- Try to get your current lender to modify your loan
- Try to qualify for the FHA Hope for Homeowners Program
- Try to qualify for the FHA Secure Program
- Try to do an FHA Short Refinance
- Do nothing and most likely end up in Foreclosure at some point
- The new VA loan must be a lower interest rate than the current loan
- The new principal/interest payment must be lower than the current loan
- The last 12 mortgage payments must have been made on time
- No appraisal is required
- No income documentation is needed
- No asset documentation is needed
- Loan Modification
- FHA Short Refinance
- FHA Secure Program
- FHA Hope for Homeowners
- If you currently owe more than your house is worth, the FHA streamline program is one of the few refinance options that you have because it is possible to do an FHA streamline without an appraisal.
- If you were to participate in the FHA streamline program in the month of December, your first mortgage payment would be due February 1 - which means that you would effectively defer or “skip” your January mortgage payment.
- When you participate in the FHA streamline program, you will get a refund for whatever is left in your current escrow account — a new escrow account will be fully funded when you set up your new FHA loan.
- When qualifying for an FHA streamline, one important criteria is that you have made your last 12 months mortgage payments on time — although there can sometimes be exceptions made for up to 2 x 30 day late payments.
- When qualifying for an FHA streamline, no income documentation is required.
- No appraisal is required on FHA streamline-without-appraisal program
- No income documentation is needed
- No asset documentation is needed
- No credit score required, only a “mortgage rating”
- Full income and asset documentation are required
- Full FHA appraisal is required
- Home must be a primary residence
- Low-mid FICO score of 580 or higher
- Must have lived in the property for the last 12 months
- Repair gutters and downspouts
- Repair/upgrade of existing HVAC systems
- Minor repairs of plumbing and electrical systems
- Minor repairs of existing flooring
- Minor remodeling that does not involve structural repairs
- Exterior and interior painting
- New appliances – which may include free-standing ranges, refrigerators, washers/dryers, dishwashers and microwaves but may not exceed $2,000
- Improvements for accessibility for people with disabilities
- Your current loan must be a non-FHA Adjustable Rate Mortgage.
- You must show a sustained history of employment.
- You need sufficient income to make the new mortgage payment.
- You need to show a history of on-time mortgage payments “prior” to the borrower’s ARM loan resetting to the higher rate.
- The Adjustable interest rate must have either reset or be scheduled to reset between June 2005 and December 2009.
- Mortgage late payments are allowed after the reset date if they are directly related to your higher loan payment. In addition, if you are in a mortgage payment plan because of late payments and there is sufficient equity in the home, the late payment amounts can be rolled into the new loan.
- Second mortgages are possible under certain specific conditions.
- A minimum of 3% cash or equity in the home.
- What are the general terms such as when does the ARM payment adjust, how will the new rate be figured, what is the maximum amount the payment could rise and minimum that it could fall?
- What is the margin?
- What index will the loan be tied to?
- How long do you plan on living in the property?
- Is there a convertibility option to convert to a fixed rate at some point?
- FHA loan applications were up 113.6 percent from a year ago in October, while applications for conventional loans were down 49.7 percent.
- FHA loan refinancings from conventional loans to FHA-insured loans were up 144.3 percent from a year ago.
- FHA loans accounted for about one in three mortgage applications in the month of October.
- Since the MBA began surveying loan applications in January 1990, FHA loans have ranged from a low of 5.8 percent of total applications in August 2005, to a high of 43.8 percent in February 1990.
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Loan Modifications: 4 Tips To Save Your House
Being a “mortgage guy” in today’s world is kind of surreal. I talk to many people each week who currently owe more than their house is worth and may (or may not) be behind on their mortgage payments.
Which means they pretty much are not going to be able to refinance their home with the current programs out there.
So if you find yourself in the situation where you are falling behind on your mortgage payments (or about to) because of some kind of economic hardship that you are going through, these are your basic options:
As we have wrote before, the FHA Hope for Homeowners program and the FHA Secure program are semi-not-real — meaning these loans are just not getting done in most situations even though the media makes it sound like they get done all of the time.
So it seems that most people I talk to are a candidate for a Loan Modification or an FHA Short Refinance or Foreclosure.
Many times, I am asked “what is the best way to get a loan modification done” and my answer generally is “try to do it yourself and if you end up frustrated, then hire a loan modification firm to represent you to work with your lender to get your loan modified.”
Here are 4 tips when deciding which loan modification firm to hire that can hopefully ensure your chance of successfully getting your loan modified at a fair price:
Make sure that the loan modification is “attorney based”. This means that you will actually have a legal firm representing you, not just a sales organization. The loan modification company will be working with your lender’s loss mitigation department - and somehow these departments seem to respond better to attorneys than they do to people who are not attorneys.
Shop around. Loan modification companies have all different kinds of pricing models — some charge $3,000 up front and no guarantees. Some charge $500 up front, then 2% if your loan is successfully modified. Some charge a flat-fee. There is a wide variety of pricing models, so be sure to speak with AT LEAST 2 or 3 different companies before making your final decision.
Look for them, don’t let them look for you. If you are contacted by someone about “having your loan modified”, be very careful. Many times, these are the most aggressive sales organizations. Good loan modification companies don’t use these tactics, they know that there are plenty of homeowners who need their help and don’t need to aggressively go after them.
Ask around for a referral for a good loan modification company. You may be surprised to learn how many of your neighbors have had their loan modified already. Many of them used a loan modification company to assist them in getting it done — don’t be afraid to ask for a referral.
Do loan modifications work?
Yes.
I have heard and seen probably hundreds of success stories of people getting their loan modified — and in a time where so few (if any) people got a FHA Hope for Homeowners loan, it makes sense to be smart about how to improve your chances of getting your loan modified.
Will Interest Rates Go To 4.5%?
As seen on ABC 15 News…
What do the Oklahoma Sooners and a 4.5% interest rate have in common?
They may both be part of a land grab.
Ok, not really, but the national (and local) media sure did jump on the story that broke in the WSJ about the possible plan for the government to do everything in its power to lower the target interest rate for people buying a new home to 4.5%. Read more
The VA IRRL Streamline Refinance Program: No Appraisal Required
When interest rates dip, refinancing activity goes up — and recently we have had a few calls from Veterans who are currently in a VA loan asking about their refinancing options.
If you are currently in a VA loan and you are interested in just lowering your monthly payment, the VA IRRL streamline makes it easier than ever to take advantage of lower interest rates and lower your payment.
The VA streamline program doesn’t require an appraisal and you don’t have to fully qualify for a new loan - much like the FHA streamline program, it is designed to allow VA borrowers to get into a new, lower interest rate without going through a full loan qualification.
The three main criteria for a VA streamline are:
With a VA streamline:
When qualifying for a VA streamline, the only documents you will need when submitting your file to underwriting are a completed loan application (without the income or asset information), a copy of your DD-214, your current mortgage note and a copy of your current mortgage statement.
The VA streamline program takes about the same amount of time as a regular, full-documentation refinance due to the processing and underwriting times, but it is much easier to qualify for (providing that you meet the 3 criteria) and much less of a hassle to gather the documentation required.
If you are currently in a VA loan and your interest rate is above 6%, it is a good time to see if the VA streamline program can help you lower your mortgage payments and put you in an overall better financial situation.
FHA Streamline Rules
With the recent drop in rates, more people are starting to ask us about refinancing options within the FHA program. A couple of the recent questions that we received about the FHA streamline program:
Question:
Earlier this year, I got into the FHA program with an FHA Secure loan. Can I do an FHA streamline refinance?
Answer:
No. FHA Secure loans are not eligible for the streamline program.
Question:
I am currently in an FHA loan that is adjustable. My current interest rate is 4.5% but I am afraid that it will go up and want to get into a fixed rate. Can I do an FHA streamline refinance?
Answer:
Yes. The guidelines for an “ARM to FIXED” (that is mortgage slang for refinancing from an adjustable rate into a fixed rate) are that the new fixed rate cannot be greater than 2% above your current arm rate.
Other General FHA Streamline Rules:
FHA ARM to FHA ARM
You must have a payment reduction *and* the maximum interest rate of the new loan cannot exceed the possible maximum interest rate of the new loan.
FHA Fixed to FHA ARM
The start rate of the new FHA ARM must be 2% below the current fixed rate. Since FHA fixed rates are almost the same as FHA ARM rates, this isn’t something that really applies in today’s world.
These are just a few of the simple rules about the FHA streamline program, be sure to stay tuned for more information to come out as people keep inquiring whether or not the FHA streamline program makes sense in their current situation.
Reverse Mortgages: “A Good Idea” FHA Commissioner Says
As some of you know, my grandparents currently have a FHA HECM reverse mortgage and I am currently working with my parents to get an FHA HECM reverse mortgage.
Many seniors are concerned whether or not a reverse mortgage is right for their situation, and the truth is “it depends”. But with the current downturn in the economy, there are more seniors than ever who are struggling to make their monthly bills and yet could benefit from an FHA reverse mortgage.
Apparently, I am not alone as someone who works in the industry and recommends an FHA reverse mortgage to his parents…
Outgoing FHA commissioner Brian Montgomery has recently been quoted as saying that there is a bright future ahead for reverse mortgages despite the current credit crunch. He has also been talking with his mom about taking out an FHA reverse mortgage although she has shown some resistance.
His thoughts about the FHA reverse mortgage program?
“I told her that I was her son and would always be looking out for her best interests,”
Montgomery said.
“I also told her that I administered the program for the United States of America and thought it was a pretty good idea.”
Phoenix Mortgage Rates December 2 2008
Phoenix, AZ Mortgage Rates December 2, 2008
Mortgage Related News
According to the Wall Street Journal today, TransUnion forecasts the number of home loans 60 or more days past due to reach 7.17 percent at the end of 2009–nearly twice the anticipated delinquency rate of 4.67 percent for 2008 and the highest level since at least 1992. The credit bureau predicts that mortgage will finally start to go down in early 2010 when loans that were based on more stringent underwriting criteria take effect.
According to Ezra Becker with TransUnion’s financial services group: “There may be an ongoing flow of consumers who may now be able to pay their mortgage but may not be able to a year from now.”
If you are having trouble making your mortgage payment, you have options that are available to you and usually fall in one of these categories:
Start with talking with your lender about getting a loan modification, then move down the list for your options. With the current foreclosure moratorium until early next year, many lenders are getting better about working with borrowers to modify their loan so they can afford their mortgage.
The FHA Streamline Refinance: 5 Things To Know
Interest rates have fallen over the last week - to the point where if you are currently in an FHA loan, it probably makes sense to call your mortgage professional about the FHA streamline refinancing options.
The FHA streamline program has been around since the early 1980’s and is designed for people who currently have an FHA loan to lower their interest rate without having to completely re-qualify for a new loan.
Here are 5 important things to know about the FHA streamline refinance program:
Is the FHA streamline program right for you? Find out now while interest rates are low… the FHA streamline program only makes sense when interest rates dip and you can take advantage of them before they go back up.
Arizona FHA Mortgage Refinance Options: Which Ones Are Real?
FHA Hope for Homeowners, FHA Secure, FHA Streamline, FHA 95% Cash-out, FHA 203k Streamline, FHA Short Refinance… these are all “real” options for people who are currently in an FHA loan and looking for FHA refinancing options.
Supposedly.
Some are more real than others.
Let’s start with the “most real” FHA refinance programs and identify who can benefit from them.
FHA Streamline Refinance Program
If you are currently in an FHA loan and have noticed the recent drop in interest rates and just want to lower your monthly payment as a result of getting a lower interest rate - this is the program for you. The FHA streamline program is designed to allow FHA borrowers to take advantage of lower interest rates without having to completely re-qualify for a new loan.
Highlights of the FHA Streamline program include:
The FHA streamline refinance program is by far the most popular with FHA borrowers when interest rates drop - because it allows them to lower their interest rates with minimal hassle and without having to completely re-qualify for a new loan.
FHA 95% Cash Out Refinance Program
The FHA 95% cash out refinance program is for homeowners who are currently in an FHA loan and want to convert some of the equity in their home into cash for any reason. In mortgage-guy-slang, the process of converting your equity into cash is called “Cash-Out” and it could include paying off credit cards, cars, other miscellaneous debt or simply getting a check at closing.
Some (not all) of the guidelines of the FHA 95% cash out refinance include:
As home equity was rising in past years, the FHA 95% cash out loan was very popular - but going forward, I think it will be more common to see people participate in the FHA Streamline program when refinancing due to declining home values.
FHA 203K Streamline Refinance Program
The FHA 203k Streamline program has gained popularity recently due to the number of foreclosed homes that are being purchased that are in need of repair. The FHA 203k streamline program can be utilized both as a FHA refinancing option as well as a FHA new home purchase option.
The FHA 203k Streamline is a modification of the standard Section 203k loan in that it only allows limited repairs costing at least $5,000 but not greater than $35,000. The total mortgage amount will allow for acquisition of the property and up to $35,000 in the loan proceeds to be applied toward repair or rehab of the property.
Some of the most common repairs done under the FHA 203k Streamline program include:
In addition to the FHA 203k streamline program, there is a FHA 203k standard program — which will allow more than $35,000 to be used in repairs but requires more “major” work.
FHA Secure Refinance Program
The FHA Secure mortgage program is where the FHA refinance programs start becoming a little less “real”.
That doesn’t mean that they don’t exist — it just means that many people who try to qualify for this program end up with something different than an FHA secure loan.
The FHA Secure program was announced by President Bush in August of 2007 and according to estimates at the time, hundreds of thousands of families would benefit from the FHA Secure program.
Recently, HUD Secretary Steve Preston recently went on the record to say that FHA has helped more than 325,000 mortgage borrowers refinance during the current crisis. While that may sound good, the truth is something different: Yes, there have been hundreds of thousands of FHA refinances. However, only about 1% of these FHA refinances were with borrowers who had already defaulted.
That would indicate that FHA Secure has only helped a few thousand people, not hundreds of thousands of them.
The FHA Secure program guidelines state that in order to be eligible for the FHA Secure program, you must meet the following criteria:
In my experience, every single person who has inquired of us since this program launch about the FHA Secure program has not ended up with an FHA Secure loan.
FHA Hope for Homeowners Refinance Program
The FHA Hope for Homeowners refinance program was launched by HUD in October of 2008 and is designed to refinance mortgages for eligible borrowers who are having difficulty making their payments, but, after a write-down in principal, can afford a new loan insured by FHA.
Is the FHA Hope for Homeowners program “real”? As we have said before “we think so…” but it has been our experience that people who are interested in the FHA Hope for Homeowners program end up doing an FHA Short Refinance or a Loan Modification with their current lender.
And the current numbers seem to agree with our experience — there have been fewer than 100 applications NATIONWIDE since the programs inception.
FHA Short Refinance
I saved the FHA Short Refinance for last because it isn’t “really” an FHA program. The concept behind the FHA Short Refinance is that you get your existing lender to write down your current loan balance to 95% of your current market value and accept a short payoff — much like a short sale except for the fact that you get to stay in the home and end up with an FHA loan.
From Arizona Short Refinance expert Paul Dunn:
An FHA Short Refinance is when a home owner refinances a loan where they owe more on their mortgage than their current mortgage is worth. FHA Short Refinance applicants are upside down on their equity, and so they need an FHA Short Refinance. The only way to refinance the home for any reason, is if the current lender takes a “short pay” on the amount owed and writes it off as a loss, thus the FHA Short Refinance. It is basically the same as a short sale with the exception that the home owner keeps their home.
And what happens if the FHA short refinance doesn’t work? According to Paul:
An FHA Short Refinance is the goal for our work, but it does not work in every situation. In the case where an FHA Short Refinance does not work, you still may be able to negotiate a loan modification with your current lender to improve the terms on your existing mortgage. You may also elect to put your home up for a “short sale” and if you do we can provide you with an excellent Realtor referral in your area who specializes in this type of transaction. If you elect a short sale, it is important to work with a Realtor experienced in the short sale process.
We are very lucky to have one of the mortgage industry’s leading experts on FHA Short Refinances living right here in Arizona. Paul has been kind enough to teach us a thing or two about getting these FHA Short Refinances done. Thanks Paul!
In Summary
The FHA Streamline, FHA 95% cash out and FHA 203K Streamline programs are very “real”. Most of the people that we talk to who are interested in one of these options end up with one.
The FHA Secure, FHA Hope for Homeowners and programs are less “real”. This doesn’t mean that they don’t exist — It just has been my experience that most people who are searching for these as a solution end up with either a loan modification from their current lender or attempting to do an FHA Short Refinance or just walk away from their current home.
Considering An Adjustable Rate Mortgage? 5 Questions To Ask.
In the last couple of years, adjustable rate mortgages have become less popular - but there are times when financing your house with an adjustable rate mortgage can make sense.
As a very general rule of thumb, if you can save about 2.5% in the interest rate by choosing an ARM and are planning on being in the property for less than 4 or 5 years, it may make sense to choose an adjustable rate.
Remember — there are a lot of variables when choosing the right loan, so don’t only go by the general rule of thumb! I can think of (at least) 5 questions to ask if you are thinking of getting an adjustable rate mortgage.
5 Questions To Ask If You Are Considering An Adjustable Rate Mortgage
If you ask your loan officer these 5 questions, it usually will become clear as he explains the answers to each whether an adjustable rate mortgage loan is right for your situation. If you don’t know what you are getting into and end up with an adjustable rate mortgage that is not right for your situation - you will end up in a situation where you need to “fix your broken ARM” at some point… and nobody likes a trip to the (financial) doctor!
Arizona FHA Loans - As Popular As Ever
Recently, we were speaking with a group of sales professionals who work for a local roofing company about the benefits of the FHA 203k loan program and how it can potentially help their clients.
After introductions, we started speaking about the FHA loan programs and which ones would be right for what types of situations and the sales manager interrupted us and said:
“Hey, guys — pay attention! I personally have an FHA loan on my house and this is not the first house that I have bought!”
Which got me to thinking: exactly how popular are FHA loans today?
If the data released today by the Mortgage Bankers Association is any indication, FHA loans are as popular as ever.
According to the release:
Are FHA loans popular?
Yes.
Even the sales managers at our local roofing companies know that!
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