But did you know that I can approve a person whose gross (before taxes and all other withholdings) income is $60,000 per year for a $2500 house payment under the right list of conditions? That’s half the borrower’s income. The before tax income! In this case the person would have approximately $1200 left every month to pay all utilities, car insurance, life insurance, groceries, Christmas presents, etc. Not sure how this make sense, but FHA will do it – and with only 3.5% down.

Here are some helpful benchmarks to consider before trying to buy a home or make a move up into a more expensive home.

Debt

Set a goal to have all of your debt paid off. No car loans, no credit cards. For most people, that would free upwards of $600 or more per month, money that can be used to make home improvements and to take care of home-related things that must be planned for like a new roof or septic repair.

Reserves

You should never get into your home using your last saved dollar. Emergencies happen in life, but buying a home is not an emergency. Even non-emergency-type events happen that cost money. So consider saving up to three months of your current monthly budget over and above what you need for your down payment. A new $300 water heater can be a very calm and non-emotional event – if you have the money to pay for it. When you don’t then something that simple (which is inevitable if you think about it) can be a day or even a week wrecker.

Stable income

We can never be sure that our income will continue exactly as it has, much less that it will increase – just ask state employees and General Motors union workers. Nothing is certain, and that’s a certainty. Yet it makes sense to remember a few things: Don’t commit yourself to a payment based on needing to make overtime or bonuses; And wait until you’ve settled into the job and like it (and they like you) before taking any step like a home purchase.

Put a ring on her finger and get Married already

I would never recommend buying real estate with a friend, or even with someone who is more than a friend. Tie the knot first. I don’t mean to be preachy, but I find more often than not, folks who are not married and buy a home together end up in a difficult spot.  Getting into a home is much easier than getting out of one. Make sure it’s forever before taking this step.

Let’s face it, lenders are good at getting deals approved and closed. They’re motivated because they get paid for it – this is good for you. You want the person working for you to work hard and not give up until the deal you want is closed. But that means you need to be watching your own back. If you walk into a lender’s office and express a desire to own a home or move up to a larger one, don’t expect much from the loan officer except for him to get that done for you, whether or not you are actually ready for it.

Regardless of the interest rate the process for approval is a simple one requiring only the following data for a full approval:

1.  HUD from the day you purchased the home or of your last mortgage closing (this is the settlement statement with all the closing numbers on it)

2.  Signed note from current loan – this will be part of that closing package as well.

3.  Two months of bank statements

4.  Copies of each of your Drivers Licenses

5.  Form filled out (quick application) we will email this to you.

After receiving this we will send you the formal application packet to sign and send back to us.

We get the loan approved and then set a closing date for near the end of the month.

Working out numbers and details at closing has to do with understanding your escrow account balances and how we lock the loan with respect to the closing costs you want to pay.

If you can save even ½%, it may make sense for you to look at it.  Call us, there is no obligation with the call and the consultation takes less than 15 minutes.

15 minutes could save you 15% in your mortgage payment – hmm, I think I hear a catch phrase here – maybe I should copy write it.

Today’s post is all about giving FHA the love it deserves.

So. . . let my LOAN open the door . . .

Despite the rise in FHA’s up front insurance cost to 2.25% of the loan amount – FHA loans continue to gain market share as the most popular loan for home buyers – and not just first timers either.

The two big drawbacks of FHA loans are the monthly mortgage insurance (most FHA loans but not all) as well as the up front mortgage insurance premiums.

That means you will “owe” more than your sale price minus your down payment because of the Up Front Mortgage Insurance Premium which is not charged on Fannie Mae and Freddie Mac insured mortgages. You will also pay around $45 per month for every $100,000 you borrow.

Fewer and fewer home buyers are deterred by these in today’s market. There are at least 10 reasons for this:

1. First time buyers who have not been able to save a full 10 or 20 percent down payment are able to get in for just 3.5% down.
2. Move up buyers who sold their home for less net cash to them are still able to be buyers and buy a home from this market because of the low down payment.
3. The monthly FHA mortgage insurance can be dropped in as soon as 5 years.
4. On 15 year FHA fixed term loans with 10% down – there is NO monthly Mortgage Insurance.
5. 6% seller concessions allow for total money invested to be 3.5% of the sale price in most cases.
6. No interest rate add ons for 640 or above credit scores.
7. FHA Interest rates are as good if not better than conventional loan rates – with no points as of this writing they are at or better than 5%.
8. Underwriting is easier than with a conventional PMI loan and believe it or not, the appraisal process is faster and gives fewer hassles.
9. You can buy a home almost anywhere and at any income level. Even though in most markets the maximum loan amount is just over $270,000 – this is not prohibitive for most (95%?) qualified home buyers.
10. Even refinancing is easier. Those in a non-traditional (not Fannie/Freddie) ARM loan can refinance easier with the need for a lesser appraised value.

It’s not surprising that FHA loans are the loan of choice for many.

If you do have 20% down and your credit score exceeds 720, then there is no question that you should use a conventional loan and avoid the negatives with FHA. But for many who don’t – FHA opens the door.

So if I haven’t said it enough times in the last 30 days, I’ll just keep saying it. Now is a great time to buy your first home or trade up.

Let my FHA loan open the door – check it out today!

FHA is going through a major overhaul because they are not yet seeing improvement in the performance of their portfolio – including loans they accepted in the last two years! Follow the link below to read a few important updates from FHA.

http://activerain.com/blogsview/1443094/fha-changes-coming-tomorrow

But hang on. As it turns out–with this stat, at least–things are looking pretty good here too. If by “here” you mean the Midwest in general.  The Pending Home Sales Index is based on contracts signed in September. Nationally, this number rose 6.1% against the previous month, and is 21.2% higher than in September of last year. This is the largest annual increase on record. In the Midwest the index rose 8.1 percent and is 17.8% higher than last year. Not bad. And though foreclosures will continue to work against us, they’re coming at a slower rate. The net result? Reduced inventories.

And there are other things helping to reduce inventories: the imminent extension of the first-home-buyer tax credit (or some form of it); the extension of Freddie, Fannie, and FHA higher loan limits (just announced last week); and the release of pent-up demand as approximately three million renters have moved into the financially-qualified category as potential buyers (this according to the NAR); and now, the continued gains in pending home sales.

Collectively, these should cut into the existing inventory and act to lower supply and eventually raise home prices. We’re seeing this in other markets around the country, and where we see home prices rise, we’re also seeing more willingness on the part of lenders to underwrite. And that will happen here too, eventually.

I’m not going to say be patient, because if you’re still in this business, you learned how to do that long ago.