Dear Reader,
Good morning from my home office here in Fairfield, Connecticut. I just read a great blog by a mortgage professional and neighbor of mine Mr. George Souto which his blog can be reached by clicking on this link: FHA Stepping Up As Sub-Prime Steps Down. George made some strong points about how FHA is coming to the rescue even though the sub-prime companies are vanishing into thin air. I absolutely agree with him but his blog kept the negativity out. What do I mean by negativity? Yes, FHA has better rates, better guidelines that fit a first time home buyer but do all borrowers qualify all the time with FHA loans or other first time home buyer special State loans?
FHA Loan Guidelines for HUD Mortgage Loans
An FHA loan is a home mortgage that allows for a purchase or refinance with a low down payment. They're great for the first time home buyer.
Nima's thoughts:
The recent sub-prime meltdown was mainly targeting the sub-prime mortgages that were handing out 100% financing to borrowers who were applying for a reduced documentation loan. Well most know what 100% financing is, but just in case you don't. 100% financing is when you purchase a home with no money down but it does not include your closing costs. Closing costs were being paid by the sellers more than 50% of the time here in Fairfield County. So the last few years borrowers were purchasing homes with no doc loans, no down payment and no closing costs. The guidelines have changed and there is barely any reduced doc loans left for the sub-prime mortgage borrowers. There are still full doc 100% financing sub-prime mortgage loans but not reduced doc 100% financing mortgages for sub-prime borrowers. This is where George is right on the money. If a borrower can go full doc then they can definitely go FHA instead of having a higher interest rate and higher closing costs. Again, the 3% down payment which can be borrowed can be a problem in many cases as people do not have money saved up to put down or to even borrow. Also, in almost all of the cases I recently had here in Fairfield County, all of my borrowers never got pre-qualified on paper for the home that they were interested in or the price range that they were interested in. *Each state and county is different.
Quick Example of a borrower not qualifying:
A borrower found me on the web and wanted to purchase something in the $175,000 to $200,000 range in New Haven County. I looked at all of the angles and I even remember staying in the office until 7 or 8pm trying my best to get this young lady a mortgage that would work for her. The only way she would get qualified for any mortgage is if she did a CHFA or a FHA loan and she was only qualified for $75,000 to $80,000 which meant that she needed to wait a while before she could purchase something in her price range and a home that fit her desires. I actually referred her out to a real estate professional from Active Rain.
Nima's current story:
I received a call Saturday around lunch time from a young couple in Bridgeport, CT who are interested to purchase their first home. I spoke to them and took a full application over the phone. I started to work on their mortgage on a Saturday in my home office and I realized their middle fico or credit score is 598. They want 100% financing and they do not have any money to put down or to borrow. The current guidelines are that you need at least a 620 for 100% financing. I text messaged and left a voice mail for my sub-prime colleague and we spoke about it over the weekend. It is Tuesday now and he should be getting an answer back from our exception department. The great thing about my company is that when you don't have the required fico scores, then we can ask for an exception from the underwriters of the bank. We try our best to do all loans that come across our table. I will try to come back here and comment on if the young couple received their exception or not. I am sharing this story because it is relevant to our FHA discussion. They can't come up with the 3% down payment and they have poor credit and want 100% financing so we will give it 120% effort to see this young couple get what they are looking for.
In conclusion:
Bank guidelines are shrinking and it is what it is. As mortgage professionals we can only try our best to seek and find a mortgage program that fits our borrowers current financial/credit situation. A great mortgage professional like George Souto and I can only work with the tools that we have.
For more information or if you have any questions/concerns, click here to ask me: Contact Nima now!
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First Time Home Buyer Guide: First Time Homebuyers Guide
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Your Connecticut Mortgage Professional,
Nima Rezvan
203.913.6016
*Note: I can originate loans in all 50 States! Making homeownership dreams come true since 2003!
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