3% Down Conventional Fannie Mae and Freddie Mac loans

Both Fannie Mae and Freddie Mac reintroduced conventional 3% down programs this year.  A few key differences to note:

Fannie Mae requires at least one of the borrowers to be a first time home buyer.

Freddie Mac Home Possible has income limits you can look up by clicking here.  The Home Possible program also has reduced mortgage insurance.

Both programs allow the 3% down payment to be entirely gifted by a relative, employer, or a community 2nd down payment assistance loan or grant.

More guidelines apply and we can help you with an approval in a short amount of time.  Complete a pre-approval request online and we can get you started right away: furlongteam.com/preapproval

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Selling and buying in a seller’s market

We have had many clients lately that have needed or wanted to sell their current home and buy another, so we wrote up some tips about buying and selling your home in a seller’s market.

Selling Your Home in a Seller’s MarketSelling your home in a seller's market

The sell side is generally the easier part (though it may not seem that way as you are painting and boxing up all your belongings getting the house ready for market). The market is currently a very strong seller’s market, which means offers contingent on the sale of another property are not as strong.

Buying a Home in a Seller’s Market

We work with our clients to devise a plan for getting approved for the next purchase without having to sell their current home, or strategies for interim financing to utilize your current equity towards the purchase of a new home. In addition to this, with all the constraints this process has, we as your lender will be flexible to meet timeline demands, concurrent closings and can assist in getting contingent offers accepted.

Planning early is never too early and we can help devise a specific strategy for you to make the transition.

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FHA Streamline 203(k)

The Furlong Team is pleased to offer the FHA Streamline 203(k).

A few quick things to know about 203(k):

  1. Find your contractor early. They need to be licensed and should be organized with their paperwork!
  2. Repairs should not require large structural changes.
  3. The timeline for closing is longer than standard mortgage programs.
  4. The underwriting process has more details and will be a bit more work than a standard loan program, but just have patience and you will be ok!

FHA’s Streamlined 203(k) program permits borrowers to:

  • Finance up to an additional $35,000 into their mortgage to improve or upgrade their home before move-in
  • Finance funding to pay for property repairs or improvements, such as those identified by a home inspector or FHA appraiser

FHA offers insurance to lenders for two repair programs – the 203(k) Streamline and the standard 203(k).

Eligible repairs include, but are not limited to:

  • structural alterations (not applicable on Streamline (k))
  • additions (not applicable on Streamline (k))
  • reconstruction (not applicable on Streamline (k))
  • remodeling (only minor remodeling allowed on Streamline(k))
  • new siding
  • plumbing
  • painting
  • decking
  • heating and/or air-conditioning
  • electrical systems
  • roofing
  • flooring and carpeting
  • energy efficient improvements
  • major landscape work (not applicable on Streamline (k))
  • pool repairs and pool fences.
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    Documenting Assets for Closing on a New Home and Deposits

    When I talk about documenting assets with new borrowers, I often get questions like: “why do I need to document funds for closing” or “why do I need to show where this deposit into my account came from?” It is required of borrowers to source all deposits into documented asset accounts over a certain amount or cumulative amount, depending on the loan program guidelines.

    How long do I need to document assets?

    Generally, we only document the last 60 days’ period of the asset statements (last two months’ bank statements). Deposits not only need to be explained, but they need to be sourced as well.

    What kinds of deposits should I document?

    For example, if I see a deposit into a bank account for $1,200 it is required that we have a copy of the check and proof of the source. If the funds came from a relative, it is considered gift funds and must be eligible under loan program guidelines. If it is from the sale of an asset, it is required to provide a bill of sale and copy of the check. If the funds are wired in, the source needs to be documented (letter from the company explaining why they sent funds).

    Many times funds wired to an account show where they are coming from (IRS, company payroll, etc) and then we don’t need any further documentation. Sometimes the deposit can be “backed out” of the statement ending balance if the source cannot be documented (cash, for example, cannot be traced/sourced), other times that asset account can be deemed ineligible as a source for closing funds.

    Bottom Line: use caution

    Bottom line, if you plan to purchase a home, be careful about the money going into your account for 2 months leading up to the underwriting. Mortgage investors have strict guidelines in regards to documenting funds for closing as this is an area where fraud has frequently occurred in the past.

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    Fannie Mae and Freddie Mac 3% Down Payment

    Fannie Mae and Freddie Mac have recently reintroduced the 3% down payment conventional programs. Many benefits are available for home buyers with these programs including reduced rates, reduced mortgage insurance and, of course, a lower down payment!

    Some differences between Fannie Mae and Freddie Mac are as follows:

    Fannie Mae 3% Down Payment:

    • Purchase or rate/term refinancing only
    • Homebuyer education is required
    • At least one buyer must be a first time homebuyer
    • Single family, primary residence only
    • Down payment assistance loans allowed (must be a Community Second)

    Freddie Mac Home Possible 3% Down Payment:

    • 680 minimum credit score
    • Homebuyer education is required
    • None of the buyers are required to be first time buyers

    Watch our informative overview video here:

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    FHA Streamline Refinance Program

    The FHA Streamline Refinance program waives the requirement for an appraisal, allows for the new, lower FHA mortgage insurance rates, and can save homeowners a lot of interest and insurance fees over the life of the loan. Not to mention, your payment will be reduced without needing to add additional time onto your loan term!

    Request a Quote

    From http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/ins/streamline:

    FHA has permitted streamline refinances on insured mortgages since the early 1980s. “Streamline refinance” refers only to the amount of documentation and underwriting that the lender must perform, and does not mean that there are no costs involved in the transaction. The basic requirements of a streamline refinance are:

    • The mortgage to be refinanced must already be FHA insured.
    • The mortgage to be refinanced should be current (not delinquent).
    • The refinance results in a lowering of the borrower’s monthly principal and interest payments, or, under certain circumstances, the conversion of an adjustable rate mortgage (ARM) to a fixed-rate mortgage.
    • No cash may be taken out on mortgages refinanced using the streamline refinance process.

    Lenders may offer streamline refinances in several ways. Some lenders offer “no cost” refinances (actually, no out-of-pocket expenses to the borrower) by charging a higher rate of interest on the new loan than if the borrower financed or paid the closing costs in cash. From this premium, the lender pays any closing costs that are incurred on the transaction. FHA does not allow lenders to include closing costs in the new mortgage amount of a streamline refinance. Investment properties (properties which the borrower does not occupy as his or her principal residence) may only be refinanced without an appraisal.

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    Conventional Mortgage Insurance Options

    About Mortgage Insurance

    Private mortgage insurance is required for borrowers of conventional loans with a down payment of less than 20% of the purchase price. Mortgage insurance is an insurance policy for the lender that provides coverage to the lender in the event that the borrower is unable to repay their mortgage.

    There are several options for paying the premium:

    • Monthly Premium: The borrower pays the same amount every month until the loan balance is paid down to 78% of the initial property value, at which point the mortgage insurance payments end. There is no initial premium at closing.
    • Single Premium (Refundable): The borrower makes one lump sum payment at closing, but receives a partial refund if the loan is terminated within 5 years. There are no monthly payments.
    • Single Premium (Non-Refundable): The borrower makes one lump sum payment at closing. There are no monthly payments.
    • Single Premium (Lender Paid): The one-time lump sum payment is paid by the lender through a higher interest rate for the borrower.
    • Split Premium: The borrower pays a portion of the premium upfront and a portion in monthly payments.

    Mortgages Unlimited 2014 Holiday Toy Drive for Cornerstone

    As a company, we find a variety of causes to get behind and help, from Habitat for Humanity to Spare Key. This year we made an extra push to collect some holiday gifts for those who don’t have the means on their own. Each of our offices piled up things for kids, dads, moms and families to help make their home just a little bit happier over the holidays!

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    FHA Back to Work

    The FHA Back to Work program allows home buyers to obtain financing if they had a bankruptcy, foreclosure or short sale at least 12 months ago. This timeline is shorter than the standard FHA guidelines of 24 months with extenuating circumstances or 36 months otherwise. The primary requirements for the FHA Back to Work program are that a 20% decrease in income led to the “economic event”, or bankrupcy, foreclosure or short sale. A divorce situation where the household income decreased as a result does not count. The other requirement is to have completed the Back to Work counseling at least 30 days prior to entering into a purchase agreement or submitting a formal loan application.

    From FHA:

    “As a result of the recent recession many borrowers who experienced unemployment or other severe reductions in income were unable to make their monthly mortgage payments and ultimately were forced to give up their home. Some borrowers were left with no choice but to file for bankruptcy or short sale their home due to the inability to afford the mortgage payment. Because of these recent recession-related periods of financial difficulty, borrowers’ credit has also been negatively affected. FHA recognizes the hardships faced by these borrowers and realizes that their credit histories may not fully reflect their true ability or propensity to repay a mortgage.”

    We can work with you to determine your ability to be approved and guide you to the counselors to become eligible for the program.

    See the FHA Mortgagee Letter Here
    Get your HUD approved counseling certificate from Springboard

    Do You Qualify?

    FHA will consider you for eligibility if you had a financial hardship in the past but can now document the following circumstances about yourself:

    • You can document the mortgage or credit problems resulted from a financial hardship
    • You have re-established a responsible credit history
    • You have completed HUD-approved housing counseling
    • You meet FHA loan requirements

    Foreclosure? Deed-in-lieu?

    Fannie Mae/Freddie Mac requirements regarding past foreclosure

    A seven-year waiting period is required, and is measured from the completion date of the foreclosure action as reported on the credit report or other foreclosure documents provided by the borrower.

    Exceptions for Extenuating Circumstances:
    A three-year waiting period is permitted if extenuating circumstances can be documented, and is measured from the completion date of the foreclosure action. Additional requirements apply between three and seven years, which include:

    • Maximum LTV, CLTV, or HCLTV ratios of the lesser of 90% or the maximum LTV, CLTV, or HCLTV ratios for the transaction per the Eligibility Matrix.
    • The purchase of a principal residence is permitted.

    Extenuating circumstances do not include divorce, only death or what I call “dismemberment” where extended hospitalization or serious medical issue arises.

    Fannie/Freddie requirements regarding past deed-in-lieu transfers

    These transaction types are completed as alternatives to foreclosure. A deed-in-lieu of foreclosure is a transaction in which the deed to the real property is transferred back to the servicer. A pre-foreclosure sale or short sale is the sale of a property in lieu of a foreclosure resulting in a payoff of less than the total amount owed, which was pre-approved by the servicer.

    The following waiting period requirements apply:

    Waiting Periods

    • Two years, 20% down required.
    • Four years, 10% down required.
    • Seven years LTV ratios per the Eligibility Matrix

    FHA requirements regarding past foreclosure:

    • 3 years, except under extenuating circumstances. See above.
    • 12 months is possible under the FHA “Back to work” program which is only applicable if the borrowers’ income decreased by 20% leading up to the foreclosure.

    FHA requirements regarding past deed-in-lieu transfers:

    Same as past foreclosure

    The only other option to finance a new home with a foreclosure or deed-in-lieu sooner than these timelines is with private financing/contract for deed, which generally require a 20% or greater down payment and unfavorable terms.