Conventional vs. FHA Loans
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Conventional FHA
No reserve requirementTwo months reserves
Minimum 10% down 3.5% Down Payment
Heavy restrictions on Gifts Gift funds allowed
No non-occupant Co-borrowers Non-occupant co-borrowers allowed (kiddie condo)
Tiered pricing based on FICO Pricing same regardless of FICO score
No Unpaid Collections allowed Up to $5k medical collections can be unpaid
ARMS with caps of 2%/6% ARMS with caps of 1%/5%
ARMS qualify at note rate ARMS qualify at initial rate if LTV is <95%
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Conventional vs. FHA LoansConventional FHA
Private MI required (over 80% LTV) Government insured
Must have DU/LP approval Loan can be manually approved
2 years after Chapter 74 years out of Chapter 7
2 yrs. after payoff on Chapter 13 1 yr. of on-time payments after Chapter 13
7 yrs. after Foreclosure 3 yrs. After Foreclosure
• Borrower must make a 3.5% cash investment*• Borrower’s documented liquid assets (IRA’s or 401K)• Gift from Relative• Gift from Charitable organization, union, public agency,
employer or public entity• Secured Loan
Down Payment Sources
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FHA Flexible Credit Guidelines
Minimum FICO score is 640*
Minimum time after a Chapter 7 Bankruptcy is 2 years (12 Mos minimum with extenuating circumstances-see below)
Minimum time period after a Chapter 13 bankruptcy is one year from creditor settlement date with proof of on time payments for that year
On Short Sale, it is possible to purchase a home one day after closing*
If little credit history is available, alternative credit can be used. Payments on items such a car insurance, Utility bills or Cell phones can be used
to create the credit required
Minimum time period after a foreclosure is 3 years, unless extenuating circumstances:
Death of wage earner
Serious Illness
Consumer Credit Counseling –must have paid payments on time for 12 mo.
*In some exceptional cases, a score lower than 640 may be acceptable
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Condominiums 234 (c)
Subdivision must be FHA approved
Spot approval no longer available
Do NOT trust MLS data-verify approval with Amerifirst LO
2 Years employment/self employmentMust be stableMust continue for at least 3 years (Alien Visa)Other verified income may be considered if more than 2 year history, if not, can be used as a comp factorCondominiums must be FHA approvedFHA’s viewpoint on flipping
Qualifying Notes
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Appraisal Valuation Conditions
These Valuation Conditions and protocol help the appraiser evaluate the standards required by the General Acceptability Criteria. The criteria are described below. It is helpful & facilitates the process if the following items are addressed prior to the appraiser viewing the property.
Known as Rehabilitation/Renovation Mortgage. Less Common – Much more comprehensive
construction project
$5k minimum for repairs, but allows for all but one foot of the foundation
to be torn down.
Requires a consultant
Maximum mortgage is lesser of:
1.Maximum FHA limit, or;
2.As-Is Value plus cost of rehab, or:
3.110% of “after improved” appraised value
Most common
Intended to facilitate uncomplicated improvements
Allows up to $35,000 to be used after closing for repairs, which can be part of
the improved value (no minimum threshold)
No General Contractor or drawings required
Does not allow for structural improvements and must use licensed and bonded
Sub-contractors*
Streamlined
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2 Types of 203(k) Loans
Standard
Controlling the elements of the 203(k) process leads to a successful closing.
1. Roofs, gutters, downspouts2. Heating, ventilation3. Plumbing, electrical systems4. Flooring5. Minor non-structural remodel6. Painting7. Appliances8. Windows, doors, existing siding9. Well, septic systems
203(k) Streamline
Examples of eligible work under 203(k)
streamline:
Repair/Replace:
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203(k) Streamline
Examples of ineligible work under 203(k) streamline:
For more information on the 203(k) program visit:http://www.hud.gov./offices/hsg/sfh/203k/203k--df.cfm
1. Pool & equipment2. Structural improvements requiring
drawings, a general contractor or layered work
3. Relocation of a load bearing wall4. New construction5. Room additions6. Repair of structural damage7. Work not deemed easily
completed in 6 months8. Additional living units (if allowed
by zoning)
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VA Loans
1. Lender's appraisals (reviews)2. Lender's inspections, except in construction loan
cases 3. Loan closing or settlement fees 4. Document preparation fees 5. Preparing loan papers or conveyance fees 6. Attorney's services other than for title work 7. Photographs 8. Interest rate lock-in fees 9. Postage and other mailing charges, stationery,
telephone calls, and other overhead 10.Amortization schedules, pass books, and
membership or entrance fees11.Escrow fees or charges a.k.a. Loan closing or
settlement fees
12. Notary fees 13. Commitment fees or marketing fees of any
secondary purchaser of the mortgage and preparation and recording of assignment of mortgage to such purchaser
14. Trustee's fees or charges 15. Loan application or processing fees 16. Fees for preparation of truth in lending disclosure
statement 17. Fees charged by loan brokers, finders or other
third parties whether affiliated with the lender or not
18. Tax service fees 19. The veteran cannot pay for appraisals requested
by parties other than the veteran or lender.
What Fees can the Veteran NOT pay? The following list provides examples of items that cannot be charged to the veteran as "itemized fees and charges."
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