Home Loans and Mortgages
Home Loan Tools and Information to Assist Our Buyers
Our home loan and mortgage resource page is a complete information resource
for home buyers. Please feel free to use the "quick-link" items in the
list below to quickly forward to a particular topic of interest.
The First and Most Important Step To Buying a Home
Getting pre-qualifed or pre-approved for a loan is one of the most
important steps of beginning your new home search.
Why? Most importantly, this information will help you understand
all the variables involved in a loan and what costs are involved. It
helps avoid unexpected and sometimes heartbreaking financial surprises.
Furthermore, it gives you and those working for you the information needed
to start out in the right direction. As your agent, with your exact financial
parameters, will be able to provide you more specific information on homes
and not have you spending time reviewing homes that are not a "fit".
As of January 1, 2010 the US Dept of Housing and Urban Developement (HUD)
requires that all lenders utilize a standardized Good Faith Estimate (GFE)
of your loan costs. This makes it even easier to compare loan options
and help make the best choice. More information on the new
standardized Good Faith Estimate is available at the
HUD web
site.
One pre-qualified, and you are ready to make an offer, your offer will
now stand out from others
and can often be given a preference in a multiple offer situation. Put
yourself in the sellers shoes. How much more likely would you be to
accept an offer and take your home off the market with a pre-qualified buyer
versus a buyer that you have no idea about their financial abilities to
purchase your home?
Visit our Service Providers page and look
under the Mortgage Companies heading for loan
officers that offer FREE loan prequalification.
Our online mortgage calculator can assist you in working some preliminary
numbers on a home loan qualification. Please note that this calculator
does not include property taxes and insurance.
Curious about today's interest rates. Rates are still at
historical low numbers.
ALERT: FHA Announces New Policy Changes for Early Summer 2010
In January 2010 the FHA announced upcoming policy changes that will be
taking affect in early summer of this year. In an effort to strengthen
capital reserves and enable the agency to fulfill its mission to provide
access to home ownership below is a summary of the changes that will take place:
- Mortgage insurance premiums will increase. Initially the up-front
premium will increase however legislative authority has been requested
to shift some of the up-front MIP to the annual MIP.
- A minimum 580 FICO score will be required for the 3.5% down payment
program. For those with FICO scores below 580, a down payment of a
minimum of 10% will be required.
- Seller contributions to Buyer closing costs will be reduced from 6%
to 3% of a maximum allowable about based on the sales price.
The
press
release announcing the new FHA policies is available online at the HUD
website.
FHA Loan Types:
Visit the
FHA website to learn about the various types of FHA loans that
are available.
We also have a
FHA Brochure that you can view online.
FHA Loan Limits as of March 2008
The FHA has increased their loan limits for our area to $271,050.
This opens the door for borrowers with 580+ credit scores and allows for a
3.5% down payment and 6% seller contributions towards buyer closing costs.
This is some of the first good news on the mortgage front since many
programs have either been eliminated and others have tightened credit
considerations for borrowers.
For complete details of qualifying for a FHA loan, please visit the
FHA web site.
Summary of FHA Loan Qualifications
Note: Please see paragraph above regarding changes the FHA loan
qualifications starting early summer 2010.
Please remember this is just general information on qualifications and each
lender will have specific guildelines. Guidelines do slightly vary
from lender to lender.
Down payment, closing costs, and escrows:
- 3.5% Personal investment required for down payment.
- Down payment assistance allowed through gifts from family members
only or grants.
- Seller contributions towards Buyer closing costs allowed up to 6%.
- Escrows required.
Income Guidelines:
- Last two years of income should be the same or increasing.
- Self-employment for a minimum of 2 years.
- Part-time job.
- 2nd job.
- Overtime (guaranteed or 2 year history).
Credit Score Guidelines:
- Automated approval, no credit score requirements.
- Manual underwriting of 580 or above.
Credit History Guidelines:
- Credit report should typically have less than two thirty day lates
in last two years.
- Bankruptcy must be at least two years old, with good credit since.
- Foreclosures must be at least three years old, with good credit
since.
- Student loans must be current.
- Co-mortgagers allowed.
- Co-signers allowed.
- Collections (automated - manual).
Debt to Income (DTI) Ratio Guidelines:
- Monthly loan payment may not exceed 29% of monthly gross income.
- Monthly loan payment plus other monthly recurring bills may not
exceed 41% of gross monthly income.
The FHA offers a loan program for handy-man specials and fixer-uppers.
Visit the FHA website for more information on this loan program.
If you have less than a 20% down payment when you purchase a home, you
most likely will be required to purchase private mortgage insurance or PMI.
PMI protects the lender on a conventional mortgage in the event the borrower
defaults and the lender forecloses on the property. The premium for PMI is
paid by the borrower and may be canceled once certain conditions are met.
There are other variations of this type of insurance that may not be
canceled if the mortgage is backed by the Federal Housing Administration
(FHA) or the Department of Veterans Administration (VA).
VA Loans
VA guaranteed loans are made by private lenders, such as banks, savings &
loans, or mortgage companies to eligible veterans for the purchase of a home
which mush be for their own personal occupancy. The guaranty means the
lender is protected agains loss if you fail to repay the loan. The
guaranty replaces the protection the lender normall receives by requiring a
down payment allowing you to obtain favorable financing terms.
Benefits of a VA Loan
- No down payment (unless required by the lender or the purchase price
is more than the resonable value of the property.)
- Negotiable interest rate.
- Ability to finance the VA funding fee (plus reduced funding fees
with a down payment of at least 5% and exemption for veterans receiving
VA compensation).
- Closing costs are comparable with other financing types (and may be
lower.)
- An assumable mortgage.
- Right to prepay with out penalty.
- Seller consessions of up to 4%. A seller consession is
anything of value added to the transaction by the builder or seller for
which the buyer pays nothing additional and which the seller in not
customarily expected or required to pay or provide. Seller
concessions may include payment of the buyers VA funding fee, prepayment
of the buyers property taxes and insurance, or payment of extra points
to rpovide permanent interest rate buy downs. Seller consessions
do NOT include payment of the buyer's closing costs.
- For all types of VA loans, the loan amount may include the VA
funding fee. No other fees and charges or discount points may be
inclued in the laon amount for regular purchase or construction loans.
Additional VA Loan Information
More information on VA loans is available at the
Department of Veterans
Affairs Home Loans web site.
A pre-qualification is an estimate of how much you can afford in a mortgage
payment. It is based on the verbal information that you provide and a
review of your credit report but it does not actually verify all income
information. The pre-qualification will be subject to further details
such the appraisal, complete income verification, and possibly employment
information.
A pre-approval is a more formal and firmer commitment from a lender which
involves verification of all income and expenses It typically includes all
of the work of a full approval except for the satisfactory appraisal,
survey, and title search. Typically for a pre-approval, you will need
to provide check stubs and W2's plus banking statements.
Please note that a pre-approval or pre-qualification does not absolutely
guarantee you a loan. After you find your home, the lender will need
to review the appraisal and make final verifications of some information and
in some cases re-check your credit report. Furthermore, your are not
obligated to particular lender to obtain the actual loan if they provide a
pre-qualification or pre-approval.
This online real estate dictionary contains a comprehensive list of real
estate and mortgage terms and definitions for home buyers, home sellers,
and real estate consumers with expanded definitions of the most
important real estate and mortgage home loan terms. This dictionary is
made available by Houston area REALTORS®. Please use the real estate
dictionary term index section containing an alphabetical list of words
with information about them.
