Property Flips - A flip is defined as any property purchased and then sold within a 6 month time frame.  Many investors are taking advantage of the depressed real estate prices and are purchasing property, rehabbing, and then selling the property later at a profit.  Seems like a perfectly good business idea however this practice makes lenders nervous as it may be artificially pushing up property values.  I have had a couple of these in the last week and this scenario presents problems.  A lot of times, as a buyer, if you haven't asked for it, you may not have access to this info until you receive a prelim or an appraisal, and it may kill the deal after you have gone to a lot of effort and expense.  So, ask upfront for this info so you know going into the deal what the facts are.  Here are the practical implications of getting financing with a property flip:

This rule applies to private parties.  Properties that are taken back by the lender through foreclosure or Deed in Lieu and are currently in an REO status with a lender as the seller is the one exception to this rule.

More Island Prime - The investor purchasing Island Prime also will consider unpermited room additions.  Also, an important point here under the new more restrictive DTI limits, when qualifying using a HELOC you can use the payment indicated on the credit report, not the 1% of the line amount as with our other investors.

New RESPA Guidelines - So far since January 1 only 1 out of 5 GFE's are correct.  When you submit your loan our staff will take a look at your GFE and let you know what's wrong.  Let me know if you have any questions.  We do not require the new GFEs to be signed so if your GFE is incorrect we will allow to correct the form and re-disclose.

Speaking of Restrictive DTIs - After the last upgrade to DU, 8.0, the FNMA max DTI is 45% generally and 50% with compensating factors.  Freddie Mac apparently is not as restrictive as FNMA and we will allow up to a 60% DTI with LP approval.  So, if you have a loan with a DTI higher than 45% and are thinking conventional financing with a max of 80% LTV ( The MI DTI restrictions are tougher ) try LP.

And yes, Speaking of MI - It really is getting harder and harder to get MI to sign off on anything.  We use primarily MGIC and Radian.  MGIC wants to review every loan and is basically turning everything down.  We used to use Radian and Radian is traditionally more aggressive than the average MI company.  Radian seems to be accepting the bulk of our business.  Basically the guidelines are min 10% down, min 720 scores, max 41% DTI on just about everything.  Call me if you have any questions.

FHA Updates -

When there is a customer purchasing a home with a non-purchasing spouse we run the non purchasing spouse's credit and include their debts for qualifying.  In the past the non-purchasing spouse had to have a social security number in order to run the credit, if they did not we would decline the loan.  Now apparently we will accept credit based on a name, so, if you have a non-borrowing spouse with no social we can now do the loan.  I used to run into this allot in the south county area.

VA -

Self Employed Borrowers - Yes we are getting into that time of the year when folks want to use their 2009 income for qualifying.  In order to use that 2009 income for qualifying the borrower needs to file their taxes and pay the tax they owe.  Advise them to walk the return down to the IRS office and get it stamped as received and pay their taxes owed and get a receipt.  If your customer shows a significant decline in income from 2007 to 2008 we may require the 2009 return to be filed.

Current Residence Retained - If your customer is moving out of their current primary residence and is turning it into a rental, and needs to use that rental income to qualify, the LTV on that property must be 70% or less if conventional, 75% if VA or FHA.  To confirm value we usually run an AVM and may require a full appraisal.  In addition we will require a copy of the lease and the deposit check.

Properties Recently Listed for Sale - If Rate & Term you must prove the property is off the market and provide a LOE.  If cash out you need 6 mos of seasoning and you are limited to 70% LTV.