Real Estate Information Archive


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FAQ – FHA Loans for Montgomery AL Real Estate

by The Hat Team

Thanks to increased loan amounts, declining market issues, and changing MI guidelines, FHA loans are becoming more popular in the Montgomery AL real estate market.  With this in mind, I have compiled some FHA FAQs to cover some of the questions we receive about FHA loans:

Is there a limit on the percentage of discount points that can be charged?

Per HUD requirements, discount points, origination fees, and other such fees cannot exceed two percent.  Keep in mind, only one percent in origination can be charged.  If the two percent limit is exceeded, the variation must be based upon actual fees or costs charged to the lender to make the loan. 

Is there a minimum Credit Score requirement for? 

FHA does not have a minimum credit score, however most lenders in the market today do.  For standard FHA loans, we currently only have one investor that will purchase loans with credit scores below 580 and those loans must receive an AUS approval.  We also have some options for borrowers with no credit scores at all utilizing Non-traditional Credit.  FHA Jumbo loans require a minimum credit score of 580. 

Does FHA allow Manually Underwritten loans? 

FHA allows the use of DU or LP and also allows loans to be manually underwritten if an AUS approval cannot be obtained.  Manually underwritten loans must be fully documented and must adhere to FHA guidelines such as ratios of 31/43, etc.  As stated in the previous question, our investors will not take a loan with less than a 580 score unless it is approved by DU/LP and we still have some investors that allow the use of Non-traditional Credit.  Loans utilizing Non-Traditional Credit or loans without an AUS approval using DPA's (Ameridream, Genesis, Nehemiah, etc.) with credit score less than 600 require a Credit Review from senior management.  

Does FHA allow Non-Occupant Co-borrowers in order to help for qualifying purposes? 

Yes, this is allowed as long as both the borrower and co-borrower are family members and they qualify with all combined debts.  The purpose of this provision is to enable a family member to have a joint interest in a property so as to enable another family member to attain homeownership. All borrowers regardless of occupancy status must sign all documents relating to the purchase of the property. This provision is not intended to circumvent FHA's ban on loans to private investors. Mortgages with non-occupying co-borrowers are limited to one-unit properties if the LTV will exceed 75%. If a parent is selling to a child, the parent cannot be the co-borrower with that child on the new mortgage unless the loan-to-value is 75% or less. 

Does FHA have Seasoning Requirements for Refinance transactions? 

No Cash Out Refinance: If the property was acquired less than one year before the loan application and is not already FHA-insured, the original sales price of the property must be considered in determining the maximum loan amount.  

Cash Out Refinance:  The subject property must have been owned by the borrower as his or her principal residence for at least 12 months preceding the date of the loan application.

Streamline Refinance (FHA to FHA Rate/Term Refi):  Except for loans that were assumed, there are no seasoning requirements for streamline refinances. 

Are previous late mortgage/housing payments allowed on FHA Streamline Refinances? 

No more than 1x30 day housing payment delinquency in the last 12 months is allowed on FHA Streamline refinances.  

Is there a maximum combined loan-to-value limit? 

It depends on the subordinate financing.  If there is a seasoned second lien (12 months or more), there is no CLTV limit provided the lien is subordinated to the FHA loan and it has been paid as agreed.  If the transaction is a purchase with a new second lien, the CLTV cannot exceed 100% of the acquisition costs (sales price plus allowable eligible borrower-paid closing costs, energy efficient improvement costs, discount points, and rehabilitation expenses). 

Can the FHA Monthly MI be cancelled when buying? 

Per FHA guidelines, monthly MI is charged on all loans regardless of the LTV and will be collected until the loan reaches 78% LTV from the original purchase price or for at least a minimum of 5 years. 

Do deferred debts need to be included in the overall debt ratio? 

If a debt payment, for example a student loan, is scheduled to begin within 12 months of the mortgage loan closing, the lender must include the anticipated monthly obligation in the qualifying ratio, unless the borrower provides written evidence that the debt will be deferred to a period outside this timeframe. Similarly, balloon notes that come due within one year of loan closing must be considered in the underwriting analysis. 

Do all liabilities need to be included in the debt-to-income calculation? 

It is the lender's responsibility to determine if the overall risk is acceptable based on the borrower's cash reserves after closing, debt-to-income ratio, and overall risk of the loan. The borrower's liabilities should include all installment loans, revolving charge accounts, real estate loans, alimony and child support payments, and all other continuing obligations. In calculating the debt-to-income ratio, the lender must include the monthly housing expense and all other recurring charges extending 10 months or more. Debts lasting less than 10 months must be counted if the amount of the debt affects the borrower's ability to make the mortgage payment during the months immediately after loan closing (this is the underwriter's discretion so if in doubt, ask the underwriter upfront).

If a revolving credit line has an outstanding balance but does not have a minimum monthly payment amount, the monthly payment must be calculated as the greater of five percent of the balance or $10.  Revolving debt cannot be paid down to qualify.

What income can be grossed up and when? 

If a particular source of regular income is not subject to federal taxes (for instance, certain types of disability and public assistance payments, military allowances, child support, etc.), the amount of continuing tax savings attributable to the non-taxable income source may be added to the borrower's gross income. The percentage of income that may be added may not exceed the appropriate tax rate for that income amount and no additional allowance for dependents is acceptable. 

The adjustments made (the amount the income is "grossed-up") for any non-taxable income source must be documented and supported.  Either the published IRS tax tables may be used for calculating the amount that may be grossed up, or the tax rate of 25%.  The lender is responsible for justifying the amount used and ensuring that the income is exempt from federal taxation. 

What is the maximum property seller contribution when buying a home? 

The property seller can contribute up to six percent of the purchase price toward closing costs, prepaids and discount points.  Money contributed by a non-profit organization for down payment assistance is not included in the six percent. 

Are escrow/impound accounts mandatory on FHA loans? 

Yes, an escrow/impound account for taxes and insurance is required. 

Can a down payment assistance program (DAP) such as Ameridream, Nehemiah, or Genesis be used? 

Yes; however, they are typically only allowed with FHA 203(b) loan programs (regular FHA Fixed Rate), other FHA programs such as FHA 203(k) using DAPs are not allowed.  Due to possible termination of approved status from the IRS for Non Profits, files must contain evidence from the IRS Website and the FHA list of approved Non Profits when DPA's are used for closing.  Here is the website to check the Non-Profits and the HUD guidelines:  

Are FHA loans on manufactured homes eligible for purchase? 

Yes, some investors allow manufactured homes.  

To learn more about investing in Montgomery AL real estate, or for a referral to a reputable local lender who can tell you more about FHA loans, please call me at 800-HAT-LADY or visit  You may also use my complimentary MLS search to begin searching Montgomery AL real estate!

PRICE REDUCED! Wetumpka AL Home For Sale - 504 Windsong Loop

by The Hat Team

This custom built home is open and has a great flow for easy living. The large formal dining room has volume ceiling and is open to the HUGE great room with corner fireplace. Off the LR is a great sunroom overlooking a screened porch. The split plan has two extra large bedrooms on one side and a spacious master bedroom, WIC and big bath on the other. Galley style kitchen has loads of cabinet space and is open to sunny breakfast room. Big two car garage and 5X13 workshop attached. The big back yard gently slopes and is like a nature preserve...with inground sprinkler system. PLUS, this neighborhood has a community swimming pool for your enjoyment without the hassle of maintaining one! Only minutes from Wetumpka and Montgomery. And will be zoned for the new Redland Elementary school opening 2009. This one is a keeper, so call for your private viewing today!

For more information on this home or other Montgomery real estate, visit our website, or give us a call for more personalized service, 800-428-5239.


Montgomery AL Real Estate Tip: Navigating Home Inspections

by The Hat Team

Home inspections are not just for new home buyers!  As we have discussed in previous posts, it is extremely important to have your Montgomery AL real estate inspected professionally on a regular basis – especially if you own one of Montgomery’s many historic properties– to ensure you keep up with any necessary maintenance or repairs.  Professional home inspectors examine existing homes using professional standards as a measure to accurately report their condition to parties involved in a real estate transaction, or to the existing owners looking to repair or renovate.

Home inspectors offer many types of inspections to suit Montgomery ALreal estate owners’ needs – some of these include:

*           - Pre-Listing Inspections

*           - Pre-Purchase Inspections

*           - New Construction Inspections

*           - HUD/FHA Inspections

*           - Multiunit Inspections

*           - Annual Maintenance Checkup

When purchasing a home, it is realistic that a buyer could save thousands of dollars by having a professional home inspection performed.  Moreover, in areas with extreme weather circumstances, inspectors can help locate potential problems or damage that may be hidden to the naked eye.

To learn more about Montgomery AL real estate or for a referral to an experienced home inspector, please call me at 800-HAT-LADY or visit  You may also begin searching for Montgomery AL real estate here!

Priced to sell. Check out this totally updated and renovation home in historic Cloverdale-Idlewild. Inside you will find the beautifully tiled kitchen with granite tile countertops, new appliances, and ample storage. There is a pass through from the kitchen to the huge den/family room. This room measures approx. 15X21. The hardwoods have all been refinished. This is a corner lot so the driveway enters from Edgemont and there is a 1-car carport. Hurry and get into this house before its too late.

For more information on this home or other Montgomery real estate, visit our website,
or give us a call for more personalized service, 800-428-5239.

Montgomery AL Home For Sale - 509 Saddlewood Lane

by The Hat Team

Great townhouse in a very convenient location. This property has new carpeting and flooring, fresh paint, countertops and bathroom sinks. Low maintenance vinyl siding along with a covered patio and new insulated windows. Stop paying rent and own your own home without all the yard work.

For more information on this home or other Montgomery real estate, visit our website, or give us a call for more personalized service, 800-428-5239.

Montgomery AL Home For Sale - 24 Felder Avenue

by The Hat Team

Never been on the market before...this 2 owner home has almost all the original features in immaculate condition! With a fireplace in most of the spacious rooms, hardwood floors, high ceilings, wonderful moldings and detail, and built-ins, you'll feel that you have stepped back in to a classic era of living. Wide central hallway is large enough for furniture and perfect for your art collection. The cheery sunroom off the master bedroom overlooks the deep private lot, and with some vision could be an awesome master bath transformation! Off the kitchen there is a den/study, bath, and big upstairs bedroom, perfect for private guest suite or teenage child. All this on a deep manicured lot in the fashionable historic Garden District.

For more information on this home or other Montgomery real estate, visit our website, or give us a call for more personalized service, 800-428-5239.

Montgomery AL Home For Sale - 2421 Noble Wood Court

by The Hat Team

A real Cream Puff. Just spruced up with fresh paint throughout, new carpet and restained cabinets. A great open floor plan with 11' ceilings in most of the house. A sun room has been added plus a covered patio. In the back yard is a beautiful rose garden that soon will need someone loving care. Let's not forget the sprinkler system to make the yard maintenance much less to maintain. This house is move in ready and has already been inspected so don't miss out before it's sold.

For more information on this home or other Montgomery real estate, visit our website, or give us a call for more personalized service, 800-428-5239.

Montgomery Homes For Sale: 7004 Eastern Shore Road

by The Hat Team

7004 Eastern Shore Road, Montgomery AL 36117
MLS# 254158



Bring your boxes and move right in this Montgomery home for sale in Eastern Oaks. Just refurbished with fresh paint and new carpet. Open floor plan with trey ceilings in the Great Room and Master Bedroom. Oversized laundry with a closet. Outside you will find a large covered patio and privacy fenced back yard.

For more information on 7004 Eastern Shore Road or other Montgomery homes for sale, visit our website, or give us a call for more personalized service, 800-428-5239.

Montgomery Homes For Sale: 866 Autumn Ridge Lane

by The Hat Team

866 Autumn Ridge Road, Montgomery AL 36117
MLS# 254178

866 autumn ridge

You'll fall in love with this gracious and well maintained Montgomery home for sale in Halcyon Summit. Conveniently located to shopping, dining, schools, doctors,and the Interstate. This gem has graceful arches, formal columns, volume and vaulted ceilings, and decorator colors. The cook's delight kitchen is sure to please, and the breakfast room is bathed in natural light. Spacious great room has fireplace and room for all your collectables. The oversized master bedroom has a walk-in closet and a wonderful bath with double vanity, garden tub, and separate shower. The other 2 bedrooms and baths are separated from the master for additional privacy via an arched hallway. Don't miss the extra large laundry and storage room. Out back there is a private back yard, patio, and large pine tree for afternoon shade.

For more information on 866 Autumn Ridge Road or other Montgomery homes for sale, visit our website, or give us a call for more personalized service, 800-428-5239.

Montgomery AL Real Estate Market Trends

by The Hat Team

Little change is expected in Montgomery AL real estate sales of existing homes over the next few months, before notably improving during the second half of the year, according to the latest forecast by the National Association of Realtors.


Lawrence Yun, NAR Chief Economist, said the market will come into clearer focus this summer.  “Existing home sales could start to show a sustained increase within a few months, unless there are some additional economic problems or excessive inflationary pressure,” he said.  “The wider access to affordable credit should increase sales activity notably this summer as pent-up demand begins to be met.”


Let’s take a look at the midtown Montgomery AL real estate market activity for this March to see how the spring is looking so far: 


The Midtown Montgomery real estate market continued to slow considerably in April 2008, when compared against April 2007.  Pending sales declined 43% while sold listings were down 37%.  Homes were on the market an average of 34 days longer than last year, and the average sales price decreased 30% to $111,999.




Market Times

Sales Price

April 2008





April 2007





Once again, it's important to realize that Midtown homes--unlike those in newer subdivisions--are pretty much one-of-a-kind. Therefore, the average sale price for any single period will reflect what age, size and renovation quality homes have sold during that short time. For a truer picture of what's going on with homes like yours, give us a call or send us an email.

This summer is the perfect time to invest in Montgomery AL real estate.  For more information, please call me at 800-HAT-LADY or visit

nformation is provided by the Montgomery Area Association of Realtors and is deemed accurate but not guaranteed. 

Displaying blog entries 1-10 of 16




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