FHA loans - Rumors need to be squashed !!!

By
Mortgage and Lending with Social Media - Infinity Home Mortgage Company, Inc

 

fha loans & fha mortgages

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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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

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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!

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

 

Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Janice Roosevelt 04/25/2009 11:01 PM
Topic:
Lending / Financial
Location:
Connecticut Hartford County Glastonbury
Groups:
Realtors®
Mortgages
All About Mortgages/Mortgage Networking
Realtors Needing the services of the Lending Powers
The FHA Mortgage Group
Tags:
mortgages
fha
credit scores
fha loans
fha mortgages
fha down payment
fha credit scores
fha monthly mortgage insurance

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Rainer
29,656
Jay Williams
Greenville, NC - Greenville, NC
Mortgage Loan Officer - Getting You The Right Loan

Jeff, what do you think the answer is to combating inaccurate information?

Jay

Apr 25, 2009 04:42 AM #1
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1,042,931
Andrea Swiedler
Berkshire Hathaway HomeServices New England Properties - New Milford, CT
Realtor, Southern Litchfield County CT

Jeff, thank you for this post. I am careful about everything with regards to mortgages. I have a list of 3 lenders, they are trustworthy, local banks. 2 of the 3 I know do not sell their notes, (I am not sure if the 3rd does) and 1 of them I know does not have a foreclosure on their books (I have not asked about the others). I do not give out information on mortgages because of a point you made here. I am not a mortgage expert, things change so rapidly that it would not benefit my clients in any way, shape or form if they looked to me for that. I know other realtors may disagree with me, but that is not my job.

I do see that you posted in CT groups, I will read more of your information, and keep you in mind. I am very interested in having a VA and USDA expert in my list.

Apr 25, 2009 04:43 AM #2
Rainer
295,611
Stephen Kappre
KW Hometown - Mantua, NJ
Helping You Home

Good points. I have to explain often to people that even though FHA (and other) guidelines allow one thing, that investors can put guidelines and charges on top of the underlying specs. Likewise, that I can get some loans done that are sold directly to Fannie that no investor will buy, but they are usually pricey, so you can explain people both the truth of getting the loan done AND the reality of higher costs.

Apr 25, 2009 04:48 AM #3
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

JAY..... . hhhhmmmm... let me pull out my magic 8 ball.   ;o)  Seriously, in my opinion, the best thing is for us mortgage professionals to write accurate posts. Also to leave comments in other posts that might be wrong or misleading. I think leaving a polite comment, but pointing things out. Or, using the reverse psychology of it, and ask them questions about the misleading information that they wrote about.  And I have done this before, and I asked AR about it, which was okay.  But to reblog something that is 110% false and state why when rebloging it. Here is my reblog : 620 minimums on FHA loans - We still have an investor that will go down to 600. And I know a few that will still go down to 580....

Overall, we need to hold loan officers to a higher standard. Sure, people make mistakes, but some of these are way to basic to make and they shouldn't be calling themselves FHA Experts or FHA Specialists. Again, just my opinion, but I have talked to many that believe the same. We just need to call some people out or question what they write and see if they can explain it... or have them correct it.  thanks

 

ANDREA.... . I think many realtors would agree with you. I think we need to leave it up to those professionals in that specific profession to put that information out there. The problem I find is that some think that they are experts out there, but many aren't.  I wrote this : To be an Expert or not to be an Expert, that is the question .

Even though I label myself as the FHA Expert, I am well versed in most loans. Just that I have been doing FHA loans since 1992 and that many that do them now, have no clue. I closed 10 loans last year, all out of state, that were denied last minute by the first lender. Half of them just needed massaging in regards the credit.

As far as possibly helping your clients, I would love to have the chance. And since you have 3 other trusted loan officers, that is awesome and I am jealous. I know many realtors that barely have one that they can turn to.  But I would even love to help with your VA and USDA clients. A small fyi... I was in the Army for a few years, so this helps me sometimes when speaking to those in the military or those retired. Please don't hesitate to call me or e-mail me. I have closed a few in CT. just this year and working on a refinance in Branford, CT.. thanks

 

Apr 25, 2009 05:00 AM #4
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

STEVE....  yes, something that I didn't mention in this blog, about investor overlays or as you stated, able to sell directly to Fannie or even as a Ginnie seller, that you can do some things that others can't, but that there is a major pricing hit to those loans. It's called risk pricing, not that you are trying to make more money. People don't understand that also.  thanks for your input.

 

Apr 25, 2009 05:02 AM #5
Rainmaker
275,682
Ken Cook
Content, coding, marketing, host. - Marietta, GA
Content Marketer/Creator

Good call to action Jeff. Borrowers will never be educated enough to know everything mortgage providers know - it's not possible. As you know we often lose applicants to other people who provide incorrect information. Side note to Andrea: Whether an originating lender services their own notes or sells them is unimportant to whether they are providing accurate information. There are loan officers who work at Countrywide who are complete liars and idiots and people who work for me who are as accurate as possible. Countrywide keeps their loans - at least the vast, vast majority. I sell 100% of my loans - most immediately after closing (as in at the closing table).

Apr 25, 2009 05:47 AM #6
Rainmaker
595,531
Lisa Hill
Florida Property Experts - Daytona Beach, FL
Daytona Beach Real Estate

You've had me convinced for a long time, that you know more about FHA loans that any mortgage broker I know. I was just telling a friend of mine about you the other day. They're not ready yet, but you'll be getting that business eventually.  So good job on exposing the different FHA programs, and continually clearing up the misconceptions! =D
D

Apr 25, 2009 11:46 AM #7
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Jeff Belonger
Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ
The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

 

KEN.... . thanks for the compliment. Just as you would say often, that we need to have more call to actions. And yes, we often lose borrowers to other loan officers who provide incorrect information or false promises.

In regards to your comment to Andrea.. great point. So many put an emphasis on those that sell their mortgages, that they might not be as good. Yet, I find I can sometimes do harder loans than those that service their loans. As a mortgage banker, we take some risk upfront.  But overall, as you stated about loan officers at Countrywide, that they just lie or have no idea about what they are talking about. Thanks for making this statement.

 

LISA.... . mortgage banker... ;o)  Seriously, it shouldn't matter, banker or broker, but knowing the correct information is so key in any business.  Thanks for the kind words and I would love to work with you and any of your clients. Talk soon...   thanks

 

Apr 25, 2009 12:02 PM #8
Rainer
45,055
Michael S. Mackey
CENTURY 21 All Islands - Mililani, HI
REALTOR ABR, CRS, GRI, RSPS

Jeff, I always know I can come to your blof to get accurate information. At my real estate office, we have an in house Countrywide/Bank of America lender, who gives us weekly updates about the FHA and Va loan programs. This week she gave us much of the same information you gave here. Like you said, two wrongs don't make a right, but I have more confidence when I see the same info from trustworthy sources.

Apr 25, 2009 04:01 PM #9
Rainmaker
472,455
Janice Roosevelt
Keller Williams Brandywine Valley - West Chester, PA
OICP ABR, ePRO,Ecobroker

I really appreciate this information and you making it available. I consider myself a student of real estate and I've learend today. The student was ready and the teacher appeared.

Apr 25, 2009 11:01 PM #10
Ambassador
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The Somers Team
The Somers Team at KW Philadelphia - Philadelphia, PA
Delivering Real Estate Happiness

Jeff - You are right !  There is a lot of misinformation out there.  And with all that misinformation, it can really confuse the consumer.  What is the answer to all of that ?  It seems that if people are "caught" providing misinformation, something should be done.  I can understand a simple mistake but their info should be updated. ~ Chris

Apr 26, 2009 01:19 AM #11
Rainer
14,849
Tammie Jungling, NMLSR ID 455110
Clearwater, FL

Jeff,

You gave great information.  I've been in the mortgage industry for over 21 years.  From processing, underwriting, closing and now originating.  My biggest frustration within my world is a loan officer who does a loan for a customer and does a rotten job.  First now explaining the program correctly and then taking up the processors time to clean up their mess.  It makes it more challenging for loan officers like myself who submit clean loans and get held up because of someones mess.

The other comment on FHA Credit Scores.  As far as I'm aware FHA doesn't have a mandatory credit score.  However, the lender based on their risk overlays are starting to require minimum scores.  We just had are set recently at 600.

How I wish for the old days when the underwriter actually looked at the credit and weighed the risks based on the overall file not just the score.

Apr 26, 2009 01:09 PM #12
Rainer
67,579
Jay-Paul Lowry
Riverside, CA

Jeff - I was out yesterday and I was wondering if you were going to write on this. I have seen some other post on here that are false and misleading and like you said when you question people they either don't change their information or they just ignore you and your comments. I actually had one women delete my comment than email to tell that because I cant do a certain deal doesn't mean another cant. I agreed but like you said, the posting made it sound common  that something was happening when in fact it wasn't. I don't know what the cure is for this lack of professional knowledge or accountability. Maybe we should we create a blog accuracy ranker that members can use to measure the accurateness of a specific post.

 

JP Lowry

President--Preferred Financial Funding, Inc--

Apr 28, 2009 07:22 AM #13
Rainmaker
99,185
Gerry Suarez Jr.
Jet Home Loans NMLS 1660135 - Maitland, FL
FL Mortgage Guru

AMEN BROTHA!

How the heck did this one pass me by? Thanks for fighting the good fight and working so hard to make the information we provide here the most accurate info anywhere. It's so hard to stay on top of the changes, but then to educate consumers and other lenders alike- you do a great job Jeff!

Now you are gonna hate me...

Check into your second bullet point buddy (ML 08-22). You know I love you Jeff, and we all need to make sure we put out the right facts! I'm sure you'll catch me on one soon! You really are the FHA guru dude.

Gerry Suarez, Jr.

Your FHA Loan Pro!

Apr 29, 2009 12:08 PM #14
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