Chico CA Real Estate News

Chico Financing

FHA Announces Changes to Lending Guidelines Effective July 14, 2008!!

by Ken Phillips

For the first time in history, FHA will begin using borrowers credit scores to determine risk based pricing and mortgage insurance premiums.


Up until now credit scores were not really a factor used in FHA risked based pricing.
With FHA relaxing some of their strict requirements recently it was easier to qualify buyers with credit scores low enough to prevent them from qualifying for “conventional” financing. As a matter of fact, with 100% financing a thing of the past basically, FHA financing has become very popular among lenders looking for high loan-to-value loans as FHA financing, which can cover up to 97.75% of the purchase price if a buyer is paying their own closing costs on a purchase, still carries low interest rates compared to high loan-to value conventional financing. FHA is a great loan for first time Chico home buyers with little money to put down and/or with low credit scores that prevent them from qualifying for a conventional loan. On July 14, 2008 FHA will begin implementing these changes and it will affect qualifying for many of borrowers.

Here’s a look at the ten major changes to the FHA guidelines:

1. Borrowers with either no score or at least a 500 score may get an LTV >90%.
2. Borrowers with a score less than 500 get a maximum LTV of 90%.
3. Borrowers without scores will require manual underwriting. What this means is no automated underwriting is available i.e. DU, LP, or DO and will require more time to give the realtors/agents a TRUE pre-approval letter.
4. Upfront Mortgage Insurance Premiums will range from 1.25% to 2.25%, depending on score. These upfront MI premiums will still be allowed to financed into the loan.
5. The Monthly Mortgage Insurance will range from .50% to .55% depending on the borrower’s credit score.
6. The premium is based on the borrower with the lowest score.
7. If one of the borrowers has no score, then the Non-Traditional credit grade is used. Non traditional credit is having trade or credit lines added to the borrowers credit report and obtaining a credit rating. These non-traditional trade/credit lines can be utility bills such as water, cable, electric, gas, phone, etc., cellular phone service, and rental history to name a few.
8. Credit rescoring is allowed to improve a borrower’s credit score. There are fees associated with credit rescoring and each bureau charges fees for each tradeline disputed.
9. All FHA Secure refinances >95% LTV with delinquencies have a 2.25% UFMIP and .55% MMI.
10. Along with purchases, these changes will apply to cash-out, rate & term, and non-delinquent FHA Secure refinances.

Feel free to call Ken 865-769-6420 if you have any questions regarding FHA financing or any of Countrywide’s many loan programs .

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First Time Home Buyer Disaster- Don’t Let This Happen to You!

Don’t mess with your credit or change employment until your Chico escrow closes!

While perusing a fellow blogger Janis Gagliardi’s recent post it occured to me that the message bears repeating for potential Chico CA buyers.

Here is the full story, courtesy of PortOrangeJuice.

I myself have had two different buyers in the past year or so that were stopped cold in their path to purchasing a new home. In a nutshell, the escrows had progressed to within a day or two before the closing. In both cases, the lenders re-checked the buyers credit and employment status just minutes prior to funding the loan.

1. The first couple had just charged new appliances to their credit card the day before. In doing so, they knocked their qualifying ratios out of whack just enough to destroy their loan package.

2. My second buyer either quit her job or was fired on Wednesday.When the lender checked with her employer on Monday, all bets were off! No job, no loan.

Apply Janis’ tips to ensure you close escrow on your Chico dream home!

DO NOT increase your credit card balances and or loan balances

  • DO NOT apply for additional or new credit, or put balances on a paid credit card
  • DO NOT ignore late payments and/or collection notices that during the course of your loan
  • DO NOT purchase anything that is “the same as cash” – it will show on your credit report as a debt
  • DO NOT buy furniture, cars, or appliances until after closing. What good is furniture if you don’t have a new home to put them in!
  • DO NOT lend money to family members, friends, etc. if you need it for closing.
  • DO NOT store your money at home. Place it in a bank account so that it can be documented as savings throughout the loan process.
  • DO NOT have overdrafts on your checking account.

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Looking to buy or sell Chico CA Real Estate? Need a Top Producing Chico CA Realtor? Call Sandi Bauman 530-864-5407 or email [email protected] Specializing in REO, residential, relocation, investment & ag property.

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What’s All This Talk About Short Sales on Chico Homes?

By guest author Mike Wiegert, Broker, Chico Homes

For Chico, CA homeowners that can’t afford to pay their mortgage, there is an alternative to bankruptcy or foreclosure proceedings – it is called the short sale.

The short sale really begins when you finally realize that your house just isn’t worth what it was just a few short years ago.

The next realization is that if you sell your house for what it’s really worth, you’re not going to actually get any proceeds back from the sale. That’s a big pill to swallow, but after you do, you might have the final realization that you’re really just starting from scratch like you did a few years ago. Back then, you’re credit was pretty good, you had your health, all your kids were fairly normal and you had a job. So rather than losing your home in foreclosure AND ending up with a terrible credit report, you think “I wish we could just be back to where we were back then.”

It’s at this point that a “short sale” might be the answer.

A short sale occurs when the net proceeds from the sale of a home are not enough to cover the sellers’ mortgage obligations and closing costs such as property taxes, transfer taxes and commission.

In other words, what a buyer might be willing to pay for your home isn’t going to cover what you owe on it and what it’s going to cost you to sell it. Unlike a foreclosure, a short sale can keep the homeowners credit intact. The first step is to do some research a find a Chico, CA Realtor that knows the Chico real estate market and has had experience and success in the short sale process. Your Realtor will need special skills and a persistent attitude in dealing and negotiating with your lender.

Banks are not in the business of owning and marketing homes and many would much rather discount the current amount of their loans than have to go through the process of marketing and holding a property in a slower market. This lender attitude will certainly grow as the number of foreclosures and repossessions increase. Conversely, the popularity of buying in the short sale market appears to be spreading rapidly.

Be advised, before you contract with any Realtor to market your home utilizing a short sale concept, you should consult a real estate attorney for the legal implications of the short sale and an accountant about the tax liabilities involved in the short sale.

You must understand everything upfront before the short sale process begins- look to your Chico CA Realtor for assistance.

1. You must prove to your lender that you are unable to afford to pay your mortgage.

If your lender is aware that you possess certain assets such as stocks or bonds, or you have a high paying job, your lender may require you to sign a note promising to repay at a future time any discount of what you owe that they make in the short sale. If you do not possess these types of assets or your job clearly indicates that you would not be able to repay such a debt, it is possible it may be forgiven.

2. Next the lender will appraise the current market value of your home.

The lender, with the help of your Chico, CA Realtor will calculate the amount of the outstanding debt and the customary costs of selling. If the proposed short sale will bring them more money than they would get during auction, the lender will mostly likely agree to it. End result, you didn’t pull the equity out of your home that you might have thought you had, but your credit is still intact, you’re out of a mortgage payment you can’t afford and the dream of once again owning a little corner of this world still burns brightly!

If you find yourself in a situation where your payments are are becoming too much to handle, please contact us at Chico Homes! We may be able to assist you in selling your home and avoiding a credit-destroying foreclosure.

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Looking to buy or sell Chico CA Real Estate? Need a Top Producing Chico CA Realtor? Call Sandi Bauman 530-864-5407 or email [email protected] Specializing in REO, residential, relocation, investment & ag property.

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Sandi Bauman (Chico Homes): Real Estate Agent in Chico, Butte County, California
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