Posts Tagged ‘Fha Home Loan’

FHA loan offers Florida homebuyers a low cost way to own a Florida home

January 14th, 2010

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Lowest costing FHA home loan.

Coming soon to FHA-mortgage loans will require Higher FICO scores and more cash at closing. The changes are needed to help keep the agency afloat.

FHA mortgage loans are about to become more expensive and harder to get for Florida FHA loan applicants.

The details will be revealed in late January. But this much already is clear: FHA Mortgage applicants will need higher credit scores and more cash at closing to get the lower interest rates and cheaper insurance of FHA mortgage loans and refinanced loans.

The rules are changing because the Federal Housing Administration is in a financial hole. It’s been paying out more to cover defaulted FHA mortgage loans than it’s taking in from mortgage-insurance premiums. The imbalance has drained agency reserves to 1.5% of the FHA mortgages  it covers — below the 2% level required by law.

To cure the FHA insurance deficit President Barack Obama’s administration has announced it will tighten the FHA Loan requirements, making four changes that will hit consumers making it tougher to qualify:

  • Raising the minimum FICO score you need to qualify.
  • Increasing the cost of FHA mortgage insurance and possibly changing how premiums are collected.
  • Increasing the FHA down payment required for an FHA loan.
  • Decreasing the amount that sellers can pay toward a buyer’s FHA closing costs.

 Why the FHA mortgage insurance exists

The FHA agency was created during the Depression to put builders and contractors back to work, keep the mortgage industry going and help keep homeownership affordable.

FHA mortgage insurance doesn’t make loans; it insures them. Anytime a mortgage applicants has  a down payment smaller than 20%, lenders require mortgage insurance. FHA’s mortgage insurance is low-cost, and the agency will insure borrowers that private industry often won’t touch. Essentially, FHA mortgage insurance lets borrowers — especially first-time homebuyers — get homes with low down payments.  

Other FHA Mortgage loan Advantages Include:

Minimal Down Payment and Closing Costs.

  • Down payment less than 3.5% of Sales Price
  • Gift for down payment and closing costs allowed.
  • No reserves or required.
  • FHA regulated closing costs.
  • Seller can credit up to 6% of sales price towards buyers costs.

Easier Credit Qualifying Guidelines such as:

  • Minimum FICO credit score of 540.
  • FHA will allow a home purchase 2 years after a Bankruptcy.
  • FHA will allow a home purchase  3 years after a Foreclosure

Easier Debt Ratio & Job Requirement Guidelines such as:

  • Higher Debt Ratio’s than other home loan programs.
  • Less than two years on the job is allowed.
  • Self-Employed individuals o.k.

 The history of the FHA mortgage

When mortgages became hard to get a couple of years ago, the FHA “helped when no one else would, when everyone else buried their head in the sand”It’s fair to say the very survival of the housing sector in 2007-08 is thanks to FHA.”

As the housing bubble expanded, FHA mortgage loans took a back seat to cheap, quick, subprime loans, dropping to about 4% of market share in 2005 through 2007 for new mortgages and refinances combined. But once subprime products disappeared in the housing collapse, the FHA mortgage market share grew, to 21% in September 2009.

Here are the changes being discussed and what they could mean to FHA mortgage applicants:

1. FHA Mortgage insurance premiums

FHA Mortgage applicants pay two kinds of premiums for FHA mortgage insurance: an upfront lump sum that’s due when the loan closes (currently 1.75% and usually rolled into the loan amount and financed) and monthly payments (0.5% or 0.55% of the loan amount, depending on your down payment).

Here’s what you’d pay now in FHA mortgage insurance premiums on a $250,000 loan:

  • $4,375 (1.75%) at closing.
  • $1,250 to $1,375 (0.5 % or 0.55%) a year, broken into monthly installments.

An increase appears certain on at least the monthly charges, based on recent remarks to Congress by Housing and Urban Development Secretary Shaun Donovan.

There’s also speculation, says Lenders One’s Stern, that the FHA might require the upfront fee to be paid in cash and close off the option of rolling it into the loan.

Stern says that financing option is “one of the primary benefits of FHA.”

The cost to you: Higher mortgage insurance premiums will increase your monthly payments. And if you’re not allowed to finance the upfront insurance premium, you’ll have to produce the entire amount in cash at closing. (Your monthly payments would drop a bit, though, if you couldn’t roll the lump sum into your loan.)


2. FHA Down payment

Another big attraction of FHA loans is the low down payment requirement. You can get into an FHA-insured mortgage with as little as 3.5% down — that’s $8,750 on a $250,000 home.

That’s likely to increase, too. The idea would be to raise a borrower’s stake in the investment, reducing the chances you’d default.

The cost to you: Some in Congress want to raise the minimum down payment on an FHA-backed loan to 5% of the purchase price. That means you’d have to come up with $12,500 to buy a $250,000 home — $3,750 more cash than today. (Read “The end of the 0% down payment” and “How to come up with a down payment” to learn how down payments work.)

3. FHA LOW FICO  Scores

During the housing boom you could get an FHA loan with a FICO score below 500. The government has been steadily raising the limit since mortgage lending has contracted.

Today, you need a minimum 600 FICO score to qualify for an FHA-backed loan. (Get a free credit score estimate here.) For many borrowers, that’s not really an issue, because their lenders require even higher scores. But a few lenders resell their loans directly to the FHA, not to loan aggregators or other banks. These lenders, for a price, will lend to borrowers with the FHA minimum FICO score, which means that today it’s still possible to get an FHA-insured loan with a FICO score of 600. That’s about to end.

Donovan told Congress that the administration intends to raise the minimum FHA requirement “for the time being” to weed out risky borrowers. He didn’t say by how much. Speculation ranges from 620 to 640. It’s possible that the new requirements will be multilayered, letting borrowers balance a lower credit score with, say, a bigger down payment.

“Of all these things, that will have the biggest impact, because there are so many borrowers who fall below the 620 score,” says Dale Vermillion, author of “Navigating the Mortgage Maze: The Simple Truth About Financing Your Home.” “Today, a lot of people have had credit issues, and their credit scores have gone down. When you combine the two (insurance and down-payment increases), it’s certainly going to have an impact on purchases.” (If your credit score is low, see “Raise your credit score to 740.”)

Raising FHA’s minimum score changes the playing field, says Stern. While private lenders usually do require higher credit scores, they can drop their limits quickly when lending safety has improved. A higher minimum FHA requirement means lost flexibility for retail lenders and their homebuying customers.

The cost to you: Buyers with FICO scores under the new minimum, be it 620 or 640, will be shut out of loans. The rules probably will become more rigid than they are today.

4. HomeSeller contributions to closing costs

Sellers sometimes agree to help pay a buyer’s closing costs. It’s a way to help a cash-poor buyer make a purchase. Currently, the FHA lets sellers contribute as much as 6% of the house price. The administration is considering reducing that to 3%.

“Three percent is what conventional loans allow, industrywide,” says Chad Bergman, a mortgage banker with Frost Mortgage in Littleton, Colo.

 The history of the FHA

The cost to you: Probably nothing. In practice, a reduction to 3% probably won’t matter to most FHA buyers, at least today, Bergman says. Closing costs are based in part on loan amounts and interest rates, and they were considerably higher several years ago, when home prices and interest rates were higher. Today, closing costs average just $2,732 nationally on a $200,000 loan (they vary from state to state), according to a study by

If you were buying a home for $210,000, borrowing $200,000 and your closing costs were $4,000, currently the seller could pay up to $12,600 (6% of the home’s price) toward your closing costs — more than enough to cover the whole bill. If the seller’s allowed “concession,” as it’s called, dropped to 3%, your seller could pitch in up to $6,300 — still plenty.


‘Still the best mortgage for Florida homebuyers out there’

Taken together, the upcoming changes will make buying a Florida home harder for individual consumers, no question about it. And the FHA administration says it intends to back out of its expanded role once FHA mortgage lenders start making more loans again.

But, FHA still has the lowest down payment in the industry, still has unbelievably low interest rates and still is doing fixed-rate 30-year amortization mortgages. It’s still the best mortgage loan out there.

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What is a Streamline Refinance?

January 8th, 2010

At the dawn of a new year, many homeowners are optimistic that 2010 will be a much better year than its predecessor. With housing prices back on the rise, many people are thinking that the worst is over. But if you already own a home, what is the best way to capitalize on the resurgence of the housing market. The answer is simple. A <a href=“”>streamline refinance</a>

is a refinance on your home that is called streamline for a few different reasons. It is hassle free and has no additional paper work saving you immense amounts of time and money. By getting the lowest interest rates available, you are able to save thousands on your mortgage. Imagine having your mortgage payment reduced each month by hundreds!. The best thing though, it is that it is fast, easy and inexpensive so it saves you time and money together. There are two major types of a streamline refinance, a FHA and a VA. A FHA Streamline Refinance is the fastest option to reduce your homes interest rate with the least amount of paper work, which in return saves you time and money.

The FHA streamline Refinance program began back in the 1980s when the government saw a need to make refinancing easier and more accessible. The program was set up specifically for a faster approval process using less documentation.

Because of this program anyone with an FHA home loan can lower their interest rates to the lowest rate possible, with no credit checks, additional paper work, or added hassle! It uses your existing FHA loan paper work, so instead of filling out mountains of new paper work, you just submit your existing documentation.

It is called a Streamline Refinance because it makes the process quick, easy, and fast, as fast as only 25 days! Both are simple and easy, and most importantly quick. It usually only takes 25 days to have everything completed. A refinance, is a great way to save money on your mortgage, have some extra spending money for home improvement products and is just a great way to capitalize on the resurgent housing market in 2010. To answer any questions on why this is a great option visit

David French is a man who enjoys helping people save on their mortgage. He spends his free time on

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FHA Mortgage Streamline Refinance Loans – Advantages and Qualifications!

January 6th, 2010

FHA Mortgage Streamline Refinance loans are available to homeowners that financed their homes with FHA Loans.

First a little history on FHA Refinance Loans. They have been available for a long time, all of the way back to the 1980’s. Because of the popularity of FHA Home Loans the FHA Streamline Refinance Program has at least 20% of the home refinance market and it is increasing at a steady rate.

The FHA Home Loan Program is very popular in today’s housing market because of the low 3.5% down payment and the lower credit scores needed to qualify for a loan. Most conventional and insured conventional loans require 20% down payment. The credit scores for FHA loans can be around 620.

There are many advantages for this type of refinancing.

The Advantages of FHA Mortgage Streamline Refinance Loans:

1. The homeowner can get a lower interest rate and this will help them to reduce their monthly mortgage payment.

2. They can change the terms of their existing loans such as the length of the loan.

3. Quick processing and reduced paperwork and documentation. This is how they get the name “streamlined”. It will take less time to close and you will spend less time trying to get all of the paperwork and information together.

4. Closing costs can be can choose to include them in the new loan if there is enough equity in the home or they can choose to have no closing costs but that may result in a higher interest rate.

5. The homeowner does not have to verify income or employment status.

Of course there are some qualifications that you will have to meet in order to get the Streamlined FHA Refinance loan.

FHA Mortgage Streamlined Refinance Loans Qualifications:

1. You can not be delinquent on your monthly mortgage payments within the last 12 months.

2. The new mortgage loan must reduced monthly payments or the length of the loan.

3. No cash-out option is available.

4. No credit qualifications.

Unfortunately things may be changing. FHA is considering changes to their loan program because of the cost of increased home foreclosures. Among the changes being discussed are the increase in mortgage insurance and higher credit scores to qualify for a mortgage.

If you are considering refinancing your home mortgage now is a good time to get more inofrmation on FHA Mortgage Streamline Refinance Loans before the changes take place!

Click here for more free advice about FHA Streamline Refinance Program where you get much more information on the different types of FHA loans.

Learn more about the FHA Home Loan Program Requirements And Guidelines.

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General FHA home Loan Underwriting Guidelines

January 1st, 2010

General FHA home Loan Underwriting Guidelines

Disclaimer:  These guidelines are to be considered standard or general.  FHA will, from time to time, change their guidelines such as loan limits or debt-to-income ratio requirements.  In times when guidelines change frequently, we are not able to update the guidelines immediately, therefore, we cannot guarantee that the guidelines outlined here will be in effect at the time of your loan application but is provided to give you the basic idea of the requirements of the FHA mortgage.

  • Neither the lack of traditional credit history nor the lifestyle of the FHA Mortgage applicant may be used as a basis for rejection
  • Collections: Based upon the surrounding circumstances, and as determined by our underwriter, these do not necessarily have to be paid.
  • Judgment: Are required to be paid off before the FHA Mortgage loan is eligible for insurance. However, exceptions can be made if the borrower has been making regular timely documented payments and the creditor is willing to subordinate the judgment to the insured FHA Mortgage.
  • Foreclosure: An FHA Mortgage applicant whose previous residence or other real property was foreclosed on, or who has given a deed-in-lieu of foreclosure with the previous three years is not generally eligible. Exceptions can be made based upon extenuating documented circumstances.

FHA Mortgage loan Advantages Include:


Minimal Down Payment and Closing Costs.

  • Down payment less than 3.5% of Sales Price
  • Gift for down payment and closing costs allowed.
  • No reserves or required.
  • FHA regulated closing costs.
  • Seller can credit up to 6% of sales price towards buyers costs.

Easier Credit Qualifying Guidelines such as:

  • Minimum FICO credit score of 540.
  • FHA will allow a home purchase 2 years after a Bankruptcy.
  • FHA will allow a home purchase  3 years after a Foreclosure

Easier Debt Ratio & Job Requirement Guidelines such as:

  • Higher Debt Ratio’s than other home loan programs.
  • Less than two years on the job is allowed.
  • Self-Employed individuals o.k.

Apply now at or all 954-667-9110

  • Reserves: There are no reserve requirements for one and two-family until residences. Three months reserves are required for three and four-family unit residence’s.
  • Rental Income: Rental income from relatives residing on the premises is acceptable provided the rental income is shown on the borrower’s tax returns.
  • Cash Saved at Home: FHA Mortgage applicant who meet the “cash borrower” profile (no traditional credit, no bank accounts, etc.) who have saved cash at home and are able to adequately demonstrate the ability to do so are permitted to have this money included, with satisfactory explanation, as an acceptable source of funds to close a mortgage loan.
  • Child care expenses are NO LONGER included as debt.
  • Non Occupant Co FHA Mortgage applicant: When there are two or more borrowers, but one or more will not occupy the property as a principal residence, the maximum mortgage is usually limited to 75% loan to value. However, maximum financing is available for borrowers related by blood or for unrelated individuals that can document evidence of family type, long-standing and substantial relationship not arising out of the loan transaction. Qualifying is determined by the underwriter.
  • Assumable: All FHA loans are assumable
  • Electronic/Online Payroll: 1st Continental Mortgage, and the industry as a whole, recognize that some employers use online payroll for pay stubs and W-2′S. These types of documentation are acceptable.
  • Rate Adjustments: There are no interest rate adjustment “penalties” for higher loan to values with FHA fixed rate loans. The rate, is the rate, is the rate.
  • Secondary Financing: Secondary financing is not allowed with an FHA loan. The only acceptable second mortgage is with an approved HUD gifting agent such as down payment assistance provided by a gov’t agency in the form of a “silent” second mortgage. Piggie Back seconds/HELOCS are simply not allowed.
  • Home Inspection: A home inspection may or may not be required on a property based upon various factors. Typically you will find it is not required, but is recommended on any existing residence.
  • Pest Inspection: A termite inspection is required for all existing properties.
  • Closing Costs: Closing costs charged to the borrower are restricted and may in fact be less than conventional closing costs dependent upon your lender or broker.
  • Chapter 7 Bankruptcy: Will not disqualify a FHA Mortgage applicant if at least two years have passed since the bankruptcy was discharged
  • Chapter 13 Bankruptcy: An FHA Mortgage applicant paying off debt under Chapter 13 may also qualify if at least one year of the pay out period has elapsed with satisfactory payment performance and the court approves the borrower entering into a mortgage transaction.
  • Aliens: FHA will insure mortgages made to lawful permanent resident aliens under the same terms and conditions as a US citizen.
  • No Income Restrictions
  • Multifamily: Three and four family unit residences, regardless of occupancy status, must be self-sufficient. The maximum mortgage is limited so that the ratio of the mortgage payment divided by the monthly net rental income does not exceed 100%. The net rental income is the appraiser’s estimate of fair market rent from all units (including the unit chosen by the borrower for occupancy) less the allowance for vacancies and maintenance which is 15%. 85% of the rental income that is expected from the non-occupied units is added to the borrower’s income for qualifying purposes. Down Payment is calculated the same as single-family units.
  • Overtime, Bonus and Part-time Income: Overtime and/or bonus income received for a period of less than two years is acceptable where the underwriter determines that there are reasonable expectations of it’s continuance. An earning trend over the period of time of receipt must be established and analyzed. Part-time income means income from jobs taken in addition to the normal regular employment to supplement the FHA Mortgage applicant income. The same rules apply for determining using it as a part of qualifying.
  • Extended Absence from Workforce: In some cases, the FHA Mortgage applicant may have recently returned to the work force after an extended absence. The borrowers income may be considered effective and stable provided the borrower has been employed in the current job for 6 months or more and the borrower can document a 2 year work history prior to the absence from the work force.
  • Higher Ratios: HUD’s standard ratio guidelines are 31% (maximum exception of 36%) of your gross income for housing and 43% (maximum exception of 50%) of your gross income for housing plus other creditors. Borrowers may, at the underwriters discretion, be allowed to extend beyond these ratios based upon sufficient compensating factors.
  • Down Payment: The minimum down payment is approximately 3%. While credit quality can affect this qualifying requirement, the typical borrower only needs the standard HUD guideline of 3% to be approved.
  • Gifts: 100% gift funds are acceptable. The donor may be a relative of the FHA Mortgage applicant, the employer or labor union, a governmental agency, a not for profit private organization, or close friend with a clearly defined interest in the borrower. No repayment of any gift may be expected or implied. Sellers are allowed to pay all closing costs on behalf of the borrower up to 6% of the purchase price.

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The New Good Faith Estimate & HUD Guidelines Effective 1/01/10

December 22nd, 2009

The New Good Faith Estimate & HUD Guidelines Effective 1/01/10

The U.S. Department of Housing and Urban Development (HUD) has updated and re-released “Shopping for Your FHA Home Loan: HUD’s Settlement Cost Booklet.”

A large share of content in the 49-page publication, which helps consumers comparison-shop mortgages,
addresses the standardized Good Faith Estimate(GFE) and HUD-1 settlement statement forms that lenders must
start using on Jan. 1, 2010.

HUD estimates that consumers could save almost $700 in costs and fees per loan on average as a result
of the new requirement, which is one of several changes to the Real Estate Settlement Procedures Act (RESPA).

In addition to the updated literature, the agency has set up a RESPA “FAQ” section and other information
on a dedicated RESPA page so that consumers, settlement service providers and lenders can gain a better
understanding of the new rules.

Here is the location of the .pdf of the booklet that you can save or print out for your reference. Booklet December 15 REVISED.pdf

Lenders are now required to provide loan applicants with the following:

?Good Faith Estimate—provided at the time of application to borrowers to outline the loan terms and
total settlement costs.

?HUD-1/HUD-1A Settlement Statements—to inform borrowers of final costs at settlement.

?Servicing Disclosure Statement—to inform the borrower whether another financial institution
may be servicing their loan.

?Settlement Cost Booklet—provided within three days of application to inform the borrower of fees
involved in home purchase settlement.

There are three categories of charges that a consumer will pay at closing.  Some of the charges can change
and the Good Faith Estimate is just that ….AN ESTIMATE!  Page 17 of the booklet outlines those charges that
are fixed and will not change, those that they have established a limit whereby the charges can only increase
by 10%, and those charges that have no limits.  The charges that are limitless are available on the open market
and the borrow can shop for competitive rates or negotiate these charges as a condition of the contract.

Before closing you will be provided with a HUD-1 Settlement Statement listing all charges and credits to the
borrower and seller in a transaction.  The HUD-1 will often differ from the GFE ( Good Faith Estimate). 
Question the lender about any changes in fees between you rGFE and the HUD-1.  If the lender has exceeded the  closing cost “tolerances”  established by these new guidelines the must reimburse you.

BE AWARE AND INFORMED of your rights.
A good real estate agent will also review the HUD-1 and should be knowledgeable enough to discuss it with you  and point out any errors or discrepancies they may find.

Pay special attention to the last section of the HUD-1.  This section details the terms of your FHA loan,
including the loan amount, your interest rate, your loan balance or your monthly payments can increase and
whether your loan has a prepayment penalty or balloon payment.  Look at this information carefully and
determine if these are the terms of the loan you agreed to and what was shown on your GFE.

Before you consider buying a home, page 36 of the booklet has a very simple worksheet that will assist you in
determining what you can afford before you start to look at homes on the market.

This is an excellent resource for real estate and FHA  loan professionals.  I feel it may be complicated for the
average consumer or first time home buyer who may not have a good understanding of terms people in the industry take for granted.  Home buyers should use this resource along with the knowledge of their real estate professionals to navigate through the home loan process.

Applying for an FHA home loan has many advantages including

Minimal Down Payment and Closing Costs.

  • Down payment less than 3.5% of Sales Price
  • Gift for down payment and closing costs allowed.
  • No reserves or required.
  • FHA regulated closing costs.
  • Seller can credit up to 6% of sales price towards buyers costs.

Easier Credit Qualifying Guidelines such as:

  • Minimum FICO credit score of 540.
  • FHA will allow a home purchase 2 years after a Bankruptcy.
  • FHA will allow a home purchase  3 years after a Foreclosure

Easier Debt Ratio & Job Requirement Guidelines such as:

  • Higher Debt Ratio’s than other home loan programs.
  • Less than two years on the job is allowed.
  • Self-Employed individuals o.k.

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