Archive for the 'Interest Rates' Category
FHA Home Loans – Credit Requirements
Posted by Paul Gonzales | Leave A Comment »
This is the second in a series of four posts that deal with important aspects of FHA financing. The first post provided an overview of the program. This post will detail the credit requirements necessary to obtain an FHA home loan.
Traditional Credit History
This describes the typical credit history that most people tend to establish over time. As consumers utilize credit in its many forms (credit cards, car loans, student loans, mortgages etc.) detailed histories of how they have managed their credit responsibilities are collected by at least three credit bureaus. In addition, each bureau also computes a composite credit score commonly known as your FICO score (stands for Fair Isaac Corporation, the company that created the current credit-scoring models).
The FHA lender will review the FICO scores as well as the details of the individual’s credit history to determine how well a Borrower has managed credit in the past. NOTE: You may obtain a free credit report once each year, from each of the three major bureaus (Equifax, Experian and Transunion) by going to www.annualcreditreport.com. There are many websites where you can obtain your FICO scores, usually for a fee. One popular site is www.myfico.com.
Derogatory Credit
You knew we would get there eventually. Derogatory, or negative, credit are the dents and dings that people can incur in their financial lives. Here is a breakdown of how FHA lenders consider such items:
- all derogatory items within the last 24 months require a written and signed letter of explanation
- “minor” derogatory remarks older that 24 months do not require explanation
- all “major” derogs require written explanation, regardless of age (the FHA lender determines what is minor vs. major)
- collections are considered major derogs and must be explained; most FHA lenders will require them to be paid off
- judgments must likewise be paid off unless a verifiable repayment plan is in force and all payments have been made to-date
- a foreclosure must be at least 3 years old, but may be less than that for certain documented extenuating circumstances beyond the Borrower’s control (I.e. serious illness, death of a wage-earner). Divorce will not normally be considered.
- Chapter 7 bankruptcy discharge must be at least 2 years old with no new derogatory credit issues after the discharge; may be less than 2 years with acceptable extenuating circumstances. Less than 12 months not allowed
- Chapter 13 and/or Consumer Credit Counseling allowed with at least a 12-month history of on-time payments; permission of the bankruptcy court or counseling agency is required
Non-Traditional or Alternative Credit
The FHA allows for Borrowers without traditional credit histories to document their bill-paying behavior by showing on-time payment of other types of consumer bills such as rents, utility bills and car insurance. Such documentation cannot be used to enhance an existing traditional credit report or offset other derogatory credit
A Final Word On Credit
As you can see, the FHA has certain minimum standards and requirements, yet also allows FHA-approved lenders a certain degree of discretion in some areas. It is up to the lender’s underwriter to render a final decision on the creditworthiness of a particular Borrower. Some lenders may add additional requirements as well, but can never ignore or toss out FHA guidelines. Click here to go to the FHA’s consumer website.
The next post in this series, to post here shortly, will discuss income and employment requirements for obtaining FHA financing.
For more information contact Paul Gonzales, Manager, Countywide Mortgage Inc (760) 746-7388 or paulforloans@aol.com
Related Posts: CW Mortgage, Financial news, Home Loans, Homeowners, Interest Rates, Mortgage News
FHA Loans – The Basic 203(b) Home Loan
Posted by Paul Gonzales | Leave A Comment »
This post will be the first of four brief articles covering the most important aspects of what has become the darling of the real estate market – the venerable FHA home loan.
Established in 1934, the Federal Housing Administration, as stated on its website “…. has served as an economic backstop working hand-in-hand with lenders to provide consumers with access to safe and affordable loans, even during times of tremendous market volatility as with the current subprime situation“.
This post will describe some highlights of the most common type of FHA financing, known as the Section 203(b) loan.
Subsequent posts will detail credit requirements; income and employment; and finally, assets, down payment and cash required to close.
Maximum Loan Amount
The current limit is the same as it was in 2009, varies county-by-county and is the lesser of 125% of the median house price in a given area, or the following amounts:
- Single family unit – $729,750
- Two family unit – $934,200
- Three family unit – $1,129,250
- Four family unit – $1,403,400
Property Types Allowed
As noted above, FHA financing is available for single-family homes, condos and PUDs as well as 2 to 4 family properties provided that they are owner-occupied. Second homes and investment properties are not allowed. Condominiums must be FHA approved and HUD recently made it somewhat easier for a lender to initiate the approval process if necessary.
Other Notable Features
- Can be used to purchase or refinance a primary residence
- Minimum allowable down payment is 3.5% of the purchase price (for homebuyers with FICO scores below 580 the minimum down payment will be 10%)
- Down payment can be gifted
- For now the “Upfront Mortgage Insurance Premium” (UFMIP) is 1.75% of the purchase price; however this will be increased to 2.25% April 5, 2010. FHA still allows this premium to be rolled (financed) into the loan
- Seller can credit up to 6% of the purchase price to closing costs (HUD plans to lower the maximum amount of Seller credit to 3% later this year, the date to be announced)
- No financial reserves required for 1 or 2 units, 3 months reserves for 3 to 4 unit properties
- Allows non-occupant co-borrowers (for example, Mom and Dad can be on the loan to help qualify, even though they will live elsewhere)
- Allows cashout refinancing to 95% of value ($417,000 maximum; 85% over $417,000)
- No prepayment penalties
- A borrower can have only one FHA loan at a time (fairly obvious since these are strictly owner-occupied loans and a person cannot have two “primary” residences. Exceptions: you are relocating, selling your home to purchase a new home, or a divorce situation.
- U.S. citizenship is not required: the borrower must have a valid Social Security Number, hold Permanent Resident Alien status or be eligible to work in the United States and hold the appropriate work visas.
Watch for the next article in this series to be posted very shortly which will detail the credit requirements for obtaining an FHA home loan.
For more information contact Paul Gonzales, Manager, Countywide Mortgage Inc (760) 746-7388 or paulforloans@aol.com
Related Posts: Buyers, CW Mortgage, Condos & Townhomes, Financial news, Home Loans, Homeowners, Interest Rates, Mortgage News, Real Estate News, San Diego
Why NOW May be the Best Time to Sell Your Home
Posted by Rachel LaMar, J.D. | Currently 4 Comments »
Happy New Year! I wanted to discuss an important issue that could effect buyers and sellers this year. There have been many articles out there lately about what will happen to the housing market in 2010, and many contradict each other. Some say the market will stabilize and start to climb, others that the bottom is not even in sight yet. So who do you believe?
There are three critical factors that will play a role in the state of the market and how it will fare this year. But even more importantly, if these factors combine in several different ways it could make it more difficult to sell a home in the latter part of the year.
If you are thinking of selling your home this year you may want to consider doing so now. To find out why please read my latest blog by clicking the pencil below or by visiting http://www.rachellamarrealestate.com/blog/?p=317.
Related Posts: Buyers, Financial news, Foreclosures, Great Real Estate Deals, Interest Rates, Real Estate News, San Diego, Sellers, homes for sale, rachel lamar, tax credit
Finding And Buying A Home With Help From An Expert In Real Estate
Posted by Misty Dobson | Leave A Comment »
Media doesn’t agree when it comes to the current housing market and it seems that are no answers that make you the buyer comfortable with making a purchase….working with an expert in Real Estate will get you the right answers!
I am here to help you start your search for your home and find it…
- There is information that needs to be compiled by you the buyer when beginning a search for the right property ..price point, location, lifestyle, expert help, mortgage programs and how quickly you want/need to move.
- As your Realtor I can give you the tools to assist in finding your ideal home.
- A Mortgage Professional can help you determine how much home you can afford and what kind of loan best suits you.
- The Search begins
I will help you prepare for the home buying experience and to help you along the way when you are ready to make your purchase. Experts that are needed in a home purchase are Home Inspectors, Appraisers, Escrow Officers, Title Companies, Termite Companies and YOUR REALTOR. You are not alone and you can feel more confident making your purchase when you have an expert on your side.
There are benefits to you as a buyer right now. Tax incentives, Low Interest Rates and More Inventory.
For more information and to start the search for your ideal home with the right tools contact me.
Misty Dobson
Realtor
Hot On San Diego Team
Related Posts: Area Information, Area Statistics, Buyers, Condos & Townhomes, Education, Escondido, Find A Home, Great Real Estate Deals, Interest Rates, Investment Properties, Market Trends, Real Estate News, San Diego, homes for sale
When Does It Makes Sense to Refinance?
Posted by Paul Gonzales | Currently 1 Comment »
Trying to decide whether or not to refinance your mortgage can be like trying to find treasure on a deserted island. You can shovel a lot of sand and still come up empty-handed at the end of the day. However, you can sift it all down and find that nugget of wisdom rather quickly if you know how.
There are three primary reasons to refinance your mortgage:
(1) To take advantage of a lower interest rate and/or smaller monthly payments
(2) Pull cash out of your equity to consolidate other more costly debt, like credit cards, car loans, student loans and such, thus saving a lot of money each month
(3) Pull cash out to invest or pay for other expenses such as college tuition, home improvements, medical expenses or taxes.There are other reasons to refinance that you might consider such as swapping an adjustable-rate loan for a fixed-rate mortgage, but they all boil down to the three primary reasons noted above.
Refinancing to consolidate debt, invest or meet other obligations is usually straightforward and the numbers are easy to grasp. But how do you know when refinancing just to lower your interest rate or monthly payment really makes financial sense?
Back when the Beach Boys were Surfing USA, the “rule of thumb” was that it made sense to refinance your loan if you could lower your interest rate by 2 percent (say from 12% to 10%). But that was in the days when the typical middle-class home loan was $65,000.
Today, with most home loans considerably larger than that, a good standard rule is that if you can recover the cost of refinancing within 24 to 36 months, you should consider doing so.
For example, if you can refinance your $300,000 loan and reduce the interest rate by just one-half percent from 6.5% to 6.0% you will save $98 per month. If the cost to refinance is $2,900, dividing that cost by your monthly savings of $98 results in a payback of your initial $2,900 cost in about 30 months.
This simple calculation is called a “break-even analysis”. After 30 months, you are making money on your lower interest costs – and that makes sense for most people. As I have said before, consult your trustworthy loan officer and ask him or her to work up a break-even analysis for you. Then you will quickly be able to sift a beach-full of sand and discern that golden nugget!
Call me at (800)775-7334 or email me at paulforloans@aol.com to see if refinancing makes sense for you!
Related Posts: CW Mortgage, Financial news, Home Loans, Interest Rates, Mortgage News
