FHA loans & FHA rates - Why so different from conventional loans?

 

FHA loans in many cases are much better than conventional loans. I have made this statement several times recently because I am tired of listening to loan officers, realtors, and the average consumer get all excited because FHA mortgages are back. People, they never left. FHA loans are not the new subprime mortgages. 

FHA loans have been around since 1934. And why are they much better than conventional loans?  I can make this statement if your credit score is below 680 and especially if you are putting 10 percent or less down. 

Overall, it's not rocket science to figure this out. The reason why so many consumers are led down the wrong path sometimes is because either the loan officer doesn't know how to handle the credit aspect of FHA loans or because their mortgage company is not FHA approved. 

 

 

 

Come see how you can save $272 per month on FHA loans - what a great deal.... (clicking onto this link will show you the secret to a much lower payment) 

 

 

 

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For all of your mortgage needs and for more information on FHA loans, please go to this link. The FHA Expert

For more information on how you can obtain your dream home, please click here : Mortgage Financing Options

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!!

Copyright © 2008 by Jeff Belonger

Creative FHA loans — No Money out of pocket

FHA loans are becoming a vital part of todays financing when it comes to buying a new home or refinancing. You will still hear from some lenders or realtors that FHA financing is not the way to go. Here are some reasons why and the rumors mentioned :

• They are old school and dont know about the new appraisal changes that have taken place in the last 5 years. Truth : FHA appraisals are now done the same way as conventional appraisals.

• The lender is not FHA approved or understands how FHA mortgages work.

• Some loan officers advertise FHA loans as 100% financing. Not true at all.

• Some lenders or loan officers have said that the down payment assistance programs (DPA) are dead.
  

The reality of it is that FHA loans are more in likely the best option for many consumers if their credit scores are below 680 and putting less than 30% down. So, how can we get creative with FHA loans and possibly put no money out of pocket?  For that secret, please read this :

No Money out of pocket — Nehemiah style…..

  

 

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For all of your mortgage needs and for more information on FHA loans, please go to this link. The FHA Expert

For more information on how you can obtain your dream home, please click here : Mortgage Financing Options

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!!

Copyright © 2008 by Jeff Belonger

Google -- Customising your home page

As many of you know, I follow Google from time to time. They are so innovative. They change their logos for specific holidays and when you click on that particular logo for that holiday, it gives you a short history lesson. Example : 

Now Google has gone beyond that. They are now allowing you to customize your home page with the work of world class artists and innovators. Then you can add your choice of news, games, e-mails, and so many more gadgets, making your homepage colorful.

Here is the link for those artists and such... iGoogle Artist Themes

(These pages are for your Google home page, not your blog page..... )

 

 

 

This is what you would see if you clicked onto todays Google logo.  The link, See more artist themes », takes to you to about another 100 artists and virtual themes. Anything from a virtual aquarium, to a tribute to Lance Armstrong, to artists, and special CEO's that have made their name in the world of art and fashion.

 

 

 

 

 

 Here are some examples of some of the artists and home pages ..........

 

 

 

 

And here is an example of Michael Graves, who he is, and the gadgets that you can add to your home page. 

 

 

 

 

 GADGETS for Michael Graves to add to your homepage........

 

 

 

 

 

 

 

 

         I hope you all enjoy these.  There are many themes to choose from and you can update them anytime that you would want.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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For all of your mortgage needs and for more information on FHA loans, please go to this link. The FHA Expert

For more information on how you can obtain your dream home, please click here : Mortgage Financing Options

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!!

Copyright © 2008 by Jeff Belonger

FHA Loans - FHA Mortgages -- What's behind the credit score....

 
Credit scores.....  aka fico scores.  I am a firm believer that you can't believe in everything that you read. 

As you can see the illustration to my left, that it states that the average credit score is 678. I have a hard time believing this and just talked to a few loan officers and even a credit specialist about this. I just don't believe that 678 is the average credit score. If I had to put a number on it, I would say 610 to 620.

 

Why am I bringing this up?  With so many changes to conventional loans and FHA loans when it comes to credit scores, it's been more costly for those applying for a conventional loan.

Conventional loans --  If you have less than 30% down with credit scores below 680, you will have pricing hits to your points or to the rate. Even if you don't see the hits, it will be in the price somewhere. This is a major wide adjustment made by Fannie Mae and Freddie Mac. No matter what mortgage banker or broker that you use, those penalties will be applied.

 

 

 

FHA loans --  FHA mortgages 

There even has been some major changes on credit scores on FHA loans also. It comes down to the investors who make up their own pricing adjustments based on the risk that they want to take.  This risk pricing is then passed onto the consumer from your lender.

 

 

So, what kind of pricing adjustments are we talking about when it comes to FHA loans?  Many lenders can't go below a credit score of 580.  Some can't even go below 600 or 620. I can go down to 500, but there are some pricing hits. We actually manually underwrite our own FHA loans in-house.

When it comes to the FHA jumbo loans, we can go down to 580, when many lenders can't go below 620. And this is still based on a manually underwritten loan.  But if it got approved in the system by DU / LP / or DO, then we can go down to 560. The new pricing for these FHA jumbo loans is based on anything over the old limit for that particular county, up to the new limits. Those new limits can be found here : New FHA loan limits

 

 

Overall, some food for thought. Here are some red flags....

• If you are with a lender that is telling you that you are better off with a conventional loan rather than a FHA loan, but you are putting less than 30% down and your credit score is less than 680, you better look around.  Not every lender is FHA approved.   A great rule of thumb is if you are putting 10% or less with a credit score of 679 or below, that you would probably be better off with a FHA mortgage. Here is some proof. FHA loans vs conventional loans -- The true story told by numbers....

• If you have been in process for 3 weeks or so and settlement is fast approaching and your lender tells you that you are now in underwriting, keep tabs on this.  If you don't have an approval within 5 days, start asking your lender questions. Yes, some of these brokers that send their FHA loans to other lenders are 10 to 14 days behind in underwriting. This could delay your settlement.

The last statement above was not based on assumptions.  I have closed 3 clients in the last 45 days that were with other lenders. 2 of them were in underwriting for 10 days a piece and both were denied by their previous lender. The 3rd client missed their settlement date, but was never denied.  One of these was in Virginia, one was in Pennsylvania, and the other client was in Florida. I closed all 3 of them in less than 10 days. Just beware of certain red flags and of some excuses that loan officers might use at times. 

 

 

PLEASE READ : 

If you aren't sure of your status, don't hesitate to call me. If you don't feel like you are getting the correct answers, call me. If things start getting changed on you (rates and or fees) or that your settlement date has been changed by the lender, definitely call me. Don't give in and give them a 2nd or 3rd opportunity, when it could cost you more money and frustration. If anything, seek another opinion. It can't hurt. 

 

 

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For more information on FHA loans, please go to this link. The FHA Expert

For more information on how you can obtain your dream home, please click here : Mortgage Financing Options

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!!

Copyright © 2008 by Jeff Belonger

FHA loans vs conventional loans -- The true story told by numbers....

 

FHA loans are not the next subprime loans.  Don't let anyone else fool you on this. FHA has been around since 1934 and subprime mortgages started to emerge in 1994. Subprime loans in many cases were good for those lenders that weren't FHA approved. The problem with that is the rates on subprime mortgages were typically 2% higher than FHA mortgages.

Lastly, just because someone said that they can qualify you for a conventional loan and that it would be cheaper than a FHA mortgage, might not always be correct. In many cases, FHA loans are now cheaper than conventional loans, which I will show you below.

One main reason why a loan officer might still make it sound like conventional loans are cheaper than FHA loans is because they aren't FHA approved. Another reason would be because they don't know much about FHA mortgages.

 

 

The example below is based on a $300,000 purchase price with 10% down. One reason why conventional rates are a little higher in this scenario as in FHA rates is because Fannie Mae and Freddie Mac have added penalties per se. If you are putting down less than 30% and your credit score is less than 680, certain fee penalties would apply to you, which would increase your rate.  The FICO (credit score) that I am going to use is 640, which is above average credit and will still show in this example that FHA loans are cheaper, even with 10% down.  

***And keep in mind, some lenders have penalties on FHA mortgages with credit scores under 620. It all comes down to the investor. We don't have penalties on any credit score above 580. And we can do credit scores down to 550. Many lenders can't go below 580.***

 

Type of Mortgage	Conventional Loan	FHA Loan
Purchase Price	$300,000	$300,000
Mortgage amount w/10% down	$270,000	$274,500
Mortgage Rate with Zero Points	7.00%	6.00%
Principal & Interest Payment	$1,796.32	$1,645.77
Mortgage Insurance Payment	$117.00	$112.00
Total Mortgage Payment PI & TI	$1,913.32	$1,757.88
Savings		$155.44 per month

Disclaimer :  These rates are just an example and can change because of various market conditions and are based on a 30 year fixed rate as of today. The fees would be the same and with zero points, so as to compare this scenario apples to apples. The conventional rate also includes the penalty for the 640 credit score.

 

 

Some of you might be saying that you will be adding $4,500 onto your principal balance if you did the FHA mortgage because of the FHA one-time mortgage insurance premium. This is correct and I don't want to confuse you with more numbers and charts. But here is a quick breakdown. If you kept your house for 5 years, which most people sell in a 6 year period, you would have saved $9,326.40 in payments in 5 years. This is a difference of $4,826.40 that you have saved!!!   And one other thing that is very small, but still makes a difference. You will be subtracting a few more dollars per month from your principal because your interest is lower. Just something else to remember.

 

 

How do I find an FHA approved lender?    You want to make sure who you are dealing with is FHA approved.

Why do I say this?  Not all lenders are approved FHA and some may tell you that you don't qualify FHA because in reality, they aren't FHA approved. 

 

You can find a HUD approved lender in your area by going to the following HUD website: http://www.hud.gov/ll/code/llplcrit.html     DISCLOSURE (just be careful of the spelling of the lender. If I put in my company's full name, Infinity Home Mortgage Company, Inc, it tells me that there is no such company. If I put in Infinity Home Mortgage, it shows my company as being FHA approved. Just keep this in mind. You can always call HUD also. (202) 708-1112

 

 

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For more information on FHA loans, please go to this link. The FHA Expert

For more information on how you can obtain your dream home, please click here : Mortgage Financing Options

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!!

Copyright © 2008 by Jeff Belonger

FHA Streamlines - FHA Loans make it an easy process to refinance

I decided to venture out in the blogoshpere today to see what some other lenders are writing about FHA Streamlines. As I have stated, you can't believe everything that you read, even if it sounds true.

In this post, I want to highlight some of the misleading facts that I read and to share with you what is actually right.

FHA loans have been around since 1934 and FHA streamlines been around since the 1980's. It is basically for those borrowers that currently have a FHA mortgage. FHA's sole purpose is to streamline the process, making it very simple and quick when refinancing. The main key points of FHA streamlines are :

• no credit check or income verifications
• no cash-out

Here is what I found on the internet. The misleading information will be underlined and the correct answers will be in Blue.

Streamlining does not require an appraisal; there are no closing costs. There are always costs of doing a mortgage. It just depends on if the lender passes it along to you or builds it into the rate.; no employment verification, no credit scoring, no debt to income requirement. You just need a good mortgage history with no late payments it states here, fha streamlines/handbooks/.pdf, that FHA does not require a credit report. You can have lates, you just have to be current on the mortgage when going to settlement ; unless the late payment was AFTER a rate adjustment - this is applied on the FHA secure loan.

What are the requirements for a streamline refinance?

The only basic requirement of a streamline refinance is; a person can not have more than one late FHA mortgage payment in a six month period. I already explained this above.

However, if that person does have more than one late payment they may still quallify after paying some additional fees. This sounds like how a lender can have the excuse to charge you more in fees or a higher rate.

How long does a streamline refinance typically take?

A typical streamline loan takes between 25 to 40 days to complete, depending on the time of the month that you lock in your rate. Wow.... it shouldn't take that long to even process a regular FHA loan or FHA mortgage. A streamline should take no more than 10 to 15 days, depending if you need an appraisal or not.

Here are your two types of FHA streamlines :

1. Streamline refinance with an appraisal : This is where you can include your closing costs within the loan amount. There are two types of calculations to achieve this type of refinance. The lower of the two would be used.

• Maximum loan-to-value percentages multiplied by the appraised value, exclusive of closing costs.

• By adding the existing first mortgage lien, the closing costs, accrued late charges, escrow shortages, and any pre-paid items minus any refund of the upfront MIP (mortgage insurance premium).

2. Streamline refinance without an appraisal : The calculation for this is to include the original principal balance of an existing FHA mortgage to include any new upfront MIP.

These 2 types of refinancing are only for primary residences only. Investment properties that were originally bought as a primary residence, may only be refinanced without an appraisal to only include the outstanding principal and nothing more.

If you have a 2nd mortgage or any junior liens older than twelve months old, then this would be considered a regular refinance and could not be done as a streamline refinance. And then you would have to qualify with income and credit.

FHA programs and insight :

• FHA -- Non-Occupant Co-Borrowers, are they allowed?
  

• FHA refinancing cash-out -- knowing your options -- Part 1 of 2

The First Time Homebuyer Series :

• First Time Homebuyer Tips : FHA - Conventional - VA - Subprime -- Part 1 of 4

• First Time Homebuyer Tips : Getting Qualified & Knowing your Credit -- Part 2 of 4

• First Time Homebuyer Tips : FHA, is the best mortgage program? -- Best Programs & Why -- Part 3 of 4

• First Time Homebuyer Tips : Understanding the Total Process -- Part 4 of4

• Renting vs Buying -- Understanding the difference........ FHA? -- Part 1 of 3
  

• Renting vs Buying -- Showing the difference in $$ -- Part 2 of 3

• Renting vs Buying -- Knowing your loan options -- Part 3 of 3

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For more information on FHA loans, please go to this link. The FHA Expert

For more information on how you can obtain your dream home, please click here : Mortgage Financing Options

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!!

Copyright © 2008 by Jeff Belonger

FHA mortgages are not just for First Time Homebuyers.......

 

 
FHA mortgages are not as complex as many make them out to be. They are not the next subprime mortgages.  FHA loans have been around since 1934, while subprime mortgages started to come into full force back in 1994. Lastly, just because someone said that they can qualify you for a conventional loan and that it would be cheaper than a FHA mortgage, might not always be correct.

 

 

 

What else should you know about FHA mortgages?

• If you put 10% or less down and your credit scores are less than 680, 99% of the time, your payment will be much lower on a FHA mortgage than it would be on that conventional loan. Don't let anyone tell you differently. I can show you proof.  Numbers don't lie, people do.
  
• FHA mortgages are not just for first time homebuyers.
• They are not just for those with less than perfect credit.
• You can do up to a 95% cash-out with a lower rate than you can do with a conventional loan up to 90% LTV.
• You need only 3% of your own money out of pocket.
• You can get into a home with no money out of pocket with the help of down payment assistance programs. One example is the Nehemiah Program. Stay away from those that say you can do 100% with FHA. There is no such beast. But you can still do creative financing to make it look like 100%, but there is no 100% financing. That is false and misleading no matter how you view it.  Creative FHA financing -- No money out of pocket from the buyer!!!
• It's the only true residential type of mortgage that can be manually underwritten with great rates.
• Bankruptcies allowed -- discharged between 1 to 2 years after the bankruptcy. FHA Credit -- Understanding what works
• You can have a non-occupant co-borrower help you obtain a FHA mortgage. FHA -- Non-Occupant Co-Borrowers, are they allowed?
  
• You can buy a family members house and use the equity as your source of down payment and for closing costs. FHA Gift of Equity Loans
  
• I can do credit scores down to 500, even after a bankruptcy, as long as the credit fits the profile. Many companies can't do below 580 and some under 620 on FHA mortgages.

 

 

Make sure you seek a mortgage professional that can help you find the right programs, answers all of your questions, and is able to offer any program out there. Each consumer is different with different needs. 

 

 

Some things to pay attention to when shopping for any kind of mortgage.

• Good Faith Estimate -- What to look for when shopping......

• Shoppers that shop themselves right out of the market……

• FHA Shopping, rate shopping, fee shopping.... call it what you want, just be careful!!!

• No Closing Cost Loans VS Closing Cost Loans

• Purchase Price vs Payment. what's missing??????

• FHA - Conventional - APR vs Rate -- Understanding the difference......

• FHA origination fee and what it means......

 

 

 

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For more information on FHA loans, please go to this link. The FHA Expert

For more information on how you can obtain your dream home, please click here : Mortgage Financing Options

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!!

Copyright © 2008 by Jeff Belonger

Do you sacrifice service for price ???

Do you go 3 extra miles out of your way to get your gas 5 cents cheaper per gallon? To end up with longer lines or for the gas attendant that takes their time? 

What about the bakery whose ad says birthday cakes for $5.00 done in 3 days. When in reality, they normally are $9.00 and take 7 days. You then go to pick up that $5.00 cake on day 3 and it's not ready. You need it today, but now they promise you tomorrow. 

How many of us sacrifice good service or quality for a cheaper price?  How many of you think that the level of service should be the same, no matter what you pay.

 

 

 

So you decide to go with that person that offers the cheaper product and promises you great service. You can't get out the starting gate. You are applying for a FHA mortgage. They promise you the Good Faith Estimate as you were shopping around. It's been days. You decided to go with them, because they were the cheapest.  This is just the beginning. What do you think it will be like down the stretch, at the finish line?  Do you think you will close on time?  Do you think you will end up with the same rate and or costs as you were promised in the beginning? What happened to 5 Star Service?

I have a consumer just this week who is shopping my good faith estimate. I not only beat out the first lender in rate who was Wells Fargo, but they didn't put the taxes, homeowners, and mortgage insurance on the Good Faith Estimate. Does the fact that the overall charges look cheaper then?  How about misleading, because you will need to pay for them at the end.

How about the fact that their realtor gave them two of her own choices to speak to. But you know what, it's been 3 days so far and they haven't gotten them over their good faith estimates. And when I spoke to the consumer today, she just said, "maybe they are just busy, so I will give them some more time."

 

 

 

Summary :  I am not here to brag, but I think I am busier than 70% of the loan officers out there. But I am still able to get back to her in less than 4 hours with a good faith estimate. Here is what she stated to me :

 

"The Wells Fargo good faith estimate is much less complete analysis and did not include escrows for taxes, hazard insurance and mortgage insurance.  It also doesn't look at a possible seller's credit. 

My husband and I want to show your estimate to our realtor and wll get back to you.  Thank you for taking the time to be so thorough in our conversation yesterday."

Yet she still wants to wait for others to get back to her. I don't try to pressure, but you then have to look at the reality of the situation. Time is money. Rates move daily.  I might end up being more expense 3 days later, because the rates might have improved. And you might make a split decision and it could cost you more in the end. Or, what happens if rates go higher?

 

 

What do you get with me?  I won't be the cheapest, yet I won't be the most expensive. This consumer is out of state. Okay?  I can do the same as the person in your town. The only thing is that I won't be at the settlement table. That is what cell phones are for.

What you will get from me is expertise. You will get good, clear, explanations. You will be able to reach me on my cell phone or e-mail 7 days a week. I will take the extra 30 minutes to clearly explain the whole process, from the mortgage application, to your title charges, to what will happen at closing. Many just want to give you a rate in the first 5 minutes. You will end up with the same rate and fees that I lock you into. And I usually give you answers to many of your questions before you usually ask them. Are you willing to give all of this up for an extra $9 a month in savings? Will it even work out to that much per month? What happens if they changed your rate last minute?  Delayed your settlement for a week?  It can add up quickly.  Just remember this...You usually get what you pay for.

 

Read this and it might just save you thousands : Consumers need to be aware of these Red Flags !!!!

 

 

 

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For more information on FHA loans, please go to this link. The FHA Expert

For more information on how you can obtain your dream home, please click here : Mortgage Financing Options

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!!

Copyright © 2008 by Jeff Belonger

Want to meet a Pilot aka Mortgage Planner? --- Meet Robert Ashby

Look up in the sky.... it's a bird, it's a plane, it's Robert D. Ashby.....mortgage planner by day and pilot by night. Okay, sometimes it's the other way around. Robert is a pilot for American Airlines, but he also owns his on mortgage company. And most importantly, Robert Ashby is a Mortgage Planner and not just a loan officer. You might ask what a mortgage planner is?  It's a cross between a loan officer and a financial planner/adviser. 

In any case, I had the pleasure of meeting Robert two Saturdays ago when he e-mailed me that Thursday telling me that he was arriving Friday night and leaving Sunday morning. Robert was one of the first 5 AR members that I started talking to on here when I first joined. That was back in October of '06 and we started talking on the phone by December.  When we first met, even though it was for about 4 hours, I got to know the person behind the flight attire.

 

 

So a week later, I get another e-mail from Robert on Saturday, telling me that he will be back in the Philadelphia area on Sunday night, leaving Tuesday morning. So I decided to meet up with him for a few hours on Sunday evening and for part of Monday. Robert is the one in the black jacket with cap. He brought along his co-pilot, George, who is also a Colonel in the reserves.

Overall, we had a great time. We first went to Moriarty's Restaurant/Irish Pub for a few drinks. Then down the street for a quick bite and then onto a few other places. The more I hung out with Robert, the more we had a lot in common, especially when it came to the mortgage business. Not only is Robert just a good, down to earth guy, but he really goes the extra mile in not only giving his clients options, but that he cares about them and their finances. You don't find that in every loan originator in this business. I just wanted to say, it was great to meet a true mortgage professional as myself. Looking forward to it again Robert.....

 

 

If you want to get to know more about Robert Ashby's style, here are two great reads. The first one has to be one of the best written mortgage blogs ever posted on Active Rain and I am not the only one that agrees with this.

• Mortgage Transparency Kills Mortgage Service: Will the Mortgage Industry's Commoditization Follow That of the Airlines?

And here are two more reasons why Robert Ashby is on top of his game and more people should listen to him. Take the serious time to read these, because more people need to think like this.  Please read :

• Would You Rather Spend $6 to Save $4 or Spend $4 to Earn $6?

• Equity Harvesting, Money Merge Accounts and the Benefits of Using Both

 

 

 

 

 

On another note, if you know this person, tell him that he missed out on a good time. Jason Sardi was going to try and meet us out Monday night, but he said that he was working hard.  I am not sure if the Cayman Islands can be classified as work, but we'll just chuck it up to Jason missing a great person from the mortgage industry. Jason, next time my friend. I hope the Caymans, aka work, was worth it. 

 

 

 

 

Members that I have met from Active Rain :

1. My 1st Active Rain meeting with an AR member..... Rob who?????
2. Lunch with Ravi Shah......
3. West meets East....... a face to face with Jonathan Vetter, loan officer.
4. Active Rain gathering in Philadelphia -- A Success !!!
5. NYC - Bloggers Connect - Friends & new acquaintances !!!!!!
6. Want to meet a Pilot aka Mortgage Planner? --- Meet Robert Ashby

 

FHA mortgages - Understanding credit that works -- Part 2 of 2

 

FHA credit revised........Piecing together your credit can sometimes be confusing. That's why you should always seek a qualified loan officer that is a FHA Expert.

In all honesty, credit is not as difficult as it may seem and FHA has made it easier for you to qualify for your dream home. There are just some important facts that the average consumer needs to know.

 

Several key facts :

• You don't need credit scores. No minimum credit scores. You need to pay attention to this part, because many lenders will advertise this. But they fail to tell you initially that every investor out there have credit score requirements though. HUD writes the guidelines, but in this case, the investors can make up their own also. Many lenders can't even go below a credit score of 580.  We at Infinity Home Mortgage can go down to 500. 

• Non-traditional credit can be used. This is listed below.
  

• Very flexible on credit issues when it comes to collections, charge-offs, judgment, and even liens.

What an underwriter looks for usually is good established credit in the last 12 months. This is not written in stone, but definitely helps. The beauty about FHA loans is the fact that your credit could be less than perfect less than 12 months while purchasing a house. It comes down to the reasons why and a make sense approach. We understand that things happen in life, but they do need to be documented.

 

 
Great assets of a FHA mortgage and the credit requirements : 

• A Chapter 7 bankruptcy (liquidation) needs to be 2 years old from date of discharge. Less than 2 years depending on extenuating circumstances.
  

• A Ch 13 can be 12 months out of bankruptcy while in repayment (not discharged), as long as you can show 12 months of payments on time.
  

• Usually want to see reestablished credit with no lates after a bankruptcy. But the best part of this is that the underwriter at his or her discretion can overturn the time frame of a bankruptcy depending on if the circumstances were out of your control.
  

                    -- Death in the family

                    -- Loss of job(s)

                    -- Sometimes divorce --  not always, depending on the circumstances.

• Consumer Credit Counseling -- sometimes viewed the same way as a Ch. 13 bankruptcy, guidelines are similar. The lender needs to see a 12-month payment history from the credit-counseling agency showing satisfactory payments and a letter from agency saying that the loan will not adversely affect the applicant's ability to repay current debts.

• Foreclosure -- Generally 3 years must have passed. But the catch here is, we don't use the date when you went into foreclosure. It's 3 years from the date that the house was sold after it went into foreclosure. There are extenuating circumstances and exceptions that can be made.

• Delinquency or Default on Federal debt -- This seems to be overlooked by many loan officers. I have heard some loan officers tell consumers that you can not obtain a FHA loan if delinquent or obligated on any type of federal lien. ie. school loans, etc. This is not true, as long as we can obtain a CAIVARS authorization number. The account would need to be brought current, paid, or otherwise satisfied. And a payment plan is satisfactory as long as it's in writing and that you have established some payments on time, generally 6 months. 

 

What happens if I have no credit at all?   

We call this non-traditional credit. Here is a list of things that we could use. But we would need some type of proof.  And we usually want to show a 12 month payment history on letterhead from that agency, store, or company.

• car insurance -- showing your monthly or quarterly payment, how long, never late, how much a month.
  
• utility bills
• cell phone bill
• repayment of loans or past debt -- doctor bills, collection accounts, etc etc
• store accounts and so much more....  anything that can be documented to show a credit history on paper

Unique credit traits of a FHA loan that conventional loans don't offer :

• At the discretion of the underwriter, collection accounts and medical collections can be opened. More times or none though, collections outside of medical usually have to be paid off.
• Many say that if you have a lien show up on credit, that it needs to be paid in full. It depends on the type of lien and if it doesn't show up on title. Example : If you have car repo that is now a lien on your credit, as long as you have a repayment agreement and have made at least 6 months of payments on time, this is acceptable.
  

 

Summary :  FHA loans can be manually underwritten even if it comes back as a refer. As long as we can determine decent credit risk, several things can be overlooked. But we would need compensating factors. 2 months reserves is usually a big one. In many cases, at least 6 months in reserves is very strong. There are others, such as 10% down or no payment shock. (10% or less of an increase in new mortgage payment)

 

• FHA mortgages - What to believe & credit issues -- Part 1 of 2

• FHA mortgages - Understanding credit that works -- Part 2 of 2

 

 

 

The Series on Credit Reports :

• Free Credit Report & Credit Repair companies -- BEWARE !!!!! -- Part 1
  

• Credit Tips - FHA or Conventional Mortgages -- Part 2

Here are some more posts with some credit tips.

• As a consumer, is your credit bad enough to deserve the worst scenario? --

• First Time Homebuyer Tips -- Getting Qualified & Knowing your Credit -- Part 2 of 4

 

 

 

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For more information on FHA loans, please go to this link. The FHA Expert

For more information on how you can obtain your dream home, please click here : Mortgage Financing Options

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!!

Copyright © 2008 by Jeff Belonger