Posts Tagged ‘FHA Loans’

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.

New Administration: What This Means For HUD

Saturday, December 20th, 2008

President-Elect Obama announced that he would appoint Shaun Donovan to head up Secretary of Housing and Urban Development, or HUD. HUD is an important part of the mortgage industry, indirectly. This department is responsible for the housing within the country. In this administration, during this economy, this new Secretary will need to find ways to jumpstart the housing market to help individuals find the homes they need.

In his radio address on December 13th, Mr. Obama said this about the housing market: “To end this economic crisis, we must end the mortgage crisis where it began.” He continued, “This all started when Americans took out mortgages they couldn’t afford. Some were reckless, aware of the risks they were accepting. But many were innocent, tricked by lenders out to make a quick buck.” Later, he added, “This is deeply troubling. It not only shakes the foundation of our economy, but the foundation of the American Dream.”

Later in his broadcast, he mentioned that one in ten homeowners face some level of stress in regards to their homeownership.

What This Means To You

Depending on who you are and what your circumstances are, there is hope available. While the new administration will likely put in place programs to continue to support the housing within the country, there are many programs already in place to help struggling homeowners. Those facing foreclosure or the risk of getting behind on their mortgage should take the time now to contact an FHA loan specialist. Determine what your options are, including programs like HOPE for Homeowners and easy refinancing options already in place.

What about those who are looking for a home to purchase? Are they safe to buy? Many of the predator lenders are gone. They have lost their funding since investors are no longer willing to gamble with high risk mortgages. It is safe to borrow money. Commercial lenders are actively seeking borrowers who are qualified to borrow. Interest rates are very low and FHA loans are readily available to help those who are able to make payments to get into homes.

While you may not be able to improve the economic crisis fully, you can improve your financial security by considering new loans now. Home prices are low. Home interest rates on loans are low. Programs are in place for refinancing quickly and affordably. Determine if you qualify for a home loan through an FHA specialist. You may be happy to learn there are so many options available.

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.

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.

Home Buyers With Less Than 20 Percent Down Need FHA

Saturday, October 18th, 2008

It used to be common that purchasing a home with little to even no money down was acceptable, especially when you were a first time homeowner with decent or better credit. This “used to be” was in fact just a handful of years ago. The problem is now that lenders are not willing to take on that level of risk any more.

As one of the problems of the current credit crunch, people from all walks of life are finding it more difficult to obtain the loan they need and want to buy a home. The only organization offering any type of mortgage loan under 20 percent down is the FHA. FHA loans with low down payment are becoming the best route for those homeowners who just want to find an affordable solution to buying a home.

Why Creditors Just Aren’t There

Over the course of the last two years, many lenders who typically provide home loans have faced a number of foreclosures on their properties. Some continue to lose money on these properties and are facing an incredible decision: risk losing more money or only lend to those less likely to default.  By requiring a larger down payment, the homeowner is less likely to walk away from their loan since they have a stake in the property. Therefore, these loans are less risky to lenders.

Here’s the kicker: in order for the credit markets and financial markets to get better, the housing market must improve.  In order for the housing market to improve, banks have to lend to borrowers so they can purchase the homes. The cycle is quite limiting and stressful.

What To Do If You Don’t Have 20 Percent

The American family just starting out may have a small amount of money set aside, but most do not have 20 percent for a home. They are struggling to find lenders who will qualify them for a home loan. If you are one of those looking for a home loan with a low down payment, one of the best places to look is the Federal Housing Administration, or FHA.

Here’s how you will benefit from an FHA loan:

  • Down payments as low as 3%
  • Low interest rates on home loans
  • Easier qualifications for home loans than most traditional lenders
  • Fixed rates: giving you stability in your repayment terms
  • Help even with less than perfect credit
  • A variety of programs for those who need help or have unique requirements

They are federally backed loans, with a larger amount of flexibility. What is important is to note that the current credit freeze traditional banks are placing on the housing market is unlikely to change right away. But, FHA can help you to get the home you need and want.

Contact a professional to talk about your options. When 20% down is too much, these lenders can help.

Hope for Homeowners Program: Refinancing Opportunity for Borrowers

Wednesday, October 8th, 2008

With all the latest legislation passing through Congress specifically aimed at the housing market, it’s getting not only harder to get loans but more difficult to understand it all.  Luckily, the HOPE for Homeowners Program looks to be one with a basic breakdown.  The program has authorization under the National Housing Act, which was amended earlier in the year by the Housing and Economic Recovery Act of 2008.

What Does It Say?

HUD issued Mortgagee Letter 2008-29 detailing what this program includes.  First, it gives any current or delinquent borrowers the ability to refinance into a 30 year fixed rate loan through FHA. In order to qualify for this aspect, you must have made at least six payments on the mortgage prior to requesting the refinance.

Additionally, the program is designed for those who have a debt to income ratio higher than 31 percent with their current home loan.  The original loan must originate prior to January 1st, 2008.

  • Payment to income is limited to 31 percent while debt to income is limited to 43 percent.
  • These numbers may be higher, according to the program, following a three-month trial modification put in place through the program first.
  • There is a maximum loan of $550,440 on all loans through the HOPE for Homeowners program, (referenced as the H4H program.)
  • There is also a restriction of a 90 percent loan to value in place on these loans.
  • All homes must be owner occupied homes, on one unique properties
  • FHA approved appraisers must appraise the properties within three months prior to the closing
  • Origination fees are capped at 1 percent
  • Buyers do not pay closing costs and prepaid items upfront
  • A 3 percent upfront mortgage insurance premium and annual premium up to 1.5 percent will be applicable.

One of the unique aspects of the HOPE for Homeowners program is that lenders must insure that appraisals are complete within the letter of the law.  In other words, they are responsible for any poor or fraudulent appraisals that lead to an FHA insured mortgage.  Inflated home values, considered one of the problems within the housing market crash today.

More Information

The HOPE for Homeowners program promises to offer outstanding opportunities for homeowners to get out of the hole they are in.  Namely, they are able to get into FHA loans with a fixed rate, often lowering the amount they must pay monthly.

The program is available to those who have government loans and conventional prime loans, as well as Alt-A loans and the worrisome subprime loans. This includes most types of mortgages, too, including negative amortization, payment option and interest only mortgages.  There are legal restrictions, for example, any state or federal fraud conviction within the last ten years can disqualify an individual from obtaining the loans.

For homeowners struggling with their current loans, falling within these areas, there is no doubt that the HOPE for Homeowners Program offers a lifeline.  It is highly encouraged that you seek out FHA lenders to get the process started.