Changes are coming to the FHA Reverse Mortgage Program

Some details are emerging on the changes that will probably happen to the FHA HECM (reverse mortgage) program.
Both the House of Representatives and the Senate have bills in front of them to cover the requested 798 million dollar subsidy that the program will require.
The House bill doesn't provide any funds to subsidize the HECM program(reverse mortgage), while the Senate bill reportedly covers only 200 million of the subsidy and requires HUD to reduce the available loans by 5% loan to value.
There are alternate suggestions by NRMLA to adjust the mortgage insurance premiums to cover the shortfall, but it remains to be seen if that will be included in the bill.
Right now, there is an effort by some in congress to kill the program or at least make it even more regulated. Some such as Sen. McCaskill, are making the outrageous claim that reverse mortgages are the next subprime. When challenged by the media for her to produce specific instances where there was abuse of the program, she could not. It will take take vigilance on the part of the industry to see that such misinformation is not allowed to go unchallenged.
In the meantime, the need for the FHA HECM is expected to grow as more baby boomers are reaching retirement and find they don't have the funds to cover their needs. By making minor adjustments, we can ensure that the program remains viable and a useful tool for our growing senior population.
Bottom line is if you are considering a Reverse Mortgage or know someone who is, they should move quickly before Congress reduces the program.
As always, I can be reached for information at 208-861-7579. To receive a quick quote on your reverse mortgage scenario, go to: http://www.fastidahohomeloans.com/forms/reverseMortgage.html

What kind of credit is needed to get approved for an FHA Loan?

I get asked more questions about credit than I do about interest rates. Many times its from someone with a credit issue or perceived credit issue and they're looking for reassurance about their credit. In this blog, I talk exclusively about Idaho FHA Mortgages, so I will approach the credit subject from that perspective.

The FHA Mortgage program doesn't have a minimum credit score, instead it looks at the credit history as a whole. The biggest one is that a borrower must have a clean credit history for the last 12 months. That means anyone with a 30 day late payment on their credit report is ineligible. Also, FHA Mortgages have a 2 year waiting period after a bankruptcy discharge.

Now the lack of a minimum credit score doesn't stop the individual banks and lenders from having their own requirements on top of FHA Mortgage guidelines. Right now, most lenders and banks are requiring a 620 minimum fico score. They are also requiring that the borrower have a minimum established number of credit lines, usually 3 to 5. This can be a problem for the first time home buyer or someone who doesn't use a lot of credit.

In my next post, I'll go into detail about how one can overcome a skinny credit profile and get approved for one of my Idaho FHA Mortgages.

Thanks for reading,

Roger

What is an FHA Loan?

Before I get too far into this blog, the question of what is an FHA Loan needs to be answered.

Quite simply, an FHA loan is a loan insured by HUD for the benefit of lenders who make the loans to home owners. HUD will cover losses incurred by the lenders if the home owners default on their loan.

Why would a home owner want an FHA loan? Quite simply, they are much easier to qualify than a conventional loan. For instance, on a conventional loan you need 5% minimum down payment, on an FHA, its only 3.5%. Also, on a conventional loan with less than 20% down, it requires expensive private mortgage insurance.

FHA loans allow the down payment to be gifted by family, churches, non profits and other civic organisations.

The biggest reason for FHA loans is they will loan to those with less than perfect credit. For instance someone who has had a bankruptcy will have to wait 5 yrs to get conventional financing but FHA allows financing after 2 yrs from a bankruptcy discharge. Conventional loans will charge more for those with less than 740 fico and FHA doesn't have "risk based pricing".

An FHA loan also allows a parent to "co-sign" on the loan with their adult child if needed to qualify for the loan. This is called a Non Occupant Co-Borrower. The parent would have to fill out an application, credit, and qualify as if they were making the payment themselves. In many cases this can make the differnence if qualifying or not. After a couple of years, the borrower can refinance into another fha loan and take their parent off the loan.

For more information about Idaho FHA Loans, contact me at my office at 208-955-1234 ext. 30

Thanks for reading my Blog,

Roger Howell

First Time Home Buyers can use their Tax Credit towards their down payment

Here in Idaho, we are lucky to have the ability to use the new tax credit for a first time home buyer's down payment. We can write a 2nd mortgage up to 3.5% of the purchase price ($7,000 limit) that can be the required down payment on an FHA mortgage. This new, "tax credit anticipation loan" is due in full next year after you receive your tax credit from the IRS. Some of the requirements are:

Must be approved for a FHA Mortgage

Must be a first time home buyer in Idaho

Must have a fico score of 640 or higher

Must have a debt to income ratio of no more than 45%

There are other requirements and terms that need to be discussed, so call me at 208-861-7579 to schedule an appointment. Tell me that you wish to discuss the FHA Mortgage and the Tax Credit Anticipation Loan. I look forward to meeting with you.