Friday, February 27, 2009
Short Sales: A Buyer's Guide
As the Housing Bubble continues to let out air and drags down the Economy, many Sellers find that the value of their home has decreased BELOW the amount they owe to their lender (the BANK). I actually have a client that owes $420,000 on a home that is now worth $200,000! How can a Seller avoid foreclosure and limit the damage to their credit? The answer is Short Sale!
For a Buyer, this can present a terrific opportunity to purchase a home at an outstanding value, while still retaining the ability to perform inspections and get a home that has not been "trashed" by a angry homeowner. There are some considerations for Buyers and what follows is a list of things every Buyer of Short Sales should know.
1. Short Sales are not Short! The term Short Sale refers to a Seller "shorting" the amount owed to the Lender. It is not uncommon for a short sale to take as long as 6 months or more.
2. Buyers need to be pre-qualified or pre-approved by a lender and present a letter to the seller with the offer. This is a terrific idea with any sale ( I always do it) but the seller's agent has to put together a packet to send to the Lender, and part of this packet is proof that the buyer can perform.
3. Buyers need to find out who the seller's lender is. This can be helpful because a savvy buyer's agent can know approximately how long a transaction could take.
4. As crazy as this may sound: Each lender deals with Short Sales differently. Countrywide originated many of the loans in the last 3 years, so understandably, they get the most requests of short sales. As a result, they probably take the longest to approve.
5. Only 20% of short sales close. Why? Buyer's get cold feet or find something else, Lenders reject offers and in rare cases, Sellers get loan modifications.
6. The Lender is actually not the owner of the loan, they are a company that services the debt. What does this mean? They collect and distribute the money paid on the mortgage. Many times the loan is bundled with many other loans and sold to investors. Each investor has their own criteria as to what steps need to be taken.
7. Buyers should keep looking for a house, even if they have an offer accepted by a seller. Why? Because the offer could be rejected; the house could be foreclosed on; or they could miss out on another sale that isn't Contingent on Lender approval. A buyer doesn't have a fully executed contract until they have Lender approval.
8. NEVER release the Earnest Money deposit to an escrow company or a seller. You want full control over that money and you never know what will happen. This does not apply to traditional sales, probate sales or REO sales, just Short Sales.
9. Make clear in the offer or with the Listing Agent that ,if accepted, your offer should be the ONLY OFFER submitted to the lender. Any other offers should be put in a back up position. Every additional offer that gets presented to the lender will only SLOW DOWN THE PROCESS. This benefits no one, not the buyer and not the seller.
10. Be ready to accept the property AS-IS. The big question here is whether to perform inspections upon acceptance by the seller. I say yes, but there is an inherent risk: if the transaction falls apart, you lose out on the money spent on inspections. On the other hand if you wait until approval by the Lender, you may find an adverse condition that will affect the desirablity or the amount you want to pay. If you do choose to wait and you request the lender to make more concessions, you run the risk of extending the approval process (which could result in foreclosure) or being told by the lender, "NO".
11. Be prepared to have long periods of time without an answer or an update. Why? Because the agent commonly has no contact with the Lender's Negotiator. To be precise, they have a don't call us, we'll call you mentality. This does not mean that the listing agent shouldn't call after all the squeaky wheel gets the grease.
It's best for a buyer of a Short Sale to be flexible in the sale as to the close date and the process. Pick a reliable agent to help you through the process and have faith that the deal will close...eventually.
For more information about distressed sales, short sales or foreclosures call Andy @ 707-616-3456 or email me: andy@azalearealty.com
Opinions expressed on this blog are those of Andy Parker and not those of any other person or entity.
Friday, January 2, 2009
Humboldt County Real Estate - How long do I have before the bank forecloses?
Greetings and Happy New Year! It might not be such a Happy New Year for everyone though. In these uncertain economic times, a job loss or a death in one's immediate family can quickly change one's financial fortunes in a hurry. The following is a timeline that outlines the legal timeframes for foreclosure. If you are in foreclosure this the minimum amount of time before you lose your house. Actual times may vary because of large workloads placed on the foreclosure departments of lenders and loan servicers.
FORECLOSURE TIMELINE FOR OWNER-OCCUPIED REAL PROPERTY LOANS (made from 2003 to 2007)
The approximate minimum time frames for the non-judicial foreclosure of owner‑occupied real property loans made from 2003 to 2007 are as set forth below. In California, most lenders elect to foreclose non-judicially by conducting trustees' sales, not by judicial foreclosure.
Pre-Foreclosure Period
A lender may initiate the foreclosure process when a borrower defaults on a loan, such as by missing a mortgage payment. However, a slight delay may not justify acceleration and foreclosure by the lender. Hence, in practice, lenders generally wait a few months after a missed payment before starting the foreclosure process.
Day 1: Lender Contacts Borrower
For owner-occupied loans from 2003 to 2007, a lender initiating the foreclosure process must generally contact the borrower by phone or in person to assess the borrower’s financial situation and explore options for avoiding foreclosure. During the conversation, the lender must inform the borrower of the right to meet with the lender within 14 days. The lender must also give the borrower the toll-free number for finding a HUD-certified housing counseling agency.
Day 31: Filing of Notice of Default
For owner-occupied loans from 2003 to 2007, the lender may file a notice of default 30 days after contacting the borrower to explore options for avoiding foreclosure. The notice of default must be filed in the county where the property is located and a copy must be mailed within 10 business days after recordation to the borrower and all other persons who have requested such notice. The notice of default informs the borrower of the default. It must also include the lender's declaration that it has contacted the borrower to explore options for avoiding foreclosure, tried with due diligence to contact the borrower, or the borrower has surrendered the property.
Day 121: Filing of Notice of Trustee’s Sale
Three months after the filing of the notice of default, the lender may record a notice of trustee’s sale setting forth the date, time, and place of the upcoming trustee’s sale. Because of the gravity of a notice of trustee’s sale, it must be widely disseminated. The notice of trustee’s sale must be recorded, posted, mailed to the borrower and others, as well as published once a week for three consecutive weeks in a newspaper of general circulation.
Day 145: Deadline to Cure Default
Up to five business days before the trustee’s sale, the borrower may reinstate the loan by curing the default or paying the missed payments plus allowable costs. After the reinstatement period expires, the borrower still has the right to redeem the property by paying the entire debt, plus interest and costs (not just the arrearage), before the bidding begins at the trustee’s sale.
Day 152: Trustee’s Sale
Although California law allows a trustee’s sale to take place 20 days after the posting of the notice of trustee’s sale, lenders customarily wait at least 31 days instead to help protect against federal tax liens. At the trustee’s sale, the property is sold through a public auction to the highest bidder. Title is transferred to the successful bidder by trustee’s deed.
USING THIS FORECLOSURE TIMELINE
A foreclosure timeline helps you as a listing agent ascertain whether you have enough time to market and sell the property as a short sale. Depending on the stage of foreclosure the homeowner is in (“Foreclosure Stage”), the chart below gives you the total time frame you have, at a minimum, to sell a property as a short sale before the trustee’s sale occurs (“Minimum Time Left to Sell”).
Foreclosure Stage
Minimum Time Left to Sell
Homeowner just missed making mortgage payment for the first time.
About 6 to 8 months total
Homeowner has just been contacted by the lender to explore options for avoiding foreclosure.
About 5 months total
Notice of default has just been filed.
About 4 months total
Notice of trustee’s sale has just been filed.
Date of trustee’s sale is on notice of sale
As an example, if a notice of default has just been filed, you have a minimum of about four months to sell the property before the trustee’s sale may occur. That’s four months not only to find a buyer, but also to get the lender to approve the short sale and close escrow. The short sale lender may agree to postpone the trustee’s sale in some situations (such as when there’s an accepted offer), but be sure to get any agreement for a postponement in writing.
FORECLOSURE TIMELINE FOR OTHER TYPES OF LOANS For loans that are not secured by owner-occupied real property or not made from 2003 to 2007, lenders are not required to contact the borrowers to explore options for avoiding foreclosure. For these loans, the total minimum time for the foreclosure process is roughly only 122 days, not 152 days. If the lender is not required to contact the borrower, the foreclosure process takes a minimum of about 4 months from the filing of the notice of default to the day of the trustee’s sale.
FORECLOSURE TIMELINE FOR OWNER-OCCUPIED REAL PROPERTY LOANS (made from 2003 to 2007)
The approximate minimum time frames for the non-judicial foreclosure of owner‑occupied real property loans made from 2003 to 2007 are as set forth below. In California, most lenders elect to foreclose non-judicially by conducting trustees' sales, not by judicial foreclosure.
Pre-Foreclosure Period
A lender may initiate the foreclosure process when a borrower defaults on a loan, such as by missing a mortgage payment. However, a slight delay may not justify acceleration and foreclosure by the lender. Hence, in practice, lenders generally wait a few months after a missed payment before starting the foreclosure process.
Day 1: Lender Contacts Borrower
For owner-occupied loans from 2003 to 2007, a lender initiating the foreclosure process must generally contact the borrower by phone or in person to assess the borrower’s financial situation and explore options for avoiding foreclosure. During the conversation, the lender must inform the borrower of the right to meet with the lender within 14 days. The lender must also give the borrower the toll-free number for finding a HUD-certified housing counseling agency.
Day 31: Filing of Notice of Default
For owner-occupied loans from 2003 to 2007, the lender may file a notice of default 30 days after contacting the borrower to explore options for avoiding foreclosure. The notice of default must be filed in the county where the property is located and a copy must be mailed within 10 business days after recordation to the borrower and all other persons who have requested such notice. The notice of default informs the borrower of the default. It must also include the lender's declaration that it has contacted the borrower to explore options for avoiding foreclosure, tried with due diligence to contact the borrower, or the borrower has surrendered the property.
Day 121: Filing of Notice of Trustee’s Sale
Three months after the filing of the notice of default, the lender may record a notice of trustee’s sale setting forth the date, time, and place of the upcoming trustee’s sale. Because of the gravity of a notice of trustee’s sale, it must be widely disseminated. The notice of trustee’s sale must be recorded, posted, mailed to the borrower and others, as well as published once a week for three consecutive weeks in a newspaper of general circulation.
Day 145: Deadline to Cure Default
Up to five business days before the trustee’s sale, the borrower may reinstate the loan by curing the default or paying the missed payments plus allowable costs. After the reinstatement period expires, the borrower still has the right to redeem the property by paying the entire debt, plus interest and costs (not just the arrearage), before the bidding begins at the trustee’s sale.
Day 152: Trustee’s Sale
Although California law allows a trustee’s sale to take place 20 days after the posting of the notice of trustee’s sale, lenders customarily wait at least 31 days instead to help protect against federal tax liens. At the trustee’s sale, the property is sold through a public auction to the highest bidder. Title is transferred to the successful bidder by trustee’s deed.
USING THIS FORECLOSURE TIMELINE
A foreclosure timeline helps you as a listing agent ascertain whether you have enough time to market and sell the property as a short sale. Depending on the stage of foreclosure the homeowner is in (“Foreclosure Stage”), the chart below gives you the total time frame you have, at a minimum, to sell a property as a short sale before the trustee’s sale occurs (“Minimum Time Left to Sell”).
Foreclosure Stage
Minimum Time Left to Sell
Homeowner just missed making mortgage payment for the first time.
About 6 to 8 months total
Homeowner has just been contacted by the lender to explore options for avoiding foreclosure.
About 5 months total
Notice of default has just been filed.
About 4 months total
Notice of trustee’s sale has just been filed.
Date of trustee’s sale is on notice of sale
As an example, if a notice of default has just been filed, you have a minimum of about four months to sell the property before the trustee’s sale may occur. That’s four months not only to find a buyer, but also to get the lender to approve the short sale and close escrow. The short sale lender may agree to postpone the trustee’s sale in some situations (such as when there’s an accepted offer), but be sure to get any agreement for a postponement in writing.
FORECLOSURE TIMELINE FOR OTHER TYPES OF LOANS For loans that are not secured by owner-occupied real property or not made from 2003 to 2007, lenders are not required to contact the borrowers to explore options for avoiding foreclosure. For these loans, the total minimum time for the foreclosure process is roughly only 122 days, not 152 days. If the lender is not required to contact the borrower, the foreclosure process takes a minimum of about 4 months from the filing of the notice of default to the day of the trustee’s sale.
- The above timeline was reprinted with permission from the California Association of Realtors.
If you have questions about foreclosures or want to know if there is a way to prevent foreclosure from happening to you, please call me today! 707-616-3456 or email me: andy@azalearealty.com
Wednesday, October 1, 2008
Humboldt County Real Estate - The Bail Out!
With all that is going on with our Economy, I felt that it was time to weigh in on the situation. Of Course there are a whole gamut of reactions to it and I'd like to point out that all of my information is culled from NPR's Planet Money. I find that the blogs and podcasts are very informative and they take on listeners questions and explain the workings of Wall Street in a way that I can understand.
So the White House and Secretary Paulson came out a few weeks ago and said that our economy is on the precipace of certain doom. They presented Congress with a 3 page bill that gave Secretary Paulson unprecedented control over 700 Billion Dollars to stabilize the financial markets. This would be done by the USG buying the so called "Toxic Waste" that was sitting on Banks balance sheets. These were mortgage backed securities that had an unknown value.
Of course, Congress would have none of that. This made me happy. I viewed this as an attempt by the White House to grab more power than they have already. Congressional leaders worked with Fed Chairman Bernake and Sec. Paulson to craft a bill that would work in some safeguards and no just give a blank check to Sec. Paulson.
This was defeated in the House of Representatives on Monday Sept. 29th, 2008 and that defeat lead to an unprecedented 777 point drop on the stock market. Over a trillion dollars was lost!
Stockmarket aside, the main issue that I see is this CREDIT.
Credit runs the world and as credit tightens, the cost of credit moves upward. It cost more to borrow and credit is harder to come by. Business will freeze up. More and More People will not be able to buy Houses, cars, furniture, and other goods and services.
This situation is especially important to me and others like me who make their livelihoods in sales or people that want to buy a home or a car. If there are fewer buyers, there will be less money to be made in my field of choice, real estate. I'm sure that I can find a few people who would like to see a financial meltdown, but by and large, most people don't want to see the Economy go in the CRAPPER! So please contact your representative and let them know that you support the bill.
Friday, August 22, 2008
Short Sales - a Great deal or a huge waste of time?
I've had many people ask me about short sales. What are they and how do they work? Let me give you the who, what,why,where,and how of short sales, this might help to answer some of the questions.
Who? : Sellers who are upside down on their mortgage. Buyers looking for a great deal.
What? : A Sale of a house or property that is for less than the amount owed to the bank/lender.
Why? : A Seller might choose to try to sell their house in a short sale in an attempt to salvage their credit. Most homeowners in distress want to own a home again. Fannie Mae
and Freddie Mac will accept borrowers who have gone through a short sale 2 years after versus 5 years after a foreclosure.
A buyer might want to purchase a short sale because they will be afforded the same buyer's inspection rights as a standard sale while getting the same pricing as a foreclosure. Additionally, there is less of a chance that they will be "trashed out".
The drawback can be that it can take a LOOONG TIME! Short sale is definitely a misnomer.
Where? The offer after being accepted by the seller is then forward to the lender (along with piles of supporting documentation) for them to review. This is commonly called the loss mitigation department.
How? This is a complicated question. The how is what takes so long! A seller accepts an offer on their property and they present this offer to the lender. The lender determines what the property is worth and either, accepts, counters or denies the offer. They are likely doing this on behalf of the holder of a mortgage backed security (holder of the note). When the offer is accepted by the lender, the sale can close escrow and the loan comes up on the Seller's credit as satisfied. This is not as good as "paid in full" but better than a foreclosure. Previously, the lender would try to issue a 1099 to the seller for the short amount, but now this can be waived.
More Questions about short sales? Call me at 707-616-3456 or email at andy@azalearealty.com
or text me at:
Who? : Sellers who are upside down on their mortgage. Buyers looking for a great deal.
What? : A Sale of a house or property that is for less than the amount owed to the bank/lender.
Why? : A Seller might choose to try to sell their house in a short sale in an attempt to salvage their credit. Most homeowners in distress want to own a home again. Fannie Mae
and Freddie Mac will accept borrowers who have gone through a short sale 2 years after versus 5 years after a foreclosure.
A buyer might want to purchase a short sale because they will be afforded the same buyer's inspection rights as a standard sale while getting the same pricing as a foreclosure. Additionally, there is less of a chance that they will be "trashed out".
The drawback can be that it can take a LOOONG TIME! Short sale is definitely a misnomer.
Where? The offer after being accepted by the seller is then forward to the lender (along with piles of supporting documentation) for them to review. This is commonly called the loss mitigation department.
How? This is a complicated question. The how is what takes so long! A seller accepts an offer on their property and they present this offer to the lender. The lender determines what the property is worth and either, accepts, counters or denies the offer. They are likely doing this on behalf of the holder of a mortgage backed security (holder of the note). When the offer is accepted by the lender, the sale can close escrow and the loan comes up on the Seller's credit as satisfied. This is not as good as "paid in full" but better than a foreclosure. Previously, the lender would try to issue a 1099 to the seller for the short amount, but now this can be waived.
More Questions about short sales? Call me at 707-616-3456 or email at andy@azalearealty.com
or text me at:
Wednesday, June 18, 2008
Humboldt County Real Estate: Real Estate Etiquette
Etiquette in Real Estate is very important. If you have been using a particular Realtor to help you buy a home, there are a few things that should be considered:
1. Always call your Realtor first! If you see a home at an open house or in a advertisement, call your Realtor first. The Listing Agent may be able to tell you more about the home, but imagine if you had to call every listing agent for every home that interests you. That would take a lot of time, which is what your Realtor gets paid to do. Additionally, for a Listing Agent, it can be annoying to get a call from someone that wants you to show a home to them, only to find out a few minutes into a conversation that they are working with another agent. Commonly, when asked why they call the listing agent the reply is "Well, I didn't want to bother/waste the time of my agent." This is certainly not acceptable for anyone concerned. If your agent gives you the impression that they are too busy to work for you, then perhaps you should find another agent that will. Which brings me to two more points:
2. Always tell the Agent right away if you have decided to work with someone else or if there is a change in your circumstances. There are a host of reasons switch agents: the chemistry isn't right; your agent is too busy or something completely different. But always inform your agent of changes.
Perhaps there are extenuating circumstances such as family issues, but leaving the scorned agent twisting in the wind is NOT ACCEPTABLE. Many times, they have spent long hours looking for properties or showing them to you, time they could have spent on finding new clients or spending time with family and friends. Which brings me to my next point:
3. Realtors have lives too. Always remember this: no matter how committed a Realtor is to their profession, they have family and friends too. Sometimes personal events such as children's birthdays, weddings or even funerals take priority over getting you into a house, and this should in no way be construed as being unavailable or unwilling to work.
Also remember, don't expect your Realtor to answer a call late at night. They don't work 24-7 and you probably wouldn't want them to.
Additionally, Realtor's take vacations and this is a time for them to unwind and relax. Many Realtors have someone to take care of their files/clients while they are away. If this is the case direct all inquiries to that person. Hold the emails and the phone calls.
4. Start looking for a house after you've been Pre-Qualified. You can certainly talk to an agent and they might be able to send you some listings, but until you know for sure how much you can afford, you are doing yourself a disservice. Any agent should ask a prospective buyer this question right away. They will likely have a lender that they feel comfortable dealing with or that they have worked with before.
5. Be realistic about what can be done. You can certainly try to buy a home for 80% of the list price, but don't expect your Realtor to produce a miracle.
Thanks for reading and remember, if you have a question email me andy@azalearealty.com or send me a text message:
Get a FREE text message feature on your profile.
1. Always call your Realtor first! If you see a home at an open house or in a advertisement, call your Realtor first. The Listing Agent may be able to tell you more about the home, but imagine if you had to call every listing agent for every home that interests you. That would take a lot of time, which is what your Realtor gets paid to do. Additionally, for a Listing Agent, it can be annoying to get a call from someone that wants you to show a home to them, only to find out a few minutes into a conversation that they are working with another agent. Commonly, when asked why they call the listing agent the reply is "Well, I didn't want to bother/waste the time of my agent." This is certainly not acceptable for anyone concerned. If your agent gives you the impression that they are too busy to work for you, then perhaps you should find another agent that will. Which brings me to two more points:
2. Always tell the Agent right away if you have decided to work with someone else or if there is a change in your circumstances. There are a host of reasons switch agents: the chemistry isn't right; your agent is too busy or something completely different. But always inform your agent of changes.
Perhaps there are extenuating circumstances such as family issues, but leaving the scorned agent twisting in the wind is NOT ACCEPTABLE. Many times, they have spent long hours looking for properties or showing them to you, time they could have spent on finding new clients or spending time with family and friends. Which brings me to my next point:
3. Realtors have lives too. Always remember this: no matter how committed a Realtor is to their profession, they have family and friends too. Sometimes personal events such as children's birthdays, weddings or even funerals take priority over getting you into a house, and this should in no way be construed as being unavailable or unwilling to work.
Also remember, don't expect your Realtor to answer a call late at night. They don't work 24-7 and you probably wouldn't want them to.
Additionally, Realtor's take vacations and this is a time for them to unwind and relax. Many Realtors have someone to take care of their files/clients while they are away. If this is the case direct all inquiries to that person. Hold the emails and the phone calls.
4. Start looking for a house after you've been Pre-Qualified. You can certainly talk to an agent and they might be able to send you some listings, but until you know for sure how much you can afford, you are doing yourself a disservice. Any agent should ask a prospective buyer this question right away. They will likely have a lender that they feel comfortable dealing with or that they have worked with before.
5. Be realistic about what can be done. You can certainly try to buy a home for 80% of the list price, but don't expect your Realtor to produce a miracle.
Thanks for reading and remember, if you have a question email me andy@azalearealty.com or send me a text message:
Get a FREE text message feature on your profile.
Saturday, May 31, 2008
Buyer vs. Seller
Good day and thanks for visiting my blog! This week I've been working with a seller/buyer, a person listing their home and then buying a replacement home. This can be very tricky, but if planned properly can work out just fine. However it occured to me that they have 2 different mindsets. As a seller, this client wants the most for their property, but as a buyer they want to get the best deal on the replacement property. I just came across a terrific article that can summarize both sides of a transaction, and can be found '>here.
I actually wrote a letter similiar to this not long ago with an offer. The letter asked the seller to consider countering an offer I wrote on behalf of a client. The buyer (from out of the area) believed that they could offer $120,000 less than asking on a house that was priced at $420,000. Now, I'm all for a good deal, but I felt that this was a really bad offer. It would serve the purpose of insulting the seller and closing the door on all negotiations. In fact they wanted to offer less, but I convinced the buyer that they would never get a response. The seller was insulted, but they kindly gave us counter offer, that my clients did not respond to.The real problem here is that many buyers are looking for an unbelieveable deal, but rarely will you buy a house for 50% of list price, atleast not in the Humboldt County market. That may work in areas that are battling with unprecedented numbers of foreclosures, but Humboldt County has one of the lowest foreclosure rates in the state.
The NY Times article points out that more and more loans will be backed by freddie mac and fannie may, which buy mortgages from lenders and help make it possible for them to lend more money. So in effect, there may be more buyer in the near future. I won't be like the bad old days of lending to anyone with a pulse, but it may serve to get more buyers in the mix.
Of course I want to give my buyers the best chance of getting an offer accepted, and that means offering a reasonable price, but I also don't want them to "break the bank".
My concern, and the concern of many Real Estate professionals, is the perception that Sellers can sell their homes and Buyers aren't out there anyway, and that's just not true. People are always selling and buying homes and that's not about to change. The bottom line is trust your real estate professional to help guide you through the entire process.
As always feel free to email me with any comments about this blog andy@azalearealty.com
or if you want to take a look at our local market and what's out there feel free to use these links:
INCLUDES: MANUFACTURED, MULTI-FAMILY, SINGLE FAMILY AND LAND.
$150,001 - $250,000 *CLICK HERE*
$250,001 - $350,000 *CLICK HERE*
$350,001 - $500,000 *CLICK HERE*
Please note that the listings will take a moment to load up!
LINK to NY TIMES ARTICLE
http://www.nytimes.com/2008/05/31/business/yourmoney/31money.html?ex=1369972800&en=9957e7e6ef3371c4&ei=5124&partner=permalink&exprod=permalink
Wednesday, April 2, 2008
Humboldt County Real Estate - FHA Loans
New loan limits were released in March for FHA backed loans. Previously, Humboldt County's limit was $299,250, but now the limit has been raised to: $393,750. What does this mean for buyers? Now that the limits have been raised, FHA will now insure loans for a much higher amount than they would previously, making it easier for loan originators to sell them on the secondary market.
The hope is that this will shore up the credit crunch.
A buyer's biggest concern: Will I be able to make the payment? This was easier as lending restrictions loosened because Mortgage Insurance or PMI is only required on a loan that exceeds 80% of the Loan to Value or LTV. This PMI will ADD to your payment and thie amount could be a couple hundred dollars. With FHA, they will do a loan of up to 97% LTV, but you will have to pay the PMI, that previously was avoided by getting a first at 80% and a second at 20%. No loan would exceed 80% LTV, so therefore no mortgage insurance. With FHA, there is no way around it, so it will end up costing the buyer more per month.
The Value of FHA for the First Time Buyer: "Unlike conventional loans that adhere to strict underwriting guidelines, FHA-insured loans require very little cash investment to close a loan. There is more flexibility in calculating household income and payment ratios. The cost of the mortgage insurance is passed along to the homeowner and typically is included in the monthly payment. In most cases, the insurance cost to the homeowner will drop off after five years or when the remaining balance on the loan is 78 percent of the value of the property -whichever is longer." - Source HUD Website
For more information about FHA loans and who is qualified to do them in Humboldt County, call me and I will help you find a lender who does these loans.
Andy Parker
707-616-3456
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