5/2/24 – FHA Departing Residence Rule

5/2/24 – FHA Departing Residence Rule

President | Loan Officer
Mike Meena
Published on May 2, 2024

5/2/24 – FHA Departing Residence Rule

A client who is in escrow on a property called me late yesterday. They were pre-approved by another lender. They are two weeks into escrow, and the listing agent is asking for the removal of all contingencies. The buyers were denied an FHA loan, and their agent sent them to me! I looked over their paperwork, and the only issue I see is that they need to have 25% equity in their departing residence to call it an investment property. 25% equity in the departing residence is an FHA requirement, and the loan officer did not know the guidelines. The buyer has a 644 credit score, so FHA sounds like an excellent way to go, but after further review, I noticed a few things that could make the file work as a conventional loan.

First of all, the buyer has a poor credit score, but decent credit, and their score is low due to having a lot of debts! They will sell their current house, but they were waiting to list the property until they closed on their purchase so they could rent the property and offset the mortgage payment. I explained that they could list their house, and we would not hit them with the payment if they sold, and the buyer had removed all contingencies before we closed the purchase.

They have 5% down plus closing costs in the bank, but they also have $38K in credit card debt. Paying off $16,000 in credit cards will move their middle credit score to 680, and paying off $24K will take them to over 720. The buyers owe $520K on a property worth $665K. So I made an exception, and I am lending them the $24K they need to get their credit scores over 720, and they will put 5% down on the house. Conventional loans do not have the 25% equity rule, and they will rent their home for a few months and then sell it later in the year. After talking with the listing agent, I found out that this was the first leg in a three-deal purchase, so they want me to close in 17 days, and we can do that, assuming we get the credit scores back quickly.

This is another case where a mini bridge loan will work for our buyers. By the time we close, the buyers will save the 1.75% ($14,350.00) Upfront Mortgage Insurance premium, their monthly PMI will be lower by about $230.00 per month, they can get rid of the PMI with their conventional loan when they have 25% equity, and the PMI on an FHA will be with them for the life of the loan.

I am available all weekend if you need anything. Let me know if you have any questions or if someone is interested in buying a property! My cell is 661-714-6258, and my office line is 661-260-2970 ext. 2222. My direct line is 661-291-2222. When you text, text (661-714-6258) or email me at Mike@AugustaFinancial.com.

But wait, there’s more!

Condo Change?  

I was told by a good source that Cornerstone at Copperhill has good insurance again!

I was told by the same source that Scenic Hills is working on their Insurance issues!

I am leaving them both on the list for now, but please give me any information you have on these or any others!

Condo / Townhome – issues we know of now. Properties can be financed with 10% down and are considered NON-WARRANTABLE:

  1. American Beauty Condos – The brown ones – Insurance – 50 Mil in coverage for 748 units is not nearly enough!
  2. American Beauty Gardens: 19% delinquency on special assessments due. 19% are 60 days or more late! We can do with 5% down, but others can’t!
  3. American Beauty Village West: Reserves
  4. Bouquet Canyon Village – Insurance – On Fannie’s list!
  5. Bridgewater, Emeryville - On Fannie’s list!
  6. Brookside Walk – Insurance –
  7. Cabrini Villas, Burbank - On Fannie’s list!
  8. Canyon Village – Reserves and 10% of the dues not going to reserves!
  9. Canyon Oaks – Insurance On Fannie’s list!
  10. Casa Marabella – 13951 Sherman Way, Van Nuys -On Fannie’s list!  
  11. Cornerstone – Insurance -On Fannie’s list!
  12. Creekside – ??? We don’t know
  13. Encino Oaks – 5460 White Oak Ave – On Fannie’s list!
  14. Liberty Canyon HOA – 27409 Country Glen Road, Agoura Hills, CA- On Fannie’s list!
  15. Madison at Towne Center  – Litigation – We can do with 5% down, but others can’t!
  16. Mariposa: Insurance On Fannie’s list!
  17. Penn Court HOA – 4201 Pennsylvania Ave La Crescenta On Fannie’s list!
  18. Princessa Estates – has $8200 in Reserves, and they are voting on an assessment in May!
  19. Rainbow Sierra Terrace – Underinsured and voting on Insurance in March!
  20. Scenic Hills – Insurance – On Fannie’s list!
  21. Shadow Ridge – Oak Park – Insurance -On Fannie’s list!
  22. Sherman Way Condos – 17900 Sherman Way Reseda – On Fannie’s list!
  23. Sierra Glen Condos – Insurance – On Fannie’s list!
  24. The District Community Association – 19533 Cardigan Dr, Northridge – On Fannie’s list!
  25. Treana – Stevenson Ranch:  On Fannie’s list!
  26. Valle Di Oro –  On Fannie’s list!
  27. Vista Del Canon – Insurance is too low, UGH!
  28. Walnut Gardens II – 7320 Lennox Ave Van Nuys CA – On Fannie’s list!
  29. Warner Center Condos – 5515 Canoga Ave, Woodland Hills, CA –  On Fannie’s list!
  30. West Creek Condos and Townhomes: Insurance On Fannie’s List!

Please let me know if you hear anything new on condos or townhouses.

Interest rates are better this week but still need to be where we want them. A few good days have brought us back to where we were on April 15. We have a long way to go to get back to where we were in March, but if we all stop spending, we may get there sooner!

  • 12-day escrows if your buyer is pre-approved - Conventional / FHA / Jumbo / Bridge
  • We do loans in all states, so call me with anything you need.  
  • Government Loans (FHA / VA/ USDA) are in the high 5’s and low 6’s
  • Conventional Loans up to $766,550.00 are in the high 6’s and low 7’s
  • High Balance Loans $766,550.01 – $ 1,149,825.00 are in 7’s
  • Jumbo loans above $1,149,625 are in 7’s
  • Bank statement loans - They are available with 10% down again! 7’s to 9’s depending on down and credit score.
  • Profit and Loss Statement loans- You don’t need bank statements, just a profit and loss statement!
  • No income qualifier – 40% down with reserves! In the 8’s!
  • 0 down loans are in the high 7’s – 660 credit score min right now, up to $793,000.00.
  • Private Money lenders - Hard Money Loans – 35% down!
  • No Ratio Loans 30% down
  • DSCR – Debt Service Coverage loans with as little as 15% down
  • Bridge Loans - typically 7.99% with limited fees – and they get you where you need to go!
  • 0 down California Dream for all Equity Share – Registration April 3 to April 29, 2024
  • 3/2/1 Buydowns 2/1 Buydowns and 1/0 Buydowns are available at great start rates!

Interest rates are subject to change without notice! The above are LA County Loan Limits.

I am still available all weekend if you need anything. Let me know if you have any questions or if someone is interested in buying a property! My cell is 661-714-6258, and my office line is 661-260-2970 ext. 2222. My direct line is 661-291-2222. When you text, text (661-714-6258) or email me at Mike@AugustaFinancial.com.

Have a great day and an even better tomorrow! Please call me when you have a client who needs to borrow!

President | Loan Officer
Mike Meena President | Loan Officer
Click to Call or Text:
(661) 714-6258

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