Conventional vs. FHA Loans

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Conventional FHA

No reserve requirementTwo months reserves

Minimum 10% down 3.5% Down Payment

Heavy restrictions on Gifts Gift funds allowed

No non-occupant Co-borrowers Non-occupant co-borrowers allowed (kiddie condo)

Tiered pricing based on FICO Pricing same regardless of FICO score

No Unpaid Collections allowed Up to $5k medical collections can be unpaid

ARMS with caps of 2%/6% ARMS with caps of 1%/5%

ARMS qualify at note rate ARMS qualify at initial rate if LTV is <95%

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Conventional vs. FHA LoansConventional FHA

Private MI required (over 80% LTV) Government insured

Must have DU/LP approval Loan can be manually approved

2 years after Chapter 74 years out of Chapter 7

2 yrs. after payoff on Chapter 13 1 yr. of on-time payments after Chapter 13

7 yrs. after Foreclosure 3 yrs. After Foreclosure

• Borrower must make a 3.5% cash investment*• Borrower’s documented liquid assets (IRA’s or 401K)• Gift from Relative• Gift from Charitable organization, union, public agency,

employer or public entity• Secured Loan

Down Payment Sources

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FHA Flexible Credit Guidelines

Minimum FICO score is 640*

Minimum time after a Chapter 7 Bankruptcy is 2 years (12 Mos minimum with extenuating circumstances-see below)

Minimum time period after a Chapter 13 bankruptcy is one year from creditor settlement date with proof of on time payments for that year

On Short Sale, it is possible to purchase a home one day after closing*

If little credit history is available, alternative credit can be used. Payments on items such a car insurance, Utility bills or Cell phones can be used

to create the credit required

Minimum time period after a foreclosure is 3 years, unless extenuating circumstances:

Death of wage earner

Serious Illness

Consumer Credit Counseling –must have paid payments on time for 12 mo.

*In some exceptional cases, a score lower than 640 may be acceptable

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Condominiums 234 (c)

Subdivision must be FHA approved

Spot approval no longer available

Do NOT trust MLS data-verify approval with Amerifirst LO

2 Years employment/self employmentMust be stableMust continue for at least 3 years (Alien Visa)Other verified income may be considered if more than 2 year history, if not, can be used as a comp factorCondominiums must be FHA approvedFHA’s viewpoint on flipping

Qualifying Notes

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Appraisal Valuation Conditions

These Valuation Conditions and protocol help the appraiser evaluate the standards required by the General Acceptability Criteria. The criteria are described below. It is helpful & facilitates the process if the following items are addressed prior to the appraiser viewing the property.

Known as Rehabilitation/Renovation Mortgage. Less Common – Much more comprehensive

construction project

$5k minimum for repairs, but allows for all but one foot of the foundation

to be torn down.

Requires a consultant

Maximum mortgage is lesser of:

1.Maximum FHA limit, or;

2.As-Is Value plus cost of rehab, or:

3.110% of “after improved” appraised value

Most common

Intended to facilitate uncomplicated improvements

Allows up to $35,000 to be used after closing for repairs, which can be part of

the improved value (no minimum threshold)

No General Contractor or drawings required

Does not allow for structural improvements and must use licensed and bonded

Sub-contractors*

Streamlined

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2 Types of 203(k) Loans

Standard

Controlling the elements of the 203(k) process leads to a successful closing.

1. Roofs, gutters, downspouts2. Heating, ventilation3. Plumbing, electrical systems4. Flooring5. Minor non-structural remodel6. Painting7. Appliances8. Windows, doors, existing siding9. Well, septic systems

203(k) Streamline

Examples of eligible work under 203(k)

streamline:

Repair/Replace:

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203(k) Streamline

Examples of ineligible work under 203(k) streamline:

For more information on the 203(k) program visit:http://www.hud.gov./offices/hsg/sfh/203k/203k--df.cfm

1. Pool & equipment2. Structural improvements requiring

drawings, a general contractor or layered work

3. Relocation of a load bearing wall4. New construction5. Room additions6. Repair of structural damage7. Work not deemed easily

completed in 6 months8. Additional living units (if allowed

by zoning)

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VA Loans

1. Lender's appraisals (reviews)2. Lender's inspections, except in construction loan

cases 3. Loan closing or settlement fees 4. Document preparation fees 5. Preparing loan papers or conveyance fees 6. Attorney's services other than for title work 7. Photographs 8. Interest rate lock-in fees 9. Postage and other mailing charges, stationery,

telephone calls, and other overhead 10.Amortization schedules, pass books, and

membership or entrance fees11.Escrow fees or charges a.k.a. Loan closing or

settlement fees

12. Notary fees 13. Commitment fees or marketing fees of any

secondary purchaser of the mortgage and preparation and recording of assignment of mortgage to such purchaser

14. Trustee's fees or charges 15. Loan application or processing fees 16. Fees for preparation of truth in lending disclosure

statement 17. Fees charged by loan brokers, finders or other

third parties whether affiliated with the lender or not

18. Tax service fees 19. The veteran cannot pay for appraisals requested

by parties other than the veteran or lender.

What Fees can the Veteran NOT pay? The following list provides examples of items that cannot be charged to the veteran as "itemized fees and charges."

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