cheyenne52883

Qualifying for Home Loans

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With the housing market disaster and the Feds taking over Freddie Mac and Fannie May what are banks looking for in the way of credit scores and down payments?

Are these standards going to ease up later on?

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IMO, purchasers of mortgage backed bonds have been burned and will force mortgage approvals to tighten further. They have to. No one wants junk debt anymore. The lax restrictions of the past 6 years were a short term blip. We're trending towards the norm again- the norm was GOOD credit and a SIZABLE down payment. A 20% cushion was needed or you forked over monthly mortgage insurance. These restrictions keep home prices somewhat stable and keep homeownership to those who have skin in the game.

Because of the bailout, rates will drop considerably in the short term. Then as FRE and FNM shed their assets as they are required to do in 2010, rates will jump a bit. This is because these two beats have been buying paper at below market rates for some time now. When they stop buying it, private market rates will prevail.

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With the housing market disaster and the Feds taking over Freddie Mac and Fannie May what are banks looking for in the way of credit scores and down payments?

Are these standards going to ease up later on?

FHA has tightened up quite a bit but there are still lenders out there that will do loans with credit scores as low as 580 (some even lower). Just be prepared to explain in detail (documentation helps) any derogatory credit issues that you are having/had.

A very strong letter of explanation can do wonders. :)

Although the rate may not be as favorable as prime, if you were to get into an FHA loan, after at least a year you can look into an FHA Streamline. Which is basically rolling your current FHA loan into a lower rate one. No credit, no appraisal, no income qualifying. Easy breezy.

Best of luck!

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I heard in passing on a radio show on Saturday that

(a) PMI will soon be required if you have less than 35% and in some cases even 40% (!!!!!) to put down

(B) You will need 750+ to qualify for the best mortgage rate.

What are our expert's opinions on these speculations? It was a blip of commentary, so the guy had little else to say in the way of backup for these statements.

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You should be prepared to put down about 3.5%. See if you can get your scores up to 621 for the middle score. You can get an FHA loan with less, as low as a 560 score, but there is a rate increase for the lower scores

Charles

With the housing market disaster and the Feds taking over Freddie Mac and Fannie May what are banks looking for in the way of credit scores and down payments?

Are these standards going to ease up later on?

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I heard in passing on a radio show on Saturday that

(a) PMI will soon be required if you have less than 35% and in some cases even 40% (!!!!!) to put down

(B) You will need 750+ to qualify for the best mortgage rate.

What are our expert's opinions on these speculations? It was a blip of commentary, so the guy had little else to say in the way of backup for these statements.

(a) I think that is crazy. You put 20% of your hard earned money into a house, chances are you would do anything to keep it.

(B) You need a 740 or better to qualify for the best rate now on a conventional loan.

Just my 2 cents on (a), fact instituted by Fannie Mae on (B).

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RE "PMI", that is actually a brand name for the first company to offer Mortgage Insurance, so that people could buy homes with less than 20% down. I use PMI when I have loans that are over 80% LTV and conventional. They are very much into letting us know what is going on that will potentially effect our business in the future, and they have not mentioned anything about the need for MI for loans under 80% LTV.

There are so many people that are in the news that will pass on rumors as if they were facts.

But, to confirm what Goose said, 740 is the key to lowest rates.

Charles

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Thanks for the responses, guys. As I said, it was kind of in passing. Not a "talk radio show" but a news radio station here in L.A. and the two guys were talking about something they had read, but either didn't reveal where they read it or I had tuned in too late. So thanks for clarifying.

BTW, does the 740 apply to getting best rates on FHA loans?

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Credit score doesn't effect the rate on an FHA loan. It does effect your mortgage insurance cost. You need at least a 680 score to get the cheapest upfront/monthly mortgage insurance.

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Im just thinking out loud here. But why dont lenders have a program where if you pay 12 months with no late payments and no deferred payments on your mortgage you get an interest rate decrease by XXX amount?

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Great idea. I think student loans have something similar.

You are talking about student loan rehabilitation. With student loans, you have to already have defaulted on your student loan, then request to get into rehabilitation and then make 9-12 on time monthly payments (depending on where you are and/or who owns your student loan paper). One late payment, and you have to either start the process from scratch or the rehab is done altogether. As someone who went through that, I don't wish that on anybody, if they can help it. Especially if your guarantor is a state/federal agency.

I understand life happens, and even though I would love to see this happen even for responsible mortgage payers, I pretty much don't think those greedy mortgage lenders will do anything to voluntarily lower interest rates on loans. That's why folks should try to throw a couple of hundred more a month at their mortgage and lower their interest that way.

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I have a question which loan is better FHA or VA? I can get a VA loan when I get my credit better but I was wondering if it is the best choice. Thanks for any info.:)

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FHA has one advantage in that the loan is assumable and VA isn't.

For a while you can only borrow 96.5% of the sales price of the home.

VA has an advantage in that you can borrow 100% and there is no mi.

Charles

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FHA has one advantage in that the loan is assumable and VA isn't.

For a while you can only borrow 96.5% of the sales price of the home.

VA has an advantage in that you can borrow 100% and there is no mi.

Charles

....And so far, the Federal Government has not forced VA to join in the subprime bailout, and buy loans that are not of the quality that VA accepts (FHA, Fannie Mae, and Freddie Mac), which has caused greater default rates, and the raising of UFMIP, and tiered mortgage insurance premiums.xangelx

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VA is also not score driven. With 12 months of OT payments, you should be good to hook. You get the better rate (even UCK credit cant be charged more than 1% over the best rate). Although no PMI, the VA funding fee is deductible as PMI (because that is it's real purpose). BTW, the funding fee is lower if you put a down payment.

I loved being able to get a VA loan. It so reduced the stress, I didn't worry about my credit scores (which were 'decent' anyway - mid being 645).

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VA is also not score driven. With 12 months of OT payments, you should be good to hook. You get the better rate (even UCK credit cant be charged more than 1% over the best rate). Although no PMI, the VA funding fee is deductible as PMI (because that is it's real purpose). BTW, the funding fee is lower if you put a down payment.

I loved being able to get a VA loan. It so reduced the stress, I didn't worry about my credit scores (which were 'decent' anyway - mid being 645).

Yeah I qualify for a VA loan but I have a lot of negs I need to square away, for personel reasons and I don't want anyone trying or putting a lein on my home.

I went to their web site a couple of months ago and I read that 2 years after BK and recent credit is good they will sign you. BUT if you have negs. and no BK they will not.

I owe some back taxes right now(down to 4300.00) for year 04(didn't have enough taces with held..oops.) I have been paying on and will be PIF in a year, mean while I plan on trying to get my credit fixed and maybe buy a home..

Thank you and everyone for all of the information...:)

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I owe some back taxes right now(down to 4300.00) for year 04(didn't have enough taces with held..oops.) I have been paying on and will be PIF in a year, mean while I plan on trying to get my credit fixed and maybe buy a home..

Tell me you asked for a lien withdrawal (or were you hit with a lien at all)? That will be one more negative you will have if you didn't get that when you did your installment agreement. I paid off my back taxes, and a few months later got whacked with a lien reporting on my CRs (EX and EQ). Been trying to fight this in vain to get them off (by nook or by crook).

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Tell me you asked for a lien withdrawal (or were you hit with a lien at all)? That will be one more negative you will have if you didn't get that when you did your installment agreement. I paid off my back taxes, and a few months later got whacked with a lien reporting on my CRs (EX and EQ). Been trying to fight this in vain to get them off (by nook or by crook).

No It is not a tax lein. The letter they sent said "If I dont make a full payment or arrangements, they can put a tax lein on me, seize property ETC..." I made arrangements before it went to that...They sent me a letter saying that I owed X amount of dollars...If I can't pay it all at once call toll free number.

I called the number and worked out payments with them for 63$ PM, I can't be late filing again till this is paid off, and I can't have a late payment either.

I have been through this before but with a lot less money owed to them. As a matter of fact the last time I owed money to them it was real close to income tax season, so I never responded to their letter because I knew I was getting a return that would more than pay them off. But this time since it was so much I didn't screw around with them.

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VA is also not score driven. With 12 months of OT payments, you should be good to hook. You get the better rate (even UCK credit cant be charged more than 1% over the best rate). Although no PMI, the VA funding fee is deductible as PMI (because that is it's real purpose). BTW, the funding fee is lower if you put a down payment.

I loved being able to get a VA loan. It so reduced the stress, I didn't worry about my credit scores (which were 'decent' anyway - mid being 645).

I get emails from military online and a few months ago they sent me a email saying VA loan backing went to 420,000.00 instead of 350,000.00...I wouldn't buy a home for that much but still it is nice that they back you though.

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