Julie Messina's Q&A

With the exception of private money (hard money) financing, after any kind of default on a mortgage you can generally expect to wait four years for new conventional financing, or three years for a new FHA loan. Lenders have set the bar at 620 to obtain an automated underwriting (AUS) approval, and the trend is moving up (some lenders like Chase have set the bar at 660).  Monitor your credit scores and pay rent on time as your rental housing history will count when you apply for a mortgage down the road.  Fannie and Freddie (who are owned by our government) are requiring that lenders adhere to the AUS decsion if they want to close loans that can be sold (about 85% of all mortgages originated today are sold to these Agencies).  The AUS engine reflects current Agency credit policy in this market.  I think you would be setting yourself up for disapointment if you expected to get an Agency loan in under 3 or 4 years.You are not alone...Many good people have seen thier credit rating tank due to high leverage when the value of thier (RE) assets fell and we are still not out of the woods yet.  Hang in there.  Time cures everything.

The short answer to your question is YES.  Here are some reasons why:There are three ways to value a home:  replacement cost (cost to toally replace structure on the land)  income approach (if the property was used for cash flow purposes)  sales comparison (market value)In residential real estate lending, the market approach is the most relavant number, as the lender will want to know what they can re-sell the property for in the event of borrower default.  That number is a moving target subject to demand and supply, but the loan will be made on the number the appraiser uses at the time the appraisal report is done.  To determine market value, the sales approach requires the selection of at least three similar homes within the immediate 1 mile radius that have closed in the last 60 - 90 days. At the present time, forecosure sales make up most of the sales activity (pretty much everywhere in the country).  Appraisers are not allowed to "guestimate" what "normal" market conditons would bring for your property.  They must base value on current facts.  Lenders are additionally running an AVM (automated valuation model) on every appraisal to meet the transparency and securitization requirements of today's secondary market for mortgage backed securities.  Hopefully this AVM will support the original appraisal report.  When it does not we run into big problems as the AVM usually trumps the original report (if the AMV is lower).Hope that helps.  Colateral valuation is obviously not an exact science, but right now the lenders are making hard decisions; albiet conservative, for long term preservation of housing finance.

FHA requires three years afer a foreclosure, Fannie and Freddie require 4 years.  Both programs require re-established credit. It's not likely you will be able to qualify for an agency loan.  Private money is available with 50% down however.  Interest rates are higher than Agency, and the lenders are usually giving a two or three year note and expecting you will have an exit strategy to refinance out.

for some reason the sort feature just disappeared about a month ago.  I cut and paste the comparable sales to a spreadsheet and then sort by sale date.  The only ones that are relevant are sales in the last 90 days. .

You will need to prove that you can make the mortgage payment on the new house If you want an A-Paper loan with the best rates.  You may be abe to use passive income (retirement income, distributions from investments) if you have a history of recieving these and they are likely to continue. You did not say what income you are living on.Since you have at least a 25% equity position in the existing home (that you are converting to a rental), you will be able to use rental income to offset that mortgage payment. Most private money (hard money) programs require a 50% down payment, and they will want to verify your source of income to make sure you will not default on the loan.

I'm, not a big fan of jumping to another lender for price unless you are really being taken advantage of.  If you are financing a conforming 30yr fixed rate with 720 or better fico on a conventional or FHA loan, the interest of rate of 5.500% with 0.500 fee seems fair.    I don't know how much better the other offers are, but some of the quotes on Zillow are from lenders that sell to Provident and that investor is notoriously difficult to obtain an approval with as they cherry pick applicants and properties they will finance.  If this is a  refinance and if you are pulling cash out, or have a loan amount under $100,000 or FICO is under 720, there are pricing adjustments that may not be factored into the rate quotes you received on Zillow.  Pricing is a moving target and since rates are a little worse already this morning (compared to Friday), you may have to pay a little more.    If you do decide to lock with this lender ask about a floatdown to a lower rate if the market substantially improves before your closing docs.  Almost all lenders offer this these days.

Yes.  Anything that affects livability, marketability, and saftey will be notated by a (FHA) appraiser on the report, and will have to be remedied prior to closing.  You really want to buy a home that is move in ready anyway.  Unfortunately many of the REO properties have been vandalized or stripped by the previous homeowners and are missing appliances.  Lenders want to finance a home that is "move in ready" to set you up for the best possible experience as a homeowner, meaning you can live there as soon as it closes without sinking your own money into repairs or appliances.  Washer and dryer are not required, but they draw the line at a stove as you will want to be able to eat in your new home.  Some homebuyers using FHA financing on a purchase only have the program minimum required down payment of 3.5% (which can be gifted).  The FHA program does not have reserve requirements.  FHA was designed for a buyer to purchase modest housing that is move in ready. 

I always recomend a homebuyer education class for anyone who is new to homeownership.  These classes are often free of charge and administered by HUD approved counseling agencies.   These classes are available in every metro city.  Contact your city housing resource division to find on close to you.

If you do not have a lot of other debt and you are looking for a house in the 150k - 200k price range, your housing qualifying ratio should be about right.  There are a lot of factors that go into determining your qualifying ability in addition to credit.  Nothing you have said so far sounds difficult, and the type of loan you are looking for (FHA with a 3.5% down payment) would be available with a bank, mortgage banker, or broker. I would recomend looking for a mortgage banker with an onsite underwriting and closing department.  If there is something unique about your transaction or property, a mb may also have the ability to broker your loan to a local lender using niche programs you won't find at a bank.

You need to check with your local lenders to find a HUD approved non-profit housing agency that is willing to use their government sponsored funds to do this.  Mu understanding is that these are the only agencies that are allowed to do it, although most of them are not. In Phoenix, AZ for instance, I have not yet been able to find anyone that is dong these loans.The good news is that depending on your income and qualifying ratios you may qualify for down payment and cosing cost assistance on a FHA loan, then you can get your FTHB tax credit as well when you file your tax returns.