Yale Roth M.A., M.Ed

Posts Tagged ‘FHA’

Can You Get A Mortgage After You've Had A Bankruptcy?

With the overwhelming number of bankruptcy filings out there many people wonder whether they will ever be able to get a mortgage loan to buy a new home or refinance their existing mortgage loan.

Many people ask me: “I’ve had a bankruptcy, can I get a mortgage loan again?”

Or, “How long do I have to wait before I can get a mortgage loan after my bankruptcy?”

First, you are able to get conventional mortgage financing after you’ve had a bankruptcy.

You just have to wait some time.  It’s called “bankruptcy seasoning.”

Here’s what it means.

If you’ve had a Chapter 7 bankruptcy, then you have to wait at least 2 years from the bankruptcy discharge date to apply for a FHA mortgage loan.

For a conventional mortgage loan, you have to wait 4 years after the bankruptcy discharge date.

If you’ve had a Chapter 13 bankruptcy, then you have to wait 1 year from the bankruptcy discharge date to be eligible for a FHA mortgage loan.

For a conventional mortgage loan, you have to wait 2 years.

Just remember that you want to reestablish good credit after the bankruptcy discharge.

Also, after the bankruptcy discharge, in addition to reestablishing credit, concentrate on maintaining good credit by paying the bills on time and keep the credit card balances low or at zero.

If there are credit issues after the bankruptcy discharge date, your credit scores will suffer and you’ll be less likely to qualify for either a conventional or FHA mortgage loan.

So don’t despair, waiting 2 years after a Chapter 7 bankruptcy  or 1 year after a Chapter 13 bankruptcy isn’t a lot of time.

You will be able to get mortgage financing again!

Related Posts:

• 5 Mortgage Loan Types That May Help You Get What You Want
• Mortgage Rate Update. Thursday, April 8, 2010
• Mortgage Video FAQ – “What Makes Up The Borrower’s Closing Costs When Buying Or Refinancing”?
• Why Getting A Mortgage For A Manufactured Home Is So Difficult
• Why A Homeowner Should Not Pay PMI When The Loan To Value Ratio Is 82%

HARP - Home Affordable Refinance Program. What Is It?

I’m getting a lot of mortgage questions about the HARP program so I thought I’d write a short post outlining what it is.

HARP, which stands for the Home Affordable Refinance Program, aims to make refinancing easier and possible for homeowners who are unable to refinance into a conventional or FHA mortgage because they owe more than their home is currently worth.

For example, if you currently owe more on your mortgage than your home is currently worth, the only way you can refinance the existing mortgage into a lower mortgage rate or shorter mortgage term is to take cash out of your savings and pay your mortgage down so there is equity.

Remember, equity is the difference between what your mortgage balance and your home’s value.

A lot of people either choose not to do this or cannot afford to pay the mortgage down.

And who can blame them.

To do this would be to take cash that has present day value and pay it against a declining asset.  Yes, you don’t want to think of your home as an asset, but it is and when the home value is dropping, the asset isn’t performing well. It’s like taking good cash and putting it against a bad asset.

So now people who are “underwater” can take advantage of the low mortgage rates and refinance their existing mortgage.

But wait, there’s more!

You have to qualify for HARP.

What are the HARP qualifications?

Here they are:

1. Your current mortgage must be owned by Fannie Mae or Freddie Mac.

2. The mortgage must have been sold to Fannie Mae or Freddie Mac before May 2009

3. You have to be current on your current mortgage and not have been late over the past 12 months.

4. The current loan to value ratio LTV cannot be lower than 80%

In addition, certain lenders put “overlays” on this criteria, which make it even tougher to get.

For example, some lenders still have a 125% loan to value cap as well as a minimum credit score requirement of 620.

Also, if you’re currently paying PMI private mortgage insurance, you aren’t eliglible for HARP or if you’re in a FHA mortgage, you’re not eligible for HARP.

What you want to do if you’re current mortgage balance is greater than what your home is currently worth is to contact your existing mortgage servicer and see if you qualify.

If you do, you want to shop around  to see where you can get the best HARP mortgage terms.

Related Posts:

• Can You Get A Mortgage Loan After You’ve Had A Bankruptcy?
• 6 Tips On How To Refinance Your Mortgage If Your Home Is “Underwater.”
• Mortgage Questions – “Can You Finance Your Mortgage Closing Costs?”
• FHA Mortgage Questions – “What Is A FHA Streamline Refinance?”
• Mortgage Refinance Questions – “What’s Your Mortgage Rate With No Points?” Is This The Right Mortgage Question?

With mortgage rates very low, a lot people who are already in FHA loans are wanting to do a FHA streamline refinance.

What is a FHA streamline refinance?

Well, there are 2 kinds of FHA streamline refinance: one with an appraisal and one without an home appraisal.  Obviously, most people want to avoid the appraisal as it’ll save them the appraisal fee – which ranges between $350 and $450.

In order to qualify for the FHA streamline refinance WITHOUT the appraisal, your new loan amount must be lower than then the original FHA mortgage loan amount.

So, let’s say that the original FHA loan amount that you’re currently in was $200,000.

In order to qualify for an FHA streamline refinance without the home appraisal, the new loan amount can’t exceed $200,000.

Simple enough.

With the FHA streamline without the appraisal, you are not able to finance your closing costs.  So if your closing costs are $2000, you have to pay that out of pocket.

FHA will, however, allow you to finance the upfront mortgage insurance premium (UPMIP) that FHA charges, which is 1% of the loan amount.

Also, note that FHA will not allow you to streamline into a shorter term loan.  So you can’t streamline from a 30 year fixed mortgage into a 15 year fixed mortgage.

Also, your monthly mortgage PAYMENT has to drop by 5%.

When underwriting the FHA streamline mortgage, a copy of your existing FHA note and HUD-1 settlement statement from the time you took out the original FHA mortgage is required.  This will allow underwriting to verify the original FHA loan amount.

Debt to income ratios are not calculated when underwriting the FHA streamline refinance, which is why it’s called “streamline.”

A FHA streamline refinance WITH an appraisal is required when you’re borrowing more than the original FHA mortgage amount.

The FHA streamline refinance is a good loan type to get into if your currently in an FHA mortgage and have recently took it out.  Also note that the FHA mortgage rates are the same as the FHA mortgage rates for a non-streamline FHA loan.

If you’ve been your existing FHA mortgage for 5 years – let’s say – you are eligible to stop paying the monthly mortgage insurance premium (MIP).   This is a big deal.

Here’s why.

If you apply for a FHA streamline refinance, you will have to pay the monthly MIP again and it has to stay on the loan for 5 years and you’ll need 22% equity in the property to remove it – so this may not make sense even if you’re lowering your mortgage rate.

So the FHA streamline refinance will allow you to lower your mortgage rate and mortgage payment without having to go through the rigors of a normal underwriting process.

Related Posts:

• FHA Upfront Mortgage Insurance Premium To Increase in April, 2010
• Can You Get A Mortgage Loan After You’ve Had A Bankruptcy?
• Mortgage Refinance Questions – HARP? Is It For You?
• Should You Take Out An FHA Mortgage?
• Mortgage Services ALERT. Mortgage Rates Drop! August 30, 2011

I get a lot of people asking me ”should I take out an FHA mortgage.”  The short answer is “it depends.”

FHA mortgages provide many benefits over conventional mortgages; however, the FHA mortgage is designed for a certain borrower profile.

An FHA mortgage would be the right mortgage if you’re buying a new home and you only want to put down 3.5% as a down payment.  This doesn’t always apply to first time home buyers.  FHA mortgage are available for those who’ve already owned a home before – however, you cannot use a FHA mortgage for a second home or rental property.

A conventional mortgage requires 5% down payment and very good credit scores.

An FHA mortgage allows you to have mediocre credit.

In the “old” days, credit scores weren’t even a consideration for a FHA mortgage.  Now most lenders won’t do a FHA mortgage with credit scores below 620.  It’s going to be tough to qualify for a conventional mortgage with a 620 credit score.

An FHA mortgage would be the right mortgage if you’ve filed bankruptcy between 3 and 7 years ago.  You won’t be eligible for a conventional mortgage with a bankruptcy filing within the past 7 years.

If you want to take the maximum mount of cash out of your home, the FHA mortgage will allow you to take cash out to 85% of the value of your home.  On a conventional mortgage, your capped at 80% of the home’s value.

So, in conclusion, if you’re credit profile is good, you have equity in the home (if you’re refinancing) or if you’re putting down more than 5% on a home purchase, it is cheaper for you to go into a conventional mortgage.

I talk to borrowers who have great credit scores and have a relatively low loan to value ratio who are advised by loan officers or mortgage brokers to take out an FHA mortgage.  WRONG ADVICE.

Either the mortgage loan officer doesn’t know what they’re doing or they’re trying to maximize their commission (as they will be paid more on an FHA mortgage) – all things being equal.

Again, the mortgage terms are better on a conventional mortgage (which is a mortgage that is bought by Fannie Mae or Freddie Mac) if you have a good credit rating and equity in your home.

For those of you who have filed bankruptcy between 3 and 7 years ago, have mediocre credit or have little equity in the home, the FHA mortgage is the better loan type.

Related Posts:

• FHA Mortgage FAQ – What’s The Difference Between An FHA Mortgage And Conventional Mortgage?
• Mortgage Services ALERT! Mortgage Rates Rise. August 29, 2011
• Can You Get A Mortgage Loan After You’ve Had A Bankruptcy?
• Mortgage Refinance Questions – HARP? Is It For You?
• FHA Mortgage Questions – “What Is A FHA Streamline Refinance?”

If you’re currently in an FHA mortgage and are considering refinancing that mortgage, you may want to consider an FHA streamline refinance.

The FHA streamline is just what is sounds like – an faster way to refiance the FHA mortgage into another new FHA mortgage (with a lower mortgage rate.).

FHA streamline refinances can be with appraisals or without appraisals.

The benefit of doing the streamline refiance without the appraisal (in addition to not having to pay for a new FHA appraisal) is if you’re unsure about your home’s value or you think you may have no equity in the property or even if you think you owe more than the property is worth, you can still refinance your mortgage and lower your rate and mortgage payment

This way, an appraisal isn’t needed so the loan to value ratio guideline isn’t considered.

To do an FHA streamline without an appraisal you cannot borrow more than the original mortgage amount you borrowed – not including the Upfront Mortgage Insurance Premium.

Also, you are no longer allowed to finance your closing costs or prepaid interest or escrows – however you can finance the Upfront Mortgage Insurance Premium.

On a FHA streamline with an appraisal, you can borrow more than the original FHA mortgage amount.

In addition, (and this applies to FHA streamlines without the appraisal) you must have made at least 6 mortgage payments with no lates and your toal mortgage payment must drop by 5%.

If you have more than 12 months payment history, FHA doesn’t allow more than one 30 day late payment in the preceding 12 months.

If you’re going from a fixed mortgage to an adjustable mortgage ARM, the mortgage rate must drop by at least 2%.

If you’re going from a ARM to a fixed mortgage rate, the mortgage rate can’t increase more than 2% and your payment can’t increase more than 20%.

Please note: you cannot do a FHA streamline refinance if you’re currently in a 30 yr FHA and want to go to a 15 yr fixed FHA mortgage.  So FHA won’t allow a term reduction for the streamline program.

Finanlly, discount points cannot be included in the mortgage if you’re doing a streamline with an appraisal and you want to finance your closing costs.

If you’re paying discount points to buy the mortgage rate down, you must show assets to support the cost of the discount points.  So, if the discousnt points amount to $2000, you need to provide a bank statement showing you have the $2000.

In a nutshell:

• Borrower must have made 6 payments to the existing FHA mortgage (no lates)
• If existing FHA mortgage is over 12 months old, you can have 1, 30 day late, in the last 12 months, but must be over 3
  months ago.
• Benefit of streamline refinance -total mortgage payment must drop 5%.
• If going fixed to ARM, rate must drop at least 2%.
• If going ARM to fixed, rate can’t increase more than 2% (and payment cant’ increase more than 20%)
• Can’t reduce mortgage term, so you can’t streamline from 30 yr to 15 yr fixed mortgage
• Streamline without appraisal, – max loan is now current outstanding mortgage balance plus you can finance MIP, so
  you can no longer roll in closing costs or prepaids

Related Posts:

• Can You Get A Mortgage Loan After You’ve Had A Bankruptcy?
• Mortgage Services Alert! Mortgage Rates Drop On Poor Jobs Number. September 2, 2011
• Mortgage Services ALERT. Mortgage Rates Unchanged. August 31, 2011
• Mortgage Services ALERT. Mortgage Rates Drop! August 30, 2011
• Mortgage Services ALERT! Mortgage Rates Rise. August 29, 2011

Choppy, choppy.  That’s how I would describe mortgage rate movement over the last week or so.

Mortgage pricing is better one day, then worse the next, suggesting some volitility in the mortgage market.

Mortgage backed securities opened higher this morning pushing mortgage rates down a tad.

The S&P/Case-Shiller Home Price Index showed home prices rose 3.6 percent in the second quarter of 2011, following a decline of 4.1 percent in the first quarter.  Good news, indeed.

On a national level, home prices are at levels last seen in early 2003.  Amazing.

Compared to the second quarter of 2010, home prices have fallen 5.9 percent.

Looking across the 20-city composite on a seasonally adjusted basis, 5 cities hit their price lows in 2009 and have not fallen back.  They are Los Angeles, San Diego, San Francisco, Denver, and Washington D.C.  Two (Boston and Dallas) hit lows in 2009, but are still near those lows.  Phoenix, Miami, Tampa, Chicago, Detroit, Minneapolis, Charlotte, Las Vegas, New York, Cleveland, Portland, and Seattle all hit new lows in 2011.  Atlanta hit its most recent low in December, 2010.  Las Vegas, Detroit and Cleveland remain the weakest cities in the report.

In other news, consumer confidence remains weak though it increased to 59.5 in July from a revised 57.6 in June.

During good economic times, this reading would be near 80.

Ladies and gentlemen, we are still in an economic recession from a consumer standpoint.  People aren’t feeling terribly warm and secure about their economic well being.

On a positive note, mortgage rates are very low.

So, if you’re in a position to refinance or buy (yes, buy a new home as there are bargins out there,) do a personalized mortgage rate search on the blue Amerisave Mortgage box on the right side of the page.

Related Posts:

• Mortgage Services Alert! Mortgage Rates Drop On Poor Jobs Number. September 2, 2011
• FHA Mortgage FAQ – What’s The Difference Between An FHA Mortgage And Conventional Mortgage?
• Mortgage Services ALERT. Mortgage Rates Drop. August 26, 2011
• NEW! Mortgage Rates – Where Are They Today? August 24, 2011
• Mortgage Services ALERT. Mortgage Rates Unchanged. August 31, 2011

For the second day in a row, bond prices rose nicely, pushing mortgage rates down again!

Retails sales reports were up slightly; however the intial jobless claims unexpectedly rose amid Easter-related volitility.

If you’re within 30 days of close, risks favor locking!

Yale Roth is a FHA Mortgage Specialist and provides mortgages for homeowners throughout the United States. 

Call Yale at 561-350-7684 with any mortgage-related problems or visit his rate page at http://www.YaleHomeLoan.com

Related Posts:

• Mortgage Video FAQ – “What Makes Up The Borrower’s Closing Costs When Buying Or Refinancing”?
• Mortgage Rate Drop! Wednesday, April 7, 2010
• Mortgage Rate Forecast for March 29, 2010
• Mortgage Video FAQ – Is An Attorney Necessary To Close My Mortgage?
• Mortgage Video FAQ – Does It Make Sense To Do A Debt Consolidation Loan?

Mortgage rates have dropped this morning on a well-received three-year note auction and no major surprises from the Federal Reserve’s Open Market Committee minutes.

If you’re in a position to lock, take advantage of the improved rates and secure the lock.

To view the current rates, do a Personalized Rate Search under the FREE Mortgage Rate quote.  No personal information is needed and it only takes 30 seconds.

Yale Roth is a FHA Mortgage Specialist and provides mortgages for homeowners throughout the United States. 

Call Yale at 561-350-7684 with any mortgage-related problems or visit his rate page at http://www.YaleHomeLoan.com

Related Posts:

• Mortgage Rate Update. Thursday, April 8, 2010
• Mortgage Video FAQ – “What Makes Up The Borrower’s Closing Costs When Buying Or Refinancing”?
• Mortgage Rate Forecast for March 29, 2010
• Mortgage Video FAQ – Is An Attorney Necessary To Close My Mortgage?
• Mortgage Video FAQ – Does It Make Sense To Do A Debt Consolidation Loan?

Mortgage rates opened  slighlty higher this morning.  

Initial jobless claims came in at a 19 month low – however, attention is focused on the March jobs report due out tomorrow morning at 8:30 ET.

Remember, a significantly better than expected number has the potential to push rates up.  Conversely, if the number comes in a lot worse than expected, we could see bonds rally and rates improve.

Regarding FHA mortgage changes, FHA case numbers have to be assigned by tomorrow in order to use the current Upfront Mortgage Insurance Premium factors. 

As of Monday, April 5, the FHA Upfront Mortgage Insurance Premium will go to 2.25%.

Yale Roth is a FHA Mortgage Specialist and provides mortgages for homeowners throughout the United States. 

Call Yale at 561-350-7684 with any mortgage-related problems or visit his rate page at http://www.YaleHomeLoan.com

Related Posts:

• Mortgage Video FAQ – “What Makes Up The Borrower’s Closing Costs When Buying Or Refinancing”?
• Mortgage Video FAQ – Is An Attorney Necessary To Close My Mortgage?
• Mortgage Video FAQ – Does It Make Sense To Do A Debt Consolidation Loan?
• Mortgage Video FAQ – “What’s The Difference Between A FHA Mortgage And Conventional Mortgage”?
• Mortgage FAQ #7 – What’s The Difference Between A Cash Out And Regular (Rate/Term) Refinance?

A lot of people ask me…”What’s the difference between an FHA mortgage and conventional mortgage”?

First off…an FHA (Federal Housing Administration) mortgage is a government insured home loan.  It’s primarily designed for people whose credit rating is mediocre and who have little equity (which is the difference between what is owed on the loan and the home’s value) in their property.

For example, FHA will allow the borrower to purchase a new home with as little as 3.5% down or refinance on a rate and term refinance at 96.5% loan to value.  The minimum down payment allowed on a conventional mortgage or rate/term refinance is 5%.

In addition, on a FHA mortgage, the borrower is allowed to take cash out of their home up to 85% of the value of the home while on a conventional mortgage, the cap is 80%.

So, FHA loan guidelines are a bit more flexible.

The interest rates are comparable as well.

Another important difference between the FHA and conventional mortgage is that on an FHA loan, the borrower will have to pay an upfront mortgage insurance preimum. 

That premium is set to increase on April 5 to 2.25% for 30 yr fixed loans. 

So…on a $100,000 loan, FHA will charge and UPMIP of $2250.  They allow the borrower to finance the UPMIP so the total loan amount in this scenario would be $102,250. 

In addition, FHA does charge a monthly MIP, no matter what the loan to value ratio.  The monthly MIP will fall off after 5 years and the LTV ratio has hit 78%.

On a 15 yr fixed FHA mortgage, if the LTV ratio is below 90%, no monthly MIP is charged.

On a conventional mortgage, there is no UPMIP; however there will be PMI if the LTV exceeds 80%.

These are some of the basic differences between the 2 mortgage types.

Yale Roth is a FHA Mortgage Specialist and provides mortgages for homeowners throughout the United States. 

Call Yale at 561-350-7684 with any mortgage-related problems or visit his rate page at http://www.YaleHomeLoan.com

Related Posts:

• Can You Get A Mortgage Loan After You’ve Had A Bankruptcy?
• FHA Mortgage Questions – “What Is A FHA Streamline Refinance?”
• Should You Take Out An FHA Mortgage?
• FHA Mortgage FAQ – What’s A FHA Streamline Refinance? Do You Need An New Appraisal For The FHA Streamline Refinance?
• Can You Get A Get A Home Loan If Your Home Needs Repairs?