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Archive for Friday, December 8, 2006

New FHA rules help home buyers

December 8, 2006

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Q: Several months ago, you wrote that the Federal Housing Administration was considering making some "borrower friendly" changes to its loan programs. Did the changes get approved?

A: Yes, the FHA recently instituted a number of changes to make its variety of low-down-payment loan programs available to many more Americans.

In one key change, the agency removed its restrictions on down payment gifts. Now a buyer's entire down payment can be a gift from a family member, a charity, an employer or even another government agency. The change should be particularly beneficial to first-time buyers, many of whom get down payment help from their parents or others.

Similarly, the FHA loosened its restrictions on the amount of cash that a seller can contribute to an FHA borrower's closing costs. Sellers can now provide an amount equal to as much as 6 percent of the home's sale price toward closing costs - another change that helps cash-strapped buyers.

The agency also said it would no longer automatically deny its mortgage insurance to borrowers who don't have a lengthy credit history. This will help younger buyers who are just starting their working careers, as well as immigrants who recently arrived in this country and are now beginning to form a U.S.-style credit profile.

You can get more information about the FHA's various loan programs by contacting the nearest office of the U.S. Department of Housing and Urban Development or by visiting its Internet site, www.hud.gov.

Q: I have never been involved in a lawsuit before, but now I would like to sue my contractor in small claims court because he totally messed up the remodeling of my kitchen. How do I go about filing a small claims case?

A: The first thing you need to do is determine whether the small claims court in your particular state will hear the type of case you want to file. Though most states allow lawsuits against contractors to be processed in the small claims system, some states have special guidelines for such suits, and a few allow only certain types of real-estate-related cases to be heard.

Next, you have to decide whether the amount of money you hope to get from the defendant falls within the court's pre-set limits. Most states limit small claims court to cases that involve $5,000 or less, but a few have even lower thresholds. If you're hoping to get more, small claims court isn't for you.

If you still want to proceed, the filing clerk at the local courthouse can probably provide you with the paperwork needed to get the case rolling and explain how the process works. You also can look up the state's rules and get additional information by visiting www.consumeraffairs.com on the Internet and clicking the "Small Claims Guide" link, or by visiting www.ncsconline.org and using the "Small Claims State Links."

Of course, there's no way to predict the eventual outcome of your case. The only guarantee there is when filing a small claims suit is that you'll probably spend dozens or perhaps even hundreds of hours preparing your case and arguing it before a judge or similar court official.

Before you file, also think about one more thing: Even if you win your case, will you be able to collect the money? If the defendant is broke or declares bankruptcy, prepare to spend several more months or even years trying to get paid.

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