As many of us search more and more online, through the internet, there becomes a greater chance for misinformation also. Now, this is just my opinion, but it's based on seeing at least 2 blogs a week now that has wrong information within the topic of discussion. I am seeing this even more so when it comes to FHA loans.
What disturbs me most is that if we don't question the author of that blog, those reading it will believe it and spread that information as the bible per se. I even went as far as to send an author of a blog on AR, telling her that she was incorrect and that she should change her information. Not only did she not respond to me, but she never changed her information. And she continues to write on here. What does that say?
I am speaking to about 2 to 3 consumers per week now, that not only read incorrect information, but they hear it from other loan officers and worst of all, from past borrowers, friends, co-workers, etc, etc. Let me give you two examples :
Example: I am dealing with a borrower that is shopping me against another loan officer that isn't adding in the Fannie Mae cash-out pricing hit of a 1/2 point. She shares this with her husband and this was her response.
"I told my husband everything you told me and he said let him think about this first because his friend just do the loan for $298,000 wiht 4.75% last month with no point and he paid total closing cost about $6,000 something not even $7000 yet."
People, there is not one deal that will ever be the same. This is a great example of this, because her husband's friend bought the house and he borrowed $298,000. This is a cash-out loan and the loan amount is only $152,000. Each company has a specific profit margin, no matter the size of the loan. So if someone has a smaller loan amount, in order to meet that profit margin, they will need to charge more. It's simple math. Please read this for more clarification : I want the same deal my friend got - Please read the comments also.
Another Example : I have a borrower in Long Island, NY who has spoken to 3 different loan officers at Wells Fargo in her area. All 3 of given the same information about monthly mortgage insurance and how it will fall off in 5 years on a refinance, even though they will be at a 88% loan-to-value. This is 110% false and there is even a FHA document that every borrower is required to sign, that explains this. But here is what is scary.... I usually say that if you have 4 out of 6 people that give you the same information, then it must be right. Well, not in this case. As it stands, 3 out of 4 people gave the same answer and it's the wrong information. Moral of the story? Be extremely careful no matter what you hear. Please read : Two wrongs don't make a right.
What other things that I am reading or hearing about that are false or misleading when it comes to FHA loans?
- That you need 5% of your own money and as a down payment. FALSE - you only need 3 1/2% down and of your own money. And that 100% can be gifted from a relative/family member, even to use for the down payment.
- No matter how much you put down on a FHA loan, you will have monthly mortgage insurance for at least 5 years. This is TRUE.
- I read just the other day that FHA credit scores will now have pricing hits for scores under 660. This is 110% false. Yes, some investors already have this pricing adjustment on FHA loans and there will be some more to follow. And when I questioned this person, they came back and stated that it was Bank of America/Countrywide making this change. But his blog made it sound like everyone will be changing, but didn't specify.
- That FHA loans take 45 - 60 days to close. - FALSE - Sure, many lenders are under staffed and many are taking a longer time. But we are still closing loans in 3 weeks. It starts with the loan officer, putting the deal together correctly and with most of the information needed. And if you get the appraisal done in 10 days, 3 weeks should still not be an issue.
- FHA is is harder on the appraisal. - FALSE - They are a lot more relaxed than they were in the 90's. And the FHA appraisal is done on the same form as a conventional appraisal.
- FHA loans have more fees than conventional loans or are more expensive. Double false. I can actually be a tad cheaper on an FHA loan because of the higher SRP's, which is called the servicing release premium. Sometimes they might seem more expensive because the loan officer might be taking advantage of the borrower because of their credit.
These are just some of the basics that I am reading about, and that scares me even more. Just imagine some of the other things that these loan officers might be spreading out there then, if they can't get the basics of FHA loans 101 correct, such as your down payment requirement.
Lastly, just because someone claims to be an Expert or Specialist in their field, doesn't mean that it's 100% true or accurate. Don't be fooled by ones title. Please read : To be an Expert or not to be an Expert, that is the question.
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Experience & Knowledge at its BEST !!!
For more information on FHA loans, please go to this link. The FHA Expert
For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!
Copyright © 2009 by Jeff Belonger