Tuesday, September 24, 2013

Loans Now Available To Previously Troubled Borrowers

FHA recently announced a new mortgage rule that will benefit borrowers that have experienced foreclosure, short sale, deed in lieu or bankruptcy.  In the new Back to Work - Extenuating Circumstance program, borrowers with a record of foreclosure, short sale, deed in lieu or bankruptcy will still be able to get a new FHA loan in 12 months instead of the standard three year waiting period.

For a borrower to qualify, they must prove that major economic event like job loss or at least 20% income reduction (for at least 6 months) was the main reason in losing their home.  Furthermore, borrowers will also need to prove that they have recovered from their situation and they must have a satisfactory credit score.  And lastly, potential borrowers will need to complete a one hour one-on-one housing counseling session.  BUT, borrower's MUST have a satisfactory credit score and in good standing prior to the said major economic event. 

Borrowers "MUST" satisfy the following criteria in a minimum of 12 months to be considered borrower with "SATISFACTORY CREDIT":

- No delinquency payments on rentals.
- No more than one 30-day late payment due to other creditors.
- No collection accounts/court records reporting (other than medical and/or identity theft)

Back-to-Work program is now available until September 30, 2016. Once the borrower qualifies the program, the same 3.5% minimum FHA required down payment will apply. Mortgage insurance and closing costs will also apply.

Reverse mortgages are ineligible for Back to Work program.  In reverse mortgage, the home owners can borrow money against the value of his or her home.  No repayment will be applied until the borrower dies or the home is sold.

However, even with the new Back to Work program, the final decision to lend the borrower is still up to the lender.  So, it is VERY important for the borrowers to prove that they can satisfy all requirements for them to be able to obtain a loan. 

If you want to fast-track your home ownership but has trouble in obtaining a loan because of your previous record, then I can help. Don't hesitate to call.

Tuesday, September 10, 2013

FHA, Bailout is Still a Possibility

As a result of the housing crash, private investors pulled out of the housing market.  FHA, the government mortgage insurer, helped stabilize the housing market.  Its market share increased to 25% from 3% market share during the boom. A lot of first time home buyers have turned to FHA to make home buying a possibility during the housing bust.  However, FHA's delinquency rate is still high at 8.22%, while the delinquency rate for all loans is at 5.88%.

It is hard for the low down payment market to get a loan without the help of the government.  The government helps make the availability of the capital on a large scale.  However, with mortgages getting more expensive, even with the help of FHA, home buyers may still have a difficult time afford a home of their own. And if the delinquency rate still goes up, then FHA might also need a bailout in the future.

If you're thinking of getting your new home, NOW is the time to act - before the rules get stricter and mortgage rates increase again. 

For more information on how to take advantage of the current market situation, please feel free to contact me.

Thursday, September 5, 2013

The New 43% Loan Cap in Qualified Mortgage Rule

Getting approved for a mortgage loan has become so difficult as compared to few years back, prior to the housing collapse.  However, Federal regulators are issuing more new lending rules that could possibly make it harder for both existing and potential borrowers to obtain loans.  Effective January 10, 2014, Consumer Financial Protection Bureau (CFPB) will implement the new Qualified Mortgage (QM) Rule. The new QM rule will require new borrowers to have a debt-to-income ratio (DTI) not exceeding 43.

The new lending rules will limit potential borrowers from taking out a mortgage or refinancing an existing one that puts their overall household borrowing at more than 43% of their income. The Debt-to-income cap of 43% means that all the debt expenses (this includes total mortgage payment) do not exceed 43% of the borrower's gross income (income before taxes). That new debt cap also includes a wide swath of common forms of debt that count toward the total, including student loans, most fees and points related a home purchase, and property taxes. It also tightens rules on documentation, and lenders who improvise to give customers easier terms will be open to consumer lawsuits if the loans go bad. (Source: http://money.usnews.com/money/personal-finance/mutual-funds/articles/2013/08/20/fewer-easy-mortgages-under-us-consumer-agency-rules)

The following groups may be affected by the new Qualified Mortgage rule:

- First time home buyers, especially those who are carrying college loans.  College loans will be counted towards the 43% debt-to-income cap.
- Home owners that want to refinance but lost their equity due to the housing bust.
- Retirees with limited savings.

The new credit restrictions can result to a more expensive, harder-to-arrange loans or outright disapproval for qualified borrowers.

With mortgage interest rates on the rise, increase in house prices and combined that with tightening credit standards, how can a average Joe afford the American dream of owning his own house?

If you want to own your new home, NOW is the time to act! In 4 months, the new Qualified Mortgage rule will take effect and acquiring a home may be more expensive and more difficult by then. If you want to take advantage of the more relaxed rules and buy your new home, please feel free to contact me.