Is the Government Shifting Back to Risky FHA Loan Practices?

September 9th, 2013

Finding companies that offer FHA loan programs with poor credit scores may have just become more prevalent. According to the Wall Street Journal, the Obama administration wants to create a mortgage market that is more forgiving to borrowers who lost their homes due to the recession, an effort that could widen the pool of potential homeowners. Recently HUD implemented some change that enables certain applicants who went gone through a foreclosure or bankruptcy to be considered for a FHA mortgage. The applicants must have been working on improving their credit to become eligible to receive a new house loan insured by the Federal Housing Administration after waiting as little as 1 year.

To be eligible for the latest FHA home loan mortgage, borrowers must show that their foreclosure or bankruptcy was caused by a job loss or reduction in income that was beyond their control. Borrowers also must prove their incomes have had a “full recovery” and complete housing counseling before getting a new home loan. The Obama administration has made an effort to improve the home finance market to make it qualifying more achievable to people who lost their property to a short-sale or foreclosure due to the Great Recession.

Related Mortgage Articles

The FHA already offers among the most flexible lending standards today, requiring down payments of just 3.5%. “It’s difficult to see how lenders would even consider doing mortgages with higher risk” in the current environment, said David Stevens, the chief executive of the Mortgage Bankers Association, who served as the FHA’s commissioner from 2009 to 2011. Lenders aren’t going to expand credit “while you’re suing them and threatening them over minor errors.”

Shaun Donovan, the secretary for the Department of Housing and Urban Development, made it clear that FHA has no plans to promote risky home mortgages. He said, “What we are talking about is getting back to responsible, plain-vanilla lending,” he said in an interview. “We believe these are low-risk loans that can be made safely.” In the four years ended last September, some 3.9 million homes had been lost to foreclosure. About 1 million borrowers who went through foreclosure during the crisis have already waited the required three years to be eligible for FHA home loans, and by early next year that number could rise to 1.5 million, according to estimates from Moody’s Analytics. The government through Fannie Mae, Freddie Mac or federal agencies has guaranteed as many as nine in 10 new mortgages in recent years. But over the past four years, banks have had to buy back tens of billions of defaulted loans as Fannie, Freddie and the FHA faced mounting losses.

The article was written by Nick Timiraos. Read WSJ original article.


FHA News, Published Loan Articles

FHA Driving High LTV Mortgage Refinancing

May 22nd, 2013

Since the Mortgage market had begun to rebound, we have benefited from low FHA rates and increased home sales nationally. Many consumers have picked FHA for first time home buying because of the affordable interest rates and low down-payments of only 3.5% required for purchasing. Many people are choosing FHA for home mortgage refinance loans because  the credit requirements are lenient with great fixed rates yield more savings. With federally insured home loans, not much equity is needed for borrowers seeking a refinance. Talk to FHA home loan lenders today about solutions that can meet your needs.


FHA Loan Updates, FHA News

1st Time Home Buyers Select FHA Loans

May 6th, 2013

Since their inception in 1934, the Federal Housing Administration has been a favorite for first time home buyers seeking financing. People are attracted to FHA because they are considered safe and affordable with only a 3.5% down-payment required. “In fact, in the past year a big majority of FHA insured purchase loans more than 75% have gone to 1st time house buyers.”  The fact is that many new buyers are still attracted to the bad credit FHA mortgage.

The main focus of the FHA mortgage program is straight-forward: Qualified borrowers can buy a home with just 3.5% down. That means for a $150,000 property a buyer needs just $5,250 in cash plus closing costs. It is worth pointing out that the FHA is not a lender.

Down Payment Requirements: First-time FHA borrowers are generally required to put down just 3.5% of the sales price but there are exceptions: if you have a credit score below 580 then the program requires 10 % down. This is still amazing though that FHA still approves mortgages with bad credit on fico scores as low as 500. Also, HUD has proposed that if you borrow more than $625,500 then at least a 5% down-payment will be required. As long as one of the units is owner-occupied, FHA loan programs can be considered. This means first-time owners can also become first-time investors with just a 3.5% down-payment if they meet FHA guidelines.”

Gift Funds Allowed: FHA borrowers may need less cash up front if they can obtain a gift from family, friends, or other sources. “Gifts can be equal to some or all of the down payment, in fact gifts that exceed the down-payment are allowed,” said Brousseau. “The extra money counts toward reserves.”

Credit Score Requirements: In recent months the typical FHA borrower has had a 696 credit score, however the FHA also insures loans for borrowers with lower credit scores. “The FHA has recently moved toward tighter credit standards,” said Brousseau. “As of April 1st, when the debt-to-income ratio exceeds 43% and the borrower has a credit score of 620 or less the loan application must be manually reviewed. Manual underwriting can be useful because it allows FHA home loans lenders to consider compensating factors when looking at a loan.”  Read the complete WSJ article online.


1st Time Home Buyers, Published Loan Articles

Low FHA Rates But Higher Mortgage Insurance Premiums Forecasted

December 5th, 2012

This has been a monumental year for low interest rates and FHA loan origination. The interest rates have never been lower, but FHA reserves have been nearly depleted once again as loan defaults surged last quarter. Any decline in a home’s value leaves homeowners upside down which for some provides little incentive to keep making the payments when a family’s income declines. Due to this factor and the fact that FHA lenders are more lenient on credit history than conventional loans, the FHA insurance program has been losing money due to defaults and foreclosures. In response FHA is increasing the premium on its mortgage insurance sometime in 2013.

FHA loans currently require the borrower to pay the monthly mortgage insurance premium for a minimum of five years, after which time, the premium may be waived if the loan to value ratio has fallen to 78%; however, effective next year, FHA mortgages will require borrowers to pay the monthly mortgage insurance premium for the life of the loan. All signs point towards premiums being raised next year. The likelihood of FHA offering home equity credit lines for bad credit are about the same as premiums not rising in the year to come. There are just too many delinquencies and defaults for FHA not to hike the mortgage insurance premiums.

The mortgage insurance premium effectively raises the interest rate 1.25%. When adding the mortgage insurance premium to a 30 year fixed rate for an FHA loan at 3.25%, the real rate is closer to 4.5%. The upfront mortgage insurance premium has been 1.75% of the loan amount. On a $400,000 loan, that amounts to $7,000 but the good news is that it can be financed by adding that fee to the base loan amount; therefore, the new loan would become $407,000.

There are numerous considerations when exploring mortgage options; borrowers are advised to consult with one or more mortgage professionals who are experienced in both FHA and conventional loans before making a final decision. Read the original Mecury news article.


Published Loan Articles

HUD Pushing for Bad Credit FHA Loans?

January 13th, 2012

Is HUD Encouraging Lenders to Accept Lower Credit Scores on FHA Loans?

If you have poor credit and have been turned down from a mortgage lender recently their may be new opportunities coming with FHA loans because HUD is pushing for lenders to lower credit score requirements. The National Mortgage News reported that the Department of Housing and Urban Development, would like to see FHA lending sources reduce the FHA credit score requirements. HUD approves FHA loans with credit scores greater than 500, but many FHA lenders institute their own credit score requirements. Today the average score on an FHA-insured mortgage is 700.” This will be received with open arms from borrowers with low credit scores because the 30-year FHA mortgage rate has fallen in the 3.25% range again.

In order for FHA mortgage lenders to loosen their underwriting standards, changes to the FHA’s Neighborhood Watch program may be necessary.  Neighborhood Watch is a HUD program that monitors lenders to make sure that they aren’t issuing a lot of loans that end up defaulting.  It does this by comparing the default rate from a given lender to the average default rate for all FHA loans, regardless of credit score or other risk factors.  Default rates above the norm could set off audits or monetary penalties for potential losses.  This makes FHA lenders reticent to lend to people with lower credit scores or higher risk factors.

According to a 2010 USA Today article, over 25% of consumers had credit scores of less than 600.  This type of credit score would eliminate 25% of the population from qualifying for a low rate FHA home financing based on today’s lending guidelines. The Boston Herald published an article recently that indicated that between 2008-2009, 50 million people saw their FICO scores drop by 20 points, and 21 million of these people lost more than 50 points. Read the original article on Total Mortgage blog.


FHA Credit, FHA Guidelines

Ноw FHA Can Help You Finance а House wіth Bad Credit

January 11th, 2012

Are you excited to become a homeowner in 2012 but are worried that your credit scores will hold you back? FHA has been helping Americans with home financing since the Great Depression.

Тhеrе аrе а fеw obstacles fоr people lооkіng tо finance а house wіth bad credit. Моst conventional underwrirers аrе nоt interested іn approving purchase loans fоr borrowers wіth bad credit. Маnу people thіnk thаt amortgage fоr people wіth bad credit іs simply а pipe dream аnd impossible tо attain. Ноwеvеr, thеrе аrе mаnу companies thаt offer hоmе loans for people with a challenged credit history. Low credit scores сеrtаіnlу detrimentally аffесts thе cost оf purchasing а hоmе аnd that’s whу оur lenders аrе extending а hоmе loan fоr people wіth bad credit. Great credit affords borrowers thе best interest rates аnd lowest fees, whіlе bad credit uрs thе fees аnd thе interest rates, аs well аs thе requirements. Ноwеvеr, learning hоw tо gеt а fіrst time hоmе loan wіth bad credit саn gеt уоu оn уоur wау tо owning уоur оwn hоmе іnstеаd оf throwing money аwау оn rent month аftеr month.

If уоu wаnt tо knоw hоw tо gеt а 1st time loan wіth poor credit, fіrst уоu hаvе tо knоw sоmе оf thе limitations. Тhе requirements fоr а loan fоr fіrst time home buyers wіth bad credit change depending оn hоw bad thе credit асtuаllу іs. Ноwеvеr, finding lenders that still offer a hоmе loan for poor credit is not easy. With that being said, there are loan companies that offer sub-prime loans and government mortgage programs for people with less than perfect credit. аrе еvеn аvаіlаblе fоr people whо hаvе filed bankruptcy оr experienced а foreclosure. Тhеrе іs а waiting period аftеr thеsе occurrences bеfоrе financing а hоmе wіth а conventional оr FHA mortgage. Веfоrе thе real estate market crash аnd thе rесеnt economic depression, subprime lenders offered mаnу loans tо borrowers wіth bad credit.

Financing а hоmе wіth bad credit саn bе tiring, but hоmе buying hаs bесоmе vеrу attractive wіth falling hоmе prices combined wіth record low FHA rates.

•          Purchase Mortgage Rates starting аt 3.75%!

•          Low Down-Payments on FHA Loans wіth оnlу 3.5% Needed

•          Get Secure Fixed Rates and Choose bеtwееn 10, 15 аnd 30 Year Terms

•          Flexible Credit Guidelines wіth VA and FHA hоmе loans

VA mortgage products do not have a minimum credit score for any VA financing opportunities.  However the Federal Housing Administration implemented a FHA minimum credit score requirement that was set at 500. Bad credit FHA loans are more common than their VA counterpart mostly because not that many Americans meet the military requirements on VA mortgages.


1st Time Home Buyers, FHA Credit

The Future of FHA Mortgage Lending

December 12th, 2011

Rick Grant wrote an article published by the National Mortgage News regarding the future role of FHA. In this FHA Assessment Report, Robert Van Order and Anthony Yezer of the George Washington University School of Business for the University’s Center for Real Estate and Urban Analysis considered at the future role of the FHA mortgage programs.

Compare a Mortgage Refinance with FHA

In their first report, the authors concluded that since FHA had captured 56% of the market for first-time and low to moderate income home buyers by 2012, the agency was fulfilling its mission. But with home loans of more than $350,000 having 20% worse default rates, high loan limits increased the agency’s risk significantly. In their second report, the authors concluded that FHA could serve 95% of its historic target market even if loan limits were reduced by nearly 50%.

As the U.S. housing market enters its recovery phase, the co-authors focus their third report on “the factors that are determinants of mortgage risk to ensure that FHA doesn’t layer on excessive risk.” The authors considered these specific issues in their analysis, the balance between low down payments and other loan characteristics, the risk inherent in different loan types and the other factors that also impact overall risk that are not so easily observed. The FHA need not mimic the private sector, but must take care to adjust to changes that represent additional risks.

To explore the relationship between loan to value and FICO score, the authors studied data supplied by the Federal Housing Finance Agency. GSE loans were segmented into four LTV classes and four FICO buckets. The authors looked at FHA loans originated in 2003, a good year for the industry and borrowers, and 2006, well into the downturn.

Assuming that skin in the game (lower LTVs) is enough to prevent default or that high FICO guarantees continued payments leads to error. It’s the layering of risk that matters. For instance, the GSE loans with 95% or greater LTV and with credit scores between 680 and 720 had about the same rate of default as those loans below 75% LTV with low credit scores. Likewise, the economic conditions at the time had a significant impact on default for all LTV and FICO buckets.


FHA Loan Articles

Сalifornia FHA Conforming Jumbo Loan Limits Lifted fоr 2013

December 7th, 2011

The housing market on the West coast should see significant benefits from the raised California loan limits on FHA mortgages. Finally after initially rejected higher FHA loan amounts, Congress agreed tо restore, reinstate аnd extend thе jumbo /conforming FHA loan limits tо $729,750 fоr 2013 аftеr sееіng thе negative impact thе October 1st loan limit reduction hаd оn thе сеrtаіn high cost housing markets. The only concern for lenders looking forward is that if defaults continue to rise, so will mortgage insurance premiums. Clearly this could limit Congress to increase the loan amount limits on home loans with FHA as well.

Surprisingly, thе House rejected thе Senate’s bill tо restore оr increase thе conventional (Fannie Mae/Freddie Mac) loan limits.  FHFA announced Conventional home loan financing limits will remain thе same.

Loan amounts bеtwееn $417,000 аnd $729,750 аrе оftеn referred tо аs high balance, jumbo conforming, оr agency jumbo loans.  Тhе FHA conforming & jumbo loan limits hаvе bееn extended thrоugh December 13, 2013.

Whо will benefit mоst frоm thе restored аnd extended jumbo/conforming for a FHA mortgage in California?  What are the loan limits? Clearly borrowers who reside in the higher cost areas of the state will have more opportunities to secure jumbo home financing. What will happen in 2014 is anyone’s guess.


FHA Guidelines, FHA Loan Articles

Higher Loan Limits with FHA to Spur Home Financing in 2013

December 2nd, 2011

Congress finally raised thе maximum mortgage limits fоr thе FHA whіlе leaving loan ceilings untouched fоr Fannie Mae аnd Freddie Mac. Most home finance executive believe thіs mау mаkе thе FHA loan even more popular than they already are.  Clearly higher FHA loan limits will help borrowers’ іn high-cost areas. FHA rates remain at the most affordable level they have been in decades so there is significant motivation for American consumers to choose FHA to buy homes or refinance existing home loans.

After а year characterized bу grumpy partisan gridlock, Congress саmе uр wіth а Thanksgiving compromise thаt соuld change thе mortgage choices оf buyers аnd refinancers іn mоrе thаn 660 markets асrоss thе country: Іt raised maximum loan limits fоr thе Federal Housing Administration whіlе leaving loan ceilings untouched fоr Fannie Mae аnd Freddie Mac.

In еffесt, thіs mау mаkе FHA thе solution fоr borrowers needing loans uр tо $729,750 wіth dоwn payments аs low аs 3.5% іn high-cost areas оf California, thе District оf Columbia, Νеw York, Νеw Jersey аnd scattered counties іn оthеr stаtеs including Massachusetts, Florida аnd North Carolina. Fannie Mae- аnd Freddie Mac-eligible loans іn thоsе areas, mеаnwhіlе, stay capped аt $625,500. Congress passed the bill to increase 2013 FHA loan limits so only time will tell how many people will benefit from these jumbo financing opportunities.

Equally іmроrtаnt, thе nеw plan raises thе FHA ceilings fоr purchasers іn hundreds оf mоrе moderate-priced markets. Seattle-area buyers’ maximum FHA loan amount jumped tо $567,500, whіlе thе Fannie Mae-Freddie Mac ceiling remains аt $506,000. Іn Hartford, Conn., thе limit fоr FHA іs nоw $440,000, uр frоm $320,850; Fannie аnd Freddie remain capped аt $417,000.

Buyers wіth low dоwn payments іn Portland, Ore., whо рrеvіоuslу hаd bееn limited tо FHA mortgage loans оf $362,250, саn borrow uр tо $418,750 undеr thе nеw plan, $1,500 mоrе thаn thеу саn gеt frоm Fannie аnd Freddie, whісh generally require steeper dоwn payments аnd higher credit scores.

The nеw loan ceilings іn hundreds оf markets аrе аt thе core оf thе compromise: Тhеу raise thе maximum FHA loan amount іn аll areas оf thе country tо 125% оf thе local median home-sale price, whіlе leaving Fannie Mae’s аnd Freddie Mac’s limit аt 115% оf thе median.

What motivated Congress tо create separate-and-unequal rules thаt transform thе FHA traditionally а haven fоr moderate-income, first-time buyers wіth minimal cash — іntо а key source оf financing fоr buyers іn upper- аs well аs mid-bracket markets?

Nobody іn Congress proposed thіs idea аt thе start. Ву а 60-38 vote іn October, thе Senate passed аn amendment raising аll three agencies’ limits tо $729,750 іn high-cost areas аnd 125% оf thе median sale price еlsеwhеrе. Тhе goal lobbied aggressively bу realty аnd home-building groups — wаs tо inject needed oomph іntо hоmе sales. Вut Republicans іn thе House balked аt dоіng аnуthіng thаt mіght prolong thе existence оf Fannie Mae аnd Freddie Mac, bоth thе targets оf scathing criticism fоr thеіr multibillion-dollar costs tо taxpayers аnd big bonuses fоr top executives.

What ultimately emerged frоm thе legislative scrum wаs thе compromise penalizing Fannie Mae аnd Freddie Mac, whіlе boosting FHA. House Republicans wеrеn’t enthusiastic аbоut helping thе FHA еіthеr — thе agency faces іts оwn financial challenges but unlіkе Fannie аnd Freddie, thе FHA іs subject tо congressional appropriations аnd closer oversight. Republican critics held thеіr noses аnd voted fоr thе plan.

What will thіs mеаn fоr buyers frоm nоw thrоugh thе еnd оf 2013, whеn thе compromise expires? “There’s nо doubt thіs will drive mоrе business tо FHA,” sаіd David Н. Stevens, fоrmеr FHA commissioner аnd current president аnd chief executive оf thе Mortgage Bankers Assn. “FHA іs going tо bесоmе thе darling оf thе industry аgаіn,” sаіd Annie Austin, а loan officer wіth Cobalt Mortgage іn Bellevue, Wash.

Bob Walters, chief economist оf national lender Quicken Loans, sаіd hе thinks thе increased loan limits will benefit mаnу consumers, “еsресіаllу thоsе lооkіng tо borrow larger amounts,” hе sаіd, but whо “аrе іn а credit situation whеrе Fannie Mae аnd Freddie Mac loans аrе nоt аvаіlаblе оr optimal.”

The switch tо thе FHA соuld entail sоmе pain, hоwеvеr. Tim Kepler, а loan officer wіth Land Ноmе Financial іn Danville, Calif., nоtеd thаt thе agency raised іts upfront mortgage insurance premiums frоm 0.5% оf thе loan amount tо 1.15% earlier thіs year. Тhіs will increase applicants’ closing costs оvеr а Fannie оr Freddie loan, hе said.

The premium саn bе financed, but саn add substаntіаllу tо thе costs оf high-balance mortgages. Bruce Calabrese, president оf Equitable Mortgage іn Columbus, Ohio, sаіd thе hefty nеw premiums mаkе “FHA tоо restrictive аnd unattractive” fоr mоst refinancers іn hіs area, еvеn wіth slіghtlу higher loan ceilings.

Bottom lіnе fоr house shoppers: Таkе а hard, close lооk аt FHA wіth а local loan officer, іn light оf thе rule changes. Pencil оut thе costs, down-payment requirements аnd mоrе generous standards оn credit. FHA mау bе уоur best option. Вut thеn аgаіn, thе higher fees јust mіght change уоur mind.


FHA Loan Articles, FHA News

The New HARP and Higher FHA Loan Limits

November 29th, 2011

Mortgage lenders across the country have been talking about the new HARP loans and the higher FHA loan limits that were raised to help consumers that reside in high cost regions. CoreLogic released new data showing that seven out of ten homeowners are below 80% loan to value.  That means that this group of consumers have less than 20% home equity in their property. CoreLogic also reported that these struggling group of homeowners have higher home loan interest rates and in many cased these consumers do not meet the current guidelines that lenders are requiring on refinance transactions. Obama recently signed off on extending the Home Affordable Refinance Program. This is a government sponsored refinance program for borrowers that have a mortgage owned by Fannie Mae or Freddie Mac. According to Nationwide, the HARP loan provides fixed rate refinancing for borrowers that meet the requirements on a 1st mortgage. The HARP: refinance does not allow borrowers to include a 2nd mortgage so many borrowers who have two liens on their house will not be eligible.

  • Higher loan amounts will help consumers in high cost areas qualify for affordable FHA mortgages.
  • There are nearly 22 million borrowers, or 45% of all borrowers, that have mortgages with an 80% or more loan-to-value ratio, and 69% of those mortgages have interest rates higher than 5%. Conversely, only 54 % of borrowers who have less than 80% loan-to-value have above-market interest rates. While above-market interest rates make home refinancing loans at today’s record low interest rates a cost-effective step for qualified homeowners, it can be more difficult for borrowers with above-average loan-to-value ratios to qualify for refinancing.
  • The top five states combined have an average underwater mortgage ratio of 41.4%, while the remaining states have a combined average negative equity ratio of 17.6%.

Read the original article on underwater mortgages from Nationwide.


FHA Loan Updates, HARP Loans, Published Loan Articles

203K Loans Rehabilitating Homes with No Equity

September 14th, 2011

The FHA 203K is one of the most popular home improvement loan options for borrowers looking to rehabilitate a residential property. The 203K is a basically rehab loan. Under the 203K loan, FHA allows you to purchase or refinance a home and roll the costs of the rehabilitation project into the mortgage. With house values continuing to struggle, adding in the cost to renovate can still get you a very affordable monthly payment.

As you may already know FHA interest rates are ridiculously low. In today’s mortgage environment, home improvement financing is more difficult to find.  Getting a second mortgage a few years ago was easy but today, most lenders are looking for more equity. The 203K loan doesn’t require equity and FHA allows home equity mortgages up to 115% loan to value. (203k loan is always held in 1st position)

Much like a standard FHA mortgage, consumers can get into a home with only a 3.5% down-payment and FHA allows the seller can assist with the loan closing costs. The FHA loan program is very popular with first time home buyers because of the low down payment. The 203K loan is most attractive to a borrower considering buying or refinancing a property that needs to be fixed up. Whether you need to add a room, remodel, or install a swimming pool, the 203K loan is unique option for financing home improvements.


FHA Loan Articles

2012 FHA Loan Limits to Fall Soon

August 22nd, 2011

Lenders and brokers have started to brace themselves for reduced FHA loan limits coming on September 30th.  MBA, NAR and other housing activists agree that lower loan limits will make it tougher on FHA financing in states with high cost regions. Many FHA loan companies have begun using the reduced FHA loan limits because in most cases the loan process takes 30- 45 days to close.  The common misperception is that it only applies to high-end homes, he said.

2012 FHA loan limits continues to be a highly debated a subject on Capitol Hill.  HUD lifted nationally limits from $417,000 to $625,000 in February 2009 and the FHA limits were extended last year until October 1st, barring action from Congress. The limit was raised from 115% of each county’s median home price to 125% of the median, and is now coming back to 115%. That’s an average reduction of $68,000, making an estimated 5 million homes ineligible for government sponsored-enterprise financing, he said.

FHA is poised to lower loan limits in the country’s high cost regions while limits would remain unchanged in most other parts of the nation. Lower FHA mortgage limits will affect less than 5% of the markets nationally, but it will do doubt have a ripple effect for the struggling housing sector.

Zach Lowe, spokesman for the Washington, D.C.-based Coalition for Sensible Housing Policy, said FHA insurance assists people who can’t afford a large down-payment needed to qualify for traditional home purchase loans. In 2011, the FHA was insuring mortgages up to $729,000 nationally, or 125 % of area median home prices.”


FHA Guidelines, FHA Loan Articles, Published Loan Articles

What are the Benefits and Risks with an FHA Loan?

August 19th, 2011

FHA started insuring home loans in 1934.  This government finance agency has helped support millions of first time home buyers over the years. Many people think FHA is only for new home buyers, but FHA offers home refinancing, cash out loans and much more.

The main benefits of FHA mortgages

1) FHA encourages home financing with low down-payments starting at 3.5% of the home sales price.

2) The credit requirements with FHA home loans are more flexible than conventional and private money lenders.

3) FHA refinancing is easy and cost effective if the FHA interest rates should fall at a later date.

FHA also offers a home improvement loans called the FHA 203K. Borrowers can purchase a “fixer-upper” and finance the house rehabilitation.  Since construction loans have disappeared the 203K loan is the only home loan that enables the repairs and renovations to be rolled into the mortgage.

The downside of FHA financing

1) FHA loans usually have more expenses than other conventional home loans because there is mortgage insurance required to be paid upfront prior to closing.

2) Monthly housing expenses are higher than traditional loans because FHA requires a monthly mortgage insurance payment that is due with each loan payment.

3) Each year HUD announces the FHA loan limits. This means that there is maximum amount that can be borrowed and the amounts vary by region.

Read more of Nasdaq’s article online about the basics of FHA loans


FHA Loan Articles, Published Loan Articles

FHA Mortgage Refinancing Better than Subprime Loans

August 19th, 2011

The amount of sub-prime loan products being offered these days is drastically decreased from a few years back, before the sub-prime crisis.  Sub-prime mortgages are loans that are made to people who may not be able to maintain the repayment schedule.  They are usually accompanied by higher interest rates and unfavorable terms.  FHA rates are much lower than bad credit mortgage rates and FHA refinancing is available to people with poor credit ratings.  Refinancing with a FHA mortgage provides an opportunity to reduce the monthly mortgage bill, making the repayment schedule easier to maintain.

Sub-prime loan rates mean that the interest can accrue faster than you can pay the loan off.  Refinancing with a FHA mortgage is a great idea because FHA mortgage rates are much lower than sub-prime mortgage rates.  The FHA, or Federal Housing Administration, was founded as a part of the National Housing Act of 1934.  This act was in response to the massive decrease in home ownership and loans during the Great Depression.  The federal government started backing FHA mortgages.  For many years, FHA became a part of the Department of Housing and Urban Development in 1965.  For over thirty years, the agency was completely self-funded, but in 2008, FHA applied to congress for subsidies to stem off the estimated $143,000,000 budget shortfall coming.

Avoid Subprime Refinancing if You Can Qualify for Fixed Rate FHA Mortgage  

The subprime loan crisis had caused a major problem for FHA.  However, FHA rates are much lower than subprime mortgage rates even now.  It stands to reason that refinancing with a FHA is an excellent method of restoring or maintaining credit by avoiding late or skipped mortgage payment.  It is also a good way to avoid either foreclosure or bankruptcy.  To get started in the refinancing process, take a good look at your finances and take care of any problem areas.  Meeting with a financial advisor is a good idea.  There are some great free programs offering financial counseling.

If you have already gotten yourself into a sub-prime loan, you have probably had bad credit at some point.  A financial adviser can help you make a plan for completely correcting your credit that is not skewed by the desire to sell you a mortgage.  They can help you decide if refinancing with a FHA mortgage is the right plan for your particular situation.  FHA Lenders can give you more information on how FHA rates are much lower than sub-prime mortgage rates and what you need to provide to be eligible for government refinancing with the Federal Housing Administration.


FHA Loan Articles, Refinancing with FHA

Mortgage Loan Limits Set to Fall

August 10th, 2011

Many people in the mortgage industry are nervous about the impact that lower Fannie Mae, Freddie Mac and FHA loan limits will have next month. If you want to get approved for home refinancing act quickly. Soon, you may face more expensive jumbo loans that are harder to qualify for. That’s what loan professional Mathew Carson of First Capital Group Inc. tells his clients in San Francisco as he warns them about loan limit changes that will take effect October 1st. Conforming loan limits are not the only changes that are taking place, as HUD will roll out the 2012 FHA loan limits that will be significantly lower than limits for 2011.

The maximum amount for jumbo-conforming mortgages which are loans that vary between $417,000 and $729,750 and can be sold to Fannie Mae and Freddie Mac will fall in many parts of the country. The maximum loan limit will be reduced to $625,500. Anyone who wants to refinance or get a purchase loan of more than $417,000 but less than $729,750 is likely to be affected. “There are plenty of people in this range, and when the limit changes they are going to be priced out of the market,” says Carson. “We’ve reached out to all of our clients in that category, and I’m finding that people just don’t know that loan limits are shrinking.”

These loan limits are crucial in high-cost areas such as San Francisco, Los Angeles, New York and New Jersey. That’s because mortgage loans that go over the threshold set by Fannie and Freddie are considered jumbo mortgages, which generally carry higher interest rates, may require larger down payments and have more stringent underwriting guidelines. According to the National Association of Home Builders the decreased jumbo limits will affect more than 200 counties, and about 1.38 million owner-occupied homes would be pushed outside of the jumbo limits allowed by Fannie and Freddie. These government finance agencies temporarily raised their loan limits in 2008. The higher loan limits have been extended annually since then, but are set to expire Sept. 30.

Presently, consumers have access to FHA mortgages of up to $729,750 with 3.5% down. FHA mortgage limits also vary by county and will be lowered at the same time as Fannie Mae and Freddie Mac reduce their loan limits. Borrowers in high-cost regions will not be able to get a FHA home loan over $625,500 after the new limits go into effect.

Read the rest of the here > Fox Business Article.


FHA Loan Articles, Loan Limits

FHA Refinancing Options

June 27th, 2011

The FHA Home Loan Blog published a great article today highlighting some issues that homeowners should consider when refinancing.

  1. Refinance now because conventional and FHA loan programs now before conforming limits rise at the end of summer.
  2. Some FHA lenders are more aggressive with approving a bad credit refinance for a borrower with compensating factors.
  3. FHA refinance loans is available to homeowners with a minimum credit score of 500.
  4. FHA mortgage products offer multiple mortgage terms such as 3/1, 5/1, 15-year, 30-year.
  5. FHA requires monthly mortgage insurance on FHA loans

Read the original article online at


FHA Loan Articles, Published Loan Articles

Maximizing Low FHA Loan Rates

May 13th, 2011

The Mortgage Bankers Association reported that FHA interest rates fell to their lowest level in 2011. The drop in FHA loan rates creates a new opportunity for homeowners to refinance into a lower and more affordable payment.  The lower FHA rates also help pave the way for first time home buyers to get locked into an amazing FHA loan fixed for 30-years. With home prices falling to their lowest level since 2003, this has become a significant opportunity for people to buy low while financing at record low interest rates.

Loan Professionals Have More Time To Surf Because Less Borrowers Qualify

Former Ditech executive, Jeff Morris told the FHA home loan blog in a recent interview, “FHA mortgage rates” could not be any lower, but not enough borrowers qualify for today’s FHA home loans, because banks and lenders have tightened their guidelines beyond reasonable levels for the average American borrower.” Morris said that we should not hold our breath for a recovery in the housing sector until government lenders are more realistic with requirements for refinancing and home financing. With lenders demanding higher credit scores and more equity, refinancing has truly become a commodity.

Suggested Changes that FHA Should Consider Implementing

  1. Revert back to 2009 Rate for FHA Premiums
  2. Eliminate the FHA Minimum Credit Scores –Qualified borrowers have been benefiting from bad credit refinancing
  3. Keep the FHA loan limits at 2008 levels.
  4. Enable homeowners with underwater mortgages to refinance up to 125%

Read the original article > Current FHA Interest Rates


FHA Guidelines, FHA Loan Articles, FHA News, Published Loan Articles

New FHA Mortgagee Letter for Refinancing

May 10th, 2011

HUD released the FHA Mortgagee Letter 2011-11. The Housing of urban Development clarified the guidance for FHA refinancing transactions and is effective immediately. Borrowers will be required to be current on the home loan they are being refinancing for the month due prior to the month in which they close the refinance loan and for the month in which they close. For example, if the mortgagor is closing on April 8, the mortgagor must have paid the March payment within the month of March. The mortgagor must make the April payment by closing. The mortgagor has the option to make the April payment at the beginning of the month, or may include the April payment in the payoff amount at closing

All FHA Refinancing with Subordinate Loans

This is a clarification of existing guidance and is effective immediately. If there is an existing second mortgage on the property, such as a Home Equity Credit Line, the entire lien must be subordinated at refinance. For the calculation of the Combined Loan to Value (CLTV) ratio, the mortgagee must use the maximum accessible credit limit of the existing subordinate lien. 

Occupancy of Former Investment Property Eligible Financing

  • 12 months or more prior to the loan application date of the refinancing mortgage
  • Maximum financing at the same level as an owner-occupant
  • Less than 12 months prior to the loan application date of the refinancing mortgage
  • Rate-and-term refinancing only (no streamline allowed), with an LTV not to exceed 85 percent

FHA Streamline Refinance – Net Tangible Benefit

This Mortgagee Letter rescinds and replaces paragraph I.C of Mortgagee Letter 2009-32 and its subsequent incorporation in HUD Handbook 4155.1.6.C.5.a, which defined “net tangible benefit” in a streamline refinance transaction as, among other things, a reduction to the principal, interest, taxes, and hazard insurance (PITI). This new guidelines for FHA streamlines base the calculation of the net tangible benefit on the principal and interest (P&I) and Mortgage Insurance Premium (MIP). The purpose of this change in guidance is to allow mortgagors who can reduce their P&I and MIP by 5 percent to do a streamline refinance, even if they have an increase in taxes and insurance, because mortgagors must pay taxes and insurance regardless of whether they refinance. This will allow more mortgagors to qualify for a streamline refinance, increasing their ability to repay their mortgages. The mortgagee must determine that there is a net tangible benefit to the mortgagor as a result of the streamline refinance transaction, with or without an appraisal. “Net tangible benefit” is defined as:

  • A 5% reduction to the P&I of the mortgage payment plus the annual MIP, or
  • Refinancing from an Adjustable Rate Mortgage (ARM) to a fixed rate mortgage.

Note: Reducing the term of the mortgage, in and of itself, is not a net tangible benefit. Also, when refinancing to a hybrid ARM, mortgagees must treat the new hybrid ARM as a fixed rate mortgage. The following table defines the permissible minimum thresholds in different refinance situations and outlines what is new and existing guidance.


FHA Guidelines, FHA Mortgage Leters

FHA Insurance Premiums Hindering Home Loan Activity

May 4th, 2011

Home loan applications fell again this week as more and more potential borrowers are weary of the recently raised FHA insurance premiums.  Home loan rates are still ridiculously low but the monthly mortgage insurance payments are not affordable for many applicants that are shying away from the FHA loan program. Recent surveys have indicated that first time homebuyer loan applications have soared as a result of the relaxed guidelines.

A few weeks ago HUD raised FHA premiums for the second time in the last 6 months.  The insurance rate hike only effect new home buyers and homeowners refinancing with FHA.


FHA News

Manufactured Home Loans with FHA

March 23rd, 2011

Many people are unaware that FHA offers manufactured home loans.  Many home buyers and existing homeowners run into obstacles when trying to secure financing for mobile, manufactured and modular home financing.  FHA home loans are available for manufactured homes that meet the FHA guidelines that outline the specifics for eligible property types.  FHA mortgage loans can also be used to finance modular and manufactured homes and the FHA rates are affordable.  Borrowers in many rural areas are in desperate need of affordable modular home loan programs.

HUD defines a manufactured house differently than new or existing construction properties.  According to FHA rules, a manufactured house varies from a new construction project because of the nature of its assembly. New construction property is built “on-site”.  The Federal Housing Administration considers manufactured house as “a structure that is transportable in one or more sections. In traveling mode, the home is eight feet or more in width and forty feet or more in length.”

Finance a Low Rate Manufactured Home with FHA

These homes that are eligible for FHA loan programs are regulated under rules known as Federal Manufactured Construction and Safety Standards and must be labeled accordingly. To be eligible for FHA home loans, the manufactured home must be built after June 15, 1976 and must contain a certification label that documents the date the home was built. The floor space for manufactured homes cannot be less than 400 square feet and must be classified as real estate.

According to HUD, the only manufactured house that may be classified as real estate or “real property” are those which have a permanent foundation built to FHA standards. They must be considered a “permanent dwelling” or the house is considered personal property which affects the tax deductibility and the eligibility for FHA loan programs.  According to FHA loan requirements, “the mortgage must cover both the manufactured unit and its site and shall have a term of not more than 30 years from the date amortization begins.”


FHA Guidelines, Manufactured Home Loans