Ins and Outs of FHA

[upstater]

Hi Everyone,

I'm a first time poster, but an avid lurker for the last month or so around here. Apologies in advance for the long post.

Here's the issue / questions:

6 weeks ago I applied for mortgage pre-approvals from several lenders only to find out that my FICOs weren't high enough. EQ:577 (Don't know the others at that time). With this wakeup call I checked through my CRs to find out what was killing my scores. The scoring explanation from myFICO suggested that late payments (20+ 30days, 3-60 days, 1-90 day, 1-120 day) and high CC utilization are the major issues.

So I attacked them by paying them down with my tax return, and getting some negative tradelines removed. I checked all 3 FICOs on monday and they were EQ:688 EX:644 TU:633. 6 weeks ago I was pre-approved for a subprime through HFC at something like 12%. With my new scores they were offering me 9.6% APR on a 30yr fixed rate.

I thought I could do better so I called BoA about an FHA. They seem very interested and the loan officer has quoted me something like 6.5% on an FHA. I quoted him my FICOs and he said I was in line with the requirements.

What is the likelihood that I'll actually be approved for this loan? My 49K income is high enough for the sale price of $110K. And my other debt stats fit FHAs formula. But I'm worried about the numbers of late payments. I've had no COs, CAs, or BRs.

Are FHA mortgages like other prime mortgages in that rates differ from lender to lender and do rates fluctuate with exact CR records?

My TU score should become my mid score soon (less than 30 days) when Chase removes a duplicate TL on a CC. My EQ score jumped 40+ points when that happened. Sadly though I'm already shopping for mortgages. Once you go through the application process and you are approved at a given rate can your rate be adjusted before closing if your FICOs improve?

Should I shop around for FHAs? Compared to regular mortgages they're much harder to find online.

Thanks in advance!

[2ndTimeAround]

Upstater

I understand where you are with your credit, I used to have 511, now I'm in the 700 club. This web site is a valuable tool for helping your self build and maintain your credit scores.

Doing a FHA loan is relatively simple. You have to go full documentation. Your credit score is not looked at, but if you have lates showing. You have to explain (in writing) every late (going back 7 years).

Your $49k per your income, your Debt ratio would allow you for a loan amount in the $300k range, providing you don't have alot of other bills.

Good thing about FHA loans, you only have to put 2.6% down for your purchase.

Also the rate that was quoted was a little high, the interest rates on FHA loans par is 5.875%.

As for shopping around - not every bank/broker is FHA licensed, thats why it's hard to find banks to do FHA loans.

Be advised when you get your home appraised. Make sure the appraiser is FHA licensed, they are normally $100 more for the appraisal.

PM me if you need anymore help finding a FHA banks. I don't want to get in trouble selling banks on this website.......

[tazunemono]

Actually, the down payment requirement can be partially waived if you pay your own closing costs...FHA closing costs are higher due to the upfront mortgage insurance premium they take. BTW, they are going to want to see your assets (e.g., savings account statement) and if you have made any new deposits in the past 3-6 months they will want explanations of where this money came from.

If you receive gift money you will need a letter stating the money was a gift. Underwriting for FHA usually doesn't vary too much.

If you use seller-paid closing costs, you will have to make a 3% down payment.

There are more caveats than this, but that's all I can remember right now...

[firstsource]

And there are grant/Down Payment Assisstance programs that can help with the 3% down requirement if the seller is willing to give that amount up.

[upstater]

Thanks for all the replies everyone.

One question remaining: Are my lates going to keep me from qualifying?

The mortgage officer says no problem, but I have my worries, especially since the contract was signed today, and they want a pre-qual from a local lender in 5 days!

The sellers also want a mortgage approval in 15 days! I thought the stress in home buying was finding a house and getting the contract approved. Now I feel like the pressure has been turned way up!

Time is certainly ticking away...

P.S. Should I shop my rate @ 6 and 3/8 on a FHA in NY?

[pclonghi]

I was told lates on FHA only needed to be (PAID) it was ok for them to still list but all needed to be paid

[melisadawn]

We went FHA. You can ask about FHA liberty gold program. This is where seller pays down payment. But normally your bid will have to be the asking price or slightly higher for seller to agree.

We had to pay 3% down PMI etc. Alot of costs involved.

We locked in at 6.5%

His income was close to yours 46k and was preapproved for 150k. Only debt we had was a 370$ car payment. Did have to write a goodwill letter for his medical collections and pay them off.

We go through GMAC and so far for 1 yr I like them. Statement every month that breaks down how much went to interest-escrow-and principal. No book so far to keep track of.

[kailix]

I'm looking into an FHA loan now, and from what my research tells me, your lates won't keep you from qualifying.

I'd really appreciate you sharing any info you learn; it would really be helpful to those of us interested in getting a FHA loan!