For immediate assistance call my Cell: 954-729-8536
Recent increases in subprime home foreclosures have seen many turning to FHA Secured home loans. The Federal Housing Administration was created in 1934 as an effort to bolster homes sales during the Depression. By financially guaranteeing loans the FHA lifts much of the risk of non-payment and foreclosure from private lenders. It is important to remember that the FHA is not a lender; they just guarantee your loan.
Advantages to FHA Secure Loans:
· Bankruptcy not an automatic disqualification. In an effort to afford more people the opportunity to use this type of loan bankruptcy is not a disqualifier. The bankruptcy must be two years old and you must have good credit since then.
· Less stringent credit requirements. Instead of looking solely at your credit report the Federal Housing Administration looks at what they call the "total scorecard". The total scorecard allows the FHA to better assess and manage the risk of a given loan.
· Lower interest rates. Normal subprime lenders have employed much higher interest rates in order to compensate for the increased risk of the loan. Because FHA loans are guaranteed, there is substantially less risk for the lender and therefore interest rates are lower.
· Down payment is required. FHA might be just what you need. Your down payment can be as low as 3% of the purchase price, and programs available that literally cost you no money down and all closing cost paid for. Example: AmeriDream Downpayment Assistance Program – was created to overcome the greatest barrier to homeownership, the down payment. The program provides an opportunity for qualified low to moderate income individuals and families to purchase affordable homes by receiving money for the down payment on a home. Homebuyers never have to repay the gift from AmeriDream. The program has helped over 250,000 qualified homebuyers become homeowners. AmeriDream is recognized as the most trusted and valued name in gift assistance. www.AmeriDream.org
Feds cut down-payment assistance programs
· For a decade, credit-challenged homebuyers have used a regulatory loophole that lets them get Federal Housing Administration mortgages without putting their own money down, while at the same time avoiding costly subprime loans. About 7,000 buyers per month were exploiting the loophole, and now the feds are squeezing it shut.
· The new policy means that prospective homebuyers with marginal credit will have to act quickly if they want to buy houses without putting any money down. Otherwise, they will have to save for down payments or wait for the FHA to roll out its own zero-down program.
The housing boom and the loophole
The FHA allows homebuyers to accept gifts of down-payment money from nonprofit organizations. There's your loophole: Since the 1990s, the FHA has grudgingly allowed home sellers to "contribute" money to nonprofits, and for the nonprofits to then "donate" the money to homebuyers. In effect, sellers could fund buyers' down payments, which was a no-no, but the enterprise was technically legal because the money was shuttled through nonprofits. The nonprofits collected service fees from sellers.
· A lively down-payment assistance industry grew quickly behind the protection of this loophole in FHA regulations. In the 2000 fiscal year, 6 percent of FHA-insured purchase loans had down payments channeled through nonprofits; four years later, 33 percent did. When this funding method was most popular, in fiscal years 2003 through 2005, more than 10,000 people per month were taking advantage of it, boosting the housing boom. From 2000 through 2006, more than 650,000 buyers got their down payments through nonprofits.
· The federal housing department and Congress have commissioned at least three studies since 1999 that concluded these loans were riskier than FHA loans that didn't involve down-payment gifts. Sellers inflated home prices to recoup their contributions to the nonprofits, researchers found.
· The studies recommended that the nonprofit down-payment assistance loophole be closed. Mortgage lenders, home builders and down-payment assistance programs argued to keep the loophole open, on the grounds that boosting the homeownership rate was good for everyone. The feds didn't take action until now.
Opposition to rule change
This fall, the Department of Housing and Urban Development adopted a rule that prohibits the down payment money from coming, directly or indirectly, from the seller or "any other person or entity that financially benefits from the transaction." HUD administers the FHA. The rule takes effect Oct. 31.
The down-payment industry has come to be dominated by two nonprofits: AmeriDream, based in Gaithersburg, Md., and Nehemiah Corp. of America, based in Sacramento, Calif. Both have asked federal courts to block HUD from enforcing the rule. The housing department won't comment, other than saying it will defend itself in court.
"HUD completely disregarded any effort to fix the problems and improve the program," says Ann Ashburn, president of AmeriDream. Among the improvements she suggests: prohibiting sellers from inflating their sales prices to make up for their down-payment contributions and requiring property appraisers to include the down-payment gifts in their assessments.
If the new regulation goes into effect on Halloween, it would immediately end down-payment assistance grants from AmeriDream and all its competitors except Nehemiah. Scott Syphax, president of Nehemiah, says his nonprofit won a six-month exemption as a result of litigation against HUD 10 years ago, so Nehemiah will be able to serve as a conduit for down payments until March 31 -- six months after HUD published the rule in the Federal Register. There website is http://www.getdownpayment.com/buyers/
Act Now and Call Today before it’s too late!!!! 1-888-660-MORTGAGE(6678)
History of the FHA
The FHA, or the Federal Housing Administration, was established by the government to improve housing conditions for Americans. The government established the FHA mortgage program in 1934 to improve existing housing standards and conditions. Prior to 1934, a down payment was typically 50 percent of the home’s price and payments were stretched out between only 1-5 years. You can learn more about FHA loans from the Department of Housing and Urban Development.
How a FHA Mortgage Works
The FHA does not lend the money; it simply insures that the total mortgage will be paid to the lender if the buyer defaults. It is always the decision of the private lender (a bank, credit union, or savings and loan) to decide whether or not they will lend the money.
The FHA mortgage program tends to be more forgiving than conventional mortgages in terms of past credit history. A bankruptcy discharged as little as two years ago may not hinder a homebuyer from qualifying for the FHA program. Even medical bills and collections do not have to be paid.
Typically, FHA mortgages do not require more than a 3-5 percent down payment. Unlike traditional loans, this money may also be a gift to the homebuyer and does not need to be secured as the homebuyer's own money. Often, there are "points" associated with FHA mortgages that are usually worth about 1 percent of the total mortgage value. These points are paid to lenders to help lower the interest rate of the mortgage.
Borrowers will also have to pay PMI (private mortgage insurance) on the mortgage. PMI is used to ensure that the total amount of the mortgage will be paid to the lender if the buyer defaults. Usually, a PMI will not?? be put into effect until 20 percent of the mortgage has been paid.
FHA mortgages have no mortgage value cap. In other words, you can take out a FHA mortgage for $150,000 - $300,000 without any restrictions, other than credit applicability.
Closing costs on FHA (or conventional loans) are usually between 2-3 percent of the total mortgage amount and are the responsibility of the buyer. However, FHA closing costs can be financed into the total amount of the mortgage and paid off accordingly.
Learn more about the different types of loans.Qualifying For a FHA Mortgage
To be approved for a FHA mortgage, you must have a satisfactory credit history, which shows your commitment to paying off debts in a timely manner. Also, you must be able to prove that the total monthly mortgage payment will be less than 29 percent of your monthly income. The number arrived at after multiplying your total monthly income by 29 percent is referred to as PITI, or principle, interest, property taxes, and insurance. The PITI amount is the highest amount that your monthly mortgage payments may be. Furthermore, long-term debt, such as car loans and credit card balances, in addition to the monthly PITI amount cannot be more than 41 percent of your total monthly income. More information about loan qualifications is available from the FHA.
While these qualifications may seem a little stringent, they are actually more lenient than traditional mortgage qualifications. The decreased down payment makes this type of mortgage even more desirable for many people.
The House Committee on Financial Services issued a Press Release yesterday, December 14, 2007 on the passage of the new FHA Modernization Bill (S. 2338) in the Senate. |
“I welcome the Senate’s passage of their FHA legislation. We are in agreement that this is an important action in dealing with our subprime challenges, and that we should act quickly so that the FHA can be a resource for people who can refinance their loans. I look forward to working with the Senate to preserve important elements of the House bill, for example, ensuring that lower income people do not pay higher premiums than other borrowers, especially for refinance loans for subprime borrowers; sufficiently increasing FHA loan limits to make more Americans eligible for FHA loans; and preventing HUD from imposing unnecessary fee hikes." Rep. Barney Frank, chairman of the House Committee on Financial Services FHA Secure Refinancing In addition to these specifications; FHASecure refinancing is available for single-family or multi-family homes and manufactured homes. A new FHA premium pricing plan goes into effect on the same date the expanded FHASecure refinancing program begins, July 14 2008. Borrowers should know this "second chance" refinancing does not indicate relaxed requirements for credit. Borrowers applying for FHASecure are subject to the same requirements as any other applicant for an FHA loan. Delinquency issues for mortgage payments aside, loan officers still require proof you are a good credit risk. Borrowers should; 1-888-660-MORTGAGE(6678) Your FHA Loan Checklist Before you start the FHA loan process, be prepared to provide some information to your loan officer. Have it ready now to save time later.
Personal tax returns (past two years), current income statement and business balance sheet for self-employed individuals. |
Copyright . Michael Minichiello, Minichiello Mortgages, Inc.. All rights reserved.
