Archive for November, 2013


November 13, 2013 Leave a comment


FHA Loan After Bankruptcy or Foreclosure

The Federal Housing Authority has announced it is shortening the mandatory waiting periods for homeowners with a black mark [economic event] on their credit, such as a short sale, deed-in-lieu, foreclosure or even bankruptcy, to buy again through an FHA loan.

Instead of waiting the mandatory three years before qualifying for a new loan, buyers must prove, over the period of a year, that they are back on track financially.

The new deal is part of the FHA’s Back to Work – Extenuating Circumstances Program, which allows borrowers who lost their homes due to financial hardships to be eligible for an FHA mortgage much sooner than before.

The main ingredient in the program is that borrowers must that the prove they suffered from a loss of income of 20% or more, that lasted 6 months or more, directly causing the bankruptcy or foreclosure, or both!

Call Loan Officer Lonn Dugan at Midwest Mortgage To Find Out if This Applies to You!  419-764-9643

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Repair Escrows for VA Mortgage Loan, FHA Mortgage Loan

November 5, 2013 Leave a comment

roofpaintAppraiser Says


Repairs Needed?


Mortgage Appraisers for both VA Home Loan Mortgages and FHA Home Loan Mortgages will be sticklers on safety, habitability, and structural soundness.  In the past they worried about things like porch railings or uneven cement sidewalks that caused trip hazards.  These don’t get flagged much any more.

However, failing roofs or peeling paint are two of the most common issues flagged by appraisers in a VA Mortgage or FHA Mortgage Loan Appraisal.  We will deal with exposed electrical wires and foundation issues in a future post!

The roof issue is fairly self explanatory.

  • A bad roof can allow structural damage to the house.  Neither FHA nor VA wants the buyer or veteran to have to come up with the money for a new roof in the first two years after closing.  If the appraiser determines that the roof does not have two good years left, then it must be replaced before closing, weather permitting.

OK, so what’s he big deal about peeling paint?

  • Any peeling paint on a home built before 1978 is automatically assumed to represent a lead based paint hazard.  No health hazards are allowed in homes financed by VA loans or FHA loans.  So, if appraiser flags peeling paint, it must be repaired before closing – weather permitting.

If weather not permitting then repair escrows need to be established at closing, so funds are held until the new roof, or the scraping and painting can be verified in the spring.

Who pays?

  • Repair escrows can be funded by buyer or seller, but somebody has to contribute the money at closing.  Seller may be willing to contribute the money to fund repair escrows if appraisal comes in high enough to add the same amount to purchase price?

Who does the work?

  • The best policy is for buyer to get professional estimates to repair these things.  When weather permits, buyer can have work done professionally, or – if qualified – do it himself.

If work is done professionally:

  • The contractor may be willing to agree to wait for payment from repair escrows. If so, then once compliance inspection/appraisal is done, Raymond can submit contractor bills so that contractor is reimbursed.  If contractor wants payment from Raymond when job complete, then Raymond can pay out of pocket, submit paid receipts, then keep the reimbursement.

If buyer does the work:

  • Materials are paid out of pocket, then order compliance inspection, then submit materials receipts and keep the reimbursement.

Either way, after compliance inspection, any unused funds will be credited back to reduce the mortgage balance.

Copyright Lonn Dugan.  Click for more information about VA Mortgage Home Loans, FHA Mortgage Home Loans