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What if They Accept the Offer?

Congratulations, your offer has been accepted!

Over the next 30 to 60 days, your purchase will be pending and you will begin the escrow process. Typically, an offer will have several contingencies. Contingencies are terms and conditions written into a contract by the buyer or the seller, which must be met within specified timelines in order for the sale to be completed. Know this, contingencies are a homebuyer s best friend. When contingencies are not met, the sale is cancelled and your deposit money may be refunded.

Some common contingencies include proper financing being in place and conducting a home inspection. Without proper financing in place, you ll have a tough time paying for your new house! In addition, conducting a home inspection can re-open negotiations to pay for hidden problems the house may have  or terminate the sale entirely if truly serious problems are found.

There are many other contingencies that can be attached to the sale of a particular piece of property depending on the different needs of buyers and sellers. Again, a good real estate agent will suggest the contingencies that you should make as part of the offer.

During the sale pending period, you will also be provided with a number of disclosures relative to the sale of your new home. These disclosures run the gamut from information about the business relationships between your real estate agent and your lender, to natural hazards that may exist in and around your new home.

Two of the most important disclosures you will receive include:
Real Property Transfer Disclosure Statement This disclosure is completed by the seller. It tells you the physical condition of the property and potential hazards or defects that may be associated with it. While the seller is principally responsible for the disclosures presented in this document, the agent is also responsible for conducting a visual inspection of the property and disclosing any readily observable defects detected in the process. This document also discloses any special taxes, assessments and other factors that may have a material effect on the value or desirability of the property.

Agency Relationship Disclosure Your real estate agent is required to provide you with a written disclosure stating whom he or she represents in the transaction. The agent may represent you as the buyer exclusively, or the seller exclusively, or be a dual agent representing both you and the seller. You should carefully review and understand this disclosure as it has a material effect on the level of responsibilities that your agent owes to you.

Attaching excessive contingencies to an offer or sale in a hot real estate market can easily kill a deal. There may be several other buyers waiting in line with a shorter list of needs.

Home Buyer Hint
Depending on the location, age and other factors involved with the residential property that you are purchasing, additional disclosures may be required. If you have questions about disclosures, ask your real estate agent.

Questions to Ask When Choosing a REALTOR?

Make sure you choose a REALTOR who will provide top-notch service and meet your unique needs.

1. How long have you been in residential real estate sales Is it your full-time job While experience is no guarantee of skill, real estate  like many other professions  is mostly learned on the job.

2. What designations do you hold Designations such as GRI and CRS  which require that agents take additional, specialized real estate training  are held by only about one-quarter of real estate practitioners.

3. How many homes did you and your real estate brokerage sell last year By asking this question, you ll get a good idea of how much experience the practitioner has.

4. How many days did it take you to sell the average home How did that compare to the overall market
The REALTOR you interview should have these facts on hand, and be able to present market statistics from the local MLS to provide a comparison.

5. How close to the initial asking prices of the homes you sold were the final sale prices This is one indication of how skilled the REALTOR is at pricing homes and marketing to suitable buyers. Of course, other factors also may be at play, including an exceptionally hot or cool real estate market.

6. What types of specific marketing systems and approaches will you use to sell my home You don t want someone who s going to put a For Sale sign in the yard and hope for the best. Look for someone who has aggressive and innovative approaches, and knows how to market your property competitively on the Internet. Buyers today want information fast, so it s important that your REALTOR is responsive.

7. Will you represent me exclusively, or will you represent both the buyer and the seller in the transaction While it s usually legal to represent both parties in a transaction, it s important to understand where the practitioner s obligations lie. Your REALTOR should explain his or her agency relationship to you and describe the rights of each party.

8. Can you recommend service providers who can help me obtain a mortgage, make home repairs, and help with other things I need done Because REALTORS are immersed in the industry, they re wonderful resources as you seek lenders, home improvement companies, and other home service providers. Practitioners should generally recommend more than one provider and let you know if they have any special relationship with or receive compensation from any of the providers.

9. What type of support and supervision does your brokerage office provide to you Having resources such as in-house support staff, access to a real estate attorney, and assistance with technology can help an agent sell your home.

10. What s your business philosophy While there s no right answer to this question, the response will help you assess what s important to the agent and determine how closely the agent s goals and business emphasis mesh with your own.

11. How will you keep me informed about the progress of my transaction How frequently Again, this is not a question with a correct answer, but it reflects your desires. Do you want updates twice a week or do you not want to be bothered unless there s a hot prospect Do you prefer phone, e-mail, or a personal visit

12. Could you please give me the names and phone numbers of your three most recent clients
Ask recent clients if they would work with this REALTOR again. Find out whether they were pleased with the communication style, follow-up, and work ethic of the REALTOR .

Reprinted from REALTOR magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS .
Copyright 2008. All rights reserved.

Simple Tips for Better Home Showings

1. Remove clutter and clear off counters. Throw out stacks of newspapers and magazines and stow away most of your small decorative items. Put excess furniture in storage, and remove out-of-season clothing items that are cramping closet space. Don t forget to clean out the garage, too.

2. Wash your windows and screens. This will help get more light into the interior of the home.

3. Keep everything extra clean. A clean house will make a strong first impression and send a message to buyers that the home has been well-cared for. Wash fingerprints from light switch plates, mop and wax floors, and clean the stove and refrigerator. Polish your doorknobs and address numbers. It s worth hiring a cleaning service if you can afford it.

4. Get rid of smells. Clean carpeting and drapes to eliminate cooking odors, smoke, and pet smells. Open the windows to air out the house. Potpourri or scented candles will help.

5. Brighten your rooms. Put higher wattage bulbs in light fixtures to brighten up rooms and basements. Replace any burned-out bulbs in closets. Clean the walls, or better yet, brush on a fresh coat of neutral color paint.

6. Don t disregard minor repairs. Small problems such as sticky doors, torn screens, cracked caulking, or a dripping faucet may seem trivial, but they ll give buyers the impression that the house isn t well-maintained.

7. Tidy your yard. Cut the grass, rake the leaves, add new mulch, trim the bushes, edge the walkways, and clean the gutters. For added curb appeal, place a pot of bright flowers near the entryway.

8. Patch holes. Repair any holes in your driveway and reapply sealant, if applicable.

9. Add a touch of color in the living room. A colored afghan or throw on the couch will jazz up a dull room. Buy new accent pillows for the sofa.

10. Buy a flowering plant and put it near a window you pass by frequently.

11. Make centerpieces for your tables. Use brightly colored fruit or flowers.

12. Set the scene. Set the table with fancy dishes and candles, and create other vignettes throughout the home to help buyers picture living there. For example, in the basement you might display a chess game in progress.

13. Replace heavy curtains with sheer ones that let in more light. Show off the view if you have one.

14. Accentuate the fireplace. Lay fresh logs in the fireplace or put a basket of flowers there if it s not in use.

15. Make the bathrooms feel luxurious. Put away those old towels and toothbrushes. When buyers enter your bathroom, they should feel pampered. Add a new shower curtain, new towels, and fancy guest soaps. Make sure your personal toiletry items are out of sight.

16. Send your pets to a neighbor or take them outside. If that s not possible, crate them or confine them to one room (ideally in the basement), and let the real estate practitioner know where they ll be to eliminate surprises.

17. Lock up valuables, jewelry, and money. While a real estate salesperson will be on site during the showing or open house, it s impossible to watch everyone all the time.

18. Leave the home. It s usually best if the sellers are not at home. It s awkward for prospective buyers to look in your closets and express their opinions of your home with you there.

Reprinted from REALTOR magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS .
Copyright 2008. All rights reserved.

What a Home Inspection Should Cover

Home inspections will vary depending on the type of property you are purchasing. A large historic home, for example, will require a more specialized inspection than a small condominium. However, the following are the basic elements that a home inspector will check. You can also use this list to help you evaluate properties you might purchase.

For more information, try the virtual home inspection at www.ASHI.org, the Web site of the American Society of Home Inspectors.

Structure: A home s skeleton impacts how the property stands up to weather, gravity, and the earth. Structural components, including the foundation and the framing, should be inspected.

Exterior: The inspector should look at sidewalks, driveways, steps, windows, and doors. A home s siding, trim, and surface drainage also are part of an exterior inspection.

  • Doors and windows
  • Siding (brick, stone, stucco, vinyl, wood, etc.)
  • Driveways/sidewalks
  • Attached porches, decks, and balconies

Roofing: A well-maintained roof protects you from rain, snow, and other forces of nature. Take note of the roof s age, conditions of flashing, roof draining systems (pooling water), buckled shingles, loose gutters and downspouts, skylight, and chimneys.

Plumbing: Thoroughly examine the water supply and drainage systems, water heating equipment, and fuel storage systems. Drainage pumps and sump pumps also fall under this category. Poor water pressure, banging pipes, rust spots, or corrosion can indicate problems.

Electrical: Safe electrical wiring is essential. Look for the condition of service entrance wires, service panels, breakers and fuses, and disconnects. Also take note of the number of outlets in each room.

Heating: The home s heating system, vent system, flues, and chimneys should be inspected. Look for age of water heater, whether the size is adequate for the house, speed of recovery, and energy rating.

Air Conditioning: Your inspector should describe your home cooling system, its energy source, and inspect the central and through-wall cooling equipment. Consider the age and energy rating of the system.

Interiors: An inspection of the inside of the home can reveal plumbing leaks, insect damage, rot, construction defects, and other issues. An inspector should take a close look at:

  • Walls, ceilings and floors
  • Steps, stairways, and railings
  • Countertops and cabinets
  • Garage doors and garage door systems

Ventilation/insulation: To prevent energy loss, check for adequate insulation and ventilation in the attic and in unfinished areas such as crawlspaces. Also look for proper, secured insulation in walls. Insulation should be appropriate for the climate. Excess moisture in the home can lead to mold and water damage.

Fireplaces: They re charming, but they could be dangerous if not properly installed. Inspectors should examine the system, including the vent and flue, and describe solid fuel burning appliances.

Source: American Society of Home Inspectors (www.AHSI.org)

Reprinted from REALTOR magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS .
Copyright 2008. All rights reserved.

ARE WE HOME YET?

There are many factors to take into account when trying to choose the right home. After you ve settled on a price range that you can afford, start asking yourself some questions:

  • What part of town do I want to live in In an urban area Near good schools (Are you single, partnered, partnered with kids )
  • Is a big house more important than location
  • How many bedrooms do you need/want Bathrooms Other amenities
  • Do you want a new home A used home A condominium A fixer-upper

Other things to consider: Are you very tolerant to loud neighbors or un-kept houses If you answer  yes, you should have no problem finding a great deal on a home. A problem may arise, however, when you attempt to sell the home. While making yourself happy with your new home, keep in mind that one of these days you may want to try and make someone else happy with it!

Choosing what part of town to live in is mainly based on your lifestyle. If you re single and enjoy a very active lifestyle, living in a quiet, tree-lined neighborhood close to good schools may not be too important to you. On the other hand, if you have three small children, living in a singles condo complex might be a poor choice  or at least make you unpopular with your neighbors!

Pay attention to the quality of the neighborhood in which you are looking.  Pride of ownership shows through in how well yards and homes are maintained. If dead lawns and over-grown shrubs are the norm, you may want to think twice before buying there.

True, you might get more house for the money, but in the long run, you may have trouble re-selling it.

Think about what is going to make your home livable: bedrooms with bathrooms a removed master bedroom a two car garage a gourmet kitchen a large yard a small yard You should write up a wish list, then start looking at what is available in your price range. From there, you can whittle the list down to what you really want and what you can live without.

8 Tips to Guide for Your Home Search

1. Research before you look. Decide what features you most want to have in a home, what neighborhoods you prefer, and how much you d be willing to spend each month for housing.

2. Be realistic. It s OK to be picky, but don t be unrealistic with your expectations. There s no such thing as a perfect home. Use your list of priorities as a guide to evaluate each property.

3. Get your finances in order. Review your credit report and be sure you have enough money to cover your down payment and closing costs. Then, talk to a lender and get prequalified for a mortgage. This will save you the heartache later of falling in love with a house you can t afford.

4. Don t ask too many people for opinions. It will drive you crazy. Select one or two people to turn to if you feel you need a second opinion, but be ready to make the final decision on your own.

5. Decide your moving timeline. When is your lease up Are you allowed to sublet How tight is the rental market in your area All of these factors will help you determine when you should move.

6. Think long term. Are you looking for a starter house with plans to move up in a few years, or do you hope to stay in this home for a longer period This decision may dictate what type of home you ll buy as well as the type of mortgage terms that will best suit you.

7. Insist on a home inspection. If possible, get a warranty from the seller to cover defects for one year.

8. Get help from a REALTOR . Hire a real estate professional who specializes in buyer representation. Unlike a listing agent, whose first duty is to the seller, a buyer s representative is working only for you. Buyer s reps are usually paid out of the seller s commission payment.

Reprinted from REALTOR magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS .
Copyright 2008. All rights reserved.

Is It an Offer They Can t Refuse

So you ve gotten pre-approved on your loan and you ve decided on what type of home you want to buy. And, you ve found your dream home. Now it s time to make an offer on it. This is when the real fun begins.

To make a good offer on a house, look at its fair market value. To get its fair market value, there are two things you can do: get a comparable market analysis (CMA) or have a professional appraisal done.

The CMA is typically done by your real estate agent. Again, this is a good time to have a great, knowledgeable agent. A CMA is a process of looking at comparable sales in your prospective neighborhood. By examining things like size, location and purchase price, a good agent should be able to give a fairly accurate determination of a home s fair market value.

On the other hand, you can choose to have a professional appraisal done on your prospective home. An appraiser estimates the value of the home and will give you an estimated fair market value. However, you will have to pay to have an appraisal done  whether you get the property or not.

Q-A Series – CLOSING

Q. WHAT HAPPENS AFTER I’VE APPLIED FOR MY LOAN

It usually takes a lender between 1-6 weeks to complete the evaluation of your application. Its not unusual for the lender to ask for more information once the application has been submitted. The sooner you can provide the information, the faster your application will be processed. Once all the information has been verified the lender will call you to let you know the outcome of your application. If the loan is approved, a closing date is set up and the lender will review the closing with you. And after closing, you’ll be able to move into your new home.

Q. WHAT SHOULD I LOOK OUT FOR DURING THE FINAL WALK-THROUGH

This will likely be the first opportunity to examine the house without furniture, giving you a clear view of everything. Check the walls and ceilings carefully, as well as any work the seller agreed to do in response to the inspection. Any problems discovered previously that you find uncorrected should be brought up prior to closing. It is the seller’s responsibility to fix them.

Q. WHAT MAKES UP CLOSING COST

There may be closing cost customary or unique to a certain locality, but closing cost are usually made up of the following:
– Attorney’s or escrow fees (Yours and your lender’s if applicable)
– Property taxes (to cover tax period to date)
– Interest (paid from date of closing to 30 days before first monthly payment)
– Loan Origination fee (covers lenders administrative cost)
– Recording fees
– Survey fee
– First premium of mortgage Insurance (if applicable)
– Title Insurance (yours and lender’s)
– Loan discount points
– First payment to escrow account for future real estate taxes and insurance
– Paid receipt for homeowner’s insurance policy (and fire and flood insurance if applicable)
– Any documentation preparation fees

Q. WHAT CAN I EXPECT TO HAPPEN ON CLOSING DAY

You’ll present your paid homeowner’s insurance policy or a binder and receipt showing that the premium has been paid. The closing agent will then list the money you owe the seller (remainder of down payment, prepaid taxes, etc.) and then the money the seller owes you (unpaid taxes and prepaid rent, if applicable). The seller will provide proofs of any inspection, warranties, etc.

Once you’re sure you understand all the documentation, you’ll sign the mortgage, agreeing that if you don’t make payments the lender is entitled to sell your property and apply the sale price against the amount you owe plus expenses. You’ll also sign a mortgage note, promising to repay the loan. The seller will give you the title to the house in the form of a signed deed.

You’ll pay the lender’s agent all closing costs and, in turn,he or she will provide you with a settlement statement of all the items for which you have paid. The deed and mortgage will then be recorded in the state Registry of Deeds, and you will be a homeowner.

Q. WHAT DO I GET AT CLOSING

– Settlement Statement, HUD-1 Form (itemizes services provided and the fees charged; it is filled out by the closing agent and must be given to you at or before closing)
– Truth-in-Lending Statement
– Mortgage Note
– Mortgage or Deed of Trust
– Binding Sales Contract (prepared by the seller; your lawyer should review it)
– Keys to your new home

10 Questions to Ask the Condoboard

Before you buy, contact the condo board with the following questions. In the process, you ll learn how responsive  and organized  its members are. You ll also be alerted to potential problems with the property.

1. What percentage of units is owner-occupied What percentage is tenant-occupied Generally, the higher the percentage of owner-occupied units, the more marketable the units will be at resale.

2. What covenants, bylaws, and restrictions govern the property What grandfather clauses are in place You may find, for instance, that those who buy a property after a certain date can t rent out their units, but buyers who bought earlier can. Ask for a copy of the bylaws to determine if you can live within them. And have an attorney review property docs, including the master deed, for you.

3. How much does the association keep in reserve Plus, find out how that money is being invested.

4. Are association assessments keeping pace with the annual rate of inflation Smart boards raise assessments a certain percentage each year to build reserves to fund future repairs. To determine if the assessment is reasonable, compare the rate to others in the area.

5. What does and doesn t the assessment cover Does the assessment include common-area maintenance, recreational facilities, trash collection, and snow removal

6. What special assessments have been mandated in the past five years How much was each owner responsible for Some special assessments are unavoidable. But repeated, expensive assessments could be a red flag about the condition of the building or the board s fiscal policy.

7. How much turnover occurs in the building This will tell you if residents are generally happy with the building. According to research by the NATIONAL ASSOCIATION OF REALTORS , owners of condos in two-to-four unit buildings stay for a median of five years, and owners of condos in a building with five or more units stay for a median of four years.

8. Is the condo building in litigation This is never a good sign. If the builders or home owners are involved in a lawsuit, reserves can be depleted quickly.

9. Is the developer reputable Find out what other projects the developer has built and visit one if you can. Ask residents about their perceptions. Request an engineer s report for developments that have been reconverted from other uses to determine what shape the building is in. If the roof, windows, and bricks aren t in good repair, they become your problem once you buy.

10. Are multiple associations involved in the property In very large developments, umbrella associations, as well as the smaller association into which you re buying, may require separate assessments.

Reprinted from REALTOR magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS .
Copyright 2008. All rights reserved.

Q-A Series – HUD and FHA

Q. WHAT IS THE U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Also known as HUD, the U.S. Department of Housing and Urban Development was established in 1965 to develop national policies and programs to address housing needs in the U.S. One of HUD’s primary missions is to create a suitable living environment for all Americans by developing and improving the country’s communities and enforcing fair housing laws

Q. HOW DOES HUD HELP HOMEBUYERS AND HOMEOWNERS

HUD helps people by administering a variety of programs that develop and support affordable housing. Specifically, HUD plays a large role in homeownership by making loans available for lower- and moderate-income families through its FHA mortgage insurance program and its HUD Homes program. HUD owns homes in many communities throughout the U.S. and offers them for sale at attractive prices and economical terms. HUD also seeks to protect consumers through education, Fair Housing Laws, and housing rehabilitation initiatives.

Q. WHAT IS THE FHA

Now an agency within HUD, the Federal Housing Administration was established in 1934 to advance opportunities for Americans to own homes. By providing private lenders with mortgage insurance, the FHA gives them the security they need to lend to first-time buyers who might not be able to qualify for conventional loans. The FHA has helped more than 26 million Americans buy a home.

Q. HOW CAN THE FHA ASSIST ME IN BUYING A HOME

The FHA works to make homeownership a possibility for more Americans. With the FHA, you don’t need perfect credit or a high-paying job to qualify for a loan. The FHA also makes loans more accessible by requiring smaller down payments than conventional loans. In fact, an FHA down payment could be as little as a few months rent. And your monthly payments may not be much more than rent.

Q. HOW IS THE FHA FUNDED

Lender claims paid by the FHA mortgage insurance program are drawn from the Mutual Mortgage Insurance fund. This fund is made up of premiums paid by FHA-insured loan borrowers. No tax dollars are used to fund the program.

Q. WHO CAN QUALIFY FOR FHA LOANS

anyone who meets the credit requirements, can afford the mortgage payments and cash investment, and who plans to use the mortgaged property as a primary residence may apply for an FHA-insured loan.

Q. WHAT IS THE FHA LOAN LIMIT

FHA loan limits vary throughout the country, from $115,200 in low-cost areas to $208,800 in high-cost areas. The loan maximums for multi-unit homes are higher than those for single units and also vary by area.

Because these maximums are linked to the conforming loan limit and average area home prices, FHA loan limits are periodically subject to change. Ask your lender for details and confirmation of current limits.

Q. WHAT ARE THE STEPS INVOLVED IN THE FHA LOAN PROCESS

With the exception of a few additional forms, the FHA loan application process is similar to that of a conventional loan (see Question 47). With new automation measures, FHA loans may be originated more quickly than before. And, if you don’t prefer a face-to-face meeting, you can apply for an FHA loan via mail, telephone, the Internet, or video conference.

Q. HOW MUCH INCOME DO I NEED TO HAVE TO QUALIFY FOR AN FHA LOAN

There is no minimum income requirement. But you must prove steady income for at least three years, and demonstrate that you’ve consistently paid your bills on time.

Q. WHAT QUALIFIES AS AN INCOME SOURCE FOR THE FHA

Seasonal pay, child support, retirement pension payments, unemployment compensation, VA benefits, military pay, Social Security income, alimony, and rent paid by family all qualify as income sources. Part-time pay, overtime, and bonus pay also count as long as they are steady. Special savings plans-such as those set up by a church or community association – qualify, too. Income type is not as important as income steadiness with the FHA.

Q. CAN I CARRY DEBT AND STILL QUALIFY FOR FHA LOANS

Yes. Short-term debt doesn’t count as long as it can be paid off within 10 months. And some regular expenses, like child care costs, are not considered debt. Talk to your lender or real estate agent about meeting the FHA debt-to-income ratio.

Q. WHAT IS THE DEBT-TO-INCOME RATIO FOR FHA LOANS

The FHA allows you to use 29% of your income towards housing costs and 41% towards housing expenses and other long-term debt. With a conventional loan, this qualifying ratio allows only 28% toward housing and 36% towards housing and other debt

Q. CAN I EXCEED THIS RATIO

You may qualify to exceed if you have:
– a large down payment
– a demonstrated ability to pay more toward your housing expenses
– substantial cash reserves
– net worth enough to repay the mortgage regardless of income
– evidence of acceptable credit history or limited credit use
– less-than-maximum mortgage terms
– funds provided by an organization
– a decrease in monthly housing expenses

Q. HOW LARGE A DOWN PAYMENT DO I NEED WITH AN FHA LOAN

You must have a down payment of at least 3% of the purchase price of the home. Most affordable loan programs offered by private lenders require between a 3%-5% down payment, with a minimum of 3% coming directly from the borrower’s own funds.

Q. WHAT CAN I USE TO PAY THE DOWN PAYMENT AND CLOSING COSTS OF AN FHA LOAN

Besides your own funds, you may use cash gifts or money from a private savings club. If you can do certain repairs and improvements yourself, your labor may be used as part of a down 8 payment (called -sweat equity”). If you are doing a lease purchase, paying extra rent to the seller may also be considered the same as accumulating cash.

Q. HOW DOES MY CREDIT HISTORY IMPACT MY ABILITY TO QUALIFY

The FHA is generally more flexible than conventional lenders in its qualifying guidelines. In fact, the FHA allows you to re-establish credit if:
– two years have passed since a bankruptcy has been discharged
– all judgments have been paid
– any outstanding tax liens have been satisfied or appropriate arrangements have been made to establish a repayment plan with the IRS or state Department of Revenue
– three years have passed since a foreclosure or a deed-in-lieu has been resolved

Q. CAN I QUALIFY FOR AN FHA LOAN WITHOUT A CREDIT HISTORY

Yes. If you prefer to pay debts in cash or are too young to have established credit, there are other ways to prove your eligibility. Talk to your lender for details.

Q. WHAT TYPES OF CLOSING COSTS ARE ASSOCIATED WITH FHA-INSURED LOANS

Except for the addition of an FHA mortgage insurance premium, FHA closing costs are similar to those of a conventional loan outlined in Question 63. The FHA requires a single, upfront mortgage insurance premium equal to 2.25% of the mortgage to be paid at closing (or 1.75% if you complete the HELP program- see Question 91). This initial premium may be partially refunded if the loan is paid in full during the first seven years of the loan term. After closing, you will then be responsible for an annual premium – paid monthly – if your mortgage is over 15 years or if you have a 15-year loan with an LTV greater than 90%.

Q. CAN I ROLL CLOSING COSTS INTO my FHA LOAN

No. Though you can’t roll closing costs into your FHA loan, you may be able to use the amount you pay for them to help satisfy the down payment requirement. Ask your lender for details.

Q. ARE FHA LOANS ASSUMABLE

Yes. You can assume an existing FHA-insured loan, or, if you are the one deciding to sell, allow a buyer to assume yours. Assuming a loan can be very beneficial, since the process is streamlined and less expensive compared to that for a new loan. Also, assuming a loan can often result in a lower interest rate. The application process consists basically of a credit check and no property appraisal is required. And you must demonstrate that you have enough income to support the mortgage loan. In this way, qualifying to assume a loan is similar to the qualification requirements for a new one.

Q. WHAT SHOULD I DO IF I CAN’T MAKE A PAYMENT ON LOAN

Call or, write to your lender as soon as possible. Clearly explain the situation and be prepared to provide him or her with financial information.

Q. ARE THERE ANY OPTIONS IF I FALL BEHIND ON MY LOAN PAYMENTS

Yes. Talk to your lender or a HUD-approved counseling agency for details. Listed below are a few options that may help you get back on track.

For FHA loans:
– Keep living in your home to qualify for assistance.
– Contact a HUD-approved housing counseling agency (1-800-569-4287 or TDD: 1-800-483-2209) and cooperate with the counselor/lender trying to help you.
– HUD has a number of special loss mitigation programs available to help you:
– Special Forbearance: Your lender will arrange for a revised repayment plan which may Include temporary reduction or suspension of payments; you can qualify by having an Involuntary reduction in your Income or Increase In living expenses.
– Mortgage Modification: Allows refinance debt and/or extend the term of the your mortgage loan which may reduce your monthly payments; you can qualify if you have recovered from financial problems, but net Income Is less than before.
– Partial Claim: Your lender maybe able to help you obtain an interest-free loan from HUD to bring your mortgage current.
– Pre-foreclosure Sale: Allows you to sell your property and pay off your mortgage loan ,to avoid foreclosure.
– Deed-in lieu of Foreclosure: Lets you voluntarily “give back” your property to the lender; it won’t save your house but will help you avoid the costs, time, and effort of the foreclosure process.
– If you are having difficulty with an-uncooperative lender or feel your loan servicer is not providing you with the most effective loss mitigation options, call the FHA Loss Mitigation Center at 1-888-297-8685 for additional help.

For Conventional Loans:

Talk to your lender about specific loss mitigation options. Work directly with him or her to request a “workout packet.” A secondary lender, like Fannie Mae or Freddie Mac, may have purchased your loan. Your lender can follow the appropriate guidelines set by Fannie or Freddie to determine the best option for your situation.

Fannie Mae does not deal directly with the borrower. They work with the lender to determine the loss mitigation program that best fits your needs.

Freddie Mac, like Fannie Mae, will usually only work with the loan servicer. However, if you encounter problems with your lender during the loss mitigation process, you can coil customer service for help at 1-800-FREDDIE (1-800-373-3343).

In any loss mitigation situation, it is important to remember a few helpful hints:
– Explore every reasonable alternative to avoid losing your home, but beware of scams. For example, watch out for:

Equity skimming: a buyer offers to repay the mortgage or sell the property if you sign over the deed and move out.
Phony counseling agencies: offer counseling for a fee when it is often given at no charge.

– Don’t sign anything you don’t understand.

Q. WHAT IS A 203(b) LOAN

This is the most commonly used FHA program. It offers a low down payment, flexible qualifying guidelines, limited lender’s fees, and a maximum loan amount.

Q. WHAT IS A 203(k) LOAN

This is a loan that enables the homebuyer to finance both the purchase and rehabilitation of a home through a single mortgage. A portion of the loan is used to pay off the seller’s existing mortgage and the remainder is placed in an escrow account and released as rehabilitation is completed. Basic guidelines for 203(k) loans are as follows:
– The home must be at least one year old.
– The cost of rehabilitation must be at least $5,000, but the total property value – including the cost of repairs – must fall within the FHA maximum mortgage limit.
– The 203(k) loan must follow many of the 203(b) eligibility requirements.
– Talk to your lender about specific improvement, energy efficiency, and structural guidelines.

Q. WHAT IS AN ENERGY EFFICIENT MORTGAGE (EEM)

The Energy Efficient Mortgage allows a homebuyer to save future money on utility bills. This is done by financing the cost of adding energy-efficiency features to a new or existing home as part of an FHA-insured home purchase. The EEM can be used with both 203(b) and 203(k) loans. Basic guidelines for EEMs are as follows:
– The cost of improvements must be determined by a Home Energy Rating System or by an energy consultant. This cost must be less than the anticipated savings from the improvements.
– One- and two-unit new or existing homes are eligible; condos are not.
– The improvements financed may be 5% of property value or $4,000, whichever is greater. The total must fall within the FHA loan limit.

Q. WHAT IS A TITLE I LOAN

Given by a Lender and insured by the FHA, a Title I loan is used to make non-luxury renovations and repairs to a home. It offers a manageable interest rate and repayment schedule. Loans are limited to between $5,000 and 20,000. If the loan amount is under 7,500, no lien is required against your home. Ask your lender for details.

Q. WHAT OTHER LOAN PRODUCTS OR PROGRAMS DOES THE FHA OFFER

The FHA also insures loans for the purchase or rehabilitation of manufactured housing, condominiums, and cooperatives. It also has special programs for urban areas, disaster victims, and members of the armed forces. Insurance for ARMS is also available from the FHA.

Q. HOW CAN I OBTAIN AN FHA-INSURED LOAN

Contact an FHA-approved lender such as a participating mortgage company, bank, savings and loan association, or thrift. For more information on the FHA and how you can obtain an FHA loan, visit the HUD web site at http://www.hud.gov or call a HUD-approved counseling agency at 1-800-569-4287 or TDD: 1-800-877-8339.

Q. HOW CAN I CONTACT HUD

Visit the web site at http://www.hud.gov or look in the phone book “blue pages” for a listing of the HUD office near you.

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