FHA HOME LOAN's Qualifications

  • Posts: 208

Replied by shark6 on topic Re: FHA HOME LOAN's Qualifications

I mentioned that title insurance is one of the largest components of the closing costs. I neglected to mention that recording/document stamps is possibly the largest expenditure of closing costs or second to title. This is the cost to record your deed in the county records. There is a formula for this based on an amount per thousand cost of the house.

Also note, that you can get up to 3 or 6% of the home value paid for you towards your closing costs/downpayments from the builder, seller or third party. If you are purchasing a new home, it is not uncommon for a builder to do this if you use their lender and to throw in extr perks as well. From a private seller, because the market is soo slow, folks are paying money towards the buyer's closing costs. Sometimes, they just tack this amount on top of the loan so you are not getting it free but it depends.

The bottom line is don't worry as long as you can get and maintain Fico scores of 660-680, have about $3k or more saved, no big debt (really, put off getting the new car until after you have the house, this will surely screw your ratios) and you will be fine.

FHA is still the best way to go imo and FICO of over 600 is fine even though they say that they don't look at it, it helps to have decent scores. Try to get all collections off or paid on your reports and u will be fine.
11 years 4 weeks ago #16

Please Log in or Create an account to join the conversation.

  • Posts: 208

Replied by shark6 on topic Re: FHA HOME LOAN's Qualifications

Closing clost can be anywhere from 5-7% of your total loan but this varies by state and county. The bulk of this amount is from title insurance which protects you and the builder if there were any titel defciency et. The builder says that they own the land free and clear and you purchase it which is recorded in your county offices. 3yrs later, Charlie sues you and the builder stating that his great-grandfather deeded him the land and somehow the builder got it through forgery or when he was given the land, it wasn't recorded properly and maybe his great-grandfater estate sold it erroneously.

Guess what, without the title insurance, you and the bank are out of your asset. Always get owner's title insurance. Some times the agent will tell you to only get banks title insurance but even though this would save you money, you would be out of a house and more money if your property were to be proven defected.

Escrow.

What I was referring to was based on new property. In this case, the builder is only paying taxes on the raw land. When a house is built on that, the taxable base increases but it won't be estimated until the next years taxes after you have purchased your home. This is the reason why people are sticker shocked. This happened to us, our first years prop. taxes were $1280 which I knew was grossly underesttimated and based on theland. The next year, it jumped to $2500 approx and the third year , just under $5k. We had our mortgage increase by close to $500 until that shortage was paid as the bank paid the property assessment office here and we had to pay the bank back.

When you are buying a resale, this hardly happens as the homeowner would have already been paying the proper taxes.

If you are contemplating moving to Georgia, I can tell you that depending on where in GA you live, you can get at least a home over 3k sq fee.

REgarding insurance

There are various kinds attached to a home. If you put down less than 20%, you will have to pay MIP or Mortgage Insurance Premium which for a 300k home would probably be around $1590$175.

There there is property insurance which covers the replacing of a home and it's contents incase it would be destroyed by fire, accident, theft, etc.

In my state, insurance is ridiculous. For a 300k house, it depends on how high or low your d eductible is, whether u live in a flood zone, whether you live in a state where there are alot of hurricanes(i dont think that GA is one of them). I m totally guessing when I would say anywhere from $1k to $1700 for insurance.

Your mortgage payment comprises of these parts:

principle + interest+ taxes + insurance

taxes is the property taxes collected in escrow and paid to the property assessor's office in your county probably around Nov.

Insurance includes property insurance and MIP insurance.

With FHA, you pay FHA inurance instead of MIP and if I remember correctly it is paid in one lump sum and financed in the mortgage.

If you are moving to GA, have you fear, keep your credit clean, get a job there for a year or two, have at least $3k or more in savings, Fico of 660 and above and you will be fine.

I'm guessing a $300k home payment may be $1800-$200k depending on the property taxes in that area and the interest rate.

Trust me Meya, when I first embarked on purchasing our first home, were were told we couldn't do it as we didn't have the 5% required down, my credit was jacked and my DH had limited credit. The TH we wanted, they told us that we nedded around $8k for down and closing close on a 103k new TH.

I read every book in the library and then called the mortgage person back and asked her if we could do a FHA mort. She said, I 'm not familiar but i will check. I told her that we only needed to put down 3.25% instead of 5%.

I was also reading the real estate section of my local paper every Sunday which I still do and other books. I asked her about a buydown- her response was, I don't know I have to check.

a buy down is where you take a higher interest rate than the prevailing rate and for doing this, the bank will give you a point or 2pts at closing.

Long story short, we educated our mortgage person and got us a house through no help of the builder's agent who thought that we were wasting her time and couldn't qualify.

We got a buydown FHA loan starting at 5.5% the first year, increasing to 6.5% the second year and finally increasing and remaining fixed the 3rd year at 7.5%.

The prevailing rate at the time was 6.5%. We got 1.5pts back at closing from the bank so we got $1500 towards our closing from the bank.

We only had to come up with a total of $4700 as opposed to the $8k that they first told us. We also got $580 back at closing from the builder as they went over their delivery rate(always get a date in writing that the builder will gurantee the house will be ready). Seeing that we were on a month to month lease, we had to extend our lease anothe rmonth (good thing) but the builder violated the agreement and had to give us one months' rent.

This went towards our new Amanda fridge from Sears taht we purchased cash.

Go to the library and check out a book a month on purchasing a home, read the realtor section of your local paper every week. You will prob. end up knowing more than your agent.
11 years 4 weeks ago #17

Please Log in or Create an account to join the conversation.

  • Posts: 4523

Replied by Meya on topic Re: FHA HOME LOAN's Qualifications

woe, woe, woe, wait a minute, I need this ran down to me in laymen terms....lol. I was wondering about insurance, how much does it cost (lets say on a $300k home)? Do you have to pay per month or do you pay in quarters? Can someone throw me an example in?

See, I want to purchase a home, but I want to do it in Atlanta. My kids are going to college down south and of course I want to be close to them while making a change in life. I could not afford California homes if I tried.

Shark6, you just made me realize something to where I need to ask a question. OK, I know the less you put down, the more you pay right? Well when you mentioned the reason why people are shocked and paid more were due to an increase in rent after 2 years, and if you don't have the funds, they will recalculate your escrow and tie it together with your mortgage, why is this?

I am so afraid of buying a home since what happened to people during the housing crunch. I don't want no one taking something away from me that I did not voluntarily give to them. I was told that you have to also purchase a lot when you want a home built. I can have majority of that covered right away because I am about to sell my (and my dad) share of land that we have in Texas. This is another reason why i am going to LA this month (or next) so that we can get this started.

Last thing, whats up with the closing cost? Is that expensive and does it counts toward your down payment? Do you have to pay money down more than once, or does it go together after final approval?
11 years 4 weeks ago #18

Please Log in or Create an account to join the conversation.

  • Posts: 208

Replied by shark6 on topic Re: FHA HOME LOAN's Qualifications

Kiejon, those links are great and I know in my area, 95% of the builders are pushing the 'Nehemiah Program' and telling people that they can get in with $500.

My point to YOYO is that yes, they are great but for her own purpose, I believe that it is prudent to have one's own reserves built up, AND take advantage of these programs.

If one is purchasing an existing home, make sure that the seller includes a warranty. However, once that warranty, usually, a year expires, if your A/C goes or heater, etc, you don't want to be in a position tor un your cards up again or worse not be able to pay your mortgage.

IMO, this is part of the reason why folks are in trouble with their mortgages, no money down etc. One still should have savings for emergencies. Nothing beats this not even downpayment assistance programs.

In most instances, your property taxes increases the 2nd year of ownership when one purchases new home. This bill puts people in shock because if you can't afford to pay it in one swoop, your mortgage company once they recalculate your escrow, they will say that you have a shortage and will tack this on to your mortgage and increase your payments.
11 years 4 weeks ago #19

Please Log in or Create an account to join the conversation.

  • Posts: 246

Replied by KIEJON9 on topic Re: FHA HOME LOAN's Qualifications

Down Payment Assistance Programs
Down Payment Assistance Programs (DAPS) are loan programs designed to assist first-time home buyers with the required down payment and closing costs required by the FHA loan program. These types of down payment assistance programs are typically broken into two types of loan programs. These are the 501 (c) (3) Non-Profit organizations or county, city, state backed down payment assistance programs.


The 501 (c) (3) non-profit down payment assistance programs will typically require the assistance of the home seller in order for the buyer to take advantage of the program. Following is a list of just some of the available down payment assistance programs offered by non-profit organizations. Nehemiah Grants up to 3% towards down payment. HART Grants up to $15,000 towards down payment and closing costs. The above programs typically do not have a repayment schedule nor is there a second mortgage required. If you would like to learn more about the above type of programs, please click here.

The State, County, and City backed Down Payment Assistance programs are typically secured by a second mortgage. Some of these second mortgages may be "silent" meaning there is no payments required initially and some of the programs forgive the loan after 10-20 years of living in the home. Following is a list of some of these programs available]
All of these types of down payment assistance programs use a FHA loan. Since you must be able to obtain FHA financing in order to use any of these programs, learn more about FHA Loan Qualifying
11 years 4 weeks ago #20

Please Log in or Create an account to join the conversation.

  • Posts: 208

Replied by shark6 on topic Re: FHA HOME LOAN's Qualifications

Yoyo:

1. Regarding you, I would wait. However, you can start or continue to do the things that you are doing now to ensure that your credit is in the best shape that it can be, your Fico score is at the best place you can get it with your circumstances and that you have at least 2-3mths reserves built up.

Banks for conventional loans like you to have 2-3mths mortgage saved up as a reserve in case something happens. FHA doesn't really require this but it is prudent and it will help your package when an underwriter looks at it.

I would wait until about 22-23mths on the job to apply if you are looking to purchase a pre-existing home. If a home is being built, you may be able to get away with applying when you only have about 20mths on the job.

Trust me, you will be in better shape if you can pay some more of your cards down and amass a savings of at least $3-$5k down before you apply. Your application will look great and that time will fly.

Your Friend

Kevin Trudeau , IMO, is a scam artist. I would have preferred her to get Suze Orman's book, Young, Fabulous and Broke, or anyone of her other books. Even Dave Ramsey's Total Money Makeover would be good for her. In fact, I would reccommend her to read this site and www. creditboards dot com credit forum. She will get so much more fromt hese two sites.

Have her order all 3 of her credit reports and try to focus on the 'low hanging fruit' to dispute first. Baring in mind, to note any SOLs that may come into play for any of her collections.

She shouldn't try to purchase her home until she gets her utilization down and her cards within their limits and no more inquiries for now.

I encourange anyone in the market for a home to read as much as they can on homeowernship. I can nottell you how many brokers, realtors that we came across who did not know as much as we did or who gave her wrong information that could have harmed us. If not for our own knowledge to challenge them, we could have made some collossal mistakes.

information is your friend, read,r ead,r ead
11 years 4 weeks ago #21

Please Log in or Create an account to join the conversation.

  • yoyo11
  • yoyo11's Avatar Topic Author
  • Offline
  • Finance Leader
  • Finance Leader
  • Posts: 307

Replied by yoyo11 on topic Re: FHA HOME LOAN's Qualifications

Yoyo11, regarding your friend, based on the info provided, I don't think that she is ready for the home ownership process, here's why and what she needs to do.

She has maxed out cards, 2 over the limit and yet she is taking funds to go on a vacation. Not good or not indicative or someone serious about purchasing a home.

1. Before paying off the collections, check out the SOL date. Tell her to find out what the SOL is in her state for open ended debt i.e credit cards. If there are some , about to fall off, don't pay. I would also try disputing with the CBs as obsolte to see if they would delete early.

2.If she is inclined, i would have her debt validate/verify the cos before paying. Sometimes this results in them falling off. Most importantly, she has to check the dates to see if any are due to fall off first before payming, if none are due soon, see if she could write the collectors and offer a payment for deletion first.

3,.You didn't state that she had a judgement, repo or anyother negative info other than the small collections. I would urge her to pay down the cards over the limit and try to get her utilization to at least 49% and then ultimately 30%. Her Ficos will improve once she does this.

4. The new car payment will hurt their ratios but what is done is done.

5. See if she can get some CLIS with soft pulls.

6. Her broker lied to her imo, her scores for FHA should at least be around 580 imo and for conventional, at least 660 - 680.

Pay down those cards, take her to thelibrary and have her check out some books. Tell her to read, read, read.


Thank you for your response Shark...by the way she did purchase: "Debt cures" by Kevin Trudeau. She said that the operation tried to sign her up for other things like a weekly paper etc...I'm looking at the book right now, she left it here while she was on vacation. (She should be back today LOL). I would not have paid anything for this book because he's just stating everthing I've already learned on this forum and other website..articles etc. He doesn't have all the letters to drop/improve scores...tell you to have collections stop calling you because of SOL. Get your rent paid (section 8) SSI, Food stamps..Gov.assistance programs for utilities..we all know this..but it just for low income people LOL. Well my friend is new to the credit game ..so she should continue to read it. By the way..I've only been on my job for 1 year 1 month..FHA says you should have your job for 2 years...should I wait before appling?
11 years 1 month ago #22

Please Log in or Create an account to join the conversation.

  • Posts: 208

Replied by shark6 on topic Re: FHA HOME LOAN's Qualifications

Meya, unless things have changed, your loans are deferred for 6mths after you graduate so you may want to time a home purchase in that 6mths period. If you don't and I believe that you mentioned your loans are over $30k unless Imisread, you will prob. be looking at payments over $300. I

I would hold off purchasing a new car until you purchase your house because a payment of $350 ore more will definitely hurt your ratios.

It can be done with proper planning so don't give up. Your credit card balances are low so that is a plus.
11 years 1 month ago #23

Please Log in or Create an account to join the conversation.

  • Posts: 4523

Replied by Meya on topic Re: FHA HOME LOAN's Qualifications

Shark6, you put it down. This is good info that you provided :white-flag: this thread is rockin!
11 years 1 month ago #24

Please Log in or Create an account to join the conversation.

  • Posts: 4523

Replied by Meya on topic Re: FHA HOME LOAN's Qualifications

Meya, I am not really sure if you can apply for defearment at any time. From what I understand deferment only occurs while your in school (and than it doesnt count against your debt to income). But, you can apply for forbearance on your loan at anytime, but I think that might count against you.

You know what, I was trying to say forbearance :laugh:.

Well if that is the case, I will never be qualified for a home. It is giong to take me some years to pay off my student loans.:embarrassed:
11 years 1 month ago #25

Please Log in or Create an account to join the conversation.

  • Posts: 208

Replied by shark6 on topic Re: FHA HOME LOAN's Qualifications

Yoyo11, regarding your friend, based on the info provided, I don't think that she is ready for the home ownership process, here's why and what she needs to do.

She has maxed out cards, 2 over the limit and yet she is taking funds to go on a vacation. Not good or not indicative or someone serious about purchasing a home.

1. Before paying off the collections, check out the SOL date. Tell her to find out what the SOL is in her state for open ended debt i.e credit cards. If there are some , about to fall off, don't pay. I would also try disputing with the CBs as obsolte to see if they would delete early.

2.If she is inclined, i would have her debt validate/verify the cos before paying. Sometimes this results in them falling off. Most importantly, she has to check the dates to see if any are due to fall off first before payming, if none are due soon, see if she could write the collectors and offer a payment for deletion first.

3,.You didn't state that she had a judgement, repo or anyother negative info other than the small collections. I would urge her to pay down the cards over the limit and try to get her utilization to at least 49% and then ultimately 30%. Her Ficos will improve once she does this.

4. The new car payment will hurt their ratios but what is done is done.

5. See if she can get some CLIS with soft pulls.

6. Her broker lied to her imo, her scores for FHA should at least be around 580 imo and for conventional, at least 660 - 680.

Pay down those cards, take her to thelibrary and have her check out some books. Tell her to read, read, read.
11 years 1 month ago #26

Please Log in or Create an account to join the conversation.

  • Posts: 208

Replied by shark6 on topic Re: FHA HOME LOAN's Qualifications

I forgot to add if money is tight, a quick and costless way to increase a Fico score is to ask for CLIs without hardpulls. This is free and only takes about 5mins to do.

Then when u get a house, don't run out there and purchase a new car, new furniture etc as this is a sure fire way to put yourself at risk for foreclosure or late payments if you were to suffer a life changing event like having a baby, being layed off or having a spouse lose a job, or illness.

If purchasing furniture, wait until a major holiday and get 0 int. financing or 0 payments but still pay something on it. At the end of the term, your furniture will be paid for.
11 years 1 month ago #27

Please Log in or Create an account to join the conversation.

  • Posts: 208

Replied by shark6 on topic Re: FHA HOME LOAN's Qualifications

Some good info here. I have purchased a home 3xs, refinanced and I have been a landlord.

Our first home was a FHA and the others have been conventional. Just some quick pointers some of which may be redundant.

When looking for a home, before one starts to look:

1. Pull a 3 of your credit reports and get all 3 Fico scores
2. Start to work on any misinformation, write disputes etc and try to clean up any inaccuracies now
3. Try to get most, if not all of your cards balances to about 30% utilization. This is a attainable goal where you will see your Fico scores go up once you have accomplished this. Utilization accounts for 30% of the Fico score so this is a quick way to increase your Fico . If you cannot pay down to 30%, try for 49% and Do NOT, I repeat, DO NOT allow your cards to remain maxed out as that will decrease your scores and it is a red flag for underwriting.

I have known people to have as a condition of their loan per underwriting to pay down X, Y and Z card

4. Thomas mentioned not to close any credit lines. This is excellent advice as some mortgage lenders/brokers are known to advise people to do which is counterintuitive to having high Fico scores and can impact a loan decision negatively.

5. Try to have any kind of deposits/monies already in your account. Once you consult a broker/bank, they will ask for your last 2 paystubs, the last 3mths bank statements, tax returns etc. They will also ask to see your bank statement before the loan closes and they may ask for an updated statement during the middle of the loan. This happened to us as our home took 7mths to build. If there are any large deposits, you will have to explain where it came from

6. I know that FHA allow you to get some of your downpayment in the form of a gift from relatives, friends. The caveat is that you have to provide a letter from them stating that it is a gift and that you don't have to pay it back.

7. When you apply, the bank/broker will attempt to pre-qualify you which is different from pre-approval. A pre-qual is a quick review of your income, debt etc and tells you what you qualify for and the payment amount that you qualify for.

A pre-approval involves a more detailed process and is a firm committment from a bank in written form that you have been pre-approved for a loan in X amount. This is the best way to go BEFORE you start to look for a house as this gives you bargaining power. When we got preapproved, we asked the bank, not to write in the amount as if we found a lower priced home, we did not want the realtor/owner to know our hand and thus not be open to negotiations for a lower price because they see that we have been approved for more. We had them type in , 'have been approved for a six figure loan.

8.Do not apply for any credit at any point in the loan process until after settlement. The bank will find out and it could be a deal breaker. REmember that loans and committments are based on ratios, when you apply for credit, you are in a sense increasing your debt ratio even though you may not have any intention of accessing that credit. To the bank, it is there and you could screw up your rations putting the bank loan at risk i.e say you apply and get approved for an Amex Blue at $5k, Citi card at $3k, furniture store at $2500. If you were to access those lines and max them out, you would have to pay around $200 or more. Let's say that this extra $200 puts your debt to income ration including your mortgage to 40%, this is a deal breaker and you will not be approved or if you have not accessed it, if you did down the line, it is predicted that you may be a canidate for late pays or foreclosure.

Trust me, after you purchase a house, everyone and their mother will be sending you credit apps and pre-approvals.

9. FHA allow higher ratios. There are 2 rations, debt to income not including your mortgate and dept to income including your mortgage. I know that FHA allows a higher ratio.

10. Conventional loans focus alot on this and many banks won't even look at you if your FICOs are less than 660 or 680.

11. One good thing is that if you have a car loan or any type of loan that will be paid in less than a year, they will not include this payment in your ratios.

12. Student loan debt doesn't count if it is deferred. I did have one bank try to include it, there reasoning is that they were saying that it was only deferred for 6mths so be wary of that. I have a degree and I'm not sure if things have changed but when you graduate, your loans are deferred for 6mths after which you have to begin to pay. After the 6mths, if you are unemployed or if your income doesn't cover the payment or if there has been an illness, you can apply for forebearance.

10. The best way to go absolutely is FHA. Conventional loans in FL are asking for 10% down, high Fico scores and the works. FHA doesn't really look at Ficos and they only ask 3 or 3.25% and many programs have programs that pay that for you. With the new Housing law that was passed, i am not sure if it did away with 3rd parties offering downpayment assistance.

To the poster who got the Kay card, I got a Kay card and it reported about a month after I got it, even though I have not used it yet. I would not close it as the other poster wrote, u already took the hit and the bank will see the inquiry any way.

11. Also, when looking for a loan, I called around quite a bit, laid out the facts to the broker, loan person, inquired about their rates, about their stance on certain issues etc. I will tell you now that eveyrone whom you call will not want to give you any information unless they pull your credit. I can also tell you that there are some unethical people who will ask for your SS# and when u think that they didn't pull your #, they will have pulled it. We were very skeptical of who we allowed to pull our credit. Before I purchased our first TH, i read everybook in the library on home ownership. I strongly advised anyone considering to purchase a home to do this so you aren't scamed or given the wrong information.

Realtors, brokers, loan agents all work on commission . Their interest is to themselves first and you last. REaltors don't work for you so be careful of the info that you divulged to them. Unless you are working with a buyers agent signed tow ork for you, agents have a fiducary responsibility to report any and everything you disclose to them, income, credit, your price ceiling, how much you love the home etc to the seller who is paying their commission.

I only gave my SS# to folks who I felt was truthful, knew what they were talking about and had a hunger to want to get us the best loan out there. Doing my research and having this attitude, only resulted in us having 3 inquiries at the beginning of our house search and we absolutely did preapprovals. I ahve seem people have 6 and 10 pulls at the beginning. That is ludicrous.

Good luck guys/gals and remember information is power. There really isn't any reason for people to be ignorant of the process right before they go to a bank as there are tons of books out there and online sites. Lack of the consumer being educated is how the scammers and con artists make their money so be warned.
11 years 1 month ago #28

Please Log in or Create an account to join the conversation.

  • Posts: 296

Replied by Brian23 on topic Re: FHA HOME LOAN's Qualifications

Meya, I am not really sure if you can apply for defearment at any time. From what I understand deferment only occurs while your in school (and than it doesnt count against your debt to income). But, you can apply for forbearance on your loan at anytime, but I think that might count against you.
11 years 1 month ago #29

Please Log in or Create an account to join the conversation.

  • Posts: 4523

Replied by Meya on topic Re: FHA HOME LOAN's Qualifications

Wow, this is some good info. Well one part is bad, my student loans are going to be out of deferment next year. Should I file for a deferment while looking for a house and then remove the deferment when I move in one?:confused:

I cant look for a house until I graduate and find a job within my career. I will never purchase a house with my income fluctuating back and forth. I want a paycheck that can only decrease if I am the cause of it. I have everything down packed and ready for a broker but I do not want to purchase a house as long as I am a hairstylist.
11 years 1 month ago #30

Please Log in or Create an account to join the conversation.