretty much closed on 12/30/14.

 

This change will affect both buyers as well as sellers who are flipping properties. In my opinion, it will likely slow the sale of flipped homes and even lower the price of them in areas where FHA financing is the norm and so is flipping property since supply and demand will be affected.

Feel free to contact me if you would like to discuss this change and how it may affect you or your area.

(parts of this update were  excerpted from an email provided courtesy of Peggy Valley at Summit Funding, peggy.valley@summitfunding.net, 925-890-5255. The opinion is mine, however)

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Will the Softening of Lending Guidelines Lead to Another Bubble Burst?

I can see pros and cons to this. The last time the industry tried to do whatever was needed to get people into homes because of high prices, people who really should not have been buying homes were doing so….sometimes with just stated income and stated assets! That, in my opinion, helped lead to the market crash. Maybe this time will be different. What do you think?