Lehigh Valley Real Estate Blog

Financing Your Lehigh Valley Home with an FHA Mortgage

 
I have touched on the topic of FHA mortgages in earlier posts but I felt the following information was critical when purchasing a Home.

The new FHA guidelines for 2009 require that a Lehigh Valley Home Buyer put at minimum 3.5% of their own money into the transaction. So, to purchase a $100,000 home, the buyer must use at least $3,500 of their own money. If they don't have it, they may receive a fully documented gift from a family member but there is no getting around the 3.5% minimum. The rest of the needed funds can be obtained using seller's assist.

When purchasing a home there are out-of-pocket expenses throughout the process. As long as these expenses are documented (with receipts) and paid by cash or check (not on a credit card) they can be counted towards the 3.5% minimum.

For instance, the following expenses typically occur during the home buying process:

Appraisal  ~$400.00
Home Inspection ~$350.00
Property or Hazard Insurance  ~$600.00

In the above example, these expenses add up to $1,350.00. As long as they were paid for by check or cash, this amount can be deducted from the $3,500 minimum required to purchase that $100,000 house. So, the home buyer would need to contribute $2,150.00 of their own money at the closing table. If they don't have it, chances are they will not be moving into the house.

Selling Your Lehigh Valley PA Home is like Selling a Diamond!

When you go to purchase a diamond two things typically come into play; the size and the quality.

Jeweler one is offering a 1/2 caret diamond for $1000.00. It is nice and big and sparkles.

Jeweler two also has a diamond for $1000.00. It is a 1/4 caret and also sparkles.

The first inclination would be to purchase the larger diamond for the same price. But, jeweler two pulls out his looking glass and starts pointing out the highlights of the interior of the diamond.  Wow, the smaller diamond is the one I should purchase.

So, how does this analogy translate to selling your Lehigh Valley home?

In this competitive market, there are many houses (or diamonds) for sale. The above example uses size versus quality but when selling a house there are many other factors that come into play.

• Square footage
• Lot Size
• Number of Bedrooms
• Upgrades
• Garage
• Central Air

....the list goes on.

It is critical to examine the competition. Out of all of the other houses for sale, where does your home rank? Is it at the top of the scale?

In this market, you don't want to be at the top of the scale. If you are, then your house is being compared to Every other available property. A better position is in the middle of the list.

Buyer's are taking time to really examine the homes for sale. A 2nd or 3rd showing is common. It is during these follow-up showings, that the "interior qualities" really get examined.

See how your house ranks by getting a Free Local Market Analysis of your House.

Beware of Mortgage Interest Rates!

If it sounds too good it may be. Lehigh Valley 30 year conventional interest rates are around the 5% mark with FHA mortgages being around 5.5%.

With rates going down it may be easy to believe that you qualify for a lower interest rate. Interest rates are based on credit scores and debt ratios. A generic question such as "What are the rates?" doesn't mean much unless a full credit report is ordered and your complete finances are looked at by a Lehigh Valley Mortgage Professional.

In addition to credit scores and debt ratios, there may be costs included to "Buy-Down" the rate. Typically, these are known as Origination Fees or Points.

Make sure to ask for a GFE (Good Faith Estimate) for full disclosure of all of the closing costs as well as a breakdown of your mortgage payment and tax and home owner insurance escrows.

Lehigh Valley Home Inspections when Buying or Selling a Home

A Lehigh Valley Home Sale can have 3 different inspections performed on it. Any or all of these inspections may require the seller to perform work or become a negotiable item throughout the home selling process.

The 3 possible Inspections are:

• CO (Certificate of Occupancy)
• 3rd Party Property Inspector
• Appraisel

A Certificate of Occupancy (CO) is an inspection done by the municipality that looks for safety items (handrails, GFI outlets, smoke detectors...etc). The Certificate of Occupancy is dependent on the municipality and some require this inspection and some don't. Although the PA Agreement of Sale makes the CO repair work a negotiable item, most buyers believe it is up to the seller to provide a "clean" CO.

Each municipality has different requirements so the home seller should check with their municipal inspections office to make sure they are in compliance. CO repairs MUST be done within a certain time frame (whether the seller or the buyer does the work).

The Agreement of Sale includes a section regarding inspections that will be done specifically by the home buyer. In this situation, the buyer hires a 3rd Party Inspection Company to inspect all or certain parts of the house (property, termite, radon, well, septic). Since these inspections are requested and paid for by the buyer, it is up to the buyer and the terms in the agreement of sale on how any problems are addressed with the home seller.

The third inspection is actually done by the appraiser. Depending on the buyer's financing (FHA, VA, Conventional), the appraiser may note items that need to be fixed before a mortgage can be obtained. Once the UnderWriter tags these items, they must be fixed before the mortgage company will give the buyer a mortgage. These inspections can stop a buyer from purchasing the property.

So, in summary the house may have all 3 or none of the inspections:

• CO - may or may not be required by the municipality
• 3rd Party - may or may not be required by the buyer (dependent on agreement of sale)
• Appraisal - dependent on the type of mortgage the buyer is getting

Visit www.lehighvalleyhomesonline.com for more information about Lehigh Valley Home Buying and Selling.

Lehigh Valley FHA 203k Renovation Home Mortgage and Financing

I believe one of the most mis-understood mortgages available to Lehigh Valley Home Buyers is the FHA 203k Renovation mortgage. When you hear the word renovation you think "lots of work". This isn't true.

FHA 203k Home Financing can be used for something as simple as replacing windows, updating a kitchen or bath or replacing carpets and painting.

Since it is an FHA program, the guidelines are enforced with respect to the fact that the property must be Owner Occupied. It can be used to purchase a 1-4 unit investment property but one of those units must be occupied by the buyer.

The FHA 203k Mortgage can be used to purchase:

• HUD Homes
• Foreclosure Properties
• Bank Owned/REO
• Any property needing work that the buyer wishes to include in the mortgage

In addition to cosmetic updating, an FHA 203k can include:

• HVAC
• Roofs
• Gutter
• Siding
• Windows
• Flooring
• Septic or Well
• Electrical
• Plumbing

Just about anything can be included that does not involve Structural Repairs.

An example:

A buyer makes an offer on a house that needs the kitchen updated. They agree to purchase the house for $90,000 but get a loan for $105,000 to include a kitchen update and some other work. The seller will get their $90,000 and as long as the home appraises (taking into account the updates) the buyer will have 6 months to get the kitched remodeled and perform the other updates (for $15,000).

Since it is an FHA loan, the buyer can still request up to 6% sellers assist to help with closing costs.

For more information visit Lehigh Valley Homes Online.

Lehigh Valley Investment & Foreclosure Properties

Find out all about Lehigh Valley Investment and Foreclosure Properties!

Information about Investment properties in the Allentown, Bethlehem, and Easton areas and the surrounding municipalities can be found on this new website including Foreclosures, HUD Homes, Sheriff Sales, Home Auctions, and Short Sales.

Visit www.LehighValleyInvestmentProperties.com