FHA is the lender of choice these days, however, you should be aware that new guidelines have been established which is making it even more difficult to qualify for FHA financing:
1) Individuals wanting to make a new purchase can no longer just present a signed lease on the home they are leaving and expect that rental income will be used in the debt to income ratio calculation unless it can be determined that the current residence to be rented has a minimum of 25% equity. The FHA is concerned that some borrowers were leaving their old home behind and the associated debt so that they could purchase another home at the current, lower prices. In some cases, the borrower after closing stops making mortgage payments on the former residence. The FHA has now plugged that possibility. So unless a borrower has sufficient income to qualify for a new loan with the debt service on both homes being considered, the borrower will be, for practical purposes, barred from moving on.
2) Another change which has been instituted is that a relocating borrower can no longer just show an offer of employment to satisfy the income requirement. The new rule says that for the offer of employment to be valid, it must be an actual employment contract – otherwise, the closing could not occur until the borrower has actually relocated and started the new job and can show the first paycheck. This same guideline is being applied to conventional Fannie Mae loans.
3) Beginning January 1, 2009, the required down payment from the borrower will increase from 3% to 3.5%. Borrowers are still able to use funds received from relatives as a source of a down payment. Sellers can continue to contribute up to 6% of the purchase price towards the buyer’s closing costs.
4) The move to implement risk-based pricing effective October 1, 2008 has been put on hold for one year. This would have provided for a varying amount of upfront mortgage premium as well as varying amount of annual mortgage insurance premium depending on a person’s FICO credit score and the loan-to-value. During the next year, a flat 1.75% of the loan amount will be added to the loan amount and either an annual premium of .50 or .55 depending on whether LTV is greater or less than 95%.
Bob Lefcort provides help and information for people about many different aspects of the mortgage and credit process. Visit http://www.mortgagebobusa.com for help with your mortgage loan or to improve your credit score.
Source: http://www.ArticlePros.com/author.php?Robert Lefcort
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