Section 8: Government Loans in Texas

The Ropers are purchasing a home using VA financing. The sales price of the home is $210,000. The CRV comes in at $215,000. On what number will the VA's loan guarantee be based?

$210,000, the sales price

Texas veterans, military members, and their spouses must meet the following requirements to be eligible for any of the Veterans Land Board programs:

-Be at least 18 years old -On the application date, be a bona fide and legal resident of Texas -Meet one of the following service criteria: Be an active duty military member, Be a member of the Texas National GuardBe a reserve component military member who has completed at least 20 qualifying years for retirement, Be a veteran who has served at least 90 active duty days, unless discharged sooner due to a service-connected disability (and not discharged dishonorably), or Be the surviving spouse of a veteran whose death was service-connected, or who is listed as "missing in action"

VHAP Qualifications

-Must be used to purchase the primary home. -The land must be located in the state of Texas. -If the home is new construction, it must be ENERGY STAR®-certified. -The veteran must remain in the home for at least three years.

So what happens if the appraiser returns a CRV that's less than the sales price? A borrower who still wants to move forward with the purchase has these options:

-Pay the difference in cash -Get the seller to reduce the sales price to natch the CRV -Some combo of those two

Which three of the these conditions must be met in order to qualify as a Texas veteran?

-Texas resident -At least 18 years old -Served at least 90 active duty days

VA Home Loan

-The VA provides guarantee to the lender. -The property may be located anywhere in the U.S. -The veteran applies for the loan through a VA-approved lender.

The following requirements apply to VHAP loans:

-The home must be a single-family home, townhome, or condo, or an owner-occupied two- to four family unit (under the conditions noted below). In addition, some modular and manufactured homes also qualify. -If purchasing a duplex or other multi-family home, that property must be owner-occupied, and must have been built at least five years prior to the loan's closing date. -All new construction homes must be ENERGY STAR®-certified. -The veteran must occupy the home within 60 days of closing, and live in the home as a principal residence for at least three years.

The following requirements must be met for VHIP loans:

-The home must be located entirely in Texas. -The home must be the primary residence. Single-family homes, condominiums, duplexes, triplexes, and four-plexes are eligible. However, duplexes, triplexes, and four-plexes must be at least five years old to qualify. Modular or manufactured homes may be eligible if they're on a permanent foundation and are part of the real property (but the VLB will make the final decisions on loans for modular/manufactured homes). -The VLB must be in first or second lien position. -The borrower must use a general contractor. Because VLB home improvement loans are FHA Title I insured loans, they require a valid lien in favor of the VLB against the property—and this lien type cannot be created if there is not a general contractor. -The borrower must not advance any funds to the contractor or purchase material before receiving the loan proceeds from VLB. Those proceeds are made available on the fourth business day after closing.

VHIP Qualifications

-The home must be located in the state of Texas. -Must be primary residence

In addition, the following requirements must be met for VLPs:

-The land must be located completely in Texas. -The land must have usable, legal access to a public road. -The land must be described in a complete copy of the recorded subdivision plat (if it is a "lot and block" description), or in a Field Note description with the Surveyor's Official Seal and Signature (original or copy). -The land must not be zoned for commercial use. -If there are improvements on the land, those improvements will not be given any value.

Veterans Land Program Qualifications

-The land must be located in the state of Texas. -The land must have legal access to a public road.

Texas Veteran Loan Programs

-Veterans Housing Assistance Program (VHAP) -Veterans Land Program (VLP) -Veterans Home Improvement Program (VHIP)

What's the minimum qualifying credit score for an FHA mortgage loan?

500

Disaster Relief

A 90-day moratorium on foreclosures for homeowners with an FHA loan who are trying to repair or rebuild after a natural disaster.

SAH and SHA Grants

Available to veterans with total and permanent service-related disabilities; used to adapt housing to accommodate the disability.

To qualify as a Texas veteran, a person must ______.

Be at least 18 years old

The Federal Housing Administration funds its mortgage insurance program ______.

By charging borrowers a mortgage insurance premium

A VA loan program that allows a veteran to refinance at a lower rate and receive cash proceeds to fund other investments or purchases is ______.

Cash out refinance

Which of the following VA programs requires a credit check, new appraisal, and income verification?

Cash out refinance

Fatima is using a VA loan to purchase a home from Sue. Sue agrees to pay Fatima's closing costs. Which of the following statements is true?

Closing costs aren't considered a seller concession.

Which loan program is only available to homeowners who are 62 or older?

Home Equity Conversion Mortgage

Which of these programs is aimed at first-time homebuyers?

Homeownership Voucher Assistance

How do VA loan programs compute "residual income"?

Income minus shelter expenses and debts

Veterans using the ______ program aren't required to submit a COE, get a new appraisal, or verify income.

Interest Rate Reduction Refinance

Your client has a VA loan and wants to refinance to a lower rate. Which of the following is likely the simplest option?

Interest rate reduction refinance

Which of the following is a true statement about HUD's Good Neighbor Program?

It allows qualified individuals to buy a home at a 50% discount.

What is the interest rate on a VA loan?

It varies by lender

Which of the following statements is true about the annual MIP on an FHA mortgage?

It will decrease each year as the loan is paid down.

You're a homeowner with a VA loan. You've been in the home for a few years, and you notice that interest rates have dropped significantly in the last few months. You realize that the rate on your loan is 2% higher than the current 30-year fixed rate. What would be a good first step for refinancing your loan?

Locate information about refinancing on the Veterans Administration website.

FHA Loan Players -Natalie and Cam are first-time homebuyers. They don't have much credit history or cash for a down payment, but they are determined to buy a condo.

Natalie and Cam work with a lender who looks into qualifying them for an FHA loan. With this loan, their lender is willing to accept the credit risk that Natalie and Cam pose as borrowers, because the loan is insured by the FHA. If Natalie and Cam default on their loan, the FHA will compensate the lender for the loss.

Your buyer, Chet, is a veteran trying to buy a house, but the certificate of reasonable value came in $10,000 lower than the agreed-upon sales price. What can Chet do?

Negotiate with the seller

Mikki's husband, Craig, served in the Army for 10 years before he was killed in a car accident on his way home from the gym. Since then, Mikki has moved to Texas, where she is a bona fide, legal resident. She wants to take out a Veterans Land Board loan to purchase a home. Does she qualify?

No

What percentage of closing costs can be included in a VA loan?

None

To qualify for the FHA Streamline Refinance program, a homeowner must ______.

Not be delinquent on mortgage payments

Veterans Land Program (VLP)

Offers Texas veterans money to buy at least one acre of land. According to the VLB, this is the only program of its kind in the nation. Through the VLP, Texas veterans can borrow up to $125,000 to buy land on a fixed-term 30-year loan. Typically, they only have to pay a minimum 5% down payment for tracts of one acre or more. The applicant must pay a $325 appraisal and contract service fee at the time of application. There are no prepayment penalties on VLP loans.

Which of the following statements is true regarding closing costs on a VA loan?

Payment of closing costs may be negotiated.

Veterans Housing Assistance Program (VHAP)

Provides money to qualifying veterans and their spouses to purchase a primary residence in Texas.

Title II, Section 203(h)

Reconstruction in a disaster zone

Since the FHA was established, it has taken strategic action to stabilize the mortgage market. Which of these items is one of the FHA's strategies?

Reduce lender risk by establishing borrower qualification standards

Annual MIP can be removed from an FHA loan by ______.

Refinancing to a conventional loan

What qualifying ratios are used in a VA home loan?

Residual income and debt to income

2.15% funding fee

Retired Marine captain, no disability, first VA loan purchase, no down payment

Because of the funding fee required for a VA loan, a borrower with no down payment funds saved should ______.

Roll the funding fee into the loan

Two Programs for Adaptive Housing

Rose asked, "Has your cousin looked into the adaptive housing programs available from the VA?" Ellen shook her head. "Not that I know of. What do they do?" "There are two programs. They're both designed to help veterans with total, permanent service-related disability modify their living environment. Sounds like your cousin would be eligible for the larger SAH grant, which can be used to modify the house they already own to improve access and mobility. There's also a smaller grant, the SHA, for people with severe visual impairment or loss of their hands. It can be used for home adaptations like lighting and special light switches or door openers." "Thanks! I'll find out if my cousin knows about those programs!" Ellen said.

Which of the following requirements must a person meet to qualify as a Texas veteran?

Serve at least 90 active duty days

Your client, Shelby, a veteran using a VA loan to finance his purchase, just learned that the CRV came in lower than the sales price. But no problem: Shelby's brother is willing to loan him the difference. If the loan is approved ______.

Shelby must still be under the VA's debt-to-income ratio

The FHA ______ program allows a borrower to refinance an FHA loan without verifying income or assets.

Streamline Refinance

Which of the following statements is true about the MIP on an FHA loan?

The FHA may adjust the percentage used to calculate MIP on FHA loans.

Sylvia is shopping for a mortgage. Because she's a veteran, she compares the VA home loan with the 3.5% down FHA mortgage. If she has only $5,000 available in cash, with all else being equal, which loan will allow her to spend more on a home?

The VA loan

Tom's CRV came in low and he's decided to make up the difference in cash. What else will be required?

The VA may require Tom to prove the source of his funds.

Which of the following is a true statement about borrower qualification standards for a VA-guaranteed loan?

The applicant must have a certificate of eligibility.

IRRR Interest Rate Reduction Refinance

This program allows a VA loan to be refinanced in order to obtain a lower interest rate.

How does the VA qualify a property for a VA-guaranteed loan?

Through a VA-approved appraiser

Which veteran loan program offers qualified veterans help with repairs on their current home?

Veterans Home Improvement Program

Which Texas veteran loan program is available to help with the purchase of a single-family home?

Veterans Housing Assistance Program

Which veteran loan program offers qualified veterans help with the purchase of their primary home?

Veterans Housing Assistance Program

Which veteran loan program offers qualified veterans help with the purchase of land in Texas?

Veterans Land Program

No funding fee

Widow of Army corporal who died in service

A qualifying veteran can participate in all loan programs at the same time.

Yes

Does the VA make direct loans?

Yes, for Native Americans on trust lands

Nadia uses a VA loan to buy a house for $125,000. She wants to buy the neighboring property, an empty lot, so she can improve the house using the extra land. The lot is for sale for $135,000. Can she use a VA loan for this purchase?

Yes, she should have partial entitlement left.

Veterans Home Improvement Program (VHIP)

offers Texas veterans up to $25,000 for a 20-year loan, or up to $10,000 for a 10-year loan to complete repairs or home improvements on their current home. Those veterans who have a VA service-connected disability rating of 30% or more qualify for a discounted interest rate. Although no down payment is required on VHIP loans, the borrower must pay a $10 flood certification fee and a $125 title search fee at time of application. Closing costs also apply.

Lloyd and Amy are purchasing a duplex. They chose an adjustable rate mortgage for their purchase because they intend to sell the property after a few years. Based on their application, the lender offers them an FHA-insured loan under Section 251. What are some of the terms that Lloyd and Amy can expect with this loan?

-Their loan will begin with a fixed-rate term. -Their interest rate won't change more than a specific number of percentage points set by the FHA. -The interest rate on an ARM can increase or decrease. -The lender must inform them of any adjustment to monthly payment at least 25 days in advance. -Interest rate adjustments are based on market indices approved by FHA.

By stabilizing and improving the mortgage market, the FHA helped to build ______.

A global market for mortgage-backed securities

Energy efficient mortgage

Allows the borrower to incorporate the cost of adding energy-efficient features in combination with an FHA-insured mortgage

FHA may adjust loan limits for each county ______.

Annually

Good neighbor next door

Law enforcement, teachers, firefighters, and EMTs get a 50% discount on certain foreclosed FHA-insured properties

FHA county loan limits are based on ______.

Median price for the area and property type

Title II, Section 234(c)

Purchase of a single condominium unit

Debt-to-income

Total monthly debt payments against gross monthly income

203(k) Program Details

-Cost estimates for repair work must be provided to the lender. -Work must be completed within six months. -Work must be approved by a 203(k) inspector. -Work must meet FHA standards. -The combined cost of the home value and repair work must be within FHA mortgage limits.

When a buyer obtains an FHA loan, the seller may ______.

Contribute up to 6% of the sales price (or appraisal, if that's lower) to the buyer's closing costs

As a mortgage broker, Mike is very familiar with the ways that the FHA has influenced the mortgage market. Here's one example: The Rodriguez family obtained their three-bedroom home with an FHA loan 10 years ago, which they will have paid off in another 20 years. Which FHA benefit applies here?

Long-term amortized loan

Title II, Section 203(b)

Purchase of one- to four-family homes

Title II, Section 223(e)

Purchase or rehab of a home in an older, declining urban area

Can They Get an FHA Loan?

-Housing ratio of 31%, total debt obligations 40% -Housing ratio of 29%, total debt obligations 32%

Not every buyer will want to use an FHA-insured loan. Which of these borrowers is likely to benefit from using the FHA loan program?

-Sally has reasonably good credit, but only $2,000 to put toward a down payment. -Nicholas has some credit issues, though he has a good job.

To qualify for a streamline refinance:

-The mortgage must already be FHA-insured -The refinance must result in a reduction of mortgage payments -The homeowners must be current on their mortgage payments (not delinquent) -No money may be taken out

1.50% funding fee

Air Force major, no disability, first VA loan purchase, 5% down payment

Danica graduated from college last year, landed herself a great job, and now she's ready to buy a condo in a great complex. She just hopes that her student loan won't get in the way of a mortgage approval from her lender. Which FHA strategy for mortgage market stabilization may impact Danica's purchase?

Borrower qualifying standards

The VA requires a VA-assigned certified real estate appraiser to provide a formal estimate of value for the property, resulting in a report called the

Certificate of reasonable value (CRV)

3.30% funding fee

Coast Guard lieutenant, no disability, second VA loan purchase, no down payment

Andy is selling his home to Erika and Doug, who are using an FHA loan for the purchase. To facilitate the purchase, Andy can agree to pay ______.

Discount points to buy down Erika and Doug's interest rate

Jean is a high school English teacher. With the Good Neighbor Next Door program, she's able to buy a foreclosed FHA-insured property ______, though she does have to agree to live on the property for three years.

For a 50% discount off list price and a down payment of only $100

The interest rate on an FHA Section 251 adjustable rate mortgage will ______.

Go up or down, but can't change more than a maximum number of points allowed by the FHA over the life of the loan

How and when does a contractor performing work associated with a 203(k) loan receive funds from the lender?

Half is received up front and the other half after the work is completed and approved

2.40% funding fee

Helicopter pilot in the National Guard, no disability, first VA loan purchase, no down payment

Programs for Native Americans

Mortgage insurance for Native Americans to construct, acquire, refinance, or rehabilitate single-family housing located on tribal land

Ron and Dawn hope to qualify for an FHA mortgage so they can buy a home for their family. Their housing ratio is 28%, their total debt obligation is 45%, and their credit score is 650. Do they qualify under FHA underwriting guidelines?

No, they don't meet the total debt obligation requirement.

When a buyer uses an FHA loan, the down payment amount is calculated ______.

On the lesser of the sales price or the appraised value of the property

In which of these situations would a 203(k) loan be applicable?

Purchase of a home requiring repairs

Cast-Out Refinancing

This program can be used to refinance a non-VA loan into a VA loan.

FHA Loan Limits by Texas County

$314,827: One-family property located in Hudspeth County $331,200: Single-family residence located in Montgomery County $506,450: Duplex (two-family residence) located in Kaufman County $612,150: Three-family property located in Parker County $749,700: Four-unit property located in Hays County

Regina is a homeowner who wants to sell her home. She originally financed the purchase using an FHA loan in 1998. She finds a buyer, Doug, who wants to assume the original loan. Which of these items are true about this assumption?

-Doug must occupy the property for the life of the loan. -All FHA loans are assumable, though not everyone is allowed to assume an FHA loan. -If Doug doesn't pass the creditworthiness review, he can't assume Regina's loan.

Paul's Loan Approval

-The VA loan program doesn't include a minimum credit score. -Paul's new housing expense will be very similar to his current rent payment, and his lender may use this as a compensating factor. -A qualifying debt-to-income ratio is 41%. -Paul's lender calculated residual income and compared it to a regional chart to determine qualification for the VA loan. -Lenders are allowed to exercise judgment, and are not expected to automatically approve or reject a loan on the basis of either residual income or debt-to-income ratio.

VA Loan Facts

-The property appraisal must be done by a VA-assigned appraiser. -The buyer may not finance closing costs. -Most borrowers will pay the funding fee, but certain borrowers aren't required to do so. -The seller may pay the buyer's closing costs. -Seller concessions may not exceed 4% of the sales price. -The seller may pay for the buyer's buydown of interest rate on a fixed rate loan.

The Federal Housing Administration's qualifying standards for a mortgage loan ______, but the mortgage insurance the FHA provides balances the risk for the lender.

Are somewhat less stringent than standards for conventional loans

Percy is buying a home with an FHA loan. He uses the ______ to borrow enough money to cover the cost of replacing most of the windows in the home, which will improve its energy usage by 15%.

Energy Efficient Mortgage

Trixie purchased her one-bedroom beach cottage in 1992 with an FHA loan. Now she's selling it, and the buyer wants to assume her loan. The buyer intends to rent the cottage to vacationers. Will the FHA allow this buyer to assume Trixie's loan?

No, investors aren't allowed to assume FHA loans; the property must be owner-occupied

Title I, Manufactured Housing

Purchase of a manufactured house on a developed lot, development of a lot for a manufactured home, or a combination of the two

The energy efficient mortgage program insured by the FHA requires an energy consultant to provide the lender with a report listing recommended modifications for energy efficiency, an estimate of the cost for each recommendation, and ______.

An estimate of the energy savings that would result

Lucas would like to be a homeowner, but his low credit score makes lenders unwilling to give him a mortgage. What makes the 203(b) loan a more likely option for Lucas to qualify for a mortgage?

It has less stringent qualifying requirements than a conventional loan.

The upfront MIP on an FHA loan is calculated on ______.

The base loan amount

The FHA Streamline Refinance

-Allows borrowers who already have an FHA loan to refinance. So what, you say? Here's what: The program allows a refinance without verifying the borrower's income or assets, and in some cases, without even requiring an appraisal. The streamline program is the simplest and easiest way to refinance an FHA loan. One of the biggest advantages to this program is that it allows for an unlimited loan-to-value ratio. In other words, the borrower doesn't need to have any equity in the property. Therefore, even homeowners who are severely underwater may still be able to take advantage of lower mortgage rates by refinancing with an FHA streamline.

Your client, Judy, with a credit score of 620, has been approved for an FHA loan for a home with a sales price of $200,000. What is the minimum down payment that will apply?

$7,000

Here's the situation: Becca is purchasing a three-bedroom, two bath Craftsman. She's offered $218,000, and the seller, May, has agreed. But the CRV returned a value of $210,000. In order to obtain her VA loan, what could Becca choose to do?

-Ask May to reduce the price to $210,000. -Increase her down payment by $4,000 and ask May to sell for $214,000. -Pay May the $8,000 balance in cash.

Danielle was in the Air Force on active duty for many years, though she is now retired. What will she need to qualify for a VA home loan? Select all that apply.

-Certificate of Eligibility -Sufficient income -Sufficient credit

Can You Qualify These People?

-Gretchen is a single mom with three kids. Her credit score is 620, her housing ratio is 31%, and her total debt obligations come to 40%. -Tom has some credit issues. He's got a housing ratio of 29%, but his total debt obligations are at 42%, and his credit score is 525.

Title I

-Hank is purchasing a manufactured home, along with a lot to place it on. -Rose needs to fix the roof and replace some windows and doors in her home.

Residual income

The amount of money left after housing expenses, debts, obligations, and monthly shelter expenses are met

Paul is buying a new home for his family using a VA loan. Which closing costs is Paul allowed to pay?

-Loan origination fee of 1% -Discount points -Initial deposit for escrow account -Appraisal fee -Title examination fee -Seller must pay for the termite inspection/report fee

What are some other factors that Michelle, Ray, and their lender should be aware of with their HECM?

-Michelle and Ray must maintain homeowners insurance, or risk defaulting on their reverse mortgage. -The lender is required to counsel Michelle and Ray about the possibility that there will be no equity left in the home by the time the reverse mortgage ends. -The FHA collects an insurance premium from the loan. -Homeowners must be 62 or older, and the value of the home and any remaining mortgage are also considerations.

Lydia put the minimum 3.5% down on her $210,000 home. She'll have to pay an MIP. What type of loan does Lydia have?

FHA

Paul doesn't have a lot of cash to use for his purchase, so he asks the seller, Alex, if she can cover some of the closing or other transaction costs. Alex agrees. Indicate whether the statements are true regarding costs that the seller can pay for the buyer with a VA loan.

-If Paul has a good negotiator on his side, Alex could pay for all of Paul's closing costs, but these would not be considered seller concessions. -Alex may pay Paul's VA funding fee. -Alex may include the washer and dryer in the sale as a seller concession -If Alex pays for Paul's prepaid property taxes and insurance, this is considered a seller concession. -The total amount of seller concessions may not exceed 4% of the sales price.

Which of the following is a true statement about FHA financing?

An FHA loan is usually more attractive to borrowers who have lower credit scores and down payments.

Joe loves working outside and is glad to put his skills to use building homes. He can point to houses all over town that he helped build. He feels good knowing that he's been a part of providing safe, healthy homes for the community where he lives, and that they are quality structures that will shelter people for many years to come. Which FHA benefit is at work here?

Construction standards

Monty has certain goals in life, and most of those goals revolve around making money. He loves following the market and deciding where to invest his money. What is available to people like Monty as a result of stability in the mortgage industry created by the FHA?

MBS investment

Title I, Property Improvements

Moderate rehabilitation of properties, such as alterations, repairs, and site improvements on single-family homes

Using the FHA Energy Efficient Mortgage

-It is used in conjunction with other FHA mortgage programs. -An energy consultant must evaluate the improvements that will be needed to make the home energy efficient. -The EEM may be used on new or existing homes, as long as the property qualifies for the FHA mortgage program that is also being used. -The loan is based in part on an estimate of energy savings that would result from specific changes to the home.

Upfront MIP (Mortgage insurance premium)

-Paid at closing -Percentage of the original loan amount

Annual MIP

-Recalculated each year -Paid each month -% based on loan amount, LTVR, and loan duration

Title II

-Nadia is purchasing a unit in a cooperative housing project. -Lori and her husband want to purchase a duplex. -Sydney has contracted for repairs on her home, which was damaged in flooding that was declared a federal disaster.

Using the FHA 203(b) Loan

-Requires only 3.5% down payment -Lender is allowed to consider factors that compensate for bad credit -Lender is insured against loss, so not such a big risk -Debt-to-income requirements aren't as strict as for a conventional loan. -Lenders can consider compensating factors if a credit score is too low.

The Chens are an older couple who want to retire near the beach. Even though the home they want to buy is smaller than their current house, its location makes it cost quite a bit more. They're glad when the home's appraisal comes in a little bit higher than the sale price, as it increases their confidence in their investment. Which FHA benefit applies to the Chens?

Appraiser licensing

The house payment Tim and Vickie are considering would give them a housing ratio of 34% and a total debt obligation of 40%. Their credit score is 640. What do they need to change to meet the underwriting requirements for an FHA loan?

They should look for a home in a lower price range.

The Takadas are a family of four who are purchasing their first home. They hope to qualify for an FHA loan. Which of these items meet the requirements they need to meet in order to qualify?

-They have $2,000 to use for a down payment, which is 3.5% of the home's appraised price. -The home is selling for less than the FHA limit for the area. -The seller has agreed to pay $4,000 of the Takadas' closing costs, about 3% of the loan amount. -The seller agreed to pay for one discount point.

Sam is eligible for the VA loan program, and he makes an offer on a property for which he'll obtain VA financing. Are there any restrictions on the type of property Sam can buy, or on how he uses it?

-Sam is required to occupy the property he buys with a VA loan. -Sam could build a home using his VA loan. -Sam could buy a manufactured home with his VA loan. -If Sam pays off the loan, he can have his entitlement restored. -Sam is allowed to use a VA loan to buy a condo.

The VA Loan: Second Mortgages and Assumptions

Myra assumed Julie's VA loan that was originated in 1987. The lender doesn't need to approve Myra's creditworthiness. Bob, a veteran, assumed Rick's loan, which was originated in 1999. If Rick wants to be eligible to receive another VA loan, he should ask Bob to sign a substitution of entitlement. Stella, who's not eligible for VA benefits, assumed David's VA loan in 2015. Stella does have to prove her creditworthiness to David's lender. David wants to ensure that he won't be held responsible if Stella defaults on the loan, so he and his lender require Stella to sign a release of liability. Jerome needs some cash and decides to get a second mortgage, along with his first VA mortgage. He's able to do this because the first and second mortgage liens don't exceed the CRV on his property.

Sandra is a single woman fresh out of college. She hopes to qualify for an FHA loan. Her lender calculates her housing ratio as 31% and her total debt obligation as 43%. Her credit score is 480. Does she qualify under FHA underwriting guidelines?

No, she doesn't meet the credit score requirement.

NADL Program

This is a direct home loan program from the VA to eligible Native American veterans. -The VA services the loan. -The property must be located on federal trust land. -The veteran applies directly to the VA for the loan.

Becca works out a deal with May (who is a nice woman) to reduce the sales price to $214,000, and Becca will provide $4,000 in cash at closing to make up the difference between the CRV and the new sales price. The VA must approve the source of the extra funds that Becca is paying to May. Why?

To ensure that Becca is not borrowing the funds.

Is a homeowner with an FHA loan allowed to obtain a second mortgage?

Yes, if the total of the first and second mortgages is within the maximum loan to value ratio

The VA home loan offers veterans some great benefits when they purchase a home and during the term of the mortgage. For each of these examples, identify whether a VA home loan can help.

-Logan McMillan, a former Air Force service member, would like to buy a house, but it will take years to save enough for a down payment. -Dori purchased a condo with her VA loan benefit. Just a few months later, she received a large inheritance and wants to pay off her mortgage without a pre-payment penalty. -Chuck has been paying on his VA loan for 15 years, but his wife's ill health has made it difficult to make their payments the last couple of months. -Howard used his entitlement to purchase his first home. Now, he'd like to sell it and purchase another one, and he'd like to use the VA loan program again.

Describing the FHA Loan Program

-The FHA covers the lender against loss if the borrower defaults. -The FHA collects a mortgage insurance premium on each loan. -FHA loans are only available from FHA-approved lenders. -The FHA mortgage insurance program helps to stabilize the mortgage market. -Most FHA-approved lenders participate in the direct endorsement program. -FHA loan insurance helps lenders make riskier loans without assuming more risk. -The FHA is a federal agency. -The mortgage insurance premium is paid by the borrower, and it's not related to the direct endorsement program.

How the FHA Helps the Mortgage Market: Five Ways

-The FHA set basic standards by which to qualify borrowers, helping to reduce lender risk. These standards have been adopted by all FHA-approved lenders. -The FHA also requires specific construction standards for properties purchased with FHAinsured loans, making buildings safer and longer-lasting, thereby reducing lending and insurance risk. -The FHA introduced the long-term amortized loan. Loans provided prior to the establishment of the FHA required as much as 50% down and had to be paid in full within five years. As you can imagine, homeownership rates were dismal back then, with less than 20% owning homes. The long-term amortized loan is in many ways responsible for today's homeownership rate of nearly 65%. -The FHA has also influenced the appraisal industry. Since September 1999, the FHA has required that all appraisers evaluating property for FHA-insured loans be state-licensed or certified. -The stability the FHA brought to the mortgage industry opened up the global market for mortgage-backed securities.

Michelle and her husband, Ray, are both in their 70s. With no children, they have no one to leave money to when they shuffle off this mortal coil. They're also on a fixed income. They do have full ownership of their home, however, so they decide to apply for the HECM reverse mortgage. If you were describing the benefits of this program, could you help them separate fact from fiction?

-There are no income qualification requirements. -FHA covers any negative balance after the sale of the home. -Michelle and Ray will receive their payments as long as one of them remains in the home. -There's no repayment requirement until both Michelle and Ray no longer live in the home. -There are limits on the amount of origination fees that can be charged for them to obtain the loan.

The FHA places limits on how much the seller can contribute to the buyer's closing costs. Which of these items is the seller allowed to cover for the buyer, as long as the total contribution doesn't exceed 6% of the sales price?

-Up front mortgage premium -Prepaid property tax -Interest rate buydown -Origination fee -Mortgage payment protection insurance

Sam has contacted Mike, his mortgage broker, to ask him about the possibility of getting a VA loan. Sam was in the Army for three years, and he has his eye on a particular house he'd like to buy. Which of the statements could Mike truthfully say to Sam?

-You'll need a COE to find out if you are eligible for a VA loan. -Not every veteran will qualify for the VA loan, no matter the length of service. -The amount of entitlement you're eligible for is shown on your COE. -A secondary entitlement is available if the home value is more than $144,000. -You'll need to have sufficient income and credit to qualify for a VA loan, even if you're otherwise eligible.

Aron and Sonja Pay MIP

Aron and Sonja know they can't afford to pay the upfront MIP at closing, so they have it financed into their loan. This increases their monthly payment slightly, because it increases the principal. Their lender has informed them how this will affect their mortgage payments. The lender has also calculated the first year of annual MIP and the amount it will add to each month's payment. The lender explains that this amount will decrease each year as the loan is paid down, because of the changes in loan amount, LTVR, and loan duration.

The Federal Housing Administration Loan Insurance (FHA)

Helps buyers who may have trouble qualifying for a conventional loan. This includes many first-time homebuyers, as well as borrowers with credit issues or inadequate cash for a conventional down payment.

Chris and Nick hope to qualify for an FHA loan. Their lender calculates their housing ratio as 33% and their total debt obligation as 43%. Their credit score is 620. Do they qualify under FHA underwriting guidelines?

No, they don't meet the housing ratio requirement -Underwriting requirements for an FHA loan specify a housing ratio of no more than 31%, a total debt obligation that doesn't exceed 43%, and a minimum credit score of 500, with 620 or higher being preferable.

The annual MIP is recalculated each year using ______.

The end-of-year loan balance, plus the balance after the next 11 payments

Celeste hopes to qualify for an FHA loan. She calculates her housing ratio as 31%, and her total debt obligation as 42%. Her credit score is 580. Does she qualify under FHA underwriting guidelines?

Yes

The Woodwards bought their home using an FHA loan 10 years ago. Now they need some extra cash, and would like to use the equity in their home. They applied for a second mortgage, which will bring their LTV ratio to 85% (less than the maximum allowed by the FHA loan program). Their lender qualifies the Woodwards to make the total combined payments on both mortgages; and the loan has no toxic loan features. Will the FHA allow the Woodwards to take a second mortgage on their property?

Yes -The Woodwards have complied with all of the rules that the FHA sets for allowing a second mortgage on property financed with an FHA loan.

As it happens, the property that Sam bought didn't use his entire entitlement. He and his family found another property a year later and decided they'd like to move. However, he hadn't sold the first property yet. Is he allowed to use the remaining entitlement with a second loan?

Yes, it's called partial entitlement. Due to the requirement for owner occupancy, Sam will need to sell his first home.

Lenny intends to refinance his current mortgage and would like to take out enough to complete some seriously needed rehab on his home. Can he use the 203(k) loan?

Yes-The 203(k) can be used when refinancing the mortgage on a home as well as when purchasing a home.