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Archive for FHA Mortgage Lending

After getting hammered for years from special interest groups, banks and lenders, the Federal Housing Administration has announced they are loosening credit standards on federally insured mortgages under the FHA finance program. The Department of Housing and Urban Development has worked with the FHA in an effort to simplify the process for borrowers that recently defaulted on their home loans to get a second chance. To qualify for this revised FHA loan program for people with poor credit, applicants must be able to document that their loan default, short-sale or bankruptcy was caused by economic factors beyond their control. According to the LA Times, people must be able to show the underwriter that their income dropped at least 20% for at least six months.

Get a Second Chance with FHA Home Buyer Loans for People with a Bad Credit History

People that have the ability to document the income dip, job loss or reduced business income now would be required to document 1 year with on-time housing and credit-card payments prior to applying to finance a house with a FHA home purchase loan. In a recent HUD bulletin, the Federal Housing Administration introduced this aggressive FHA home buyers loans.

FHA also mandated that borrowers interested in this bad credit FHA mortgage must attend house counseling from an approved agency outlined by HUD. In the past, people were not eligible for a FHA mortgage programs for 3-years after a home foreclosure or 2-years after a chapter 7 or 13 bankruptcy.

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In a recent interview, FHA Commissioner Carol Galante said, “What we’ve did here is to say, ‘Let’s look at the Great Recession and financial crisis with that lens,'” Galante said. “We want to recognize and distinguish between Americans hindered by that very serious circumstance beyond their control versus borrowers that may have run into problems because they maxed out their charge cards and fell behind on their payments.” As the economy started getting better we were hearing about more and more people whose access to credit moving forward was being stifled by the situation the country has been through,”

Many people in the industry had been anticipating that HUD and Congress would tighten guidelines more because of the low reserves and increased delinquencies, so this announcement of expanding guidelines for FHA mortgages for people with bad credit. Many lenders and brokers believed that HUD would raise the 500 minimum credit score requirement as well as increase the down-payment requirement from 3.5% to 5%., so the fact that this isn’t happening is great news for loan originators and home buyers nationally. Read the original LA Times Article.

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Many people have a distorted view on FHA home mortgages and first time home-buyer loan programs. One of the common misperceptions on FHA financing is that the loan programs are only for new home buyers and borrowers with low incomes. It is true that the Federal Housing Administration was formed with the intention of extending credit to all types of people fairly, but there is no minimum or maximum income requirement. However, when underwriting these government loans, the FHA mortgage lenders consider the borrower’s entire profile; rather than just a credit score or bank reserves. It’s no secret that the Department of Housing and Urban Development takes more risks on people with poor credit scores under many of the FHA loan programs.

  1. Low Down-Payment Home Loans
  2. Competitive Interest Rates for Buying a House
  3. Reduced and No Cost Mortgage Opportunities
  4. Flexible Credit Guidelines with 500 Minimum Credit Scores
  5. No Pre-Payment Penalties for Refinancing

Although FHA lenders do make exceptions on some borrowers to spend up to and even over 50% of their gross monthly income on their combined monthly debts, we prefer to keep this ratio at or below 43%. However, the automated underwriting system often approves borrowers for home loan payments that are above their comfort zone, because new homeowners often start spending more money. Buying new furniture and making home repairs can result in increased expenses.

Maybe the most notable downside to loans insured by the FHA is that they require both an upfront mortgage insurance premium and then monthly insurance payments on top of that. Unfortunately in some cases these premiums have become twice as high as the private mortgage insurance offered on conventional mortgages. The rise in FHA insurance rates can be directly attributed to the increase in loan defaults and depleted reserves under the FHA loan programs.

However with a minor down-payment of only 3.5%, lenders continue to match first time home buyers with FHA loans. According to VIP branch manager, Pat O’Connell, “You can’t forget that FHA has given millions of Americans the ability to become a homeowner with their flexible purchase mortgages.” O’Connell continued, “Many people use FHA home loans like training for new homeowners because the borrowers will often only keep the loan until they have enough equity to shed the mortgage insurance or they will refinance into a loan with lower housing expenses derived from reduced mortgage insurance premiums.”

It appears that FHA will be hiking insurance premiums once again in 2013, so it this could limit the loan origination from some FHA lenders, but as the purchase market roars back with affordable housing options, you can bet that FHA will be ready to extend first time home buyers loans to those in need.

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If you are a first time home buyer considering jumping into the market next year, you will likely consider FHA home loans.

Getting approved for home financing has become challenging for most Americans so we decided to explore why FHA has become so popular with first time home buyers.  The Federal Housing Administration was created by the U.S. government during the Great Depression in an effort to promote home ownership across the country.

Since then more than half of first time home buyers have chosen FHA mortgages for many reasons. Over the last 20 years, FHA has dominated the market for first time home buyer loans.

1. Borrowers only need a 3.5% down-payment to purchase a home compared to 10 to 20% needed for traditional loans from private lenders.

2. FHA interest rates are as low as any interest rates in the land helping to ensure that purchase mortgage financingis affordable.

3.  There is no penalty for home refinancing or early pay-off.

4.  Americans also like FHA because they are lenient with their credit guidelines. Consumers with a range of credit scores can get financing at the same interest rate regardless of their credit. This government program encourages lenders to offer a home loan for bad credit if the borrower can demonstrate significant compensating factors like solid money in savings or the ability to to make a larger down-payment.

5.  FHA makes refinancing easy with flexible guidelines that do not require as much equity as private home loan lenders. People can refinance easily with only 3.5% equity because the loan to value guidelines permit refinancing up to 96.5%.

6.  FHA even allows you to get cash out and refinance debt up to 85% loan to value.

7.  FHA even offers the streamline refinance in case the interest rates fall after a new home buyer gets a mortgage.

We anticipate that FHA will remain popular in 2012 but if HUD continues to raise the mortgage insurance rates we predict their will be a backlash against government financing. Many finance executives believe that private money lenders will roll out some aggressive home loan programs in 2012 and 2013 and that could erode the FHA market-share as well.

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The Federal Housing Administration announced last month that new FHA borrowers will see increased rates for the annual FHA mortgage insurance premium by a quarter of a percentage point .  The FHA mortgage insurance premium will rise to 1.1 or 1.15% the FHA loan amount for fixed 30-year mortgage rates and 0.25 or 0.50 for 15-year or shorter mortgage terms. The 30-year FHA rates have been very competitive over the last few years.

The increased insurance premium applies to FHA loans that are originated on or after April 18th 2011.

FHA said the raise in insurance premiums is only modest increase that would not influence the borrower’s ability to afford the FHA mortgage.  A spokesman for the agency said, “The new changes are only a marginal increase and would have little impact on the affordability factors for most home buyers who would qualify for a new home loan.” But many mortgage industry experts have a different take. According to Josh Slemmons of the Mortgage News Post, “Borrowers who have little equity in their home need a “FHA refinance”, because the program allows refinancing to 96.5%.” Slemmons continued, “Many of these borrowers don’t actually save money because the higher insurance premiums can offset the lower FHA mortgage rates. The New York Times pointed out that many borrowers with less than perfect credit, may not benefit from mortgage rate refinancing, because the mortgage insurance increases their monthly housing expenses too much.

Will FHA mortgage rates continue to rise or can we expect the Fed to lower interest rates like they have done in the past?

The annual premium for 30-year mortgage was just changed in November, to 0.85 percent or 0.9 percent. Whereas previously borrowers only 0.50 percent or 0.55 percent.  iServe Lending’s Al Pereida said “The higher premiums equate to a quarter-point increase in interest.” FHA indicated that the new insurance premiums would raise the cost of the average $157,000 mortgage, by about $33 a month, or $396 a year. But borrowers residing in high cost regions like California, Florida, New Jersey New York, Virginia and Washington D.C. could be affected significantly.  For example a $475,000 California mortgage loan would see a monthly increase exceeding $100. In a struggling economy, paying $1,200 more a year could prove to be difficult for many borrowers in California. The agency requires that all borrowers of loans it insures pay the premium.

What if I already have a FHA mortgage in process?  The higher insurance premiums do not apply to FHA home loans that already in exist or that is in process and registered with a direct endorsed FHA underwriter.  The other FHA mortgages that will not be affected are the reverse home loans or home equity conversion loans.

The bottom line for loan applicants is that they must look at the whole picture (mortgage rate, insurance premiums and total monthly payments) and assess the benefits of refinancing or home financing with FHA.  Borrowers can’t just look at a lower FHA interest rate and assume the savings. Needless to say, the next month will likely see a huge spike in loan applications volumes because many consumers will be rushing to get their FHA loan in process before HUD imposes the higher insurance premiums.  The higher insurance premiums will likely have an adverse effect on the FHA streamline program as well because lower FHA rates won’t necessarily translate to lower monthly payments.  If you are considering buying or refinancing with FHA loan, we recommend you act fast getting your loan in process with an approved FHA lender before the deadline passes.  

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Let’s be honest— There are many borrowers with less than perfect credit who need a second chance loan with FHA that enables them to buy or refinance at a low affordable interest rate. Many applicants have been rejected recently from FHA mortgage programs because their credit score is too low for the new lending guidelines that most lenders have implemented in 2011. We are one of the unique lenders that offer FHA loans to borrowers with credit scores between 500-640 FICO.  In a recent article, Bloomberg indicated that there are 6.3 million borrowers in the 620-640 FICO range alone.  Imagine how many applicants are looking for mortgage refinancing or new home loans in with credit scores below 620.

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B.D. Nationwide is one of the few FHA lenders in the U.S. that continues to offer home loans and a “bad credit mortgage” to the borrowers who need it most.  Take advantage of this lending opportunity and save money with lower payments and enjoy the security of a fixed rate FHA mortgage loan.  With the economy ailing, Americans need second chance loans now more than ever before.

FHA Mortgage Loans – 620-640 FICO

  • DU Approve/Eligible for premiere FHA rates
  • DU will be reviewed by the underwriter to determine acceptable credit and income risk.
  • Accounts showing “in dispute” requires downgrade to a manual underwrite – even if closed
  • Home loans with high Debt to Income Ratio subject to UW discretion

FHA Mortgage – 500-620 FICO

  • DU Approve/Eligible
  • Case Numbers after 10/4
  • 580 FICO = 96.5% LTV
  • 500-579 FICO = 90% LTV Max
  • Alt Credit for No FICO = 96.5% LTV
  • Max DTI of 31/43%
  • Can stretch ratios to 40/46 with strong compensating factors from 4155.1
  • No late mortgage payments in last 12 months (Rev + Installment)
  • No Collections with Date Opened in last 12 months
  • Verification of Rent or 12 months cancelled rent checks
  • Non-occupant co-signers must be related as parents, children, or siblings.
  • Access to new home buyer education course online
  • Accounts showing “dispute” on credit invalidate DU Findings and force manual underwrite

HUD continues to expand home loan and refinancing programs this year and the Federal Housing Administration still offers the best second chance loans with the FHA mortgage.

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Lately we have received a lot of people are asking for advice about whether they should get a conforming refinance or a FHA refinance.  With home loan rates on the rise many homeowners want to make sure that they choose the right refinance loan.  Both the conforming and FHA refinance are good choices but you must first see which programs you are approved for because you only want to compare home refinancing options that you are actually eligible for.

For example, with “FHA refinancing” you only need 3.5% worth of home equity to qualify, whereas with conforming refinancing you need 10 to 20% equity depending on your credit score.  If you want cash out you will need 15% equity in your home with a FHA loan, whereas with the conforming options you would need 20-25% depending on the size of the loan amount.  The major advantages of FHA refinancing is that they require less equity and typically the underwriters are more forgiving when it comes to credit.

If you qualify for both refinance options, then conforming is the best option because there is no mortgage insurance to pay monthly. With FHA mortgages there is a charge for mortgage insurance monthly.  Nobody likes paying mortgage insurance if they do not have to, but if you do not have enough equity, then FHA refinancing may be the best solution for you.

You also want to make sure that there is no pre-payment penalty, because you never know if you will need to move or even refinance again in the future.  Most qualified lenders will not have a pre-payment penalty attached to conforming or FHA loans, but you never know so verify that with your loan officer. As far as closing costs go, both refinance options should have $2,000 to $3,000 in closing costs, but some lenders like Nationwide have the ability to offer a no cost refinance loan.  We recommend the no cost refinance, if you meet the qualifications and it doesn’t increase your interest rate more than 0.125%.  Both conforming and FHA interest rates remain nearly at record lows and usually the rates are the same.

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Jul
27

Government Mortgage Help

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Government home financing continues to play a major role in rehabilitating the mortgage industry. In the wake of a severe financial crisis, the Federal Reserve lowered government mortgage rates to record levels.  The two most popular U.S. government mortgage programs over the last seventy years are the VA and FHA loans. VA mortgages are only available to military veterans who qualify with their VA loan eligibility.  However, all Americans are eligible for FHA mortgage loans if they can demonstrate they have the ability to repay the loan.  Government mortgage help is more available and accessible than most people realize.Nationwide brings a significant amount government mortgage loan experience to the table with home financing opportunities for consumers seeking fixed rate refinancing, debt consolidation, new home purchase and cash out refinance loans.

Take Advantage of Record Low Goverment Mortgage Rates

Take advantage of low FHA mortgage rates available for fixed mortgage refinance and new home purchase mortgages.  FHA first time home buyer loans are a popular choice for new home financing.  FHA has been insuring American mortgages since 1934.

The U.S. government guarantees veteran loans and VA mortgage rates have never been better!  If you are a military veteran consider the 100% VA mortgage for refinancing or new home financing.Both FHA and VA streamline loans are available to borrowers seeking a rate and term refinancing who already have existing government mortgages in good standings.

  • FHA Home Loans with only a 3.5% Down-Payment
  • VA Loans with Zero Down-Payment on Home Purchases
  • Streamline Refinancing with FHA and VA
  • No Pre-Payment Penalties with FHA or VA Mortgages
  • No Cost Government Mortgage Help
Government Mortgage

Take advantage of the Nationwide Mortgage Lender’s government mortgage experience and lock your mortgage rate now before the interest rates rise.

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