FHA loans

An FHA loan is insured by the Federal Housing Administration, a federal agency within the U.S. Department of Housing and Urban Development (HUD). The FHA does not loan money to borrowers, rather, it provides lenders protection through mortgage insurance (MIP) in case the borrower defaults on his or her loan obligations. Available to all buyers, FHA loan programs are designed to help creditworthy low-income and moderate-income families who do not meet requirements for conventional loans.

FHA loan programs are particularly beneficial to those buyers with less available cash. The rates on FHA loans are generally market rates, while down payment requirements are lower than for conventional loans.

Some of the other benefits of FHA financing:

• Only a 3 percent down payment is required.
• Closing costs can be financed.
• Lower monthly mortgage insurance premiums and, under certain conditions, automatic cancellation of the premium.
• More flexible underwriting criteria than conventional loans
• FHA limits the amount lenders can charge for some closing cost fees (e.g. the origination fee can be no more than 1% of mortgage).
• Loans are assumable to qualified buyers.

VA Loans

VA guaranteed loans are made by lenders and guaranteed by the U.S. Department of Veteran Affairs (VA) to eligible veterans for the purchase of a home. The guaranty means the lender is protected against loss if you fail to repay the loan. In most cases, no down payment is required on a VA guaranteed loan and the borrower usually receives a lower interest rate than is ordinarily available with other loans.

Other benefits of a VA loan include:

• Negotiable interest rates.
• Closing costs are comparable and sometimes lower – than other financing types.
• No private mortgage insurance requirement.
• Right to prepay loan without penalties
• The Mortgage can be taken over (or assumed) by the buyer when a home is sold.
• Counseling and assistance available to veteran borrowers having financial difficulty or facing default on their loan.

Although mortgage insurance is not required, the VA charges a funding fee to issue a guarantee to a lender against borrower default on a mortgage. The fee may be paid in cash by the buyer or seller, or it may be financed in the loan amount.

A VA loan can be used to buy a home, build a home and even improve a home with energy-saving features such as solar or heating/cooling systems, water heaters, insulation, weather-stripping/caulking, storm windows/doors or other energy efficient improvements approved by the lender and VA.

Veterans can apply for a VA loan with any mortgage lender that participates in the VA home loan program. A Certificate of Eligibility from the VA must be presented to the lender to qualify for the loan.

The Federal Housing Administration is an agency of the federal government. The FHA insures private loans issued for new and existing housing, and for approved programs for home repairs. The FHA was created by Congress in 1934, and in 1965 became part of the Department of Housing and Urban Development’s Office of Housing.

The FHA’s mission in the present day includes offering help borrowers get the amounts they qualify for, and to assist lenders by reducing the risk of issuing loans. To get situation-specific information and advice on how you might be able to take advantage of an FHA-insured loan, you’ll need to contact us and get started.

I have credit problems; will this hinder my chances of getting an FHA loan?

The FHA recommends a Credit Repair program for anyone who fears being denied a loan as a credit risk. We offer an in house credit evaluation and restoration program.

You should, as a rule, be in a satisfactory payment situation for at least one year before applying for any FHA loan program. FHA is usually pretty lenient on “OLD” collections/charge offs as long as you are able to provide a good explanation of what caused them.

Our credit counselor can address issues such as income-to-debt ratio, how to maintain satisfactory payments for the required time and challenging unfair or erroneous entries on your credit report. The FHA uses common sense Underwriting, call 972-422-9016 x 500 or click here today to get started.

What kinds of information will I need to gather to get started with the FHA?

The FHA Underwriter will ask for a lot of information, which will go on your loan application. Be sure to ask your loan officer for a complete list of required data and give yourself plenty of time to gather the information. Click here to download a list of normally required documents.

You will need to provide the FHA with a wide range of details; this includes all the addresses where you have lived in the previous two years, your employers name and addresses for the last two years, plus the amount of your Gross Monthly Salary. If you have had multiple jobs over the last twenty-four months, you will need your W2s for all of them.

If you are Self Employed you will need your income tax forms submitted for the last two years. If you don’t have copies of your W2s, you should contact your employers for assistance. If you need replacement copies of your income tax returns, go to IRS’ site and follow the instructions on how to order replacements. A tax transcript is free of charge, and copies of actual tax returns cost around forty bucks.

1. Low out of pocket requirements – You can put as little as 2.25% of the sales price down. That down payment can be a gift and can even be funded by the seller.

2. Flexible Underwriting guidelines and lower credit score requirements – The underwriting process for FHA is not as cut and dry as it is with conventional guidelines. FHA will accept common sense explanations in some cases.

There is room for credit blemishes when using the FHA. They will not penalize you for something that happened 4, 5, 6, or more years ago. Life happens and sometimes financial hardships do to. At Southwest Funding we understand that issues arise and we know how to address them. We are normal people too, therefore we understand. If for some reason you are not approvable now we will help you map out a plan that when implemented will result in an approval in the future!

Call or click here today to get started. 972-422-9016 x 500

Effective 5-29-2008 FHA and the department of Housing and Urban Development (HUD) released a new set of guidelines for alternative tradelines.  They divided these types of accounts into 2 groups to help lenders and underwriters evaluate borrower credit worthiness:

Group One – rent/housing payments, gas, electricity, cable and land-line phones.  These tradelines need to be paid separate, and not be included in the rent payment.  Also if the borrower is renting from a family member, HUD requires lenders to request independent documents to prove regularity of payments, such as cancelled checks.

Group Two – consists of receipts of paid auto insurance, renter’s insurance, cell phone, internet, school tuition, child care providers, etc.  These types of accounts are acceptable but do not hold as much weight as Group One accounts.

Verifying Nontraditional Credit – HUD prefers all non-traditional credit references be verified by a credit bureau reported back to the lender as a nontraditional mortgage credit report (NTMCR) in the same manner as traditional credit references.  If a method is used to verify credit and rental references other than NTMCR, all references obtained should be backed with the most recent 12 months cancelled checks.

Evaluating Nontraditional Credit -

1. No history of delinquency on rental housing payments allowed.
2. No more than one 30-day delinquency on payments due to other creditors.
3. No collection accounts/court records reporting (other than medical) filed within the past 12 months.