I started selling Boise real estate in 2005. At that time, most homebuyers were getting conventional 80/20 loans (80% 1st and 20% second). Nothing down and no mortgage insurance. Many homebuyers were getting what is now being referred to as subprime loans. For my first year and a half as a real estate agent, I didn’t do any FHA loans. (In fact I didn’t even know what one was.)

In 2006, that all changed. Loans became increasingly difficult to obtain and requirements got progressively restrictive through 2010. Over that time, more and more Boise homebuyers (and I assume homebuyers across the nation) turned to FHA financing. FHA loans only require 3.5% down (vs. 5-10% down for conventional) and for the past several years have had lower interest rates than conventional loans. In fact, every one of the owner occupied clients I worked with (around 100) chose FHA financing over conventional loans.

There was no reason to choose a conventional loan. FHA has lower credit score requirements (currently 580 vs. 620), requires less time out of a short sale or foreclosure (2 years vs. 5) and features better interest rates (currently 4.32% vs. 4.75%). You retain more of your own money (3.5% down vs. 5%) and by 2007 most lenders were FHA registered.

Today my first client in over four years chose a conventional loan over FHA financing. It turned out that mortgage insurance was the key.

As indicated above, although FHA’s interest rate is lower, the required mortgage insurance is twice the price. As a result, my client’s total monthly payment is higher through FHA. In addition, FHA won’t let you drop mortgage insurance until at least five years have passed.

Even at the five year mark, my client would have to actually pay down 20% of the loan before being eligible to drop mortgage insurance payments instead of simply having 20% equity due to real estate appreciation. Conversely, a conventional loan requires only an appraisal. If the value of the home vs. the loan balance indicates she has 20% equity in the home, she’ll be able to drop her mortgage insurance. Through FHA financing, at the five year mark she’ll only be able to drop her MI payments if she has reduced her principle on the loan by at least 20% (regardless of the appraised value).

So what’s the bottom line? More Boise home buyers (at least the ones I’m working with) will be taking a good look at conventional financing again. Increases in FHA mortgage insurance offset the lower interest rates. In addition, time restrictions and the way home equity is calculated both favor conventional loans.

Todd McCauley is an owner/agent of Eagle Rock Properties, a Boise real estate brokerage. He manages a program called The HELP Program that designed to help struggling buyers qualify for a home. He helps buyers and sellers with Boise homes.

The FHA or the Federal Housing Administration is a government institution and is the biggest mortgage insurer in the world. The FHA back-up loans for up to $729, 750 for single family homes. Down payments can be as low as only 3.5%. The FHA website states that their FHA-insured loans require minimum cash investment to be able to close loans. Another advantage of FHA loans is the low minimum FICO score required to qualify for a financing. A low 620 FICO score can get you the money you need. Your household income is considered and your payment schemes are flexible. Debt-to-income ratio can go over 50%. You can get a loan amount of 98.75% of the purchase price. FHA lets the seller contribute 6% of the selling price for the closing expenses.

Your household expenses and monthly income are considered when payment schemes are set. The payments schemes are very flexible and in tune with how much money you make each month. You can avail of a loan of 98.7% of the selling price which not bad at all. Your debt-to-income ratio can go over 50%. FHA requires the seller to contribute 6% of the asking price for closing fees.

You may think that this is all too good to be true, but honestly, it is possible. Thousands upon thousands of people have purchased their houses the past 12 months by using tax credit of up to $8,000 from the government. People who live in California have it even better because they get an additional $10,000 tax credit if they are a first-time home buyer. The average home in Southern California costing a little over $300,000, home buyers is practically being paid to buy homes. The past few months have showed slower movement and activity because many companies in the US are standing by, waiting for new tax laws and new health laws to be implemented. Large companies want to see how these new laws and rules will affect their business and profitability before they start hiring new employees or start giving higher wage.

The protests and chaos in the Middle East are also raising gas prices and production costs, further complicating matters. The increase in living costs, gas prices, food, and transportation costs have dealt a blow on how people can repay loans too. The future is uncertain for many and it is beginning to worry some people. The country is suffering from a real-estate and mortgage meltdown and many people are afraid that their homes will be foreclosed. Some are wondering if the homes they were able to buy through FHA will join the next wave of foreclosures. If you have some savings left and if you are currently employed, then you should not worry too much. You can try to save your home if you still have job and can repay your loans. If your financial situation is a bit unstable, you should think about selling while you can. Another option is to apply for debt-relief. You should act immediately so that you do not sink further into debt. The longer you wait the more chances you have of losing your home and investment.

You can search all of the Homes For Sale In Rossmoor right on Jeremy’s site. He is a recognized author, Mensa member and Rossmoor resident. He currently lives on Wallingsford with his wife, Heather, and their three children. For more information on Rossmoor Homes, make sure to follow the links.

If you have bad credit and have been thinking of buying a house or refinancing your current mortgage you have probably run into a few problems.  With the economy in it’s current recession, lenders have tightened down even more on lending requirements and have raised the credit score requirements to qualify for mortgage loans.  Are there even bad credit mortgages out there for people to quality for?  The answer is a nice loud YES!

The primary bad credit mortgage product is called an FHA mortgage.  FHA stands for (Federal Housing Administration) and is insures 100% of the loan amount that a lender funds to a borrower as long as it fits within FHA guidelines.  This is nice because you can get an FHA loan from any large bank or the bank of your preference so it really opens up your options to getting the best mortgage loan interest rate. 

FHA guidelines have less stringent guidelines than a regular conventional loan.  What exact guidelines do you have to follow to achieve an FHA loan you may ask?  The guidelines to be able to qualify for an FHA loan if you have less than perfect credit is as follows;

• FHA just recently announced that you must have a mid credit score of at least 620.  This used to not be the case. Out of your 3 credit scores the middle number must be above the 620 score to even be considered for an FHA mortgage loan.  Mos people that have bad credit usually have above a 620 credit score so this requirement is great for someone seeking a bad credit mortgage product.
• Regardless of how bad your credit is you must not have any lates or collections that have happened within the last 12 months.  The only way to get away from this guideline is if you have a high credit score.  If you have a high credit score above 720 than your score will compensate for blemishes that have happened within the last year on your credit report.
• All Collections, liens, and judgements must be paid prior to the closing of the loan.  Its totally ok if you have had collections, or judgements in the past, but they must all be paid off before the loan can close.  The reason for this is that if you have an open collection or judgement, those types of accounts take first lien position on the property you are buying.  This means that if you lost your house the collectors would get the money first before the lender who loaned you the home loan.  Lenders simply do not go for this on an FHA mortgage. 

We have just barely scratched the surface on FHA loans but hopefully if you have bad credit you have been filled with some hope of being able to purchase a home or refinance your existing home.

The first step in preparing to purchase home or to refinance your current mortgage is to understand what a mortgage lender expects from you the borrower.  Too often people just call a bank to see if they qualify for a bad credit mortgage without doing any research on their own about their own credit situation.  There are many free ways to pull a credit report such as freecreditreport.com or you can pay 15 dollars and go to a bank that can pull your report.  Make sure when you pull a credit report that it is a tri-merge report, meaning that all 3 credit bureaus are reporting on the credit report.

Now that we have that out of the way lets get down to the nitty gritty about what mortgage lenders want to see on a credit report and what they will accept.  The First thing an underwriter looks at is the mid credit score.  This score is calculated using special equations specific to each credit bureau such as the fair isaac model and beacon.  FHA and VA loans require a minimum score of 620.  Conventional loans accept credit scores within the range of 680-740.  If you have a score lower than a 680 absolutely look into a FHA or VA mortgage as they are amazing products that are usually much cheaper than a conventional mortgage loan.

The second thing an underwriter looks for is payment history.  An underwriter does not want to see lates, collections, or judgements that have happened within the last 12 months.  They will however make an exception on a few bad things that have happened within the last 12 months ONLY if you have a high credit score.  Why is that?  The reason is that if the score is high it means you have a high probability of getting back on track to make your payments on time every month.  If you have a credit score around 620 but have had lates within the last 12 months you will not be able to qualify for a bad credit mortgage loan product until 12 months have passed since the date of you most recent late. 

I cannot stress this enough, but buying a house is a process!  If you can’t qualify right now its OK!  By researching your credit situation you can make a plan that can help you get to qualification status within the year.  If you have had lates just work on getting on time and then just be on time for 12 months since the last late.  Too many people just give up and think they’ll never get into a house and ruin their credit even more.  Don’t get caught into this trap.  Be proactive and work out a realistic plan to help you move to qualification material.