The Washington Post explains:

“The major force behind assumptions is the ability of buyers to get financing at an interest rate lower than that currently charged by lenders. If the home seller has a mortgage with a rate below the market rate, having the buyer assume the seller’s loan can be better for both. The buyer enjoys a lower rate and avoids the settlement costs on a new mortgage.”

FHA mortgages are just about the only type of home loans that are assumable these days. They also offer lower interest rates and more generous qualifying requirements than conventional loans.

See Also:

FHA Mortgage Guide

• Beginning in the spring, borrowers will be charged an upfront fee of 2.25 percent for mortgage insurance, instead of 1.75 percent.
• The FHA will ask Congress for permission to raise the about they charge annually for mortgage insurance.
• FHA mortgage applicants with credit scores below 580 will be required to make a down payment of at least 10% of the home’s purchase price. Previously, most borrowers were allowed to make down payments as low as 3.5%
• Sellers may only make closing cost “concessions” of 3% instead of 6%.

The new FHA regulations will make buying a home more difficult for some borrowers. But, they are still able to offer the most lenient terms available in the recession housing market.

photo credit: TheTruthAbout…

See Also:

FHA Basics

The requirements are quite narrow, as explained by the USDA:

“Applicants for direct loans from HCFP must have very low or low incomes.  Very low income is defined as below 50 percent of the area median income (AMI); low income is between 50 and 80 percent of AMI; moderate income is 80 to 100 percent of AMI…Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance, which are typically within 22 to 26 percent of an applicant’s income.  However, payment subsidy is available to applicants to enhance repayment ability.  Applicants must be unable to obtain credit elsewhere, yet have reasonable credit histories .”

If you’re one of the few that fits these unique requirements, check out the USDA website for more info on these government subsidized mortgages.

photo credit: Micheal  Peterson

See Also:

FHA Mortgage Guide

The Calgary Herald reports:

“All borrowers will have to demonstrate that they could make the payments on a five-year, fixed-rate mortgage — even if they end up choosing a mortgage such as a variable-rate mortgage, that would result in a smaller payment.

And anyone who wants a government-insured mortgage to buy a home in which they will not live will have to come up with a minimum down payment of 20 per cent, up from five per cent.”

Wow, those are some tough new rules! The American-based FHA is expected to tighten their mortgage requirements as well. If the changes are this stringent, you can bet that a lot more borrowers will be looking for creative financing solutions. photo credit: ★Debs★

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FHA Loans

My Bank Tracker explains:

“Because banks are now taking a more cautious position, peer-to-peer (P2P) lending networks have been making headway for both borrowers and lenders. For many prospective borrowers who cannot obtain a loan through traditional methods, P2P loans may be the next viable alternative to a bank.”

Currently, most peer-to-peer lending offers cannot cover an entire mortgage. However, many borrowers choose peer-to-peer lending in order to consolidate debt or make purchases for their business.

In some cases, home buyers are able to take out a peer-t0-peer mortgage from a family member or friend using private programs such as Virgin Money. Total costs including escrow and closing are about $3k.

See Also:

List of Peer-to-Peer Lenders

However, the FHA 203(k) has quite a bit of paperwork and many professionals believe that too many borrowers get fed up before the process is over.

Boston Real Estate Now puts it this way:

“FHA loans take even more time, the underwriting seems endless, and the paperwork could kill a forest. The consensus is this advice: if you are going to apply for a 203K loan, find a lender who does them on a regular basis. Like all FHA products, the process is different and it takes some experience to know where the traps are. If you barrel in without proper guidance, you will end up stuck for weeks, waiting for the next list of paperwork the underwriter asks for.”

As with all creative financing techniques, choosing someone who has experience in the area can save you a lot of time and trouble.

See Also:

FHA Mortgage Guide

FHA 203(b) Loans

Bloomberg reports:

“The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan increased 4.7 percent to 1,250.6 in the week ended April 3, a fifth straight gain, from 1.194.4 the prior week. The group’s refinancingpurchase measure jumped 11 percent. gauge rose 3.2 percent and its

The increases mean Federal Reserve efforts to lower mortgage rates and boost lending may succeed in preventing housing from slumping further.”

Unfortunately, more applications don’t always result in more mortgages. As we’ve seen during the past year, taking out a conventional loan can be very difficult in this market.

photo credit: TMAB2003

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Non-Conforming Bank Loans

Congressman Barney Frank is currently pushing legislation that would require banks to hold on to at least a portion of each mortgage they create, instead of selling the entire loan to investment groups.

A recent Reuters article reports:

“He said part of the reason the country finds itself in its current fiscal crisis is a shift from traditional bankers, who made loans but found themselves on the hook if the loans went bad, to complex financial deals that allowed mortgages to be combined and then sold — with little financial risk to those making the loans.

‘If only banks made mortgage loans, there would be no crisis,’ he said.”

As most borrowers know, the mortgage market is very tight right now. Although these laws may curtail another mortgage meltdown, they are likely to make it even more difficult to take out a loan in today’s market. Perhaps we’ll see yet another influx of borrowers seeking creative financing in the months to come.

photo credit: rjs1322

See Also:

FHA Mortgage Guide

But, it looks like the tide may be turning as a growing number of banks reintroduce jumbo mortgage  programs.

The Wall Street Journal reports:

“Lenders no longer have many institutional buyers for their jumbo loans, forcing them to keep the loans they write on their books. Banks held back when cash was tight. But banks have more money to lend these days, as consumers have taken money out of the stock market and put it into safer investments…

Plus, banks have gotten assistance from the federal government, and record-low conforming mortgage rates have inspired more people to refinance loans — giving banks some more liquidity, he says.”

This is good news for potential buyers, who may now take out a jumbo mortgage from a traditional lender instead of seeking out more costly creative financing strategies.

See Also:

Non-Conforming Bank Loans

The San Francisco Chronicle reports:

“CAR’s offer is essentially like insurance for people who get laid off. It applies to first-time home buyers who open escrow starting today and close before Dec. 31. They must use a California Realtor in the transaction, not be self-employed and be younger than 70. If qualifying people are downsized, they may receive up to $1,500 a month for up to six months to help make mortgage payments.”

It’s certainly an interesting idea. However, people who worry about job security may not want to commit to a mortgage right now – even with such an incentive.

Technically, this deal should work with seller financing purchases, assuming that a Realtor is involved.

photo credit: TheTruthAbout…

See Also:

Seller Financing Guide