Richard's Real Estate Thoughts: Richard Smith FHA VA Rural Development in TN GA

Mortgage rates continue to be historically low. This home for sale in Hixson, TN, is a great example of how affordable your new home payment can be. Terri Rule with Re/Max Properties North is the listing agent for this property.

The payments shown are for a conventional 5% down payment with standard mortgage insurance and with lender paid mortgage insurance. You can compare these payment options with an FHA loan that has a lower down payment requirement.

Many home buyers indicate that they do not like mortgage insurance, but mortgage insurance is what makes it possible to purchase a home with less than 20% down payment. Many home buyers though are not aware of the different options for mortgage insurance premiums.

By considering the different options home buyers can select the mortgage insurance option that best suits their budget and long term plans.

Terri Rule is having an open house for this home on Sunday, October 2, 2011. Call her at 423-994-3993 with any questions about this great home for sale in Hixson. 

Call me, 423-280-0345, with any questions about your home purchase financing and your different mortgage insurance options. Visit my HomeBuyer YouTube channel to learn more about home buying programs.

Home mortgage rates have reached new lows in response to the recent announcement from the Federal Reserve to work to keep long term rates as low as possible.

These low rates have increased the push for existing home owners to refinance their mortgages. And if you are able to refinance your present mortgage, the new lows in interest rates offer you a great opportunity for maximum saving.

For excited home buyers though these low rates may provide an opportunity for home prices to begin to edge upwards.

This market right now gives home buyers the best combination of low home prices and low interest rates.

From 2000 until 2007 home prices went through a period of rapid growth with the housing bubble. Since that bubble, prices had seen a fairly steep decline, pushed in a large degree by the many foreclosures.

This year and especially in the last few months, home prices seem to have reached a bottom. It looks like home prices may even be enjoying a bit of a recovery.

This is good news for us all - to see home prices back on the mend. This chart is from the recent FHFA home price survey.

What is shows is the home prices are beginning to rebound. They have fallen to the level that matches what might be expected to have been a normal appreciation increase from pre housing boom times.

But what it means for home buyers, the time is now. Home prices are probably at the bottom, and home mortgage rates are also at bottom.

For information about home purchases please visit my Home Buyer Series videos. A good start is with this video.

  You can call me at 423-280-0345 or visit my website at www.RichardSmithHomeLoans.com.

We are approaching the deadline for the new fee structure for Rural Development Guaranteed Home Loan program. I spoke with the USDA area director earlier this month and he clarified that the new monthly fee structure will be applied to all loan submissions that do not receive a Rural Development commitment by September 30, 2011.

This means all files should be sent to Rural Development probably by September 25 or earlier. For Georgia properties, the files will need to be submitted even sooner.

For home buyers who may not know, Rural Development loans must receive a commitment from the area Rural Development office before the purchase transaction can close. This commitment is issued after the lender has completely finalized their loan approval.

This Rural Development commitment typically adds a few days up to an extra week or so to the loan closing time frame.

Even with this extra few days, and even with the new monthly fee, Rural Development is an excellent choice for qualified and eligible home buyers.

The basic eligibility requirements are:

1. Household income below the maximum level (in the Chattanooga area, for 1 to 4 member families this maximum is $74,050 total household income)
2. the property must be a primary residence and be within the Rural Development eligible areas. (This can be checked on the Rural Development website.)

The new fee structure that is effective October 1, 2011 adds an annual fee of .3% of the anticipated average balance. This fee is lower each year, but will be in place for the entire loan amortization. With this fee, Rural Development is lowering the initial up front fee from 3.5% to 2.0%. This upfront fee is generally added to the loan amount.

So Rural Development loan allows eligible buyers to purchase a great home with no down payment. And even with the new fee structure, payment remain lower that most other purchase options. You do not need to be a first time home buyer to take advantage of this great purchase program.

Call me with any questions about your home purchase, or specifically about qualifying for a Rural Development purchase. You can also start your purchase approval at www.RichardSmithHomeLoans.com.

Most clients recognize the importance of credit and income to qualifying for a mortgage. Assets though are as important, and for many clients it becomes the most important simply because it is the qualifying requirement that they missed.

All programs have specific guidelines stipulating what funds are required for closing and importantly what sources are allowed to supply those funds.

Conventional home loan programs typically require that home buyers must have their own funds to close.

Government home loan programs typically allow other sources for funds to close, such as a family gift.

Funds to close include the required down payment, closing costs, prepaid and tax/insurance escrow costs, and if required reserves funds that must be available after the purchase closes.

More and more, lenders are reviewing asset accounts very closely to check that all funds being used for closing (down payment, closing costs, prepaids/escrow costs, and reserves) are from acceptable source.

Once a deposit is made, that record is established. Any deposit from a source that is difficult to document or that is not allowed for the loan program, may mean that you cannot qualify for that program, or at least that you must delay your home purchase.

When you are preparing to purchase, take time, ahead of time, to  understand the funds that will be required, and what sources are acceptable.

In today's market, prospective buyers are well informed about the credit requirements for a home purchase and take action to meet those credit requirement.

It is equally important to ensure that you assets documentation will meet the loan requirements. Call and discuss what funds and asset documentation you will need before you begin to look for your new home.

And certainly know what funds will be needed before you begin to negotiate the contract for the new home you want to be yours.

Many prospective home buyers mention that they are interested in purchase a foreclosure. Many of these prospective foreclosure home buyers though are not aware that the financing choices depend on who the seller is.

In the Chattanooga and North Georgia areas home buyers will find many properties available.

There are many considerations that should be made when looking at a potentional foreclosure purchase, but financing options should be one of the earlier considerations, unless the home buyer has significant down payment funds.

In many cases foreclosure financing options depend on the seller. Typical bank foreclosure properties often do not have any special financing options. And as always, property condition should be a concern. Always include a provision for a home inspection when purchasing a foreclosure.

FNMA owned properties are generally eligible for HomePath financing. This is a 97% purchase program for primary residence purchasers. There is no mortgage insurance with the program, which for many buyers is a plus. The rate for this program is higher than regular financing programs.

This program is only available for FNMA owned properties. More information is available on the HomePath.com website.

HUD owned properties can be f for this HUD $100 down purchase program. The terms with a HUD $100 down are the same as with regular FHA financing. Tis is a great advantage to the $100 down program, regular FHA loan terms but with only a $100 down payment.

More information on HUD owned properties can be found at hudhomestore.com.

Call me or email me with any questions about financing your foreclosure home purchase.

Rural Development Guaranteed home loans remain popular in the Chattanooga area, including eligible areas in Tennessee and Georgia. Home buyers and sellers are growing increasingly aware of the many benefits of this program. You can find many listings that specifically advertise the property is eligible for a Rural Development home loan. The program is also known as a USDA home loan.

The main benefit of a Rural Development home loan is that it allows for 100% financing of the home purchase.  No down payment. It also allows for closing costs and repairs to be included in the loan, up to the appraised value. I will write more repairs and closing costs in a later post.

The two key eligibity points with a Rural Development home purchase are the buyer's income and the property's location.

For the Chattanooga area, which includes surrounding counties in Tennessee and in Georgia, the basic income eligibility is for a family with 1 to 4 members is $74,050.

For families with 5 to 9 members the basic income limit is $97,750. These levels are much simpler that the previous income levels.

There are some income adjustments that are used to establish the income for determination of eligibility. You can check your income yourself on the Rural Development income eligibility page.

Rural Development income eligibility check.

The property's location is the other essential eligibity check. For the Hamilton County, the elibility boundaries are basically Thrasher Pike, Hunter Road, and Ooltewah-Ringgold Rd. The boundaries are a little more complicated in the Georgia counties that surround Chattanooga.

Several counties in Tennessee around Chattanooga are 100% eligible. These include Marion, Sequatchie, Bledsoe, Rhea, Meigs, McMinn, Polk, and Grundy.

For any area, you can check the property address to see if it is in an eligible area on the Rural Development property eligibility page.

Rural Development property eligibity calculator.

Rural Development Guaranteed Loan is an excellent home purchase loan for moderate income families. For more information about its many benefits, feel free to contace me at 423-280-0345 or to visit my website at www.RichardSmithHomeLoans.com. You can start your home purchase approval process on my website.

The biggest advantage of Rural Development home loans is of course the No Down Payment. A second great feature of Rural Development loans has been that they had no monthly mortgage insurance, an upfront funding fee was included with the loan, but no monthly charge.

Effective October 1, 2011, the benefit of no monthly fee will change.

Rural Development is adding an annual fee  charged to lenders of .3%. For a $130,000 Rural Development purchase loan, about the median for Chattanooga home purchases, the annual fee would be about $450. The actual fee will be based on a projected average.

Lenders will be billed annually for the fee. This is a new announcement, so no one has plans in place to collect from the fee from borrowers. I am certain though that the fee will be billed monthly with the regular payment escrows.

In effect this will become an equivalent to mortgage insurance. In the example above the charge would add approximately $37.50 to the monthly payment, for the first year.

The change is effective in October 1, 2011

The upfront guaranteed funding fee will drop to 2%. It is currently 3.5%

The annual fee will be paid at closing for the first year, and billed annually in subsequent years. The upfront fee will probably still be added to the loan amount. It looks like the initial annual fee though will be collected as a closing cost. I did not see any suggestion in the memo that it would be added to the loan amount.

The fee is actually not called mortgage insurance, but a fee. The fee is calculated annually based on the Average Loan Amount for the coming year. But the fee does not drop off at a certain loan to value amount. Mortgage insurance typically drops at 80% or so. This fee is lower with each year but it carries through to the full term.

The change is effective October 1, 2011.

The stated purpose of this change is "to make the Single Family Housing Guaranteed Loan Program (SFHGLP) subsidy neutral, thus eliminating the need for taxpayer support of the program." This seems to be consistent with the housing goals as put forth in the Administration's white paper on the future of housing, published on February 13.

It is consistent also with the recently announced increase in FHA mortgage insurance costs. 

New regulations allow for Rural Development to charge as high as 3.5% upfront and .5% annually, but the program will start with the 2% upfront and .3% annually.

If you have any questions about this or Rural Development home loans for the Chattanooga area, feel free to contact me via my website, www.RichardSmithHomeLoans.com, or call my cell phone, 423-280-0345.

The 2011 Tri State Home Show opens today. It is the 45th Home Show, and the exhibitors worked hard Thursday to finish, the last day for set up. Most of the larger exhibits were already completed by Thursday morning.

It is going to be a great show.

Come by this weekend and get some ideas for those home improvements that you want and have been waiting on.

The vendors have worked hard planning the displays. When you see all the exhibits you will be able to tell the effort put every one. These exhibits really show off the craftsmanship that we have in Chattanooga.

You can keep up with the Home Show and post comments on their Facebook page. Click on the picture to the right.

Below are some more images from the set up this week. Compare with my previous blog post.

Home Show times:

Friday 10am to 8pm
Saturday 10am to 5pm
Sunday 11am to 5pm

Location at the Trade and Convention Center.