What You Should Know About Wisconsin and Illinois FHA Loans
Posted by madisonmortgage on December 17th, 2009
With all of the recent changes in FHA loans, I thought I would take the time today to share information that you as a home buyer should know.
Down Payment:
First, we’ll start with the down payment. About a year ago, FHA changed the requirement to 3.5% of the purchase price. 3.5% is not a lot and may be raised to 5% or more in the future. In the mean time, if you don’t have the 3.5% FHA allows gift funds from relatives or in some cases an employer or non-profit organization. Keep in mind that on top of the 3.5%, you will also need to come up with your closing costs and prepaids which vary from place to place. If you haven’t submitted an offer to purchase, you can try and have the seller pay these as a credit to you at closing. Ask your realtor or give me a call for additional details.
Mortgage Insurance:
The monthly mortgage insurance payment for an FHA loan is not nearly as much as for a conventional loan due to the upfront mortgage insurance premium. What FHA does is add an upfront mortgage insurance premium into the loan amount and then charge a much smaller monthly premium. Even with the higher loan amount due to the upfront mortgage insurance premium, the monthly payment for an FHA loan is less than if you had obtained a conventional loan. They let you borrow part of your payment from your mortgage!
Appraisals:
FHA appraisals have changed drastically in the past 10 years. It used to be that when a seller would get an offer from a buyer for an FHA loan, the seller would want nothing to do with that offer and it would be bumped. Looking back, I don’t blame sellers for doing this. FHA used to require appraisers to fill out what was called VC sheets which was basically 3 pages of a home inspection. If there was anything, I mean anything, wrong with the property, the appraiser would have to notate it on the VC sheets of the appraisal. This killed a lot of deals. Well, a few years back, FHA finally got rid of the VC sheets and sellers should no longer fear an FHA appraisal.
Credit:
Credit seems to be the biggest issue with any buyer these days. Unlike a couple years ago, credit matters a lot! With FHA loans, your credit doesn’t have to be perfect, but there are minimums. For instance, you must have a minimum of 620 for a middle of three credit scores. This is rapidly changing to 640 with most of our lenders but we still have some that will go as low as 620. If you have any judgements or collections, expect to pay them prior to closing. This is pretty much the case for all instances except for medical collections. In most cases, the lender will not make you payoff medical collections. If you have any mortgage lates in the past year, expect to wait until they are at least 12 months in the past. No lender wants to see mortgage lates. I’m not saying you are automatically denied but again, they must be at least 12 months old.
Non Occupying Co-Borrowers:
Yes, FHA is one of the few programs that allows a non occupying co-borrower on the loan. Keep in mind that it must be a family member or relative and their income, assets and debt will be counted towards qualifying.
All in all, FHA is a fantastic program and if you are interested in additional details please visit our FHA page of our site or contact me from the information below.
Dennis Hardy
Toll Free: 877-240-5810 x104
dennis.hardy@madisonmortgageguys.com
http://www.MadisonMortgageguys.com
Visit my new blog at http://www.madisonmortgageguys.com/blogs_dennis_hardy/
