The House Financial Services Committee has approved a bill that will enable the Federal Housing Administration to raise its monthly insurance premiums. The committee passed the bill after defeating proposed amendments by Rep. Scott Garrett, R-N.J., to raise the FHA downpayment requirement, prohibit financing of upfront premiums and limit the FHA guarantee to 95% of the loan amount. As of April 5, FHA increased its upfront premium to 2.25% of the loan amount to help shore-up the FHA insurance fund. However, in the long run, agency is proposing to raise its 55 basis point annual premium to .85% to .90% and lower the up-front premium to 1.0%.. Raising the annual premium would be "safer for homeowners and better for the health of the FHA fund," according to Housing and Urban Development secretary Shaun Donovan. In addition, the bill also strengthens FHA enforcement powers to hold lenders accountable for bad loans. "The bill provides that a lender's improper or imprudent activities at the regional level may now yield enforcement actions that restrict their nationwide activities," the HUD secretary said. Read More »
There is a tremendous amount of publicity going into the ideas of lower debt levels and accelerating mortgage payoffs—especially at a time when home values are no longer skyrocketing and many homeowners are either “upside-down” in their houses or at least are coming to the realization that they can no longer use their homes as piggy banks. While there is a tremendous amount of publicity, there is also tremendous confusion. Many have no idea why they work and how to compare one from another. Here are the financial concepts behind equity acceleration. • First, a large prepayment on a loan early in the term of the loan is worth many times money prepaid later on. For example, if you took $5,000 and prepaid your mortgage in the first month, this would be worth more than prepaying $100 per month for the next 60 months. The earlier you remove principal from a loan, the less time that principal is available to be charged compound interest. By using a HELOC as a secondary instrument, some equity acceleration programs can fuel early and large prepayments. • Second, putting your income in a checking account each month means you are obtaining little value or no value from that money. The bank that holds the checking account is using your money for free. By depositing that money in an open line of credit, it will pay down the balance on the line and be working for you. For example, if you borrow $5,000 on a HELOC in order to pay down your first mortgage as in the aforementioned paragraph, but you deposit a $5,000 pay check in the same account, your balance is now zero. Now, as you pay expenses during the month, the balance will then rise back to $5,000. But if you paid the expenses equally during the month, the average balance would be only $2,500 for the month. In other words, you borrowed $5,000 but only paid interest on half of that. If your home equity line was charging 8.0%, your effective interest rate would be 4.0% in this simplistic example. You will not find checking accounts giving you 4.0% in interest and even if you could—the money you “removed” from compounding on your first mortgage would add another benefit to using your money in this way. That benefit makes the worth of the money much more than 4.0%. • Third, your discretionary income can be put to work for you automatically. The average American has a few hundred dollars per month that they can spend the way they would like. That is why we call it discretionary. Usually, we would let it sit in our checking account until we spend it (98% of the time) or move it to savings (2% of the time). We would not use it to pay down our mortgage because we would not have use of the money. So it sits there and disappears. But if you were using your line of credit as a checking account, that money would further lower the balance on what you owe while it sits there. If it sits there long enough, you can transfer the money to pay off more of your first mortgage. If you need the money in the future, you can still borrow it from the “open” home equity line. In other words, we reversed tendencies. At the present time we use any excess money we have monthly to pay down our mortgage only as a last resort. With these programs, utilizing excess money to pay down our mortgage can become the first option. Changing tendencies or the paradigm is what this is all about. • Fourth, if the equity acceleration program has a live automated component, it can act like a GPS to direct your efforts. Imagine you leave your house on a long driving trip to a place you have never been before. There are lots of turns. You can run “Mapquest” or you can use a GPS. Which will get you there quicker? Well, if you use map-driven static directions, the first time you veer off course because of a poorly marked road, you can get lost. You need turn around and get back to where you veered of course. You may have to stop to read the map. If you have a “living, breathing” GPS—when you make a wrong turn, the system automatically adjusts to get you back on course. Imagine your quest to eliminate debt more quickly as a road trip. You will get off course many times over the years. Is the system automatically adjusting? Does the system tell you what the true cost of purchases are so that you can make good qualified decisions? Right now we spend, spend, spend without thinking. With help we can adjust our spending habits to strengthen the probability that we will reach our goals—and the speed with which we obtain those goals. You can even adjust how we use the bank’s money so that we hold onto our money as long as possible—because it is working for us every day. If the tool chosen is static, you will not receive that help and you will not be as efficient using the aforementioned tools and strategies. What is it worth to you to have your mortgage paid off even two years more quickly than a static plan? Thousands or even tens of thousands of dollars! • Finally, there is still a strategy to be employed when paying off debts. It is better to pay off certain debts than others. For one debt we can save $500 per month by paying $5,000 and for another it may take $40,000 to achieve the same result. Debt elimination plans that employ “snowball” strategies actually look at the payoff efficiencies. Eliminating one debt, they use the savings to attack the next debt and so on. Further, credit restoration programs may actually go to creditors and negotiate a reduction in debt owed (settlements)—but these can negatively affect credit histories. Even credit histories that are bad can get worse. So the next question is which strategies are best? Obviously, if you are drowning in debt and don’t own a home, the strategy may be different than if you have only one debt (a mortgage) and they desire to pay that one debt off more quickly because you are coming to retirement. Hopefully this work will help you make a better educated decision. For those who can’t keep up with their debts, debt renegotiation may be the only alternative. Read More »
The Federal Housing Administration (FHA) recently issued a letter that outlines an increase in mortgage insurance costs for applicants. Effective with applications submitted after April 5, the up-front premium will increase to 2.25% of the mortgage amount from the present level of 1.50% of the loan amount. This upfront premium is typically financed into the mortgage amount. For example, if an applicant borrows $100,000 to purchase a home, the loan amount including the up-front mortgage insurance premium would be $102,250. On a $100,000 loan, this hike in premiums would increase the payment by $10 to $15, depending upon the loan’s interest rate. This new up-front premium affects both purchase and refinance loans. In addition, in the President’s budget proposal, FHA has asked Congress to raise the premiums for the FHA monthly insurance from the present levels of .50% to .55% for 30-year amortized loans to as high as .90% for low-downpayment loan 30-year loans. This additional hike would increase the payment on a $100,000 mortgage by as much as $30 monthly. It is not known when the second increase would be effective if approved by Congress, however, our advice is to purchase as quickly as possible if you are thinking about buying a home. With the tax credit for first-time and move-up buyers set to expire by April 30 and FHA costs rising, purchasing now with rates low and housing prices down makes all the sense in the world. Read More »
Recent changes in lending rules have made your credit score even more important to your long-term economic health. Subprime mortgage program alternatives are disappearing. Fannie Mae and Freddie Mac are now charging a higher rate for lower credit scores. Even FHA has proposed such a surcharge. What does this mean? In general, America’s credit scores are getting lower. We are borrowing more at higher rates and this is causing the situation to get worse. What does a low credit score cost the average American? Credit scores can range from a low of 300 to a high of 850. In general, a credit score above 700 is considered good. From 600 to 700 is considered marginal and now may be subject to higher rates. Below 600 is considered poor. If your score is significantly below 600, borrowing can be close to impossible depending upon other financial consideration such as cash reserves. This means that you may not be able to obtain the home of your dreams or may not be able to refinance your present home. Let’s say that you would have a rate of 6.0% if your credit was great. Let’s also say that you would pay 7.0% because your credit is not good. What does that cost you? Not even considering other debts such as your credit cards, your higher mortgage payment will cost you plenty more. On a $300,000 mortgage, the higher cost over the term would be approximately $90,000. Add your other debts and even higher insurance costs and many will pay hundreds of thousands of extra dollars for a lower credit score. And those who have lower credit scores generally can ill afford higher payments as compared to the general population. We are here to say that you can break this cycle. How? Credit score improvement is something that you can do in the short-run to save money instantaneously as well as the long-run so that you can save thousands over your lifetime. The key is getting on a long term plan as well as making short-term adjustments. The following list demonstrates the make-up of a credit score. • 35% payment history • 30% amounts owed • 15% length of credit history • 10% new credit • 10% credit mix What can you do in the short-run and the long-run to help increase your credit score? More immediately, you can correct inaccuracies. Did you know that more than 30% of the average credit reports contain one or more items that are false? Without action these inaccuracies can cost thousands and the average consumer does not even know that these inaccuracies are on his/her credit report. Therefore, step one is to run a credit report and look for any inaccuracies. From there, a professional can help you remove any found in the report. In addition to inaccuracies are those items which are true but not added to the report in a compliant manner. The Fair Credit Reporting Act includes such requirements for creditors. For example, the creditor must notify a consumer before it places a negative rating on a credit report. Getting these removed may seem unfair to the creditor if they are true, but this lack of notification does not give the consumer the chance to dispute or rectify the situation. There are also long-term actions that can be taken. These may include paying off debts which reduces the amounts owed. You can also change the mix of credit from revolving to installment and even make sure that your balances are not too high of a percentage of the total credit limit. For example, a credit card with a $5,000 balance can reduce the score if the total credit limit is $5,000 versus $20,000. Therefore, a good credit score improvement program usually must include a debt reduction program. Did you know that a debt reduction program can pay your debts off more quickly? The creditors would like you to continue paying forever on these debts as that is how they make their money. The new credit rules in America dictate that you have a short-term plan to increase your credit score as well as a long-term plan to keep it high. The savings? Thousands of dollars that will benefit you instead of the bank. Read More »
Beginning January 1, 2010, lenders and closing companies will have to use two new forms to itemize the costs of obtaining a mortgage loan and consummate a real estate transaction. These forms are made mandatory through regulatory changes implementing The Real Estate Settlement Procedures Act (RESPA) administered by The Department of Housing and Urban Development’s (HUD) Federal Housing Administration (FHA). The revised Good Faith Estimate must be given to applicants for a mortgage loan within three business days of loan application and itemizes all charges by lenders as well as those of third-parties such as appraisers that are required to obtain the loan. Applicants are advised which charges may change before settlement as well as demonstrating how the interest rate chosen will affect the closing costs. The second form is the Uniform Settlement Statement (HUD-1) and is utilized at closing to consummate the transaction. This form includes all final charges and for the first time the lines on the form are synchronized with the lines of the Good Faith Estimate so that it is easier to compare the initial estimate with the final charges. Read More »
Fannie Mae has conducted national surveys regarding the obstacles potential home owners have to overcome when trying to purchase their first home. The findings showed that there are many obstacles to home ownership ranging from credit to income, yet, there is no obstacle more important than finding the cash necessary to close. The cash necessary to close is comprised of these components— • Downpayment • Closing costs • Reserves required after closing. The current fiscal crisis has made it much tougher from a cash perspective. A few years ago, just about anyone could find a loan program that would enable one to purchase with no money down. Programs were available for those with poor credit and whose incomes could not be verified. Now, there are very few no downpayment programs available and most of the programs remaining service very specific segments of the population such as veterans and rural housing. Most programs require at least a five percent downpayment and together with closing costs and required reserves, might result in the need for $15,000 or more on a $200,000 home purchase. Coming up with that much cash is a hardship for many Americans, especially with the economy contracting. We are here to tell you that a long-standing governmental program is proving to be the answer for many Americans presently The Department of Housing and Urban Development (HUD) houses an agency called the Federal Housing Administration which insures mortgages made by lenders. Why is FHA so important? Let’s just look at the cash requirements… Lower downpayment. The required downpayment on an FHA loan is 3.5%, instead of 5.0%. That is a savings of $1,500 on a $200,000 purchase price. Alternatives to coming up with the downpayment. FHA not only requires a smaller downpayment than most, they also are more liberal as to “where” the potential purchaser can come up with the cash— • Gifts. One hundred percent of the required cash can come from a gift from a relative or someone with a “family-type” relationship. Most other programs allow gifts, but may require that the purchaser have a certain percentage of his/her own money in the deal. FHA allows 100% of the money required to come from a gift. • Grants from Governmental Agencies. FHA did tighten its requirements which had previously allowed the down payment to come from non-profits that collected the money from the seller. However, grants and loans for the down payment (and closing costs) are still allowed from government agencies. States and some localities have agencies that are authorized to raise money by selling non-taxable bonds under the Federal Bond Subsidy Act. This money can be used to provide below interest loans to finance real estate outright or grants for cash to close. Closing costs. The most popular alternatives for funding closing costs include— • Seller Contributions. Especially in a buyers’ market such as we are experiencing presently, many sellers are willing to pay closing costs to entice a purchaser to buy their home. FHA again is more liberal than most programs in this regard. FHA allows the seller to pay up to 6.0% of the sales price towards closing costs. Many other programs cap this contribution at 3.0%. This means that the seller can typically cover all closing costs and might even provide a subsidy for a lower interest rate. • Lender rebates. Using a slightly higher interest rate, the lender can also sometimes use a “rebate” or “yield spread” to pay closing costs. This rebate is made possible because the higher rate brings a better price when the loan is sold on the secondary markets. FHA allows the lender to pay all closing costs in this way. Reserves. Many loan programs require that the purchaser have up to two months payments in reserve after closing. FHA does not have such a requirement. However, that does not mean that having money left is not a good idea. It is always a good idea to have cash available as a “cushion” after closing. How much cash can you save purchasing using the FHA program? On a $200,000 sales price, the requirement of $15,000 or more could be reduced to $7,000 or even less. That is a significant savings and coupled with available tax incentives could reduce your net cost to zero! Dave Hershman is the top author and a top speaker in the mortgage industry with seven books authored including two texts published by the Mortgage Bankers Association of America. Read More »
The Federal Housing Administration has issued a letter with new condominium lending policies that went into effect in December. The letter limits the number of condo units in one complex that can be financed with FHA-insured loans at 30% and 50% of the units must be owner-occupied before FHA financing can be used. FHA is allowing a temporary exception to the FHA concentration and owner-occupancy requirements until Dec. 31, 2010 because of depressed market conditions in many areas. For example, FHA will allow lenders to ignore foreclosed units in calculating the owner-occupancy rate until that date. Also, for the first time, the new condo lending policies give lenders the authority to approve condominium projects directly. Because of the lower prices of condominiums, this form of ownership has been very popular with first time buyers and the exceptions should help many become owners during the next year. Dave Hershman is the top author and a top speaker in the mortgage industry with seven books authored including two texts published by the Mortgage Bankers Association of America. Read More »
We have undergone a credit crisis in America. This is a crisis that has taken away many home financing alternatives for those with fair to poor credit. However, Americans are not without home financing alternatives. It is time to take a good look at an old standard—FHA financing. For years, FHA was the standard for first time buyers, immigrants and those with credit issues. During the real estate and subprime boom, FHA financing shrunk from over 25% of the loans in America to well under 5% of the market. But now the government has moved to make FHA more attractive. Last year, Congress passed a bill to raise the FHA loan limits in many parts of the country, at least on a temporary basis. In the meanwhile bills have been passed to permanently increase these limits and make additional modifications to help the average American finance his/her home. Even without these modifications, here are some of the advantages of FHA... • A Low Downpayment. Generally the downpayment on an FHA mortgage is very affordable as compared to conventional financing. The down-payment required is less than 5.0%. A a total of 3.5% cash is required from the borrower’s owner funds to be invested in the total transaction, inclusive of closing costs. • A More Liberal Gift Policy. FHA borrowers virtually do not have to come to the transaction with any liquid assets in savings. All money may be provided by gift from a relative. Relatively all conventional lending requires that a certain amount of the borrower’s funds belong to the borrower through savings amassed some time before the transaction takes place. FHA also requires no cash in the bank (also known as cash reserves) after settlement. • More Lenient Qualification Standards. FHA requires less income to qualify for a mortgage. The standards allow a housing payment which is 31% of a borrower's gross monthly income and total debt service which is 43% of a borrower's gross monthly income. By contrast, most conventional programs have ratios of 28% and 36%. FHA also allows a prospective borrower who does not qualify to add a related co-borrower to the application--and this related co-borrower does not have to live in the home. Even more importantly, FHA does not require a credit score to qualify for a mortgage and thus has no minimum credit score standards. It should be noted that many lenders who purchase FHA loans do have minimum credit score standards. • FHA ARM Program. The FHA one-year and 3/1 adjustable mortgage programs are very popular because annual adjustments are limited to one percent each year, as compared to most conventional adjustables which have caps of two percent each year. For example, this means that 3/1 adjustable can only increase one percent at the start of the 4th year. Also, the lifetime cap on these FHA adjustables is five percent, while most conventional alternatives have a six percent limit. • FHA Loans Are Assumable. Though not as freely assumable as a few years ago, FHA remains as one of the few programs to allow assumption of adjustable and fixed rate mortgages at the same rate and term as the original loan. This is a major advantage when you are trying to sell your home in a high-rate environment. Note that the assumption must be accomplished by an owner-occupant who is credit- qualified. • FHA Has No Maximum Income Limits. Though FHA loans are limited as to a maximum loan amount, there is no maximum income limitation. Many conventional first time buyer programs that allow a minimum downpayment, zero cash reserves and expanded ratios also limit either the maximum income level of the borrower or restrict lending to certain locations. Put it all together and you have a program that packs a lot of punch with first time homebuyers and low-to-moderate income borrowers. If you are in the market to purchase a home, you should look seriously at an FHA mortgage. Dave Hershman is the top author and a top speaker in the mortgage industry with seven books authored including two texts published by the Mortgage Bankers Association of America. Read More »
Owning a home is a dream that is shared by millions and millions of Americans. Earlier in the decade the national home ownership rate reached a record high as almost 70% of all families owned their own home. This number has fallen somewhat during the present recession, however the dream of obtaining home ownership has remained a goal for many who are presently renting. This year many Americans will be able to reach their goal of home ownership because of record low interest rates and lower home prices that have made owning more affordable than ever. In addition, the government has offered a tax credit of up to $8,000 for first time buyers. It is clear that this is the time to buy your first home. Unfortunately, many lending programs now require a greater down payment and clean credit as opposed to what was required only a few years ago. This means that even though we have a great buying opportunity, many first time buyers may need additional help in order to purchase their first home. FHA continues to be the mortgage program of choice for first-time buyers across the nation. One reason for this popularity is that FHA enables parents to be a significant source of help when their children decide to become part of the community of homeowners. Here are a few important ways in which parents can help their children purchase real estate using FHA financing. Alleviating cash shortages through gifts. According to major surveys, the number one obstacle to owning a home is a shortage of cash. Although FHA requires only a small downpayment in order to purchase a home, some capital must be provided by the prospective homeowners. FHA is one of the most liberal programs with regard to the provision of gifts are. FHA is a very popular program for first-time buyers because it allows all of the capital necessary for the purchase, typically 3.5% of the sales price, to come from a gift. FHA even has a special bridal registry program and allows unsecured loans from immediate family members.Purchasing together for income support. Purchasing a home with your children may enable those who do not have enough income to qualify for a mortgage to finance their home purchase. Once again, mortgage programs vary with regard to the allowance of co-borrowers and FHA has the most liberal requirements. Under the FHA program, immediate family members can help a relative purchase without living in the home themselves. Purchasing together for credit support. One area a parent can help is for children who have a substandard credit history. It should be noted that adding a co-borrower with a clean credit history in no way erases the existence of a poor credit history. On the other hand, a strong co-borrower may be able to make the difference in cases where the credit history of the child is close, but not quite up to standards. Cash, income and credit. The three major barriers to obtaining a mortgage and reaching the American dream of homeownership. Help for overcoming these obstacles may be no further away than going back to your roots. With rates so low, a tax credit available and home prices down, there are many reasons to act now. With FHA financing and the help of parents, thousands of Americans will be able to overcome the obstacles presented by tighter credit requirements in this buyers market. Dave Hershman is the top author and a top speaker in the mortgage industry with seven books authored including two texts published by the Mortgage Bankers Association of America. Read More »
HUD or the U.S. Department of Housing and Urban development announced a plan to set the minimum standards states must meet in order to comply with the Secure and Fair Enforcement Mortgage Licensing Act of 2008 (SAFE Act). This is step by the federal government to introduce state wide standards and licensing guidelines for loan originators. For many home owners who felt the government let them down during the sub-prime crises this is one of the first real steps towards correction. This is the steps towards regulation that are needed to keep our lenders honest and the lending community from preying on those who are not well versed in the language of mortgages. The SAFE Act essentially was designed to enhance consumer protection and help states to establish standards for the licensing and regulation of loan originators. SAFE is also responsible for a nationwide mortgage licensing system and registry (NMLSR). HUD will oversee the program and ensure that compliance and state standards meet the minimum guideline. These guidelines will require loan originators to take ongoing educational courses, pass a test, and undergo civil, criminal, and financial background checks. The deadline for states to comply is July 31, 2010, to be eligible for clearance under the SAFE Act criteria. I am whole heartedly behind HUD and the passing of the SAFE Act. It is long overdue and something that should have been in place. I personally witnessed nothing short of criminals preying on the week during the bubble. Some may say that sub-prime borrowers should have known better. I ask if you didn’t have a high school education and tried to make sense of the nearly 200 pages of a mortgage agreement. If you have a lender who pushes you through the paperwork without explanation and hidden fees you’re in for a world of hurt. Lenders have the power to let you see what they want you to see and tell you what you want to hear. Buying a home is an emotional experience and lenders know this. Working with a reputable lender is paramount. This Act ensures there will be more ethical lenders and I can tell you that is exactly what this industry needs. With FHA loans on the rise there will no doubt be the temptation to make qualification and FHA requirements as easy as possible for applicants. This will spur the economy but at what cost? We need regulation and reputable lenders while also growing the economy. Read More »
There has been a lot of pressure from consumers and real estate brokers in areas where home prices are exceptionally high to raise the maximum limit of FHA-insured loans. FHA and the Department of Urban Development (HUD) have tried to accommodate this need, but in the process has caused much confusion. "Recent reports about FHA loan limits have created the mistaken impression that federal loan limits allow loans up to $729,750 anywhere in the country. This is simply not true," said Barney Frank (D-MA), chairman of the House Financial Services Committee on December 2. "In fact, there are only 77 counties where an FHA loan as large as $729,750 can be made, and less than 2 percent of FHA's outstanding loan portfolio consists of loans that exceed $417,000, the previous conforming loan limit." The average FHA loan made in Fiscal Year 2009 was only $185,278, Frank noted. "FHA has and will continue to focus on loans to middle and lower income families. Real estate markets have very localized characteristics and a single national standard makes no sense," he said. The primary reason Congress recently changed FHA practices to allow higher cost loans was to ensure that affordable mortgage credit was available to middle income families in areas with higher price home. Several years ago, administration officials came before Congress to testify that FHA was effectively out of the market in major portions of the country because the restrictive one-size-fits-all national ceiling was well below median home prices in those areas. Congress changed the law to allow FHA to finance higher cost homes in higher cost areas, Frank pointed out. "This is not a new approach," he said. "The law already permitted FHA loans to be 50 percent higher in Alaska and Hawaii because of higher home prices in those areas. For decades, home price and income limits have been in place for various HUD and mortgage revenue bond programs in order to reflect varying local area characteristics," he noted. It's important to keep in mind that Congress retained the longstanding FHA provision that limits loans in all areas based on the median home prices in those areas. In markets where the median home price is low, the FHA limit is correspondingly low. In the majority of counties, the FHA loan limit is only $271,050. That's the nationwide FHA loan floor. "Instead of presenting a financial threat to FHA, allowing higher priced loans brings more geographical diversification to FHA. A recently completed audit of FHA concluded that higher cost loans actually have a lower claim rate than lower cost loans," Frank said. Read More »
FHA loan requirements are generally more lenient than those of conventional lenders. The Federal Housing Administration is a government program administered by Housing and Urban Development (HUD) to help Americans who can't qualify for a conventional mortgage loan and become homeowners taking part in the american dream. With the announced changes that could help hundreds of thousands of Americans impacted by the current housing crisis, FHA loan requirements have never been easier to meet. Required Income There are no minimum FHA loan requirements for income to obtain an FHA mortgage loan, but you must demonstrate steady income for at least three years, and demonstrate that you've consistently paid your bills on time. FHA loan requirements allow seasonal pay, child support, retirement pension payments, unemployment compensation, VA benefits, military pay, Social Security income, alimony, and rent paid by family to qualify as income sources. FHA loan requirements also allow part-time pay, overtime, and bonus pay to count as income as long as they are steady. Debt-to-Income Ratio The FHA allows you to use 29% of your income towards housing costs and at total of 41% towards housing expenses plus other long-term debt. Compare this with a conventional loan, which generally allows only 28% toward housing and 36% towards housing expenses plus other debt. Down Payment FHA loan requirements specify that you have a down payment of at least 3% of the purchase price of the home, but this cash may be a gift or grant. Most affordable loan programs offered by private lenders require between a 3% - 5% down payment, with a minimum of 3% coming directly from the borrower's own funds. Credit Score FHA loan requirements are generally more flexible than conventional lenders are in their qualifying guidelines. You can qualify for an FHA loan without a credit history. If you prefer to pay debts in cash or are too young to have established credit, there are other ways to prove your eligibility. Talk to your lender for details. FHA loan requirements do not include a requirement for the borrow to have good credit. In the case of bad credit, the FHA allows you to re-establish credit if two years have passed since a bankruptcy has been discharged and all judgments and tax liens have been paid, or if arrangements have been made to establish a repayment plan with the IRS or state Department of Revenue. The FHA may also allow you to borrow once three years have passed since a foreclosure or a deed-in-lieu has been resolved. Read More »
On August 31, the president announced new initiatives to help troubled borrowers with high-risk mortgages. A key element is to allow homeowners with a good credit history, but who cannot afford their mortgage payments, to refinance into FHA mortgages insured by the Federal Housing Administration (FHA) to keep from defaulting. “The markets are in a period of transition as participants reassess and reprice risk,” the president said. “This process has been unfolding for some time and it’s going to take more time to fully play out. America’s overall economy will remain strong enough to weather any turbulence.” Real estate and mortgage groups are obviously delighted with the announcement. John Robbins, chairman of the Mortgage Bankers Association, made this comment after hearing the president’s announcement: “The president’s attention to turmoil in the mortgage markets and the plight of homeowners facing foreclosure will encourage Congress to take the needed steps to reform FHA and help borrowers who face difficulties making their mortgage payments.” Read More »
"The recession is very likely over at this point," said Federal Reserve Chairman Ben Bernanke. This comment from such a credible source is very good news for today's home buyers and sellers. However, as the housing market continues to stabilize, consumers need more protection when they apply for an FHA home mortgage loan or other types of loans, whether it's to finance the purchase of a home or refinance and existing mortgage loan. It's also important that consumers know what the FHA requirements are and know if they qualify. Fortunately the FHA loan requirements are very favorable for most applicants. That's the conclusion of the Federal Reserve, and the reason the Fed is now preparing new consumer-protection amendments to the frequently changed Regulation Z. Generally, this regulation mandates detailed disclosures by banks or other lending institutions in the area of home loans, along with other requirements. The most serious collapse in the housing and mortgage markets in many decades was primarily caused by home buyers who didn't have sufficient information about the mortgage they applied for and, therefore, took a mortgage they could not afford. And, of course, lenders and mortgage brokers who urged consumers to take these high-risk loans must take much of the blame. "Consumers need the proper tools to determine whether a particular mortgage loan is appropriate for their circumstances," said Federal Reserve Chairman Ben Bernanke in a news release. "It's often said that a home is a family's most important asset, and it's our responsibility to see that borrowers receive the information they need to protect that asset." Recently implemented FHA home loan requirements for lenders to provide borrowers with an initial truth-in-lending mortgage cost disclosure within three business days of the application. Until the borrower receives the initial disclosure, lenders can't collect any fees except for the cost of a credit check. Previously, lenders and brokers collected appraisal, credit and other charges at the beginning of the application process. Also, lenders must provide borrowers with a final truth-in-lending disclosure statement by three business days before the scheduled closing of the transaction. The lender can't close the mortgage loan until at least seven days after the applicant receives the initial disclosure statement, thus providing time for the borrower to read and consider the figures and overall transaction. There are other new and proposed FHA lending requirements, changes and additions to Regulation Z. For more information, visit: www.federalreserve.gov/. Read More »
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