First homebuyer speaks to a loan officer or a real estate agent. For some reason, they decide to seek a 2nd opinion because of that gut feeling or because they have heard something different.

A buyer called me regarding some mortgage information after speaking to another loan officer. Forward ahead, skipping details of the story. I give them a totally different answer and I see some major read flags. I also have a bad feeling about how this loan officer is explaining things based on the buyers answers to me. This buyer tells me that they will get the documents from her mom and call me the next day. I never heard back from her, so I followed up.  Here is what I received in an e-mail today....

"His mother is still looking it over and is waiting for her other Son to get back from vacation to look it over. She also has a Brother who has purchased numerous homes looking it over. I mentioned to her that maybe she should look to getting a professional second opinion. She however is not going to make a decision without her other sons and brother input. When he returns I will pass on your information and concerns to him."

 

What is wrong with this picture?  As a first time homebuyer, she is gravitating towards advice from family members. But shouldn't they be seeking advice from other like minded professionals? Maybe another mortgage professional?  I know opinions and insights can help some. But if I needed a second opinion on a special type of surgery such as heart surgery, am I going to wait for my son to come home, who has had shoulder surgery and surgery on his gall bladder?  Maybe to get an idea if it was painful or not, but really nothing else. But what else could my son tell me?  Could he in detail explain the exact procedures for such a surgery? What would be right or wrong? Maybe tell me things that he read online?  Even reading things online can be dangerous. Please read these two posts showing the bad information that is out there.

• HUD guidelines are creating misinformation & scare tactics -  by Paula Henry - Very good post, yet very scary because of the details set forth by a specific loan officer, which was 110% wrong and incorrect.

 

• Rumors about FHA loans monthly mortgage insurance increase  - Same kind of wrong information that is talked about in Paula's post above. That someone else listed the same wrong information of 1.55% for the monthly mortgage insurance.

 

Too many hands in the cookie jar?  Again, seeking help from family members can some times be helpful when trying to seek a specific direction in life or when dealing with a problem.  But to try and get insightful knowledge about mortgages from family members?  I would rather take my chances with a deadly snake in the amazon. At least if I get bit, it will be a quick death. In regards to the woman above, it could be a slow death, after trying many different answers from her family members. Not unless they deal with mortgages on a daily basis, should this woman be taking strong advice from them. Sorry people, I have seen this back fire more often then none.  I have even seen the old "going with a friend" answer fall apart at the end.  It's easy to give an answer or to promise something, but when it falls apart or doesn't come true?  Then were are all of these people at?

 

Hey, want a cliff notes version of this women's story?  Before I start... Mother pays $800 a month on her house. They will cash-out $220,00 to give to the daughter to buy their new home in cash.  So, bottom line was that this loan officer told them that her mothers new payment would go from $800 to $1,350 a month.  pppssss... mind you, she only has 5 yrs left on her mortgage. But the worst part? The loan officer said that the mother could still pay the $800 monthly and she, a new home owner, could pay her mother the extra $300. And then went on to say, this is great considering that we are talking about 2 homes. Hey loan officer, what about taxes and home owners insurance?  Ah, another $400 a month for the mother and another $500 a month for this first homebuyer who will own the home free and clear.  Rut row, that is another $900 a month that he didn't explain about and the buyer didn't think about this. It gets better.

I told her that he mom could co-sign for her instead of tapping into her mom's house.  Remember, mom only has 5 years left. Secondly, I did some research and found out that the property that they wanted was approved for a USDA loan in New Jersey, for 100% financing. She began to listen, but still needs to talk to family members.

 

Conclusion : First off, it sounds like this other loan officer has no clue and was just telling her what she wanted to hear. Imagine that. Secondly, she seems to want to trust family and not a professional expert. Lastly, will she pick door number 1 or door number 2?  ( ssshhhh, I am behind door #2)  Time will tell and I will keep you posted. 

 

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

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

FHA first shared these changes on August 4th, after it had been approved by Congress and then the President signed off on it on August 11th. FHA has finally come out with the mortgagee letter, ML 2010-28, which puts it officially in writing now.

This mortgagee letter is effective on FHA loans in which the case number is assigned on or after October 4th, 2010. This policy will increase the monthly mortgage insurance and decrease the mortgage insurance premiums for purchase money and refinance transactions, to include FHA streamline refinances.

 

 

 

So what are the major FHA changes regarding mortgagee letter 2010-28? - For terms greater than 15 years -

• LTV's <= 95% will increase the monthly fee to 85 bps  >> Old monthly fee was .50 bps
  

• LTV's >   95% will increase the monthly fee to 90 bps  >> Old monthly fee was .55 bps 

 

And lastly, it will reduce the Upfront Mortgage Insurance Premium, UFMIP, from 225 basis points to 100 basis points.

 

 

How will this affect new homebuyers?

3 quick examples (these examples are putting the minimum down payment of 3.5%)

• On a $275,000 mortgage – the change in payment would be about $70 higher a month

• On a $200,000 mortgage – the change in payment would be about $45 higher a month

• On a $125,000 mortgage – the change in payment would be about $27 higher a month

 

Buyers Beware - If you have your eye set on a specific home, or are negotiating on a property, or are very serious about buying soon, you will have 31 days to make a mortgage application before these new changes take place.

 

 

FYI in regards to Charlie Ragonesi's  comment, #4 - I still don't think that this will move buyers from FHA loans to conventional loanss.  Here is my reason why... please read : FHA loans vs conventional loans  - The buyer's buying power will only decrease by about $10,000 or so. 

 

 

These 2 posts I wrote previously below go into more details about the changes and showing more detailed figures.

 

• Bill H.R. 5981 passes - FHA Mortgages to increase it's annual mortgage insurance premium

• STOP TAXATION? - The new changes for FHA loans are being called : The New Homebuyer Tax

 

 

 

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

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

 

FHA loans have been one of the main focal points in today's real estate transactions. Two main reasons for this is that it comes to the down payment and the credit scores. In the past, some loan officers were using other types of financing that were easier for them, but not suited best for the borrower. What I do hate hearing is that FHA mortgages have taken the spot of the subprime loans. This is not true at all. This statement is very misleading. Many subprime loans should have gone FHA and that is just a fact. 

But why are FHA loans getting bad press now, stating that they are the most defaulted loans recently?  Read this : We should ABOLISH FHA loans... Even with 10% down and credit scores less than 680, FHA mortgages in many cases will be the best mortgage for you.

As I have stated many times, a lot of it comes down to your goals, when determining what mortgage would be better for that specific borrower.

 

 

Just about a month ago, FHA got it's approval to increase the monthly mortgage insurance while decreasing the upfront mortgage insurance. Many thought that this would make FHA loans more even with conventional loans. Please read : FHA mortgages new mortgage insurance changes - One main factor not mentioned when most people bring this topic up is that it's still hard in many cases to get mortgage insurance on a conventional loan if your credit scores are under 680. You also need to be careful of the rumors circulating around FHA loans regarding the new monthly mortagge insurance changes.

 

The example below is based on a $250,000 purchase price with 5% 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 5% down and the new increase in monthly mortgage insurance.

 

 

***And keep in mind, some lenders have penalties on FHA mortgages with credit scores under 660 or can't do them. 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. The conventional rate also includes the penalty for the 659 credit score, hence why the interest rate is much higher.

 

 

Some of you might be saying that you will be adding $2,375 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 $5,629 in payments. Subtract the Upfront Mortgage Insurance premium from the monies saved in 5 years and you have saved a difference of $3,254!!!   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 5.00% rate. Just something else to remember, but consult your tax consultant or CPA. And as I showed above, you would have reduced your principal balance by $4,508 more in 5 years on the FHA loan scenario.

 

IMPORTANT REMINDER : Mortgage Insurance on conventional loans can be harder to obtain nowadays. The scenario above could only be done by some mortgage insurance companies if your credit score was a 680 or above. The monthly mortgage payment reflected above for the conventional scenario would be this exact monthly payment for a credit score of 680.

 

FHA Myth - Some people, including loan officers, without doing the math, will say that FHA loans are more expensive because of the Upfront Mortgage Insurance. Because in this scenario, you are adding $2,375 to the FHA loan and because of the new monthly mortgage insurance change. This kind of mortgage myth needs to be squashed on all levels.

 

 

 

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 -

• FHA loans vs Conventional loans - Even with 20% down, FHA loans could be better - 05-23-10 - Knowing your goals are very important and this should be talked about, even if putting 20% down.
  

• FHA loans vs conventional loans - Why FHA home loans in New Jersey can be better with 5% down - 07-11-10 - There is a huge savings by using FHA loans with a credit score of 679 and 5% down.
  

 

Donw Payment Series - A Must Read -

• FHA loans vs Conventional loans - A real comparison with 20% down - Part 1 of 3 - 01-28-10 - Not much of a difference, unless you stay in the house for more than 5 years. Hence why a loan officer should be talking about your goals. So very important, yet many dont ask.

• FHA loans vs Conventional loans - Don't be cash poor!! - Part 2 of 3 - 01-29-10  I want to show even a bigger difference if you put less down. And even if you decided to put less than 10% down, because cash is king now. You can't predict even next week. And keeping in mind of some misleading rumors, that you need more than 10% down to buy a house.
  

• FHA loans vs Conventional loans - Get a bang for your buck - Large down payments aren't always the best way - Part 3 of 3 - 02-01-10 - Some great examples of having cash left over and not really affecting your monthly mortgage payment. And that you will have cash left over for emergencies. Keeping in mind that cash is king.

 

 

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

 

 

 

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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 important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

 

 

Wanting the best deal is usually on most peoples minds when heading into a purchase of any type. We all love deals, sales, getting the best. And sometimes to brag about such deals.  Back in 1993, I still can remember a Veteran that wanted a VA loan, yet we had to try to put him into a FHA loan because of his credit. Then that became a problem because he wanted the same deal that his neighbor was getting, who was also getting a FHA loan, but I told him that he had too wait 6 months or so. And back then, credit scores didn't even exist. But he had an employment issue, having 5 different jobs in 2 years with less than perfect credit.

One key point to remember through this whole post, Not one borrower is the same. Even though these two pears look the same from the outside, they aren't the same. You can argue taste, texture, and color, just as a few differences.

Another key point?  "interest rates change daily" and "home values can change".

 

 

 

As we look into real estate and mortgages, how many times did someone say these key phrases??..........

  --   Well, my neighbor sold their house for $325,000 and I should be able to get the same since we have a similar house.

Okay, so let's look at the differences.

• Does your house have upgrades?

• Is one lot larger than the other?

• Is one house in average condition and the other in excellent condition?

• Does one have a superior view than the other?

• How long ago was that sale? 3 months ago? Values can change...
  

 

  --   My co-worker just got a 4.50% interest rate with no points and I know it's still out there, so I want that.

How could this be so different for so many?  I'll name just a few reasons why.

• Did you see the good faith estimate?  It could have many fees on it. You need to compare apples to apples.

• What was your co-worker's credit scores?

• How much money are they putting down?

• Are they getting a FHA loan or a conventional loan or a VA loan?

• What was their debt-to-income ratios for qualifying with income?

 

 

 

Summary : All fingerprints are not the same. This goes the same for those selling homes or trying to buy home or refinance a home. Not one home is exactly the same. Not one borrower is exactly the same with credit or scenarios. What you need to do is be able to pick a real professional and not a wanna be. Please read :  Are you begging me to lie to you?

One excellent reason why it can be even more confusing when it comes to FHA loans, when they can be manually underwritten. Compensating factors can make a borrower a better credit risk at times, and scenarios can change quickly.

Overall, there are too many variables when selling homes, buying homes, or trying to obtain mortgage financing for these homes. This is more true in today's market, considering the major changes that have taken place. You have a friend or family member in the business?  This doesn't even mean that you will get the best deal. Besides, define best, it might not be the same with your friends or family member. And what about this part...  did your friend or neighbor leave something out?  How do you know. Did they pay extra somewhere else?  Keep in mind, not everyone is upfront and or ethical. Do you want reality or fluff & deception?

 

 

 

• Shopping for mortgages - It's not like shopping for cars

 

 

 

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- Conventional Loans - 203 k loans -

- FHA Home Loans - Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

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_____________________________________________________________________________________________________

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

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

 

The highway informational system gone wrong again?  There has been talk of blogging dying in the last year and now even so much as being dead now. Is this true? How can this be?  The internet is full of blog sites, people blogging left and right.

Teresa Boardman wrote this post the other day which was posted on Inman News : Agents killed the real estate blog - Now, I have met Teresa a few times, respect her, her opinions, and that she is a great blogger. But what she has stated, is this true?  An opinion that looks at a glass half empty?  Or a post that she actually disagrees about, but picked a topic because it's controversial, and that she just wanted to stir the hornet's nest some.  Not sure... but let's look at it from her perspective on what she had mentioned.

 

 

 

Here are two strong comments that Teresa stated that I disagree with.

"The real estate blog is largely dead." and "It had to die."

 

 

Here are some things that Teresa listed to why blogging has died. :

"The blog-type sites that have headlines from sites like this and others, and a lot of advertising, have been dead for years but they take almost no effort to maintain so their owners keep them going." - I agree, these sites take little or no effort.

"Many of the real estate blogs that are all about local events died before they were born." - I am semi confused. As a local expert, wouldn't you want to inform your local readers of the local activities and events in your area?

"The typical real estate blog has been dead for some time, but few are willing to make the proclamation. The Internet is littered with real estate blogs that get little traffic or that were abandoned years ago -- often within three or four months of their launch." - So what, be different than these other sites.  Focus about quality content.

"Those agents who post every listing they have, and nothing else, helped kill the real estate blog." - Okay, so this is the bloggers fault. Will a consumer follow them further?  Probably not, because they lack new stimulating content or post worthy information about a local area that is not talked about much.  Ask Erica Ramus about this. Schuylkill area - She lives and works in an unique area and has blogged about some specialties and some issues, that aren't found any where else on the net. She has garnered some excellent business because of this. Overall, these agents think this will make them money. But does it kill blogging?  Not in my opinion.  And Renee Burrows gets some very good business from her marketing reports. This might not work for all, but it works for her and because she does an excellent job with this.

 

 

 

Teresa did mention these things that I truly agree about. :

"Agents read a success story about a blog and try to replicate it, failing to realize that each area has its own culture, and that Realtors have their own personality and voice." - Amen... your blogging voice. You need to be original, yourself, and post quality content. Not hundred's of posts in a short time with bland information.

"Some real estate blogs are written for Realtors. I don't think those blogs will die." - I know many realtors that follow each other. Sometimes it's just a popularity thing and in many cases, these people are just that good with very good content and who supply interesting topics or thoughts.

"They are looking for information they can trust, in a sea of generic information." - Isn't this one of the main reasons to why we should blog?  I am passionate in what I do and I want to get the best possible information into the hands of borrowers and other like-minded professionals, but info that is not biased.

"The idea that a Realtor should be a local real estate market expert died in favor of the idea that a Realtor should make friends on the Internet and those friends will become clients." - I do think social marketing has it's place, but is over used and abused in the sense that the blog in some sense has died. To many people focus on short tweets that is based on fluff marketing of their name and or product, that they sell sell sell, yet they don't offer up useful information that is real. It's more of a numbers game to them.

"Some blogs died because their owners spent more time building and tweaking the blog than they did generating content. It is easier to build a blog than it is to write one." - This kind of goes back to social marketing and not true content or original content. I know some people that buy their material, yet they act like an expert. All they are doing is marketing someone elses material as their own, and as an expert. And some do it very well.

 

 

 

Conclusion : I could easily add another 500 words to this topic.  But I look at this glass as half full and not half empty. Keep this in mind, about 80 to 85% of the borrowers search online first. I think that the internet is way to powerful when it comes to it's searching power.  Are more than 50% of the blogs and posts out there crap, misleading, false, or just fluff?  Yes, I would say so.  Does this mean that blogging is dead?  No. Or is it dead because of how some use their blog?  Or that social media has taken over now. Such applications as Facebook, Twitter, Yelp, Foursquare, and a few others to name? No.. I think these applications are just quick fill-ins for those that want quick updates. But in my opinion, you can't get realistic information and or opinions by a quick post, a tweet, or because someone is a Mayor of a specific place.

 

 

BLOGGING is not DEAD - (my opinion) - It's how you get your information out there, the quality of your content and... I think if you come across very passionate and knowledgeable, that this is the key.

 

 

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- Conventional Loans - 203 k loans -

- FHA Home Loans - Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

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_____________________________________________________________________________________________________

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

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

The President officially signed Bill H.R. 5981 on August 11th, 2010 which became public law.  I wrote about the actual changes to FHA loans and how it will affect borrowers as of October 4th, 2010.  Please read :  Bill H.R. 5981 passes - FHA Mortgages to increase it's annual mortgage insurance premium 

There has been a main problem in regards to the information being supplied since this bill was passed by the Senate, which was on August 4th, 2010. I have read several blogs out on the internet both by AR members and the news media stating that the monthly mortgage increase has been raised to 1.55 basis points. This is correct and incorrect. Read below...

 

 

 

The following summary below was written by the Congressional Research Service.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Yes, congress passed the monthly mortgage insurance to 1.55 basis points.  But this is a cap and not the actual amount that FHA is prepared to use on all FHA loans for now.  The new monthly mortgage insurance rates will be either .85 or .90 basis points, all depending on the amount of your down payment., which I explained in this post. FHA Mortgages monthly mortgage insurance changes - effective October 4th, 2010 -

But if you read some of these other posts, they don't explain it this way. Some give examples of the mortgage payments of like $167 more a month on a $200,000 mortgage, which is based on 1.55 basis points. If you actually use .90 basis points, that mortgage payment now increases only to $59 more a month.  Sorry folks, but that is a huge and misleading difference of $108 a month and could scare possible buyers away if not properly educated about this new change for FHA loans.

Keep in mind though, FHA will not need the approval from Congress to ever change these rates as long as they don't exceed 1.55%. 

 

 

Another thing, HUD has not released a FHA mortgagee letter as of yet. But FHA did announce this as a press release with a FHA letter.  FHA Mortgages - change in mortgage insurance  Any and all FHA case numbers assigned on and or after October 4th, 2010 will be subject to these new changes.

 

 

3 quick examples :(both examples are putting the minimum down payment of 3.5%)

• On a $275,000 mortgage - the change in payment would be about $70 higher a month

• On a $200,000 mortgage - the change in payment would be about $45 higher a month
  

• On a $125,000 mortgage - the change in payment would be about $27 higher a month
  

 

 

These FHA Loan changes are the same, no matter what state you reside in.

 

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- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- FHA Home Loans - Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

Follow me on:

 

 

_____________________________________________________________________________________________________

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

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

 

Shop till you drop - this might not be wise advice when shopping for a mortgage

 

I wanted to bring up this topic because it still happens more than it should. I know we all want the best deals, but anyone can make general promises on the phone or on paper.

Shopping for a mortgage in New Jersey is not easy and it's not like shopping for a car. A car is a car, but ones service could be better.  And one could argue that most mortgage companies should have the same interest rates and mortgage programs. But there are way to many unknowns upfront that can change interest rates. In my opinion, those that don't want to ask all of the appropriate questions upfront and educate you about the different types of programs, generally just want to get you in the door and then worry about everything later.  Yes people, this still happens, even after several changes in the last year that try and protect the consumer when applying for a mortgage.

 

 

 

 

I read this comment from a realtor -  "I tell my clients to shop loans and make sure the lenders provide the information about costs and fees associated with the loan.  I think that is a service to my buyers."

I am sorry, but this kind of statement is like pointing a gun at your head that holds 6 bullets, yet 3 bullets are loaded. Your chances of being shot are 50%. Just like when shopping with to many lenders, that it could increase your odds of not getting the right information or misleading information and rates/fees.

 

 

 

 

Here are two quick stories -

1.  I had a realtor that decided to give me a chance, yet she told me that she had 2 very good loan officers that she recommends all of the time because they were excellent and that they closed her deals. After speaking to this borrower, who already spoke to the other 2 loan officers, I realized that this borrower was never explained on how adjustable rates worked.  Yet he was sold on an adjustable rate, because the rate itself was very attractive.  The funny thing was that I was about 1/4 percent cheaper in interest rate and $1,000 cheaper in points on the fixed rate. But on the 5 yr arm, this lender was beating me out by 3/8 of a percent. He chose the loan officer with the lower rate, even though he thanked me for educating him on adjustable rates, going over his goals (which neither loan officer did), and just for the fact that I taught him about refinancing in the future. See, he was under the impression with FHA loans that if he refinanced 4 years later, as long as he had 20% or more equity, that he wouldn't have monthly mortgage insurance. This is 100% false on FHA loans. But see, I went into great details, knowing what he was trying to accomplish in the future, and because we went over his goals. Yet this was never talkied about by the other two loan officers.

End Result - 1 day after he applied with this lender, rates began to drop. By the end of the week, I was barely 1/8 of a percent higher in rate, yet this other loan officer never offered a lower rate since rates dropped. Yes, many loan officers/lenders can offer you good rates and such, but at what price to the borrower. And sometimes these costs could add up as future costs and not as present costs, hence why goals are important. And in my opinion, this realtor really wanted to give out 3 names just to protect herself. If you really trust one person, there is no need for 2 other names.

 

2.  A person that I have know for 3 years has said all along that I was his guy.  He trusted me and such. I have done over 5 pre-qual letters for him in the last 4 months. Well, that turned quickly and he ended up using another loan officer that his realtor pushed, because the other lender made it look like I wasn't doing my job. He told the borrower that we didn't order the appraisal as of yet and his total costs were $800 cheaper than me. I tried to explain that I always try to be on the high side. Besides, I had no lender fees, so I knew this couldn't be true.  Also, the loan officer had offered a lower rate after I told the realtor what I was giving the borrower.  But wait, the borrower was floating and I wanted to surprise my so-called friend later on with a lower rate. 

The end result? I could have given this borrower a 1/4% less in rate.  And wait, just yesterday he was told that he needs $400 more at closing tomorrow for escrows.  hhhhmmm - Who lost here?  We both did. But I just called this person and told him to fight it at closing tomorrow, because the lender didn't disclose the new update 3 days prior to closing. He was appreciative, even though he went some where else.

 

 

 

Conclusion - All the reason why shopping for mortgages in New Jersey with many lenders could backfire on you or just hurt you overall.  I wrote a series about this. So who do I trust?

• TRUST - Find a trusted realtor or loan officer - Who defines trust ???

• Would you rather work with a Marketing Guru or a Real Professional?

 

• To be an EXPERT or not, what is thy question?
  

 

• What is Transparency?? Best Mortgage Rates/Online services/Real Estate Services - (Part 1 of 2)

• Transparency in Real Estate/Mortgages - Interview your Realtor or Loan Officer - (Part 2 of 2)

 

 

Some important reading - Some changes in the last 12 months by the government, trying to protect the consumer when it comes to shopping for mortgages. But has it really helped as much?

 

• The MDIA - The Mortgage Disclosure Information Act - Effective July 30th, 2009

 

• Good Faith Estimates Explained - FHA Loan Good Faith Estimates - Understanding the whole process - Part 1 of 2

 

• Good Faith Estimates Explained - Changes for the WORST - Detailed changes - Part 2 of 2

 

 

- I wrote about this same topic on October 25th, 2006 -

• Shoppers that shop themselves right out of the market……

 

 

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- Conventional Loans - 203 k loans -

- FHA Home Loans - Mortgages -

 

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

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

 

Just last week, Assistant Secretary for Housing and Federal Housing Commissioner David Stevens announced that FHA was changing their annual mortgage insurance plan. - FHA announcement - I wrote about it here : HR Bill 5981 - FHA mortgage insurance.

We now have some groups and people announcing these FHA Loan changes as a tax. Think Big Work Small released their version in this video on Monday. New Homebuyer Tax Starts September 2010 - 08.09.10  - Brian Stevens, from TBWS states this... "A tax that furthers HUD's Agenda." Sounds scary, right?  Because it sounds like the government is taxing us more. But this kind of wording irks me and can make it sound a lot worse than it is, or a lot more expensive. Let me further explain.

 

 

UPDATE : as of 8/10/10 - HUD has announced to make this new change effective October 4th, 2010 -

 

 

I do know where Think Big Work Small is going with their argument in regards to what HUD stated. HUD made this statement in January 2010.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In regards to HUD's statement above, I think I was one of first to question HUD's statement back in January and then I argued this in more detail in this post.  HUD - Don't insult my intelligence about new FHA Loans changes - We can argue HUD's statements until we are blue in the face.

But my concern with others stating that this is a Homebuyer Tax is that I call this a 'spin on words'.  Can we call it a tax?  Sure, I will give everyone that. But why are we calling it a tax.  Are we trying to make the government look bad? Is that person or group trying to make a name in the news by coming up with an interesting subject line or title? Hey, I will admit, I love stirring the pot, to get recognized.  But one thing I dislike are those that stir the pot but offer no solutions. If you read many of my posts over the years, I might knock on something, but I try to look at it from both sides and come up with solutions.

 

 

 

 

So let's take it a step further. Could I make this statement and be 100% correct?  If FHA loans were to disappear tomorrow, would our economy crumble to the worst ever? I would say yes and I think many would agree with me. I wrote many reasons why FHA loans should not be abolished. - Should we abolish all FHA loans? - So FHA has raised their monthly mortgage insurance premiums and lowered the upfront mortgage insurance premium. Should we tax the tax payer?  Should the government print more money to pay for this?  Or should we just pass this along to the borrower?  I would say no, no, and yes.  My question to you... aren't we trying to stimulate the economy? Yes, and to allow FHA mortgages to crumble would defeat this easily.

 

 

 

 

Summary :  In many cases, the grass is always greener on the other side.  Yes, we can complain that the new changes on FHA loans will hurt buyers than help them. But if the mortgage insurance fund wasn't replenished and we lost the ability to do FHA loans, then what would happen?  How about this question. How come many haven't complained about the extremely high pricing hits on conventional loans with LTV's less than 80% and credit scores below 720? If I put 5% down and have a credit score of 679, my penalty would be 1.75 pts.  And don't forget that the mortgage insurance factor on that scenario is much higher than on FHA loans. That is if you could even qualify for mortgage insurance.  Most won't go below a credit score of 680.

 

 

 

FOOD for thought : Remembering the '90s. Many of you might not know or remember, but the one time mortgage insurance premium was once 300 basis points while the monthly mortgage insurance was 50 bps. Really quick.....

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As you can see, your total loan amount would be even more prior to 2000. Now, if I had to choose on how to make some of these changes to FHA mortgages, I would go back to the old, because as you can see, your total payment wouldn't be as much. But FHA is hoping that people hold onto these newer mortgages longer, to recoup more money. As I mentioned in this post, HR Bill 5981 - FHA mortgage insurance, FHA would add about $2,500 more if you held onto the loan for 7 years.

So how do you look at this?  Which would you prefer? What would you call this whole traffic jam of mortgage information?

 

 

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- FHA Home Loans - Mortgages -

 

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

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

FHA first proposed the monthly mortgage insurance changes in the beginning of 2010. Bill H.R. 5981 was first passed by the House in the spring and was just passed by the Senate the other day.  What does this bill do for FHA mortgages? They have projected that it will yield approximately $300 million per month to the FHA insurance fund.

So what are the new FHA changes? - For terms greater than 15 years -

LTV's <= 95% will increase the monthly fee to 85 bps

LTV's >   95% will increase the monthly fee to 90 bps

And lastly, it will reduce the Upfront Mortgage Insurance Premium, UFMIP, from 225 basis points to 100 basis points.

The plan is to go into effect by September 7th, 2010 on all FHA case numbers. FHA gives it's reasons to this new plan. FHA letter from David H. Stevens

 

UPDATE : as of 8/10/10 - HUD has announced to make this new change effective October 4th, 2010 -

 

So what do the actual changes mean to the average borrower that will rely on FHA loans when purchasing a new home or refinancing?

                - The Old Plan -

LTV's <= 95% the monthly fee is 50 bps

LTV's >   95% the monthly fee is 55 bps

 

 

Example of the changes regarding the FHA monthly mortgage insurance known as MMI or annual mortgage insurance premium and the FHA upfront mortgage insurance premium known as UFMIP.

UPDATE BELOW in chart - The 2nd column, the upfront mortgage insurance premium, is usually added into the base loan amount. In this scenario, that is what I did. It's not actually a cash savings out of pocket, but just a reduction in the new loan amount.  I guess it wasn't clear, because a few people said that this whole change was going to help those with less money out of pocket. The buyer still needs 3.5% out of pocket, which is the down payment.

 

 

 

 

 

 

 

 

 

 

 

As you can see, it would be much cheaper monthly with the old plan, even though you pay $3,317 more upfront, on top of your loan. This can also be a tax write off since it's included in your principal. Your break even point on this type of scenario is 47 months, which is roughly 3.9 years. After this break even point, you would have started to spend more money in reality. This is how FHA will increase it's mortgage fund. As you can see, it won't be increased as quickly upfront, but over a longer period of time. So if you held onto this mortgage for 7 years, you would have spent approximately $2,522 more.

Now, there are several other factors to consider when reviewing this kind of information.  Just for the fact that your original balance on the loan will be $3,317 lower and in 7 years, still be that much lower. And as I mentioned, you would have a little more of a tax advantage on the higher balance though.

All I wanted to do was to present the basics of FHA loans and not get into the extreme details on how one could show either side. What could this do to a potential home buyer?  It could reduce your purchasing power. In this scenario, if you had originally qualified for a $275,000 loan with qualifying ratios of 31/43, what would your new purchase price be.

 

 

- New Purchasing Power after September 6th, 2010 -

With the new FHA monthly mortgage insurance and the FHA upfront mortgage insurance premium changes, your purchasing value would drop approximately $10,000, a purchase price of $265,000. Now, these are just averages, because this will all be based on the actual purchase price. Meaning if values are higher or lower, the total amount could change some. But this should give you a good understanding of what changes lie ahead for FHA mortgages in the near future.

 

 

UPDATE : Travis Newton did a similar post, using a $200,000 purchase price and as you can see, the mortgage payment inceased by $45.29/month.   Notice *** FHA Changes

 

UPDATE : as of 8/10/10 - HUD has announced to make this new change effective October 4th, 2010 -

 

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- FHA Home Loans - Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

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_____________________________________________________________________________________________________

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

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

 

Facts & Numbers vs Assumptions - Part 2

 

 

I love what I do and I love crunching numbers, sometimes being creative and finding a way to maximize my clients cash assets, putting them in a good financial position for years to come. Meaning that I like to act like a financial planner, making sure that the borrower doesn't always use all of their assets, especially in today's market.

Before you continue with this post, you will need to read part 1, Planting Seeds in the Borrower's Head. If you want the cliff notes version, read the next few sentences below.

I truly believe as a loan officer, that I do my job as well as I can, with pride and satisfaction. That a realtor should not give mortgage advice deeper than the basics. The basics would be to know what programs are good in your area, and that you ask a few simple questions to make some determinations. Other than that, the realtor should not get into the rates and down payments. I hope to explain better below.

 

 

 

So what am I questioning?  It's when a realtor makes a statement such as this one.  "home buyers can receive 6% closing help with 10% down.  Which benefits our buyers more, making a larger down payment or paying their cash for closing costs???" - How about possibly neither, which I will show below. The last comment was followed with this kind of comment. - "The lower interest rates often offered with 10% down compared with FHA may make the conventional more attractive. " These same statements are mentioned in part one and written by Lenn Harley.

If you remember the title of Part 1, it was Planting seeds in the borrower's head. Read my conclusion in part 1. I truly believe when you talk about such statements, that you could be planting a seed in the borrower's head. This could confuse the borrower or even worse, make them choose your thoughts without knowing the details.  Let me show you what I am talking about.

 

 

Key Important Points -

• If the property is in a distressed area (declining market), the maximum LTV is 90%, which means you have to put 10% down.

• The monthly payments on the conventional loans can increase or decrease depending on the credit scores.

• Each scenario is the same profit margin. You would need a credit score of 720 + to avoid any pricing penalty.

• Most PMI companies won't go below a 680 credit score.  There are a few that could go down to 660, but depending on the status of the lender with that MI company. But in all honesty, FHA loans would be the best option once you go below a 680 credit score. So why even bother with details.
  

 

The scenarios used below are based on a mid credit score of 699.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Now, there are a few other scenarios, such as lender paid mortgage insurance (LPMI) or 80/10 or lender paid closing costs (which you increase the interest rate which pays for some closing costs), and a few other mortgage insurance programs. But I just wanted to give you an idea on the statements that were mentioned above and how one needs to be careful in what they state to the buyer.

On another note, FHA is trying to reduce the seller help from 6% to 3%.  HUD seeks public comment on three main issues for FHA loans.  In the examples above, I decided to pretend that FHA's seller help was reduce to 3%. 

 

Reminder : - Comparing 10% down conventional with 3.5% down FHA - In regards to the money that you don't use on the FHA loan, you either save it as cash on hand or you could invest it. You can usually get a 6% to 7% return on your money. If you have a decent idea or work with a good financial planner, you could get 9% to 10%. If you really know what you are doing and or are aggressive, you could get like 12% return. And please don't read into those that sell you the idea to pay down your house off in half the time. There are some scams out there. They work, but not as advertised.  Secondly, you will be writing off less interest if you pay off your house quicker. And the interest write off on the interest rate itself, depending on your interest rate, might not be as much as you think. Just food for thought and showing the complexities when comparing different types of mortgages.

 

 

Key Important Reminder -

Lender Overlays and different PMI companies (private mortgage companies) have different guidelines and rules. Also, when doing a conventional loan with MI, you will also have to send the file to the MI company to be underwritten.  So even if your company says yes, the MI company could still say no. On FHA loans, it's just underwritten once.

 

 

 

Conclusion : Many would think and or assume that with 10% down on a conventional mortgage, that it could be cheaper in interest rate and in payment than on a FHA mortgage with 3.5% down.  And in some cases, even though your down payment is more with a conventional loan, it could cost you more out of pocket or possibly more within the price of the home because some sellers will tack on the seller concessions onto the price. And look at the fact that you added about $6,000 of upfront mortgage insurance on the FHA loan, yet the FHA loans look to be cheaper all the way around. And you can compare the principal balances after 5 years and how much cash that you kept in your pocket with a lower monthly payment. Food for thought.

Cash is King - I highlighted the FHA loan scenario with 5% down. As you can see, the mortgage payment would actually be about $30 less than when putting 10% down. What I hear so many people focus on is the fact that they don't want to be underwater on the property.  People, buying a home is suppose to be an investment and in many cases, a long term investment. This is a whole other topic, but it needs to be discussed. You just never know what will be around the corner and having a larger savings could save you down the road. I wrote an excellent series on this topic.  Click on the Cash is King link.  Part 2 of 3  -

Numbers don't lie, uneducated facts or assumptions do.

 

 

UPDATE : I had originally worked on this post starting at 3:30 am this morning and had most of it done by 7 am. But I didn't submit it because I had to check out one issue and then the day got away from me.  But Mr. Stevens of FHA has announced new upfront mortgage insurance changes and changes for the monthly. In my opinion, the 5% comparisons, FHA loans will still be the best option, even with a credit score of 699 or less. In regards to the 10% down on conventional loans?  The payment might be better by $100, but still keeping in mind that you are keeping $13,000 in your pocket.  You need to think of the trade off and your future. Here is the link to the letter from FHA.  Bill approved to give FHA the ability to change upfront and monthly mortgage insurance.  I will be writing about this tomorrow and giving examples.  thanks

 

 

• The Mortgage Hype that seller concessions on Conventional loans could be the better play than on FHA loans - Planting Seeds in the Borrower's Head - Part 1

 

• The Mortgage Hype that seller concessions on Conventional loans could be the better play than on FHA loans - Facts & Numbers vs Assumptions - Part2

 

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- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- FHA Home Loans - Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

Follow me on:

 

 

_____________________________________________________________________________________________________

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

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

Planting Seeds in the Borrower's Head - Part 1

 

In regards to the world of mortgages, can one be more confused now then ever before? You betcha...  As many of us know, FHA is now trying to reduce the seller concession from 6% to 3%. I wrote about it here : HUD seeks public comment on 3 issues for FHA loans & Solutions for these FHA loan changes.

Let's take this up a notch now. Just the other day, I wrote a post about some listing agents not accepting offers for FHA loans and or VA loans for various reasons. There could be several ways to look at this... but there is more.

My post is sparked by a post that Lenn Harley wrote yesterday; Lenn just had a Eureka moment!! Conventional financing may permit more seller incentive than FHA. Now, don't get me wrong. I respect Lenn and many of her opinions. I will agree with the first part of her post, in regards to the questions that were asked. But I have to disagree with the 2nd part, because in my opinion, a realtor should only discuss the very basics. Lenn points out that she is looking at the forest while I look at the twigs. Well, it's my job to look at the twigs when discussing such issues when it comes to the different types of mortgages. And I believe that Lenn was looking at some of the branches when giving her opinions, and not the forest.

 

 

 

Let me define what should be the forest for the realtor. What should a realtor know and how far should they go.

A realtor should know that there are FHA loans, VA loans, Conventional loans, USDA loans, and any special kind of grant programs or state mortgage programs in their area. The realtor should know the function of each loan. And in my honest opinion, they should stop there.

 

 

So if a borrower came to you with a loan officer already, you might want to stick to the basic questions. This would be my opinion of what a forest would be for that realtor.  One of your questions to the borrower is asking them if they are military or ex-military. If they say yes, you then ask them if their loan officer went over VA loans and compared them to conventional & FHA loans. Or if you are predominantly in an area where USDA loans are accepted, you ask the borrower if this option had been presented to them. If you are a realtor like Lenn Harley, to where you have your buyers fill out a buyer's financial statement and you see good assets, you ask them if the loan officer went over various methods of financing.  Such as putting 5% down to 10% down, and comparing this to a conventional loan or an FHA loan.

Here is where I run into the problem of a realtor taking this a step further. Lenn mentions this in her post.

"Our home buyers can receive 6% closing help with 10% down.  Which benefits our buyers more, making a larger down payment or paying their cash for closing costs???"

Why I am upset about such a statement is that there are still way to many unknowns. And if you as a realtor make this suggestion and make it sound like the answer would be to put 10% down so you as the buyer can get the seller help of 6%, this could be a huge mistake. I know Lenn's statements are general and she even says this, but I think that can cause more problems than good. And if the loan officer doesn't know any better, how can you as a realtor know what is better then?

Here is another general statement that Lenn makes.  "The lower interest rates often offered with 10% down compared with FHA may make the conventional more attractive."

In my opinion, this is just an assumption that could very well play tricks on the borrower's mind.  I will tell you why some of these statements can create more problems than one would think. If the borrower starts to believe everything that the realtor says, and I end up crunching some numbers that actually make sense and explain this to them, they might still turn down my suggestions.  Even if I show them on paper. Yes, this has happened before.

 

 

Conclusion : Trust me, I understand what Lenn is saying and trying to do. But in my opinion, if you go below a certain point as a realtor when explaining their financing options, could you actually hurt the situation more than help it. I say yes.  And yes, we will have some bad loan officers in this business, period.  It's a fact.  But if you think something doesn't sound right, you just seek other like-minded mortgage professionals that you trust. But don't take it in your own hands to get into more specifics. That is why I do mortgages for a living, full time, and nothing else. I don't give opinions based on assumptions, I give facts based on collecting facts. And yes, in my opinion, there is a huge difference. What people need to understand is that a borrower's decision could be influenced because of what they heard from their realtor, just like when borrowers tell you that their dad tells them to pay no points, or to put 20% down to avoid mortgage insurance. It happens.

 

Part 2 - Facts & Numbers vs Assumptions -

In part 2 tomorrow, I am going to dissect the differences of putting 10% & 5% down on conventional loans with different credit scores and showing the difference on FHA loans with 3 1/2% down and those same credit scores. I want to introduce different reasons to why even with 10% down and getting the seller to pay an additional 3% could be worse for the buyer, such reasons to make you think otherwise.

 

 

• The Mortgage Hype that seller concessions on Conventional loans could be the better play than on FHA loans - Planting Seeds in the Borrower's Head - Part 1

 

• The Mortgage Hype that seller concessions on Conventional loans could be the better play than on FHA loans - Facts & Numbers vs Assumptions - Part2

 

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                                                                                                           FOLLOW ME ON FACEBOOK

 

 

- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- FHA Home Loans - Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

Follow me on:

 

 

_____________________________________________________________________________________________________

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

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

Sellers, don't accept offers from a buyer with FHA financing. Wait, don't accept offers with VA financing. Wait, don't accept offers with conventional financing. Gee, you might as well wait around for a cash buyer.

FHA loans are not a bad thing. It could just be that your listing agent isn't familiar with FHA mortgages, or maybe had a bad experience once before, or that they are afraid that the house might not pass a FHA appraisal. In my opinion, I just think the listing agent is flipping a coin on your property and it could cost you thousands of dollars.

I have been hearing negative things about FHA loans since I first got into mortgages back in 1992. But what prompt me to write about this again was after reading a comment by Sally Cheesman in her post, Holding an offer hostage for a second pre-approval.  Read Sally's comment : Listing agent denies offers with FHA & VA financing.

PS...  make sure you truly understand about the difference between pre-approval letters and pre-qualification letters.

 

 

I wanted to point out two comments from a post comparing FHA loans and Conventional loans.  And keep in mind, these 2 comments are coming from realtors defending FHA mortgages.

1. Chris Olsen wrote this comment : Comment by Chris -  He states that a seller accepted a conventional offer that was $10,000 less than his clients FHA offer.
2. Karen Crowson wrote this comment : Comment by Karen - She states the bias opinions from other realtors.

 

 

 

Here are some false assumptions about FHA loans :

• Only for first time homebuyers

• for those borrowers with poor or bad credit

• for those with no money

• FHA loans take a longer time to process or close - FALSE

• FHA loans are more expensive, have higher fees and or rates.  Again, False. Every mortgage lender has a profit margin, regardless of the type of mortgage. If someone is charging you more on a FHA loan, it's purely out of greed. Here is a good example. FHA fees and why I was charged more. Please read the 2nd paragraph.

• appraisers are more difficult on the appraisals.  This comment is so 2002 and prior. Yes, this was sometimes an issue back in the '90s.  But HUD changed the appraisel requirements about 7 years ago. (I would love for some appraisers to chime in here and I will post your answers.)

• If you have 20% down, conventional is the way to go. FALSE.... it depends on your credit score.  Please read this. FHA Loans vs Conventional Loans - 20% down - A Rude Reality Check

• a lender that is asking for more information that you didn't expect, because it's an FHA loan. This is not always because of FHA, but could be because of specific investor overlays. Just keep this in mind.

 

 

 

Conclusion :  Pick your realtors and loan officers wisely.  We all should have the buyers or sellers best interest at hand, but this is not always the case. Is this negative?  Yes, but it's the truth and it's reality. Just do your research carefully and keep the emotions out of your decision.

Overall, these negative comments from realtors about FHA loans usually come from old time realtors that haven't left the 90's, from those new realtors that don't know any better, or just from someone that heard a comment by another agent. You know, that trickle down effect. when someone gives their opinion as a fact, sometimes that other person listening will do the same. Just beware...

 

Solutions : If the property needs some work, or even major work, why not use a FHA 203-k loan. Here is some information on 203 k loans.

•  - What is a FHA 203 k loan & what can 203-k loans be used for -

•  - Energy Efficient Mortgages & 203-k loans -

 

PS...  I don't make any extra money by promoting FHA loans. My job is to make sure that the borrower gets the best type of mortgage out there that suits their needs and goals.

 

 

Sellers, fire your listing agent if they tell you not to take an FHA offer !!!!   Just my opinion, but the agent could be costing you lots of money. Unless you just don't care about throwing money out the window, this is extremely poor advice that could be based on assumptions or just a bad experience.

 

 

Please read : FHA loans aren't a bad things and the reasons why.

 

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- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- FHA Home Loans - Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

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_____________________________________________________________________________________________________

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

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

 

In the ever changing world of mortgages, you really need to stay on top of what is going on. So many think it's simple when pre-qualifying a borrower. But if you don't ask the right questions upfront and get very detailed, even the cleanest of deals could crash and burn.

So what is a 4506-t and what is its importance in the mortgage process?  Basically it's a form used by lenders that allows them to request a transcript copy of your tax returns from the IRS.  In the past, this form most times was used for those that were self-employed or to keep fraud in check. If a lender suspected something funny regarding your income, they could send this form to the IRS.

 

 

 

Your income is being examined very closely now by most lenders. No matter if you are self-employed or the lender/investor thinks there might be fraud involved, 4506-t's are being pulled on all borrowers. Now, I have heard some lenders brag that they aren't doing this, but is that true?  I don't know, but I can tell you this, all the lenders that I know are doing this.

So I am a loan officer who pre-qualifies a borrower, asking them their current income situation. The primary borrower has a full time job at their current job of 8 years and makes a salary of $85,000 a year. Hey, it sounds cut and dry, right?   Wrong !!! The borrower also has a side job in which she has been collecting and selling antiques for 3+ years. She even files taxes on this legally. Okay, so what's wrong?  Well, she shows a loss on her tax returns. On a salary borrower, in most cases, we just have to collect W-2 forms for 2 years on FHA loans. Some lenders require the borrowers full tax returns no matter what.  But what happens if your lender doesn't require this? Hence the reason now for the 4506t. When we get the transcript back from the IRS, it will list what she grossed on her primary job and show any other types of incomes, no matter if she showed a profit or a loss.  In this case, the borrower showed a major loss, which had to be counted towards her income. And just because of this, it killed the deal because her qualifying ratios went through the roof.

 

 

 

Summary : No matter what the loan officer asks you, especially when it comes to your income, give them every bit of information for the last 2 years.  If the loan officer tells you that they don't need your other sources of income, especially if it's showing a loss, just pick up and leave.  Find a new lender. The 4506-t is extremely important and could be the difference of you moving into your house or not. And this doesn't matter if you are applying for a FHA loan, a USDA loan, a VA loan, or a conventional loan. It all comes down to the lender or the investor buying the loan.

 

 

 

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_____________________________________________________________________________________________________

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

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

FHA Home Loans have been a big part of the home buying process when it comes to your financing options. This might not mean much to many, but when you apply for a conventional loan, if you don't get an automated approval, you are declined. With FHA loans, even if you received a refer in the system, your loan can still be manually underwritten. But there are many guidelines that need to be followed, even for a make sense deal. Especially if your qualifying ratios are above the normal FHA requirements of 31/43. This means that your total mortgage payment (to include property taxes, homeowners insurance, association dues) divided by your gross monthly income can't not exceed 31. This called your front end ratio.  Your back end ratio would be your total monthly payment plus any monthly reoccurring debt that would be on your credit report (to include child support and such on your pay stubs) divided by your gross monthly income. This can't exceed 43%. Now, those are the normal qualifying ratios, but they can usually be exceeded by 5% to 6% with a manual underwrite, but depending if you have strong compensating factors. (each lender is different)

 

 

 

So... what are some of the major compensating factors for FHA loans?  Please read below ...

 

The Borrower : (there could be a few more not listed)

• makes a 10% or more down payment on the home.

• shows the ability to save monies consistently and has a conservative use towards their credit.

• shows that there is a minimal increase in their new housing payment from their old payment.  Typically a 10% or less increase.
  

• shows a successful ability in making their housing payments (mortgage or rent) for the last 12 to 24 months. The best proof is when supplying canceled checks. And this FHA compensating factor is much stronger if the previous monthly payments would be the same or greater than the new proposed mortgage payments.
  

• shows cash reserves. Typically 3 months or more. The higher the ratios, but the more monthly reserves, the better this helps out the borrowers chances. This is just to include liquid-able reserves such as cash from checking or savings accounts, stock options, and 401-k plans, etc.  When using such assets as the 401-k plan or retirement funds, only 60% of the total can be used as the reserves. ** you can borrower against such funds for your closing costs and down payment, but these monies won't be counted towards your reserves. This is the same for any gift funds received, that they can't be counted as reserves either.

• can show additional income that is documented but not reflected in their effective income. Such income could be shown as a cash side job that they pay taxes on, maybe income from a spouse who will not be on the mortgage, food stamps, or other public benefits. This is a fine line and up to each lender.
  

• shows that they do not abuse their credit, not over-extending themselves, and or that they don't borrower from one card to the next.
  

• can show that they have a potential for increased income because of their education, profession, or potential raise that would be indicated by their employer.

• is relocating with their spouse and the spouse does not work as of yet, but had a history of stable income prior to moving, and has some sort of job/income lined up that can be documented. This can be at the underwriter's discretion.

 

 

Minimal FHA compensating factors that could play a role in an underwriter's decision :

• Length of time on the job, showing stability.

• Sometimes in cases of refinancing, the length of time at their residence.

 

 

 

Summary : The mortgage industry is ever changing and yes, some things have gotten tougher. Just because you meet the credit score requirements doesn't mean that you are an automatic approval. And if you need some extra help in qualifying for FHA Loans, you can always get a co-signer, which would be a non-occupying co-borrower. Please read below :

 

FHA Loans & FHA co-signers aka non-occupant co-borrowers

 

My credit is not good - but my co-signers credit is excellent - Yippie, I can buy & use FHA loans

 

 

 

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_____________________________________________________________________________________________________

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

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

 

Making a statement that FHA loans are more expensive than conventional loans because of the monthly mortgage insurance is a blind statement.  This is like saying that your house is better than your neighbors house. Just to many unknown variables to make this kind of determination.

Here is what a realtor on Trulia stated the other day....

"While an FHA loan has many benefits, the downside(aside from some hefty mortgage insurance) is meeting the guidelines.  If you can put 5% down, there is a conventional lender that can do the loan(and the Mortgage insurance is actually lower)."

Two major issues with that whole statement. There are to many factors when determining mortgage insurance for conventional loans and conventional loans are black and white. If the AUS (automated underwriting system) says no, then it's no. At least with FHA loans, you can manually underwrite them.

 

 

The basics with FHA monthly mortgage insurance (MMI) : (this could possibly change in the near future)

• LTV(loan-to-value) > 95% = .55 basis points  Ex. $200,000 loan amount, the MMI would be $91.67/month

• LTV(loan-to-value) = or < 95% = .50 basis points  On a $200k loan, the MMI would be $83.33/month

 

** Keep in mind, the credit score is irrelevant, and does not affect the monthly percentages for FHA loans.**

 

 

The basics with conventional monthly mortgage insurance :

• LTV > 90.01% to 95.00% = .78 basis points (best case scenario and will explain below) On a $200,000 loan, the monthly mortgage insurance would be $130.00/month

Now, keep in mind, I said best case. Mortgage insurance for conventional loans have changed drastically in the last 2 years. The mortgage insurance companies have added new guidelines based on LTV, credit scores, and if the property is in a declining market. If in a declining market, you would need credit scores above 740 just to be able to put 5% down. The other issue is the credit scores. The lower the scores, the higher the percentage of the mortgage insurance. Some even have cut offs that are higher than the normal cut off of 620 that most lenders have.  In regards to FHA loans, it doesn't matter if you have a 620 or a 700, when it comes to the monthly mortgage insurance.

 

Another issue is the mortgage interest rates when comparing FHA loans to conventional loans.

Most lenders only have a slight penalty for FHA mortgages with credit scores of 620-640. This pricing hit is normally a quarter point. On $200,000, that is $500.

On a conventional loan with 5% down, these pricing hits can be as high as 2.75 extra points with credit scores ranging from 620-639.  On $200,000, that is $5,500. Even with a credit score of 719, the pricing hit is a half point.

 

 

Summary : There are some many ways to look at this, hence why it's imperative not to really listen to anyone but a loan officer.  But most of all, you want to listen to a very qualified loan officer that knows how to dissect all of this information properly.

Yes, some will argue still that I forgot about the upfront mortgage insurance on FHA loans in New Jersey and that is another reason why FHA mortgages are more expensive. Well, I have proven that wrong with this post by comparing both a FHA loan vs a conventional loan with 5% down and by using an above credit score of 679. I am including both the upfront mortgage insurance and the monthly insurance.  Please read :

FHA Loans vs Conventional Loans - Why FHA home loans in New Jersey can be better with 5% down

As shown in this example, you are still saving $200 a month with the FHA loan. The proof is in the pudding.

 

 

Important Note : When doing a conventional loan with mortgage insurance, you have a a seperate underwriter from the MI company that needs to underwrite the loan also. On FHA mortgages, you just have one underwriter for the whole file.

 

 

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- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- FHA Home Loans - Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

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_____________________________________________________________________________________________________

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

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

Meet the Members of the Mortgage Myth Busters

 

 

Jeff Belonger John Cannata Gerry Suarez Larry Bettag  Colleen Craig   Robert Ashby           Ken Cook            Gary Miljour

 

 

 

- Click Me -

 

 

 

The Mortgage Myth Busters is born : by Gerry Suarez

Who we are.

It’s been over a year and a half ago since Jeff Belonger started to put this group together. For a long time we were a group called the Mortgage Masterminds that met for weekly conference calls to brainstorm about industry issues and changes. We are all very experienced Mortgage Loan Originators that strive to play at the top of our game, and we knew by combining forces it gave us an edge over other lenders. Over time some of the original members have left, and some new ones have joined.  The current members are listed above.

 

What we are passionate about.

What drives us is our desire to be the best we can be within our industry. We are adamant about offering information that is not only timely and appropriate, but accurate too. Considering the rate of change in the mortgage world these days, this is no small task. Even with a group of true experts that specialize in everything from government loans to jumbos and condo financing, it’s a challenge to keep up with the changes. Do we know it all? Hell no, but by combining forces we seem to keep up with things much better than most.

It bothers us that there is so much mis-information and partial truths out on the internet. That’s how Myths are born anymore, and that’s why we bust them. When it comes to the mortgage industry, half of the truth is not enough. If you don’t get it all right, you got it all wrong.

 

Mortgage Myth Busters group description :

The Mortgage Myth Busters is a group of experts from different companies all over the country that share the commitment to provide consumers with the right answers to their real estate finance questions. Our unique approach of collaborating and combining forces enables us to provide factual mortgage information and invaluable insights especially during these trying times.

Our purpose is to educate and assist the consumer in navigating the often confusing process of obtaining financing. It is our goal to dispel the confusion, myths, and lies that surround the real estate and mortgage industry. We do this in hopes of earning your trust and eventually your business. 

 

 

 

You can find Mortgage Myth Busters on various sites :

 

• Mortgage Myth Busters on Active Rain

 

• Mortgage Myth Busters - Our own main blog site

• Mortgage Myth Busters on Facebook - Become a fan of Mortgage Myth Busters on Facebook

 

• Mortgage Myth Busters on Twitter - Follow us on Twitter - please don't hesitate to Re-Tweet us

 

 

 

Conclusion :  We are very excited about this endeavor and look forward in helping in any way possible.  I invite all of you to follow us on the sites mentioned above and to forward any of these sites to your peers, co-workers, or to any consumer. We look forward to the challenges of this ever changing market and for your support.  Thanks, Jeff Belonger

 

 

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- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- FHA Home Loans - Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

Follow me on:

 

 

_____________________________________________________________________________________________________

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

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

 

 

Mortgage interest rates continue to still be very low, ranging from 4.25% to 4.75% for a 30 year fixed rate. 

So why are interest rates so low?  Some investors on Wall Street fear a double dip recession approaching. And these investors will seek more stability in buying bonds, such as the MBS's, Mortgage Backed Securities. By buying more MBS's, this can control the interest rates. Another reason is because earlier this week Treasury auction bids rose to 18% to record as investors surpass bond dealers.

 

 

 

 

Interest rates at one point this week hit a historical low, but since have increased slightly. But don't fret it, when I say that they have increased, I am talking about the cost of a 30 year fixed interest rate. The rates themselves are the same, but at times during the week, the actual cost might vary from .125 of a point to .375 points. On a $200,000 mortgage, this could mean the difference of $250 to $750. Let's say that this happens on an interest rate of 4.50% for the worse. You can have the choice in paying the extra cost that was mentioned or going to a rate of 4.625% which will usually offset those costs.  What does this do to your mortgage payment?  On a $200,000 loan, your payment would increase $14.92. That means that it could take you anywhere from 17 to 50 months to recoup that difference. This is where a good loan officer will ask you about your goals, to determine what might be the best course of action.

 

 

 

Mortgage Interest Rate Future Outlook

 

There is a hint of inflation that may be coming back and could hurt the markets for the worse.  It could be a bumpy ride ahead. Overall, I would float cautiously in the next 3 to 5 days, but for the long term, I would think rates still hold steady. Meaning that they will continue to be low in the next 30 days, but could be a tad higher than what we are experiencing now. So if I had a settlement date in the next 30 days, I might lock now.

 

 

Word to the WISE :

If you see individuals and or mortgage companies offering mortgage interest rates at 4% or lower, there could be many points and or high lender fees involved.  What is being sold off on Wall Street right now are the 4.0% coupons.  Just be careful in what someone might tell you or promise you just to get you in the door.

 

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- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- FHA Home Loans - Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

Follow me on:

 

 

_____________________________________________________________________________________________________

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

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

 

There will always be some sort of mortgage myth in our industry or a piece of information given by a loan officer that is misleading. What I am about to talk about is regarding FHA loans and a borrower using a co-signer to help them purchase their new home. We call this a non-occupant co-borrower type of loan.

 

 

 

Let's first talk about co-signers for mortgages, because this term is used loosely throughout the real estate industry. When doing a mortgage, a co-signer is much different than when buying a car. When buying a car, you can still have bad credit below normal standards and bring a co-signer into the mix to solidify the deal. On a mortgage, if the primary borrower doesn't fit the normal credit score requirements and or the credit criteria, then you can't use a co-signer to help you purchase or refinance. A co-signer is used only for the purposes of qualifying with more income. The main point, the good credit of a co-signer can't be to offset the bad credit of a primary borrower, it's not allowed.

Now, there is a difference between specific types of loan products when using a co-signer.  On a conventional loan, the primary borrower still needs to qualify with an income ratio, which is usually only about 6%-8% above the normal qualifying ratios of 28/36. In regards to an FHA mortgage, there is no minimum requirement. In many cases, the primary borrower wouldn't even need income, but this depends on the overall deal. As long as the primary borrower met the credit requirements and the credit scores. This kind of scenario is typically scene when doing a FHA kiddie condo loan, which can also be known as a FHA non-occupant co-borrower loan. This is when you have a college student buying a property and the parent(s) are co-signing. More details on FHA kiddie condo loans.

 

 

 

Summary : I had to bring this up because I just received a call from a borrower who has credit scores of 565 who was told by a large bank that they can't get a loan.  But if they get a co-signer with good credit, that they would be able to get a loan. Knowledge in regards to the basics of FHA loans is so important. To me, this is actually Mortgage 101.

In regards to the word co-signer, in the mortgage industry, this is referred to as a non-occupant co-borrower. As long as the person who is co-signing is a family member or a relative and they aren't living in the property. Hence why they are called a non-occupying co-borrower. And a FHA non occupant co borrower is much easier doing this with than a conventional loan. So it's a mortgage myth if one says that you can get a co-signer no matter how your credit is. Lastly, if the primary borrower has someone that will occupy the property with them and will be on the loan, they are known as a co-borrower.

 

 -- Update per Missy Caulk's comment # 8 - The co-signer, aka non-occupant co-borrower can have a primary home, even a home with a FHA mortgage on it. Meaning that the home does not have to be free and clear. It's considered a debt and is part of the qualifying ratios.

 

• FHA Non-Occupant Co-Borrower loans - Also known as Kiddie Condo loans

 

• Good Credit scores - Good FICO scores don't mean it's a good mortgage loan

 

 

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- FHA Loans - USDA Loans - VA Loans -

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- Conventional Loans - 203 k loans -

- FHA Home Loans - Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

Follow me on:

 

 

_____________________________________________________________________________________________________

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

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

 

Could one say that the sky is falling?

 

There has been a major discussion whether or not Pre-Approval letters will be like dinosaurs, extinct. It was started with this post by Marilyn Boudreaux - Pre-Approvals Disappearing? -  It was then followed by Lenn Harley's post, Calling all loan officers on Active Rain?? What are the facts here?? No Pre-Approval letters??? - After reading every comment on both posts, it sounded like some realtors just wanted to walk the plank per se. Some mentioned that Pre-Approval letters aren't worth the piece of paper that they are written on. So I wanted to set the record straight and give some insight.

 

 

 

In regards to both posts and the comments, I think some seem to be losing focus on what we should be paying attention to. When writing a blog post or comment that is of opinion, some people will read it as if it's factual or correct. This is sometimes why news is misleading or incorrect. And I read several comments by loan officers that were just wrong. Some of them are lender overlays and nothing more.

 

Some other comments to nibble on :

 

 

From a real estate agent - "I definitely require a pre approval letter - make darn sure the loan commitment is in 15 days and financing contingency in the contract is off - buyer's deposit is on the hook - sorry"

Me?  A loan commitment in 15 days? This is to include weekends? It's just not that easy anymore.   Gerry Suarez talked about these so-called 10 day closings.  I can close a loan in 10 days or less.  Also, some commitment dates be unreasonable.  What is a reasonable commitment date?

 

From a real estate agent - "I am at a loss. Sellers are still expecting "pre-approval" letters, and are not willing to go forward with a "pre-qual" which is considered useless."

Me? Here is a Call to Action to all realtors. Educate your sellers properly. Give them the facts about the real differences. Sure, there is more curb appeal when you say "Pre Approval". A good loan officer's pre qualification letter should be just as good. More later.

 

From a loan officer - "I think that defining the difference between pre-quals and pre-approvals is important.  I view a pre-qual as taking an application and getting an automated approval.  I view a pre-approval as the pre-qual plus validating income, assets and etc.  I then have another category for a pre-approval with an underwriting decision...(more was stated)"

Me? The first sentence is right on. But it sounds like this person has Pre-Approval A and B. A real pre-approval should be fully underwritten. Please read below.

 

 

 

Pre-Qualifying Letter vs Pre_approval Letter

What I want to focus on is the difference between a Pre-Qualification Letter and a Pre-Approval Letter.

 

Pre-Qualification Letter -  

The loan officer should be pulling a credit report and inquiring about income and assets. They should go a little further and ask some important basic questions such as time on the job, rental history, etc, etc.  Jeff Belonger's questions for a pre-qualification of a mortgage.

 

Pre-Approval Letter -

The same thing that was done with the pre-qual situation, but that you also take a full mortgage application and collect income and asset documentation. Not only should you be running this loan through AUS (automated underwriting system), but an underwriter should be approving this also subject to the appraisal and title. What happens is that many loan officers just run the loan through AUS and if they get an approval, they then hand out a Pre-Approval Letter. One can argue on opinion that you can stop at the AUS and not proceed with the underwriter. That if you have an underwrtier review and underwrite this, then this would be called a commitment to lend.

In my opinion, here is the major issue regarding the pre-approval with an AUS approval. What happens if the loan officer calculated income incorrectly?  Or that they missed a large deposit on the bank statements?  Or they missed child support on the pay stubs?

 

 

Summary :  A very good qualified loan officer should be able to just hand out a pre-qualification letter and the loan should still close. Here is an excellent comment by Robert Rauf on Lenn Harley's post. - Rob's comment - This is just myself, but if I am unsure of a particular borrower and I run AUS and it comes back refer, I will then go over it with my underwriter. I don't need to go through the whole approval process.

Something else that just took place more recently and why Pre-Approval Letters might not be as credible, even if an underwriter signed off on the file. Under Fannie Mae, a new credit report has to be pulled prior to closings. You don't have to do this on FHA loans.  But it has become a lender overlay with many lenders, to where they are doing this anyhow. Larry Bettag wrote about this - Don't use your credit after you apply for a loan.

 

 

Answer to Marilyn's original post - You can still offer Pre-Approval letters - Ken Cook wrote an excellent comment on Marilyn's post.  - Ken Cook's pre-approval comment -   

There was some discussion about RESPA and the new GFE rules and what Fannie Mae has said about pre approvals. First thing is that you don't need a Good Faith Estimate to give out a pre-approval letter. You can give a borrower a form that is called an 'Itemized Fee Worksheet', which is exactly the same as the old GFE, Good Faith Estimates. There are 7 trigger points that have to be met to tell a loan officer that a GFE has to be sent out by RESPA's rules. You could still give out a GFE prior to this, but the lender is held to that GFE. That is the issue surrounding GFE's.

Keep in mind - There are many lenders with their own lender overlays, which is why you are reading so many different answers from loan officers. Some loan officers think their answers are from HUD, when it's actually from their company, just trying to be extra careful.

 

 

PS.  - I received an approval from my underwriter to post on this topic - Monday dry Humor -

 

 

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- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- FHA Home Loans - Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

Follow me on:

 

 

_____________________________________________________________________________________________________

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

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

From the consumer - "I have bad credit".. "my credit is so so"... "my credit is good". "My credit scores are good", etc, etc. I have heard it all and just this alone doesn't make or break you as a potential buyer when wanting to buy a home.

The thought process of an average loan officer - "Yippie, my borrower has a 635 credit score and my company's cutoff is 620.  This borrower fits the credit ratios also, so I can do the loan."

Knowledge is power people. I know some loan officers in the past that made the mistake of primarily looking at the credit score, aka the fico score,and if it fit the criteria, that they thought they had a good loan. Many would miss some lates on the credit report.  And yes, some even missed judgments and or collection accounts.

A good loan officer is going to understand how credit works, what to look for, and know if they need good credit explanations. Also to show documentation to prove such explanations, and sometimes compensating factors.

 

 

 

Summary :  I bring this up because I currently have a borrower who has a middle credit score, fico score of 638. She originally started the loan application process with another lender in the beginning of May. Well, this lender not only missed 2 commitment dates, but the closing date of June 30th. This is a very tough FHA loan, even though she has a credit score of 638. She has a Ch. 7 bankruptcy that was discharged in June of 2003. But after this, she had a voluntary repossession of a car in 2008, which totals $10.800. Yes, this will have to be paid off.  Her credit outside of that?  Just one credit card that she has had for 1 year. And I have qualifying ratios of 38/48. But yes, I have several excellent compensating factors, such as canceled checks for rent and a car that someone else bought for her, and about 2 years worth of cash reserves. And the fact that she has been on her job for 9+ years and her mortgage payment to only increase by 12% more than her rent payment.

Overall, the worst part was that the other lender came back to her about a week ago and said, "sorry, we can't do your FHA loan because your credit score doesn't meet our criteria." Not every lender can do every deal. Her credit score never changed. To me, just a loan officer or lender saying... it was a hard deal and we didn't review the facts upfront, when we gave you a pre-approval letter. 

My advice?  Just be careful of loan officers that promise loans to those with bad credit or less than perfect credit. And those that make it sound like FHA loans are good for those that have bad credit. You need the knowledge of a good loan officer and a good lender such as Infinity Home Mortgage, that has common sense underwriting, and to put the pieces together.

 

Those with less than perfect credit or low credit scores - Please don't hesitate to reach out to me.  I would love to help you and show you how to get your scores up.

 

 

• Mortgage Financing made to look easy - FHA loans Have NO Min Credit Score for Florida Homebuyers - Really???

   

 

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

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc