There’s no perfect time to buy a home. There will always be outside factors that affect your home buying experience, no matter how much you plan ahead. Thankfully, there are a variety of home loan solutions to meet you right where you are financially.
If you need a loan with flexible income, debt, and credit requirements, an FHA loan could be the solution you’ve been looking for.
The Benefits of an FHA Loan
The government-insured Federal Housing Administration (FHA) loan is a beneficial option for those who are looking for more financial flexibility from their home loan.
- Low down payment (as low as 3.5%)
- Minimum 580 credit score required
- non-occupant co-borrowers may be on the loan
- 100% of the down payment can be from gift funds
- The seller can pay closing costs up to 6%
- Qualification with less than two-year rental history
2020 Loan Limits
Increased loan limits, no matter what loan you qualify for, put more power into the consumers’ hands. It also allows those who already own a home to take more cash out of their home’s equity. For many, FHA mortgages offer an opportunity for homeownership that would otherwise be unavailable
FHA loan limits will vary and change as the housing market does. Although there is no guarantee that rates will change from year-to-year, it’s common that they will. To find out what FHA loan limits look like in your county, you can search by location here.
FHA Manual Underwriting
An estimated 4-5% of FHA loans are flagged during the initial assessment, requiring them to be manually underwritten. However, the majority of FHA loans fall under TOTAL Scorecard approval unless the application triggers the system based on risk factors such as the following:
People like to say, “cash is king,” until they need a high credit score. Although it seems like the most responsible choice, a debt-free lifestyle tends to leave even people with excellent cash flows in a tight credit score spot. Lacking sufficient credit history to generate a score will trigger a manual underwriting with the FHA.
Following a financial problem such as bankruptcy or foreclosure, getting a mortgage approval may be difficult. You will have to meet requirements for a waiting period after significant derogatory credit events. If you have satisfied the seasoning requirements, a manual underwrite may lead to loan approval in situations where an automated approval would still be off the table.
The amount of total debt you have in comparison to your overall income is your debt-to-income ratio. Although this factor has a bearing on FHA approval, manual underwriting allows for balancing the ratio against compensating factors that may support an approval. In some cases, home loans can be approved at ratios of 40-50 percent.
It’s important to keep in mind that a manual underwriting review does not necessarily result in a rejection. However, your application could require further discussion, so it will be in your best interest to work with your Mortgage Advisor to demonstrate an ability to pay.
Should You Consider Conventional Financing Instead?
For strong borrowers with great credit, and/or substantial down payments, conventional (a.k.a. conforming) home loans may be a better option for you. It pays to check with both programs and to discuss both options with your Mortgage Advisor to decide which mortgage option will save you the most money in the short and long term.
We understand that no two clients are the same. That’s why we sit down to find the best possible solution for your home loan needs. At The Polder Group, we offer a variety of loans to meet an array of financial differences. Contact Us Today!
Did you know that if you are a Veteran, you can qualify for a VA Loan? A VA Loan is a mortgage loan guaranteed by the U.S. Department of Veterans Affairs and was created to make housing affordable for eligible U.S. veterans and members of the military.
VA home loans are available to veterans, reservists, active-duty military personnel, and surviving spouses of veterans with 100% entitlement. Eligible veterans may be able to buy a home with no down payment, refinance up to 100% of the home’s value and pay no private mortgage insurance.
These loans carry a number of benefits (such as no down payment) that make them far more appealing than conventional loans in most cases for those who qualify.
Benefits of a VA Loan
The biggest benefit of a VA loan, for many borrowers, is that there is no need for a down payment. There aren’t many loan types that don’t require a down payment, and VA is one of them. There is no need to pay Private Mortgage Insurance (PMI) or arrange for a “piggyback” mortgage to cover your down payment.
Another significant benefit of a VA home loan is the competitive interest rate. Many times with a lower down payment, the interest rate will increase. But VA loans don’t have that problem!
What Can You Do With a VA Loan?
- Specifically, a VA home loan can help veterans:
- Buy a home or residential condominium
- Build a home
- Repair, alter or improve a home
- Refinance an existing home loan
- Buy and improve a manufactured home lot
- Add energy-efficient improvements to a home
- Purchase and improve a home simultaneously with energy-efficient improvements
- Refinance an existing VA loan to reduce the interest rate
VA Loan Limits for 2019
If you want to purchase a home, condominium or manufactured home, the VA can guarantee up to the conforming loan limit of the total loan – with additional benefits such as no down payment and no private mortgage insurance (PMI). Keep in mind, your VA loan may have a funding fee depending on which benefits you qualify for.
If you are considering refinancing an existing loan, VA offers you two options. You can either refinance to reduce your current interest rate. This is also known as a “streamline loan” or “Interest Rate Reduction Refinancing Loan (IRRRL).”
Veterans also have the option to take equity out (a “cash-out” loan). You can obtain a VA cash-out loan for up to 100 percent of your home’s value.
Veterans can use a Jumbo VA loan to purchase or refinance when the loan amount exceeds the conventional loan limits. Jumbo VA loans require a down payment. The amount of the down payment is determined using a calculation that factors in the county loan limits for the area the home is in, and the portion of the amount exceeding that loan limit which the VA will guarantee.
Our expert mortgage advisors can explain the details on how much of a down payment would be based on your specific scenario. Typically, the amount of down payment required on a VA Jumbo loan will be significantly lower than what’s required on a conventional jumbo loan. VA Jumbo loans also do not require mortgage insurance, regardless of the down payment amount, whereas conventional loans with down payments less than 20% always require mortgage insurance.
Do You Qualify?
Reach out to us on The Polder Group at Summit Funding. We are here to help.
Segments of the potential mortgage market are completely ignored by some lenders. Not only is this a poor business choice, but ignoring certain populations can be seen as a discriminatory practice by regulators. At PRM, we want to serve all communities and bring the dream of home ownership within reach. Through Fannie Mae’s HomeReady program, we can help you to grow your business in underserved communities for credit-worthy clients with low to moderate income. With flexible income guidelines not seen in other conventional programs, HomeReady helps PRM to assist you in bridging the gap for clients who otherwise would have limited financial options. Segments of the potential mortgage market are completely ignored by some lenders. Not only is this a poor business choice, but ignoring certain populations can be seen as a discriminatory practice by regulators. At The Polder Group, we want to serve all communities and bring the dream of home ownership within reach. Through Fannie Mae’s HomeReady program, we can help you to grow your business in underserved communities for credit-worthy clients with low to moderate income. With flexible income guidelines not seen in other conventional programs, HomeReady helps The Polder Group to assist you in bridging the gap for clients who otherwise would have limited financial options.
HomeReady Flexible Income Guidelines
- Rental income acceptable
- Boarder income acceptable
- Non-Occupant Co-Borrowers acceptable
- Expanded eligibility for lower income families by potentially using income derived from occupants other than the borrower as a compensating factor
- Flexible DTI requirements
- HomeReady increased home affordability in other ways, with low down payment options, which can be less than the required amounts for FHA loans. Additionally, your client also doesn’t have to be a first-time homebuyer, and properties can be more than 1 unit.
In order to qualify for the HomeReady program, your client must meet income requirements for the area the subject property is located in. For low-income census tracts, there are now income limitations. Income limitations by area can be viewed
If you have a client you think might benefit from the flexibility of the HomeReady Program, contact The Polder Group Today.
Most industry professionals know that VA Loans can be a great option for some clients, offering a simple and smart solution to their financing needs. However, as beneficial as the VA loan program can be, these transactions still possess traits which require knowledge and finesse to navigate confidently. Over-eager or inexperienced lenders can turn the underwriting process into a nightmare for your client, so it’s important to have an expert on your side.
Mishandling of VA loans is more common than you think. In November of 2016, the CFPB released a report detailing how many consumers had felt cheated or mislead during the course of a VA Loan. You can read the report here. In the best of cases, the borrowers felt stressed out or confused by the processes. While some unfortunate clients suffered from buyer’s remorse at the closing table or were declined all together when they were already in contract. The question becomes, why did this happen, and how can you help your clients avoid a situation like this? We can take a look at the data to see how we can avoid repeating these mistakes.
VA Loans – Mistakes and Solutions
Mistake 1: For some clients, loan terms were not in the borrower’s best interest. Just because a borrower is a Veteran, doesn’t mean that a VA loan is the right choice for them. Without a qualified Mortgage Banker looking out for the borrower’s best interest, borrower’s found themselves in new mortgages that presented new financial difficulties, instead of making their lives easier.
Solution: You need a mortgage banker who looks at your client holistically, not just as a commission check with legs. I treat every client with respect and put their goals and needs first. Like you, I want clients for life, with a relationship based on trust.
Mistake 2: In many cases, a thorough examination of the borrower’s financial profile was never performed, so qualification-threatening issues were discovered at underwriting, instead of upfront. A lender may lack a deep understanding of VA guidelines which cause the borrower to be declined.
Solution: This is why my team and I request full documentation upfront from the borrower, so issues aren’t caught in the end or the middle of the underwriting process. I work closely with our underwriters so no one is surprised by guideline changes. No one should sell something they don’t fully understand.
Mistake 3: For other clients, communication with the lender was either delayed, or non-existent, causing the process to stretch on endlessly, blowing the borrower’s rate lock period, or allowing sensitive documents to expire.
Solution: My team and I engage our clients with clear, transparent communication at every step of the mortgage process. We update both the client and you, so there is never a need to request the status of the loan. The process can be stressful enough without being left in the dark.
All of these errors highlight why expertise in lending matters. You need a lender who knows how to work within the VA system, who can set realistic expectations for all parties involved, and who provides one-on-one, personal service with the history and experience to back it up. And most importantly, you can trust I have your client’s best interest in mind during every step of the process.
Contact The Polder Group today if you have questions with how we can help your clients obtain smart and confident VA financing!