Qualifying for a government loan program like FHA may be more attainable than you may have thought. If you are looking to finance a home, but you are afraid that you may not meet the FHA requirements, the last thing you should do is give up hope and continue being a renter. For some people, especially those with families, there is nothing more fulfilling than owning a house. This means that you have to make the home buying process work for you. The good news is that this is certainly a possibility, but you have to know about the different opportunities available to you. It’s amazing how many people don’t know about the FHA loan programs that are available to help low and middle income families become homeowners by providing them with affordable mortgages. FHA mortgage rates have dropped to levels not seen since Dwight Eisenhower was president.
To begin with, you are going to want to make sure that you have a good income that will make the minimum payments. You will want to think about your other expenses and bills, as well as loans and debts for cars, medical bills, and school.
When you are looking into an FHA mortgage, you will want to begin by considering how realistic it is that you can make the monthly payments. The good news, however, is that you will have the option to refinance your mortgage down the line, but you will have to keep up with your payments. If you are late even once, or if your mortgage is delinquent, you can very well risk not being able to qualify for home refinancing. When this happens, you can lose your home and even have to declare bankruptcy.
In short, when you are thinking about FHA mortgages, you will be able to find some great opportunities to own a house. This is not an excuse, however, to be late on payments or to let your mortgage become delinquent. This means that the federal government offers you a wonderful opportunity, but falling behind has many penalties attacked. This means that you will want to make sure that you do not get in over your head when you are buying that house you have always wanted. Make sure that your hopes and dreams do not cloud the reality of your finances and income.
Many mortgage brokers and FHA lenders are privately concerned about the prospect of FHA loan limits being reduced significantly in 2011. In high cost states like California, Virginia, New York and Colorado, the reduced loan limits could eliminate many homeowners from FHA loan eligibility. According to Shawn Downs, a Colorado mortgage lender who founded Downs Financial, “Unfortunately consumers from all types of neighborhoods may be unable to refinance if Congress decides to lower the loan limits on government loans next year.” Downs continued, “HUD must protect themselves against rising foreclosure rates, but lowering the FHA limits could end of backfiring and cause loan defaults to spike as many homeowners have mortgages with low rates that are about to reset into a higher rate that is variable.” The reality is that there is a very good chance that 2011 FHA loan limits could be quite a bit lower and this may prevent borrowers in higher priced markets from home buying or even refinancing.
The Wall Street Journal reports that HUD is strongly considering lowering the FHA loan limits. Unless Congress extends the current mortgage limits, FHA limits in high cost areas will likely be reduced to $625,000. This amount may provide many homeowners with the mortgage amounts needed to purchase pricier homes, but in areas such as New York and San Francisco, borrowers may be limited to conventional mortgage loans. Current FHA loan limits are set to expire until December 31, 2010 and many real estate professionals are starting to voice their concerns. Most lenders and realtors strongly back Congress to pass an extension, or announce higher 2011 loan limits by early next month. Otherwise, FHA lenders may be reluctant to originate and underwrite FHA home loans at current loan limits.
Filed under FHA Articles, FHA Guidelines, FHA Mortgage Articles, FHA news · Tagged: FHA lending, FHA mortgage insurance, FHA requirements
Why would HUD decide to raise FHA mortgage costs at a time when the economy and the housing sector nationally are struggling so much? Just a few years ago, FHA home loans were considered a financing dinosaur. FHA loans were nearly considered obsolete because they were time-consuming and more regulated, and sellers were usually not comfortable with FHA financing being written into the sales contract, because they knew at the time that the appraisal requirements and timeline for underwriting would drag out the process for closing the loan. Times have changed, and FHA has automated the FHA home loan process.
Today, an FHA mortgage remains the only low down-payment lending product, requiring just 3.5% from borrowers. Just five years ago, FHA loans had a market share of only 5%. In 2010, FHA lending accounts for about 30% of all home loan originations nationally. This surge of mortgage loan volumes has increased the pressure on the FHA Mortgage Insurance Fund. FHA is required to maintain this emergency fund of reserves above 2% based on all of its insured mortgages. This year we saw the reserves fall well below the 2% minimum and HUD has been forced to take drastic steps, like tighten the FHA guidelines.
FHA Mortgage Lending Back in Style
In an effort to preserve the sacred FHA loan program, HUD announced it will be raising its annual mortgage insurance premium from 0.55 % of the mortgage amount to 0.90% (for loan to values higher than 95%) or 0.85% (for LTVs lower than 95 %). This insurance premium hike will go into effect, October 4th, 2010. In an effort to save face, FHA will be lowering their upfront mortgage insurance to compensate homeowners for their rising monthly payments. This is good news for new homebuyers because the fees are dropped to 1% of the loan amount from 2.25%. Overall, it looks to add $300 million a month to the insurance fund by taking these actions.
FHA Borrowers to Pay More Monthly
So what does that mean to FHA buyers come October? It means they will be paying more each month. For example, let’s take a $250,000 purchase. Under the current FHA mortgage insurance framework, the upfront premium would be $5,428 for a total loan amount of $246,678. The monthly mortgage insurance would be $110.57. Take an interest rate of 4.625%, and the principal and interest payment would be $1,268.27. Add the $110.57 and you get $1,378.84.
Under the new FHA requirements, the new upfront amount would be about $2,500 on a FHA mortgage loan amount of $250,000. However, the monthly insurance jumps to $180.94. Take the same interest rate, and the principal and interest payment decreases to $1,252.76. But with the higher premium, that total payment comes in at $1,433.70, an increase of almost $55 a month. To a borrower who is just barely qualifying, that can have an effect. It also puts into play taking another look at private mortgage insurance as an alternative for the borrower. These types of adjustments shouldn’t be surprising as FHA tries to adjust to the marketplace. It recently released its quarterly report to Congress, and it shows just how much FHA has become a part of the mainstream when it comes to mortgage lending.
HUD continues to make significant effort to clean up FHA mortgage lending. With FHA rates reporting all-time lows and flexible FHA guidelines, now is not a good time for a mortgage company to lose their ability to origination FHA mortgage loans. Recently, the FHA Mortgage Review Board pulled its approval stamp from 905 national FHA mortgage lenders for 12 months. That means those FHA lenders cannot sell low-interest, FHA-approved mortgages to home buyers over the next 12 months or until their FHA certification has been restored. “Lenders should know by now that FHA will not tolerate fraudulent or predatory lending practices,” said David Stevens, FHA commissioner. “Any approved FHA lender that does business with us must follow our standards. If we determine that our partners are not playing by the rules, we will take action – it’s that simple.”
According to DSNews.com, So far this year the MRB has taken action against nearly1,500 approved FHA mortgage loan companies who failed to meet FHA loan requirements. A notice was published in the Federal Register with cited actions that included reprimands, probations, suspensions, withdrawals of approval, and civil money penalties. The board said it voted to immediately withdraw its approval because the 905 lenders were not in compliance with the department’s annual recertification requirements.
An additional 147 FHA lenders were said to have failed to timely meet requirements for annual recertification of HUD/FHA approval, but are now in compliance. The board voted to give these FHA lenders an opportunity to settle the matter by paying a $3,500 civil money penalty without admitting fault or liability.
The HUD Reform Act of 1989 established the MRB. The board’s primary purpose is to monitor approved FHA mortgage lenders for violations of the agency’s program requirements. The question is — Will the lenders survive for a year without the ability to originate FHA home mortgage loans?
Filed under FHA Mortgage Articles, FHA news, Published Articles · Tagged: 1st time homebuyers, FHA loan programs, FHA mortgage financing
The Federal Housing Administration has been insuring home loans for 1st time homebuyers since 1934. The government created the FHA loan programs to promote homeownership and to ensure fair lending for all Americans.
FHA mortgage interest rates are fixed and there is never a pre-payment penalty with a FHA home loan. Buying a home can be a costly experience, so first time home-buyers have the ability to preserve capital with FHA loans because borrowers can finance up to 96.5% loan to value. That means that a new home buyer can get into a home with only a $3,500 down-payment.
There is a lot to consider with FHA mortgage financing, but an experienced FHA lender or licensed loan officer should be able to shed some light on the pros and cons of a FHA mortgage. The $8000 first time home-buyer tax credit expired April 30th, but the record low rates should be enough of an incentive to become a homeowner. Read the original FHA mortgage advice article online > FHA Home Loan Options for 1st Time Homebuyers.
Filed under FHA Articles, FHA Mortgage Articles, FHA Mortgagee Letters, FHA news, FHA refinance, Mortgage Reform, Mortgage Rescue Articles, Published Articles · Tagged: FHA mortgage relief, FHA refinance guidelines, mortgage relief companies
FHA borrowers have refinance options that enable struggling homeowners to avoid going the loan modification route. There is nothing wrong with getting a loan modification, but you can expect the process can take 6-12 months and you risk you losing your home in the process. Just last week, the New York the state attorney general, Andrew Cuomo, has sent cease and desist letters to more than 200 loan modification companies. The FHA loan Pros published an article that discussed how FHA customers could get relief without getting tangled up with mortgage relief companies. They pointed out that laws for mortgage relief companies vary by state but Cuomo reached out to homeowners with FHA mortgage relief insured by HUD.
The NY attorney general’s office said “Mortgage relief companies target homeowners facing foreclosure by promising to restructure their home loans with an affordable loan modification. Cuomo accused these mortgage relief companies of operating in deceptive practices that lure distressed homeowners to pay them for mortgage relief services, yet they often fall short to modify the mortgage.
The FHA Mortgage Solution
First of all FHA has been helping struggling homeowners since 1934. With their flexible FHA guidelines, HUD has been a leader in the foreclosure prevention arena. FHA has solidified a good reputation for rectifying FHA loans in default. In 2009 the FHA annual report says that “82.7% of the FHA mortgage loans that were 90 days or more delinquent were brought under control.”
To get FHA mortgage relief, you need to contact a HUD foreclosure avoidance counselor at http://www.hud.gov/offices/hsg/sfh/hcc/fc/. There is no fee for their mortgage relief services so you have nothing to lose. FHA refinance guidelines remain more flexible than conventional loan programs. For borrowers who don’t have much home equity, they may still qualify for a rate and term FHA refinance at 96.5%.
Filed under FHA Articles, FHA Mortgage Articles, FHA news · Tagged: FHA Loan Blog, MBA
Finally there was some good news for FHA lenders. MBA announced today that both FHA and VA loan applications rose noticeably. refinance loan guidelines have seen some tightening of one of the most popular programs, the FHA streamline in which borrowers are no longer allowed to finance the closing costs. According to the FHA Loan Blog, “Many FHA lenders have said that this had hurt their FHA refinance business, but it appears the borrowers are still using FHA for refinancing transactions.” Read the original FHA Loan Blog Post > FHA Lenders See Rise for FHA Refinancing and Home Buying
Filed under FHA Articles, FHA FAQ, FHA Guidelines, FHA Mortgage Articles, FHA Mortgagee Letters, FHA news · Tagged:
Yesterday, the U.S. House of Representatives approved a bill to inject finances into the FHA by approving the authority to raise FHA mortgage insuance premiums. The FHA reserves are low and it created significant cash flow problems that the government was forced to deal with. It is no secret that Federal Housing Administration is strapped for cash because all of the recent FHA defaults that continue to mount. The government also considered a measure to raise the FHA mortgage limits used to develop some apartment buildings. In a 406-4 vote, lawmakers approved legislation to strengthen the finances that back the FHA home loans by giving it authority to nearly triple the annual fees it charges to borrowers, known as mortgage insurance premiums. Read the original article > House Approves FHA Bill to Reestablish Finances