Jeff, great post and so easy to understand. YOU are my FHA lender and resource.

I predict the answer is almost 'yes'. Sad, but true. But that's what whining will get you.

They don't call you the FHA Expert for nothing!  Excellent Post!  Thank you for the reference.  This just goes to show you that we are moving back into an FHA world. 

MISSY....  now I am blushing...  ;o)  Seriously, thanks for those kind words. I just wanted to point out to everyone on how to look at this and that the end of the world is not here.  thanks

JENNIFER......   huh?   Whining will get you what?  But yes, yes, yes. But yes to what?

REY....   moving back to an FHA world?  I never left that world. My last 7 closings, 5 of them were FHA...  either less than perfect credit or no much money to work with.... and 2 of them... both. But seriously, thanks for those polite compliments. Much appreciative.

This latest administration move is simply another in a long line of ideas that go nowhere and do nothing. Nice post Jeff

What about the write offs from using conventional and not paying PMI.  Is the savings still that great?

J.

KAYE...... I totally agree.  Talk about going backwards for being greedy in the previous years. It's going to affect so many new home buyers now. Especially, in my opinion, to those that go to lenders that don't offer FHA mortgages.

JEFF K. ....   you make an excellent observation. I didn't bring this up because of 2 reasons...  first off, it's just plain confusing to explain in an e-mail. 2nd of all, I even had a conversation with a loan officer last week who told me that they were even having a difficult time with some MI companies, not approving his loans. I said.. what about lender PMI.... he said, no, it wouldn't do anything for them.  I said, I disagree and that it could save them money, depending on how long that they would be in the house. This is a post I did a year ago.  PMI (Private Mortgage Insurance); why you need it and the different types of PMI……  Overall, FHA would be better if you were to stay in your house for 3 plus years....  You need to add about 3/8% to 1/2% on the No MI rates. With these penalties, you will even have higher rates now. And what's sad is that I would bet that 50% of all loan officers out there don't even know the difference between the different types of MI and No MI...

And I just did a no MI rate mortgage comparison. Your payment would still be $24 more and the loan amount would be $1,100 more. So hopefully that will answer everyone's question. Thanks for bring this up. 

Jeff   Thanks for the quick response.  My first loan was FHA  the guidelines are great and helped me get in a lot easier.

J..

Jeff superb post! Sometimes we have to move back a little bit to move forward alot.  Great references. Have a great day and keep the awesome posts coming! I enjoy reading.

I love the side-by-side comparison charts. I have to admit, the mortgage posts are frequently over my head. But I keep reading them because I want to understand. Thanks of continually explaining, and breaking it down into a more easy-to-understand format =)

Our prices are so high in the DC area that I have not seen any FHA financing.  This was a great explanation of how to look at any program vs another so you can see long term consequences of your decisions.  It's a good explanation for anyone in any market that it's always more than just the rate!

The answer to this question is Yes and No.

 Yes, conventional agency lending guidelines will absorb the subprime markets product.

 No, conventioal agency lending guidelines will not emulate the "guidelines" Wallstreet utilized to underwrite subprime loans.

Subprime lenders did not demonstrate any measurable ability to effectively maintain satisfactory lending compliance, tangible benefit calculation, or predatory lending process, procedure or policy.

I will be glad when the last one turns out their lights.  Speaking from experience, wallstreet organizations attempting to operate mortgage origination platforms was very bad idea.

Matthew Starr Longwell

. 

JEFF K. ..... my pleasure. And I just sent you an e-mail explaining that I added to my response to you. It would be even less than 3 yrs. thanks again.

MAREY...... thank you very much for the kind comments.  I love breaking things like this down, because we could assume so much. Or, listen to someone selling one specific feature, making it sound good, when it really might be good for you. And probably because that person or company doesn't even have the other program, which could have been your better choice.

LISA H. ...... you don't need to fully understand mortgages. That is why you have mortgage professionals and you have realtors.  In any case, thanks for reading and thanks for the compliment.

JOSETTE......  I would agree that several areas and markets can't use a FHA mortgage. Hopefully that will change in January of 2008, when they should come out with new loan limits. I truly hope that they don't rethink this decision because of what is happening in the market.  Thanks for you feedback.

Thanks for the great post. It is always good to be more educated on different types of mortgages. I appreciate you sharing the wisdom.

For updated information about the Pensacola real estate market, visit my blog at Pensacola Real Estate News.

Good posting.  I see your point between conventions and FHA.  However, I don't think these difference are in the legue of the subprime as far as high risk for foreclosure.

Jeff,  Always look forward to your posts.  keep bringing the good stuff !

Jeff- Absolutely right, it's good to break things down and let them know everything up front, gives them more options. :-) So they can choose the best choice.

Jeff-excellent information for those like me, who could benefit from understanding the differences. In the Princeton market with the home prices so high, I hope like you said it would be something available next year.

Hey Jeff - you are an amazing resource for the straight talk about these loans, and truly an expert resource for all things FHA.  I wish you worked my marketplace!

Ann

I heard someone say it's as if we have borrowed buyers from the future because of the creative financing.  In California, we aren't looking so much for a bottom price, it's more of a monthly payment.  Many economists don't truly include the emotional side of buyers.  The money they are willing to throw at a monthly home payment is different depending on the market.  Buyers in the next few years will be much less likely to want a major portion of their paycheck to go to a mortgage payment. 

The trick is, how do we find these new first time buyers? 

YES - conventional loans will likely be just like the subprime mess. Because all this whining is causing congress to write BAD legislation that will make it this way. But you already KNOW this Mr. Mortgage Guy!! :-)

Jeff,

An excellent explanation about the benefits of the FHA market.  It was helpful to me becasue i really have little experience with FHA's.

Wonderful explanation of a complex subject.  Will be suggesting FHA more often for borrowers.

I like FHA loans for clients personally.  I hope the raise the ceiling so more CA buyers can take advantage of the programs. 

Great post.  FHA is a great option.

MATTHEW.....  I do agree with your last statement, ... "wallstreet organizations attempting to operate mortgage origination platforms was very bad idea."  This is so true.  Thanks for your feedback.

KARL....  my pleasure and thanks for the polite compliments.

SCOTT.... in my opinion, homes are just not foreclosing because of the subprime issues. That is the general public and the media talking. A lot of it comes down to education, letting people know what to try to do before they go into foreclosure, and job stability. ... and so many other things. On another note, thanks for the compliment.

BILL.... thanks for stopping by and for those kind words.

MAREY.....  I agree about breaking it down. What's sad is that so many loan officers don't know how to or want to. I worked with a guy once that told me he put people in subprime loans that could go FHA because it was easier for him. Overall, just very sad that some clients don't get the chance to know what their choices are.

FAINA.....  what are your average prices in the Princeton area?  And thanks for stopping by and for the polite words.

ANN.... well, thank you very much for those thoughtful and kind words. In regards to working in your market place, is 320 miles too far?  ;o)   And I am serious about that ......  again, thanks for those kind words.

AARON.... the trick...  well said. Maybe family's can double up and live together....  lol  Seriously though, you make a great comment in the first sentence that could be a title of a blog. You make some great points. Thanks for your input and feedback.

JENNIFER.....  exactly right. Congress needs to step back and let it run its course. Thanks Ms. Realtor.  ;o)

DIANE..... My pleasure and I am glad that it helped some.  Thanks for the compliment.

MARSHA.....  thanks for the polite compliment. If you ever have any questions, please don't hesitate to ask.

MELINA......  don't get me wrong, Conventional is just as good.... but with the changes, consumers need to talk to a mortgage professional that can offer every type out there.  I hope they do raise them and enough to help out areas as you mention.

ALAYNA.....   I agree and thanks for the compliment.

Hello Jeff,

Good detailed post.. The people without 5% down will have to rent or get disciplined enough to save the money. I sit with people in foreclosure, behind in their mortgage by 6-8-10 months, and they still don't have a dime to put down on a house..I agre that the FHA business is going thru the roof in the future, but that underwriting standards will greatly improve. As they should. Accountability is not a dirty word. Good hardworking credit worthy borrowers\buyers will pay the cost of the current crisis for years to come.

Like Real Estate, the bar is set way to low to get a mortgage license. I have read much of your writings,and would have to say that you are knowledgeable and have compassion for your job. I'm sure that translates into better, and honest service for your clients....All the best Jeff... and keep up the good work

Given there might be a flood of new FHA originations (and originators, for that matter), do you see any potential changes to FHA since this appears to be the solution for not only conventional scenarios but also subprime loans...I would be interested to hear your insight.  Good information.

MIKE.....  you hit one key point, to be disciplined to buy. and the 2nd part that you mentioned, that some people are so far behind and still don't have any money saved. That is called free spending...spending everything that you have.

In regards to underwriting, that is the great thing about FHA, it can be written manually. Sure, you would expect that a loan that was approved through the automated system and not by a person, would have to meet many checks and balances. But can someone fool these?  And I think what hurt more are these people that put no skin into the deal, no money.  Nothing to lose?

Overall, thank you very much for those kind words..... it's much appreciative.  

MICHAEL....  that's a tough one. I could see FHA/HUD getting a little tougher so they don't lose their shirt per se. But what can be risk for a lender is possibly to lose their FHA license. It can cost money just to be approved. In all honesty, I hope many lenders don't jump on this train. I want to be busy. I am starting to get some business because other lenders don't do FHA.

Hi Jeff - I'm not a member yet, but I enjoy your posts.

Please look for an e-mail I'm sending you via your AR e-mail link, related to this post.

Thanks,

Jeff~  Excellent post.   I love FHA, always have.   For a long time real estate brokers seemed to shy away from them as they felt they were "Too cumbersome and restrictive on property"    I think FHA has come a long way and I find it a seamless program.  I also agree with your assessment that a large percentage of people who were put into sub-prime on an adjustable rate, would have been much better served in an FHA with a 30yr fixed. 

Love your chart and comparison -  you do your homework for sure.   (one question, I assume in your compassion that both options are 30 yr fixed)

Well done!

Jeff, what a great summary of posts for all of us agents to use.  I really appreciate it as I have been wanted some real information to pass along not what they read in the news!

Thanks for this post Jeff.  You make it so much easier to understand!  For years, almost all of my clients got FHA loans.  I only vaguely remember how to calculate them and I'm sure that's all changed since I used to do them.  Our market got so crazy in the mid 90's that I haven't seen an FHA loan since.

Hi Jeff,

Although I have never claimed to understand the complexities of the mortgage world, perhaps you remember a very long time back when I posed the question about 100% financing?  Call me simple-minded but I just never could wrap my mind around buying with no money in your pockets.  I suppose old-fashioned goes along with being old but I'm glad you are here to unravel the details of the mortgage news.

Hi Jeff - I thought you told me one time, quite awhile back, that you weren't able to do NH and/or Maine....am I remembering that incorrectly?

Ann

FHA rocks.  I've sold several homes to buyers with "non-occupant co-borrowers". 

They are rare around here because of the appraisal requirements.  That will cure itself as more and more government appraisals get in the comps.  It's hard though.  Agents don't understand the disservice to buyers and sellers when they advised their sellers "Don't take contracts with FHA financing". 

We could use them now with the tightening of conventional money.

Oh well.

Wow, I cannot believe that.  Things have really gotten bad out there.

JEFF.....  I received the e-mail, thanks. And thanks for the kind words. Hope that you join AR soon....

LINDA.....   you are exactly right. And the problem with people remembering stricter appraisals was prior to 2000. I think it was around 2002?...  that HUD decided to reduce many of the appraisal tasks associated with FHA. The problem is that this hasn't caught up to the average realtor still. I have seen MLS listings state conventional financing or cash....  lol  In these cases, the realtor is even hurting their chance for a quicker sale for the client. 

In regards to my comparison, yes, it's a 30 yr fixed rate and I added that in there because of you. Thanks and thanks for the polite compliments. 

DIANE..... my pleasure and I hope they help some. Thanks for the kind comments.

DEBBIE..... yes, the market did get crazy some, but part of the reason that FHA was lost per se was because subprime was easier to originate sometimes. And many brokers aren't FHA approved.

Overall, I am glad that you could understand this. And thanks for compliment. 

LISA.....  old fashioned doesn't have to mean that you are old... lol  And I can definitely see where you are coming from in regards to consumers with having no skin into the deal. I think the client just needs to be educated a little better by the loan officer when placed into these loans.  thanks for your input.

ANN.....  I think that was about a year ago when we had that conversation. Thanks for stopping back. I'll send you an e-mail later this afternoon.  thanks

LENN.....  Yes it does and so do you.  ;o)  The "non-occupant" co-borrowers are a great part of FHA. And as I explained to Linda, it was great that HUD relaxed their appraisal requirements. 

On another note, that ticks me off when a realtor gets picky about a FHA offer and talks their client out of it...  if the client is actually qualified, why ruin a good sale and especially now, taking your chance on someone else. A good loan officer can make a realtor comfortable about this... usually. 

MATTHEW.....  you lost me... gotten bad in regards to what?  thanks

Good stuff.  I know that some lenders don't want to play FHA because they don't want extra hoops... and occasionally, buyers or sellers don't want the hoops either.  But, obviously, the client may benefit. 

wow...very interesting article...interesting benefits for FHA

Lane   "The extra hoops that you speak of are not very significant.   They (FHA) may be a little more anal documenting assets to close, but the benefits FAR outweigh that extra piece of paper.    If you or the lender you are working with have a good overview of the program, I am certain your reservations will vanish.  While "doing good for the client" should always prevail, being comfortable with the program goes a long way to a smooth transaction.    FHA is an awesome program.   Now if the Feds would just raise that max loan amount, we can overcome a LOT of hurdles that we will be facing us as we move forward in these uncertain times,  and the elimination of most Alt A programs.

I think fha has a strong future

For the first 26 years of my career I was an FHA expert.  I have not done an FHA in 6 years.  Our market is definetly turning FHA and it is time to brush up on my skills.

The max loan amount is one of the hurdles While a buyer can use 6% seller concession toward thier down payment, finding suitable homes under the 200k cap requires cash to close that many who would choose a FHA loan won't have ...Other requirements are not as stringent as the old FHA, but loan limits are a big drawback..

Jeff~ this is great information for all of us.  I've bookmarked this for future reference.

I did my first FHA Loan in quite a while last year and agree it will be one of the sources we all need to be aware of and even with a traditional 20% down buyer may start to look at. Thanks

The world is not crashing...opportunity exists and investors should be investing.  Buy low sell high!

LANE.....  the client would benefit in many more cases. And if it was explained correctly to both buyer and seller, they both would go through with it. At least the buyer....  but some loan officers want the easy route. I know this first hand because of some that I worked with.  SAD.

TEAM DiMURIA......   thank you for the comment and for stopping by.

LINDA.....   I totally agree that you really don't have to jump through too many more hoops. You just need to know what you are doing when it comes to compensating factors and such.  And yes, doing good for the consumer should prevail all other obstacles, but it hasn't in many circumstances.

In regards to the FHA loan amounts, just waiting.... hopefully by end of January.  thanks for your feedback. 

BRETT.... yes, I would concur..... thanks

JOSEPH..... I am going to check out what market that you are in....   I was stagnant for 2 yrs when it came to originating FHA deals... they either were very clean or too bad for FHA.

MIKE.... yes, this is a hurdle for so many, especially in Cali. I have a deal that I need the loan amount to go up about $30,000 to make the deal work. Hopefully this takes place in January. 

But you made a statement that the buyer can use the 6% seller concession towards  their down payment. You can't use the seller help towards down payment unless you do the DPA program.

But overall, yes, the loan amounts can be and have been a big drawback.  Thanks for stopping by. 

LISA R. ..... thank you very much and I hope it becomes useful in the near future.

TERRY...  it will definitely be for those conventional buyers with 10% or less down..... especially those with 5% down. 

JOE.......   well, that can be debated on. If the gov't steps and starts bailing those out, yes, it could be crashing. Investors?  A true investor, one who has money. There are more wannabe investors that don't have money to put down. I see and hear it all from the investor side. I have seen many investors foreclose. Hey, I am all for being positive, but also one that will face reality.  Buy low and sell high sounds a lot easier. There are very few markets that you can do this with. Just my .02. 

Jeff,

Good post and thanks for putting all the links to the posts you referenced.  Thanks for keeping us informed on this important topic.

Jeff,

Thank you for the honorable mention. If FHA limits could have only kept pace with home prices I'm convinced we would be singing an entirely different tune. Even at this stage of the down cycle, a hefty raise in limits would curb the damage especially if Fannie and Freddie followed suit. The benefit to the down trend is that FHA will pick up steam as investors demand more discriminating investments from both Fannie and Freddie next year. Best to you and thanks again for the terrific mention.

You are the MAN Mr. Belonger!  This one I'm bookmarking for sure, great resource for everybody.

Jeff, thanks for the work on this. It looks like we will be loving FHA now. There has been a time when that was not so. I so wish a couple of my clients would have done FHA loans. They would not be in the pickle there are. Thanks for post....good work!

FRAN.....    my pleasure and I hope it helps you understand some of what is going on.... and thanks for the polite comment.

MICHAEL....  I agree and hopefully we will see a increase come the first of the year. Actually, everything that you mentioned is right on and I guess time will tell. Hopefully it's right around the corner. And my pleasure in regards to the mention. 

JASON.....  thank you sir. Hopefully it was easy to understand and gave a good example of what is out there and how we need to look at things.

JEANEAN....  well, many of us should have been loving FHA in the last 8 years. But because of the changes, it should be more readily used. The main thing clients need to first ask, if the lender is FHA approved. And the problem here is that I am sure some will yes, even if they weren't. I guess it's all a part of sales. Thanks for thr polite compliments. 

We are very blessed here in Michigan.  The FHA loan limits will purchase a very nice home for most people.  I've been touting this product for years.  Now it will become almost the only way to purchase for a large percentage of consumers here.

Jeff, you did a great job of explaining and showing the value in this product once again.  Thank you so much. 

Excellent post. Thanks for making it clear and concise.

Great info!

I enjoy reading your posts

what are the rules for applying for an fha loan after a foreclosure? Is it 3 years after the foreclosure filing date? Or 3 years after the sale. If it is 3 years after the sherriff's sale, is there any getting aroiund it?

Excellent Post Jeff.

My broker is FHA approved and I have yet to venture to that side.  I have been doing some research and have realized that I have been selling myself and my borrowers short.  So the next one that I think will qualify, I will give it a shot.

Palm Springs Mortgage Guy, Charles Dismuke

KRIS......  I agree, that this will be a very good option for so many. Thanks for the kind words and for stopping by.

CRAIG.....  my pleasure. Thanks for stopping by and for the compliment.

ROBERT.....  thank you very much. That's very kind to say, thank you.

DENEALE..... Sorry it took a few days to get back to you. In regards to your question, it's 3 years from the sale date of the house that was foreclosed upon.  Getting around it has to be one of those few reasons to why it happened, followed by very good to strong compensating factors. Such as a death in the immediate family or loss of job.  Other than that, usually not. And the credit previous to this has to be very good or stellar to allow this to take place.

CHARLES...... well, jump into it....  FHA doesn't bite...  ;o)  Check out this post and realize that most clients under this situation are sold short...

FHA mortgages vs Conventional mortgages - A True 3% down Comparison

And thanks for the polite compliment.... 

I agree FHA is a must in today's market. I saw a post that someone posted here on AR in where they were referencing Dave Ramsy and mentioning that Dave Ramsey says that there is "no mortgage crisis" and that the conventional arena is doing just fine.... HAH.. We are seeing plenty of fast acting chages on the conventional side of things as well. Lenders are paring lending because in many cases they cannot afford to lend their usual volume, keep their cash reserves where they need to be, and legally stay in business. Dave Ramsey ought to do his homework before spewing out at the mouth about stuff that he guenuinely does not understand rather than just saying whatever he feels will make a splash with his audience.