FHA has released a letter that revises the loan application for reverse mortgages as well as the agreement for these loans. The FHA Home Equity Conversion Mortgage (HECM) is the most popular reverse mortgage program in the United States. Reverse mortgages allow homeowners over the age of 62 to access their home equity by taking out a mortgage loan which requires no payments. The loans provide monthly payments to seniors or the senior can elect to receive the proceeds in a lump sum or a combination of cash and monthly payment. Reverse mortgages have increased in popularity in the past decade as a greater percentage of the population have reached aged 62 with no retirement plans other than social security. Many older Americans are “cash poor” but have a significant amount of equity in their homes. Read More »
The process of purchasing a home takes savvy, time and diligence. It is the most important investment we make in a lifetime and studies have shown that a consumer takes anywhere from six months to two years to contemplate the purchase.The complexity and importance of this transaction gives us every reason to go about it more seriously. This means having every tool at your disposal when you are ready to purchase your first home or move up to a new home. Why would anyone not utilize an important tool—especially if that tool is free and can save them money, time and energy?
FHA has announced that they are introducing a series of significant changes to their guidelines. These changes include an increase in the cost of FHA mortgage insurance which is required on all FHA mortgages. The upfront mortgage insurance will be raised from 1.75% to 2.25% effective with applications taken on April 5. FHA is also asking Congress to give it the authority to raise monthly premiums as well. In addition, FHA indicated that those with a credit score below 580 will have to have a 10% down payment to obtain an FHA loan. Those with a higher score will still be eligible to purchase with a 3.5% downpayment. Finally, FHA also indicated that they will be lowering the amount that the seller will be allowed to contribute to the buyer’s closing costs from 6.0% of the sales price to 3.0% of the sales price. These changes are being effective because the reserves of the FHA insurance fund have fallen below the level required by Congress. Therefore, FHA is taking actions to shore up this fund by tightening underwriting requirements. Read More »
Late last year, the Federal Housing Administration issued a letter with new condominium lending policies that went into effect in December. The letter limits the number of condo units in one complex that can be financed with FHA-insured loans at 30% and 50% of the units must be owner-occupied before FHA financing can be used. Also, for the first time, the new condo lending policies give lenders the authority to approve condominium projects directly. Since that time, both the Veteran’s Administration and Fannie Mae have reacted by indicating that they will no longer allow FHA approval of condominiums on VA loans and Fannie Mae Conforming Loans. This means that the condominium must be approved separately by VA and Fannie Mae before homes in that complex can be financed using these programs. Because of the lower prices of condominiums, this form of ownership has been very popular with first time buyers and this restriction will make it more difficult with regard to paperwork. Dave Hershman is the top author and a top speaker in the mortgage industry with seven books authored including two texts published by the Mortgage Bankers Association of America. Read More »
The Federal Housing Administration (FHA) recently announced that the effective date of proposed appraisal rules will be delayed until February 15, 2010. These rules were issued in 2009 and are intended to shield appraisers from influence by loan officers and mortgage brokers during the home valuation process. It is generally felt that pressure on appraisers previously resulted in valuations that were too high. Fannie Mae and Freddie Mac have passed similar rules under the Home Valuation Code of Conduct (HVCC). The rules also prohibit mortgage brokers and commission-based lending staff from ordering appraisals. In granting the extension, FHA indicated that the new effective date "will provide FHA and lenders additional time to adjust systems to accommodate the changes." Read More »
The Federal Housing Administration has issued a letter which changes the maximum fee requirements for lenders effective January 1, 2010. Traditionally, the lender’s “origination fee” has been limited to 1% of the loan amount. FHA has allowed the lenders to charge reasonable miscellaneous fees in addition to the origination fee as long as they are “usual and customary” and itemized on the Good Faith Estimate of Settlement Charges given to applicants within three business days of loan application. Beginning January 1, 2010, the lenders must use a new Good Faith Estimate that now longer itemizes these charges. All direct lender charges will be lumped into one line on the form and that line-item will no longer have the 1% cap. "FHA expects that lenders will continue to charge fair and reasonable fees for all origination services and the agency will continue to monitor to ensure that FHA borrowers are not overcharged," FHA commissioner David Stevens says in the mortgagee letter. Read More »
Congress recently held hearings regarding the financial status of the FHA lending program. Now the most popular program in the nation, this lending program is essential for the health of the housing market because of the easier qualification standards that include a 3.5% down payment for purchasers. Some in Congress want to raise that requirement to 5.0% as well as increasing the costs of FHA mortgage insurance. Many believe that this may be the last chance to purchase a home with less than 5.0% down using this program. With the tax credit being extended, it is expected that 40 percent or more of first time buyers will be using this program to purchase homes in the next few months. Dave Hershman is the top author and a top speaker in the mortgage industry with seven books authored including two texts published by the Mortgage Bankers Association of America. Read More »
In December, the Federal Housing Administration proposed a new rule which will affect the approval requirements of lenders that offer FHA mortgages to consumers. Under this rule, lenders will be required to have a net worth of $2.5 within the next three years in order to maintain their FHA approval status. "These changes are consistent with industry standards and will ensure that FHA lenders are sufficiently capitalized to meet potential needs, thereby permitting FHA to mitigate losses and decrease risks to its insurance fund," the statement said. At the same time, FHA is proposing that mortgage brokers will no longer be approved by FHA. It will be the lenders’ responsibility to approve loans originated by mortgage brokers. The comment period on these proposed rules are 30 days. Making sure that enough lenders and brokers have access to FHA is critical because of the popularity of this program with consumers. FHA is the nation’s number one program for the financing of first time homebuyers. Dave Hershman is the top author and a top speaker in the mortgage industry with seven books authored including two texts published by the Mortgage Bankers Association of America. Read More »
In the year 1910, life expectancy in the United States was only 50 years. By the year 2000, life expectancy had increased to 73 years. The overall effect of this longevity on the population of the United States is significant. Between 1995 and 2025, the number of people who are elderly is projected to double in 21 states. The total U.S. population of those over 65 years of age is projected to grow from 12.8% to 18.5%, according to the census bureau. While this growth is happening, the economics of America will change. It is already accepted that major changes will have to be made in order for social security to survive the increase in recipients. Most Americans do not have significant retirement plans outside of social security. The good news is that many seniors have equity in their homes which can help with retirement. The current estimate? As of the second quarter of 2007, SeniorJournal.com reports that those over 62 years of age own homes worth $5.09 trillion with equity of $4.28 trillion. Putting these numbers in perspective, it is no wonder that reverse mortgages have become more popular in the United States. What is a reverse mortgage? It is a mortgage that provides the home owner over 62 years of age with cash and/or a monthly payment over time, with no repayment required until the ownership of the home is transferred either through sale or death. Basically, the owner of the home can receive a monthly income from their home to help with living expenses without having to pay a mortgage payment. It is obviously why such a mortgage would be popular for those who are retired on limited and fixed incomes and have substantial equity in their homes. The most popular reverse mortgage program is one administered by the Federal Housing Administration (FHA). The program is called the Home Equity Conversion Mortgage (HECM). Not all lenders are FHA approved and even less lenders actually offer reverse mortgages. Recently there has been a concerted effort by the government to get more lenders FHA approved. In addition, legislation has been approved in Congress to increase FHA mortgage limits for reverse mortgages to a Nationwide limit of $625,000 which means that more homes qualify for the program. The amount of money that can be obtained under a reverse mortgage will be subject to many variables including… • The amount of equity in the home. Obviously if the home is worth $300,000 and the current mortgage amount is $290,000, there is not room to access significant equity. • The amount of the current mortgage. Regardless of the value of the home, if the current mortgage is over the FHA loan limits previously specified in this report, an FHA reverse mortgage will not be possible. It should be noted that some lenders have released “jumbo” reverse mortgage programs to address this situation. These programs may or may not be available based upon market considerations, so we recommend that you speak to your mortgage consultant. • The age of the homeowner. The closer the homeowner is to the age limit of 62 years of age, the longer is their life expectancy. Therefore, there may be less income available on a monthly basis. • Interest rates. Higher market rates would also reduce available income and/or up-front cash. Expect reverse mortgages to become even more popular in the future with the graying of America expected to continue while the economics expected to become tighter for our aging population as social security programs are stressed to the limit and heath costs are skyrocketing. If you are a candidate, talk to your mortgage consultant so they can assess your needs. Even if they don’t carry the program, they may refer you to an expert who might help you determine if this program may help you through your retirement years! Dave Hershman is the top author and a top speaker in the mortgage industry with seven books authored including two texts published by the Mortgage Bankers Association of America. Read More »
FHA recently released a letter that provides standards regarding when borrowers who are purchasing a home but have a short-sale on their credit record can quality for a new FHA loan. FHA clearly indicated that that homeowners who used short sale to walk away from their primary residence which has gone down in value and then attempt to purchase a new residence at a lower price to take advantage of the soft real estate market are ineligible for a new FHA loan. Borrowers who sold and repurchased for other reasons and were current on their home loan and installment debts at the time of the short sale and purchase of the new home are eligible for FHA financing as long as the short sale proceeds were accepted by the previous lender as payment in full. A borrower who was in default on the mortgage at the time of the short sale cannot qualify for an FHA loan within three years of the pre-foreclosure sale. However, there are some exceptions in this regard with extraordinary circumstances such the death of the primary wage owner. But lenders have some flexibility in this area. FHA will also allow “short-refinances in which the existing lender writes down the balance because of a decline in the property's value or a reduction in income. Dave Hershman is the top author and a top speaker in the mortgage industry with seven books authored including two texts published by the Mortgage Bankers Association of America. Read More »
Late in 2009, new guidelines were released by FHA mortgages which apply to the FHA Streamline refinance mortgage. At the time of application, the homeowner must have made at least six payments on their present loan. In addition, FHA now allows no more than one 30-day late in preceding 12 months and all mortgage payments must be made within the month due for three months prior to the date of loan application. For the first time, lenders must certify that borrower is employed and the income and cash needed to close must be verified. No appraisal is still required if the applicant is not financing closing costs, however, a new appraisal must be procured if closing costs are to be financed. Keep in mind that FHA still allows lenders to pay the closing costs without ordering a new appraisal. Dave Hershman is the top author and a top speaker in the mortgage industry with seven books authored including two texts published by the Mortgage Bankers Association of America. Read More »
Considering the rising popularity of FHA mortgages and FHA mortgage rates in today's market, this is a good time to review some basic guidelines for these mortgages -- loans that are insured by the Federal Housing Administration. One of the key guidelines for FHA loans relates to the amount of loan an FHA applicant is eligible to receive. This, of course, is tied to the borrower's household income. The FHA loan officer will look closely at the mortgage's monthly payment amount in relation to the borrower's income and debt obligations. The FHA will want the borrower's mortgage payments (including principal, interest, property taxes and property insurance) to be no more than 31 percent of the family's gross monthly income. The borrower's total debt obligations, include mortgage, credit cards, auto loans, student loans and others, cannot exceed 43 percent of the family's monthly income. These ratios are more generous than those required by most other non-FHA mortgages in today's market. Down payments can be as low as 3 percent of the purchase price. Even better terms and ratios are available to buyers of energy-efficient homes. A property appraisal is required for all FHA mortgage loans. The applicant must disclose all "sales concessions" to the appraiser. This may include the seller paying for such cost items as discount points or origination fees, interest rate buy-downs, closing cost assistance and builder incentives. The closing costs that FHA considers to be reasonable include lender origination fees (up to 1 percent of loan), attorney's fees, appraisal fees, home inspection fees (up to $200), title insurance, property survey, credit reports, and transfer and recording fees. The FHA has credit history guidelines that play a role in determining the qualification of applicants. In most cases, credit scores above 620 will be acceptable. With re-established credit, applicants who still pay on a Chapter 13 bankruptcy can be eligible after one year of documented good credit. Those who filed Chapter 7 are eligible after two years. Applicants who have experienced a foreclosure are not eligible until at least three years have passed since the foreclosure date. In the interim, the applicant must have re-established good credit. However, if the foreclosure of the borrower's main residence was the result of extenuating circumstances, an exception may be granted if they now have good credit. There is no established limit for the amount of an FHA mortgage. The amount is based on the median cost of homes in the local area. That amount is usually adjusted annually. These are general guidelines for processing an FHA mortgage rates application. Keep in mind they do change from time to time. For more information, particularly related to the situation of individual applicants, consult with an FHA mortgage loan officer. Read More »
FHA loan guidelines are generally more lenient than those of conventional lenders. The Federal Housing Administration is a government program administered by Housing and Urban Development (HUD) to help Americans who can't qualify for a conventional loan to become homeowners. With the announcement of changes to help hundreds of thousands of Americans impacted by the current housing crisis, FHA loan guidelines have never been easier to meet. Required Income There are no minimum FHA loan guidelines for income to obtain an FHA mortgage loan, but you must demonstrate steady income for at least three years, and demonstrate that you've consistently paid your bills on time. FHA loan requirements allow seasonal pay, child support, retirement pension payments, unemployment compensation, VA benefits, military pay, Social Security income, alimony, and rent paid by family to qualify as income sources. FHA mortgage guidelines also allow part-time pay, overtime, and bonus pay to count as income as long as they are steady. Debt-to-Income Ratio The FHA allows you to use 29% of your income towards housing costs and at total of 41% towards housing expenses plus other long-term debt. Compare this with a conventional loan, which generally allows only 28% toward housing and 36% towards housing expenses plus other debt. Down Payment FHA loan requirements specify that you have a down payment of at least 3% of the purchase price of the home, but this cash may be a gift or grant. Most affordable loan programs offered by private lenders require between a 3% - 5% down payment, with a minimum of 3% coming directly from the borrower's own funds. Credit Score FHA loan guidelines are generally more flexible than conventional lenders are in their qualifying guidelines. You can qualify for an FHA loan without a credit history. If you prefer to pay debts in cash or are too young to have established credit, there are other ways to prove your eligibility. Talk to your lender for details. FHA loan requirements do not include a requirement for the borrow to have good credit. In the case of bad credit, the FHA allows you to re-establish credit if two years have passed since a bankruptcy has been discharged and all judgments and tax liens have been paid, or if arrangements have been made to establish a repayment plan with the IRS or state Department of Revenue. The FHA may also allow you to borrow once three years have passed since a foreclosure or a deed-in-lieu has been resolved. Compare FHA Lenders The Housing and Economic Recovery Act of 2008 has markedly increased the capacity of the FHA to insure loans for borrowers affected by the US housing crisis. Loan amount limits have been raised in some areas, and other restrictions loosened. FHA loan guidelines have never been so easy, and any home owner suffering mortgage stress would be well advised to investigate the possibility of FHA mortgage or loan assistance. Read More »
The FHA Revitalization Bill, now working its way through Congress with the president’s strong support, will empower the Federal Housing Administration to make changes that will open the door wider to families wanting to purchase their own home. It will create more affordable housing nationwide. Key provisions in the bill will include providing FHA with flexible authority to introduce new products and program changes, such as flexible down-payment programs. It will also increase FHA loan limits in high-cost areas. And it will allow improvements to be made in the FHA Home Equity Conversion Mortgage (HECM) Program. “FHA has the potential to expand homeownership to underserved consumers, especially first-time buyers, minority and low-income borrowers,” said Regina Lowrie, chairperson of Mortgage Bankers Association. “These changes will put FHA back on track to achieve its mission of facilitating affordable housing for Americans.” The changes incorporated in this new legislation, coupled with the widening range of new conventional mortgage plans now available to consumers, will be a big help in making homeownership achievable for many more families in the months and years ahead. As always the FHA loan rates are considered to be the lowest they have been in some time and FHA mortgage rates have been favorable for the past few months. Read More »
FHA mortgages and FHA mortgage rates – those insured by the Federal Housing Administration – have long been considered one of the best ways to finance the purchase of lower-priced homes, particularly for first-time buyers. Recently the FHA overhauled their programs, making their FHA mortgages and FHA mortgage rates more attractive to consumers. FHA mortgage guidelines are especially well known for their low down payment requirements. In many cases buyers only need three percent of the purchase price, with military personnel paying as little as 2.25 percent. And some of that cash requirement can be applied to closing costs. However, FHA had its fair share of burdensome FHA loan guidelines that have made these loans less appealing in recent years, according to a report from the National Association of Mortgage Brokers. "It wasn’t uncommon for an FHA loan to be held up because an inspector found a cosmetic flaw in a house,” said NAMB’s FHA Committee Chairman. “This all changed when HUD (Department of Housing and Urban Development) recently adjusted some of its requirements for FHA loans.” In December, the FHA waived the requirement to fix cosmetic flaws. It also made it easier for consumers to negotiate payment for common mortgage costs. Previously, the seller had to pay all non-allowable expenses. This would include items like the processing, document preparation, inspection, photo, tax service and underwriting fees. With the exception of the tax service fee, these costs can now be paid by the buyer, adding more flexibility in the mortgage process, the NAMB report said. It also noted that FHA mortgage insurance is much cheaper than private mortgage insurance. As always its best to have a good understanding of the FHA mortgage guidelines before applying. Read More »
New FHA policies, now being finalized, will be implemented on January 1, 2010. There are now new guidelines for FHA loans that have been updated to serve the greater good of the community. In a letter sent to mortgagees, FHA said it will reaffirm existing policy on appraiser independence and geographic competence. FHA's appraisal validity period will be reduced from six months to four months. And HUD acknowledged that FHA is considering implementing certain components of HVCC (Home Valuation Code of Conduct) for FHA-insured mortgages, according to a report from the National Association of Realtors. The mortgagee letter also noted that audited financial statements will be required from supervised mortgagees. FHA will modify its FHA streamline refinance process and enhance appraiser independence. The FHA streamline refinance process will include new requirements for seasoning, payment history, income verification, and demonstration of net tangible benefit to the borrower. Read More »
FHA mortgages – loans insured by the Federal Housing Administration – are booming in popularity. In fact, the availability of these cost-effective mortgages is a major reason for the recent rise in home sales in most markets. It's no surprise that FHA mortgage guidelines have become increasingly more searched online. FHA loans reached a share of 23 percent of all mortgages in mid-2009. Some analysts are predicting a share close to 30 percent by the end of the year. Its share was only 2.7 percent three years ago. Outstanding FHA loans reached $439 billion in fiscal 2008. That number is expected to reach $627 billion this year. At the mid-year point, about 7.8 percent of FHA loans were 90 days late or more, or were in foreclosure, according to the Mortgage Bankers Association. That's about the national average for all mortgage loans – up from 5.4 percent a year ago. FHA mortgage losses are offset by premiums paid by borrowers. Federal law mandates that FHA maintains reserves equal to at least 2 percent of the loans insured. The low interest rates and minimal down payment requirements of FHA loans make them very appealing to a growing number of home buyers, particularly first-time buyers. Read More »
FHA mortgages are not only being enhanced to make them more accessible and affordable to home buyers, they are also structured to serve the real estate needs of other groups. FHA mortgage rates have never been lower or accessible to so many diverse groups. For example, the Federal Housing Administration (FHA), working through the Department of Housing and Urban Development, has a special program for providing insured mortgage financing for hospitals and critical care facilities. Applicants for these mortgages can now obtain financing for projects for which they qualify. Many have been cut off from the credit markets due to the collapse of the bond insurance business and other factors, according to a report carried in National Mortgage News. "The FHA's Section 242 mortgage insurance program is designed to support hospital projects by helping to reduce their cost of capital," said Steven Hunt, a senior account executive for HUD. The program focuses on hospital construction but can be used for other purposes. It's traditionally used mostly at urban hospitals, and is now available in 43 states. The program has been ignored by many hospitals in the past because the HUD standards have been perceived to be too onerous. And municipal bond deals associated with the program have been few in number and relatively small in size. But now the program is gaining more attention and considered to be more viable in today's market. Under the program, a qualifying hospital can get an FHA-insured mortgage that can be securitized as a Ginnie Mae loan that is guaranteed by the federal government and purchased by an investor. Most current participants in the program are critical care facilities in urban and rural areas, it was reported. During fiscal 2009, HUD processed preliminary reviews of 43 applications for the program. Twenty-three of these applications did not qualify successfully. However, HUD expects 2010 to be a record year. Jim Woodard writes a nationally syndicated column and freelance features on real estate and mortgage news and trends. Email: storyjim@aol.com Read More »
About 40 percent of today's home loan applications are for FHA mortgages, insured by the Federal Housing Administration. And nearly 80 percent of those home loan applicants are first-time home buyers, according to FHA commissioner David Stevens. The FHA provides a very unique vehicle which is helping to make this housing market sustain itself and recover at a very difficult time in the economy, Stevens said when interviewed by a reporter for the Real Estate Today radio program (sponsored by the National Association of Realtors). The FHA guidelines are very focused on the credit quality and strength of the fund and has recently changed policies to deal with this, he noted. It has hired a new chief risk officer, and brought in a new head of single family business. With more than $30 billion in capital, the FHA has not required any tax payer money. There has been no bailout required and the total combined capital ratio is over 4 percent. When compared to other industry players who participated in this mortgage market over the last decade, the FHA is the only institution of its size that hasn't needed special funds from the government, a bailout, or hasn't failed, Stevens pointed out. The FHA sees itself today in a far better position than any of the other participants at this time in the housing cycle, he said. Over 34 million families have used an FHA mortgage to finance their home purchase since the late 1930s. The program was created under Franklin Roosevelt's administration during times similar to our current situation. Jim Woodard writes a nationally syndicated column and freelance features on real estate and mortgage news and trends. Email: storyjim@aol.com Read More »
Sub-prime mortgages can be very important to those who have a bankruptcy lurking in their past, and although the down payment requirements and interest rates can be higher than for traditional loans, sub-prime mortgages can be a good way for borrowers to rebuild their damaged credit and build up a steady payment history. Unfortunately, sub-prime mortgages have taken a beating over the past 4 years as they should. Now there are new programs that can help you if you have low credit scores that are insured by the federal government. Sites like this one will help you find the FHA mortgage rates and using the FHA loan guidelines you can find out if you qualify. In most cases it is much easier especially in today's climate to qualify for an FHA loan. All you have to do is follow the FHA guidelines which are pretty simple.
It is important for every consumer to keep on top of his or her credit report and credit score. The information contained in your credit report is of vital importance to your financial well being, and it will determine the FHA mortgage rates you get on your FHA mortgage loan, as well as the interest rates and terms on a number of other loan products.
* Credit score of 600 or greater required to continue
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