The Federal Housing Administration (FHA) program first began in 1934 in an effort to encourage home ownership despite the difficult economic times of the era. Just like todays economic times, options for borrowers with less than perfect credit is critical to substain an economy as the housing market plays a large factor in the economy in general. The FHA program enables consumers who may not qualify for a standard loan to obtain the financing they need to purchase a home without income limitations.

FHA loans differ from typical loans in that they are insured by the Federal Housing Administration, which is a part of the Department of Housing and Urban Development (HUD). Because this insurance, both up-front mortgage insurance of 1.75% for purchase transactions, and .55% per year divided into monthly payments, reduces the lender's risk on the loan giving lenders a greater flexibility with regard to approving loans.

For example, FHA loans are not credit-score driven, so a client may be able to obtain a loan despite having had credit problems or even a bankruptcy in the past. Although FHA does not require a borrower to have a minimum credit score, lenders have developed underwriting overlays where a borrower needs at least a 620 score while conventional requires at least a 660 to even obtain a loan over 80% and forget about 96.5%. A bankruptcy with FHA loans are far more lenient than conventional loans with guidelines specifying that a bankruptcy must be discharged at least 2 years ago with some exceptions made for borrowers having a bankruptcy discharged 1 year ago under certain circumstances.

Unlike conventional loans, which have large loan level pricing hits for less than perfect credit, FHA loans have minimal loan level pricing hits for lower credit scores. For example, a borrower with 680 credit scores trying to purchase a home with 10% down would have a loan level price hit of approximately .75% which would be either paid in the form of points or by taking an increase in rate.  Alternatively, an FHA loan would have no loan level price hits at all in the same scenario.

For consumers that do not have a traditional credit history, it is still possible to obtain financing by documenting payment histories on items such as rent and utilities. Alternative credit history can not make up for a poor credit history meaning if you have credit history with missed payments and collections with a score less than 620, you can not provide alternative trade lines such as rent history, cable, electric, etc with a  good payment history to make up for the poor trade lines.

FHA loans also provide added flexibility when it comes to closing costs and the down payment. FHA allows for the seller to pay up to 6% of the purchase price towards your closing cost opposed to conventional loans only allowing 3%. The minimum down payment for FHA loans is only 3.5% while conventional loans require at least 5%.

The FHA down payment is extremely flexible and  may be obtained through many different facets. To list a few, a gift from a family member, down-payment assistance programs, collaterilized loans, and employee assistance plans. You may contact me for a complete list of down payments acceptable by FHA. FHA loans are processed just like any other loan, opposed to the old way where there were FHA inspections and god forbid if there is a stain on the carpet! Over all FHA loans provide a wonderful opportunity for consumers who are seeking to achieve home ownership!

Joshua Lerette - The Tampa Bay Mortgage Pro
Innovative Mortgage Services, Inc.
www.TheTBMortgagePro.com
Josh@TheTBMortgagePro.com
727-488-7355

Joshua Lerette, The Tampa Bay Mortgage Pro, is a mortgage specialist in St. Petersburg, Florida providing financing solutions for homeowners and homebuyers alike. The Tampa Bay Mortgage Pro specializes in First Time Homebuyer programs utilizing FHA, VA, and the USDA Rural Housing Loan.

This may come as a shock to many borrowers, but it's absolutely true. Mortgage interest rates are not set by the Federal Reserve and, contrary to popular belief, mortgage rates are not directly tied to the yields of US Treasury bills, bonds, or notes – including the 10-year Treasury Note. That's right. Despite what you might hear in the media, mortgage interest rates are actually set by lending institutions, and are based solely on the performance of mortgage-backed securities.

For years now, the media and inexperienced loan officers everywhere have suggested that the 10-year Treasury Note, a government-backed security, is directly tied to mortgage interest rates, that the two are separated by a specific interval – which is simply not true. The graph on this page, which shows interest rates for 30-year fixed-rate mortgages and the yield for the 10-year Treasury Note for 13 months, clearly demonstrates this fact.

At a quick glance, yes, it's easy to see why the mistake is made. As you can see, for 11 out of the 13 months recorded in the graph, the yield of the 10-year Treasury Note and interest rates for 30-year fixed-rate mortgages did follow a somewhat similar long-term path, despite obvious short-term divergences. However, take a closer look at the drastic change that occurs from January through March 2008. What's interesting about this graph is that, during this period, the Federal Reserve had cut interest rates six times, from September 2007, to March 2008, and yet mortgage rates were actually higher in March 2008 than they were a year before. Not only does this demonstrate that the yield of the 10-year Treasury Note is not pegged to mortgage interest rates, it also reveals that mortgage interest rates are not set by the Fed either.

Stop being misled. If you or someone you know is thinking about buying or refinancing a home, give us a call. We'll give the facts you need to make a truly informed decision.

Joshua Lerette - The Tampa Bay Mortgage Pro
Innovative Mortgage Services, Inc.
(P) 727-488-7355
josh@TheTBMortgagePro.com
www.TheTBMortgagePro.com

Joshua Lerette, The Tampa Bay Mortgage Pro, is a mortgage specialist in St. Petersburg, Florida providing financing solutions for homeowners and homebuyers alike. The Tampa Bay Mortgage Pro specializes in First Time Homebuyer programs utilizing FHA, VA, and the USDA Rural Housing Loan.

On May 29th, 2009 HUD/FHA announced the terms of the first time homebuyer tax credit and its use as a down payment assistance program. Read the entire HUD Mortgagee Letter 2009-15 by clicking on the HUD logo off to the right. Reader Beware, like many other ML's, you must be a lawer to dissect this information!

As we already know, Secretary Shaun Donovan released this information prematurely early this year at a National Association of Realtors summit. You may read this article for yourself. This Mortgagee Letter 2009-15 was quickly rescinded as Donovan did not check with the Offices of Management & Budget Officials prior to releasing the information. Ooops!

HUD finally has released the details of how a first time homebuyer may use their tax credit as a down payment!
Yay, jump for joy, right? Not so fast, like many of the other government programs, (cough) Hope for Homeowners, HUD's attempt to assist buyers has fell short once again.

There is two ways you may receive the first time homebuyer tax credit upfront and use it as part of your down payment on a FHA loan.

Option #1 Secondary Financing

This one is rocket science, HUD actually already allows eligible government agencies and instrumentalities of government to offer second lien's to be used as a down payment and closing cost. So what was the point of putting this in the letter? Considering if you read the last condition of the secondary financing, "The secondary financing may not require a balloon payment before ten years." So, if no balloon payment is allowed, then how would the agencies collect on the $8000 first time buyer tax credit. There is far too much risk for non-profit, government agency to issue a second mortgage based off the receipt of an $8000 tax credit that they can not require to be paid off right away.

Option #2 Purchase of Tax Credit

This options simply doesn't matter as ML 2009-15 clearly states that the funds derived from the sale of the tax credit can not be used as part of the 3.5% required minimum down payment on FHA loans. It may only cover an additional down payment, cost of buy down, and or closing cost. Now, if I'm a first time home buyer, why would I request my tax credit up front just to pay for my closing cost when I could ask the seller to pay up to 6% of  the purchase price towards my closing cost on a FHA loan. I would rather keep that $8000 tax credit in my pocket and utilize the full benefits of FHA financing.

Summary: Another fantastic flop by HUD! Why announce that you will allow a tax credit to be used as down payment assistance when in fact it can not be used for your minimum contribution of 3.5%. The real funny part, government is trying to eliminate mortgage brokers through HR 1728 because there thoughts are that brokers were manipulative and misleading. Talk about the pot calling the kettle black!

Joshua Lerette - The Tampa Bay Mortgage Pro
Innovative Mortgage Services, Inc.
(P) 727-488-7355
josh@TheTBMortgagePro.com
www.TheTBMortgagePro.com

Joshua Lerette, The Tampa Bay Mortgage Pro, is a mortgage specialist in St. Petersburg, Florida providing financing solutions for homeowners and homebuyers alike. The Tampa Bay Mortgage Pro specializes in First Time Homebuyer programs utilizing FHA, VA, and the USDA Rural Housing Loan.

With today's combination of lower home prices, some of the lowest interestrates the industry has ever offered, and the $8000 tax incentive for first-time buyers, buying a home has never been so attractive. The only real hurdle left for many Americans is coming up with a down payment. With this in mind, I have put together some of the most frequently asked questions I get about down payments in today's market.

Q. Are there any no-down payment programs left?

Yes. While it's true that most of the popular no-down payment programs disappeared in the wake of the subprime mortgage collapse, there are still two longstanding government-backed programs that offer mortgages with no down payment: the USDA Rural Development Program and the VA Loan Program.

A USDA Guaranteed Loan is a government-insured, 100% purchase loan. This means there is no down payment required if you – and the house you intend to buy – qualify for the program. Not all areas qualify, but you'd be surprised at how many neighborhoods in your area do. If you intend to purchase in Florida and are intrested to see if your potential property qualifies for the USDA Guaranteed Loan, you may check for eligibility at the USDA website. There are income and other limitations, but if coming up with a down payment is challenging, you might want to consider this program.

If you or your spouse is a military veteran, you may qualify for a 100% financed loan from the US Department of Veterans Affairs. More than 29 million veterans and service personnel qualify for this service benefit. Give us a call to find out if you're one of them.

Q. Are there any other government-insured programs that can help someone struggling with a down payment?

Yes. In 1965, the federal government created the FHA loan programs to encourage homeownership throughout the country. FHA-insured mortgages offer many benefits, including a minimum down payment of 3.5%. FHA-insured loans have grown in popularity recently due to the seller's ability to pay closing costs up to 6% and a temporary increase in loan limits up to $729,750 in certain high-cost areas, which allows more potential buyers to utilize this program. If you are interested in a FHA mortgage in Florida, here are the latest Florida County Loan Limits.

Q. May I use a gift from family members as part of my down payment?

Yes. In many cases, immediate family can provide monetary gifts to be used as a down payment. There are restrictions of course, and strict documentation will be required, but we will gladly walk you through the finer details of this process. Be sure to mention this option when you're filling out an application with us.

Q. May I use funds from my IRA for my down payment?

Yes. First-time home buyers can use funds from an IRA under certain circumstances for a down payment. The rules regarding this option, however, can be complicated, especially with a Roth IRA, and it's important to understand any and all tax implications before tapping into these accounts. Please talk to your tax professional before making any decisions. If you don't have one, we'll gladly refer you to one we work with on a regular basis.

Q. May I use the $8,000 tax credit as my down payment?

No. At the time of the writing of this article, qualified first-time home buyers do not have direct access to the $8,000 credit to use as a down payment. In May, HUD officials made an announcement to the contrary, but statements backing the announcement were quickly withdrawn from the HUD website. This doesn't mean that HUD and lawmakers will not allow this in the future. For complete details you may read my blog about the $8,000 tax credit. We're following this issue closely and will let you know if anything changes.

Joshua Lerette - The Tampa Bay Mortgage Pro
Innovative Mortgage Services, Inc.
(P) 727-488-7355
josh@TheTBMortgagePro.com
www.TheTBMortgagePro.com
Joshua Lerette, The Tampa Bay Mortgage Pro, is a mortgage specialist in St. Petersburg, Florida providing financing solutions for homeowners and homebuyers alike. The Tampa Bay Mortgage Pro specializes in First Time Homebuyer programs utilizing FHA, VA, and the USDA Rural Housing Loan.

Credit scores arecomprised of five factors. Points are awarded for each component, and a high score is most favorable. The factors are listed below in order of importance.


Paying debt on time and in full has the greatest positive impact on your credit score. Late payments, judgments and charge-offs all have a negative impact. Delinquencies that have occurred in the last two years carry more weight than older items.When it comes to collections, there is a general rule of thumb. Any collections within two (2) years should be paid off. Any outside of 2 years should be left alone. As stated before, your last two years history is the most important. So anything outside of two years that is paid off will bring it to a current status and negatively impact your score.


This factor marks the ratio between the outstanding balance and available credit. Ideally, the consumer should make an effort to keep balances as close to zero as possible, and definitely below 30% of the available credit limit at least 2-3 months prior to trying to purchase a home. If you have had some mistakes in the past, i.e. late payments, collections, and are trying to repair your credit, it is important that you use your credit cards often, but pay them off completely. This will help to establish new "good" credit.


3. CREDIT HISTORY - 15% IMPACT

This portion of the credit score indicates the length of time since a particular credit line was established. A seasoned borrower will always be stronger in this area. Too often I run in to potential buyers that had closed a credit card after they paid it off thinking it will help their credit score. The opposite is actually in effect. You want to keep your most established accounts, and if anything close newer accounts.


4. TYPE OF CREDIT - 10% IMPACT

A mix of auto loans, credit cards and mortgages is more positive than a concentration of debt from credit cards only. You should always have 1-2 open major credit card accounts.


5. INQUIRIES - 10% IMPACT

This percentage of the credit score quantifies the number of inquiries made on a consumer's credit within a twelve-month period. Each hard, i.e. auto loan, mortgage, credit card, inquiry can cost from two to 25 points on a credit score. Lower score clients will actually have a larger decrease in credit scores by inquiries than a better score borrower. Note: When shopping for large ticket items such as an auto or a mortgage, credit pulls from the same industry done within a couple of days will not have as great of an impact as if you were to have your credit pulled from a credit card company one day, and a auto dealer the next. It is understood that you shop and therefor credit inquiries will be made. The maximum number of inquiries that will reduce the score is ten. In other words, 11 or more inquiries within a six to tweleve-month period will have no further impact on the borrower's credit score. Note: If you pull a credit report yourself, it will have no effect on your score.

Remember that the credit score is a computerized calculation. Personal factors are not taken into consideration when a credit report is generated. It is merely a snapshot of today's credit profile for any given borrower, and it can fluctuate dramatically within the course of a week.

Your Credit Score - What It Means to You as a Prospective Home Buyer

Part I - The History of Credit Scoring

Your Credit Score - What It Means to You as a Prospective Home Buyer

Part II - Why Your Credit is So Important

Joshua Lerette, The Tampa Bay Mortgage Pro is available for all of your St. Petersburg, Florida mortgage needs.

The credit scoring model seeks to quantify the likelihood of a consumer to pay off debt without being more than 90 days late at any time in the future. Credit scores can range between a low score of 300 and a high score of 850. The higher the score, the better it is for the consumer, because a high credit score translates into a low interest rate. This can save literally thousands of dollars in financing fees over the life of the loan. Only one out of 1,300 people in the United States have a credit score above 800. These are people with a stellar credit rating that get the best interest rates. On the other hand, one out of every eight prospective home buyers is faced with the possibility that they may not qualify for the home loan they want because they have a score falling between 500 and 600. Finding out what your credit is prior to applying for any credit is crucial. After all, you do not want to be that one out of 8 home buyers that is denied for credit.

The subject of credit scoring has become an increasingly hot topic, and for good reason. For many years, the general public only associated the concept of credit scoring with the need to purchase high-ticket items such as a new car or a home. Today, credit scoring goes much further. Your credit score can affect your ability to get a good rate on commodities such as car insurance, cell phones, or even determine whether or not you get the job or promotion that you want and deserve. Indeed, the financial snapshot provided by the credit score has also become a gauge for many employers, especially those who seek to place employees in a position of management or financial responsibility.


The credit score system used today has evolved since the 1950s. It was originally designed to provide lenders with financial profiles on consumers who wished to borrow money. The lenders' biggest concern was whether or not an individual had the ability to repay a loan, and establish what percentage of risk might be involved. Congress passed the Fair Credit Reporting Act in 1971 to establish guidelines for fair practices in regard to the use of credit scoring. This law was designed to promote accuracy in reporting and protect the privacy of consumers. In light of the increased use of credit scoring and a growing fear of identity theft, recent legislation has been passed to further protect Americans and improve consumer awareness. The Fair and Accurate Credit Transactions Act of 2003 (sometimes referred to as The FACT ACT or FACTA) was signed by President George W. Bush on December 4, 2003. This amended the Fair Credit Reporting Act, enabling each American to obtain one free credit report every 12 months from each of the three main credit reporting agencies (CRAs); Equifax, Experian® and TransUnion®. Those bureaus have created a central web site, www.annualcreditreport.com, to accommodate Americans who wish to obtain copies of their credit report.

Your Credit Score - What It Means to You as a Prospective Home Buyer

Part II - Why Your Credit is So Important

Your Credit Score - What It Means to You as a Prospective Home Buyer

Part III - The Five Factors of Credit Scoring

Joshau Lerette, The Tampa Bay Mortgage Pro is available for all of your St. Petersburg, Florida mortgage needs.

The following is an article from The National Association of Realtors:

Daily Real Estate News | May 18, 2009

Detailed guidance on the federal government's plan to provide short-term loans to borrowers using the First-Time Homebuyer Tax Credit is expected to be out shortly, but a spokesperson from the U.S. Department of Housing and Urban Development, which is writing the guidance, couldn't give a firm release date.

HUD policy staff are "still working out the details on it," HUD spokesperson Lamar Wooley told REALTOR® Magazine today. "So we expect it to be published shortly."

The short-term loan program, which would effectively monetize the first-time homebuyer tax credit by permitting eligible lenders to make bridge loans collateralized by the borrower's expected tax credit, was announced by HUD Secretary Shaun Donovan at the Real Estate Summit NAR hosted on the opening day of its 2009 Midyear Legislative Meetings in Washington last week.

At the summit, Donovan said the loans would enable FHA consumers to access the tax credit funds when they close on their home loans so that the cash could be used as a downpayment.

"FHA will permit trusted FHA-approved lenders and HUD-approved nonprofits, as well as state and local governmental entities to 'monetize' the tax credit through short-term bridge loans," Donovan said. "We think the policy is a real win for everyone, ensuring that borrowers can tap into the numerous organizations that are already part of the FHA network to receive this additional benefit. FHA will be publishing the details shortly."

It's unclear at this point what shape the guidance will take and whether authorization for the loans will be available across the board or only in states in which the state housing finance agency already has a tax credit bridge-loan program in place.

There are 10 states today that have such a loan program, according to the National Council of State Housing Agencies: Colorado, Delaware, Idaho, Kentucky, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania, and Tennessee.

You can access details of these loan programs on the NCSHA's Web site, "First-Time Homebuyer Tax Credit Loan Programs."

When it's released, the guidance is expected to be issued as a HUD Mortgagee Letter and will likely discuss which federal, state, and local governmental agencies and nonprofit organizations will be permitted to make the loans, and whether lenders such as FHA-approved mortgagees will be permitted to make the loans.

The guidance could also cover how loan amounts will be limited, what happens if repayment problems occur, and what repayment terms would look like.

REALTOR® Magazine will be checking with HUD regularly on the status of the guidance and will report its availability as soon as it's issued.

—By Robert Freedman for REALTOR® Magazine

Hopefully the tax credit loan will be put in place with enough time for potential home buyers to take advantage of it. With short sales and REO's taking a couple of months for approval and underwriting turn times taking longer than before, time is ticking.

If you have been looking to refinance your existing mortgage only to find your value has dropped and refinancing was not an option, help has finanlly arived. In response to the Homeowner Affordability and Stability Plan (HARP), Fannie Mae's Home Affordable Refinance Program, or other wise known as Making Home Affordable, has finanlly been made available for home owners in need of refinancing. The Home Affordable Refinance program is available to any home owner with a current loan that was sold to Fannie Mae. To find if your loan was sold to Fannie Mae, visit http://www.fanniemae.com/index.jhtml.

Features of the Fannie Mae DU Refi Plus Program include:

• Loans must be a Full Doc loan with salaried borrowers submitting one paystub and self-employed borrowers qualifying off last year's federal income tax return.
• Up to 105% Loan to Value.
• No maximum Combined Loan to Value.
• All existing subordinate financing must be re-subordinated. New subordinate financing not allowed.
• No minimum credit score requirement.
• Standard conforming, and high balance loan limits are eligible.
• All existing loan types are eligible, as long as it was sold to Fannie Mae.
• No seasoning requirement.
• Salaried borrowers require one month paystub; self-employed borrowers require one year’s federal income tax return.
• If you current mortgage did not require Mortgage Insurance (MI), your new loan will not require MI.
• Program available to single family homes, 1-4 units, condos, townhouses, second homes, and investment properties

To find out more about the program and to see if you qualify, contact The Tampa Bay Mortgage Pro.

Joshua A. Lerette - Home Loan Specialist
The Tampa Bay Mortgage Pro
727-488-7355

With the number of REO properties increasing, Fannie Mae has decided to follow Freddie Mac in offering the HomePath Mortgage. HomePath financing is available for Fannie Mae REO’s with the HomePath logo found on HomePath.com.  There are approximately 200 homes available in the Pinellas County Region today that are eligible for this financing.  I’ve personally noticed a significant increase in questions about this financing so I thought I would cover the basics. 

Here is a quick synopsis of the HomePath Mortgage:

• Minimum 5% down for primary residence, 10% down investment property 
• Borrower can own up to 10 financed properties (but need 25% down if they own more than 4)
• NO APPRAISAL NEEDED
• NO MORTGAGE INSURANCE
• High balance (jumbo) and interest only products available
• Seller contributions can be 6-9% on primary residence (the larger the down payment, the larger the allowable contribution), only 2% on investment property
• This loan does price with a higher rate than your average 30 year fixed conforming loan.  If you want an equivalent rate to the going 30 year fixed, this loan would price with an additional approx 1% to 3.75% discount points.  Keep in mind, much of this can be covered by the seller and there is no mortgage insurance.  Of course one can just opt for the higher rate in lieu of the discount points.
• Same basic underwriting requirements of a conforming loan, but without the property issues (appliances missing - no problem)

This program is especially perfect for seasoned investors or even first time investors. For anyone who has been in investing knows that guidelines for investment properties tightened greatly over the past few years. Now, you have the opportunity to buy very reasonably priced homes with as little as 10% down with fantastic interest rates and NO MI. I personally think this is a fantastic program that will help you take advantage of a wonderful market to buy your first home or buy your next home! Take advantage of a down economy and invest in your future.

Joshua A. Lerette - Home Loan Specialist
Innovative Mortgage Solutions, Inc.

 

Visit Me at www.TheTBMortgagePro.com