Mortgage issues

There have been several changes in the FHA backed mortgage market in the last year and the newest will occur on April 1. We will see upfront Mortgage Insurance increase from the current 1.0% to 1.75% that will help strengthen the capital reserves of FHA.  On top of this, the annual renewal premium will be as high as 1.25%. This will significantly increase a borrower’s cost.

This is important because a good many of our home buyers in Louisville utilize an FHA backed loan. As I look over my clients in the past, our first time home-buyers are often using FHA mortgages due to the low down payment required.

One complaint that I hear is that MI (Mortgage Insurance) is required with an FHA loan.  I think that it is hard to complain about paying mortgage insurance when you are able to buy a new home with a lot less than 20% down payment.  With this being said; the increase in Mortgage Insurance on a yearly basis and upfront will make a difference in the monthly payment of our Louisville real estate clients.

FHA loans will also work with some condominium purchases.  The key here is for the condo development to be FHA approved.  If I am showing homes to an FHA buyer, I always make sure that the condo is approved first.  I don’t want to waste our time showing something that won’t work.  Your FHA loan officer will be able to tell you if the condo development is approved or not.

Feel free to contact Steve Dobbs with The Dobbs Team if you have any questions about this or the Louisville KY Real Estate Market.

Real Estate agents think that this is a great time to buy with historically low home mortgage rates.  Mortgage loan officers would tell you the same thing.  However, some people have trouble qualifying for a loan and agents are always looking for alternatives.

KY Housing Corporation (KHC) is the state finance agency with very attractive rates.  They are currently quoting rates well under 4% on a 30-year fixed rate loan.  Rates such as these make it much cheaper to own a home or condo then rent an apartment.

They also have programs for down payment and closing cost assistance.  There is usually a small premium to use their down payment assistance.  KHC works with FHA, VA and RHS loans.  They are not known as a sub-prime lender as they do insist on a good credit score and assurance that the borrower will pay back the loan.

KHC is able to use the New Issue Bond Program (NIBP) to get these great rates.  The U.S. Department of Treasury provides these funds through a federal bond purchase program.

It is important to jump on these programs early.  In the past, there has been a finite amount of money to loan on some of Kentucky Housing Corps special programs.  As always, the early bird gets the worm.

Not all mortgage companies work with KHC, so it is best to check around and find a lender that knows how to use the Kentucky Housing program.

The Dobbs Team would advise you visit with a lender and see if you qualify for one of KHC’s loan programs.  Feel free to give us a call and we will try to point you in the right direction.  As always, The Dobbs Team is here to help you find your next home in Louisville, KY and the surrounding counties.

I had not been to the Jefferson County Commissioner’s sale in a while and had the opportunity to attend with a friend yesterday. Since Louisville and Jefferson County has merged, this is basically the Louisville Kentucky foreclosure sale.  My friend had interest in a neighbor’s property and wanted some real estate expertise as he went to make his purchase.  I also went to see if much has changed; it hasn’t.

 The December 6^th sale had 142 properties on the agenda.  32 of these, or 22%, were withdrawn before the sale.  Either restitution had been made, or the lender had some promise of a short sale occurring and postponed the foreclosure auction.

There were 7 properties that actually changed hands.  This is only 5% but is on track with all of the other sales that I have attended.

Most of the sales were 2/3 of the Jefferson County Commissioner’s appraisal to avoid the right of redemption act.  There were a couple of sales below this number which gives the original owner a chance to repurchase their property.

Of note was a property the commissioner appraised at $17,000.  The bidding was fast and furious with the bidding ending at $43,000.  The weird part; the bank was the final bidder.  Jewell

There was another house that the commissioner appraised at $100,000.  The Jefferson County PVA has it valued at $112,900.  The bank made an initial bid of $160,125 and this was the only bid.  Obviously, there is something that I don’t know.

Back to my friend and his attempt to purchase a foreclosed home.  The bidding started at 2/3 and he was the only bidder against the bank.  There comes a point when the price becomes uncomfortable.   The buyer has to factor in the fact that he has not been in the property and has no control until he has paid for it in full.  In short, we walked away empty handed.

It is more of a sure thing to buy a bank-owned foreclosure once it is on the MLS.  You have the ability to at least see the interior of the home and will more than likely do a home inspection.

 If you want more information about the short sale process, foreclosures and short sales in the Louisville KY area, feel free to contact the Real Estate Experts at The Dobbs Team.

Renovation loans can be a challenge in the Louisville KY market as well as many others.  We see lots of bank owned homes that need more than a little TLC to get them back in shape.  These would include Fannie Mae, Freddie Mac, local banks as well as the big boys, and HUD homes.

We recently bought a Fannie Mae Foreclosure that needed a lot of “Tender Loving Care”.  Our issues were termite damage, dilapidated carpet, single pane windows, shingles at the end of their life, gutters, siding with holes, outdated kitchen, etc.  Did I mention that it needed paint?  We knew that the price was right, but we required funds for repairs as well as the regular mortgage. 

We initially tried to get a HomePath “Renovation” loan as that seemed like a great deal.   Our first obstacle was finding a loan officer that could take care of us.  In Kentucky, HomePath loans are fairly popular, but we do not have anyone writing HomePath Renovation loans within the state.  To get a HomePath Renovation loan required us going to an out of state lender.  We found a good loan officer in Ohio and were quickly pre-approved.  As we progressed, we found that our down payment would now be 5% putting a squeeze on our cash flow.

FHA has always had their regular 203b loans.  They now offer a program called the 203k Renovation loan.  Within this program, they have the “Streamlined” version as well as the “Standard”.  The FHA Streamlined Renovation version is for expenditures of up to $35,000 and works for most people.  This enabled us to roll the repairs into the cost of the initial mortgage.  The list of what you can receive funding is quite large.  You can’t do major remodeling such as removing a load-bearing wall.  The FHA Standard Renovation loan is a different animal and something for another blog.

Before we made our offer, we contacted a general contractor of our choosing and had him give us an estimate.  We then felt comfortable making an offer and Fannie Mae accepted.  There was some paperwork involved, but we were able to close within 45 days.  Our contractor needed to show proof that he was licensed and insured and that was no big deal. 

As part of the appraisal process, we needed an “as-is” appraisal and a “finished” appraisal before we could get our loan.  The appraiser had our work estimate in hand so he knew what we were looking to accomplish.  The finished appraisal was estimated to be $15,000 more than we would have in the house.

On the day of closing, our contractor was able to receive 50% up front to cover his initial outlay for materials.  We are off to the races!!  A couple of weeks have passed and great progress is being made.  Our family moves to a newly painted and modernized home in a great neighborhood.

I like a story with a good ending.

For more details, feel free to contact The Dobbs Team in Louisville KY about this FHA Renovation process.

I worked with a client last week that was interested in one of our home listings.  They informed me that they had some credit issues in the past, but were working through those, and both had good steady jobs.  I suggested a couple of loan officers that could get them approved for a home loan and to let me know the amount of the pre-approval.

A few days later, my client calls me and reports that he was turned down for the home loan approval.  I was expecting to hear that his credit score killed them and he tells me that it is 650.  Not being a Louisville loan officer, I am thinking that this is not too bad and there is more to the story, and there was!  A few months back, they had hired a “credit counselor”.  They would give the counselor XX dollars a month and the counselor would pay their bills in the way that would best bring up their credit score.

Now here is the rub, the Louisville, KY mortgage officer looked at the fact that they had hired a credit counselor in a negative light.  The reasoning is that the couple must not be responsible if they have to hire someone to pay their bills.  To say my client was unhappy, was an understatement.

Here is the amazing thing, this couple had cash in the bank and thought that they were doing the best that they could to raise their credit score.  Their plan was to pay off the “credit counselor” that day and take over their day to day affairs.  Hopefully in 2 or 3 months, they can buy a house in Old Louisville.

If you have any questions about your mortgage payments, check out our mortgage calculator at The Dobbs Team in Louisville, KY.