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FHA Streamline Refinances Can Lower Your Monthly Mortgage Payment

The FHA has made it easy to reduce your mortgage interest rate and lower your monthly mortgage payment using an FHA Streamline Refinance program. This loan program is designed for homeowners with an existing FHA mortgage loan that is in good standing. Since the FHA already owns the mortgage loan, the process is simple and faster than a traditional refinance.

Call an FHA approved mortgage lender to get started. Only certain mortgage bankers are able to issue FHA loans so ask this question first, before completing the application. During the application process, they will ask the standard questions like how long you have lived in your home, where you work, how much money you make, and what assets you have. This information is all documented on the loan application but since it is a streamline refinance, the information is rarely verified. This makes it possible for people to lower their interest rate without worrying about employment or income verification. As an added benefit, credit is also not a factor in whether or not you can obtain the refinance. The underwriter will look to see if you are making your mortgage payments on time and use that as a determining factor as to whether or not you are likely to continue making payments on time in the future.

The FHA Streamline Refinance loan program is essentially a no credit, no asset, no income, and no employment loan because these aspects are not verified. If you have an existing FHA loan and have been making payments on time, the FHA believes that you will increase your ability to make on time mortgage payments by reducing the interest rate. This is a logical approach to making homeownership affordable. If you or your spouse has had their hours cut back at work or you recently had a credit issue, this is the best option for lowering your mortgage interest rate.
Many homeowners are still concerned about the value of their home and how it will turn out in an appraisal. Home values have been increasing over the past two years, but not enough to give everyone positive equity again. The FHA Streamline Refinance does not require an appraisal, so it doesn’t matter if you are upside down in your home. This is a straight interest rate reduction loan, so the value of the home doesn’t impact the process. Not obtaining an appraisal also saves homeowner’s time and money throughout the refinance process.

In order to use this program, you must be interested in simply lowering your interest rate or switching from an adjustable rate mortgage (ARM) to a fixed rate loan. The FHA needs to see that there is a clear benefit to refinancing. If you are looking to obtain cash out, you will not qualify for a streamline refinance. You can, however, refinance your existing FHA mortgage then apply for a home equity loan or line of credit at a later date. To find out exactly how much you can save, contact your mortgage banker today.

How to Buy a House this Summer

If you are a first time home buyer, or someone looking to purchase a larger home, summer is an excellent time to move. The kids are out of school, the weather is great, and the flowers are in bloom so you will be able to look at neighborhoods in their full glory and move without juggling school schedules. Buying a home is a major life event and your mortgage lender can help you by making sure you are pre-approved for a home that fits within your budget.

What is the Difference between Pre-Qualified and Pre-Approved?

Before you start looking at houses,it is important to become pre-approved for a home loan. It is easy to become confused about the difference between being pre-qualified and pre-approved. Many mortgage bankers will send out letters stating that someone is “pre-qualified”. That typically means that based on publicly available data, you should qualify for a certain type of loan. These letters are sent out without a mortgage lender reviewing your credit report, income status, or assets. It is not a firm approval.

You need to get “pre-approved”. In order to start the process, call your local mortgage lender and let them know that you want to purchase a home. They will ask you questions, take a full application, pull your credit and ask for your income documents. After reviewing the information, your mortgage lender can let you know how much you are pre-approved for and issue you a letter to show your real estate agent.When you put an offer in on a house, the real estate agent may include your pre-approval letter to show the seller that you will be able to get a home loan.

Down Payment

There are several types of mortgage loans that allow you to buy a home with little or no down payment. First time home buyers may find this particularly useful. Even those that are selling a home may want to keep the proceeds for other things like paying off debt or taking a long vacation. Your mortgage lender can tell you which types of loans you are qualified for. If you want to make a low down payment, ask the lender about these loans:

• FHA Mortgage Loan – The Federal Housing Administration (FHA) helps to make homeownership affordable for millions of low income and middle class families. You can purchase a home using an FHA loan for as little as 3 percent down.

• VA Mortgage Loan – If you or your spouse has served in the Armed Forces, you may qualify for a VA mortgage loan. VA home loans do not have a down payment requirement, making it extremely easy for veterans to purchase a home. VA purchase loans can be used on single family up to four unit homes, with the requirement that the property is owner occupied.

• Conventional Loans – Some banks will finance a higher loan to value, based on the community loan programs that they offer. These typically come with a requirement to pay private mortgage insurance and a slightly higher interest rate than if you put 20 percent down.

Your mortgage lender can walk you through the process of becoming pre-approved, tell you how much money you will need to put down, and what your final payment will be. By working with an experienced mortgage banker and realtor, you can get out of your rental and into your own home this summer.

HUD Selling Homes for Half Listing Price with New Program

The Department of Housing and Urban Development is seeking to promote homeownership through a collection of FHA home sales programs known as the “Good Neighbor Next Door” initiative.

Through this initiative HUD is now selling homes for 50% off of their listing price, and buyers only need to pay $100 for the down payment. The FHA does not issue the loans that buyers will be receiving. Rather, they insure about $1 trillion dollars worth of home loans against default.

How the Program Works

The Good Neighbor Next Door program is limited in scope and applies to only certain properties in specific neighborhoods. Of course, not all home buyers are going to be able to qualify. The areas and properties up for grabs are limited to spots that the FHA has determined are in need of revitalization. These spots are determined by a number of different factors including household income, foreclosure rates and homeownership levels.

One of the good aspects of the program is its consistency. All eligible homes that are part of the program are 50% off. There aren’t different sets of discounts for different properties. Financing is also fairly straightforward. As long as you finance with the FHA, then the minimum down payment is only $100. Of course, the borrower can still put more down should they so choose.

Borrowers who do not want to finance through the FHA are subject to standard down payment requirements. For example, if you’re a veteran of the United States military, then you may be able to finance 100% of the loan through the VA. More conventional loans will typically come with down payment requirements ranging from 5% to as high as 20%.

Who is Eligible?

Unfortunately, not everyone who wants to buy a home for 50% off the listing price is going to qualify as a “Good Neighbor.” For this program, good neighbor refers to certain types of public sector employees like teachers, firefighters, law enforcement officials and emergency medical technicians. These public sector employees must also be working full time for a federal, state or local government including Indian tribal reservations. In short, fulfilling those two requirements of being full-time and working for the government will qualify you.

There are a couple of other factors that should be kept in mind as well. The home cannot be used as an investment property. In other words, you can’t buy 10 homes through this program at half off and then turn around and sell them. The house must be used as your primary residence for a minimum of 3 years. After the 3 year time period has elapsed, then the buyer can turn around and sell the property, the buyer is free to sell the home or rent it as an investment property.

In all, the program is a great way for public sector employees to potentially get their first home. It almost sounds too good to be true on its face. It’s not very often that the opportunity comes up to buy a home at 50% off the listing price. But it is a real program backed by the federal government. If you work as police office, teacher or firefighter it is definitely worth looking into.

Zero Down Payment Options Available for Home Buyers

Buying a home can often be one of the most challenging financial undertakings that most people will make in their life.

This is true for a number of reasons, especially considering the amount of money that often needs to be saved in order to afford the down payment. But luckily there are a number of options for buyers to get low down payment loans or in some cases to pay nothing down.

Zero Down-payment Options

The department of Veterans Affairs finances zero-down home loans for veterans that qualify. Because these loans are guaranteed by the government, borrowers are also able to forgo having to buy mortgage insurance. The borrowers simply have to pay a funding fee, which can often be included into the price of the loan amount.

The amount that the borrower will have to pay for the funding fee varies depending on what branch of the military the veteran served in. However, the fee typical varies from as low as 2.15 percent up to 3.3 percent.

Borrowers with exceptional credit also have the option of getting a home loan with zero-down. These borrowers may qualify for the 80/20 combination mortgage loan. With this option, the borrower takes out two separate loans, one for 80 percent of the loan and the other for 20 percent. The 20 percent loan would normally represent the down-payment. Borrowers will typically pay a higher interest on the second loan for 20 percent. However, both the 80 and 20 percent loans are tax deductible.

Small Down-Payment Loans

But if you don’t have exceptional credit and aren’t a veteran, there are still a number of affordable options for you. FHA loans allow borrowers to get homes with little money down. And what’s great about these loans is that they don’t even require the borrower to have great credit. However, keep in mind that the better your credit is the better deal you’ll likely get with your FHA loan.

FHA loans can either be taken with fixed interest rates or variable interest rates. Variable interest rates of FHA loans may start out low but as the name implies they will change with time. To be specific, they change with market conditions. So if interest rates in general are going up, then you should well expect that the variable interest rate on your home loan will go up as well.

The down payment on FHA loans is low compared with other types of loans. But the amount required for the down payment can still vary from lender to lender. Typically, this amount is anywhere from 3 to 3.5 percent of the loan. So, for a home loan valued to $300,000 the borrower would only need to put about $9,000 down. Borrowers with very low credit scores less than 580 will normally have to pay around 10 percent down if they manage to qualify. Even with this higher amount, the down payment is still roughly half of what buyers would be required to pay with many types of conventional loans.

Getting An FHA Loan Just Became Easier

First time home buyers and others looking to secure a mortgage will find it easier this month to get a home loan as the FHA has lowered credit score requirements and loosened guidelines.
Wells Fargo is just one of the companies that has been allowed to qualify buyers with credit scores as low as 600. This is what is typically considered to be subprime territory and down 40 points from the previous threshold which was 640.

These lowered standards come at the same time that demand for FHA loans has been increasing. FHA loans have become more popular because of both the lower credit score and down payment requirements. In many cases borrowers are able to purchase a house with as little as 3.5% down.

How Safe Are These Loans?

After the housing crash there has been a lingering concern about risky loans and whether or not borrowers will be able to pay back their mortgages. Anyone with a credit score between 600 and 640 is statistically more likely to default than other buyers with higher credit scores. However, Wells Fargo, one of the lending companies offering FHA loans, maintains they are safe. “All loan applications are fully underwritten and documented, and borrowers must demonstrate ability to repay,” Wells spokesman Tom Goyda said.

Who Are FHA Loans For?

The FHA has been around for 80 years and was created in order to provide Americans with affordable housing options. So, FHA loans are designed to help the largest number of people be able to purchase a home. This doesn’t mean that FHA loans are necessarily the best types of loans that you can get, especially if you have a good credit score and ample amounts of money for a down payment.

Borrowers with good credit scores and lots of cash for a down payment will be able to take advantage of some of the best interest rates. And for that reason these borrowers will often be able to save more money in the long run than borrowers who take out FHA loans. This can usually end up amounting to a difference of tens of thousands of dollars over the duration of any mortgage.

FHA loans are designed for people who have less than perfect credit. Perhaps these borrowers made mistakes with their credit or have lots of student loan debts. Finding out what your credit score is should be your first priority when it comes to determining what type of home loan you’re thinking about receiving.

As mentioned earlier, another factor that can make FHA loans compelling for many people are the low down payment requirements. Houses are among the most expensive assets that many people will ever purchase in their life. Saving up enough money for a home loan that’s worth $300,000 is just out of reach for many people. At just 10% down that would add up to $30,000. Compare that to paying 3.5% down which would mean that the borrower would only have to pay $10,500. This is a much more manageable amount to deal with especially for first time homebuyers who are often burdened with other types of debts such as car payments and student loans.

FHA Minimum Credit Score Requirement Was Lowered

Great news for borrowers everywhere! If you have a low credit score, it is now easier for you to purchase or refinance a home. Mortgage lenders have announced that they are lowering their minimum credit score requirements from 640 to 600 for FHA home loans. People that have been hit hard by the bad economy, now have the opportunity to purchase or refinance a home, even if their credit score has dropped in the last several years.

Many people throughout the country suffered financially as jobs were cut, and hours reduced. This created an entire group of people that were used to paying their bills on time and having a good credit score that were forced to pay bills late while waiting for work to pick up. This unfortunately has had devastating effects on people’s credit scores. Taking borrowers that once had a 720 credit score into the low 600s. Thankfully, there is now hope for the millions of people that want to buy a home but haven’t had the credit score to do so. Mortgage lenders lowering the FHA credit score requirements will make it possible for people throughout the country to purchase or refinance their home.

FHA Home Loans are Excellent Options for People that Filed Bankruptcy

The FHA makes it easier to obtain a home loan after filing for bankruptcy. As long as it has been 12 months since a foreclosure, bankruptcy or short sale the FHA may approve your loan application. Some conventional lenders require seven years to pass after a bankruptcy, making the FHA an important solution.

The FHA has a lower credit score limit on their loans that most banks. They are truly a homeowners resource. Most mortgage lenders have been enforcing a minimum credit score requirement of 640, with the FHA only requires a 500 credit score for their FHA Streamline Refinance. It is important for borrowers to understand that just because the FHA sets loan criteria, doesn’t mean that a mortgage lender will be that generous. After all, the FHA doesn’t actually issue the loan. They insure the loan in order to mitigate the lenders risk. FHA loans must meet FHA loan criteria in order to qualify, but each mortgage lender may issue its own criteria above and beyond what is published by the FHA. This move to lower the minimum credit score requirement is a major step in opening the lending backup to American families.

Benefits of an FHA Home Loan

FHA home loans enable families to purchase a home for as little as 3.5% down. With low interest rates, it can be cheaper for families to buy a home than to rent one. FHA approved lenders can discuss the exact payment amount with you and help you to budget for the size of a house (purchase price) that will fit within your family’s financial goals.

Once you have an FHA home loan, you can qualify for their streamline refinance program. This loan will lower your interest rate without checking your credit score, current income, appraised value, or verifying your employment. This is the easiest refinance program around, and the main requirement is that you have an existing FHA home loan that is being paid on time.

For more information on FHA mortgages, and to see if you qualify, contact an FHA approved lender. Not every mortgage banker can offer FHA home loans so ask if they are approved before scheduling your appointment.

Student Loan Debt Hampering First Time Buyers

High levels of student loan debt may be hampering and in some cases preventing many prospective first time home buyers from securing a mortgage.

A changing workforce and rising college tuition are just two of the factors leading students to take on more debt. Even as unemployment across the United States continues to shrink, there is still a considerably high unemployment level for adults between the ages of 18 to 30.

The Importance of First Time Buyers

First time home buyers have long been the cornerstone of the housing market. As demand for housing has waned in recent months among rising interest rates and home prices, many housing experts were hoping that first time home buyers would partly fill in the void. But that hasn’t happened, and some believe that student loans may be to blame.

Lawrence Yun, chief economist at the National Association of Realtors, says that for the past six months only about 30 percent of new home sales are coming from first time home buyers. “And this is historic lows,” he says. “Typically it should be about 40 percent to 45 percent. And I believe the key reasoning is that many of the younger households, they are saddled with student debt.”

To give some perspective, student debt has tripled from where it stood a decade ago and now stands at more than $1 trillion. That’s roughly 7% of the United States GDP for 2012. And to make matters worse wages for college graduates have actually dropped. In the meantime everything from food, gas and housing has also gone up.

The problem is student loan debt can contribute heavily to a potential buyer’s debt-to-income ratio (DTI). Depending on how much money you make even paying back 300 or 500 a month on loans push some above the threshold that many lenders will allow. Of course, this doesn’t take into account other forms of debt including car payments, child support and credit card bills.

What Can Be Done?

Rising student loan debt is so interconnected with multiple pieces of the economy, it can be hard to know where to begin. For starters, there needs to be serious effort put into the lingering problem of high unemployment among young adults – far too many of whom have joined the ranks of the working poor. But there is another important step that could be taken on behalf of the FHA which could help allow more people to buy their first home.

The FHA currently allows the lenders that it does business with to ignore student loan debt that has been deferred for more than 1 year when determining a borrowers eligibility to pay back a mortgage. So, even if you owe 40,000 in student loans, and that debt has been deferred, it won’t hurt your chances of getting a loan. However, the FHA is looking to get rid of that waiver this year. Should the FHA keep this waiver in place at least until unemployment fell a bit more, it would help more people to be able to take out a loan for their first house. If the FHA does decide to scrap the waiver, then that means there is still a narrow window for recent graduates to get their first home.

Fix Your Interest Rate with an FHA Streamline Refinance

Many homeowners are still stuck in an adjustable rate mortgage (ARM) loan. These loans can be extremely risky because they can go up at any time. Families that have budgeted for a specific loan amount could find themselves strapped for cash if their interest rate and monthly payment goes up. An FHA Streamline Refinance can fix your interest rate so that your monthly payments stay the same, no matter what the market is doing.

How Does an ARM Loan Work?

An adjustable rate mortgage loan assigns each borrower a margin over the index. For example, when your loan is approved the margin is the specific interest rate that is assigned to you. In our scenario,we will use the rate of 3 percent. Your rate will be tied to an index such as the Cost of Funds Index (COFI). As we write,this post COFI is at 0.783. A year ago it was at 1.00. In this scenario,the borrower’s interest rate would be 3.783 and a year ago it would have been 4 percent.

With an ARM loan,your interest rate can go up or down based on the changes to the index. How often your interest rate changes is based on how your loan was initially set up. The problem is that ARM loans are typically uncapped. If the market shifts drastically, you could be stuck with a loan you have no way of making the payments on. These variable rate mortgages can be disastrous for families on a tight budget.

Fixed Rate Mortgage Loans

When you have fixed rate mortgage loan,your interest rate is set for the duration of your loan. If your loan is for fifteen years, the interest rate and payment will be the same every month for fifteen years. With a fixed rate loan,the only thing that can change your monthly mortgage payment is your taxes or insurance cost going up or down. This will change your escrow payment, which is typically added on top of your principal and interest payment to create your total payment (PITI).Since taxes and insurance rates do not frequently adjust this enables homeowners to set a budget and stick with it. A fixed rate mortgage loan helps families to plan for their financial future by taking the guess work out of the monthly mortgage payment.

FHA Streamline Refinance

If you have an existing FHA home loan that is an ARM, you can use the FHA Streamline Refinance program to fix your interest rate. The FHA makes it extremely easy to fix your interest rate using this program. They don’t require verification of your income, employment, or even credit score. As long as you are making your loan payments on time you can turn your adjustable interest rate into a fixed one in a few short weeks. The FHA offers this loan program because by fixing the borrowers interest rate, the FHA increases the chances of their being able to make their loan payment long term.

For more information on ARMs, Fixed Rate Mortgages, and FHA Streamline Refinances contact an FHA approved mortgage lender. Interest rates are projected to rise in 2014 so fix your rate now before your loan payment increases.