Things are moving so quickly in the market with the coronavirus being at the forefront, everyone is feeling hardship across the board.
FHA Loans provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. It is one of the largest insurers of mortgages in the world, insuring more than 46 million mortgages since its inception in 1934 and it's the only government agency that operates from its self-generated income.
Self-generated income which means the Mortgage insurance premiums that is collected from borrowers via lenders are used to operate the program.
FICO scores tells the lender what type of credit risk you are and what your interest rate should be to reflect that risk by utilizing a FICO formula.
The most commonalty used :
Equifax Beacon 5.0
Experian/Fair Isaac Risk Model v2
TransUnion FICO Risk Score 04
We’re seeing what’s “good” for rates can be bad for lenders, and what’s “good” for the market can be bad for home buyers. This tug of war has caused servicers to implement drastic measures to keep up; includes raising the minimum FICO. If you have questions or concerns please contact your lender right away.
Mortgage Rates March 16,2020
Mortgage stress test changes suspended…
Why you can't get that historically low mortgage rate…
Coronavirus sends mortgage rates lower…
Mortgage investors cheer as Federal reserve starts…
Freezing your credit won't hurt your score, but it will keep an identity thief from opening new accounts in your name which is a good thing. Keep in mind when purchasing a home or refinancing you will need to "Un-Freeze" your reports with the credit bureaus.
When a mortgage lender pulls your credit they will be alerted that there's a freeze on your credit report and you will need to contact that particular company (Trans Union, Experian, Equifax), and each company has a process so ensure you check.
Below are the 3 different Credit Bureaus that you may have a Freeze on:
By phone: You will need to have your SSN, DOB, Security Freeze Pin, lift type, start date and end dates. It can take up to 15 minutes to process this request.
By mail: Complete the Lift Section of the Security Freeze Form that is sent to you after you've requested the freeze, mail it back to the address at the bottom of the form. It can take up to 3 business days from the date of receipt to process this request.
Note: If you're in the state of Colorado and are requesting a lift, you must ask for a "Global Lift." This does not require third parties to have a PIN to access your credit file.
For either, you will need to provide your 10-digit security freeze confirmation PIN provided in your confirmation letter, date range and the name of the specific credit grantor/report user you woul like to receive your report.
What is a Loan?
An amount that you borrow and agree to repay under specific terms.
Usually a formal agreement, loans involve two parties: the borrower and the lender.
The contract specifies the terms and conditions of the loan, and once you sign, you are legally obligated to adhere to it.
Before pursuing and taking out a loan, learn how they work and how you can borrow smartly, safely and at the lowest possible cost.
These are the essentials on how loans work:
You take out a loan when you borrow money from a lender.
The amount you borrow is paid back over time, plus interest and applicable fees.
Lenders will require an application and consider your credit rating, income and other factors when determining loan approval.
Interest rates are determined by your credit rating and other qualifying factors. They can be fixed or variable.
Your loan's term is the amount of time you take to pay back the amount borrowed. Loan terms vary depending on loan type, lender and your credit rating
Considering how much you need to borrow and comparing loan terms across different lenders could help you save money.
The concept of loans is simple on the surface: You borrow money and pay it back. But it's worthwhile to dig deeper. The more you understand, the better you can avoid financial trouble. Being knowledgeable can help you borrow the right amount of money, agree to an affordable payment and payoff term, and find the best interest rate you can qualify for.
There are two basic types of loans: secured and unsecured.
Secured loans are collateralize by money in a separate account, the property you purchase or other assets, such as your home or vehicle. If you don't repay as agreed, the lender can claim the collateral to pay off the debt. Because of this guarantee, the lender's level of risk is low.
Unsecured loans do not require collateral, so they are more of a gamble for the lender.
Common loan types include:
Personal loans can be used to pay for nearly any use, though some lenders have restrictions such as no business or education use. They are often used to consolidate existing debt or finance an upcoming expense, like a wedding. Most are unsecured, though secured personal loans are available.
Business loans are for launching or operating a business. They may be secured (with cash in deposit accounts, property, or business or personal assets) or unsecured.
Student loans are for higher education costs. Federal student loans are offered through the U.S. Department of Education, including undergraduate, graduate and parent loans.
Car loans are used to buy a vehicle such as a car or truck and are typically secured by the vehicle.
Home loans, also known as mortgages,help people buy real estate. As with car loans, the property you purchase usually acts as security for the loan.
The Loan Process
Some types of loans are more involved than others. For example, you may have to submit extensive paperwork in underwriting for mortgages or business loans. But the overall process is fairly consistent with all loan types.
Applying: Some lenders offer prequalification or preapproval, but to actually obtain a loan, you'll ultimately need to fill out an application. A loan application will ask for personal information, typically your name, date of birth, Social Security number, address, phone number and email address. You'll typically need to include income and employment details. Some loan types may require details about your assets (cash in savings and investment accounts, as well as any property) and liabilities (your financial obligations).
Qualifying: Once your application is received, the lender will assess it for approval. This is also known as underwriting. With most loans, this is when a lender will check your credit report and score. At this point, the lender will decide whether you're approved for the loan and if so, what terms you qualify for, such as the loan amount and annual percentage rate. For some loans, like mortgages, loan processing and underwriting may include appraisal, inspection and other steps to gather more information about the property or your financial status.
Disbursement: If you qualify for the loan, the funds will be disbursed to you or a designated recipient, such as a title company for mortgages. Disbursement may also be referred to as loan closing. Disbursement time can vary widely depending on loan type and individual lenders. Online lenders may offer access to funds within 24 hours with an electronic deposit. Disbursement for other loans can take longer. For example, it can take two weeks to two months for a private student loan to be sent to you or your college. Whenever and wherever the money lands, it becomes your debt once it's disbursed.
Paying the balance: The payment amount and due date will be listed on the agreement you signed. A portion of your payment will go toward financing, and the rest will be applied to the principal. If the lender uses the simple interest method, interest will be calculated on the outstanding balance due. If you increase the payment, interest fees will decrease along with your debt. On the other hand, if the lender computes interest prior to, the interest for the term of the loan is already factored in, so you won't reduce interest if you pay the loan early.
The lender may report activity on the loan to the three credit reporting agencies: Experian, TransUnion and Equifax. Paying on time can improve your credit rating and save you money by avoiding late fees.
Refinancing: You might want to change your loan's terms at some point – for example, getting a lower interest rate or extending your loan's repayment term. Refinancing is essentially getting a new loan to pay off an older one, ideally with better terms.
Remember that, as a borrower, you have the power to choose which loan type works best for you. Research the best terms that you can qualify for, then borrow prudently.
We know with any purchase process gathering all of the necessary documents can be quite hassle even for the most organized. All lenders want and need detailed information about your finances to determine if you quality for a home loan.
We've provided a basic list that can help assist with this daunting task. Keep in mind each situation is uniquely different so if you don't know what you need ask your lender.
Proof of income
Lenders want to know that you'll be able to repay the loan. Depending on your income history and size of loan, you may have to show additional documentation
Social Security Number
Contact Information for your insurance agent
Previous year's W-2 Form (1099 if contract basis) (1040 form)
Bank Statements (Be prepared to show proof of any cash deposits made into your account)
Your most recent pay stubs
Profit and Loss if self-employed
Earnings outside of regular job (Child Support or Alimony) -Divorce Decree
Employment contract showing vesting schedule
Credit Report (Lender will generally pull this)
Your debt can seriously impact your debt-to-income ratio which can be Up to 57% FHA Up to 50% for Conventional across the board*
Debt Payments and Balances for credit cards, student loans, mortgages, car loans, credit inquiries or any other fixed debt obligations
Having assets just in case unexpected expenses occur after you close on the house is a factor in the home buying process.
If you received money towards the down payment as a gift, you may be required to provide documentation/letter stating it was a gift and not a loan.
Bank Statements, investment records, retirement accounts, real estate, auto titles, and any other investments require that you provide documentation.
This can include a signed 4506-T form, that allows your lender to get a transcript of your tax returns from the IRS.
If you have filed bankruptcy in the past several years, you may be asked for your bankruptcy discharge papers.
Documentation that you're involved in any lawsuits or co-sign on any loans
If you're renting out your current home a lease agreement and income received may need to be provided.
If you're a renter with a private landlord, 12 months of cleared checks on time may be required or a form confirming on-time rent.
The mortgage industry is striving to make this process more streamline by offering services that are more automated and user friendly.
An American immigration policy that allows some individuals with "unlawful" presence in the United States after being brought to the country as children receive a renewable 2 year period of deferred action from deportation and become eligible for a work permit in the U.S.
What is FHA
The Federal Housing Administration (FHA) is the largest mortgage insurer in the world with an active insurance portfolio of over $1.3 trillion. Each year, FHA helps more than a million homebuyers achieve the dream of sustainable, affordable homeownership of single family homes, while our insurance programs for multifamily properties support the availability of over 300,000 affordable rental units, including those for seniors and people with disabilities. FHA's healthcare insurance programs facilitate access to hospital medical care and assisted living in hundreds of communities across the country.
Who is Fannie Mae
Leading source of financing for mortgage lenders, providing access to affordable mortgage financing in all markets at all times. Our financing makes sustainable homeownership and workforce rental housing a reality for millions of Americans.
How are these all connected?
According to the FHA they are not going to be backing mortgages for DACA recipients, however Fannie Mae has stated that it supports (and will support) mortgages for DACA recipients.
“We have a longstanding policy on eligibility for non-U.S. citizen borrowers. Fannie Mae purchases and secures mortgages to non-citizens who are lawful permanent or non-permanent residents of the United States under the same terms available to U.S. citizens,” the government-sponsored enterprise said in a lender bulletin posted on Friday.
Fannie Mae said that it is not changing its existing policies. Rather, the purpose of issuing the bulletin was to provide “additional guidance to help lenders determine eligibility for non-U.S. citizen borrowers” in response to customer feedback on the issue.