Yes credit is tight and potential home buyers might think they need a significant of cash or a superlative credit score to wade into the devastated housing market. FHA eliminates some of the lender risks to provide mortgages because it will pay a claim to the lender in the event that a homeowner defaults on their loan.
Until 2008, FHA loan programs were capped so low that the program was out of step with the real price of a house. But in February 2008, the FHA loan limits in the high cost housing markets rose from $362,750 to $729,750. But in 2009 the FHA mortgage limits are being down-sized again.FHA announced the new ceiling in the high cost markets will be $625,500. FHA loans in 2009 will cap out at 115% of the median home price in a county or metropolitan area. Still, huge swaths of the housing market will remain, as never before, eligible for an FHA home mortgage.
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oFHA home loans can only be originated from a FHA-approved mortgage lender.
oDown payment requirements are minimal. Buyers need only 3.5% of the house’s price tag.
oThe down-payment can be a gift from a family member, employer, local charity, or local government program.
oFHA loan programs enable all ranges of credit scores with compensating factors.
oYou must have a 2-year employment record. The new FHA loan payment must be less than 31% of your income, and debt to income ratio is usually less than 43% of your income. Read the complete article at >
To get a mortgage now, you’ll have to make a down payment and document that you have the income and reserves to make your mortgage payment, run your household and still handle unexpected expenses.Subprime mortgage loans that were offered to borrowers with questionable qualifications during the housing boom have dried up because lenders — and the investment firms that bought the mortgages — can no longer count on appreciating home prices to bail out bad loans. Now FHA mortgage lenders and brokers must play by the rules of Freddie Mac and Fannie Mae, which guaranteemortgages that meet their criteria so that home financing investors will want to buy them in the secondary market.
Mortgage Lending Guidelines Tighten!
FHA mortgage loans are backed by the Federal Housing Administration have also regained favor as an option, not just for credit-challenged borrowers for good credit borrowers looking for low down payments. The FHA loan programs gave Kyle and Tracy Spear of Swampscott, Massachusetts, north of Boston, an opportunity to buy a larger home with less of a down-payment. Last summer, the couple had planned to subdivide their property in Boston and sell the home plus a separate lot. But the city and their neighborhood nixed the subdivision, and they ended up netting just $15,000 on the sale. For two months, Kyle, 38, Tracy, 37, and their three boys — Kyle, 4; Tyler, 2; and Jack, 11 months — lived with friends and family to save money until they found their next home, a 2,800-square-foot house with four bedrooms that cost $540,000. They qualified for a thirty-year jumbo mortgage loans with a fixed rate of 6.875% backed by the FHA. And because the FHA required a down payment of only 3%, they had to put down just $16,000.
Prove it. The days of “Take my word for it” are over, and stated-income loans, are very difficult to find. Lenders will ask you for at least two months of financial account statements, two years of tax returns and even verification from employers that overtime, commission or bonus income will continue.
FHA mortgage lenders are also scrutinizing more carefully the ratio of your debt to income. Beginning February 1, 2009, Freddie Mac is imposing a limit of 45% of all pretax income for all debt; borrowers with a credit score of 740 or better will get the best rates. The FHA refinance guidelines are even tighter: Mortgage debt may not exceed 31% of your income, and total debt can’t top 43%. The FHA doesn’t impose a credit-score threshold.
Home loans with no down payment, or those that combine first and second mortgages, such as the 80-20, are also gone. Home mortgages backed by Fannie and Freddie require a minimum down payment of 3% to 5%. The bigger your down payment and the better your credit score, the better your interest rate. If you put less than 20% down, you’ll pay private mortgage insurance, or PMI.But here is something to consider; If home prices have been falling in your area, you may not be able to get PMI, and if you can, you’ll have to ante up 10% to 15% for a down payment.
Congress has authorized the FHA, which relies on its own program of mortgage insurance, to take up the slack in declining markets, says Meg Burns, director of the FHA’s Office of Single-Family Program Development. The FHA can insure loans up to the same amount as Fannie and Freddie. Beginning January 1, the limit is 115% of a metro area’s median home price, up to $625,500, and the minimum down payment is 3.5%, up from 3% in 2008. FHA mortgage loans have become reasonabbly affordable.
According to HSH Associates, at the beginning of November the national average rate on a 30-year fixed-rate loan was 6.4%. FHA home loans had a 6.7% mortgage rate; the expanded jumbo interest rate was 6.8%, and the traditional jumbo mortgage rate was 7.9%. Adjustable interest rate FHA home loans didn’t offer much of an advantage: The interest rate on a 5/1 ARM was 6.4%, and on a one-year ARM it was 5.8%. Read the complete article >.
