FHA - ASSUMING LOAN OR GETTING A LOAN AFTER A FORECLOSURE OR SHORT SALE


At a listing appointment earlier this week, I toured a nice house that a young buyer, now getting married, had bought as a foreclosure in 2009.   We have bounced along the bottom of the real estate market, as to values for two to three years, and are now seeing appreciation.   In addition to having a great looking house for sale though, her FHA loan will most likely be an added asset in marketing the property for sale.  Many FHA loans not only have low rates to pass on to a new borrower, but also come with the old rules as to MIP (Mortgage Insurance Premium) that will allow the MIP portion of payment to come off the loan at some point in time (as home appreciates).

The FHA mortgage is assumable with no new appraisal required.   However, the buyer must still qualify as to income and be credit worthy.  FHA rules have changed substantially within the last year or so, dictating higher funding fees and stricter MIP rules.  The funding fee is a one-time fee that is normally added to loan amount and financed.  Changing MIP rules now dictate that the MIP portion of the payment is now a permanent part of the loan, for the life of the loan in most instances.

FHA lost billions of dollars during the housing crisis.  To ensure its solvency in the future, a new revenue stream was created by increasing funding fees and changing the MIP rules.

Borrowers who faced foreclosure and short sales will be able to buy a home after a three year period, according to FHA underwriting guidelines.  But it is not the date of the foreclosure that FHA uses to calculate the date.  It is the date the property then sold after it was foreclosed, which wil be the date the property sold after foreclosure (Date of Last Activity or Date Reported on the credit report).  The foreclosure wave that started in 2009 and 2010 puts those borrowers back in the market as buyers, starting about now, using FHA mortgages for financing. A good lender can help in determining exactly what that date is.

FHA Loan Limits dictate the maximum loan amount for a given county, based on a formula and floor.  Thanks to the Economic Stimulus Act of 2008, new floor limits of $271,050 were established (based on 65% of Fannie Mae/Freddie Mac loan limit of $417,000).  Elsewhere, the loan limits are the lesser of 125% of the area median price; or $729,750, which is 175% of 2008 Fannie Mae/Freddie Mac limits (which have remained at $417,000).  

For an idea as to how this applies to area counties, most area North Georgia counties have an FHA loan limit of $271,050 which is the FHA minimum floor (Hall County with median sales price of $138,000; Lumpkin County with median sales price of $121,000; White County with median sales price of $100,000; Towns County with median sales price of $146,000 and Habersham County with median sales price of $71,000).  The more affluent counties of Dawson, Forsyth and Gwinnett Counties, closer to metro Atlanta, have an FHA loan limit of $346,250 and a $260,000 median sales price.  These median sales prices take into account sales data through November 2012.

If you are considering buying or selling in any of these counties, please consider letting me help you.  My website is KimWaters.com

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