With subprime lenders disappearing in the wake of the housing crisis, FHA has taken on a new role to help people with credit challenges finance a home. Тhеrе аrе а fеw obstacles fоr people lооkіng tо finance а house wіth bad credit. Моst conventional lenders аrе nоt interested іn approving purchase loans fоr borrowers wіth bad credit. Маnу people thіnk thаt a mortgage loan fоr people wіth bad credit іs simply а pipe dream аnd impossible tо attain. Ноwеvеr, thеrе аrе a few FHA mortgage lenders thаt are still offering bad credit hоmе loans. Poor credit 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 buyer 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.
More Tips> How to Get a Home Loan with Bad Credit
If уоu wаnt tо knоw hоw tо gеt а fіrst time hоmе loan wіth bad credit, fіrst уоu hаvе tо knоw sоmе оf thе limitations. Тhе requirements fоr а hоmе loan fоr fіrst time homebuyers wіth bad credit change depending оn hоw bad thе credit асtuаllу іs. Ноwеvеr, bad credit hоmе loans аrе еvеn аvаіlаblе fоr people whо hаvе filed bankruptcy оr experienced а foreclosure. Тhеrе іs а waiting period аftеr thеsе occurrences bеfоrе purchasing 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 exhausting, but bесоming a homeowner can vеrу attractive wіth falling hоuse prices combined wіth record low interest rates.
- Purchase Mortgage Rates starting аt 4%!
- Low Down-Payments wіth оnlу 3.5% Needed
- Choose bеtwееn 15 аnd 30 Year Fixed Rates
- Flexible Credit Guidelines wіth FHA hоmе loans
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Is HUD increasing the FHA down-payment requirements? There are a lot of rumors going around about FHA mortgages, minimum credit scores and higher down-payments so we wanted to clear the air with the FHA Commissioner. In a recent interview, the Federal Housing Administration Commissioner Bob Ryan said, “US regulators should not forget factors like loan to value and credit scores.” Ryan was referring to the new credit score guidelines for the FHA mortgage programs.
FHA made it clear that borrower with low credit scores will be required to have more equity to refinance with FHA. New home buyers who have less than stellar credit scores will have to come up with more money for the down-payments. For example if first time home buyer had a credit score of 580 the underwriter may require a 10% down-payment rather than the 3.5% that most home loans insured by FHA have. Ryan continued, “Higher FHA down-payments will not guarantee timely mortgage payments from the borrower, but we should see less foreclosures and delinquencies because homeowners seem to take their monthly mortgage payments more seriously when they invest more money into their home.” FHA made their goals known at the recent hearing that focused on mortgage risk retention. “This definition has the potential to create false- positive situations,” Ryan told lawmakers.
Groups Petition FHA for More Aggressive Home Loan Guidelines
FHA was given a waiver for the new home loan rules outlined in the Dodd-Frank home finance bill. This mortgage exemption could take the pressure of lenders who are originating FHA mortgages. However, many real estate companies and consumer watch-dog groups contend the new mortgage rules are not fair as it could restrict credit while making homeownership more difficult for many prospective borrowers. In an effort to stimulate the housing market, this group wants finance regulators to reduce the amount of the down payment rather than raise it. Clearly this coalition is at odd with FHA as guidelines continue to tighten for new home buyers. With FHA rates still below 5% on 15 and 30 year loans, the motivation for home buying is strengthened even more. Today the current 30-year FHA mortgage rate is available to qualified borrowers with no points at 4.75%.
Brokers and lenders remain nervous as FHA loan requirements may continue to increase in 2011. While fraud risk had trended down dramatically through 2008 and even into early 2009, in mid-2009 and 2010, it started to creep back up again, according to Frank McKenna, vice president of fraud strategy for analytics provider CoreLogic. The increase is a result of high-risk government lending programs like FHA and the Home Affordable Refinance Program. “A lot of those programs are bringing risk back into the market,” McKenna said in a phone interview following the CoreLogic Mortgage Fraud Consortium Members’ Meeting in Chicago. “Lenders said their biggest concern this year is ‘flipping’ again. They are concerned with all of the distressed properties out there like short sales and foreclosed properties. There are a lot of investors that are taking advantage and flipping the properties the same day for sometimes 50%-100% more than the property sold for. They are seeing that as a very big problem right now.”
FHA Mortgage Rates Fell Below 4% on 30-Year Fixed Rates
Government experts from the Federal Bureau of Investigation, Financial Crimes Enforcement Network, Internal Revenue Service and Financial Fraud Enforcement Task Force were on hand to discuss policies and trends. FHA lenders like Shawn Downs, believe that “HUD is doing the best thing for long term security in regards to keeping the FHA loan programs a viable option.” Downs continued, “FHA loans in Colorado are a great option for first time homebuyers, but if too many borrowers default then the program won’t be around for the next generation.”
FHA lenders indicated that in 2010 FHA fraud is “the area that they are focusing in on,” McKenna said. While there is strong underwriting, it doesn’t stop the fraud from happening. FHA is “still very attractive” to the fraudsters and fraud rings because they like to recruit straw borrowers. “FHA guidelines, in terms of who qualifies and how much they have to put down, are a lot more lenient than the typical type of conforming programs. They can recruit young college graduates who don’t have a lot of credit history or people who don’t have great credit history and they only have to put 3% down.”
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The Mortgage Bankers Association reported that FHA rates should remain affordable in the near future because of concerns in Europe financial problems, but they predict rate hikes in 2011. Most real estate financial advisors agree that low FHA rates are helping the local housing communities recover. Once again HUD has come down hard on FHA lenders over fraud and disclosure negligence. FHA commissioner David Stevens stated in a MBA meeting, “This is a mortgage market surviving purely on life support and sustained by the federal government.” Stevens continued his theme of FHA mortgage reform and made an effort to persuade FHA mortgage lenders to sacrifice the commissions at this time for the good of the industry.
The government agency tightened FHA loan requirements with amendments on the FHA guidelines making qualifying more challenging for new home buyers. Read the original FHA loan article online at > Home Buying Opportunities with Declining FHA Loan Rates
Filed under FHA Articles, FHA Credit, FHA Guidelines, FHA news, FHA requirements · Tagged: FHA requirements
Did you know that FHA mortgage loans are assumable? This means that if you sell your house, the buyers could actually take over your existing FHA mortgage. Using the “assumable” function with FHA loans extends some leverage to a seller that could potentially pass on a FHA mortgage with an interest rate that is locked well below the market.
According to FHA requirements, home buyers may qualify to assume the seller’s FHA mortgage loan. This is an attractive benefit if FHA rates are higher than your existing FHA loan at the time you’re selling your home. FHA mortgage lending programs provide an important service to buyers, homeowners, and housing markets. FHA has been in the news a lot lately because HUD is looking for new opportunities to rebuild the FHA mortgage reserves.
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Realtors and mortgage brokers have been utilizing FHA mortgage lending for the last few years. FHA guidelines remain tight in 2010 as DE underwriters are expecting higher credit scores for FHA mortgage loan submissions.
Many first time home buyers are using FHA home purchase loans to get approved to buy their dream home. HUD reported that February delinquent levels for 90 days late FHA home loans dropped from 9.4% in January to 9.2% in February. Many FHA enthusiasts saw this as a supporting indication that FHA lending programs were moving in the right direction.
According to the Mortgage Bankers Association the FHA loan product had a 3.57% home foreclosure rate in the fourth quarter of 2009. That’s lower than the 4.58% home foreclosure rate for non FHA loans. A few years back, HUD created the Neighborhood Stabilization Program (NSP) in an effort to eliminate the stress from regions that high home foreclosure rates and home abandonment. Through the purchase and redevelopment of foreclosed and abandoned homes and residential properties, HUD moves to stabilize the housing markets and local economies. HUD just announced that the definition of “foreclosure” will be expanded to include homes with FHA mortgages that are 60 or more days in arrears, and “abandonment “means the property has a mortgage at least 90 days delinquent.
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Expect to see increases in mortgage insurance for FHA mortgage loans typically have a low down payment requirement of only 3.5%, so borrowers must pay for mortgage insurance to offset that risk. Unlike private mortgage insurance, FHA borrowers are able to finance the mortgage insurance, thereby spreading its cost over the loan term.
The first change that will immediately impact borrowers is the FHA’s increase of the required up-front mortgage insurance premium to 2.25% of the base loan amount. This would add an additional $1,447 to a $300,000 mortgage. New Borrowers will see a minimum FICO credit score and 10 % down payment requirements. New borrowers will now be required to have a minimum FICO credit score of 580 to qualify for FHA’s 3.5% down payment program. Borrowers with a credit score below 580, while still able to qualify for a FHA loan, must now put down at least 10% of the purchase price–an amount that may be prohibitive for many borrowers with poor credit.
The FHA is making an effort to lower its overall risk and improve the financial soundness of its insured loans, which in turn allows for the continued support of home buying in the United States. In doing so the FHA must find a way to keep their insurance fund’s capital ratio returns above the Congressionally mandated 2%, while continuing on their overall mission of aiding borrowers in underserved communities and facilitating the recovery of the housing market. These changes, along with the other FHA reforms will have varying effects on borrowers interested in a FHA home loan. For borrowers with low credit scores, some of these changes, such as the higher down payment percentage, will significantly affect their ability to buy a home. In the short term, the changes may motivate borrowers to lock into the old FHA guidelines before the new changes become effective.
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FHA continues to alter their FHA mortgage guidelines in an effort to improve its depleted cash reserves. A few days ago, the Federal Housing Administration unveiled tighter FHA guidelines with changes to the FHA requirements for underwriting new home loans and refinancing. For the first time, FHA credit requirements will penalize applicants with challenged credit. One of the FHA requirements changes will mandate larger down-payments for borrowers with bad credit or low FICO scores. In addition FHA will increase in the upfront mortgage insurance premium to 225 basis points. We also anticipate FHA, to expand their criteria for mortgage refinance guidelines in 2010.
FHA commissioner David Stevens declined to provide any guidance on how much money the changes will raise for the reserve fund. Most of the new FHA guidelines outlined Wednesday will go into effect in the next few months. The 10% down-payment is required for borrowers with FICOs of less than 580. The MIP will be increased in a few months from the current charge of 1.75 basis points.