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FHA Loans Rumor Alerts - 3% seller concessions & FICO scores - Part 1 of 2

Extremely Important as of January 20, 2010 – New changes have just been announced. Please read :

FHA Loans - Some rumors are now reality - Important information about FHA mortgage changes !!!

FHA Loans & FHA Mortgages - Rumors – Important Information

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In the last several months, I am still hearing about some rumors about FHA loans that aren't true. They are basically of opinion and speculation. I wrote this blog back in the beginning of October of 2009. It will give you a good idea about what rumors that I am talking about.

FHA loans to 5% down? No seller concessions allowed? Rumors? - The government at its BEST again !!!!

What rumors am I still hearing? The biggest one is that the FHA seller's concessions has gone from 6% to 3%. This is also known as seller's help. Yes, it was talked about in September and October. Someone in congress tried to get this to pass, but it never made it through.

flipping a coin

This part is extremely frustrating to me, especially when the majority of the time, I am reading this kind of information in a realtors blog post. And it's doubled that when I hear it from a loan officer. It's almost like people are just flipping a coin about this, not caring too much if the information is accurate, just hoping to make the phone ring. The reason I say this is because I am seeing and hearing more of these tactics from loan officers when it comes to credit scores. I will talk about this example in my part 2 segment in a few days.

What it comes down to is the FICO scores, aka Credit Scores. The standard score for many mortgage companies is 620 and there are some that have a cutoff of 640. Yes, there are a few that will go below 620, all the way down to either 539 or 580.But the problem here that many don't understand is that these types of loans with the under 620 score can't be sold to other investors on Wall Street. So these companies will now portfolio these loans. I will talk about this in greater length in Part 2.

On the other hand, when it comes to FHA loans, they don't have a credit score cutoff. Under FHA, you can actually have no credit scores with no credit. Yes, this is still allowed, but find a lender that will actually do this type of loan. Another part of what is called lender overlays. Lender overlays is basically the lender adding more rules and guidelines to the mandatory guides that are set by HUD/FHA and others such as Fannie Mae and Freddie Mac. And under FHA's guidelines, you could still have under a 500 credit score, but you would need 10% or more down. This has not changed since I wrote about this update.

FHA loan changes about credit scores as of October 2008

Summary : Overall, you just need to be very careful to where you get your updates from, no matter if it's from a trusted realtor or loan officer. The internet can be powerful,yet it can be damaging, depending on where you get your information from and from whom. Just because one says that they are an expert, might just be good advertising to gain your trust. Or because they think they are an Expert. Keep in mind, an Expert is one that doesn't know it all, at least this is my opinion. Please read below for more on this topic.

To be or not to be an Expert, that is the question. So, the question is, who has the answer.

And keep this in mind, what I talked about above is because some people are stating this information as fact now. Yes, HUD is still talking about some of these changes and so is Congress. And we could see some changes in less than a month. But to me, it's a rumor until it becomes a true hard fact that would be reality.

FHA Loans Rumor Alerts - 3% seller concessions & FICO scores - Part 1 of 2

FHA Loans Rumor Alerts - You don't need 10% or 20% down & more about credit scores - Part 2 of 2

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

HUD

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

Posted by Jeff Belonger-The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans on 01/19/2010 11:42 AM

Comments (35)

Fha Loans Rumors in the Mortgage / Finance Channel

fha loans rumors, fha mortgages rumors, fha loans, fha mortgages, fha seller help, fha seller concessions, fha fico scores, fha credit scores

Originally posted at: FHA Mortgage Expert - Tri-State Area - New Jersey/PA/Delaware: FHA Loans Rumor Alerts - 3% seller concessions & FICO scores - Part 1 of 2

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35 Comments on FHA Loans Rumor Alerts - 3% seller concessions & FICO scores - Part 1 of 2

JAN

2010

Jeff: I really hope they do not take the seller's concessions down to three percent. The six percent is one of the few ways sellers can help buyers in today's market. Thanks for keeping us up to date.

The government is entertaining every type of "killer minimum" they can think of.

5% down

No financing up front MIP - That will mean $Thousands more cash needed to close.

No seller help.

Minimum credit scores.

Why don't they just kill off the FHA loan.

They could have raised the MIP premium 6 months ago and been on their way to legal solvency. This ignorant administration would prefer to simply kill off the FHA loan, period when they can't figure out what to do.

Thanks for the updates. I am now following you on twitter.

Jeff, thanks for the information. FHA is by far the most popular financing source for my clients... VOer 90% of my buyers utilized FHA in 2009.

I think that there are so many people that don't understand all of the flexibility, but some of the challenges with FHA. Yes...you can go below 620, but no....Wall Street won't buy those loans, therefore the loans will be more difficult to obtain and, as a result, they're more costly. But yes....they do exist....

There is so much disinformation out there. Good information JB.

Jeff, thanks so much you are always on top of it.

Hey hope you had a good time at Rain Camp.

Jeff, thanks for the update. What's the story with FHA condos... are they still going to wipe out all the complexes which have not been approved in the past 2 years? That's what the rumor mill says...

Until I see a HUD Mortgagee letter stating changes I don't believe them. I also (like you) don't appreciate professionals publicizing rumors and portraying them as facts. That gets under my skin big time..

the reason you are hearing the 5% rumour is because there are actual hearings on that

KAREN... . well, it would be stupid. One theory of doing this is because seller's raise the value of the house to compensate what they give back to the buyer. There is some theory with that which has a point, but if you have really good comps of other homes in the area... it's just the govt being the gov't.

LENN.... . you bring up some other excellent points that I didn't mention. Overall, in realty, there has been some talk to kill of FHA and let the market get back to itself. Now, it's some idiots way of thinking that we need to make buyers put more money down.... but why not just make certain restrictions or higher debt-to-income ratios. Overall, this is just horrible thinking... crap people... get with the program, it's the economy, not so much these mortgage programs.. and the lack of jobs. I wish they would wake the "f" up.

JEFF.... . my pleasure and thanks for following me.

ANGELA.... . it has increased tremendously in the last 2 years. In my opinion, it's been mis-managed by HUD and now they are blaming it on other reasons and issues. FHA loans are and will be a vital part of us trying to get out of this mess, if done properly. thanks

LARRY.... . yes, there is tons of disinformation out there... and i will talk in more detail, in Part 2, about the credit scores and why some companies will and can go lower... and how this works against so many. thanks

MISSY.... . my pleasure stranger.. it's been a long time.. and yes, it was a good time and it was great to actually talk to your daughter some and to hang out, considering that she was sick last year.

BARB... . I am not sure what you mean by wipe out. I just sent you an e-mail and will try calling you. But there is a requirement that all FHA approved condos be updated in the system every few years. I am not sure if it's 2, 3, or 5... I will find out. But you can't do spot approvals now. The whole condo association must be FHA approved now. Please let me know it his is what you meant.. thanks

KRIS.... . I agree, until i see a HUD mortgagee letter or read something that HUD put out on their website. And yes, I definitely hate hear this stuff from realtors and even loan officers, that have no clue in what they are talking about.

GREATER MORTGAGE SOLUTIONS aka GENE.... . I agree with that. I wrote about that in the beginning of October. But here is my question to you... should we keep writing about stuff that floats around in congress, that hasn't materialized, and make it sound like fact? What I read never said that this might happen. I have read articles about the 5% down and the seller help going from 6% to 3%, and they made it sound like this is a done deal. It's not... they have been talking about this for more than a few months now... and it's still 3.5%.

Overall, my whole point to a blog post like this one is to kill such rumors, even if these things are in the works. Because you know why? It's not real yet. And it might never become real. We need to post stuff like this to make not only the consumer aware, but other like-minded individuals that might think otherwise. Again, just my opinion on that... but until it's a guideline and not just bar chit chat, it's a rumor. Because it's not true... at least not yet. thanks for your input.

Rumors are gossip (usually a mixture of truth and untruth) passed around by word of mouth. Being that it is a combination of things, there is some truth to it. The key is finding out what that truth is. I wait until HUD puts out the mortgagee letter before I believe it. Plenty of people spreading rumors about FHA don't even realize that FHA is an insurer of loans. Consider the source of the rumor before spreading it or believing it!

Sometimes rumors and hype spread misinformation. Glad to read your blog on this matter.

Public perception needs to have sources to verify the information such as the links to the FHA info which you are bery good at providing Jeff. Be the source of the source. That is how you make the rumor mill grind to a halt. :)

Rumors are a powerful thing! I bump into people nearly every day that that ask me things that always seem to start with "My neighbor told me (insert rumor here)" At least they ask me about it so I have the opportunity to set the record straight!

KYLE... . you hit the nail on the head. Yes, there is some truth to this, that HUD has even said there will be changes in the near future. But, the reality of it is, for now, it's not a fact. It's all talk and assumption. And I will be talking about this in my part 2 and in an update later this week. All I wanted to do here was to say that it's a rumor now, not a fact. thanks

MELISSA.... . isn't that the truth.. or is that a rumor? Wait, or is that fact... lol Thanks for your input

ALLISON.... . thanks for the kind words of wisdom... to me, even though this is still being talked about, and they might come out with a new guideline soon, this is still a rumor. It's not a hard fact, hence why I felt I needed to write about this.. thanks

BRIAN & MARIE.... . you have to love that one. I have one better, which I will be explaining in my part 2 blog. I have talked to a few potential borrowers lately that have said their loan officer told them that it was a FHA guideline. And for the most part, it wasn't. It was that lender and or investor that had investor overlays, tightening up on the FHA guideline. But the loan officer doesn't make this clear and just blames it on FHA>.. sad and lazy... thanks

Great and straight FHA information, thanks for the post.

Jeff, well-deserved feature here! I get nuts when some congressman introduces a bill or a regulatory agency issues a rulemaking proposal, and it shows up like the new law of the land.

Curtis Hall who helped create the ABR designation always said "Don't be the source, be the source of the source"

If you are going to make a statement, you better know your source. According to blank the FHA is going to blank.

Jeff: Thanks for the update. I just read on yahoofinance.com that FHA decided not to touch the 3.5% down amount but is going to raise the upfront MIP to 2.25%. Also, minimum credit score will now be 580 although we couldn't do loans below 620. Take care.

Jeff..thanks for the informative post. If people would just take a few minutes a day to read industry news we would all be better served. Case in point, front page of the WSJ has an article regarding the state of the FHA and what MIGHT happen, not what has happened.

Jeff, great info as always, thanks

Jeff,

It is good to know that you can read your information and know that what you read is what it is, and not a gossip, not a rumor, not a half truth. Because we can easily take the rumor for the true thing... and be wrong

Thanks for the info, Jeff. The chanegs are not necesarily going to help buyers. We already have issues becuase so many condos do not qualify for FHA financing.

Jeff

JAN

2010

If they kill FHA then they basically kill the market for for many first time buyers. Can't wai to read Part 2

JAMES.... . thank you very much for the compliment.

PATRICIA.... . first off, thanks... secondly, yea, that definitely drives me nuts also. But what drives me even more nuts is the fact that this is not fact yet... it's rumor, because the gov't has been talking about it... and so has FHA/HUD... but it's not a guideline yet... which means to me that it's rumor or hear se... but not implied yet. thanks

MICHAEL... . I understand your first part of the comment... but I have to be honest, you lost me on the end of the 2nd part. Here is what you said... "If you are going to make a statement, you better know your source. According to blank the FHA is going to blank."

My question is, what does the underlined part me? thanks

PAUL.... . I didn't check yahoo finance yet, but do u have a link to the article stating this? In regards to the credit score part... well, I could see this... but again, as you stated, it wouldn't matter. Investors on Wall Street aren't buying those types of credit scores anyhow... which I will talk about in part 2. thanks and thanks for the good feedback.

MICHAEL.... . I will agree and disagree with you... because not all industry related news is correct or true. Hence why I partially wrote this blog. As I mentioned, I have seen some people actually write about the 5% down and or that seller help has gone to 3% now... and that is not true. So, if you believed everything you wrote, meaning that you read all industry related stuff, you would be getting some wrong information. Just food for thought... In any case, thanks for the kind words.

DAVID..... . thank you very much for those kind words and for stopping by. thanks

JON... . I truly appreciate those kind words... but I will be honest.. I am always fearful of what I write, because I am human and can make mistakes. But because I preach so much in my blogs, or try to dig up information... and because things change so quickly... and that I do have many that look to me for this kind of information... I just would hate to let anyone down that one time... hence the word Expert... an expert doesn't know all... that is a Clavin.. lol Cliff, from Cheers... Anyhow.. thanks for the comment.

JEFF.... . well, I think those of us that have that kind of common sense should know that. It's those in office that try and get the vote from others... or do the favors, or cursh things... just because it would benefit them, and not the average consumer. I kind of wrote about this and the mentality of the gov't and their greed in this post. Are we living in an era of nuts and bolts? thanks

Both Yahoo and CNN came out with similar articles yesterday, but again who knows where they are getting it from. I checked all sources FHA and nothing yet. When we get it from the horse's mouth, then we will know what the facts are.

Great post Jeff- a well deserving feature.

Gerry Suarez, Jr.

Your FHA Loan Pro!

I was looking for information on FHA but all I read is don't trust people I trust? oookkkay?

"Overall, you just need to be very careful to where you get your updates from, no matter if it's from a trusted realtor or loan officer. The internet can be powerful,yet it can be damaging, depending on where you get your information from and from whom. Just because one says that they are an expert, might just be good advertising to gain your trust. Or because they think they are an Expert. Keep in mind, an Expert is one that doesn't know it all, at least this is my opinion."

wow.

What, as an FHA buyer, am I to do with this information? I don't know? I think I'm more confused now that I read this.

Great post! I understand FHA looking at loans from a risk factor. I'm sure you may know this but alot of the general public doesn't know, is that Dave Stevens the new "head" of FHA was the former CEO of Long and Foster. He was well aware of how many FHA buyers are out there and how important they are to strength of the real estate market, I know they have to asses risk, but in some markets they are 50-80% of the buyers, this is going to make it harder on everyone.

I think the one rule FHA has come out with recently that may be a good thing is lifting the 90 "flip" rule for one year. Good info!!

Jeff, thanks for posting this. It's like last year when the $15,000 tax credit was rumored and how many times did I see it in writing like it had been passed? Also appreciate the informatin about FHA loans, credit scores and lender overlays - love knowing that term. It makes more sense when you explain it like that.

JAN

2010

Jeff, thanks for the posting. I hope they leave at least the 6% sellers concession other wise first time home buyers with little money won't be able to make it.

JAN

2010

It will be very interesting to see where this heads. Right now the new rules are being published in the Federal Register for the mandatory "comment" period. Hopefully NAR and other consumer advocate organizations will chose to comment on these new rules. It will be interesting after the comment period to see how Dave Stevens, the FHA Commissioner rules. Having worked with Dave when he was a Sr. VP and then President of Long & Foster, I have found him to be a very thoughtful and considerate person looking at all sides of an issue before making a decision. My hope is that he reamins that way during this time.

JAN

2010

Jeff ~ Awesone content. Sounds like FHA doesn't want to loan any money!

SEP

2010

Hey Jeff - Did the allowable seller credit change from 6% to 3% earlier this year (like around May)? I thought it did but can't find anything on it. I figured you would know!

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