FHA loans are very popular with first time homebuyers and borrower who are unable to qualify because of 10-20% down-payments that are common with traditional loans. FHA is also the go-to loan for borrowers with less than perfect credit. The FHA loan requirements have always been more flexible than conventional mortgages until recently. Many lenders have announced minimum credit scores for borrowers seeking FHA home loans.

FHA requires at least 3.5%, while in most cases conventional mortgages typically require 10 to 20% more. Last November, lenders implemented minimum credit score of 500 and for borrowers that had credit scores below 580 would have to come up with a 10% down-payment.

Many subprime and bad credit mortgage programs have been discontinued, but for many struggling consumers, FHA is the only chance to qualify for mortgage rate refinancing or home buying because of the flexible credit criteria. Wells Fargo recently lowered its minimum required credit score for a FHA loan to 500 from 600. The National lender also lowered their required debt-to-income ratio to 43%. For FHA borrowers with less than perfect credit, the Wells Fargo increased their minimum down-payment requirements to 10%.   

Since the subprime mortgage crisis began in 2008, “FHA has been the only haven for borrowers,” said Sean Welsh, a senior loan officer at Campbell Financial Services in West Haven, Conn.  But the agency’s capital reserves have fallen below levels mandated by Congress, which is why the rise in the annual insurance premium was authorized.  Mr. Welsh said the increase, while “not too bad,” was still “additional pain” atop the November change.

Chip Cumming Talks FHA & 1^st Time Home Buying

www.youtube.com/watch?v=oGZBcJ_sQLo

FHA mortgage 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 homebuyers 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 homebuyer 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.

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%.

The proposed FHA lending changes or new FHA guidelines include:

*  HUD will increase “up front” cash required on a home purchase loans, giving the buyer more “skin-in-the-game.” FHA said it can tap several options, and analysts say it will mean some increase to the current minimum down payment of 3.5%. About 31% of purchase loans done in the first eight months of 2009 had the maximum 96.5% loan-to-value. Another 55% had 95% to 96.5% LTVs for FHA mortgage options.

*  The FHA will raise the minimum credit score for new borrowers. The FHA has yet to determine the minimum “FICO” and may factor in the down payment.

*  HUD will increase compliance and hold FHA lenders accountable for losses associated with loans that do not meet FHA standards. As of Dec. 8, the FHA this year has suspended eight lenders and withdrawn approvals for 270 others.

*  HUD might increase the 1.75% up-front premium and/or annual mortgage premiums. It is asking Congress to raise annual premiums since that would raise capital with the lowest borrower impact, Donovan said.

*  HUD cut allowable seller concessions to 3 % from 6 % in a move to limit incentives to inflate appraised values. The move reduces the money the seller can contribute to a buyer’s closing costs, discount points and other concessions without impacting the buyer’s mortgage.

*  It will boost enforcement and hold FHA lenders accountable for losses associated with loans that do not meet FHA requirements. As of December 8th, the FHA this year has suspended eight lenders and withdrawn approvals for 270 others.

With FHA 203k loans, borrowers could purchase or refinance a home that needs improvements and include all the modification and construction costs in the loan. FHA loans also encouraged borrowers to make their home more energy efficient. The FHA enabled people to finance energy efficient upgrades into their home refinance loan.  If you need more HUD advice for home buying with little or no credit, take a look at FHA mortgage refinance. Read the original FHA loan article written by Bryan Dornan.

o    FHA announced their new mortgage modification plans to aid distressed FHA borrowers.

o    The FHA home loan is refinanced and 30% of the FHA loan is placed into an interest-free second mortgage that must be paid back when the property is sold or refinanced.

o    Homeowners must qualify with ratios of 31/55. The 1^st ratio says that up to 31% of the individual’s monthly income can be used for housing costs and that 55% can be used for housing costs plus other monthly debts.

o    The borrowers must be able to document a hardship (ie. an income change, loss of employment etc.) and HUD must be considered as a long term hardship.   

Read the original article online > FHA Loan Modification Program.