FHA Loan Guidelines | El Paso Homes | Remax Agent
FHA 2010 Changes
With over 40% of all mortgages guaranteed by Federal Housing Administration, and in light of the housing trouble FHA commissioner David Stevens announced a set of policy changes to managing risk and strengthen it’s capital reserves. These changes include the following:
1. Increase MIP to 2.25%. Mortgage Insurance is paid by borrowers when the down payment is lower than 20%. It protects the lenders in the event of borrower default and makes lending possible for some buyers. This premium can be rolled into the loan.
2. Update the combination of FICO scores and down payments for New borrowers. The minimum score required will be 580 to qualify for FHA’s 3.5% down payment program. If FICO is less than 580 then 10% will be required for down payment.
3. Reduce Seller’s contribution from 6% to 3%. This change is expected to take effect by early summer 2010.
These changes are expected to slow the economy down as well as the housing market. Now is the time to lock in your home purchase before these changes take effect. There are never been a better time to buy. You currently have low interest rates, tax incentive of $6500-$8000, and Seller’s are motivated to sell and are presently allowed to contribute up to 6% toward closing cost. Although time is running out. You must have an executed contract on a home by April 30th and close by June 30th. The buying process is long and arduous but a competent and experienced Buyer’s agent will help you successfully navigate the most expensive and complex transaction you’ll ever make. If you are in the El Paso, Horizon city, Santa Teresa area call (915)873-8646 or visit Russell-Realtor.com.
1. Increase MIP to 2.25%. Mortgage Insurance is paid by borrowers when the down payment is lower than 20%. It protects the lenders in the event of borrower default and makes lending possible for some buyers. This premium can be rolled into the loan.
2. Update the combination of FICO scores and down payments for New borrowers. The minimum score required will be 580 to qualify for FHA’s 3.5% down payment program. If FICO is less than 580 then 10% will be required for down payment.
3. Reduce Seller’s contribution from 6% to 3%. This change is expected to take effect by early summer 2010.
These changes are expected to slow the economy down as well as the housing market. Now is the time to lock in your home purchase before these changes take effect. There are never been a better time to buy. You currently have low interest rates, tax incentive of $6500-$8000, and Seller’s are motivated to sell and are presently allowed to contribute up to 6% toward closing cost. Although time is running out. You must have an executed contract on a home by April 30th and close by June 30th. The buying process is long and arduous but a competent and experienced Buyer’s agent will help you successfully navigate the most expensive and complex transaction you’ll ever make. If you are in the El Paso, Horizon city, Santa Teresa area call (915)873-8646 or visit Russell-Realtor.com.
FHA Qualifying
What type of ratios do you need to get an FHA loan. The loan underwriter will examine what is called your front ratio and your back-end ratio to qualify your loan.
To determine your front ratio you take your total housing payment and divide by your total monthly gross (before taxes) income. Housing payment is defined as monthly mortgage payment + monthly mortgage insurance + property taxes divided by 12 + homeowners insurance divided by 12 + monthly condo HOA (if applicable).
For example if your total housing payment is $1,000 per month and your gross monthly income is $3,000 then divide $1,000 by $3,000=33%. This would be your housing ratio is.
To determine your back-end ratio you take your total housing payment + all your monthly debt (Only count items found on credit report. Payment that don't appear on your credit report like utilities, car insurance, cell phone payment, etc… are excluded in the calculations.) divided by your monthly gross income.
For example if you have a housing payment of $1,000 + 1 car payment of $100 + $50 Credit card payment + a $50 monthly payment to the local furniture store, your total debt for the purposes of the back-end ratio would be $1,200. Then take $1,200 and divide it by $3,000 gross income and your back-end ratio is 40%.
The underwriter is looking for scores that start at 31% maximum housing ratio and a 43% back ratio + other guidelines like job history and your credit score. The credit score the underwriter is looking for should be at least 620 (may change next quarter). If your ratios are not what you expected you should contact a reputable mortgage broker. There may be other factors to consider and an experienced broker may be able to get you qualified.
A loan may require a manual underwrite if your credit score is lower than 580.
To determine your front ratio you take your total housing payment and divide by your total monthly gross (before taxes) income. Housing payment is defined as monthly mortgage payment + monthly mortgage insurance + property taxes divided by 12 + homeowners insurance divided by 12 + monthly condo HOA (if applicable).
For example if your total housing payment is $1,000 per month and your gross monthly income is $3,000 then divide $1,000 by $3,000=33%. This would be your housing ratio is.
To determine your back-end ratio you take your total housing payment + all your monthly debt (Only count items found on credit report. Payment that don't appear on your credit report like utilities, car insurance, cell phone payment, etc… are excluded in the calculations.) divided by your monthly gross income.
For example if you have a housing payment of $1,000 + 1 car payment of $100 + $50 Credit card payment + a $50 monthly payment to the local furniture store, your total debt for the purposes of the back-end ratio would be $1,200. Then take $1,200 and divide it by $3,000 gross income and your back-end ratio is 40%.
The underwriter is looking for scores that start at 31% maximum housing ratio and a 43% back ratio + other guidelines like job history and your credit score. The credit score the underwriter is looking for should be at least 620 (may change next quarter). If your ratios are not what you expected you should contact a reputable mortgage broker. There may be other factors to consider and an experienced broker may be able to get you qualified.
A loan may require a manual underwrite if your credit score is lower than 580.
FHA Tips
Here are some things you can do to improve you debt to income ratios to qualify for an FHA loan. Your objective is to reduce your debt- to- income.
Pay down/pay off debt like credit cards that show up on your credit report.
Teachers should try to get your student loan deferred. ( these payments do not have to be included in your debt if deferred for 12 months).
Pay off an auto loan (this is one of the biggest killers on a credit report)
Consider a home in a lower price point
Teachers should try to get your student loan deferred. ( these payments do not have to be included in your debt if deferred for 12 months).
Pay off an auto loan (this is one of the biggest killers on a credit report)
Consider a home in a lower price point