Archive for the ‘FHA Loans’ Category

Does Refinancing Make Sense?

Friday, February 27th, 2009

In the current market, if you can refinance, you probably should be. Refinancing is the process of obtaining a new loan that pays off your existing home loan. There are several reasons for wanting to do this, but the most important is to get a lower interest rate so you save money on your home loan. FHA loans can help you to refinance, as can other conventional lenders. The key here is to know when it makes sense to refinancing.

What’s Your Rate?

The first step in knowing if it makes sense to refinance is to know what your interest rate currently is. According to Bankrate.com, current 30-year mortgages are available at about 5 percent, which is a very low number. Those who wish to obtain a 15-year loan may even be able to pick up a home loan that is under five percent. If your current mortgage is at an interest rate that is higher than this, you could save money by refinancing.

Here is an example. Let us say you currently have a mortgage loan payment of $1400 per month and you owe $175,000 on your home and have another 28 years to pay on it. You are currently paying about 9 percent for the mortgage. If you keep this loan for the next 28 years, you will end up paying a total of $304,984 in interest alone, on top of the purchase price of the home.

Now, let us say you refinancing your home loan to a loan for 30 more years and pay 5.5 percent on the loan. Your mortgage payment is now under $1000 a month. At the end of your payments, you will have paid just $182,707 in interest payments towards the loan. As you can see, this is much more affordable than holding onto the loan you currently own.

You will likely need to pay closing costs and your homes appraised value still needs to be high enough to cover the mortgaged amount to qualify for a refinance. There are other qualifications you may need to make, too.

To find out if this is an option for you, get a quote from a lender. You may even qualify for an FHA loan through the refinance process. This can further lower your interest rate and make it even more affordable to buy your home.

Stimulus Bill and FHA

Thursday, February 19th, 2009

The stimulus bill, The American Recovery and Reinvestment Act passed Congress on Friday and is to be signed by President Obama on Tuesday, February 17th.  The Bill does mention the FHA, Freddie Mac and Fannie Mae, the government lending bodies. One of the things the Bill does for these organizations is to raise their lending limits. In 2008, lending limits were raised significantly to allow the FHA to step in and help more people facing foreclosure. Those levels reverted back in 2009. The Bill pushes the limits back to the 2008 level. This means more funds are available for these banks to aid those purchasing homes.

What Do New Limits Do?

There are several things that this new higher limit offers to the mortgage industry. First, by raising the limit, there is more money available to these organizations to purchase loans. This means that when Joe Smith comes to purchase a home, and would like FHA backing on that loan, he can get it because the funds are available to allow for this.

As you know, the FHA allows individuals to get a lower interest rate when borrowing money because it gives the lenders an added insurance that the loan is secure to them. If the borrower with an FHA loan fails to make payment, the property is foreclosed on, but the loan holder can file a claim with the FHA to be reimbursed some money. It works very much like an insurance policy for the lender. Because of the lessoned risk, the lender offers a lower interest rate to the borrower. In short, it aids each body involved.

There are other ways this new higher limit on Freddie Mac and Fannie Mae will. Because it does free up some of this money, more people will qualify in all likelihood for these home loans. With better qualification numbers, more homes can be purchased. People can afford to purchase a home again with the lower interest rate. In turn, more properties that have been sitting on the market or even vacant can be sold. In other words, by raising these limits, the government is aiding in reducing inventory of available housing. This will give cities back their property taxes and aids in boosting other home values throughout the area.

The overall process improves the liquidity of the mortgage market as a whole. Many economists blame at least part of the economic downturn on the failure within the housing market. By restoring some stability here, it could also help to restore some of the value in housing and the markets as a whole.

What Does It Mean To You?

As you consider the Bill and what is included in it, one thing you may want to consider is your own ability to obtain a mortgage and to purchase one of these homes. Not everyone will qualify for a home loan through this program, but far more money is available to help more people to qualify. If you have been considering purchasing a home, but where not sure if you could, or should do so, there benefits of these increased limits makes now an ideal time.

The benefits of having an FHA loan are immense and it should not be overlooked by anyone who is looking for an opportunity to buy a home. Keep in mind that you will still need to meet income and credit qualifications to obtain an FHA loan. If you have been thinking about this type of loan opportunity, take the time to talk to an FHA loan specialist to find out if you qualify for the loan.

Foreclosure Moratorium: Lenders Have Agreed

Sunday, February 15th, 2009

As the Congress and President work to find a solution to the ever-growing problems of the average American citizen, one thing is certain. Foreclosures need to stop or find help. Even with FHA loans available, so many homes foreclosed on each month. The good news is that lenders are listening. Several lenders have agreed to moratoriums on foreclosures. If you own a home and feel threatened by foreclosure, by one of these lenders, you may have some breathing room:

*JPMorgan Chase & Co
*Citigroup Inc
*Bank of America Corp
*Wells Fargo & Co

Each of these lenders have agreed to temporarily stop foreclosures in the hopes that the government has help on the way for them and those homeowners who are struggling to stay in their homes. The stimulus programs being put into place have billions of dollars in them to help Americans to stay in their homes. This applies to ne foreclosure actions.

It’s Not Too Long

Keep in mind that this freeze is not a long-term process. Rather, according to Jamie Dimon who is JPMorgan Chase’s chief executive, as reported by Cnn.com there is limited time. He said, “We believe three weeks is adequate time for the Treasury to announce- and for use to implement- a new plan.” Bank of America’s freeze will last through March 6th. Citigroup has promised to hold off on foreclosures through March 12th. Wells Fargo has not set a specific date, but says that they will halt foreclosures until the government’s plan is announced.

What To Do

Are you likely to be affected by a foreclosure in the coming weeks? If so, you may want to use this time to secure different financing options. There is no immediate information available in terms of what President Obama will be outlining in his plan to stop foreclosures. Therefore, if you are at risk of losing your home, do not waste this time.

Keep in mind that there are already several types of programs in place to aid individuals in refinancing their current home loans to get into new ones to avoid foreclosure. FHA lenders can help you to determine if you qualify for this type of loan. While President Obama’s plan is on schedule for review in the coming weeks, do not wait that long to find out if you qualify.

The Only Low Down Program in Town

Tuesday, January 20th, 2009

CNN Money.com published an article today about why FHA loans are gaining popularity.  You probably already know the reasons but to sum it up: 3.5% down (try finding less than that these days), low rates, and attractive loan limits.  I highly recommend taking a look their article because it has some great FHA info and good examples as well.

What Is The Federal Housing Administration?

Tuesday, December 23rd, 2008

You are likely hearing a lot about the FHA, or Federal Housing Administration. They have become the backbone of the housing market currently and likely will continue to play a significant role until the economic crisis and financial markets free up. This is a good thing since the FHA has a long history of providing stability in the American housing market. They could be the resource you need to get into a home loan.

While this blog is about the FHA and loan available through it, it may be important to take a step back and find out who this organization is and why they are even around.

The FHA was created by the National Housing Act of 1934. It was created during the Great Depression, as a way of helping to support the American people in finding loans to borrow money to buy homes. The goals of the organization are specific:

• Improve housing standards and conditions
• Provide home loan financing through an insurance program for mortgage lenders
• Stabilize the mortgage market

During the Great Depression, the banking system had fallen and home loans availability was next to nothing. People could not afford their homes. When the banks failed, any mortgages out during that time (which ere shorter term and had no amortization) were called due. This caused many homeowners to foreclose on their homes for lack of funds to pay back the loans. When the Federal Housing Administration was created, its initial goal was to help regulate the interest and terms of the mortgages. Now, more people could afford a down payment and the monthly payment of their loan.

Over the last 70 plus years, the job of the Federal Housing Administration has changed somewhat, but in most terms, it still has the same job of stabilizing the housing market, specifically in terms of the availability of loans to buy homes.

Today’s Job

The FHA provides a level of insurance protection for the commercial lender. You borrow an FHA approved loan through these commercial lenders. They agree to charge you a lower rate of interest for this protection. If you default on the loan, the lender is able to get a payout for your loan.

The FHA has become one of the backbones in the housing market right now and will continue to be so. Home ownership is one of the most important factors of success in an economy. This is why so much attention is being placed on this department of the government right now. To right the economy, the housing market has to stabilize.

If you are interested in getting a home loan, find out what FHA loans are available to help you accomplish this.

Can FHA Loans Help You Qualify For A Home?

Thursday, December 18th, 2008

As a potential homeowner may find it difficult to qualify for a home loan in the current real estate mortgage market. With credit markets moving in every direction, it becomes very important for those who may want to buy a home to make wise decisions. FHA loans could be the way that people get into the homes of their dream homes, safely.

Today, the FHA helps to provide insurance backing for more than one third of all homes in the United States. Just a handful of years ago, few people took advantage of these loan programs. Many saw them as something for people who were non-creditworthy. Yet, this is no longer the case. In fact, it is safer to get your home mortgage loan through these FHA programs than it is to get your loan from other methods. In addition, it may even be less expensive.

Are FHA Loans The Only Option?

Much of the credit market’s liquidity has dried up. In many situations, it has become difficult to obtain these loans. Regardless of what is happening to help encourage banks to lend, it will still be likely that only well qualified individuals will be able to get affordable home loans through conventional loans. These loans are available, but there are fewer of them receiving approval than ever before.

FHA loans are more readily available. While they are not the only game in town, they definitely are becoming the most accessible option. In some markets, 60 to 80 percent of home loans are now FHA loans. These government backed loans are simply safer for the investor. They provide a bit of extra leverage for the investor to get back some of his money should you default on your home loan. Many of these investors have been burned by the recent foreclosure mess. They want protection for their investment. FHA loans provide this type of protection.

It is important to note that FHA loans are not government loans specifically. The government does not lend to borrowers. Rather, they provide a level of insurance to the commercial lender. You will still get your loan through a commercial bank. The only difference is that there is an insurance protection for the lender. If you default, the government will refund the lender up to a certain point for their loss. This reduces the risk of the lender.

FHA loans are a good option for many homeowners because of lower interest rates. Yet, until the housing market strengthens and the credit markets thaw, these loans are going t be the biggest game in town.

Why FHA Loans Are Cheap Home Loans

Saturday, December 6th, 2008

FHA loans are loan insured through the Federal Housing Administration.  These loans are not held by or funded by the FHA, but rather funded by commercial lenders (they must be approved prior to providing these loans.) What makes them different is that the lender is able to take an “insurance policy” out on the loan. If the borrower of the loan defaults, the lender is able to recoup some of their invested money by selling the property and by collecting an FHA insurance payment.

What Does This Mean To You?

As you take into consideration how the FHA works, consider how it affects you, the individual hoping to purchase a home in a troubled economy. There is no doubt: now is the time to buy especially if you have a good credit score, a down payment and want a good deal. Home prices are at much lower prices than they were just a few years ago. But, what if you want to save even more money on your home loan purchase?

To get cheap home loans, consider FHA loans. Because these loans have an insurance policy on them, of sorts, the lender is less at risk of losing their investment in the loan. With the opposite type of loan, a conventional loan, there is no guarantee that they will be able to make up this cost. Even if they foreclose on the property of a default borrower, they still take thousands in losses.  To the lender, the risk of an FHA loan is lower and therefore they are not as worried about the loan. In return, interest rates are lower.

Lower Risk = Lower Interest Rate

There is no way to know what your interest rate will be until you apply for or at least talk to an FHA loan specialist. You are likely to get a far lower interest rate with an FHA loan than you would if you obtained a conventional loan.

Where’s The Catch?

Many people fear a catch. What is behind this type of loan? You still have to qualify for the home loan. You still have to have a down payment for the home loan, but it is far lower than those f conventional loans. You do have to have a decent credit score. The days of having a very low credit score and no down payment and still getting a home loan are gone.

Nevertheless, FHA loans are solid investments. They can help more people to qualify and they are, by all accounts, the cheap home loans you are looking for.

Mortgage Lending Freeze Makes It Difficult For Self Employed To Get Home Loans

Tuesday, December 2nd, 2008

While there are many proposals in the works to help the ailing mortgage industry, one group seems to still be struggling to get into a decent home loan even with good credit. That is the self employed. Mortgage loans have always been somewhat difficult to get if you do not have a standard job, but the current trends seem to make it a bit harder.

Are You Self Employed?

The credit markets are starting to thaw and that means that more people are able to qualify for home loans. Those that are self-employed are still struggling to get the same treatment.

Self employed individuals, such as doctors, attorneys, small business owners and even accountants, may have good or better credit and a sizable back account, but without that steady paycheck, many lenders have shied away from loaning to these individuals. The problem is the lack of a W-2, the document that most people get in the mail at the end of the year stating that they worked for a company and earned a set amount of money. Rather, self employed individuals seeking a home loan will need to use an income tax return instead. Tax deductions that many of the self-employed receive often lessen the income, too, making it harder to prove that they do make enough to afford a home loan.

What Can You Do?

If you are in this position, where you are struggling to get a home loan because you are self employed, you may qualify for FHA financing. The FHA provides more flexible terms for borrowers. There are still specific goals that need to be met, including minimal down payments on the home and a decent credit score. Yet, the FHA loans are often easier to obtain for those who have trouble proving their income. These loans can be the best opportunity for individuals who may struggle to qualify for other types of loans.

According to some lenders, credit is the most important factor in obtaining a home loan. Yet, for the self employed, even high credit scores (in one case a woman was denied a home loan even though her net worth was three times that which she was requesting and her credit score ranked in the high 700’s) can hold you back. Proving to lenders that you are a good credit risk can be tricky, but it is something you must do.

FHA lenders can help you to avoid some of those obstacles. You still need to show income proof and you will need to be qualified for the home loan. FHA requirements are much lower. You will still need to meet qualifications including:

  • 2 years worth of income tax returns
  • If you have less than one year of self employment income to prove, you may not be eligible without some other proof of employment prior to this
  • Federal business income tax returns for the last two years, for all corporations of “S” corporations and all partnerships
  • Profit and loss statement and balance sheet showing your income
  • A credit report from your business, in some cases

The FHA lender will need to take your income over the last two years (which you need to have proof of,) and will average it over that time. Provide them with additional information, such as income growth patterns over the last months. A detailed letter explaining expenses as well as any fluctuations in income is important.

With a good credit score, there is help for those who do have the need for a home loan even if they are self-employed.  FHA specialists can help you to qualify for these loans.

HUD Mortgage Modification Program Offers Some Help

Monday, November 24th, 2008

As a homeowner struggling to make your monthly payment, you may have to choose between things like seeing a movie, Christmas presents or even food on the table just to keep the roof over your head. In a recent press release, HUD, the Department of Housing and Urban Development announced a new loan modification program, which has plans to offer individuals struggling with their mortgage some help.

Note The Changes

The program, being called Hope for Homeowner, has undergone some further modifications. The goal is to get lenders to participate, something that has to happen for anyone to get their loan under the microscope for improvement. The new modifications to the program allow the lenders to write off less of the loan value than in prior situations.

The homeowner will benefit from this program because the lender will renegotiate the mortgage with them. They get a lower monthly payment and therefore have the money they need to make the monthly payment. In order to help make this possible, the loan terms (the length of the loan) can now go to as much as 40 years.

The Hope for Homeowners program is designed to help individuals to get into new loans if they are struggling with their own. The goal is to make the loans affordable for each borrower, so that foreclosure can be avoided. To do this, the rules of the program state that the monthly payment on the mortgage cannot be more than 31 percent of the homeowner’s monthly income.

The rules also allow for the lender to write down the loan to 96.5 percent f the home’s actual value. This is up from the 90 percent it was when the program first came to be this summer.  Another change is in the amount of debt that the home has. As a homeowner, you may not have household debt of more than 43 percent of your monthly income.

In order to qualify for the Hope for Homeowners program, your home loan must have originated prior to January of 2008. You also have to have a loan amount that is lower than $550,440.

Do You Qualify?

Many people may qualify for this program. Others may not. All should make the move now to find a solution to their current financial situation.  The Hope for Homeowner program is one option that many people have, and anyone who may be struggling right now to make their loan payments should contact a loan specialist to get some help in qualifying.

If you are otherwise struggling with your debts, even if you do not quality for this specific program there is still help available to some. Refinancing your loan is an option. There are also program in place to help you to liquidate the lien you have on your home through a second mortgage or equity line, so that you can actually qualify for the Hope for Homeowners program or refinance your home otherwise.

These changes to the program may in fact help encourage more lenders to start working with their struggling borrowers. You do not have to wait to see if your lender approaches you, though. In fact, you likely should not do this. Rather, you should work with an FHA loan specialist or other lender to try and find a better solution for your loan. In many situations, homeowners are never aware that they do have options for saving their home.

In fact, even if you are not behind on payments or struggling to make them, these professionals can help you to refinance your loan into more affordable terms or to help you simply to save money.

Can Anyone Get A Home Loan?

Friday, October 24th, 2008

As someone that writes about home loans on a regular basis, I fully understand the frustrations so many are going through. The fact is, people are wondering several things.

 

  • Some think mortgage companies are going to come calling to demand payment on full on their mortgage 
  • Some people believe that no one will get mortgage loans again, not for a long time
  • Others think that the mortgage crisis is going to cause them to lose their home even though they have made payments regularly throughout their loan

These are all mistaken beliefs.

 

While there are some instances when the mortgage companies can come demanding payment in full on your loan, this only happens when you are in foreclosure, after months of trying to get you back on track. Most lenders want you to keep paying them, they don’t want to own your home. For those who are making timely payments, your mortgage loan will not become due immediately.

 

As for the second concern, there is some concern here, but not nearly as much as you may think. First, there are loans available from nearly all of the traditional mortgage lenders in business. The requirements are stricter with some lenders requiring more down and a higher credit score before they will lend. Call it the “once burned, twice shy” scenario with home loans.

 

At the same time, for those without a lot of money to put down and with a credit score that is not as high as it could be, there is the FHA.  FHA loans are still available for most American home buyers. These loans require much less down (just 3%) and they provide you with an outstanding assortment of opportunity: even the fact that these are fixed rate loans.

 

On the final concern, as long as you keep paying your mortgage back on time, your loan is going to be in good standing and to the mortgage lender, you are a good person to have on board. The only way for lenders to make money is to lend money and charge interest.

 

Is Now A Good Time To Buy?

 

Here’s another situation I hear which is one of the biggest problems with the market right now. People who have the money and want the home are avoiding the market. This is a mistake and here’s why.

 

  • The current interest rates on home loans are at an all time low: just 5 percent in some cases. This is the perfect time to buy.
  • Lenders want good buyers. They are actively looking to lend to those that want to buy.
  • Home prices are also low: lower in some areas than they have been in ten years.

No matter which way you look at it, now is the best time to buy a home, if you qualify for a home loan. If you are not sure if you do qualify, a good place to start looking is through a FHA loan specialist. These professionals provide guidance to prospective home buyers. They also have the ability to help you qualify. These are not bad mortgages, these are good mortgages and some of the safest investments to be in right now.