Over the last 3 months, most lenders have increased the minimum credit scores needed for an FHA loan to 620. Nova still have minimum credit scores of 580 for FHA loans and in many cases require no NO minimum credit scores for Streamlined refinances. We still have less than 30 day closings where most other lenders are 60-90 days in underwriting. Our FHA loans are still prices lower in rates and in fees compared to our competition. For several FHA loans we have seen rates as low as 4.625% for 30 year fixed rates. FHA Streamlines as low as 5%!!! If you have a FHA loan and your rate is 5.5% or higher you should have your loan reviewed.
FHA cash out loans will temporally have the maximum loan to value capped at 85%. FHA is trying to lower its exposure to being the only option for borrowers cashing out equity above 85%. We do no know when FHA will go back to allowing borrowers to cash out up to 95%. I would assume it will be several months before FHA will start 95% cash outs again.
Tuesday, March 31, 2009
Monday, March 9, 2009
How is your FICO Score Based?
Here are the Facts on what makes up your FICO score. This information is provided by Advantage Credit of Colorado.
Payment History = 35%
Do you pay your credit on time?
Length of Positive credit history.
Severity and quantity of delinquencies
Amount Owed = 30%
Quantity of credit Accounts – too many credit cards with balances can lower a score.
Keep balances to 10% of high credit.
Length of credit history = 15%
The longer the credit history, the better.
How long have your credit accounts been established?
How long has it been since you used certain accounts?
New Credit = 10%
Research shows that opening several credit accounts in a short period of time does represent greater risk – especially for people who do not have a long established credit history.
The Healthy Credit Mix
2 installment loans
3 revolving accounts with balances
Revolving debt balances below 10% of high credit
No collections accounts, public records, foreclosures or last payments
Accounts with long payments history and no balances
Payment History = 35%
Do you pay your credit on time?
Length of Positive credit history.
Severity and quantity of delinquencies
Amount Owed = 30%
Quantity of credit Accounts – too many credit cards with balances can lower a score.
Keep balances to 10% of high credit.
Length of credit history = 15%
The longer the credit history, the better.
How long have your credit accounts been established?
How long has it been since you used certain accounts?
New Credit = 10%
Research shows that opening several credit accounts in a short period of time does represent greater risk – especially for people who do not have a long established credit history.
The Healthy Credit Mix
2 installment loans
3 revolving accounts with balances
Revolving debt balances below 10% of high credit
No collections accounts, public records, foreclosures or last payments
Accounts with long payments history and no balances
Thursday, March 5, 2009
You may need to have a 580 credit score now for an FHA loan. Act Now!!
In the last 3 to 4 months many mortgage companies have increased the minimum credit score needed for an FHA loan. It is no surprise this is happening but I have not seen a much of a drop in volume due to increased minimum credit scores. It won’t be too long until the minimum is 620. What I am seeing are borrowers who have higher credit scores not being approved because FHA wants to see borrowers have a little in savings after closing. This is called ‘reserves’ and all it means is that after the borrower closes on a home loan they have a month or 2 of their monthly mortgage payments saved up.
Having a few months in ‘reserves’ will make a big difference for getting approved for a home loan or not. In the last week I have seen this first hand for two different borrowers. The first borrower has a 615 credit scores but has no money for reserves. I could not get his application approved for a FHA loan. If he had 2 months in reserves he would be approved. The 2nd borrower has a 589 credit score and had 3 months in reserves and was approved or a FHA loan.
Both borrowers are working on increasing their credit scores to get lower interest rates and the first borrower has actually asks his parents to gift him some money so he can have enough for the down payment and 2 months of reserves then he will be approved for the FHA loan.
For Borrowers with less than 580 credit score you need to get in and talk to me about increasing your scores. It won’t be to long before the minimum credit score for FHA loans 620. Call contact me today!!
Having a few months in ‘reserves’ will make a big difference for getting approved for a home loan or not. In the last week I have seen this first hand for two different borrowers. The first borrower has a 615 credit scores but has no money for reserves. I could not get his application approved for a FHA loan. If he had 2 months in reserves he would be approved. The 2nd borrower has a 589 credit score and had 3 months in reserves and was approved or a FHA loan.
Both borrowers are working on increasing their credit scores to get lower interest rates and the first borrower has actually asks his parents to gift him some money so he can have enough for the down payment and 2 months of reserves then he will be approved for the FHA loan.
For Borrowers with less than 580 credit score you need to get in and talk to me about increasing your scores. It won’t be to long before the minimum credit score for FHA loans 620. Call contact me today!!
Wednesday, March 4, 2009
Obama’s plan to head off millions of foreclosures??
Today Obama’s plan to save millions of homeowners from foreclosure was released. It appears to be an outline and more details are to come. The Treasury said that it is going to take some time to find out how many of the estimated 9 million borrowers this plan is targeted to help.
The plan is going to provide a standard for Mortgage Servicers to determine and to speed approval for more affordable loans to borrowers in trouble. Mortgage Servicers are the companies who receive mortgage payments for the investors of the mortgages. Currently Mortgage Servicers are over whelmed with borrowers requests for help to avoid the loss of their home. Many Mortgage Servicers will not help borrowers in trouble because the investors in the mortgage will not allow them.
The plan is hoping to help 2 groups of homeowners. First, homeowners who can no longer afford their homes because of loss of job/income, who are in loans that interest rate changed because of Adjustable Rate Mortgage, or borrower who did “liers” stated income loans to qualify for the home loan.
The 2nd group are borrowers who can not refinance because of their home is valued at less than what they currently owe. These borrowers are up side down and the Treasury is looking at allowing borrowers to refinance up to 150% of the current value of their home.
What you need to do to qualify for these “affordable loans”.
You must live in the house. Primary Residences only. No 2nd homes or investment propertied.
Borrowers in Bankruptcy may be eligible
The max loan is $729,750 Up to $1.4 million for multi family homes.
You will have to prove you are in default or facing default.
The plan will look at a 3 step process to lower your monthly mortgage payment to 31% of your gross income.
1st they will look at lowering your interest rate. The rate may be as low as 2%. The Treasury expects 70% of eligible borrowers to be offered these affordable terms.
2nd If lowering the interest rate is not enough then they will extend the term of the mortgage up to 40 years. This will help an estimated 20% of eligible borrowers.
3rd. And if the lower rate and longer term does not reduce the monthly payment to 31% of the borrowers income then they will look at reducing part of the principle balance and adding it to the end of the loan with a balloon payment.
There are many unanswered questions and major potential problems with this plan. The plan only addresses 1st mortgages and not 2nd mortgage and HELOC. It also is trying to help homeowners who did not buy more home than they could afford. It does not state how they will determine “more than they could afford”. It does not address homeowners who refinanced after they purchased their home. Mortgage Servicers my face law suites from investors who will have their returns lowered by reducing interest rates for these buyers. This is was not addressed and I would assume No Mortgage Servicers is going to lowers a borrowers interest rate to 2% with out the approval from the investor.
We don’t know when the plan will go into effect. I sure the Mortgage Servecers and Investors will have to come to agreements with the Treasury before this Plan goes into effect. Once this is done we will see how many homeowners this actually helps. I hope it is a lot because this could stop the problem with home values falling because of foreclosures and short sales.
Subscribe for My Market Blog or check back often for updates.
The plan is going to provide a standard for Mortgage Servicers to determine and to speed approval for more affordable loans to borrowers in trouble. Mortgage Servicers are the companies who receive mortgage payments for the investors of the mortgages. Currently Mortgage Servicers are over whelmed with borrowers requests for help to avoid the loss of their home. Many Mortgage Servicers will not help borrowers in trouble because the investors in the mortgage will not allow them.
The plan is hoping to help 2 groups of homeowners. First, homeowners who can no longer afford their homes because of loss of job/income, who are in loans that interest rate changed because of Adjustable Rate Mortgage, or borrower who did “liers” stated income loans to qualify for the home loan.
The 2nd group are borrowers who can not refinance because of their home is valued at less than what they currently owe. These borrowers are up side down and the Treasury is looking at allowing borrowers to refinance up to 150% of the current value of their home.
What you need to do to qualify for these “affordable loans”.
You must live in the house. Primary Residences only. No 2nd homes or investment propertied.
Borrowers in Bankruptcy may be eligible
The max loan is $729,750 Up to $1.4 million for multi family homes.
You will have to prove you are in default or facing default.
The plan will look at a 3 step process to lower your monthly mortgage payment to 31% of your gross income.
1st they will look at lowering your interest rate. The rate may be as low as 2%. The Treasury expects 70% of eligible borrowers to be offered these affordable terms.
2nd If lowering the interest rate is not enough then they will extend the term of the mortgage up to 40 years. This will help an estimated 20% of eligible borrowers.
3rd. And if the lower rate and longer term does not reduce the monthly payment to 31% of the borrowers income then they will look at reducing part of the principle balance and adding it to the end of the loan with a balloon payment.
There are many unanswered questions and major potential problems with this plan. The plan only addresses 1st mortgages and not 2nd mortgage and HELOC. It also is trying to help homeowners who did not buy more home than they could afford. It does not state how they will determine “more than they could afford”. It does not address homeowners who refinanced after they purchased their home. Mortgage Servicers my face law suites from investors who will have their returns lowered by reducing interest rates for these buyers. This is was not addressed and I would assume No Mortgage Servicers is going to lowers a borrowers interest rate to 2% with out the approval from the investor.
We don’t know when the plan will go into effect. I sure the Mortgage Servecers and Investors will have to come to agreements with the Treasury before this Plan goes into effect. Once this is done we will see how many homeowners this actually helps. I hope it is a lot because this could stop the problem with home values falling because of foreclosures and short sales.
Subscribe for My Market Blog or check back often for updates.
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