home loans

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HUD Tightens Loan Standards

In Eugene, as in the rest of the nation, lending standards for HUD insured loans—an increasingly popular option for home buyers—are becoming stricter.  The following changes are scheduled or planned to occur this year:

  • Increased mortgage insurance premium—beginning mid-April, the rate will be 2.25%, up from 1.75%

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  • Increased down-payment (10% vs. 3.5%) for borrowers with a FICO less than 580

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  • Reduction of seller concessions from 3% from 6%

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These changes will make it harder for some borrowers to get loans, and will soften demand, somewhat, for house purchases.  However, at least the changes aren’t too drastic.

 

HUD loans are a bright spot in a thorny lending environment.

 

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Loans for Borrowers with 500 Credit Scores?

If the Great Recession has damaged your credit score like so many of us, getting a home mortgage has been nearly impossible.  But—Wells Fargo recently changed their policies to allow people with credit scores as low as 500 to get loans or home mortgages.

Although—to minimize risk—they’re requiring a higher down payment for those of us who are credit-challenged.

Will the other three big lenders (US Bank, Chase and Bank of America) follow suit?  While it’s too early to tell—my guess is yes.

 

Loosening credit: 1 down and 3 to go

 

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Banks: Credit Restrictions Too High

Banks agree with Realtors that credit is too tight.  In a recent National Association of Realtors podcast, NAR President Ron Phipps discussed his recent meetings with Citibank.  Folks who should be able to get mortgages aren’t getting mortgages…the pendulum has swung too far. 

Things will loosen up again–but no one is sure how soon.

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Home loan fraud

Why are home loans so hard to get now? This is a question that has undoubtedly been on every homebuyer’s mind since the recession began. Well, as it turns out, the economy is not the sole reason for the banks’ recent stinginess. Recently a fraud probe in Oregon charged 39 people with loan fraud, including lending professionals, real estate agents and others affiliated with the real estate industry. Many of these cases were committed by falsely inflating a property’s selling price, which contributed to the housing bubble. While many of those committing loan fraud have been put out of business by the latest crackdown, fraudsters still remain. “Rescue fraud” has become increasingly popular; victims are those in danger of foreclosure and unscrupulous types are preying on them.

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Getting a Loan with Low Credit

I recently had a chance to talk with Jared Helton of Infinity Lending Solutions, about lower credit scores and how they affect getting a loan for a house.

Q. Are there minimum credit scores to get a loan for a house?
A. For most products, it is stated that there are no minimums on government backed loans. However, most lenders have instituted minimums.

Q. What are the practical minimum credit score limits for the different loan types.
A. FHA: 580 (a few lenders go to 520)
USDA: 600 (a few go to 580)
VA: 580 (a few go to 520)
Conventional: 620

Q. How do lower FICO scores affect loan pricing?
A. For government backed loans, like FHA, USDA, & VA lower credit scores have less affect on pricing with maybe as little as 0.25% for a lower fico between 580 – 619. On conventional loans, it’s a huge change on pricing. Some rates jump over 1% for lower credit scoring around 620.

Q. Is there a minimum score, below which getting a loan is next to impossible?
A. Pretty much below 520 is private money lenders only.

Q. What are some steps to improve your credit scores?
A. Schedule a review of your credit with someone that knows what they are  doing. I’ve written about it on my web-site too.

Q. Does talking to lenders and doing multiple applications hurt your credit score?
A. That is a huge myth that multiple inquires hurt your score.

All multiple “like” inquiries by mortgage companies made in any isolated 45-day period of time for TransUnion and Equifax (14 day period for Experian) are treated as one single inquiry for the calculation of the score.

Any mortgage inquiry made during the 30 days prior to the current broker/lender’s mortgage inquiry will be buffered out of any impact in the consumer’s score calculation.

Jared Helton, Partner, Infinity Lending Solutions

Jared Helton, Partner, Infinity Lending Solutions

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Zero Down Payment!

Is 102% financing for home mortgages still possible? YES! That means you can still buy a house with no money down. Surprisingly, it’s the USDA that is making this possible. That’s right, the United States Department of Agriculture. More surprisingly, your house doesn’t need to be a farm, have livestock, crops or even be within sight of a tractor.

Last week’s WSJ ran an article describing the new found popularity of the Rural Development Guaranteed Loan Program. There are a couple of notable things to qualify. Firstly, the property must be in an area of low population density. In Lane County, everything but the greater Eugene and Springfield area meets this qualification.

Secondly, there are income limitations, which are based on the number of people in your household and where you live. In general, your adjusted gross income can be about 50K to 60K in Lane County, depending on household size. The specifics of the program are best determined with a loan officer.

One of my friends specializes in writing these loans. His name is Cody Gielish at Countrywide. He can be reached at 681-4353.

Specialist in Rural Loans.

Cody Gielish: Specialist in Rural Loans.