What Buyers and Sellers need to know about FHA FINANCING

Over the next several weeks I’ll be doing a series of posts addressing what sellers need to know about both VA and FHA financing in order to make their homes more sell-able.

The first of this series will be FHA Financing which is a fairly popular loan in our area.

FHA financingAccording to the FHA Single Family Housing Policy Handbook, “HUD requires every property to be Safe, Sound, and Secure to be eligible for FHA Insurance.” There are MPR (Minimum Property Requirements) and MPS’s (Minimum Property Standards) that each property must contain in order to comply with HUD.  These basic requirements and standards are the basis for identifying the deficiencies of the property.  FHA appraisers are required to note these deficiencies within their appraisal form and must be addressed by the mortgagee prior to closing.

Examples of some property deficiencies and adverse conditions may include: Evidence of dampness, defective construction,  evidence of settlement, leakage, pests or wood destroying insects, decay/wood rot, peeling paint, environmental hazards, exposed or defective electrical wiring, double strapped water heaters, defective overhead garage door openers, carbon monoxide and smoke detectors or anything that affects the health & safety of the occupants, collateral or structural integrity of the dwelling.

In order to make the property comply with HUD’s MPR the appraiser must require repairs of all noted deficiencies, including an estimated Cost to Cure that has been properly developed and applied within said report.  Cost to Cure is based on the cost of local licensed contractors to complete repairs not the home owner’s cost of completing repairs themselves.

Many cosmetic repairs may be reported by the appraiser and considered when rating the overall condition and valuating the property. Minor or Cosmetic repairs may include minor plumbing leaks such as a dripping faucet as long as it doesn’t show damage, holes in window screens, cracked window glass,  missing handrails that don’t pose a threat to safety, or  defective interior paint surfaces in housing constructed after 1978.

As a guideline to assist my clients in expediting the appraisal process, I recommend the following repairs are completed prior to scheduling an FHA appraisal Inspection:

  • Repair (sand, scrape, fill, prime & paint) all defective paint surfaces
  • Repair all leaks (roof, foundation, HVAC system, & plumbing)
  • Repair all structural/foundation settlement
  • Repair all defective roofing
  • Repair/Secure/Install defective/missing handrails
  • Repair all defective/exposed electrical wiring
  • Install safety items such as Smoke & Carbon Monoxide detectors ,GFCI outlets, H20 safety straps & relief valves.
  • Repair/Replace broken or inoperable windows & doors as well as their locks
  • Repair/Replace inoperable overhead garage door openers (make sure the safety stop functions)
  • Repair/Replace broken stairs or uneven walkways, floors, or driveways.


Janet 
SimonsI am passionate about Real Estate and eager to answer all of your real estate questions! Text or Call me at 360-880-2356 or email me directly to ask about Buying, Selling or Investing in today's Real Estate Market - serving Lewis County & Thurston County, WA.

Janet Simons | Certified Residential Specialist | Real Estate Broker
Mountain Valley Real Estate


Special Report: Consumer Confidence in Real Estate According to the National Association of REALTORS

The REALTORS® Confidence Index (RCI) Report provides monthly information about real estate market conditions and expectations, buyer/seller traffic, price trends, buyer profiles, and issues affecting real estate based on data collected in a monthly survey of REALTORS®.

The September 2014 report is based on the responses of 4,067 REALTORS® about their transactions in September 2014.1

Responses were received from October 2-9, 2014. Questions about the characteristics of the buyer and the sale are based on the respondent’s last transaction for September which, on a combined basis, are viewed to be representative of the sales for the month. All real estate is local: conditions in specific markets may vary from the overall national trends presented in this report.
The Report also contains commentaries by the Research Department on recent economic data releases and policies affecting housing.
Lawrence Yun, Senior Vice President and Chief Economist
Jed Smith, Managing Director, Quantitative Research
Gay Cororaton, Research Economist
Meredith Dunn, Research Communications Manager

REALTORS®’ assessment of market conditions in September and their outlook for the next six months turned less sanguine in September compared to August.

Janet SimonsThe confidence indexes for current conditions and the six-month outlook and the buyer and seller traffic indexes declined in September compared to August and the same month last year. REALTORS® continued to report about the difficulty of qualifying for a loan under more stringent credit eligibility standards. Although mortgage rates continue to be the lowest in decades and homes are still more affordable today compared to the years prior to the Great Recession, REALTORS® reported that there are fewer “affordable” homes for sale for the first-time buyer. Adding an extra financial burden is the effective increase in insurance payments for FHA-insured loans.

Obtaining FHA financing for condominiums that are the entry points for home ownership has also remained a challenge. Also, there are now fewer distressed properties on the market.
Given all of these factors, first-time home buyers continued to account for less than a third of the market. With prices rising faster than rents, the share of sales for investment purposes continued to come below last year’s levels. With more inventory from new construction, listings of existing homes stayed longer on the market. REALTOR® respondents expected a modest price increase in the coming 12 months. The uncertainty about the flood insurance rate increase continued to hold down activity in coastal states.

Market Conditions

REALTORS® Confidence Dipped in September 2014
REALTORS® increasingly reported a weakening of current market conditions across all property types in September 2014 compared to August 2014 . Respondents noted that the market typically perks up in September after a seasonal slack in preparation for the school opening, but reports indicated a flatter rebound this year. In the single family market, the REALTORS®
Confidence Index – Current Conditions for single family homes dipped to 51 (60 in August). An index above 50 indicates that there are more respondents who viewed their markets as “strong” compared to those who view them as “weak.” 
Confidence about the outlook for the next six months also broadly weakened in September compared to August. The REALTORS® Confidence Index – Six-month Outlook Index for single family homes fell to 53 (61 in August). The indexes for townhouses and condominiums, which are at levels below 50, slid further down.

Download the Full Report Here >>

What Does All this Mean?

I’ve read this information cover to cover and what I’ve always taken away for any “National Report” is real estate is a local business so an overview like this can be…and should be…looked at more from a street level perspective and less from a 30,000 birds eye view! Certainly, we are all very interested in seeing the market maintain it’s steady climb and yet none of us want to go through what we went through starting in 2007-2008!

It’s been a while since we’ve seen a normal, steady market and with the extremes over the last 7 years still fresh in our minds, my suggestion is we all take a long look at what got us here, be mindful of what it will take to keep us here and most importantly…don’t let the greed and the irresponsibility of what happened before ever happen again!!! 

All information for this post was taken from the The REALTORS® Confidence Index (RCI) Report. I want to attribute the findings and all information exclusively to that report.

 


Janet 
SimonsI am passionate about Real Estate and eager to answer all of your real estate questions! Text or Call me at 360-880-2356 or email me directly to ask about Buying, Selling or Investing in today's Real Estate Market - serving Lewis County & Thurston County, WA.

Janet Simons | Certified Residential Specialist | Real Estate Broker
Mountain Valley Real Estate


What is Escrow?

Do you know what Escrow is? It might be helpful to know what goes on behind the scenes during your real estate transaction…

Most of have heard the term ‘Escrow’ and if you’ve recently purchased or sold a home, you may know a bit about it. But for many, when it comes time to negotiate your biggest financial investment, understanding the Escrow process can be a great relief during an otherwise stressful time!

What is Escrow?

Escrow opens when the buyer and seller sign a sales contract, or a purchase and sale agreement. Earnest money is also deposited in Escrow at this time. The contract, along with any additional instructions, serves as instructions for the escrow officer.

Escrow assures that the lender releases the home purchase funds at or about the same time that the deed is recorded to reflect new ownership. Escrow includes depositing, with a neutral third party, funds, documents and instructions necessary to complete the transfer.

Because the real estate transaction involves large sums of money and several documents, the Escrow process is not always a simple A-to-Z , step-by-step process. Very often, Escrow can become a confusing end game of details, last minute shuffles to get paperwork and other required documents in place before your transaction closes.

Who Takes Care of the Escrow?

Your escrow officer opens escrow by assigning your real estate transaction an account number and collects the contract and other instructions. The buyer’s deposit their Earnest Money and perhaps additional proceeds or documents related to the transaction. Deposits are either applied to the purchase price, or returned should the deal fall through.

What happens in Escrow Once my Deal Closes?

Once the loan is funded, contingencies are released and the title is cleared, only a few loose ends must be tied before close of escrow.

Remaining paperwork to sign a few days before close includes the buyer’s grant deed, any final escrow instructions such as how the proceeds are to be distributed to the seller and finally the settlement sheet of disbursements, title reports, the deed of trust lender forms, inspection reports, tax statements.

Now Escrow closes your deal and records a new deed in the buyer’s name. Lastly, the seller gets paid for the home, and all other monies are disbursed.

In some cases, money may be held in escrow after the close to pay taxes and even funds to pay contractors for any work orders that may have been negotiated during the transaction.


Janet 
SimonsI am passionate about Real Estate and eager to answer all of your real estate questions! Text or Call me at 360-880-2356 or email me directly to ask about Buying, Selling or Investing in today's Real Estate Market - serving Lewis County & Thurston County, WA.

Janet Simons | Certified Residential Specialist | Real Estate Broker
Mountain Valley Real Estate


FHA to Accept More Documents With Electronic Signatures

On January 30th, 2014, great news came from FHA regarding electronic signatures. Starting from the date of the mortgagee letter, FHA now allows an electronic signature on loan documentation.

FHA was one of the last to adopt an electronic signature capability, thus removing one last hurdle to a true electronic mortgage closing. Down below, I have posted the announcement:


computer_file_transfer_1600_clr-300x225This is from FHA: “FHA TO ACCEPT MORE DOCUMENTS WITH ELECTRONIC SIGNATURES
” Action continues broader effort to modernize FHA’s processes

WASHINGTON – The Federal Housing Administration (FHA) today announced that it is granting expanded authority to lenders to accept electronic signatures (e-Signatures) on documents associated with mortgage loans. The new policy allows e-Signatures on origination, ser

vicing, and loss mitigation documents, as well as FHA insurance claims,

REO sales contracts and related addenda. Current FHA policy allows for electronic signatures only on third party documents such as sales contracts and other documents not controlled by the lender.

“By extending our acceptance of electronic signatures on the majority of single family documents, we are bringing our requirements into alignment with common industry practices,” said FHA Commissioner Carol Galante. “This extension will not only make it easier for lenders to work with FHA, it also allows for greater efficiency in the home-buying and loss mitigation process”.

Lenders choosing to employ e-signatures may begin using this policy immediately for single family forward mortgages and FHA’s reverse mortgage products, Home Equity Conversion Mortgages (HECM). Lenders are required to adhere to theElectronic Signatures in Global and National Commerce Act (ESIGN), have specific technology and operational capabilities and controls, documented quality control processes, and the ability to adapt e-Signature to FHA’s existing record retention processes.

The e-Signatures policy announced today will help streamline the origination process and help reduce document submission timeframes for borrowers seeking options to avoid foreclosure. Initially, e-Signatures will not be accepted on the mortgage note itself. FHA plans to begin accepting e-Signatures on forward mortgage notes at the end of the year.”


Janet 
SimonsI am passionate about Real Estate and eager to answer all of your real estate questions! Text or Call me at 360-880-2356 or email me directly to ask about Buying, Selling or Investing in today's Real Estate Market - serving Lewis County & Thurston County, WA.

Janet Simons | Certified Residential Specialist | Real Estate Broker
Mountain Valley Real Estate