FHA Loans for Borrowers

Recently I received an FHA approval for a couple with a credit score of 603. In the past few months I have seen an easing in the credit policies of both conventional and FHA loans and that’s encouraging. Normally, FHA lenders requires at least a 620 credit score to get anything approved. We now have lenders who will do FHA loans for borrowers with credit scores down to 580.

These particular borrowers had a few collections, but their high credit card balances were killing their credit scores. It did help that they had a low debt to income ratio.

Keep in mind: conventional loans, regardless of the down payment still require a credit score of 620 per Fannie Mae and Freddie Mac guidelines.

Loan Programs To Choose

Did you know a buyer purchasing an investment property can put down as little as 15%?  This opens a lot of doors for your investors.  Some of the requirements are… the property be a one-unit detached single family residence, the buyer’s credit score be 720 and above, and the buyer cannot have more than 3 properties already financed.  For your buyers who already have 4 to 9 properties financed, the minimum down payment is 25% and there are credit score and reserve requirements.  

Also, we’ve seen an increase in inquiries regarding Jumbo financing.  We recently quoted a 30 year fixed at 4.375%. (4.439% APR) That’s only .25% higher in the rate than conventional financing. If you have questions regarding Jumbo, Conventional, VA, or FHA financing call or email me.

Important Conventional Loan Guideline Revision Effective Last August 12, 2014

Did you know that if a mortgage debt has been discharged through a bankruptcy, even if the foreclosure takes place after the discharge of the bankruptcy, the borrower is held to the bankruptcy waiting period of 4 years to purchase a home and not the foreclosure waiting period of 7 years?

That’s important to know because many lenders who don’t understand conventional loan guidelines are mistakenly putting borrowers in a FHA Loan which have expensive mortgage insurance requirements and a loan limit of $271,050 in Maricopa County compared to conventional loans which in most cases have lower or no mortgage insurance requirements and a loan limit of $417,000 in Maricopa County.

A conventional 97% loan from Fannie Mae

A conventional 97% loan is a Fannie Mae home loan that allows home buyers to purchase a home with a 3% down payment and get a loan amount up to $417,000.  It is designed for 'first time home buyers' who may not have the resources for a large down payment. A 'first-time home buyer' is defined as a person who has not owned a home in the last three years.

Another great feature of this program is that the entire 3 % down payment can come in the form of a gift from a relative.

Closing costs can be paid by the seller with a limit of 3% of the sales price.

Compare the Conventional 97 to a FHA loan and you will find a lot of benefits to the Fannie Mae product.  The FHA mortgage requires a 1.75% upfront mortgage insurance premium usually added to the loan amount, Conventional 97 does not. The monthly MI on a FHA loan stays on the mortgage for the life of the loan. The Conventional 97% MI will drop off after the loan balances reaches 78% of the original appraised value. FHA is restricted to $271,051 whereas the Conventional 97% program allows loan amounts up to $417,000. FHA does have some advantages, especially for borrowers with lower credit scores and past foreclosures and bankruptcies.

I can guide your clients through the advantages and disadvantages of both the FHA loan and Conventional 97% product.