FHA loans in the last 12 months have become one of the most used types of mortgages. There could be several reasons for this......
- less money down - 3.5% down
- lower credit scores - anywhere from 600 down to 550.
- less than perfect credit
- no credit at all
- 2 years out of a bankruptcy
Well, things have been changing. No, HUD hasn't really been changing the FHA guidelines, but the investors and banks have been changing them. We are in a credit crunch crisis. Just in the last few months, I have been getting a few calls and e-mails from people telling me that HUD's website says this or that. I have actually had a few people argue with me a little, because of what it's says on HUD's website. Just a word to the wise, FHA doesn't do the mortgages. They don't service them, they just insure them. It all comes down to the investors and those that sell back to Wall Street.
Now, I will admit, you can't believe everything that you read or hear. There was a rumor going around that credit scores were going to be mandatory across that board at 620 and above. This is incorrect. But you should be aware that this could happen. I just had a realtor e-mail me from Florida today, telling me that her Countrywide rep. told her that her son would have to wait another full year for a FHA mortgage even though his Ch. 7 bankruptcy will be discharged for 2 years in April of 2009. He has saved his cash, reestablished his credit, and has credit scores of 680. This actually sounds like one of my easier deals.
Conclusion - You really need to be choosing your loan officer very wisely now. Someone that is on top of these changes daily, not monthly. FHA loans do differ from lender to lender. In some cases, if it sounds too goo to be true, then it might not be true. If your lender is taking over 30 days to get a FHA mortgage approved, you might want to seek someone else. And keep in mind, just because it's on HUD's website, doesn't mean that it can be done anymore. Investors and lenders need to make sure that the loan is sell-able on Wall Street.
Disclosure - One comment that seems to pop up that does irritate me. FHA loans don't take forever. A very good loan officer and company can do them in 2 weeks. But many of us like to have 30 days to process them. But they don't take 45 days or longer, not unless they have a credit issue, need to get their credit score up, or might be waiting for a raise. And if your loan officer was good, they would have discussed this with you. It's called setting your clients expectations to a certain level. Please read : Are your expectations met as a client or a realtor?
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Experience & Knowledge at its BEST !!!
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For more information on FHA loans, please go to this link. The FHA Expert
For more information about the 2008-2009 Tax Credit for First Time Homebuyers : 2008 Tax Credit
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!
Copyright © 2009 by Jeff Belonger
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Over 17 yrs in the mortgage industry & real estate market, I bring expert knowledge and creativity to financing options & loan programs. Being honest and serving your individual needs is my desire!
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You are right about loan officers...they really need to be on top of the FHA stuff..it's tricky. I have one person, who I love, for my conforming, jumbo and investor loans and another who only does the FHA for me. He is an expert on all the changes moment by moment.
Jeff, I started writing my story about the situation of having to buy my house. I am getting ready to add you to the credit for the tax credit. I eneded up with an FHA loan and successfully bought the house out of foreclosure. I think there is a great story there for potential homebuyers that FHA will do a foreclosure transaction. Part 1 of the series is already done....check it out and let me know what you think. Perhaps we could work together to get the word out about the lessons that were learned
Bo
This is good stuff dude. I know that ultimately it's coming down to performance. If loans perform the investors buy the loans. If they don't they push back. Therefore, even though HUD has certain guidelines, investors say....too back....we're not taking a low FICO or whatever. Great post bro.
Well as usual you and I disagree in part... local vs some guy back east (ok a good guy). But beyond that you are very correct. Individual lenders are making some deals difficult. Most of my FHA's, going through local companies have been under 30 days. However in our market because our appraisers are behind the power curve a little we have been experiencing 15 days to get an appraisal back to the lender (until recently it has been 3-5 days). But a small price to pay and a good product.
Jeff, thanks for the post. Nothing helps a credit challenged buyer more than selecting the right mortgage broker.
KAREN..... . yes they do. And I thought it wouldn't be as bad as in the past, but it seems to be worse now. And I think I know one of the reasons why. It's very easy to blame it on the new changes or on the lender that the broker might be dealing with. And that concerns me, because it's an easy scaepgoat. thanks
BO...... . looking forward to reading your part 1 of the foreclosure transaction blog. And yes, let's talk some next week about your plans. thanks
LARRY..... . that's the problem, so many loan officers don't explain that it's the investors that make these changes and not HUD. We just need to keep spreading this out there. thanks and thanks for the compliment.
PERRIN..... . I have no problem with anyone disagreeing with me. But I am semi confused by your first statement about local and some guy back east. If you are saying that the borrower should always deal with someone locally, yes, I will disagree. It comes down to good loan officers period. I have done my fair of loans last year that were taken by local loan officers who missed the closing dates. I was able to close 10 of these and in some cases, I was over 1,000 miles away. Local real estate is different than local mortgages, which I will write about. The long and short of it, I have been successful with out-of-state transactions and I know a few other loan officers.
In regards to the appraisals, even if I do them 6 states over, I am still getting them back in less than 5 days. I just closed a deal in VA, it was extremely rural. Under 2,000 people in this town and out in the middle of nowhere. But I still had it back quickly. Overall, thanks for your input.
GABE.... . my pleasure and you are so right about your statement. thanks
I heard FHA loans are used more because they are about the only thing you can get in many areas.
Jeff,
And from a closing standpoint, virtually no diffrence betwen FHA and conventional...a couple of extra mortgage docs!!! Thanks, Fran
Jeff,
Don't you wish AR would just let you automatically re-post this every third day? That seem to be the retention span of many.
Keep telling them!
Bill
Keep on putting that good stuff out there! Sorry I can't make it out tonight :((( sick kiddos!
Good post, but it is getting harder to do loans under 600 FICO's.
What's HUD doing to lenders, forcing buybacks?
Drew
Great post Jeff. I think some are unaware that FHA is just the insurer on the loans, and it is the lender's funds. As with any insurance company...too many claims and they cancel the policy. Obviously the companies have determined the risk for default under 620 is too high and would force them to make more claims. Losing the ability to originate FHA loans in this market would surely make keeping the doors open more difficult.
The loan brokering industry has changed significantly over the past few years.
One of the main changes is on their minimum credit score requirement on FHA VA Programs.
Many wholesale lenders are requiring a 620 minimum credit score.
There's Hope!!!
I work directly with US Bank's Nationwide Home Mortgage division which allows me to offer a
No Minimum Credit Score requirement on our FHA VA Programs.
Realtor's, Mortgage Professionals and Consumers are all welcome to contact me.
As the industry keeps challenging us it's good to know that there are options.
Homeownership is my community pledge to you.
Contact me directly: 480-538-5663
E/M scott.lambert1@usbank.com