FHA Announces Changes to Lending Guidelines Effective July 14, 2008!!
June 16th, 2008 categories: Chico Buyers, Chico CA Real Estate News, Chico Financing
by Ken Phillips
For the first time in history, FHA will begin using borrowers credit scores to determine risk based pricing and mortgage insurance premiums.
Up until now credit scores were not really a factor used in FHA risked based pricing. With FHA relaxing some of their strict requirements recently it was easier to qualify buyers with credit scores low enough to prevent them from qualifying for “conventional” financing. As a matter of fact, with 100% financing a thing of the past basically, FHA financing has become very popular among lenders looking for high loan-to-value loans as FHA financing, which can cover up to 97.75% of the purchase price if a buyer is paying their own closing costs on a purchase, still carries low interest rates compared to high loan-to value conventional financing. FHA is a great loan for first time Chico home buyers with little money to put down and/or with low credit scores that prevent them from qualifying for a conventional loan. On July 14, 2008 FHA will begin implementing these changes and it will affect qualifying for many of borrowers.
Here’s a look at the ten major changes to the FHA guidelines:
1. Borrowers with either no score or at least a 500 score may get an LTV >90%.
2. Borrowers with a score less than 500 get a maximum LTV of 90%.
3. Borrowers without scores will require manual underwriting. What this means is no automated underwriting is available i.e. DU, LP, or DO and will require more time to give the realtors/agents a TRUE pre-approval letter.
4. Upfront Mortgage Insurance Premiums will range from 1.25% to 2.25%, depending on score. These upfront MI premiums will still be allowed to financed into the loan.
5. The Monthly Mortgage Insurance will range from .50% to .55% depending on the borrower’s credit score.
6. The premium is based on the borrower with the lowest score.
7. If one of the borrowers has no score, then the Non-Traditional credit grade is used. Non traditional credit is having trade or credit lines added to the borrowers credit report and obtaining a credit rating. These non-traditional trade/credit lines can be utility bills such as water, cable, electric, gas, phone, etc., cellular phone service, and rental history to name a few.
8. Credit rescoring is allowed to improve a borrower’s credit score. There are fees associated with credit rescoring and each bureau charges fees for each tradeline disputed.
9. All FHA Secure refinances >95% LTV with delinquencies have a 2.25% UFMIP and .55% MMI.
10. Along with purchases, these changes will apply to cash-out, rate & term, and non-delinquent FHA Secure refinances.
Feel free to call Ken 865-769-6420 if you have any questions regarding FHA financing or any of Countrywide’s many loan programs. Or, fill out an application online so that Ken can suggest a loan program tailored for your needs!
| Discussion: No Comments »
Paperwork you need to get approved for a Chico CA Mortgage
January 7th, 2008 categories: Chico Buyers, Chico Financing
Here is an easy list of paperwork you will need to provide your lender in order to get approved for a loan on a Chico residential property. It’s really not that bad- I promise!
If you are an employee, make copies of:
- · Pay stubs for the last 30 days
- W-2s for the past two years
- · Bank statements for the past two months (all pages!)
- Current statements for any other assets such as a 401K or mutual fund.
If you own a business, bring:
- Income tax returns for the past two years
- A current balance sheet for your business
- A year-to-date profit and loss statement
If you receive additional income (child support, disability, income property, etc.) bring:
- Income tax returns for the past two years
- Copy of current lease(s) for rental property
- Any other evidence that proves you are receiving income from other sources
Miscellaneous items to bring:
- A phone number for your employer, so that employment can be verified
- A copy of the purchase agreement signed by all parties (your Realtor can help here)
- A copy of your driver’s license
I realize that the thought of compiling this set of documents can seen overwhelming. After all, there are hours to be worked, school to be attended, children to feed, laundry to do, and bills to pay. I know the argument all too well! However, if you dream of purchasing Chico CA Real Estate and becoming a homeowner, it is time well spent!
Also read:
Your Chico CA Loan Application- It’s Not THAT Hard!
What is the Difference between Prequalification and Preapproval?
Why Should I Get Preapproved for a Chico, CA Home?
Like what you’re reading?
Subscribe to: Chico CA Real Estate Blog and MLS Listings Search!
Looking to buy or sell Chico CA Real Estate? Need a Top Producing Chico Realtor? Call Sandi Bauman 530-864-5407 or email sandibauman@sbcglobal.net. Specializing in REO, residential, relocation, investment & ag property.
| Discussion: 5 Comments »
Your Chico CA Loan Application- It’s Not THAT Hard!
January 5th, 2008 categories: Busy Girls Guide, Chico Buyers, Chico Financing
I haven’t quite figured out the rationale, but the prospect of getting prequalified or preapproved is often an intimidating process for a Chico Buyer.
For some reason, folks will often avoid it as long as possible, and build it up in their minds to be some horrible, awful procedure. I find myself listening to every imaginable excuse, and smiling, because I know that a mountain is being made of a molehill. It’s kind of like trying to convince your kids that if they would just put the broccoli in their mouth, they will get it over with, and can then move on to the ice cream!
- First off, a buyer does not have to go to the hassle of making an appointment. No need to get dressed, leave the house, and make your way to a stuffy, intimidating office with some guy in a 3 piece suit! In this age of convenience, many lenders will accommodate your request for prequalification by phone, fax or email. In the span of a short phone call, the lender can get the basic information he needs from you to start the process.
- Second, just because you talk to a lender to get prequalified, it doesn’t mean you’re married for life! You may decide, after your initial phone call, that you don’t like the way the lender chews gum in your ear. You might also decide, after talking to your best friend, that the lender isn’t very reputable. Fine. NEXT!
- Third, finding a great Lender shouldn’t be difficult. It should be fairly easy considering you have an excellent resource for a referral in your Chico Realtor. Consider, for a moment, that you’ve already done the work to find a top producing, highly recommended, ethical Realtor that you can actually talk to. Doesn’t it stand to reason, that the Realtor, given the choice, will choose to recommend another professional that will the get the job done efficiently and effectively, thereby ensuring a happy buyer? (In case you’re wondering, there is no $ passed between the lender and the Realtor. The payoff to a referral, is a job well done for the client).
Need a recommendation for a good Chico Lender? Call me.
Related articles:
What is the Difference between Prequalification and Preapproval?
Why Should I Get Preapproved for a Chico, CA Home?
Lenders beware: How to lose a Chico, CA Realtor (and therefore buyer) in 3 days.
Like what you’re reading?
Subscribe to: Chico CA Real Estate Blog and MLS Listings Search!
Looking to buy or sell Chico CA Real Estate? Need a Top Producing Chico CA Realtor? Call Sandi Bauman 530-864-5407 or email sandibauman@sbcglobal.net. Specializing in REO, residential, relocation, investment & ag property.
| Discussion: 9 Comments »
First Time Home Buyer Disaster- Don’t Let This Happen to You!
December 28th, 2007 categories: Chico Buyers, Chico CA Real Estate News, Chico Financing
Don’t mess with your credit or change employment until your Chico escrow closes!
While perusing a fellow blogger Janis Gagliardi’s recent post it occured to me that the message bears repeating for potential Chico CA buyers.
Here is the full story, courtesy of PortOrangeJuice.
I myself have had two different buyers in the past year or so that were stopped cold in their path to purchasing a new home. In a nutshell, the escrows had progressed to within a day or two before the closing. In both cases, the lenders re-checked the buyers credit and employment status just minutes prior to funding the loan.
1. The first couple had just charged new appliances to their credit card the day before. In doing so, they knocked their qualifying ratios out of whack just enough to destroy their loan package.
2. My second buyer either quit her job or was fired on Wednesday.When the lender checked with her employer on Monday, all bets were off! No job, no loan.
Apply Janis’ tips to ensure you close escrow on your Chico dream home!
DO NOT increase your credit card balances and or loan balances
- DO NOT apply for additional or new credit, or put balances on a paid credit card
- DO NOT ignore late payments and/or collection notices that during the course of your loan
- DO NOT purchase anything that is “the same as cash” – it will show on your credit report as a debt
- DO NOT buy furniture, cars, or appliances until after closing. What good is furniture if you don’t have a new home to put them in!
- DO NOT lend money to family members, friends, etc. if you need it for closing.
- DO NOT store your money at home. Place it in a bank account so that it can be documented as savings throughout the loan process.
- DO NOT have overdrafts on your checking account.
Subscribe to: Chico CA Real Estate Blog and MLS Listings Search!
Looking to buy or sell Chico CA Real Estate? Need a Top Producing Chico CA Realtor? Call Sandi Bauman 530-864-5407 or email sandibauman@sbcglobal.net. Specializing in REO, residential, relocation, investment & ag property.
| Discussion: 7 Comments »
Chico CA Real Estate Mortgage Meltdown
December 3rd, 2007 categories: Chico Financing
by guest writer Mike Wiegert, broker, Chico Homes
SUBPRIME! TEASER RATE! ADJUSTABLE RATE MORTGAGE!
Locally, these terms were once only known to those people that worked in the Chico CA real estate or mortgage business and a small percentage of people that took an actual interest in the workings of national mortgage markets. Today, these words are commonly known to anyone who reads a newspaper or watches a daily news program.
Our newfound familiarity with mortgage terminology is primarily due to the recent crisis surrounding a near collapse of the sub-prime mortgage markets. Why do they call it market? Because, essentially that is what it is, or was. In recent years, Chico homebuyers and those refinancing existing Chico home loans had a huge array of loan programs to choose from. Much like your favorite grocery store, some of these products were sensible and had value in the long run. Other products were just a quick way to get a new homebuyer, often with low or marginal credit scores into a Chico property with little regard for future events.
A commonly used mortgage in the sub-prime market is the 2/28 ARM. This is an adjustable rate mortgage where the rate is fixed for 2 years, and is then reset to equal the value of a rate index at that time, plus a margin. Because sub-prime margins are high, the rate on most 2/28s will rise sharply at the 2-year mark, even if market rates do not change during the period. This means that while the loan is affordable to the borrower at the initial rate, it may not be affordable after two years when the rate is reset. This type of mortgage is really only of value to borrowers who are assured of certain events that involve a significant increase of income, a situation that is unusual to most of us.
For the average wage earner, a dramatic increase in housing payment is a formula for disaster. Therein lies the problem: a sharp rise in mortgage defaults and foreclosures of those once euphorically happy homebuyers. So whom do we blame? We could blame the eager and enthusiastic Chico mortgage lenders who promoted the loans, rationalizing the validity with the forecasts of increasing appreciation of the homes. We might take a swing at aggressive Chico CA Realtors, also believing that these products were the only possible way for their customers to realize the great American dream of homeownership. We could hold responsible the Chico homeowners themselves for getting caught up in the buying frenzy with little or no regard for their own future.
How many people out there have ever bought a car that they couldn’t afford, only to have to sell it for a loss and absorb the shortfall? Why blame any particular person at all? We all got into this mess together, and we all are feeling the results as the issue resolves itself. So, how is this glob of knots going to untie itself? I don’t think that anyone has a convincing answer to that monumental question.
Treasury Secretary Henry Paulson discussed a plan at a meeting with top banking regulators and industry representatives last Thursday and is expected to announce details of the proposal this week.
The plan would freeze mortgage rates for stressed borrowers who took out loans with low teaser rates that are due to reset to a much higher level. The obvious benefit of such a plan would be that these borrowers would, for the time being, be able to hold on to their homes. At the same time, the lenders won’t be inundated with foreclosures, thereby forced to open large departments to deal with holding, maintaining and marketing these properties.
Many folks are really angry that the Federal Government would step in and bail out lenders that are experiencing high rates of foreclosures, and help individuals desperately unable to afford the higher payments of their newly reset mortgages.
Ultimately, they feel that these foolish lenders and borrowers will be sponsored by the American taxpayer and in truth, they are right. It’s always the taxpayer dollar that is used to support a national crisis, isn’t it?
Like what you’re reading? Click here to subscribe to Chico CA Real Estate Blog!
Looking to buy or sell Chico CA Real Estate? Need a Top Producing Chico CA Realtor? Call Sandi Bauman 530-864-5407 or email sandibauman@sbcglobal.net. Specializing in REO, residential, relocation, investment & ag property.
| Discussion: 3 Comments »
