I have a question on fha loans and the current stimulus plan on mortgages to help homeowners afford their homes.
I just sent in the required paperwork to my mortgage company to see if I could get the reduction in the interest rate to the current one..but...beings that I have an fha loan will I not get the current fha loan rate(which of course is higher) or the conventional rate to help me out a little more...does anyone happen to know?
either is less than what I am currently paying...so either will help...and does anyone know if there is any reason that my mortgage company may not change this for me? I bought my house in 1997 and my interest rate is 8%!!!! so they should give me some mercy...
thanks in advance for any info!

Thanks for the compliments guys.... Yea, I really havent been able to sleep very much these days, I was hoping to close and get the keys yesterday, but they put it off till Tuesday (since Mondays a holiday). I will just have to be patient thru the weekend and see what happens next week.

Heeeey Now! You go Brian, with your bad self. This is exciting news to hear. I can just imagine how you must be jumping up an down, let alone can't sleep. You sure did get a good deal and is saving a whole lot on money. Smart move, and good deal buddie!

Congrats on the new home! Hope you and the Mrs. like it and enjoy your new home. Wonderful things are coming along your way that you will not forget for the rest of your life.

Brian,

That's great news! Sounds like a solid investment for you. I say if you can better yourself early in life by smart decisions that will benefit you in the long run of life, go for it! Sounds like you have an honest banker who is giving you great information. I think the most important thing they are looking for is the past 2 years of good payment history, sufficient income to support the loan, and debt ratio front load. Sounds like you would qualify. Don't worry about the FICO score right now, you are ok in that area. That will rise QUICKLY after you're in the home for a solid 6 months. My score rose almost 65 points within 6 months of closing and putting the loan on the bureaus. One point though, and i know you won't allow this to happen, NEVER,EVER make a late mortgage payment. Your score will drop like a rock, 50-75 points, and takes months to get it back to where it was.

Shoot me an email as soon as you get in!!!! Sounds like an approval to me as long as you have the income. Next step once you're in is to work on that emergency savings plan, and open that IRA while you are young. You may want to consider going with a shorter fixed mortgage term instead of traditional 30 yr fixed. BTW, always go fixed in this market. Too many are in foreclosure due to bad ARM's that have caused people to lose everything. I don't want that to happen to you.

I've learned alot of valuable lessons in my life, i'm now 45, own several multi-million dollar businesses, and can help you with alot of knowledge, and roads i've been down. I'm impressed that with your young age that you are taking the initiative to sescure your future, and not just worrying about buying that hot new car, or the hip things that are in. You may not see it now, but in the years to come, you'll look back and be glad that you passed up the hottest, newest i-phone, or whatever. Good for you man, i hope it passes with flying colors!!!

Let me know,
Tom

Well, I had to take a break from buying a house since Sep-Oct of last year (both parents lost their job in the same month but both ended up with another job before the end of 2008).

So, I took a little break while I have been trying to feed them both money to pay their mortgage for the last 4-5 months.

But, I am happy to report, that I did (even in this tough market) get financing for a house which it looks as though I am closing either tomorrow night or Monday morning....... WOOOOOHOOOOO........

It's an FHA mortgage and with a 5.875% fixed rate for 30 years.... The house cost is 65,000 (short sale) and with mortgage, taxes and insurance I will only be paying 760 per month (currently right now I am paying $1000 a month for 2/2 apt).

So thankfully, from everything I have learned from here for the last year on dealing with credit, I got financing with no problems.....

Congratulations Buddie! I can imagine the joy you must be feeling at this time. Thanks for updating this thread and providing valuable info for us. I will make sure to direct members straight to you when they have mortgage or any type of pre-qualifications questions.

Just returned to Myrtle Beach on 1/2/09. I closed on my mortgage on 12/30/08, just outside my home town in Wash DC.....It was a FHA mortgage. The entire settlement process was really painless compared to the events leading up to the settlement/closing. This mortgage was the extremely stressful just making sure everything was verified, and verified, debt to income verified, etc. etc. I couldn't use several accounts as they were in verification stage for 2 months. This is a very specific type of loan, and at the end of what i thought it was finished, something would always come up from my mortgage broker right down to the line. I never got my commitment letter from Wells Fargo until after i closed on the loan, how weird? Anyway, i got a terrific fixed 30 year rate of 5.50%, which was unlocked a week prior from 6.25!! I am on my way back home by 1/16/09. I love my home purchase, as its a dream home, and the price is superb. If i can help anyone with what you can expect with an FHA loan, let me know. God Bless!

Thomas1, yes I have heard of the median credit score. My broker pulled all three on me and the middle one was the one that was just over the 580 (it was a 589). My broker said that either way I am still in the clear because FHA really doesnt go by credit scores, but more by your payment history in the last 2 years and of course your debt to income ratio. Heres a good way to tell if your pre-approved for an FHA without having to consult a broker.

- Clean payment history on all tradelines in the last 2 years (if not you are going to have to write a letter to the Underwriter explaining why you were delinquent).
- Your debt to income ration cannot be more than 25% on the front end (i.e. take a look at your last 2 paychecks and figure out your monthly gross income. Than look at everything on your credit report, see what all the minimum payments are an add them up. Divide your minimum payments on all your current accounts into your monthly income. As long as your not over 25%, than you've pretty much got the loan in the bag. Remember though this is only based on whats on your credit (i.e. car loan, student loans and credit cards), they dont take rent into consideration with this.

The good thing about all of it is I have 7 charge offs from 2003 - 2004 and I dont even have to worry about them because FHA doesnt even care about them as long as they are not in the last 2 years. And if its a medical condition charge off, they wont even think twice about it.

Meya, the only way a student loan doesnt count against your current debt is if its in deferrment (or your still attending school). I have 6000+ in student loans and they're not even playing a factor on my debt to income ratio.

Bottom line, I think now is the perfect time to for anyone to buy a home on an FHA loan (Meya, I think if you check it out you might be able to save a little money now since it really is a buyers market). I live in South Florida (well actually in the Metro Miami area) and this region was one of the hardest hit by foreclosures for the entire State. I have been looking at perfect 2/2 condos in my City and the crazy part is a year ago they were going for 150K plus and now I am finding them all for under 70K. Well, I found a 2/2.5 townhouse that would be a dream for me to get (1300 square feet, 2 floors and a 2 car garage). The list price was 64,900, I placed a bid for 55,000 (I figured I would shoot low), and today I received a counter offer from the bank for 58,900. I think I am going to accept there offer and close for that. The 2 best things are

Brian,

That's great news! Sounds like a solid investment for you. I say if you can better yourself early in life by smart decisions that will benefit you in the long run of life, go for it! Sounds like you have an honest banker who is giving you great information. I think the most important thing they are looking for is the past 2 years of good payment history, sufficient income to support the loan, and debt ratio front load. Sounds like you would qualify. Don't worry about the FICO score right now, you are ok in that area. That will rise QUICKLY after you're in the home for a solid 6 months. My score rose almost 65 points within 6 months of closing and putting the loan on the bureaus. One point though, and i know you won't allow this to happen, NEVER,EVER make a late mortgage payment. Your score will drop like a rock, 50-75 points, and takes months to get it back to where it was.

Shoot me an email as soon as you get in!!!! Sounds like an approval to me as long as you have the income. Next step once you're in is to work on that emergency savings plan, and open that IRA while you are young. You may want to consider going with a shorter fixed mortgage term instead of traditional 30 yr fixed. BTW, always go fixed in this market. Too many are in foreclosure due to bad ARM's that have caused people to lose everything. I don't want that to happen to you.

I've learned alot of valuable lessons in my life, i'm now 45, own several multi-million dollar businesses, and can help you with alot of knowledge, and roads i've been down. I'm impressed that with your young age that you are taking the initiative to sescure your future, and not just worrying about buying that hot new car, or the hip things that are in. You may not see it now, but in the years to come, you'll look back and be glad that you passed up the hottest, newest i-phone, or whatever. Good for you man, i hope it passes with flying colors!!!

Let me know,
Tom

thanks for tha posts

The Federal Housing Administration (FHA) runs several programs to promote home ownership. In most cases, FHA loans are mortgages obtained with the help of the FHA. With a small down payment, buyers can purchase a home. FHA loans make it easier for people to qualify for a mortgage, but they’re not for everybody.

What is an FHA Loan?


An FHA loan is a loan insured against default by the FHA. In other words, the FHA guarantees that a lender won’t have to write off a loan if the borrower defaults – the FHA will pay. Because of this guarantee, lenders are willing to make large mortgage loans.
Who Can Get an FHA Loan?


Almost anybody can get an FHA loan. There are no income limits – like you may find with first time home buyer programs. However, there are limits on how much you can borrow. In general, you’re limited to relatively small mortgage loans relative to home prices in your area. To find the limits in your region, visit HUD’s Website .
To qualify for an FHA loan, you’ll need to have reasonable debt to income ratios . In general, you have to be better than 29/41. In addition, you have to have decent credit. You don’t need wonderful credit to get an FHA loan; it just needs to be decent.
Why are FHA Loans so Great?


FHA loans are not for everybody. Nevertheless, they are a great help to some borrowers. FHA loans allow people to buy a home with a down payment as small as 3%. Other loans might not allow such a low down payment.
FHA loans offer a few other bells and whistles]
[*]Easier to use gifts for down payment and closing costs
[*]No prepayment penalty (a big plus for subprime borrowers)
[*]An FHA loan may be assumable
[*]Possible leniency during financial hard times
[/LIST]
How do FHA Loans Work?


The FHA promises to pay lenders if a borrower defaults on an FHA loan. To fund this obligation, the FHA charges borrowers a fee. Home buyers who use FHA loans pay an upfront mortgage insurance premium (MIP) of 1.5%. They also pay a small ongoing fee with each monthly payment.
If a borrower defaults on an FHA loan, the FHA uses collected insurance premiums to pay off the mortgage.
Why Not Use an FHA Loan?


You may find that FHA loans are not for you. An FHA loan may not offer enough money if you need a large mortgage. In addition, the upfront mortgage insurance premium (and ongoing premiums) can cost more than private mortgage insurance.
In many cases, you can still buy a house with a very little down using a standard loan (not an FHA loan). In particular, home buyers with good credit can find competitive offers that beat FHA loans. As always, you should compare offers for FHA loans against other offers

YoYo11, thanks. I think owning a home can bring so much pride and joy. Also, it can provide some tax benefits by moving to file a 1040A if you don't have children or have a high tax burden.

Www bankratemonitor dot com site is pretty good and their calculators are excellent for figuring out what your payment will be or how much house you can afford. That site is excellent.

Also, when purchasing a resale, everything is negotiable. I had a buyer write in the contract offer that she wanted my custom, JCPenny drapes and my crystal chandelier in living, dining room, foyer and master bath. I told her yes but not the living room one, that went with me.

WE gave them $2k towards closing cost and only came down $5k but we had already built in $8-$10k above the price we really wanted to get. WE also threw in a 1 yr warranty.

YOu can do it. By being a member of this board, working on your credit, keeping utility low, you are ahead of a multitude of people who are clueless and there are many out there.

This is why unscrupulous brokers, agents, and others were able to scam so many who were given bad loans.

The RESPA act details most of your writes as a buyer and the bank/mortgage/settlement company has to give you this book. It clearly states that you must be given a good faith estimate 24hours before you close.

Many will try to avoid this or tell you to go off the one that was given to you when you first identified your property.

That good fatih estimate is practically worthless as it contains mostly guesses. The GFE given 24hrs before close or even 3days before close is more in line to what you have to actually pay at closing.

You are required to bring a certfied check at closing and I have seem several people not have enough or shocked to see what they thought they had to pay is now triple or that fees which were quoted at one price is now double or they were promised to only be charged 1 pt but at closing it is now 3pts. that is a lot of money. Imagine purchasing a $200k house and have to pay 2pts extra, that is $4k that you have to come up with or that is added to your mortgage.

Many people that this have happened to have just gone along with it as they are too invested in purchasing the house and don't want to 'risk' losing the deal.

Closing dates.

Try to never close on a Friday because if their is a problem or error, it is hard to fix until the following Monday.

I always scheduled my close around the 25of the month or so as that is less money that you have to bring at closing.

When purchasing a house, you pay the interest up front but your first payment usually seems like 2mths after. Example, If I'm closing on Aug 25, that is only 6 days of interest that is calculated in my closing costs versus 26days of interest that I would have to pay if I were to close on the 6 of Aug.

Say for instance, your interest rate calculated for the purchase price of your house is $30. That would be 19more days of interest you would have to pay at closing i.e approx $600. See why it is important to choose your settlement date wisely.

Also, never, ever close on the last day of the month, because if there is a problem, you will roll over to the first day or week of the next month and your closing costs will increase.

Contract

I'm all over the map tonight. Whenever, you offer a contract on a property, always, always have a conditional out for you in case you change your mind, you find a better property or whatever.

some common outs are:

The contract will be based on you obtaining financing based on x interest or obtaining reasonable financing.

The contract is based on the home passing inspection with repair costs not more than $500

or you can get silly and say based on your mom agreeing etc.

The reason for this is because this is a legal and binding contract and you will be required to offer a good faith check along with the contract to show in essence that you are a serious buyer.

For a new home, this amount is usually $1500 although I have seen builders ask $3k.

My advice is to offer as little as possible because if something goes worng and you want an out , you may have to forfeit your deposit and you don't want to have to make a bad decision because you don't want to loose $3k or $5k.

Same goes for a private seller, I would never put more than 1k down as earnest deposit. I don't see why you should have to put more than $500 unless their is a bidding war.

Ok, that'ts it for tonight folks.

Remember, knowledge is power and we were told that we didn't qualify for our first home, we needed over $8k to close and my credit was not the best.

We purchased our first home, a brand new TH with only having to brink under $4500 to closing and we were refunded approx $600 which we used to purchase a fridge. So, it can be done. Don't take no for an answer and remember, many of these agents, brokers don't know everything.

You are your best advocate so read, read, read. It CAN be done!

I forgot to add, I don't ever, ever reccommend anyone getting an ARM mortgage unless they are sure that they will be moving in less than 5 yrs or their company gurantees to purchase the home from them.

Even, for me if I knew that I was moving in under 5yrs, I would still get a fix as I hate uncertainty and IMO, the arm rate wasn't much different fr om the fixed rate.

I saw people getting an arm for 4.5 and 5% and I just shook my head as the fixed rate was 6 to 6.5%. I think that the rule of thumb is not to get an arm unless there is a 2pt spread between it's rate and a fixed rate. I would say 3pts but then again, I don't believe in arms. These loans are one of the main reasons why many folks are losing their homes today.

Fixed is the way to go.

ARM= adjustable rate mortgage that is usally tied to a financial index i.e LIBOR or T-Bill. It can adjust up or down but mostly up. These loans usually have caps which says that the loan can't increase by whatever the cap is in one year ie could be 1% or 2% or 1.5%.

I detest arms. Stay away from these loans, speaking for me only.

Thanks RWMTD. I don't have a particular housing book to name of the top of my head. My learning process has occurred over time and from reading several sources.I also read and still do every Sunday, the real estate section in my local paper. You can go to www.fha.gov to read up on FHA loans or google FHA etc.

What I did do and do reccommend is to go to your local library and check out a few books at a time. After you have read about 3-4, you will be familiar with the terms and general process such as:

1. What is an arm?
2. What is a fixed rate?
3. What is a hybrid loan i.e could be an arm for the first 5years and then fixed afterwards through year 30 or it could be a 3/1 arm or 5/1 arm etc
4. What is a conventional mortgage? Anything other than an FHA and now the banks are requiring you to put 10% down, sign over your first born and cut off your leg and arms to qualify
5. What comprises an escrow account?
6. What and how much is closing costs?
7. The components of closing cost ie. doc stamps,title fees, points, etc
8. What are points? Can they be paid down (yes)?
9. What are some of the junk fees that unscrupulous brokers try to get you to pay on good faith estimate?
10. What is a good faith estimate and why it is required that you receive one 2-3 days before your settlement. In fact, a broker, bank can and should give you one once you have identified a property.

11. Why you should not divulge too much info to a real estate agent who is not a buyer's agent and why you should never, never let an agent know that you absolutely love a house and have to have it.
12. Why the builder's mortgage company probably have higher rates than the market.
13. Why it is best to not just be prequalified which you can do yourself but to be pre-approved as it gives you more bargaining power. I know when we were selling one of our properties, we told our agent not to bring any offers unless pre-approved.
14. Why you should never take no from anyone or let anyone tell you that you can not get a house
15. Why if you start working on your credit, create and stick to a loose budge and commit to saving if only $100 a month, keep your tax return that you probably may be ready to purchase a house in a year.
16.Why it is important to protect your credit and work on improving your Fico score ESPECIALLY if you are a minority as most likely you will be offered higher interest rates and risky loans. This is why knowledge is power.

There are also local loan assistant programs that may be able to help you. I know of two people who utilized these programs. One, made a little over $40k, 1 son and she got $20k from her county on a $110 house that she never has to pay back as long as she doesn't refinance or sell the house. She also hot 6% rate, lot and all she had to do was to meet a few requirements, attend a class, have decent scores etc. Her payment was $800+ and she lived in South Florida. The house is now 6yrs old and valued over $200k so it can be done.

Out of pocket, she put down less than $3k. Keep plugging away.

ps. One final thing, beware of people who just want to pull your credit. Order your own reports and use these to show rather than having every Tom, Dick and Harry pull your scores.

keep the info coming...i'm print it out!

Shark6, I've been reading this thread the past couple of days and would like to say thanks for the information. Me and my DH are in the beginning stages of credit cleanup and getting our house in order so to speak so in the next couple of years we can buy a house. I really like the way you broke down the info.

BTW, what books would you recommend for reading up on this subject?

You are the best!!