Saturday, October 20, 2018
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Randi F. Rainmaker
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Gooder Group
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Fairfax, Virginia 22031

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Can you tell me about recent changes in lending procedures I should know about before I shop for lender?

Russian Dolls FHA Changes Mean Help For More Buyers

Changes to the Federal Housing Administration's (FHA) mortgage program will open FHA up to many more potential home buyers. Home buyers with an FHA-insured single-family home loan can now finance 100% of the closing costs on the loan. Previously, FHA allowed home buyers to finance only 57% of the closing costs, adding hundreds of dollars to the up-front cash home buyers need for settlement.

A very recent change to FHA was raising the maximum loan amount in high-cost areas and linking the maximum to local housing costs. FHA's mortgage limit will be the greater of $271,050 or 115% of an area's median home price, capped at $625,500. Borrowers will have to make a minimum down payment of 3.5%.

These changes will interest higher-end buyers in FHA loans and make FHA more accessible to those whom the program is primarily intended to serve – prospective buyers who do not qualify for conventional financing. Traditionally, FHA has served buyers who have lower incomes, make smaller down payments, and purchase less expensive homes.
More Good News For Loan Shoppers
Federal regulation mandates that mortgage brokers must itemize all fees they receive to originate or close a loan.

Previously, brokers were allowed to lump miscellaneous charges and premiums into a general fees category which made it nearly impossible to comparison-shop lender fees. The law applies only to mortgage brokers, not mortgage bankers. Fees really do add up, so when loan shopping, ask up front for an itemized breakdown of lender fees.
Mortgage Help For First-time Buyers
An exciting Federal National Mortgage Association program may help open the door to home ownership for low- and moderate-income buyers.

The Community Home Buyers Program allows for slightly more debt when qualifying for a loan than standard mortgage plans. Although this program requires a 5% down payment, barrowers can make the down payment with as little as 3% of thier own mondy and up to 2% from a family gift or loan from a government or nonprofit agency.

In addition, the Community Home Buyers Program waives the common requirement that borrowers have two months' worth of mortgage payments in savings after closing.

There are special requirements to qualify: borrowers must attend a series of home buyer education classes and the borrower's income must not exceed 115% of the median income in the area. For more information: Fannie Mae, Public Information Office, 3900 Wisconsin Avenue, NW, Washington, DC 20016 or call (800) 732-6643.
Lenders Welcome Borrowers With Open Arms
Affordable interest rates mean more people can qualify to buy a first home or move up to a bigger house, and lenders are reaching out to make mortgages more attractive. Some lenders even sweeten the pot with low, or even no closing costs.

Recently, best buys have been 15-year and 30-year fixed-rate mortgages. In many cases, the rates for these loans have been just above adjustable rate mortgage initial rates, which are low for a short period of time, then rise with the market. Because fixed rates have been so attractive, many current homeowners with ARMs are trading them in for a fixed-rate loan.
Computer Programs Rate Borrowers
There's a relatively new twist in mortgage lending. In the past year or so, lenders have begun to replace traditional underwriter's judgments on an applicant's creditworthiness with a computerized credit rating called credit scoring.

Both ways of assessing a potential borrower's ability to pay back the loan – the underwriter's judgments and credit scoring – rely on much the same information: salary history, credit history from credit reporting companies, ratio of debts-to-income, etc. But credit scoring uses a computer program designed to predict who will default on a loan. It assigns a numerical score to each factor and then adds them up. Credit scoring is objective and designed to uncover hidden problems. For this reason, credit-scoring programs may assign more importance to some factors that the underwriters would overlook.
If you are interested in learning more about any of these new lending procedures, call or e-mail us. We’ll be happy to assist you.
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