As a borrower it may be a bit more difficult to obtain FHA financing in 2010.  Today the FHA announced a series of changes to the FHA insured mortgage program aimed at increasing home ownership in underserved neighborhoods.  The program has become the most widely used program for first-time buyers or move up buyers with down payments less than 10%.

In the FHA official announcement today it spelled out a series of changes that will increase the capital fund of FHA as an effort hedge against the increase of defaulting mortgages.  Fortunately FHA retained the minimum down payment of 3.5%.  The changes will consist of the following:

• Increased mortgage insurance premium by .5% (from 1.75% to 2.25%).
• Seller concessions (credit towards closing costs) reduced from 6% to 3%.
• Increased enforcement on FHA lenders/banks.
• 580 FICO score now required to qualify for 3.5% down payment program (Scores below will require 10% down payment.  However, nearly all FHA lenders nationwide have a minimum 620 FICO score overlay).

The changes come as a necessary precaution for FHA to avoid asking the federal government for assistance to sustain it’s mortgage insurance for homeowners.  FHA does not actually service the mortgages issued by FHA, but insures the loans serviced by the banks.

As a borrower, the increased mortgage insurance premium will have a small impact on your monthly payment and the limit of 3% seller concessions may require you to come to closing with a bit more cash to cover the exceeding amount of closing costs and prepaid items.

The increased enforcement on FHA lenders/banks will be determined by each banks servicing and performance of current FHA loans.  As a precaution to retain the ability to fund FHA loans we will see increased lender guideline overlays in the near future.  A guideline overlay is an individual lender/bank guideline that is usually more stringent than the standard loan guidelines.  As a result guidelines may vary significantly between banks.

We will likely see an increase in FHA loan denials in 2010.  A borrower’s FHA loan may be denied simply because it was sent to the wrong FHA lender.  If you have questions about an FHA loan or want to know if you qualify feel free to give me a call or email me.  As a broker, Landmark Mortgage has several options for FHA lenders.  It will be important for borrowers to work with a knowledgeable broker who has experience and options for each FHA loan applicant.  As a loan officer I will find the right fit for your specific loan profile.

FHA will issue a Mortgagee Letter tomorrow announcing the exact dates of implementation.

Today I had an email from a family member asking for some advice on how to correct an error on a credit report.  There are several reasons why a credit report may show inaccurate or misrepresented information and it’s important to know how to take the steps to contact the credit reporting agencies (Experian, Equifax and Trans Union).  All three are separate entities and each has a separate matrix to rate our credit/spending patterns.  Each have a range for our FICO scores from 400-850 (approximately).

Most creditors, banks and collection agencies will report to each agency on a monthly basis.  If you are aware of inaccurate information on your credit report it’s a good idea to make sure which agency is reporting the information.  Often times only one or two of the agencies will report inaccurate information.  In the case of my family member there was some very poor communication on the part of the creditor and I thought it’d be a good idea to post some helpful steps to disputing this information.

1. Access your free credit report – Often times you may become aware of an error or inaccurate information on only one agency.  If you have a credit report given to you by a bank or credit company they will likely only provide a report from a single agency (most likely Equifax) in order to reduce the cost of pulling three credit reports.  If you’re applying for a mortgage you’ll be provided with a tri-merge credit report which combines information from all three agencies.  Go to www.annualcreditreport.com and download your free credit report from each credit reporting agency.  You will need create a log-in and provide some information to receive the credit reports.  The free credit report will show you information reporting from each agency, however, you will not be provided a score.  For the purposes of challenging an error, it’s not necessary to have a score, but if you insist on having a score you can choose to pay for the score through this website.    It is very important to go to this website as there are hundreds of websites that want you to pay for the report which should be free (i.e. freecreditreport.com).
2. Identify the agency or agencies reporting the error – Print the report from each agency.  Identify the error or inaccurate infomration on each report.
3. Document the error – It’s important to document your case for the inaccurate information or error.  You will want to provide detailed information about why the information is inaccurate or an error.
4. Dispute the information with the appropriate agency – Each credit reporting agency has a website with detailed information on how to dispute these errors.  Visit the website and proceed accordingly.  Click to visit each agency’s official dispute page: Equifax / Experian / Trans Union. It is very important for you to remember your log-in information so you can follow up.
5. Check the result(s) of the dispute – Most disputes take 30-45 days for a response from the agency.  Check back with the agency’s website and view the result.
6. Contact me if you have any questions – seriously, I’m here to help – Much if this information can be overwhelming at times.  Give me a call or shoot me an email and I’ll answer any questions you may have.

Good luck!

Today the US Senate advances the new Stimulus Bill which includes an increase in the current home buyer tax credit.  Currently a home buyer purchasing a home from April 2008 to July 2009 may be entitled to a tax credit up to $7,500.  Currently the credit is to be paid back in increments of $500 each year thereafter.  The new Stimulus Bill proposes an actual tax credit of 10% of the sales price with a maximum of $15,000.  This provision may rid of the requirement to repay the credit, making it a true benefit for the home buyer.

In the article Senate Advances Tax Breaks for Homebuyers, Senator Johnny Isakson said,

“We do have a history in this country with housing and it goes back to the crash of 1974, which actually in terms of inventory and price declines was comparable to what’s happening now”.

“Within one year of the inception of that tax credit, two-thirds of the available inventory that was on the market was gone. The market moved back to a balanced inventory, values stabilized and things became very healthy. The only reason I know all of that is I was selling houses in 1974, that’s what I was doing to feed my family and make a living.”

The Stimulus Bill that was passed by the house last week will be reconciled with the Bill passed today and may have a final approval as early as Thursday February 5th.

Stay tuned for more information regarding this tax break.  Rates are still great and inventory is beginning to move again!