One Borrower Has Income One Borrower Has Credit Score

August 18, 2010 By Leave a Comment

When one borrower has most of the income… the other borrower has good credit scores… there ARE options for purchasing a home. Look at the question we had yesterday:

“We want to purchase a home, and I want to know if we can get it.  My husband currently has a mid credit score of 538,  and mine is 678.   He makes about 52,000 and I make 25,000.  I’m still in graduate school full time.  We saved  $4,000 for closing cost so far.  We want the house by the end of October 2010 Can we get a loan?”

Option 1:

Purchase a home using FHA, and have a non-owner occupied co-borrower on the loan with the borrower who has good credit scores. If you know that you can make the payments on your own, then having a parent, or other family member, on the loan will not be a burden to them.  After you’ve made 12 months of payments (and by all account mortgage interest rates will still be low a year from now) you can refinance the loan and take the family member(s) off. [Read more...]

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FHA Home Loans for Single Parents

August 14, 2010 By Leave a Comment

With the Economy in a “slump” statistics show more and more families have a single parent.  If you are in this situation, and want to purchase a home, there are some very specific details you should know:

  • FHA requires a 3.5% Investment into the Property, which is lower than the 5% charged on most Conventional Loans.
  • The down payment for a FHA loan can be a gift (for more info about FHA Down Payment requirements click here).
  • FHA loans, in today’s lending environment generally require 12 months of clean credit, and a credit score of at least 620.
  • FHA will consider part time jobs if you’ve only had that part time job for 18 months – most other underwriting requires you to have a 24 month history of working 2 jobs. (and let me just say, if you are a single parent working 2 jobs – God Bless you! WOW! Talked to a Dad today who is doing that!)

CHILD SUPPORT or Alimony

You have to have evidence that you have received child support, on time, for a year for it to count as income. One of the most common problems we see is when a mom will get a child support check, cash it, and deposit part of the check into their account.  In order to have EVIDENCE that you are receiving that income, we need to have bank statements that reflect the entire “check.”  We suggest that mom’s deposit the child support check into their account at the same time each month.  DITTO with Alimony.

We must have evidence that you will receive Child Support or Alimony for at least 3 full years after the date of closing.  Let’s say you receive $300 for each of your 2 children until they are 18.  So if you have a child who is 12 and a child who is 16 – we would only count the 12 year old’s portion of your support in qualifying you for the mortgage.

If you PAY Child Support or Alimony… we are only going to count that payment against you (like a car loan) if you have more than 9 months of payments left per your agreement.  If you are behind on Child Support or Alimony, and the court is garnishing wages for those payments, we would need 12 months history of that “work out” being made on time.  You will need a credit score of at least 620.

Non-Occupying Co-Borrower

You can purchase a home without being married to the other borrower. You could buy the home with your parents (for instance), and they would not have to live in the home. We would take all of their income, all of your qualifying income, all of their debts and all of your debts, and see what the ratios look like.  Having someone purchase the home with you helps from an Income Qualifying standpoint.  Having someone else purchase with you will not help a single parent with CREDIT issues.

Purchasing a home with someone who is NOT a family member would require that the other person live in the property with you. Again, you take all of their income, all of their debts and add it to yours… and their credit needs to be at least as good as no late payments in the last 12 months and at least a 620 credit score. (Don’t have a 620 score yet?  Click here for tips you can start doing today to improve your credit score! 8o))

RoomMates

We are seeing a ton of single parents who are living with OTHER single parents.  If you HAVE a roommate, or if you are GOING to have a roommate – it is very very difficult for us to count that income.  If the roommate is not going on the mortgage loan with you, 99% of the time we can not count that rental income.

Previous Mortgage

If you and your Ex owned a home, and the mortgage was NOT in your name – there’s nothing to worry about.

If you owned a home, and the mortgage was in BOTH names, and you Quick Claim Deeded the Property over to your Spouse… you are STILL responsible for the mortgage.

If the Seperation Agreement says that the SPOUSE is responsible for the mortgage payment -and you were ON the mortgage loan… you are STILL responsible for the mortgage. Unless you have been TAKEN OFF of the mortgage – let’s say the other person refinanced the mortgage and took your name off, or if you sold the home, you are still responsible for the mortgage.

If there was a Short Sale, or Foreclosure on that home, and you were on the mortgage, (even if you did not live there at the time and you the separation agreement said you were not responsible for the mortgage) click here for more details and time lines.

HERE’S THE GOOD NEWS!

Less income, in today’s real estate market – buys MORE home. With Interest rates in the 4% range, and home prices coming so far down – a parent who makes $38,000 with no more than $350 a month in debt can purchase a home in Raleigh with 4 bedrooms, a 2 car garage, in a NICE neighborhood for around $200,000.  The TOTAL payment, Taxes, Insurance, Mortgage Insurance, Homeowner dues and ALL on one we looked at for a mom yesterday was $1050 a MONTH!

So, if you make $35,000 – and receive $300 a month in child support… you could purchase a nice home, and you could GET a room mate to help you make your payments!  NOW really is a great time to purchase a home!

If you are a Single Parent, interested in buying a home, call Steve and Eleanor Thorne at 919-694-5058.  Each situation is different.  Let us help you with a plan that will mean you can purchase a home! We know the FHA guildelines in NC and we love helping people buy a home for their family!

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FHA PMI Changes 10/4/2010

August 13, 2010 By 2 Comments

FHA Continues to make changes to their PMI Rates.  Because of the number of defaults – the monthly rates and the upfront rates for FHA Mortgage Insurance continues to change.  We keep this information on the site for folks who received a FHA Mortgage loan on, or around October of 2010.  We do have the most up to date information on the rates – in the event you are CURRENTLY looking for a FHA mortgage loan and want to know what the FHA PMI rates are today.

For about the 5th time in the last 36 months FHA is changing the way it charges Mortgage Insurance.  While this is a pretty major shift in the Way Mortgage Insurance is calculated for FHA, it’s only about a net $20 per $100K borrowed difference.

HISTORY of FHA’s PMI (Mortgage Insurance)

First off, it’s not called PMI. FHA doesn’t MAKE mortgage loans, they insure them.  The mortgage insurance that they charge is referred to as MIP (cleaver I know, Mortgage Insurance Premium).  I refer to it in my blog posts as FHA’s PMI... well because from a Consumer’s standpoint it works just like PMI, and most people are familiar with that term.

MIP has been charged TWICE to borrowers for YEARS. FHA collects an UpFront Mortgage Insurance Premium that’s gone from 1.5 to 1.75 t 2.25 to 1% of the loan amount.  In years past they’ve refunded part of this UpFront Premium… so if you took out a loan in say 2002, and then you paid that loan off through a refinance in 2004… you received a substantial chunk of that premium back.

Then the Economy went south, and with the changes they made in 2008, they did completely away with the refund…

The other way FHA collects the premium, is in the MONTHLY MIP premium.  In year’s past, that MIP collected on a monthly basis for loans with less than a 5% downpayment was.55%.  For loans where the borrower made more than a 5% downpayment, the MIP was .50%.

How These Changes Compare to the new October 2010 MIP Rates

Okay, because I can pretty easily do the math in my head, let’s compare the “old” rates for FHA Mortgage Insurance to the “new” rates based upon a $100,000 sales price with a “fictitious” mortgage interest rate of 4.25%.

DownPayment Upfront MIP Monthly MIP Loan Amount
With Upfront MIP		 Total Payment
with MIP		 Difference
NEW Method of Calculating MIP
3.5% 1% $75.75 $97,465.00 $555.22 + $24.60
5% 1% $67.96 $95,950.00 $539.97 + $21.64
OLD Method of Calculating MIP
3.5% 2.25% $45.22 $98,671.00 530.62
5% 2.25% $40.47 $97,137.00 518.33

These numbers, at $100,000 Sales Price don’t look that dramatic…  Let’s take the same format, and change the Sales Price so that we can take advantage of the maximum Loan Amount for Wake County, NC $295,000.

So with a Sales Price of $305,000 the numbers look like this…

DownPayment Upfront MIP Monthly MIP Loan Amount
With Upfront MIP		 Total Payment
with MIP		 Difference
NEW Method of Calculating MIP
3.5% 1% $222.95 $297,268.00 $1685.33 + $66.93
5% 1% $210.56 $297,268.00 $1672.94 + $67.08
OLD Method of Calculating MIP
3.5% 2.25% $137.93 $300,947.00 $1618.40
5% 2.25% $125.39 $300,947.00 $1605.86

Well… what do you know?  It’s STILL not that dramatic a difference.  I know my peers are on Facebook, and sending around video saying that this is a “Tax” on home owners.  It’s not.  It’s a way for FHA to get the cash flow they need, while mortgage loans are defaulting.

HERE’s what I think is interesting! You can buy a house with 2723 square feet, in Raleigh, 4 bedrooms, with a 2 car garage built in 2009 for $219,000. With these new FHA calculations, and with today’s interest rates, your down payment is $7,665 (this can be a GIFT) and your TOTAL monthly payment, including Homeowner dues, and taxes and insurance and EVERYTHING is still less than $1050 a month!

If you have pretty good credit (scores above 620) and not more than $350 a month in debt – a family making only $38,000 a year qualifies for this house! Now THAT my friends, is something to get excited about!

If you are considering a FHA mortgage loan in NC, and you want more information about qualifying for a FHA mortgage loan in Cary or Raleigh NC  - please call Steve and Eleanor Thorne, Mortgage Banker in Cary 919-649-5057.  We know FHA Mortgage Programs, and we have the best Mortgage Rates available!

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Income Qualifications FHA Mortgage Loans in NC

July 29, 2010 By 2 Comments

FHA Mortgage Loans are generally easier to qualify for than a more Conventional Home Loan from Fannie Mae or Freddie Mac.  

Specific income qualifications we use to qualify borrowers for mortgage Loans:

  •  FHA allows us to “count” part time income if you have more than an 18 month history of working 2 jobs. 

We can also count tips, as long as you report them! 

Many people in North Carolina working in the IT field are working on long term contracts, they are not actually the employee of the company where their office is.  If you’ve been working on contract for over 18 months we can generally get the loan approved (takes some extra work!).

If you are laid off every year at the same time, we can still get your loan approved.  We just got a loan approved for a guy who works at a local University in their food services department.  Every year, right after graduation in May, he’s laid off.  In August, he is rehired.  He’s done this for 5 years.  Once he receives his August paycheck (in a few weeks) we will be able to close his loan!  We could count his unemployment AND his regular income from the University / State to qualify him!

Using Rental Income to qualify for a FHA mortgage Loan can be tricky – if this is the situation you are in, please click here for details.

One of the first questions we will ask when we speak with you… is how much of your total income you feel comfortable spending on housing. This ratio of Gross Income to Housing Expense helps the lender decide whether you can comfortably afford a home.

When you are qualifying for a loan, a we will use your gross income. That means all the money you earn before taxes, including overtime, commissions, dividends and any other sources. Again, we are looking for the income BEFORE insurance and any money goes out to 401K. If you receive Social Security or Pension income – we will gross that income UP for qualifying!

Your total monthly housing expense as a percentage of your monthly income is called the housing expense (a.k.a.: front-end) ratio. FHA wants a ratio of about 29% of your income to your house payment (including the mortgage, property taxes, mortgage insurance, hazard insurance and any Home Owner Association Dues).

Calculate what your new monthly mortgage payment should be by using the formula:

Gross Monthly Income multiplied by 29% = Maximum TOTAL Mortgage Payment.

Especially in situations when someone is just entering the job market the 29% of gross income just doesn’t “buy” the house of your dreams!  That’s one of the benefits of easier qualifying guidelines for FHA home loans! To qualify, you’re allowed to spend up to 34% of your income on your house payment, as long as everything else in your application shows that you can handle the “stretch.” (READ, as long as you don’t have a ton of other payments, like a $500 car payment!) 

Another thing the FHA Mortgage Underwriter will look at in considering your loan for approval is the difference in your housing expense now to the expense you’ll have if you buy a home. The smaller the increase, the stronger your application looks. So if you are paying $1000 now and your new payment will be $1400, that’s probably okay if your housing ratio is not too high.  If you are paying $1000 a month now, and your new payment is going to $1800… and you have a fairly high housing ratio… we are going to look and see that you have been SAVING money every month at $1000.  We can use that information as a reason to make the loan!

If you have questions about qualifying for a FHA Mortgage Loan in NC, and you are looking for the BEST Mortgage Rates – please call Steve and Elaenor Thorne, 919-649-5058.  We are Professional Mortgage Planners with over 20 years of experience closing FHA Home Loans in NC!

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FHA Appraisal Requirements 2010

July 7, 2010 By 1 Comment

Earlier this year, FHA clarified who was qualified to perform an appraisal.  This seems kinda’ silly, because the appraisers must be on the FHA Appraiser’s Roster… but with the HVCC ruling in May of 2009, big banks started using “management” companies to handle the appraisal process.  The companies quickly became a profit center for the big banks, and that’s when the fun began.

In the fall of 2009, it was not at all surprising for an appraiser from Burlington, NC to be “assigned” a FHA appraisal for a property in Raleigh, NC!  In the Mortgagee Letter 2009-28, FHA clarified the following for the “management” companies:

An appraiser who is primarily experienced in appraising detached, single family dwellings in one market may lack the knowledge, experience and/or sources for obtaining market data that will enable the appraiser to perform quality appraisals on condominiums or manufactured homes in the same market or detached, single family homes in another market a short distance away.

The valuation principles for appraising all residential properties are essentially the same no matter the market in which a property is located, however not all appraisers are knowledgeable and experienced or have access to sources of data for all markets. A lender must not assume, simply because an appraiser is state-certified, that the appraiser is qualified and knowledgeable in a specific market area. It is incumbent upon the lender to determine whether an appraiser’s qualifications, as evidenced by educational training and actual field experience, are sufficient to enable the appraiser to competently perform appraisals before assigning an appraisal to them.

If you are considering a purchase or refinance in NC, please call Steve and Eleanor Thorne, Certified Mortgage Planners, 919-649-5058.  The good news is that Fannie and Freddie just made a similar ruling about appraisals, for more information please click here.

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FHA Guidelines on New Jobs

June 28, 2010 By Leave a Comment

Maybe you just graduated from College – or maybe you have been out of work and are so excited because you finally got a job!  YEAH!  You have a new job, and now you want to get a new house!

Well – go ahead and buy a house.  If you are getting a FHA Mortgage Loan, you will need to have at least 30 days of paystubs before you can close.  So if you have a change in employment of any kind… this applies. (read don’t change jobs while you are in process!)

For most loan programs, we just need ONE paysub, but for FHA we need a full 30 days of paystubs… this really doesn’t make sense sometimes. We have a customer that just graduated from Vet School, she’s worked as an Intern for 2 years (so it’s not like it’s her FIRST job)!  She wanted to purchase her first home, and close for the tax credit.

Well, her new job doesn’t start until July 1st.  If she could get a “non-revocable” contract, then I think the underwriter would have allowed it to close… but who is going to give someone a “non-revocable” contract!?!?  I mean we didn’t just find this out, we knew it within 3 days of taking the loan application, but still, I’ll  bet there ARE tons of people who are trying to close in time of the Tax Credit, and for some small little reason they can’t.

If you are ready to purchase a home in NC, and you are looking for a FHA loan – give us a call!  We know the FHA guidelines, and if there’s a way to make your situation work, we’ll help you get closed!!  Steve and Eleanor Thorne, Mortgage Banker in Cary , 919-649-5058.  We answer First Time Home Buyer Questions!

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We Are Pulling Credit Report Right Before Closing

June 2, 2010 By Leave a Comment

Fannie Mae made some changes in the last 30 days that could delay closings… as a lender, we are now required to verify that any credit inquiries you have in those last few days prior to closing are not really an extension of credit!  So don’t buy a sofa, or a refrigerator… or ANYTHING ELSE between the time of loan approval and closing… or you could be jeopardizing your closing date!

Effective with loans closing 6.1.2010 Lenders are now required to run a second credit check right before the loan funds… just to make sure you haven’t run up your credit cards, bought a new car, or added any sort of debt DURING THE MORTGAGE PROCESS.  (for more details click here) [Read more...]

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FHA Lending Sign Of Weak Housing Market?

May 26, 2010 By Leave a Comment

FHA has money to lend, and boy is it flying out the doors! David Stevens, the agency’s head is quoted in Bloomburg as saying, “FHA lending last quarter may have topped the combined volume of government-supported Fannie Mae and Freddie Mac in a home-lending market that’s still a government-financed market.”

Is that GOOD news?  Well, apparently not.  Mr. Stevens told the Mortgage Bankers Conference the week before that:

“This is a market purely on life support, sustained by the federal government,”

“Having FHA do this much volume is a sign of a very sick system.”

I like David Stevens. He’s a true Mortgage Banker, and he has been open and “transparent.”  But I’m wondering if he’s not perpetuating some of conversation on the Hill about needing more Mortgage Insurance (Guarantee Fee) for USDA Home Loans!

We do not need to be causing these huge alarms right now Dave!  Shhhhh!

The April Housing numbers were released today – and they were the best in 2 years… but the tax credit ended in April, and most anybody who knows anything about anything believes that’s why April was so good!

If you are looking for a mortgage lender in NC – please call Steve and Eleanor Thorne, Mortgage Banker in Cary 919-649-5058

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FHA Streamline Refinance When You Do Not Occupy Property

May 25, 2010 By Leave a Comment

FHA allows you to Streamline Refinance when you do not occupy property.  This was actually news to me, because we always tell folks that FHA is ONLY for use as a Primary Residence!

So we have a borrower who owned a home in Ohio (financed via FHA), moved to NC – but could not sell the home in Ohio. They purchased a home in NC while renting the other one out.

The rate on their home in Ohio is 6.25% – which is a good rate… except that FHA rates have DROPPED so much right now, they wanted to see if they could get a little better position!

Turns out we can save them $275 a month, AND keep it a FHA Loan! Yeah!

Here’s the deal – must be a Streamline Refinance, meaning:

  • no appraisal
  • no increase in the base loan amount
  • must pay the closing costs out of pocket
  • the lender CAN par price the loan to pay some of the costs
  • can NOT remove a co-signor

This is seriously good news if you have what is now Investment Property that has a FHA loan on it!  If you want to see if we can help you lower your payments with a refinance, call Steve and Eleanor Thorne, Mortgage Banker in Cary 919-649-5058

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Congress Making Changes to FHA Mortgages

April 30, 2010 By 2 Comments

THE FHA PMI Mortgage Rates referred to in this post is OUTDATED.  We have the most Updated FHA PMI information, but keep this post here for the people who got a FHA loan around April of 2010.  For some folks, FHA Mortgage Insurance was refundable – and for others it was not.  FHA has made 9 changes to it’s PMI rate in the last 3 years!

 

The House Financial Services Committee acted yesterday to move forward H.R.5072, “FHA Reform Act of 2010″ which, in part, makes a move to raise the ceiling on annual FHA mortgage insurance premiums.

FHA does not make mortgages loans, they INSURE them. As an INSURANCE Agency, they are required to hold reserves against any claims  - and because the national default rate is still very high, they’ve had tons of claims.  They are required to hold a 2% capital reserve rate, and it had fallen to .53.

FHA’s Mortgage Insurance Premium is kinda’ like PMI.

Earlier this year Congress approved changes to increase the UpFront Mortgage Insurance Premium (MIP) FHA charges to 2.25%. They also changed the amount of Seller Contributions to 3% (from 6%).  The latest changes will increase the amount of MONTHLY Mortgage Insurance Premium (MIP) higher, in a gradual process.  FHA says it will increase the monthly MIP to an annual rate of @1.5%.

This will affect the “affordability factor” of purchasing for buyers. Currently, a FHA mortgage of $290,000 has a monthly MIP payment of $132.91.  When the MIP is increased to the full 1.5%, that same $290,000 loan will have a monthly MIP charge of $362.50.

If the full Congress approves the annual increase, FHA will then shift some of the upfront premium to an annual premium to reduce the burden on borrowers at closing.

Either way – the cost of borrowing from FHA is going to be more expensive over time – and borrowers will be looking for property that is $30,000 to $40,000 LESS than the properties they are purchasing now. That’s important to remember for those of us working with First Time Home Buyers!

The GOOD NEWS is that it looks like the provision to force FHA downpayments from 3.5% to 5% was dropped. We’ll continue to monitor this.

If you are considering a mortgage loan in North Carolina, and you want more details on FHA  Mortgage Loan Guidelines – please call Steve and Eleanor Thorne, FHA Mortgage Loan Specialists!  We have over 20 years of experience providing homebuyers with the BEST mortgage rates available!

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