Strong Warning From CFPB On Misleading Mortgage Advertisments

CFPB- Consumer Financial Protection Bureau

Just last week a warning was sent out regarding misleading mortgage advertisements.  You can read full release here.. What this is saying is they've found some recent advertisements are misleading to consumers and not disclosing all the information about true costs and terms of the loan agreements. 

I actually think this is a good thing.  All the ads out there that show 1% interest rate or super low fees or whatever the case may be is very misleading and I can't tell you how many times customers tell me about these deals and I let them know that those are just bait and switch ads but you won't find out until deep into the process or it's too late and by that time you're pissed off.

Sometimes it works and sometimes it doesn't and they have to go and find out for themselves the truth.  The problem is...now they don't trust anyone and that makes it hard to do business in the future...

...and we wonder why consumer confidence is low with lenders and loan officers in general.  

Now all companies don't do this type of activity but you do see some "creative" advertising to get people to pick up the phone and call.  

I take a different approach because what I have found is people just want you to be real with them.  

They will do business with and buy from people they like and trust and if I can develop a relationship with them; they will not only do business with me but will send referrals. 

Most companies are just in it for the quick buck and that should not be the approach.  

You'll make money and get some business in the short run, but this isn't how champions and professionals do business and it surely will kill you in the long run.  

Anyway...that's my two cents on it. 

I aim to build value and confidence so that customer has a great experience.  And truthfully, if you just explain things to people in plain English; all the terms, go over the benefits of how the loan will solve their problems and have a solution based presentation, people will come chasing you to do business with you.  

I don't really have to prospect anymore I just get referrals from clients, agents, and other sources because they know I'm for real; I don't sugar coat, I know what I'm doing, and I give realistic expectations.  

It's not rocket science here folks...

Just a little warning...for those of you who buy leads from these crap companies, I would stop because they have ads on the web for all kinds of ridiculous things that are misleading to get people to click and give up their information.  

So as the CFPB comes cracking down if you're buying from them ---guild by association.

Plus their sold to multiple people and companies.  The best way is to build your business organic which takes time.  

Check out the release above on the CFPB site and look out for more announcements like this as the CFPB gets up and running on all cylinders inspecting the practices of the all the lenders and brokers out there.  

Get ready we're headed for more changes in the future.  

Who will win in this environment? The Champions will... all the weanies will be pushed out and quite frankly...can't wait to see ya go...

Obama's Refinance Plan (Take Four)

Obama's First Refinance Program

Are you ready for another one of my rants? lol, I promise it will be a good one.


Well here we are folks...first we had the Obamafi 1 (aka HARP 1.0), this come out in 2009 where people with mortgages backed by Fannie and Freddie could refinance into new lower rate mortgages to help
reduce monthly payments and prevent more foreclosures.  The program was launched initially letting
homeowners refinance up to 105% of the homes value with NO add ons.

In the mortgage industry we have lingo - just like any industry - and the lingo related to add ons is loan level pricing adjustments; rate adjusters; bumps in pricing; and several other names.  But the gist of it is - based on certain "risk" criteria - the rate would be higher or lower depending on this information and would be built
into the pricing of the rate to derive at a finalized price.

Well it was well intended at first until the Fannie and Freddie added a bunch of adjusters and people who
needed it most couldn't benefit as they had the lowest scores and highest loan to value (loan amount divided
by value of the home).  So they were hit with massive bumps to the rate and it didn't even make sense to refinance. Well duh.....that's who it was for (the people who could benefit most) but what it ended up being is a cash cow fee generation system for Fannie and Freddie by putting these bumps into the rate and initializing an all out mini refi boom to extract needed cash to help the failing entities. 

Obama's Refinance Plan Take Two

At any rate...time went by and we had it adjusted to 125% loan to value.  Now we have HARP 2.0 or
Obamafi retake numero deuce where now the loan to value is unlimited!  That means your loan amount divided by the value can be 200% or more...doesn't matter, it's unlimited.  This again was another shot in the arm for the mortgage industry and banks are making money hand over fist on this program.  Mini refinance boom two.

This was designed to help all the people who couldn't get in the first time under HARP 1.0 and who were under water more than 125%.  A few programs exist; One was set up for loans serviced by your current lender (which had less restrictive guidelines since they already owned the mortgage) or you could switch lenders.  Now that this plan has been out for a little bit and because the risk is a little higher (actually it should be better because if they would make it beneficial for all everybody's payments would be much lower), some lenders are making it a requirement that the loan being refinanced is serviced by them.

You can find the differences here below:  See the vid.

NOTE: (Video is from youtube and posted by Kenney66)

Obama's Refinance Plan Take Three

The next plan involved changes to FHA's refinance programs.  You can find this HERE This allowed the homeowner with an FHA backed loan who qualified for the streamline refinance, AND, who's mortgage was originated prior to a certain date, could revert back to the old mortgage insurance annual premium calculation allowing them to take advantage of low interest rates. 

As you know FHA loans have been modified significantly over the past few years to help the ailing, failing, mortgage insurance fund as it is now WAY, WAY below Congressional mandated levels so the monthly premiums (also known as MIP and in the Conventional mortgage world PMI) have gone up and up and up so even if you could get a lower rate, the increase in the mortgage insurance didn't make it worth the money to refinance.  So the new program has spawned yet another mini boom. 

Obama's Refinance Plan (Take Four)

Obama's proposed new refinance program (you can find this HERE on the press release from the White House) is targeting all non GSE owned  loans (Fannie/Freddie) to be eligible to refinance into lower rate mortgages.  The proposed minimum credit score is 580 but will this be the same thing? High loan adjusters to the rate making it too pricey for people who really need it to take advantage? Time will tell if it's implemented.

They keep creating new mini refi booms coupled with Ben Bernanke's QE infinity program pretty much guaranteeing interest rates to stay low, we're seeing massive refinance volume. 

The volume has spike so high, lenders can't keep up and they won't hire new people to deal with the volume so you have horror stories of loans taking 90-120 days or longer to close! 

Again, this creating HUGE profits for the banks as they are selling these loans to Fannie/Freddie/and FHA and in turn the agencies are extracting more cash from the system to funnel it into the coffers because they're all BROKE as hell and bankrupt.  Just like this country is but nobody wants to realize or admit it. 

So What Next?

We're rolling into election time; we're starting to see reports of home prices increasing (I don't listen to a thing the government tells me) and the only people I see benefiting are the banks in this situation as people are refinancing which requires closing costs to be rolled back into their loans increasing your balance and stretching your term back out another 30 yrs. 

True, this scenario does help some and true this will benefit some people but if they really wanted to help people out then get rid of ALL adjustments; do it with no limited costs so that the people with the lower scores can benefit like they did when the HARP first came out but was quickly....and I mean QUICKLY changed to requiring all kinds of adjustments to the reates preventing alot of people from saving money on their payments.

So my question is: Where is the cookie for all the people who actually need it?!

That's my two cents on the matter. 

P.S. if you like this blog check out my other one http://www.livingwithnolimits.net

God Bless,

State of The Housing Market

Wow its been a very busy two weeks. Starting November 25 rates took a dive and have stayed down to levels not seen since the beginning of the refi boom in 2002. About mid week, rates had only been lower on 5 days in the last 50 years and 6 days where they were the same. this should be some great news for the market but we haven't seen alot of buyers jump back in yet.

I've been so busy with refinances working morning and night. While this is good for business, the whole purpose of the Treasury buying plan was to pull buyers back in helping to reduce our bloated inventory and stabilize home prices. I'm already starting to see some signs of stabilizing home prices and I think we've reached the lowest point we're going to see so and only back up is where we should focus our attention.

You'll hear alot of professionals and economists give their opinion on the market saying we're going to see more declines, mortgages are few and far between, and credit is so tight; just to name a few. I'm not saying credit hasn't been tight, I'm just saying that the media does make it sound alot worse than it is creating even more fear. Fear is the worst thing we need right now.

What happened in the mortgage market needed to happen to flush out the risky loans, bad mortgage brokers, and corrupt title companies. I'm not happy about the record foreclosures but little was done to regulate these people. The few bad apples ruin it for everybody else. Loans are plentiful, especially government insured loans like FHA, VA, and Rural Housing loans.

When shopping for a mortgage make sure you work out your budget, that you have at least 3.5% down (this will be the new FHA requirment Jan 2009), and take into consideration costs that are associated with buying a new home. Its been communicated by the media that you can't get a loan unless you have 20% down. This is simply not true.

Copyright © 2008

FHA vs Conventional

Not many people know the difference between conventional and FHA loans, and up until the recent market turmoil, FHA was a bad word in the housing market. What's the reason? FHA was a little archaic, with no modernized changes in many years, and the complex appraisal process made this program undesirable in a market flooded with no down payment programs.

Well I've got great news for you. I'm going to break down some differences between them. Now I won't be able to mention every single difference here, but I will give you some of the major differences in regards to rates, down payment, mortgage insurance, and underwriting differences.

Conventional loans are offered in many ways ranging from adjustable rates coming in 1,3,5,7,and 10 year hybrid arms, interest only loans, and 10,15,30, and 40 year fixed rate loans. FHA loans are offered in 3,5 yr arms and 15 and 30 yr fixed rate loans.

Some lenders offer different terms but these are the most common offered. Not ever lender will be the same in their product offerings.

So lets get into some of the differences now.

RATES:

Conventional loans in terms of pricing, or rates, have very high risk adjustments for lower credit scores and higher loan to values. Loan to values are calculated on purchases, as the loan amount divided by the purchase price. For example lets use a purchase price of $125,000 and a loan amount of $100,000. The loan to value would be calculated as 100,000/125,000 = 80%.

In this scenario the ltv (or loan to value) is 80% meaning the borrower is putting 20% down. The higher the ltv the higher the pricing. Lets say a borrower has a 650 credit score and they have 10% down, their rate would be considerably higher than someone with a 720 credit score and the same down payment. Conventional loans will also have pricing adjustments for multi-family properties, FHA does not.

MORTGAGE INSURANCE:

Conventional mortgage insurance is issued through private providers such as MGIC, Radian, RMIC, and PMI. These companies have their own guidelines when issuing mortgage insurance on conventional loans. In recent months all of them have gone to minimum credit score requirements and specific underwriting guidelines to mitigate risk. I've seen loans make it all the way to closing and fall apart because mortgage insurance could not be obtained. Mortgage insurance for multi-family properties will vary on conventional loans but will not be impacted on FHA.

Another note on this is unlike conventional loans that use private companies to obtain mortgage insurance, FHA is fully self funded by the upfront and monthly mortgage insurance premiums they collect. When comparing FHA you will see that the upfront costs associated with the loan are a little more expensive. This is because FHA will charge an UFMIP (up front mortgage insurance premium) that is equal to 1.75% (on purchases, streamline refinances are lower) of the base loan amount - I'll explain this in more detail under the down payment section. The monthly mortgage insurance premium will depend on the ltv. It'll will either range from .005% to .0055% of the loan amount. So for a $100,000 dollar loan amount the yearly mortgage insurance would be $500-$550 a year respectively. This is considerably lower than conventional which would range from .0075% - .0099% of the loan amount. Do the math that almost twice as much.

FHA 15 year loans have lower mortgage insurance, and if you put 10% down on a 15 yr loan, there is NO monthly mortgage insurance. This is not the case with Conventional.

Since FHA is fully self-funded, if you are approved for the loan, you're automatically approved for the mortgage insurance. This is not the case with the private mortgage insurance companies.

DOWN PAYMENT:

While as I write this we'll probably be in the process of receiving more changes, this is the most updated information available in regards to down payment. Conventional loans, non jumbo, which are loans above the annual Freddie Mac and Fannie Mae conforming limits, require 5% down payment. If the property is located in a declining market - which would be determined by the appraiser, Freddie or Fannie, or the MI company, you would need an additional 5% down payment. Below is the list of the conforming loan limits for 2009.

General max limits (for single family residences) are $417,000 and high cost areas $625,000.
For Alaska, Guam, Hawaii, and U.S. Virgin Islands, general is $625,000 and high cost is $930,000. For 2, 3, and 4 units these limits are higher. You can visit Fannie Mae's website at www.efanniemae.com for a full chart of loan limits.

For FHA, as of 2008, will be 3% down payment. Starting January 2009 minimum down will be 3.5%. Congress deliberated awhile on what to change the down payment requirements to on FHA loans. Ideas were thrown around for 1.5% or even $0 down. The fear was that FHA would be the new "sub-prime", so they changed it to 3.5%. The idea here is for people to have some skin in the game. If they've invested their hard earned money into the home, they are less likely to walk away from it without exhausting every avenue. FHA loan limits will vary by county and state and will adjust for high cost areas just as Fannie and Freddie do. You can find a detailed list at http://www.hud.gov/pub/chums/file_layouts.html

Now above I spoke about the UFMIP (up front mortgage insurance premium). How this would be calculated is to take the purchase price, in this case we'll use $100,000. You reduce this by the amount of down payment, for this example lets just say you are putting 3% down. This would be a base loan amount of $97,000. You then multiply this by the 1.75%, which equals $1697. This would be added to the base loan amount to get your total loan amount, which would equal $98,697. This is also the number used to calculate your monthly mortgage insurance. This was the additional up front cost I was talking about earlier. Even though you have this on FHA loans, the overall costs after a full analysis could be substantially lower versus using Conventional financing.

UNDERWRITING DIFFERENCES:

I could spend awhile on this section so I'll try to keep it short and sweet. Most lenders use Freddie Mac and Fannie Mae's automated underwriting systems, LP and DU - loan prospector and desktop underwriter - to evaluate loan candidates and shorten the time taken to make an underwriting decision. These systems have built in risk models that evaluate the data submitted and either give an approval or a denial based on that information.

FHA doesn't technically have a minimum credit score requirement, but this doesn't mean that you can get any credit score approved. When talking about having a no minimum credit score requirement, this is concentrating on those who do not have enough credit to pull a credit score. When this is the case, FHA underwriting guidelines will allow you to get what is called non-traditional credit references establishing a credit history with rent payments, utility payments, cell phone, etc. Not having a credit score will not eliminate the borrower from obtaining FHA insured financing. With the private mortgage insurance companies now implementing minimum credit scores for approval, FHA insured financing is the better option for the borrower.

While this isn't nearly all the differences when underwriting these loans, just know that FHA insured financing has more flexible guidelines then conventional loans, so this would be the better option for borrowers who've had credit issues in the past. This would provide them with low cost financing, making the purchase of the home more affordable, which is the goal of the program.

Please keep in mind this is only some of the major differences between the programs and you should still consult a professional when evaluating your options on buying home. This does not mean you shouldn't sit down at the dinner table with a piece of paper and write out ALL of your expenses, to determine if purchasing a home is right for you.

When being qualified for a loan, lenders only use debt reporting on the credit report for qualification purposes so please, do your due diligence and write out how much you have coming in and how much you have going out, taking into consideration things that may come up, before you invest savings, 401k, or other sources of funds into purchasing a new home.

Please be an informed buyer.

Copyright © 2008

Wasn't The Bailout Money for Bad Mortgages?

Well we were all sold the fact the 700 billion dollar bailout was for troubled mortgage related assets. This topic should concern you since you and I will have to fit the bill for this as taxpayers. Now the money is being used to take minority positions in banks and other companies such as AIG.

Now you have the auto industry, city governments, state governments, and everybody else coming with their hands out looking for cash. The big three have been said to be burning through one billion dollars a month a piece. Now they want $25 billion dollars to get them through these troubling times.

Since when do we socialize losses and privatize profits? The TARP or Troubled Asset Relief Program was intended to buy toxic mortgage loans from struggling banks in attempt to help ease the credit crunch. Now the money is being used to take stakes in banks urging them to lend more. Instead banks are not lending and in some instances they are using this money to fund acquisitions of other banks.

Secretary of the Treasury Hank Paulson is now switching gears from his original plan and backed his decision by saying in an interview, "Our assessment at this time is that this is not the most effective way to use TARP funds," he told the nation Wednesday.

So what now? Wasn't the whole problem stemming from the mortgage industry with all these exotic mortgages and mortgage-backed securities? Frustrating as it is we must deal with it now. As you should be concerned about the actions of the government with the use of our taxpayer money I urge you to stay focused on your business.

Just to be clear mortgages have not dried up. Loans are still available to consumers. The percentage of FHA loans being originated is growing rapidly and will continue. These mortgage loans are never talked about by the media. So even though banks are struggling with bad loans on the books, this too shall pass, and the market will stabilize. If you are in the market to purchase a home now is still a great time to buy one.

Look at using FHA financing for purchasing your new home. If you have less than 20% down you will need mortgage insurance, you will come out better with FHA mortgage insurance anyway as this, in some cases, is half the cost monthly. FHA only requires a minimum of 3% down right now, then Jan 1 you will 3.5% down payment.

While conventional loans still have hefty delivery fees for credit score adjustments and loan to value adjustements, FHA rates will be more competitive.

You can find out more by visiting my website at www.53.com/mlo/dustin-swigart. You can also email me at dustin.swigart@53.com

Copyright © 2008 by Dustin Swigart

Are We At the Bottom in Housing?

Well experts are scratching their heads to answer this question. We've seen home prices drop some 27%-30% since the 4th quarter of 2006. But really if you look at the data the majority of the declines came from the west and east coasts, mostly California and Florida. Take these states out and you have a flat market. In some markets prices are actually increasing. So is there a bottom? How do you know?

I really believe if we can get the media to start telling good news, consumer confidence will come back and "the markets" state of mind will change. All the bad publicity housing has been getting has caused a shift in thinking keeping people on the sidelines. I can't stress this enough that NOW is the time to buy a home. The government is giving a tax credit for first time homebuyers and when they begin to jump back into the market, you'll see a domino effect upward.

In the midst of the RED HOT real estate boom home prices were skyrocketing and rates were low. Now you have the same low rates but home prices have come down so why not take advantage of the opportunity. Don't listen to the hype that makes news, work the numbers and realize that this is only a correction, a hefty one, but a correction that will not last too much longer.

The media wants you to believe that home financing options have vanished. This simply not true. FHA, which stands for Federal Housing Authority, was enacted in 1934 to help stimulate a flat housing market. FHA provides low down payment, low interest, affordable financing for not only first time homebuyers but repeat buyers alike. FHA is ran by the Department of Housing and Urban Development and operates fully on self-generated income that costs the taxpayers zero. The insurance premiums, called UFMIP or upfront mortgage insurance premium, is charged on every loan and is put into an account to which the program is funded.

FHA has mortgage insurance on a monthly basis as well, similar to PMI or private mortgage insurance issued by private companies such as Radian, PMI, MGIC, and RMIC. This mortgage insurance is at a much lower cost than conventional mortgage insurance and in some instances is half the cost.

The media doesn't talk about this program of course and its important that we get some stigmas out of the way. FHA in its old days was a little more strict on the property guidelines. They would require a very long form of an appraisal called a VC sheet. This sometimes made it difficult for the Realtors and buyers because certain guidelines required additional inspections and repairs not figured into the sales price that would delay closing or cost the seller more money than they anticipated. This was for the protection of the buyer so that they were not moving into a home that needed a lot of repairs and that would put a strain on the new homeowner. Realtors and builders grew to hate the program and tried to find other avenues of financing. Since 2006 FHA has loosened its guidelines to change with the market and has made it easier to close on a home using FHA financing.

With the explosion of 100% purchase programs FHA became obsolete. Do not be afraid of this program because this is an excellent way to get low cost, low down payment financing to purchase a home. The problems we are having came from the provisions in the Community Reinvestment Act in 1995, which made banks make more and more loans to people who really couldn't afford them. Very very lax underwriting guidelines fueled by greed on Wall Street with exotic mortgage-backed bonds and collateralized debt obligations that have crippled names like Merriyl Lynch and Bear Stearns.

We've seen some consolidation in the this industry and I believe we'll see more coming down the pike. So are we at a bottom? I honestly believe the worst is behind us and we'll see an upward trend in the coming quarters. Don't listen to the hype on the news, if you are in the market talk to a mortgage professional and work the numbers.

For information on FHA loans please visit my site, www.53.com/mlo/dustin-swigart.

Have a great weekend!!!

"We all have the seeds to personal growth within us, but very few ever realize the important role circumstances play in nurturing those seeds to trees of opportunity."

Dustin Swigart

Copyright © 2008 by Dustin Swigart

Credit is Starting to Ease

As we all know we've been hammered everyday about the economic conditions we face. It's funny though how, when speaking about mortgages, the media fails to talk about government backed loans. They only talk about Fannie and Freddie but leave out Ginnie, which backs FHA securitized loans.
We still have financing available for first time homebuyers and marginal credit loans through financing with FHA, VA, and USDA rural housing loans. When talking with prospective buyers I keep hearing how "scared" people are to make a move. After I explain some of the conditions in the market and why the stock market is so volatile they settle down and understand what is happening with market dynamics.

The automobile industry used to be the main driver of the economy and signaled the dominance of manufacturing in our economy. Well now the main driver is housing. Yep that's right back in 2001 after the 9/11 attacks government was reluctant to impose regulation on the only part of the economy that appeared to be thriving, the red hot real estate market. Now we are facing the problems that all the credit default swaps, collateralized debt obligations, and other derivatives, that have caused problems for the banks and institutions that had them on their balance sheet.
We are in a flushing out phase and it will end, just not immediately. The Housing Recovery Act of 2008 made great strides to modernize FHA and come out with a tax credit for first time homebuyers in order to get them back into the market. Lets face it we need the first time homebuyers back in to purchase bloated inventory so we can start the domino effect again.

I want to explain a little bit about what is going on in the credit markets. I believe through education, you can ease your prospects minds with important information and convert more leads into sales.

Lets start with the credit markets. Credit markets are vital for individuals and businesses who need to access credit in order to purchase goods and services, make payrolls, expand business operations, make capital expenditures, school loans, and more.

The most important spread being watched right now is the LIBOR/OIS Spread. This is the spread between dollar LIBOR (london inter bank offered rate) and the Overnight index swap rates. This is a good indication of the willingness of banks to lend to each other. To give you a comparison before the credit crunch the LIBOR/OIS spread was 11bps (bps mean basis points which is 1/100th of a percent, example 11 basis points is .11% - 100bps is 1%.) The higher the spread the less likely banks will lend to each other. This week it closed at an a staggering 331bps but dropped from 341bps, which means we are seeing slight improvement.

Now what about all the selling? Well with the craziness in the market and Hedge Funds, investment vehicles for the wealthy, are deleveraging their positions and being forced to sell due to redemptions from their wealthy clients. Hedge funds are down about 19% ytd (estimate), some hedge funds after fees return 20%-26% annually. Hedge funds make their money in the stock market, credit markets, and derivative markets but in some cases borrow heavily to invest and hedge their bets. That's fine and dandy in an economic boom but in a slowdown like this they must sell and deleverage their positions causing downward pressure in the markets and then also selling on the down side, short selling, put options, etc, to keep from losing money from long, bullish positions, which causes more downward pressure. Not to mention mutual fund clients are selling their positions to meet growing redemptions from their clients as well. Thus creating the volatile environment we find ourselves in.

If you had some extra money laying around right now would be the best time to invest in real estate, and stocks pounded and are now undervalued.

The moral of the story, educate your clients in contrary to what is being splattered on the media, we are in election time and some news stations with political agendas are attempting to make this look like this is all the Bush Administrations fault and are attempting to make it sound so HORRID. Both parties failed to take action but many attempts were made but shot down by democrats in Congress. Right now is the best time to buy a home and with the Treasury recently being given 1.1Trillion dollars in buying power to purchase mortgage-backed securities (the main driver of mortgage rates) we should see some easing in the rate volatility here shortly as well.

If I can help with anything feel free to call or email me. Stay positive, do your homework on the market, this kind of thing happened in 1987 as well but how soon we forget.

God Bless!

FHA's Comeback

One of the things I want to talk about is FHA loans. This program up until earlier this year had maybe 2% penetration into the market place. Reason for this is the influx of money, from investors, into the mortgage market thus creating a plethora of alternative loan programs that were giving borrowers more options. These loans include no income verification loans, stated income an asset loans, piggyback loans to avoid pmi, and others.

The market became very creative and helped fuel a red hot real estate market that set record sales for 5 years in row. Many people don't realize that while the market was creative in providing alternative loan programs to borrowers, lax underwriting guidelines and fraudulent activity created the majority of the mess we now see today. A severe decline in home values played and is playing a major role itself. I'm not going to talk about a lot of bad news here I think we get enough of that already from the media. Lets face it bad news makes the front page. My intent is to provide information about a old but new program that many steered away from but now is one of the only high loan to value options left.

Lets talk about the benefits of an FHA loan.

1. No minimum credit score- FICO scores over the last 15 or so years have been used heavily by lenders to determine the creditworthiness of a borrower to repay a loan. Being in the people business for 7 plus years now and pulling credit and looking over credit reports I can tell you it doesn't give a very good indication. The system is designed to give you a snapshot in time of what borrowers score is and not a trend of creditworthiness. I say this because I've pulled credit on someone with a 700 credit score and 6 months later they have one late payment and their score dropped to 550. Now is that a good indication of the borrowers ability to pay back a loan? Let me answer that for you NO! With FHA you don't need a minimum credit score to qualify however common sense is needed here. A 400 credit score is highly unlikely to get approved. Now this year FHA has added risk-based premiums to their upfront mortgage insurance and that is credit score driven but overall there is not a minimum criteria for a score to qualify.

2. Low Down payment - With FHA, up until Oct 1, 2009, only has to contribute 3% down payment. After October 1 it goes up to 3.5%. The 3% can come from a relative as a gift or borrowers own funds. This is powerful because right now in the conventional world you need a minimum of 5%, if the property is located in a declining market as indicated by the mortgage insurance companies, you'll then need 10% down. Not to mention you need over a 680 credit score to get the mortgage insurance approved. You might be approved for loan but can't get the insurance. Which moves me into my next benefit.

3. Low mortgage insurance - FHA handles their own mortgage insurance so if you are approved your loan will have the mortgage insurance on it. FHA mortgage insurance also is at a lower expense then conventional and if you put 10% and take out a 15 yr fixed loan no monthly mortgage insurance is required.

4. No income restrictions - For the first time home- buyer group this is huge. Most first time home-buyer programs are designed to meet the needs of low to moderate income borrowers. Well if you make more than the income limit these programs are unavailable to you. FHA has no income restrictions to qualify.

5. Purchase or refinance new or existing 1-4 unit homes - This is a big plus. You can still get 97% on the purchase of a 1-4 unit primary residence. Conventional requires more down payment on multi-unit properties. On cash out refinances there are limitations to loan to value.

6. Financing for manufactured homes - With the credit tightening in the mortgage market some areas have an ample supply of manufactured homes. The same 97% guidelines apply on these but they must meet FHA guidelines and be on a permanent foundation.

7. You can use a non-occupying co-borrower - This is a forgotten rule but if you can have a non-occupying co-borrower, as long as they are a relative, sign on the loan and the borrower can still get the maximum financing of 97%. This is limited to 1 unit properties if the ltv is over 75%. Certain restrictions apply.

These are just a few of the many benefits to FHA financing. It provides a solution for many borrowers needs and helps them fulfill the American Dream of owning a home. I've been in the industry over 4 years now and I love providing solutions for my clients to purchase their first or next home. I get great joy out of what I do.

Stay tuned for more of my blogs and industry news. I've never been a big fan of bad news I like to spread good news but we are facing problems in the housing industry but i believe it when I say its a cycle and we'll survive this storm and come out of it with better times. Remember the market is what you make it. There are still many opportunities out there you just have to change your marketing strategy, do things a little differently, try something new to see what works and what doesn't.

Never become victim of all the bad news because you can sure find a lot of it. Now is the time to become more proficient at what you do and become a trusted adviser to your clients and business partners.

God Bless

"Whether you think you can or you think you can't, either way you're right"

Henry Ford

Copyright © 2008