Can someone explain FHA to me? I've always gone the conventional 30 year note route. I'm guessing you get a better rate with FHA and some people who may not qualify for conventional will for FHA?
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- Thread starter Bobber
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Can someone explain FHA to me? I've always gone the conventional 30 year note route. I'm guessing you get a better rate with FHA and some people who may not qualify for conventional will for FHA?
CONGRATULATIONS!!!!!!!!! I know exactly how this feels.
We tried to sell our place in Ann Arbor for 6 months before we moved and 6 months after.
We didn't have to take money to closing, but we lost money on the deal. You are 100% looking at this in the right way. You did okay as far as monthly expenditures and at some point its time to stop throwing good money after "used to be good money"
We tried to sell our place in Ann Arbor for 6 months before we moved and 6 months after.
We didn't have to take money to closing, but we lost money on the deal. You are 100% looking at this in the right way. You did okay as far as monthly expenditures and at some point its time to stop throwing good money after "used to be good money"
I don't know if the rate is always better. We used it a while back for our first place and there are benefits. I'm not sure that it has to be your first house, but The benefit we got was no PMI for less downpayment and a competitive rate with the down payment that we could afford. Parts of the program can help you when you aren't able or don't want to meet one or two of the typical lending criteria.
I don't think unless you are fairly poor or have ?'s in your credit report, that the rate really helps, but maybe that was just us.
You have to have a minimum FICO score of 640, no reports on your credit report from any lines of credit for a 12 month person, and have a single/combine income of $170,000 or less.
The advantage of going the FHA route is that you only need 3.5% downpayment, but you have to pay the PMI fees up front when the closing occurs.
We decided to go through a mortgage broker as they can find better deals then going through a single bank.
For FHA purchases, at Wells, you can go down to a 500 FICO but there are more strict LTV requirements. You can also have marks on your credit and still qualify.
You can have any amount of income as long as you are under the 40/55% debt to income ratios.
I'm in the process of finding/purchasing my first home so I found the topic interesting and informative. Simple solution: if you're not interested in the thread, don't read it.
This makes me glad that I am able to rent my house to my dad when I moved to Ames with my new wife.
Also, when I bought my house I did the FHA thing, but they must have tightened the rules since then because I didn't have a downpayment and my credit was pretty low too.
Also, when I bought my house I did the FHA thing, but they must have tightened the rules since then because I didn't have a downpayment and my credit was pretty low too.
Pretty much the real estate pricing market is stuck in mud. If they remove the mortgage deduction allowance and perhaps real estate tax writeups that would lower housing prices even more. It may also drive up the price of rentals as more people rent and the rental owners lose some of their deductions.
I think that the rules have some flex to them, because we had some down payment and excellent credit, and it seems to me they helped us get rid of the PMI without the full 20% down. Its been a long time since my first house though, so the details may be a little off.
I know that we also were able to do better on rate and PMI with a bank loan the next go round as we had great credit and they were still a bit flexible at the banks to get us over our little hurdle. Not enough down payment, but an 80/10/10 loan helped us avoid PMI. This worked for us and I recommend it if you have the income but not the savings as we've consistantly bought much less house than our income supported. Just sometimes too quick and didn't have the down payment.
Hey, I was just clarifying someone else's comments. Don't shoot the messenger.
That was probably prior to mid-2007 when you could get 100% financing from just about anyone.
Sorry, not necessarily directing that at you. More just a general observation. Also, mainly I wanted to point out that I'm finding this thread very informative and useful.
just sold our house in des moines (also an old Tudor) with no AC. had to drop the price 15K but overall still happy that we were able to sell within 6 months during the winter and no AC. hopefully i hear good news back today on my low ball offer on the next house!
-Rates are typically comparable with Conventional, usually (but not always) a bit higher, because FHA loans are considered riskier than a Conventional loan.
-3.5% downpayment (you can put more) but most don't
-You pay Up Front Mortgage Insurance at closing, and then pay it monthly as well. If you sell the house prior to paying it all, you may qualify for a refund
-Stronger appraisal process vs. conventional loan - FHA is based on the premise borrowers don't have a lot of extra money after the closing, so the house needs to be move in ready from a structural, and mechanical process. Furnace/AC must work (yes they will check the AC in the dead of winter) roof needs to have at least 3 years of remaining lifespan, or it most likely will have to be replaced. All the appliances must work, all the stairs have to have stair rails, no peeling paint on any structure, rooms must be finished, no broken windows, etc.
-Lower credit scores are acceptable, most lenders are around 580 for low end
-Seller can pay up to 6% (I believe) of the closing costs
-You can have gift funds to help with the closing costs from parents, relatives
-Need to make sure you have never defaulted on any government back loan (student loan, other FHA loan) or you will not qualify
-May combine the loan with a government agency like Iowa Finance Authority (IFA) and get money to help with closing
Everything else pretty much falls in line with a conventional loan - as far as documenting income, assets, employment, etc. You may run into a particular lender has stricter guidelines than FHA, which lenders can do.
where in hudson bobber...i live here and my sister has house for sale too, not many offers
We are looking into buying our first house, so I've been checking into the options on loans, etc. as well... One thing to also consider besides FHA is a USDA loan that is for rural development areas. I think the funds vary from state to state, but if the location is approved the loan can be a 0% down payment loan. It has similar rules to FHA as far as housing condition, etc... The rates are typically a bit higher, 1/8 to 1/4 point as compared to FHA, however they use a different method for PMI and can actually result in a smaller monthly payment when compared to FHA. Good for those you are still strapped in trying to sell their house, for a first-time buyer or just one with limited down payment funds.
Is anyone here capable of explaining to me what PMI even is? I was told that it was insurance on the loan I am taking out from the bank. Basically, I'm paying the banks insurance on the loan they are giving me. What are the companies doing with the PMI? Is it just a made up fee so they can make a few extra bucks from you? I would have assumed before the mortgage meltdown crisis, that this "Private Mortgage Insurance" shouldn't PMI have helped out a little bit for the banks when people started defaulting on their home loans. If it doesn't do a anything, then why is it still being tacked on to loans with minimal downpayments?
I remember when buying our first house scraping together a little bit more downpayment to avoid PMI, sounded like a scam then and still seems to be. What does PMI really do?
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Anything that is higher than a 80 Loan to Value ratio has to have a addon of PMI. Basically it means you are paying an extra fee to have a 3rd party company pay your mortgage if you default on your house loan. When you get your LV ratio below 80% of the house's value than that extra fee is waived.
Yeah, that's the part I do understand. I guess my real question was, what happened to all of the PMI money people were paying when they started to default on their loans? How did it become such a crisis if the banks supposedly had their ***** covered? I know it goes a lot deeper than just PMI. I also know that insurance doesn't always cover you fully. But where were the 3rd party people that were taking in all the money from the PMI, when it came time to start paying for those who defaulted?
Is it that simple, it was bigger than PMI could cover?
It is a gamble that the 3rd party makes on the loan, before 95% of the people taking out loans prior to 2007 were paying on them and the PMI companies were making money hand over foot.
Now today I believe the default rate is something like 30%+ or so. Alot of these defaults get blown off when the borrower goes through Chapter 7. In the end, it just makes it more expensive for the people that are paying their loans or taking out new loans to complete the process based on the past actions of some of these idiots.
