When thinking about buying a home that is in need of a few repairs, there are a small handful of options available. The most popular ones include the Fannie Mae HomePath Renovation loan (for homes that are owned by Fannie Mae), the FHA203k Streamline loan and the FHA 203k loan.

Many times when thinking about the FHA 203k loan program I am asked “what is the difference between the FHA 203k Streamline and the FHA 203k program?” and although the answer can be somewhat complicated, there is one magic number that separates the two.

FHA 203k Streamline vs FHA 203k: The Magic Number

The magic number that separates the Arizona FHA 203k streamline program from the FHA 203k “regular” program is $35,000. $35,000 is the amount of money that you can set aside for repairs under the FHA 203k streamline program and anything over that will mean that you need to try to qualify for the FHA 203k regular program.

FHA 203k Streamline Common Repairs

Many lenders will only underwrite the FHA 203k streamline program and the FHA 203k streamline program has some distinct advantages when considering rehabilitation financing. Some of the most popular repairs under the FHA 203k streamline program include:

• Repair gutters and downspouts
• Repair/upgrade of existing HVAC systems
• Minor repairs of plumbing and electrical systems
• Minor repairs of existing flooring
• Minor remodeling that does not involve structural repairs
• Exterior and interior painting
• New appliances – which may include free-standing ranges, refrigerators, washers/dryers, dishwashers and microwaves but may not exceed $2,000
• Improvements for accessibility for people with disabilities

FHA 203k Streamline: Popular Reasons to Choose

There are several popular reasons to choose the FHA 203k Streamline over the FHA 203k loan, and here are just a few:

• There is no minimum threshold for amount of money for repairs (note: some lenders require a minimum, but not all)
• Maximum allowance of $35,000 includes a 10% contingency for cost over-runs
• General contractors / consultants are not required
• Lender is responsible for ensuring cost to repair is reasonable for the area
• Architectural exhibits are not required

More Information:

HUD 203k Streamline Mortgagee Letter

HUD 203k “Regular” Mortgagee Letter

For more information or to see if you qualify contact Justin McHood at 480.374.0303

Guest Column from Justin McHood.

Is that interest rate you just saw on that advertisement too good to be true?

Have you recently seen an advertisement recently that caught your eye by saying something like “4.5% INTEREST RATES AVAILABLE” only to find out when you call the number that there isn’t a 4.5% interest rate available?

It happens all the time.

And there are two possible reasons for this:

1. The 4.5% interest rate was never really available in the first place
2. The 4.5% interest rate was available – on the day that the advertisement was printed and mailed

Since I happen to be a mortgage guy myself, I will give whoever-printed-the-advertisement-that-you-saw-with-4.5%-on-it the benefit of the doubt… and here is a simple explanation of how this could happen.

The ad is sent to the outsourced mail center to be processed on Monday. The ad is then printed, stuffed and mailed on Tuesday. You may have actually received the mailer on Friday.

What happened to rates between Monday and Friday?

They went up of course.

Ok, not always — but quite often the rates that were available when the mailer was printed may not be available when you actually get the mailer and call in.

Never Expect Any Interest Rate You See To Match What You Actually Get

Now, I know this sounds crazy. And there are regulators who work very hard to make sure that mortgage companies adhere to strict guidelines for advertisements. But just to be safe – don’t expect to call any mortgage company and say something like “I saw that I could get a 4.5% interest rate today, where do I sign up?”

The first reason not to expect this to happen is because there are many different rates for many different programs – and the ad that caused you to call was just one program with one interest rate. But, and perhaps more importantly — the second reason not to expect this to happen is that by the time you have seen the ad and called, interest rates have probably changed.

Which means you should reasonably think one of two things about the person you speak with on the phone:

“He is trying the old bait-and-switch technique! Promise a low rate and then when they call, give them something else!”

or

“Geez, now that I have had Justin give me a logical answer as to why I can’t get the same rate I see on this advertisement and a place to check Arizona mortgage rates every day… It makes sense!”

And if you took the time to read all of this?

Thinking the latter will be a cinch.

Justin McHood is a nationally published mortgage expert who lives and works right here in Arizona. You will normally find him wearing a blue starched shirt (he says that it goes well with is orange hair) and you can learn more about him at ArizonaMortgageTeam.com

Prices of condos in downtown Phoenix and Tempe have come down over the last year, but the market was hurt even more when the FHA lending limits were reduced at the end of 2008.

FHA loan limits on a condo and single family home in Phoenix and Tempe were raised last March from $263,150 to $346,250. That increase from the Federal Government was only temporary though. Towards the end of 2008 the limits reverted back to their prior level of $263K in Maricopa County.

If you have done a search for a condo in downtown Phoenix or around Tempe Lake you know the $263K level is not going to land you to many of the available units. So if you were wanting to use a FHA loan to make your purchase you may have found yourself coming up short, unless you could put down a large down payment. Of course if you could afford that down payment, then you probably were not going for a FHA loan anyways.

During the last week we did receive better news though as the limits have been restored back to the $346,250 limit. So if you were looking for a condo a month ago in downtown Phoenix and Tempe and thought you could not get the unit you desired because of the FHA limits, you may now be in luck. Use our free home search any time or contact me for an automatic search.

Earlier today I discussed how your FICO score works. The one questions I did not answer was what is a FICO score that you need to get a mortgage when buying a house.

Justin McHood of the Arizona Mortgage Team added a comment that discussed just that issue. Here is his comments for everyone.

Many times people I speak with ask me “what is the minimum FICO score that I can have and still get approved for a loan? In today’s mortgage world, many investors are requiring a minimum FICO score of 580 for a FHA loan – so if there is currently a “magic minimum FICO score”.. think “580.”

Thanks Justin. Justin and his wife Tammy are currently on our blog roll which you can find on the right side of this page.

Chart from myfico.com

Your FICO score is based on 5 different categories:

Payment history is 35%
What they are looking for here is if you pay your bills on time. Also any past history of judgments, bankruptcy or collections will effect this number.

Amounts owed is 30%
What is your ratio of debt owned to debt available? The higher the percent of debt owed to debt available the lower your FICO score will be.

Length of credit history is 15%
How long has your account been active? If you have had an account for ten years that will help your score more than an account that has only been open one year. If you have many credit cards and are considering closing some, this is a factor to consider.

New credit is 10%
This includes the number of new accounts compared to accounts that have been opened for a longer time and also new credit inquiries.

Types of credit is 10%
What type of accounts do you have, credit cards, retail stores, mortgages, installment loans etc.

Remember when you hear those ads on the radio trying to sell you something, there is no magic pill or fairy dust to repair your credit. Paying your bills on time and not carrying to large of a balance is the best way to keep your score high. Those tactics will be the best ways to keep your credit score healthy and get the best finance rate you can when buying a home.

For more information take a look at myfico.com

If you are looking to buy a home in Maricopa County, and looking to take advantage of an FHA loan, now may be the best time to buy. The current limits for an FHA loan in Maricopa County are $346,250, but that will be changing after the first of the year. Come January 2009 the maximum limit of a FHA loan in Maricopa will be $271,050. So if you are looking to buy a home that is more than $271K and looking to use an FHA loan, now is the time to start looking.

We all saw the reaction of the American people when the $700 billion recovery plan came before Congress. And we saw the reaction of the markets when Congress listened to the public. More than a $1.3 trillion was lost in the stock market in one day.

So now what? There is an alternative plan I just saw on Fox Business put forth by anti-debt guru Dave Ramsey. Is it the answer? I don’t know, but after reading the one page summary it seems reasonable so I invite you to read it too. And remember, whatever you support make sure you contact your representative and let them know your opinion. It appears they actually are listening.

This plan would insure sub-prime mortgages with an FHA-style insurance. It would allow bad loans to be rewritten and would cancel the golden parachute payouts to the CEOs of these companies needing assistance. There is more which you can see here. This plan is estimated to cost the American public roughly $50 billion and not $700 billion.

Today more than ever you need to take a few minutes and get pre-approved for your loan. In today’s economy, where the lending has been cut back, it has become more important than ever to get pre-approved before you go searching for a home. But even when things turn around this fact doesn’t change, take the time to get pre-approved. Take a few minutes and contact a lender to find out for certain what size mortgage you can qualify for.

When the time comes to submit an offer, a pre-approved letter from the lender will make your offer taken more seriously by the selling agent and the home owner who is selling the home. There are many option you should explore including FHA, VA and conventional loans. If you are looking for a lender to help you make the process easier let me know and I can make some recommendations.

First step: Figure out how much you can spend. Every day we turn on the T.V. we hear about people losing their homes to foreclosure because they cannot afford the payments. The first and most important step in buying a home is to figure out how much you can afford to spend, then stick to it. So the question becomes how much can you afford? FHA guidelines say your total monthly mortgage payment should be less than 29 percent of your monthly income. The number arrived at after multiplying your total monthly income by 29 percent is referred to as principle, interest, property taxes, and insurance (PITI). The PITI amount is the highest amount that your monthly mortgage payments can be with an FHA loan. Also FHA takes into account your total debt such as car loans and credit card balances. That debt plus your monthly PITI amount cannot be more than 41 percent of your total monthly income. Click here for more FHA loan information.

While the FHA has their guidelines you may consider your own guidelines based on your comfort level. Some financial planners will recommend you only spend 25 percent of your monthly take home pay as a comfortable monthly loan amount. I recommend you talk to your financial planner of a mortgage broker for the plan that works best for you. One final piece of advice, make sure your real estate agent is working for you. If you tell your agent you can afford $1,300 a month payment, and they are showing you properties that would require you to pay $1,400 a month if your offer was accepted, you have the wrong agent. Your agent needs to be looking out for your best interest. That is their fiduciary responsibility. It’s only $25 a week more is not a good answer. That is what gets buyers in trouble.

When you decide how much you can spend contact me and I will help you find a home that fits your needs and wants.