Understanding Requirements of Appraisal for FHA Loans

Understanding Specific Requirements of Appraisal for FHA Loans in Wisconsin

The all-time low mortgage rates combined with affordable home prices have generated a huge growth in business for FHA mortgages. People considering their first home need to understand the specific appraisal requirements for FHA loans in Wisconsin.

Basics of FHA Appraisal

In a nutshell, an FHA appraisal is a conventional appraisal with additional requirements. The goal is to identify any potential repairs that would need to be completed within the next 24 months and have those items addressed before the loan is closed.

It is important to note that an appraiser does not review a home to the depth of a home inspector. A home inspection is still a good idea for a home, especially if it is 5+ years old.

FHA Appraisal Caveats

Only appraisers listed on the FHA approved roster are allowed to inspect homes and complete the evaluation. Before an appraiser is assigned to review a home a FHA case number will be assigned to the loan. The appraisal is valid for the next 90 days. The lender or borrower may change during that time period without the need for a new appraisal.

Any home that has undergone a conventional appraisal within the last 90 days will still need a FHA case number. In addition, the home must be re-inspected to verify FHA specific items. Here is a list of the items:

• Confirm no existence of drainage or water damage
• Ensure water pressure is adequate for the home without any leaks
• Any exterior and interior lead-based paint must be inspected to identify peeling, chipping or cracking
• Identify exterior access for each bedroom
• Insure the minimum 18” egress and ingress from the lot line to the building
• Test the heater to ensure proper working condition as well as air conditioner
• Ensure electrical outlets are in every room and in working order
• Test the fan/hood over the oven for proper working condition
• Ensure screens are present on roof vents and no more than three layers of roof material
• Determine that the electric box has at least 60 amp
• Properly note existing wiring that is exposed as well as cover plates missing from electrical boxes
• Do a brief inspection of crawl space and attic

Any issue found on the interior portion of the home needs to be either repaired or replaced. On the exterior part of the home any issue needs to be repaired or removed.

Specific Areas of Importance

Of the items mentioned above three seem to get the most attention; water problems or drainage issues, lead-based paint and the ingress/egress points. Concerning the ingress/egress points, common problems occur with homes that have a garage touching the lot line. This prevents the homeowner from accessing the exterior wall of the garage in order to paint. If this is the case the neighbor may be asked for an easement in order to grant the homeowner access.

Consultant Required for 203(k) mortgage

Buyers that are approved for a FHA 203(k) mortgage need to understand that the appraiser will be working with a consultant. The consultant must be approved by FHA. This individual will inspect the home and determine the necessary repairs and improvements and formulate an estimated cost. The appraiser will inspect the home and ensure that the consultant has properly identified all necessary repairs in order to conform to the FHA guidelines.

This communication is provided to you for informational purposes only and should not be relied upon by you. Rock Realty is not a mortgage lender and so you should contact a lender directly to learn more about its mortgage products and your eligibility for such products.

Wisconsin Home Buyer Info

LOAN PROGRAMS and MORTGAGE INFO

• 4 Tips to Determine How Much Mortgage You Can Afford
• 7 Key Questions to ask about your Mortgage

FHA

• Getting Approved for an FHA Mortgage
• HUD/FHA $100 Down Payment Program
• Which Mortgage? FHA 203K or HomePath Loan
• Using FHA 203K Loan to Purchase a Fixer-Upper

USDA

• No Money Down USDA Mortgage

VA

• Qualifying for VA Mortgage
• Homeowner Benefits to Veterans and Service Members

JUMBO LOANS

• Understanding the New Rules for Jumbo Mortgages

GENERAL INFORMATION

HOME BUYING TIPS

• Tips for Purchasing a Foreclosure
• Tips for your first Home Inspection
• Tips for Buying a Wisconsin Short Sale
• Tips for Picking the Right Wisconsin Home
• Tips on Buying Your First Wisconsin Home

OTHER ARTICLES

• 7 Steps to Take Before You Buy a Home
• Keep Your Home Purchase on Track
• Getting Pre-Approved for a Mortgage Before Looking for a WI Home
• Avoiding Problems with Your Escrow Account
• Benefits of Buying an Owner-Occupied WI Short Sale
• Buying a WI home after a Short Sale or Foreclosure
• Getting Familiar with your Homeowners Insurance (HOI)
• Why It is a Good Idea to Choose a WI Realtor®

Using FHA 203K Loan to Purchase a Fixer-Upper

Using FHA 203K Loan to Purchase a Fixer-Upper

Across Wisconsin there are a large number of short sale homes available to buyers.  A short sale is a home being sold for an amount less than the existing mortgage balance.  These homes often have a few cosmetic repairs that need to be made in order to make the home more presentable, if not safe.  For years the issue of repairing a home prior to purchase was a catch 22.  The bank or seller was not willing to spend extra money on a home that they are selling.  The buyer could not make the repairs because they did not legally own the home.  The FHA 203k loan solves that problem with ease.

Two Kinds of Loans

The Federal Housing Authority (FHA) offers a loan called the 203k mortgage, named after the code section where the loan is found in the FHA guidelines.  This loan is offered as a Streamline version and the regular version.  The streamline was designed to offer lower amounts designated for repairs and slightly less paperwork.  Both loans are ideal for Wisconsin homebuyers who wish to purchase a home in need of some repairs.

How the Loan Works

The loan program allows buyers to purchase a home based on the sales price.  In addition, the buyers can borrow extra money to make the necessary repairs. Once the loan is approved and closed, the extra money is placed in an escrow account.  The contractor that is doing the work will receive payment once the work is completed. This protects the borrower and the lender against problems with the repair process.

The amount needed for repairs is added to the loan for the purchase and the homebuyer makes one payment, at one interest rate, on the entire loan.  Since mortgage rates are so cheap right now it is a wonderful way to buy a home that may be priced below market value due to some simple fix-ups.

Loan Amounts

The Streamline 203k loan will allow Wisconsin homebuyers to borrow a minimum of $5,000 and a maximum of $35,000 to be used towards the repairs.  The regular 203k loan allows much more as a percentage of the sales price and the estimated appraised value after the proposed repairs have been made.  The regular 203k loan will need the involvement of an appraiser, home contractor and loan officer from the very beginning to make sure the loan and repairs meet the guidelines of the program

What Can be Done with 203k?

Wisconsin homebuyers often ask about the types of repairs that can be done with the Streamline 203k program.  The following list shows some of the more popular tasks accomplished using this type of loan

• New gutters and a new roof
• New Heating and air conditioning system or repairs to the existing system
• Plumbing updates and repairs
• Electrical updates and repairs
• Bath and kitchen remodels, to a lesser extent
• New flooring of any type; wood, carpet, tile
• Painting for both exterior and the interior
• New windows and doors
• Energy efficient appliances

The 203K loan allows many types of repairs and improvements that can greatly enhance the value of a home and give buyers a chance to purchase a place at a savings. This loan is ideal for Wisconsin short sales or foreclosures.

Original Post - Using a FHA 203K Mortgage for Rehab

This communication is provided to you for informational purposes only and should not be relied upon by you. Rock Realty is not a mortgage lender and so you should contact a FHA lender directly to learn more about its mortgage products and your eligibility for such products.

Getting Approved for an FHA Mortgage

Getting Approved for an FHA Mortgage

The FHA mortgage has grown in popularity over the last few years for first-time homebuyers and experienced homeowners.  The flexible rules used to qualify buyers make it one of the more attractive ways to get a home in Wisconsin.  Although the following list is meant as a guideline, keep this in mind; FHA has the authority to make exceptions for almost every rule.  Their goal is to find a way to qualify people for a loan, rather than look for a reason to decline them.

Employment – Borrowers need to have a minimum of two years of continuous employment.  It is preferred that this employment is with the same company or in the same line of work and it should be within Wisconsin if at all possible.

Credit Report – The most recent 12 month period should show signs of being able to make your current obligations on time.  Any late payment or problem needs to have a reasonable and verifiable explanation.

Ratios – In general, the FHA underwriters look at two ratios.  The first ratio compares the proposed mortgage payment to the person’s income.  This number usually cannot be higher than 31%.  The second ratio is total debt ratio which compares a person’s existing debt, as well as the new mortgage payment, to the existing income.  This ratio normally should not be higher than 43%.  However, as stated earlier, there are several lenders in Wisconsin that can get loans approved with slightly higher ratios under certain circumstances.

Down Payment – The FHA program requires a down payment of at least 3.5% of the home’s purchase price.  However, this money can be a gift from a relative or a friend.

Closing Costs – The FHA mortgage program allows the seller to willingly pay the closing costs of a mortgage, up to 6% of the home’s purchase price.  In most cases, the 6% is sufficient to cover all expenses.

Rent or Mortgage payments – For people that currently rent they must show that the most recent 12 months payments were made on time.  For people who currently own a home, their most recent 12 mortgage payments must be on time.

Bankruptcy – For people that have filed a Chapter 13 bankruptcy they must pay in the plan at least one year, on time, before they can be considered for an FHA loan.  For people that have filed Chapter 7 bankruptcy, they must wait 24 months after the bankruptcy was discharged.

Past Foreclosure – For any borrower that has a previous home foreclosed, they must wait at least 3 years after the final foreclosure before they can be considered for an FHA loan.

If you meet these guidelines then it is quite possible that you have a good chance of getting approved for an FHA mortgage in Wisconsin.  For people that may have a couple of strikes on their credit, such as a bankruptcy or foreclosure, you need to understand that you too can qualify for a FHA mortgage loan.  It is simply a matter of allowing enough time to pass so that the negative items no longer hamper your chances of getting the loan.

This communication is provided to you for informational purposes only and should not be relied upon by you. Rock Realty is not a mortgage lender and so you should contact FHA directly to learn more about its mortgage products and your eligibility for such products.

Original Post - FHA Mortgage Approval

FHA|HUD $100 Down Payment Program

Although it is hard these days to still find a true no money down mortgage loan, there are a few programs that come pretty darn close. Take the HUD|FHA $100 sales incentive program as an example. The loan officers over at Inlanta Mortgage have brought this newer mortgage program to my attention. I have included some excerpts from their HUD FHA $100 Down Mortgage Program blog post below.

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Just like every bank out there, HUD has also seen a rash of foreclosures over the last few years. When someone defaults on a FHA mortgage, HUD may end up owning that property since they insured the borrower against default. HUD is not in the business of owning or renting properties so they came up with a unique sales incentive in order to sell these homes.

HUD has offered a program to allow for a qualifying borrower to purchase a single family home with only a $100 down payment requirement. The borrower can finance the cost of the home + the 1% UFMIP as long as the value is supported by an appraisal. The home buyer may increase the offer and ask for a seller credit to cover closing costs and then would only be required to bring $100 to close. This is a great deal if you can find a property that is eligible. We have a link we’ll post below to get you to HUD’s website where these eligible homes can be found in your area.http://hudhomestore.com/HudHome/Index.aspx

The requirements for this program:
Home must be an approved HUD home
Single Family Residence
Owner Occupied
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I'd be happy to help you find the perfect HUD home for you! Don't forget about our home buyer discounts available. Call me at 608-921-8536.

Tips on Buying Your First Evansville Wisconsin Home

Tips on Buying Your First Evansville WI Home


Getting that first home can be a really exciting time for anybody. However, it needs to be approached with realistic expectations. Going through a few of the following suggestions will make the whole process much easier.


Get Familiar with Real Estate Terms


Buying your first home will involve learning about the home market as well as loans. Therefore some terms may be unfamiliar to you. Here is a list of some common terms used in Wisconsin mortgage loans and real estate transactions.

• Closing Costs– These are fees associated with all mortgages. Amounts paid to a title company for the title search, recording the deed and mortgage at the court house, origination, credit report fees, appraisal fees and the fee from the attorney to close the loan are just some of the items involved.



• Warranty Deed – This document proves that the sellercan legally sell the home.



• FHA – This is a government organization known as the Federal Housing Authority. This organization authorizes lenders to offer FHA loans and enforces the guidelines for approving the loans.



• Bait Rate – Some mortgage companies will advertise an extremely low interest rate to entice borrowers to contact them and submit a loan application. However, it is later discovered that the advertised rate was for people with the absolute highest credit scores, along with a sizable down payment and a well established job history.



• GFE – This is an acronym for Good Faith Estimate. It provides an estimate of the costs associated with closing the mortgage loan.



• Underwriting – This is the process of approving a loan application. An underwriter will compare the borrower’s credit, income, savings and residence history to the guidelines of the particular loan program that has been matched with the borrower. The underwriter must make sure that the borrower meets the requirements of the loan in order to issue an approval.

Organize Your Finances


Before applying for a loan it is a good idea to ensure your credit rating is worthy of a mortgage loan. If you have some blemishes on your credit report then it is important to fix them before hand. Setting aside enough money for the down payment is also critical. You should plan on between 3% and 5% of the purchase price of the home. It is also a good idea to have another 3% to 5% for the closing costs.


Be Realistic About the Home


It is not a good idea to look at homes well beyond your affordable range. Talk to a mortgage company and get pre-approved for the loan. Then talk to your Realtor and ask to look at homes that fall within your price range. Looking at a home that may seem perfect, but is $10,000 more than you can afford, will make you unhappy with other homes and could lead you to make a bad decision towards an alternative mortgage.


Take some time to learn about the real estate market and get everything in order before house hunting. This will make it easier for your Realtor to find the right house for you and make the whole process less stressful.


At Rock Realty we want to make sure that your home buying experience is smooth and that you feel comfortable with your decision. It’s important that you buy the right home for you. Don’t forget about the great Wisconsin home buyer discounts that Rock Realty has to offer!


Home Buyer Discounts

Which Mortgage? FHA 203K or HomePath Loan

Short sales and bank owned properties can offer a great price point to the savvy buyer or investor. Typically though, these homes do require some amount of work and repairs. I've found that many properties just need some cosmetic ‘touch ups' like paint and landscaping. Others however may need significant remodeling, including drywall, roofing or windows.

In any event, having a mortgage available that gives you the option of financing these repairs is a huge advantage. The two most common options currently in the market are the FHA 203K and the HomePath loans. The Zillow article below goes over the differences in each.

Regards
Michael Collins, SFR
Short Sale & Foreclosure Resource

If you are in the market to buy a home, chances are that you have seen at least one property that is either a short sale or a bank-owned property.

And based on what I have seen, many short sales or properties that are currently owned by the bank are in need of a few repairs before anyone can live in them.

Which is why I get quite a few questions about two of the most popular loan programs designed to help homeowners finance needed repairs on a new home: the FHA 203k program and Fannie Mae's HomePath mortgage program.

One of the more common quick questions I hear when people are learning about these loan programs is:

"Which is better, the HomePath mortgage or the FHA 203k loan?"

The simple answer to this question is "it depends" and before I give you a simple formula that might help you choose between the two programs, here is a quick review of each loan program.

The FHA 203k and FHA Streamline 203k Loans

The FHA 203k loan program can be grouped into two different types of loans: the FHA Streamline 203k loan program and the FHA 203k loan. The FHA 203k streamline is designed to be a limited repair program and has simpler processes and no HUD consultant required like on the full FHA 203k loan. In my experience, the FHA 203k streamline is a more popular option since many of the needed repairs for bank-owned homes can be considered "cosmetic."

Highlights of the FHA 203k streamline loan include:

• It works very similar to a construction loan - it allows you to purchase a home that wouldn't qualify for FHA financing due to repair work being needed



• The loan amount is equal to the purchase price of the home plus the amount needed for repairs



• FHA 203k streamline program allows for repairs ranging from $5,000 and $35,000



• Qualifying for FHA 203k loans are the same as regular FHA loans



• Repair work cannot begin until loan closes and the money to pay contractors comes from an escrow account set up when the loan closed



• FHA 203k loans require UFMIP and MIP just like regular FHA loans



• Appraisal required



• Currently available for owner-occupied properties only although I have heard rumors of an "Investor 203k loan" coming soon.

Fannie Mae HomePath Renovation Loan

When the housing downturn began and Fannie Mae started owning more homes than ever before, one of the things Fannie Mae did to help move the homes to new owners was to design the HomePath mortgage program.

The HomePath mortgage program has two different programs within it - the HomePath loan and the HomePath Renovation loan.

For homes that are in need of repairs, the HomePath Renovation loan is the loan program that is often compared to the FHA 203k loan when weighing options.

HomePath Renovation loan highlights include:

• The property must be currently owned by Fannie Mae



• The loan amount is for both the home and the repairs required for the home



• Repairs can be up to 35% of the as-completed value, but not to exceed $35,000.



• Down payment requirements can be as low as 3%



• Fixed or adjustable rates are available



• No mortgage insurance required



• Investment properties or 2nd homes and investment properties are allowed



• No appraisal required



• Lenders can be difficult to find, not every lender is HomePath approved and many HomePath approved lenders do not offer the HomePath Renovation loans

HomePath Renovation Loan or FHA 203k Loan?

When deciding on financing for a home that is in need of repairs, the Fannie Mae HomePath Renovation loan program and the FHA 203k loan program are what most people are going to select.

Is there an easy way to select the "right" loan between the two?

Yes.

Which Loan Program Is Better?

Here is a simple way to choose the right loan program between the two if you are buying the home as your primary residence:

• Is the home owned by Fannie Mae?If yes, it probably makes the most sense to get a HomePath Renovation loan.



• Is the home owned by someone other than Fannie Mae? If so, then your best option is the FHA 203k loan.

While both the FHA 203k loan and the Fannie Mae HomePath Renovation loan programs are similar, I have found that for houses owned by Fannie Mae it usually makes more sense to go with the HomePath Renovation loan.

Which means the first question you may want to ask is:

Is this house owned by Fannie Mae?

And then you will have your answer.

> Use Fannie Mae Loan Lookup tool

Justin McHood works for Academy Mortgage and is based in Chandler, AZ. He is a contributor to Zillow Blog and has conversations about mortgages whenever he can. Learn more about Justin at http://www.mortgagecommentator.com/.