Will FHA Loans Become The Dominant Loan Products???

As American economy is starting to reach the bottom this is automatically effecting all industries. Gas is expensive as hell so people in the transportation industry who don't have a union and didn't get raises are very pissed off. The Real Estate Market has reached, pretty much all time lows and Foreclosure rates are just (negatively) amazing. This is obviously pissing off people in the Real Estate industry and people who are trying to sell a home!!! Many people lost jobs and many are being forced into different industries. People are not spending money, because they don't have any!!! So, as the American government has allowed for America to hit (pretty much) the ground and on top of that allowing for the Euro to be kicking the Dollar's ass, one good thing that the government still offers to its citizens and residents is the FHA loan.

FHA loan is a government backed loan to the banks (lenders) allowing them to charge a smaller interest rate and FHA guidelines are a lot looser than conventional (conforming) loans. FHA is not really Credit Score driven and is more oriented towards the borrower's credit history. The most important factor for the borrower is not having more than 2x30 day late payment on their credit accounts. The beauty of FHA is that even if you have a poor credit score and good credit history you can still get a prime rate.

The Main difference between FHA loans and Conventional loans is the following.

• FHA loans require an upfront 1.5% of the loan amount to be paid at closing. Conventional loans don't require this.
• FHA charges the borrower .5% of the loan amount every year. If the borrower's LTV (loan to value) or CLTV (combined loan to value) is less than 80% the borrower does not pay a premium with a conventional loan.
  
• With a conventional loan you need at least 5% down payment. FHA only requires 3% down payment.
• Most FHA loan are assumable. Assumable means that when you sell your home the buyer can take over the payment on the existing loan. This is excellent if you want to later on give the house to your kids. Most conventional loans are not assumable.
  

Scenario (600 credit score, good credit history[no more than 2x30 late payments):

Sales price 200,000

FHA Loan (30yr Fix)

• 3% Down (6000) New Loan Amount: 194,000
  
• 6% Interest Rate (Monthly payment 1163.13 +(.5%premium/12) 80 = 1243.13 + tax and insurance
• Closing cost should not be more than 4000 + (down payment) 6000 = total money at closing table = 10,000

Conventional Loan (30yr fix)

• 5% Down (10,000) New Loan Amount 190,000
• 7.75% (very realistic even too good for 600 credit score) (Monthly payment 1389.84 + (pmi) 80 = 1469.84 + tax and insurance.
• Once the borrower has more than 20% equity in home or when they owe less than 80% of loan amount no pmi (private mortgage insurance) new payment 1389.84 + tax and insurance.
• Closing cost should be no more than 3000 + 10,000 down payment = 13,000 at closing table.

So don't think that you know everything and once in a while listen to your mortgage broker. Believe it or not there not that many bad ones out there as all are either in jail or lost their licences. Thank you for reading.

Now Is Really The Time To Buy...

As mortgage interest rates are very low lately and due to the slow Real Estate market now is the perfect time to buy a home for personal use or for an investment. Analysts believe that as desperate home sellers keep on selling their homes at below value will not permanently lower house values. Instead, it is projected that by early 2009 house values will climb back where they left off in 2007. So if you have money, which not that many people do at the moment now is an excellent time for a home investment, yay!!!

Mortgage Reset May Boost Foreclosures: Study

By Ilaina Jonas

NEW YORK (Reuters) - About 1.1 million additional home foreclosures are expected over the next six years as adjustable-rate mortgages -- which made home buying more affordable to U.S. buyers in recent years -- reset to higher payments, according to a study by research firm First American CoreLogic.

The expected $112 billion in losses won't break the mortgage industry but will inflict pain on lenders and borrowers affected by the defaults, said the study, released on Monday.

more at: http://today.reuters.com/news/articlenews.aspx?storyID=2007-03-19T051716Z_01_N19243239_RTRUKOC_0_US-USASUBRIME-RESET.xml&rpc=81

Adjustable Mortgages:

Why do people take out ARM loans anyway? An ARM is an Adjustable Rate Mortgage and these can suit many people perfectly. The idea is that you have a term where your interest rate is fixed. This term can be as short as one month and as high as ten years. ARM loans are ideal for starter homes or condos, where you plan only to stay for 3-10 years and then you plan to sell. They can also be great for getting into the home of your dreams with a slightly lower payment. The risk is that when you refinance your mortgage, the interest rates may be higher, so although you are getting a great deal in the short term, your long term interests are not as clear. If you are in the financial industry and you follow interest rates, an adjustable mortgage is probably a great plan. The key is knowing when to refinance into a fixed rate mortgage to protect your long term property interests.

Choosing a Mortgage Term:

The term of your mortgage is an important factor to consider when choosing your mortgage program. Obviously, the longer the term, the lower the payments - but low payments aren't on every person's mind. In fact, some people prefer to make larger payments towards their home loan because it will be paid off more quickly and because they are putting their money into an appreciating asset. Additionally, if you plan to rent or lease your property or a unit in your property, you'll make more money the faster you pay down your mortgage. The moral of the story is that larger payments are better as long as you can afford them. This doesn't mean you can't get a 30 year fixed mortgage and just be disciplined enough to make an extra payment or two throughout the year, but it does mean that the more money you put into your home, the better off you'll be.

Quick Explanation About Interest Rates:

To be qualifies for a certain interest rate many factors are included and analyzed (income, credit score, amount of equity in your home, DTI {debt to income}, the current market, etc, etc.) However, one factor that has a total relation to interest rates is the 10Yr Bond. When ever the 10Yr bond goes up the interest rates go down, when the 10yr bond goes down interest rates go up.

Countrywide Cuts 108 Wholesale B&C Jobs

Countrywide Financial Corp., the nation's eighth largest subprime table-funder, has cut 108 jobs in its wholesale subprime division, citing a need to align the lender's "workforce with the recent changes in the mortgage market." The company declined to comment further and would not disclose how many of the jobs eliminated belong to account executives. Last week the Calabasas-based Countrywide disclosed that 19% of its $119 billion subprime servicing portfolio was in some stage of delinquency. According to the Quarterly Data Report, CFC ranks first among all subprime servicers, and third among lenders.