True?  Maybe, but in general not so much. A good, knowledgeable realtor could be a good referral source in finding a good loan officer.  The key word is good. Check.

Having a “decent” salary and good credit is pretty relative.  And it’s relative to the other risk factors when a loan officer considers your ability to qualify for a loan: income, assets and reserves, credit score and history, appraisal, loan to value, etc. He is correct, though, that you will have to provide documentation to verify the various factors that will qualify you:  pay stubs, W-2s, tax returns (maybe), full, complete statements of your assets accounts, and maybe more. I cover all this in my book.

In the end, it’s not a big deal. For some, I know, who may not be as organized with their current statements and records, it may be a little frustrating.  Nevertheless, it’s all required.

The mortgage process is not a five paragraph process.  Take your time. Think about what’s important. And seek qualified help.

The good news is that the limits for lending have increased for many areas. As outlined in the Allregs guide:

“The Act provides that the mortgage limit for any given area shall be set at 125% of the median house price in that area, as determined by the Department of Housing and Urban Development, except that the FHA mortgage limit in any given area cannot exceed 175% of the 2008 Freddie Mac conforming loan limit of $417,000, nor be lower than 65% of the same 2008 Freddie Mac conforming loan limit for a residence of applicable size.

Thus, in areas where 125% of the median house price is less than 65% of the Freddie Mac limit, the FHA limits are set at the 65% limit, i.e., the “floor,” as follows:

          1 Unit:  $271,050

          2 Units: $347,000

          3 Units: $419,400

          4 Units: $521,250

In areas where 125% of the median house price exceeds the 175% limit of $729,750 for a 1-unit property, the mortgage limits are set at the 175% amount, i.e., the “ceiling,” as follows:

          1 Unit:  $729,750

          2 Units: $934,200

          3 Units: $1,129,250

          4 Units: $1,403,400

For all other areas, i.e., those where 125% of the median home price for the area is in between the floor and the ceiling, the limit shall be at 125% of the median home price.”

So the news, for a change, is good for everyone. Buyers who need a more liberal mortgage program (i.e. have little down payment, not spectacular credit scores/history, little money in reserves, etc.), FHA is a great way to go. Sellers will have more opportunity to sell their homes, as there may be more buyers available, particularly for higher priced homes.

Here’s my thought though: I looked up the word “limit,” and the definitions point to the idea of boundary or restraint. I think we should keep this in mind.

Yes, the new FHA limits allow more people to buy “more home.” Sound familiar? Remember all those programs, in the last four years, that were able to “buy more home” buy offering high LTV (low down payment), interest only, and negative amortization programs? No income or assets required? No job, no problem? Remember those programs and remind ourselves of all the heartbreak that has spread not only throughout the country but also throughout the world.

Let’s make sure we do the right thing. Budget. Limit ourselves. Just because the limit is $729,750, doesn’t mean that we have to take a loan for that much.

Still, this is great news for the beginning of the spring season.

Thank you Leslie. Hope it helps.

Several people have conveyed that they have budgeted themselves and have determined their total mortgage payment (PITI: principal, interest, tax, and insurance). To get to that payment, we discussed the down payment amount.  In each case, none of the borrowers had the amount of down payment money. For closing.

They all will have money, from bonuses, within 60-90 days after closing. I have suggested structuring the loan by doing two loans. In all cases, they will have 20% equity after their bonus incomes have been available.

So I’ve described how we can do one loan at 80% loan-to-value, and then do a second mortgage for 20% of the purchase price.  So they all are putting down 0% for the purchase, and when they receive their bonus, they can pay off the second mortgage (which is going to carry a higher interest rate) and lower their total payment. If we do the purchase with just one loan, the borrowers can pay down the principal, but the payment doesn’t necessarily recast (change based on the new loan amount), and the mortgage insurance (payment) would not change.

So here 1 loan plus 1 loan equals 1 loan.

She just chose the colors for her kitchen and dining rooms in her new apartment. (As I mention in my new book, one of the advantages of owning versus renting is that you don’t have to ask the landlord to paint the walls pink.)

For many young people who want to purchase a condo–their first home–there is the perception that the lack of credit history and/or lower scores, insufficent assets for downpayment, lower income, and a short period of employment will prevent them from buying a home. Usually this is not true.

There are many programs for young buyers with any or all of these risk factors. Surprisingly, most borrowers find that they do qualify for loans. For some people, though, they need help, and there are programs–usually called “kiddie condo” programs–where a close relative, usually a parent or parents, co-sign the loan and help the “kiddie” qualify.

The main downside for the parents is that they too are responsible for the payment, and so if there is a late mortgage payment, this will be reflected on all credit reports.  Also, the only way for the parents to get removed from this obligation is for the child to refinance the loan without the parents on the loan. Overall, this is a fabulous way for a young homeowner to start their life-long dreams of home ownership.

The loan officer should present these programs and explain how they will be structured, detailing the pros and cons, just as they would with any other loan.

 Did I say paint the walls pink?

Many people seem to feel the same way regarding their eligibility for loan programs.  I often hear, “Am I only available for a subprime loan?”  Subprime lenders, in general, do offer programs to borrowers with less than perfect credit (and usually very poor credit) scores and history. And sometimes these programs help first time buyers. In general, most people, though they may not have “perfect” credit (scores) or history, adequate reserves, or down payment, will have several other options before looking at subprime lending programs. 

Now that there has been extensive news of subprime lenders possibly going out of business, many uninformed buyers are becoming even more nervous.

You don’t have to be perfect to get a loan.