Kristeen Smith

I recently read a post about property flipping. The Realtor basically said it's not as easy is it seems to make money flipping homes. So true. But now, Banks and Mortgage Lenders have their own rules about it. Some comments touched on the new 90 flipping rule/policy that many Lenders have. I thought I should clarify, that there are some other parts to this new rule. FHA started it and most Lenders now have the same requirement.

There are two parts to this. I hope this helps you in determining your carrying costs while waiting to sell.

Re-sales up to 90 days from last date of sale:

The property is not eligible to be financed! Exceptions are:

• Relocation company resale
• Resale - employer to employee
• HUD or other Government owned property (IE: VA, RHS, GNMA) being resold
• Property was inherited

Re-sales Between 91 and 180 Days From Last Date of Sale:

• A second appraisal by another appraisal company is required if the resale price is more than double the price paid when the property was acquired by seller.
• The second appraisal may not be charged to the homebuyer.
• If there was significant rehabilitation of the property, these costs may be documented and the transaction may be considered as an exception.

Properties sold over 180 days up to 12 months of prior sale:

These sales should be carefully reviewed. The underwriter (and HUD) may request that the value be justified and may require additional documentation to support any increase in value.

Additional Note: Policy Sale by Owner of Record:

The seller must be the Owner of record. The property must be purchased from the Owner of Record and the transaction may not involve any sale or assignment of the sales contract, regardless of the length of time between re-sale.

Any questions, contact Kristeen at kristeen@firstportland.com or visit our webasite for other tips: www.firstportland.com

What is a USDA Home Loan or a Rural Development Home Loan?

USDA stands for United States Department of Agriculture. A USDA loan is an insured home mortgage loan at a low cost. A USDA mortgage loan is one of the few remaining loans that allows you to purchase a home with no down payment. You do NOT have to be a first time home-buyer to qualify. Apply now. First Portland Mortgage Corp prefers that you have credit scores of 660 or more, however we currently offer USDA loans with credit scores as low as 620. If you are not sure what your credit rating is, First Portland Mortgage can offer assistance in wading through the mortgage process. First Portland Mortgage Corp. offers high customer service and quick processing as well as LOW mortgage rates for Maine (and New Hampshire). Call us at 1-800-370-5222 ext. 24 or e-mail us now.

What Types of Loans does USDA offer in Maine?

There two kinds of USDA mortgage loans available in Maine. First Portland Mortgage Corp. can process and close a Guaranteed Rural Housing Loan for you. The loan allows for higher income limits up to 115% of median household income for your area and 100% financing is available. You can e-mail us at Kristeen@firstportland.com or visit our website to apply at any time at www.firstportland.com. The other is a Direct Rural Housing Loan. You must contact the USDA directly for this loan. The Direct Rural Housing Loan is only for those that have annual income under the LOW INCOME limits. Visit their website at www.rurdev.usda.gov/me. Both loan types are fixed rate loans.

Am I eligible for an USDA Loan in Maine?

YOU DO NOT HAVE TO BE A FIRST TIME HOME-BUYER! To be eligible for an USDA Rural Housing Loan in Maine, you must meet some the following criteria.

1. INCOME: Your annual household income can't exceed the limits for your area. Visit the USDA site for these limits. Even if only one working member of the household will be considered on the loan, all household income is considered in determining if your income is below the limit.
2. RATIOS: Your monthly housing payment and costs (principal and interest, real estate taxes, insurance and condo fees) must not exceed 29% of your gross monthly income. With good credit (over 680), our automated underwriting systems will often allow monthly housing payments up to 35% of your gross monthly income. Your housing costs plus all other debt (like student loans, auto loans, credit card payments) must not exceed 41% of your gross monthly income, although our automated underwriting systems will often allow up to 45% of your income for all the debts.
   
3. CREDIT: Your credit background is important. At least a 620 credit score is required to obtain an USDA mortgage approval through First Portland Mortgage Corp.
4. APPRAISAL: The home that you wish to purchase must be a single family home or a brand new manufactured home. First Portland Mortgage only offers mortgages on single family stick built homes and double wide manufactured homes. The home must meet HUD (FHA) guidelines although those guidelines have become less strict in the last several years. If repairs need to be made, they can be done before... or after closing, depending on what type of repair it might be.
5. DOWN PAYMENT: USDA Mortgage loans do not require a down payment.
6. OCCUPANCY: You must live in the home. You must not own another home at the time of closing.

Some towns are not eligible for USDA Rural Development Loans. Other loans are available in the following towns:

• Portland Maine Home Loans
• South Portland Maine Home Loans

Some towns are partially eligible for USDA Rural Development Loans.

• Biddeford Maine Home Loans
• Westbrook Maine Home Loans
• Bangor Maine Home Loans
• Lewiston Maine Home Loans
• Auburn Maine Home Loans.

How much can I borrow in Maine?

Unlike FHA loans, there is no maximum loan amount allowed for a USDA Rural Housing Loan. Your income, current debt and real estate taxes will determine your maximum loan amount. Income limits for your area can be found at below. You can borrow up to 104% of the lower of the price or value of the single family home. The extra 4% can be sued for closing costs or repairs to the home. You can also finance the USDA loan guarantee fee on top of that. Complete our on-line application today at http://www.firstportland.com/ to see if you qualify.

Rent your old home and Buy a New Home?

In the past, if you wanted to buy a new home, it was simple. You put your present home on the market and boom... it went under contract quickly, you sell it and buy your new home the same day. Things are much different today. Selling your home in this market is difficult if not impossible. Everyone is waiting to buy at the bottom and who knows if it's here or not.

So you decide to buy a new home and rent out your old home until values come back. Not so fast. See what Fannie Mae, Freddie Mac and HUD have to say about that.

FHA rule:

Lenders may not consider rental income on borrower's current residence to qualify unless:

• Relocation: If a homebuyer is being transferred by a current employer or relocating to be near a new employer, a fully executed lease and copy of security deposit check and/or first months rent payment will be acceptable.
• Sufficient equity in prior residence: If the current mortgage(s) owed total(s) less than 75% of the current value of the home being vacated, then rental income and copy of security deposit or first months rent will be accepted in qualifying. The current value is determined by an appraisal (6 months old or less) or by the original purchase price of the property.
• In both instances, the rental income used to qualify must be reduced by the appropriate vacancy factor (typically 25%).

Conventional Rule:

Lenders may use 75% of the gross rental income from property being vacated if all of the following are met:

• Sufficient equity: The total mortgage(s) owed on the property are less than 70% of the current value of the home being vacated as determined by a current appraisal on the property
• Copy of the fully executed lease (for at least one year).
• Copy of security deposit check and proof it cleared borrowers account.
• Six months PITI (principal, interest, taxes, insurance) reserves for each property required.
• The current residence can't have been listed in last 90 days.
• The current residence must have been owned for at least one year.

If there is evidence of a job transfer, the last two conditions don't have to be met.

Wondering why these new rules have been put in place?

Apparently, some homebuyers in these types of transactions have purchased their new homes and either provided false documents, such as leases that weren't real or stopped paying for the old home after they've bought their new one.

For more information, visit First Portland Mortgage on the web at www.firstportland.com.

I get the same call or e-mail every day from clients or their Real Estate Brokers. They've found a great priced property, but it is in need of some repairs and they believe there's no way to finance the property. There is a is a way.

First, FHA changed Appraisal guides on January 1, 2006. Basically, FHA no longer requires minor property deficiencies to be fixed or repaired prior to closing as long as they do not affect the safety of the homeowners. These items may be cosmetic, normal wear and tear or deferred maintenance. Here are a few examples of items no longer needing replacement or repair:

• Cracked sheetrock, Doors, window glass

• Soiled or worn carpets

• Trash or debris

• Minor Plumbing Leak, such as leaky faucet

Next, if repairs are needed, how do we deal with it? The Banks typically won't make repairs nor will they allow the Buyers to make needed repairs prior to closing, so here are two options.

1. Property needs minor repairs like fixing a whole in sheetrock, or put flooring down in a room. We can set up a Seller or Buyer Paid Escrow Holdback for these minor items. We will withhold 1.5 the estimate. Work should be complete within 30 days. This is acceptable for most FHA and Rural Development loans offered to borrowers with credit scores of 585 and above. Payments made upon completion of work.

2. Property needs many repairs and has missing appliances. An FHA 203k streamline program is offered for repairs/improvements costing $5,000 to $35,000. Up to two payments can be made to each contractor. They don't have to wait until completion to be paid. Here's what can be included:

1. repair or replace roof, plumbing, heating, and/or electrical systems
2. repair or replace flooring, appliances, windows and doors
3. finish, remodel or waterproof basement

If the Costs of Repair/remodel exceed $35,000 or takes more than 6 months to complete, then it would be considered major renovation. These would not qualify under the above programs. Lastly, additions and/or structural damage repair do not fit into these streamlined repair programs.

First Portland Mortgage Corp. offers mortgage financing in Maine and New Hampshire.