First-Time Homebuyers Can Save Big With New FHA Program

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hispanic couple outside home...
The HAWK is estimated to save buyers with an FHA-average $180,000 mortgage $9,800 over the life of a 30-year loan.
By Kirk Haverkamp

With their low down payments and credit requirements, FHA mortgages experienced a surge in popularity as other lending dried up in the wake of the housing market crash. More recently, however, they've lost some of that luster as a series of fee increases have made them a less attractive option than they were a few years ago.

Now, the FHA is trying to restore some of their appeal by giving borrowers an opportunity to scale back some of those fee increases through a pilot program called FHA HAWK. Standing for Homeowners Armed With Knowledge, it will enable first-time homebuyers who receive housing

First-time homebuyers who participate in housing counseling and education programs are 30 percent less likely to default or be delinquent on their loans than those who do not.

education and counseling to reduce the fees they pay for FHA mortgage insurance.

Here's how it works: First-time homebuyers who want to take advantage of the program sign up for and participate in a three-part education and counseling program from a HUD-approved nonprofit housing agency. In return, the upfront premium charged for FHA mortgage insurance will be reduced from 1.75 percent of the loan amount to 1.25 percent.

In addition, they'll also get a 0.10 percentage point reduction in their annual mortgage premium, which presently runs as high as 1.35 percent. If they keep up with their mortgage payments for 18 months, with no 90-day delinquencies, they'll receive a further 0.15 percentage point reduction starting in the 25th month of the loan.

The pilot program is scheduled to begin on Oct. 1, 2014 and last for four years. It's estimated to save buyers with an FHA-average $180,000 mortgage $325 a year, or $9,800 over the life of a 30-year loan.

Getting an Education on Your Mortgage: The FHA says it is undertaking the program to expand access to mortgage credit for underserved borrowers. According to its figures, first-time homebuyers who participate in housing counseling and education programs are 30 percent less likely to default or be delinquent on their loans than those who do not. The education and counseling elements will be provided in three parts. Prospective borrowers must undergo a minimum of six hours of pre-contract education and counseling that must be completed at least 10 days before a purchase agreement is signed. They must undergo another hour of counseling after the contract is signed but prior to closing the loan, and a final hour of post-purchase counseling within the first year of owning the home.

The education element of the program may be provided in a group or classroom session, through online instruction or other formats. Counseling will be tailored to borrowers' unique circumstances or financial challenges.

Depending on the agency providing the service, borrowers may have to pay for their education and counseling sessions. The National Association of Realtors estimates these could run as high as $300-$500 for the whole program, although these could be subsidized or reimbursed, according to the FHA. Actual fees will be set by the individual agencies providing education and counseling services, subject to FHA guidelines.

The program is being introduced in two phases. During the first phase, the program will be limited to select lenders and housing agencies who have been invited to participate. In the second, the program will be opened up to all FHA-approved lenders and HUD-approved housing agencies who wish to take part.

The lists of approved lenders and counselors chosen for Phase I of the program has not yet been released. Names and contact information for HUD-approved housing counselors who will be eligible for the program can be obtained on the HUD website.

For FHA-approved lenders in your area, visit the HUD Lender List page; most major banks and many local banks and mortgage brokers are FHA-approved.

In the lead-up to getting a mortgage, it's also important to know what condition your credit is in. Checking your credit reports at least several months in advance of looking for a home can give you time to correct any mistakes or address problems that could be hurting your credit. Checking your credit scores during this period can help you gauge your standing, and determine whether you'll be able to qualify for an FHA loan, or if you need to take some time to work on improving your credit. You can check your credit reports for free once a year through AnnualCreditReport.com, and you can use a service like Credit.com to monitor your credit scores every month for free.

Kirk Haverkamp is chief staff writer and editor for MortgageLoan.com. He covers the mortgage and personal finance industry from both a consumer and industry perspective, and provides guidance for consumers on how to approach the sometimes intimidating process of obtaining the right mortgage and personal finance products for their needs.

 

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‘Professional Tenants’ and How Not to Fall Victim to Them

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abandoned room in the factory.
ShutterstockThe Professional Tenant can leave the landlord with a worthless judgment for thousands in unpaid rent -- and a trashed apartment.
I am an attorney who has practiced in landlord tenant law for over 15 years in Massachusetts, one, if not the most, tenant-friendly states in the country. I've seen the good, bad and the ugly when it comes to tenant shenanigans. I've written all about it on my Massachusetts Real Estate Law Blog. Most tenants are problem-free, yet there is a certain type who make even an experienced landlord cringe with fear: The Professional Tenant.

Let me give you the profile of what I mean by a typical Professional Tenant. (This is a generalization based on my professional experience.)
  • They have history of litigation, evictions and/or delinquency with prior landlords.
  • They have a surprising (and dangerous) knowledge of local landlord-tenant law.
  • They often have a background in real estate, engineering, contracting or law.
  • They have marginal to poor credit, with a prior history of collections, judgments or bankruptcies.
  • They have gaps in rental history.
  • They have non-existent or incomplete prior landlord references.
Now the above may sound simply like a poor rental applicant, and maybe that's true. But the Professional Tenant will make a landlord's life miserable and cost them thousands in lost rent and legal fees. Here's what a Professional Tenant will do to a landlord.

The Professional Tenant's Scheme

Shortly after moving in, the Professional Tenant will start to complain about small issues with the rental property. Some will complain to the local board of health to have the landlord cited for

Professional rental screening techniques, experience and common sense instincts will help a landlord avoid a Professional Tenant.

code violations. Often the tenant has caused these very code violations -- bathroom mold is a common situation. (Most state Sanitary Codes can trip up even the most conscientious landlord.) Based on the code violations, the Professional Tenant will stop paying rent, claiming that they are "withholding rent" due to bad property conditions. Under Massachusetts law, for example, a tenant can legally withhold rent for even the most innocuous code violations and there is no rent escrow requirement. The Professional Tenant will also assert that the landlord violated the local last-month-rent and security-deposit law, and ask for their deposit back, trying to set up the landlord for a hefty legal claim. In Massachusetts, tenants can win triple damages for deposit law violations.

In the meantime, months may pass before the landlord will realize that they are being set up. The landlord will have repaired the minor code issues, only to have the tenant call the board of health again and again. The landlord is forced to start eviction proceedings, only to be met with a slew of counterclaims and defenses from the Professional Tenant. The Professional Tenant will then send the landlord a myriad of document requests and interrogatories which will often delay the eviction hearing. Months and thousands of dollars in attorneys' fees later, the landlord finally gets his day in court. And the Professional Tenant doesn't show up, leaving the landlord with a worthless judgment for thousands in unpaid rent -- and a trashed apartment.

How Can Landlords Avoid the Professional Tenant?

Professional rental screening techniques, experience and common sense instincts will help a landlord avoid a Professional Tenant. My advice to landlords is to make screening the most important thing you do as a landlord, and do the following:
  • Invest in good credit history checks.
  • Follow up with landlord references for all applicants. Call the past landlords and talk to them!
  • Check and verify employment information.
  • Check prior bankruptcies and court dockets.
  • Personally interview all tenants and size them up!
  • If someone seems fishy, they probably are. Trust your instincts!
Do you have your own story about dealing with a Professional Tenant? If you do, please share them in the comments!

 

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Charming $100,000 Homes for Sale Across the U.S.

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100k philadelphia home
ZillowThis Philadelphia home's stunning original details include a pillared entrance, hardwood floors and decorative windows.

By Sharona Ott

Purchasing a home can be a big financial step. Whether you are a first-time buyer departing from the rental market or an individual entering the investment market, finding an affordable home is of great importance. Considering that the median home value in the United States is up 6.5 percent from last year and currently sits at $174,800, finding a quality home under that price may seem like an unattainable feat. Fear not, prospective homebuyers! We've rounded up homes in well-known cities across the United States that cost approximately $100,000.

 

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