Jeff Belonger -- The FHA Expert.com -- FHA Loans -- FHA mortgages - USDA loans

FHA loans seem to be one of the main choice of mortgages in the last 12 months or so. There are many reasons for this. And FHA loans will definitely be the main choice for anyone buying a condo now. More on that later.. What I hate hearing is that FHA mortgages have taken the spot of the subprime loans. This is not true by any part of the imagination. This statement is from those that are inexperienced in both the mortgage and the real estate industries. The realization has been that 30% of the subprime mortgages from 2002 to 2006, should have been FHA mortgages, not subprime.

To compound this, so many said just because you had a conventional loan, you had the better loan. This was not always true when putting 3% or even 5% down. In most cases, you were told this, because that particular lender was not FHA approved. Now? Even with 10% down and credit scores less than 680, FHA loans in many cases, will be the best mortgage for you. You want to see a shocking example?

And sellers, don't listen to your agents on how bad FHA loans are.

The example below is based on a $300,000 purchase price with 10% down. One reason why conventional rates are a little higher in this scenario as in FHA rates is because Fannie Mae and Freddie Mac have added penalties per se. If you are putting down less than 30% and your credit score is less than 720, certain fee penalties would apply to you, which would increase your rate and or points. The FICO (credit score) that I am going to use is 659 and I will still show in this example that FHA loans are cheaper, even with 10% down.

***And keep in mind, some lenders have penalties on FHA mortgages with credit scores under 660. And many lenders can't do FHA loans under 620. Just beware of those that promise you a mortgage with scores under 620. It can happen, but they aren't as easy as advertised. Please read - Credit scores/FICO scores - I need a 700 credit score? ***

Disclaimer : These rates are examples of today's pricing, and the spread shown in the example is real with the same profit margin for both sides. To compare this scenario apples to apples, there are no lender fees and with a half of a point. The conventional rate also includes the penalty for the 659 credit score, hence why there is a half of a point charge, because of the large pricing penalty for the credit score.

Some of you might be saying that you will be adding $4,725.00 onto your principal balance if you did the FHA mortgage because of the FHA one-time mortgage insurance premium. This is correct and I don't want to confuse you with more numbers and charts. But here is a quick breakdown. If you kept your house for 5 years, you would have saved $12,646.20 in payments in 5 years. Subtract the Upfront Mortgage Insurance premium from the monies saved in 5 years and you have saved a difference of $7,921.21!!! And one other thing that is very small, but still makes a difference. You will be subtracting a few more dollars per month from your principal because your interest rate is lower, which would offset the interest that you would write off on the 6.25% rate. Just something else to remember, but consult your tax consultant or CPA.

Lastly, keep in mind, depending on the area that you are buying or refinancing in, that you might not be able to get a conventional loan unless you have 10% down or a 90% LTV. The reason being is the mortgage insurance companies and how they view certain geographical areas and declining market areas.

Which leads me to the issues about Condos. Not only are there restrictions from the MI companies (Mortgage Insurance companies) in regards to what area you live in, but that many lenders won't go above 80% LTV's now on conventional mortgages. On a FHA mortgage for condos, you can still go up to 96.5%, depending on the state, but you still have to make sure that the condo association has been FHA approved. There has been a major change on FHA condo spot approvals. Please read : FHA condo changes for spot approvals -

For more FHA loans vs conventional loans comparisons :

• FHA loans vs Conventional loans - A true numbers comparison with 5% down - 12-20-08 -Using a 710 credit score
  

• FHA loans vs Conventional loans - A real comparison with 5% down - 11-15-08 - Using a 659 credit score
  

• FHA Loans vs Conventional Loans - 20% down - A Rude Reality Check - 04-03-09 - Would you believe that FHA loans could be cheaper even with 20% down? Come see why and how.

• FHA Loans vs Conventional Loans - 5% - 4 comparisons that you need to know - 05-02-09 -Comparing a FHA loan against 3 types of conventional loans with different types of monthly mortgage insurance. Guess who won while still using a 679 credit score.....

• FHA loans vs Conventional loans - Knowing the true comparisons - 07-10-09 - A great comparison with a 679 credit score and 5% down. This example will still show that even with a better than average credit score, that FHA loans are still better in many cases.

• FHA loans vs Conventional loans - Things you need to know with 10% down, especially in regards to Condos - 09-19-09 -
  

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_________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 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 of Infinity Home Mortgage Company, Inc

The average family wants to buy a home, but at what costs? At what cost to us, the American Tax Payer. The First Time Home Buyers Tax Credit is about to expire in 2 1/2 months, but now there are many urging for it to be extended. Have we looked at all of the facts?

I am sending you all to a blog that I published at 2 am this morning, and wanted to direct you to it, because I felt that it could have been missed here on Active Rain. Please click on the blue link below.

The Welfare Mentality of the First Time Homebuyers Tax Credit - I truly think that we need to study this closer, the pros and cons, before it's extended. But you see, the gov't doesn't usually work that way and this scares me greatly. Please read this. I also included several other posts about this topic as well. You will be busy reading for days.

PS… I have disabled comments on this blog, so they all can be left on the blog mentioned above. I want to keep the conversation in one spot. thanks

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_________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 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 of Infinity Home Mortgage Company, Inc

There has been a lot of buzz about extending the First Time Homebuyers Tax Credit. Why? For two reasons...

1. Because the $8,000 Tax Credit expires on November 30th, 2009.
2. And because many have stated that these tax credits have stimulated the housing market and our economy.

We have heard mention of recession, great depression, inflation, economic default, hard times, etc, etc. Has the First Time Homebuyers Tax Credit helped the economy and the housing market? Yes, in some cases. But people, it's another gov't band aide.

In regards to the tax credit, many have argued that it has gotten them more clients that would have never bought. My thought? Home buying can be an emotional process. It can also lead to misinformation on why one might buy. I am a frim believer that people will buy anyhow. Did it get some off the fence? Sure it did. Keep in mind, many real estate markets are different from each other.

But let me pose a question to everyone out there. Where do you think this money is coming from? Who do you think will be paying for this? Is our society a welfare mentality, just printing money that we don't have? Should we run our Country like a business or as a soup kitchen? Brian Brady added to my thought process with this eye opening post. Suspend the practice of flesh devouring : let the tax credit expire.

You can’t have your CAKE and EAT it too..

What inspired me to write this post, was after reading the comments on Loreena Yeo's blog, Would Congress please extend the $8,000 tax credit.

People, let's be honest with ourselves. Are we also scared if the tax credit is not extended, that it could also hurt our commissions? Just think about this. But what caught my attention were many of the comments on Loreena's post that said, "Please extend the tax credit", yet most of them didn't state why. And if they did, they said because it's helping the housing market. Based on whose facts? Yes, this can be debated.

But what about this... many of these same realtors wanting to extend the tax credit, were the same ones that said one of two things...

1. You should have skin in the game (by Lenn Harley) or

2. knocked the seller funded downpayment program, such as Nehemiah or AmeriDream

Shouldn't these same arguments be applied to the tax credit then, for those that are able to use the tax credit at closing? Let me explain further....

So how do we get out of this mess and and have an Economic Recovery, which the real estate market is a big part of.

How about starting with unemployment. Loreena argued that buying houses creates 100's of jobs, specific products would be bought. I agree and disagree. Because you will also lose jobs in the process.

But let me get to my point. Shouldn't we find ways to a recovery that wouldn't cost the tax payers money? I also read in many of the comments that the tax credit helps increase multiple offers in many areas, driving up the price of the home. Will many of you agree with this?

So prices have increased. Is this a ghost price? A real price? An inflationary price? If we accept this, why not bring back the seller funded down payment programs then? Known as the DPA programs.

Conclusion : The argument on Capital Hill and amongst many realtors and loan officers has been that you need skin in the game. And then the next wave would argue against the DPA program, because it could inflate the price of the home. But we have established that the tax credit does the same. But wait, it is costing us tax payers money for the tax credit, yet the DPA program doesn't cost the tax payer any monies.

Overall, aren't we a powerful country? With some of the smartest individuals, yet we are way in over our heads. What happened to common sense? Are we just mere puppets of a gov't that says they know best for us? Is our society a welfare mentality, just printing money that we don't have? I thought I found some common sense solutions that I wrote about in June 2009. Call to Action - We must fix the real estate market ourselves. Keeping in mind, that all of this is of my opinion, but with careful thinking and not of that of my pockets.

For other view points on this topic, please read :

• The Press is On : By Lane Bailey - I think this is a very good read and we should pay attention to this. He talks about stopping the tax credit.

• Would Congress please extend the $8,000 tax credit - By Loreena Yeo - Even though I am opposite of Loreena, read the comments. One needs to understand Economics, supply & demand, but also that hand outs have crippled us in the past.
  

• Suspend the practice of flesh devouring : Let the first time homebuyer tax credit expire. By Brian Brady - A great twist and creative view point of our children's future.
  

• We are going 35 mph, and about to hit the wall. - By Alan May - His complaint is that many people are rushing to take advantage of the tax credit. And that lenders with their delays will hurt buyers chances. Hey, I love helping first time homebuyers, but the tax credit has been around since 2008. If buyers waited last minute, do we keep extending, yet costing us millions of dollars in the future. What about inflation? Inflation vs deflation - Is it criminal?
  

• Why devouring flesh is morally wrong. By Brian Brady - Brian extended his argument and included a great video. Maybe this will open some eyes?
  

• Are first time hombuyer mortgage programs ending soon? - By Steve Kappre - Steve talks about how some states were able to get you the $8,000 tax credit at closing. But keep this in mind, less than 50% of all states has this type of program.
  

• Extending the First Time Home Buyer Tax Credit Now?.... What's the rush? - By Lenn Harely -

  I think this is an excellent article, because it's shorter than mine and too the point. Yet it brings up some easy to understand issues.

• Call to Action - We must fix the real estate market ourselves. - By Jeff Belonger - I wrote this a few months ago. I think some of the solutions mentioned by myself and in the comments, seem to be common sense, and in many cases, not cost the tax payers money.

• For god's sake, let's move on - By Paul Henderson - Paul offers a few more opinions...
  

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Experience & Knowledge at its BEST !!!

_________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 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 of Infinity Home Mortgage Company, Inc

Yes, credit guidelines have gotten tougher, but NO, you don’t need a 700 credit score.

Here we go again, with realtors making things sound semi easy. There was a question on Trulia last week, and the buyer said that they heard that you needed credit scores of 700. And what do you do if you have scores from 614 to 620.

Here was part of the answer from a realtor answering the question.

"You can actually purchase a home with a credit score in the 500'sdepending on job history, etc. I have several lenders who can assist you."

Sorry, but this answer sounds easy, and it's not that easy if you are under 620. Yes, there are investors out there that are allowing credit scores below 620, even down to 535. But the guidelines are much stricter. You really can't exceed the income ratios, your job history needs to be good, and your credit still needs to be decent and conform to the FHA guidelines.

Keep this in mind, even though it could be done, at what cost to you? Does your loan officer explain this to you and break this down? The rates and or add ons for lower credit scores are much higher also. And if loan officers and or realtors say, don't worry, you can refinance later, then WORRY !!!

Let's quickly review your refinance options.

• You can only do a rate and term within the first 12 months after you purchase your home. If you want to pull any equity out, on a normal refinance, you need 12 months or more.

• Let's say rates are now 5.50% with zero points, with a 620 credit score. You currently have a 585 credit score and because of this, your current rate is 6.25% and it's costing you 1 1/2 points. (yes, this is the type of penalty for that kind of credit score) You really can't refinance for about 6 months, and you are working on your credit scores to improve them. Well, in 6 months, rates increase to 6.00% with zero points. You are basically stuck with that higher rate that you originally received.

• Keep in mind, it still costs money to refinance, even if you do a FHA streamline refinance. Yes, there are no cost mortgages, but your rate is much higher.
  

What to do with credit scores if they are below 620 :

This is where a true mortgage professional comes into play. I just had a VA client referred to me by Allison Stewart, who was told on Friday that their scores dropped to 617, as a mid score. I spoke to them on Saturday and explained to them that I can work on their credit and get that up 3 points. Well, on Monday, the previous loan officer called them and told them the same thing. How come she didn't bring this up on Friday? Maybe she is new and not sure? Not good with credit? In any case, here are some basics.

• You want to keep your balances below 35% of your credit limit or lower. The higher the percentage, the more it could affect your credit scores. By paying down your balances, this could raise your scores.
• Don't pay off your collection accounts if you are applying for a mortgage. You would then want to pay these at closing. By paying off early, it could actually lower your credit scores. It does depend on how old these collections are.
  
• Lates over 12 months old don't hurt as much. Sometimes you can talk to your creditor to remove a questionable late mark.

Summary :

Most of what is mentioned is for FHA mortgages. If you are doing a conventional mortgage, you do need a 620 or higher, and even this costs a lot more than a FHA loan at 620. Here is a comparison with even 20% down. FHA loans vs Conventional loans with 20% down - A rude reality. Besides, you even have MI company issues, that could still deny the loan with a 620 credit score.

Overall, you might want to get into a home as soon as possible. You might have a loan officer that wants to help and can with the lower score, but don't forget, will it cost you more in the long run. You want to deal with a loan officer that will break this down and show you both sides, both comparisons. And be careful of broken promises, because not everyone has integrity and or is truly out for your best interest. This might sound negative, but this is a fact, from examples of past clients that have dealt with broken promises.

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Experience & Knowledge at its BEST !!!

_________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 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 of Infinity Home Mortgage Company, Inc

FHA Loans – FHA Mortgages

Non Occupanying Co-Borrower loans - Kiddie Condo loans

FHA loans have many features that still aren't talked about as much as one would think, because they are still fairly new to more than have of the loan originators out there. Now, some might argue half is very extreme, even though this is my opinion, I will still stick to this statement for many reasons.

As a loan officer with more than 17 years of mortgage experience, the non-occupant co-borrower program is very simple to understand.

FHA will allow a co-signer that is not living in the house to actually be on the mortgage and co-sign for the loan. Keep one important thing in mind, they must be a family member/relative. And this can be great for first time homebuyers. One thing that so many get confused no matter what type of loan they are applying for is that a co-signer with good credit can't overcome the bad credit of the primary borrower. Meaning that the co-signer with good credit can't get you a better priced loan. If the primary borrower still has lower credit scores that don't qualify, then the loan won't happen.

Now keep in mind that this is a lot different when doing a non-occupant co-borrower loan with a conventional mortgage. Unlike the FHA non-occupant co-borrower loans, which the primary doesn't actually need a job, on a conventional program such as this, that primary borrower still needs to qualify with some type of income ratios. And this usually doesn't help. Besides, in most cases, with the pricing hits on a conventional loan, it would be much cheaper doing a FHA loan. Keep this in mind also, back in April of 2008, HUD allowed this on refinances also. A family could help you refinance your property and not live in the property.

Now, for those of you who remember John Belushi in Animal House, what I consider an American Classic back then, this next part my be very important if you have kids about ready to attend college or are attending college.

The FHA non-occupant co-borrower program can also be known as the Kiddie Condo loan. This basically mirrors the same guidelines as what I explained above. It's just another term and another way to help keep your kids college expenses lower. First off, you don't have to buy a condo. It could be a single family dwelling, or a duplex. One thing that I didn't mention above is that you can't have a co-signer on 3 units or 4 units, not unless they are going to live in the property as their primary.

What's appealing about the FHA Kiddie Condo loan is that you could have other students live in the property and that you could receive rent. A great example :

Duplex : Each unit has 3 bedrooms. Rent goes for about $500 a month. Your total mortgage payment, to include mortgage insurance, taxes, and homeowners insurance is $2,250/month.

You have one son in the property who won't be charged rent. That leaves you 5 other tenants at $500/month. That is $2,500/month. That basically covers your mortgage payment and leaves you a little extra for repairs and such. Your son pays less for attending college, and you get a tax right off, and that you are building equity. Please speak to a tax accountant/CPA for details on this.

Key Point to Remember -

Even though a lot of this sounds easy, you still need to work with a loan officer that is up to date on this kind of financing and on FHA loans in general. A good example : you use to be able to have non-occupant co-borrowers even on 3 units and 4 units, up until about a year ago. One more thing to keep in mind, even though these are HUD's guidelines on FHA mortgages, many lenders have lender overlays. That some lenders might not be able to do what I described above. I know one borrower that already ran into this, after many promises upfront.

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Experience & Knowledge at its BEST !!!

_________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 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 of Infinity Home Mortgage Company, Inc