Changes to FHA Mortgages effective September 14, 2015

Loan Clip ArtThe FHA Mortgage program has some new and important changes that will certainly impact borrowers. Check out some of the major changes:

1. FHA will no longer allow student loans to be deferred. Lenders have to include a 2% payment in the debt-to-income calculation.

2. Only recorded land contracts can be done as a refinance – if they are not recorded, they must be done as a new purchase.

3. Water tests will be required if a house is on a private well.

4. Streamline refinances can ONLY be done without an appraisal.

5. New net tangible benefit for reduction in term.

6. Secured borrowed funds can only be secured by financial assets or other real estate owned – in other words, you can no longer take out a loan against a car, etc.

7. Sourcing donor’s ability to give gift funds is now an FHA requirement.

8. Only borrowers on the loan can be on the purchase contract and those will be the only parties allowed on title.  A non borrowing spouse may be added to title, but only at the title company’s discretion.

9. Appraisal updates to expired appraisals must be done before the appraisal actually expires to extend the expiration date of the appraisal.

10. Non occupant co-borrowers must be US citizens or have a principal residence in the US.

11. Business disclosure relationship statements must be submitted by Sellers, Realtors, Borrowers, Loan Officers, Processors, Underwriters, Appraisers.

12. Flood insurance must be the lesser of the appraiser’s replacement cost (less land value,) the loan amount, or the flood program’s maximum amount allowed.



Mattress Money

Mattress Money and other funds used to purchase a home

With vigilant focus on the source of funds for closing mortgage loans, its important to know what’s acceptable.  Here’s what you need to know and what you will need to provide:

Mattress Money

Or any “cash on hand” is not acceptable.   All funds must be “seasoned,” which means your money needs to be in an institutional bank account (bank, credit union, brokerage, etc.)  You will need to provide all pages of up to three months of bank statements for proof that these funds are yours.

Gift Funds

Are okay with a signed “gift letter” (a form your lender should provide) and evidence of the donor’s ability (a statement showing sufficient funds.)  Later, your lender will need copies of the check, deposit slip, and account statement to show the transfer into your account.

Assets Being Sold

Such as a car, boat, collectible, or anything of value you are selling, require proof of ownership (such as registration or title) and evidence of value (blue book value or appraisal.)   After the sale, provide copies of the receipt and the check and deposit slip showing the transfer of funds into your account.

Other Examples

Include loans from employers or against retirement savings, grants, inheritances, proceeds of sale from other property, loan paybacks and winnings.   Be prepared to show the source of funds, evidence of transfer into your account, and any supporting documentation of value, terms, service provided, etc.


If you have time and want to minimize paperwork, consolidate all funds into one account at least two or three months before you anticipate closing on your new house.  Save any and all evidence of the transfer and deposits, and keep activity to a minimum.


Top Ten Tips for 1031 Exchanges

The 1031 Exchange is slowly making its way into daily conversation by Realtors, title companies, and investors.  Please keep in mind that Section 1031 isn’t restricted to Real Estate but this is where most of the discussion takes place.

Although most sales are taxable as sales, if you use 1031, you’ll either have no tax or limited tax due at the time of the exchange.

In effect, you can change the form of your investment without cashing out or recognizing a capital gain.   There’s no limit on how many times or how frequently you can do a 1031 exchange.  Although you may have a profit on each swap, you can avoid tax until you actually sell for cash many years later.

In general, if you swap one building for another building, you can avoid depreciation recapture.  But if you exchange improved land with a building for unimproved land without a building, the depreciation you’ve previously claimed on the building will be recaptured as ordinary income.

Such complications are why you need professional help when you’re doing a 1031 exchange.  If you’re considering a 1031 exchange, or just curious, here are 10 things you should know.

1.  A 1031 isn’t for personal use.

The provision is only for investment and business property, so you can’t swap your primary residence for another home.   There are ways you can use a 1031 for swapping vacation homes.

2.   Some personal property qualifies.

Most 1031 exchanges are of real estate.  However some exchanges of personal property (say – a valuable painting) can qualify.

3.   “Like-kind” is broad.

Most exchanges must merely be of “like-kind.”  You can exchange an apartment building for raw land, or a ranch for a strip mall.  The rules are surprisingly liberal.  You can even exchange one business for another.

4.   You can do a “delayed” exchange.

An exchange involves a simple swap of one property for another between two people;e.  But the odds of finding someone with the exact property you want who wants the exact property you have are slim.  For that reason the vast majority of exchanges are delayed.  in a delayed exchange, you need a middleman who holds the cash after you “sell” your property and uses it to “buy” the replacement property for you.  That middleman is called the “intermediary.”

5.   You must designate replacement property.

Once the sale of property occurs, the intermediary will receive the cash.  You can’t receive the cash or it will spoil the 1031 treatment.  Also, within 45 days of the sale of your property you must designate the replacement property in writing to the intermediary, specifying the property you want to acquire.

 6.   You can designate multiple replacement properties.

The IRS says you can designate three properties as the designated replacement property so long as you eventually close on one of them.

7.   You must close within 6 months.

You must close on the property within 180 days of the sale of the old property.  YOu start counting when the sale of your property closes.   If you designate a replacement property 45 days later, you’ll have 135 days left to close on the replacement property.

8.   If you receive cash, it’s taxed.

You may have cash left over the intermediary acquires the replacement property.  If so, the intermediary will pay it to you at the end of hte 180 days.  That cash – known as “boot” – will be taxed as partial sales proceeds from the sale of your property, generally as capital gain.

9.   You must consider mortgages and other debt.

One of the main ways people get into trouble with these transactions is failing to consider loans.  Suppose you had a mortgage of $1-million on the old property, but your mortgage on the new property you receive in exchange is only $900,000.   You have $100,000 of gain that is also classified as “boot,” and it will be taxed.

10.   Using a 1031 for a vacation house requires caution.

You can sell your primary residence and, combined with your spouse, shield $500,000 in capital gain, so long as you’ve lived in your home for two years out of the past five.  But this break isn’t available for your second or vacation home.  Yes, taxpayers can still turn vacation homes into rental properties and do 1031 exchanges.  Example:  You stop using the beach house, rent it out for six months or a year and then exchange it for other real estate.  If you actually get a tenant you’ve probably converted the house investment property, which should make the 1031 exchange OK.

In 2008 the IRS set forth a safe harbor rule.

To meet safe harbor, in each of the two 12 month periods immediately after the exchange: (1) you must rent the dwelling unit to another person for a fair rental rate for 14 days or more; and (2) your own personal use of the dwelling unit cannot exceed the greater of 14 days or 10% of the number of days during the 12-month period.


Relinquished property:  The original property being sold by the taxpayer when making an exchange.

Replacement property:  The new property being acquired by the taxpayer when making an exchange.

Qualified intermediary:  Accommodator, facilitator, qualified escrow holder.  A third party that helps to facilitate the exchange.


4 Demands you need to make of your Real Estate Agent


Are you thinking of buying a home? Are you dreading having to walk through strangers’ houses? Are you concerned about getting the paperwork correct? Hiring a professional real estate agent can take away most of the challenges of buying. A great agent is always worth more than the commission they charge just like a great doctor or great accountant.

You want to deal with one of the best agents in your marketplace. To do this, you must be able to distinguish the average agent from the great one.

Here are the top 4 demands you need to make of your Real Estate Agent when buying a home:

1. Tell the truth about the price

Too many agents just take your offer at any price and then try to ‘work’ both the seller and you while negotiating later. Demand that the agent prove to you that they have a belief in the price you are offering. Make them show you their plan to get both the seller – and the bank – to accept that price. Every house in today’s market must be sold two times – first to you and then to your bank.

The second sale may be more difficult than the first. The residential appraisal process has gotten tougher. A recent survey showed that there was a challenge with the appraisal on 24% of all residential real estate transactions. It has become more difficult to get the banks to agree on the contract price. A red flag should be raised if your agent is not discussing this with you at the time of the original offer.

2. Understand the timetable with which your family is dealing

You will be moving your family into a new home. Whether the move revolves around the start of a new school year or the start of a new job, you will be trying to put the move to a plan.

This can be very emotionally draining. Demand from your agent an appreciation for the timetables you are setting. You agent cannot pick the exact date of your move, but they should exert any influence they can, to make it work.

3. Remove as many of the challenges as possible

It is imperative that your agent knows how to handle the challenges that will arise. An agent’s ability to negotiate is critical in this market.

Remember: If you have an agent who was weak negotiating with you on parts of the purchase offer, don’t expect them to turn into a super hero when they are negotiating with the seller for you and your family.

4. FIND the right house!

There is a reason you are putting yourself and your family through the process of moving.

You are moving on with your life in some way. The reason is important or you wouldn’t be dealing with the headaches and challenges that come along with purchasing. Do not allow your agent to forget these motivations. Constantly remind them that finding the right house is why you hired them. Make sure that they don’t worry about your feelings more than they worry about your family. If they discover something needs to be done to attain your goal (i.e. rethinking price), insist they have the courage to inform you.

Good agents know how to deliver good news. Great agents know how to deliver tough news. In today’s market, YOU NEED A GREAT AGENT!

Buyers should expect to come into the office before going out to look at homes

Your Guru works with a lot of buyers that come to me from online lead sources.    I do a really good job of promoting my Real Estate Business online and consumers find me through many different websites.    Some are my own, and some are the big national sites like,, and

A lot of these clients want me to show them a house that they’ve seen online, and I will offer to meet them in my office first.    Since I get some push-back on meeting in the office rather than just dashing out to show the house, I figured it was time to put out a post as to why.

Come Into The Office

I want to meet you.    In the office.

The first reason is a basic sense of security.   We’ve never met and I’d like you to make the effort to first show up where I work and make sure there’s nothing fishy going on.

But beyond that, the rest of the visit to my office is to save us both a ton of time!


I know that the chance of a buyer purchasing the home that they found online is right around 1%.    I would like to spend just a few minutes learning more about your wants and desires in a new home for yourself.    And I am certain that with this additional give-and-take that I can be far more effective in locating a perfect home for you.    Conversely, I also know that if all the consumer wishes to do is pick  out listings online and have me drive them to the property, then all I’ve become is “The Keeper Of The Keys,”  – or a taxi driver.

There are a LOT of listings in my market area.     I know that if it truly were as simple as picking out a 3-bedroom, two-bath, ranch with a pool, that the search would already be over.     Let me be clear – from a brief telephone conversation where you’ve told me that you’re looking for a certain number of bedrooms, a certain number of bathrooms, and a feature or two, that you would already be done.    I know that there’s a certain quality to a home that you’re seeking and it’s my job to find that ineffable quality that will truly make a house your new home.

Map Lots Listings


In my market, there are several thousand listings available.   There are about 900 single family homes on the market in Fort Lauderdale.     In the price range of $400,000 to $800,000 there are almost 200.

I would not be doing my job; never-mind that it would be a huge waste of time and resources; if all I did was drive you to all 200 homes and unlock the door for you.

My mission is to help you achieve your goals and exceed your expectations.   By doing this I also hope that you will see the value in my consultation, and that you would also be delighted enough to refer me to your friends, your family and your co-workers.

The Buying Process

My behind the scenes research ensures that I’m familiar with activity in the marketplace and new listings that become available that match YOUR desires for a new home.

The weed-out process ensures that the time that we spend together is spent productively looking at homes that are truly the kinds of homes you’re looking for – the best of the best.

My average buyer looks at 10 to 12 homes.     We can usually move through the search process in one long tour, plus a few follow up visits to either re-visit your favorites or to catch any properties we missed on the initial property tour.

I have information on new construction and developments in my marketplace as well as properties that are only offered For Sale By Owner.

Once we’ve identified a home that you wish to put an offer on, I will share my market experience with you so you know what the list price vs. sale price ratio’s are in the area and provide a detailed market analysis on the home we’ve found.

From Contract To Close

Perhaps one of the most important services I offer in helping facilitate the purchase of your home is assisting in holding the deal together once your property is under contract.  There is nothing more disappointing than a contract falling through due to some misunderstanding, missed deadline or forgotten detail.  And I keep you informed through out the entire process.    This includes monitoring inspections and repairs, surveys, overseeing your financing, reviewing your closing documents before closing and a whole host of other details that all need to be shepherded during the process.

I believe in 100% commitment to my clients and their commitment to me.   I will give you, as my buyer, 100% attention and loyalty throughout the buying process.    What I ask in return is you give me your loyalty and honesty in return.     Now that sounds fair, doesn’t it?



Top 4 Derogatory Credit Events and the waiting periods before you can buy a new home

Have you ever wondered how long you might have to wait after Bankruptcy, Foreclosure, or Short Sale before you can purchase your new home?

Check out the chart and see how long a lender will require you to wait before you can borrow again.

Link to the PDF here:

Interestingly, I recently had a client that was able to purchase a new home just two short years after his short sale.    A wonderful confluence of events allowed him to use his VA eligibility to purchase with nearly zero money down.

He was also able to begin the mortgage process several weeks BEFORE the two-year anniversary date of his short-sale closing, so that he was able to close in a matter of days after the anniversary date passed.

Derogatory Credit Chart

Floridians are paying the 9th highest closing costs in the nation

Closing Costs

Check out the interesting article at that describes how Floridians are paying the 9th highest closing costs in the nation.

Besides lender fees and title charges, don’t forget about your pre-paid taxes and your insurance premiums when you’re calculating how much to save for your down-payment.

Here in South Florida, your insurance premiums are going to be a LOT more than the standard 1% that your lender is going to estimate for insurance on your Good Faith Estimate. Single family homes that don’t have hurricane windows and other storm protection can have insurance premiums as high as $5,000 a year.

Cheaper to buy than rent in most metro markets

Even though asking home prices rose 7.0% in the last year, outpacing rent increases of 3.2%, the gap between buying and renting has narrowed only slightly. One year ago, buying was 46% cheaper than renting. Today’s it’s 44% cheaper to buy versus rent. In fact, homeownership is cheaper than renting in all of America’s 100 largest metros.


Check out the interactive map over at


cheaper to buy than rent