Mortgage FHA and Short Sale

[usermi]

Hi guys,

 

Well, I've been trying to buy a house, I was shooting for a conventional loan but just found out that since I had a short sale I don't qualify for a conventional per new rules (funny, earlier in the year I was able to do conventional, who's making these rules? lol), lender said FHA will work. Is there any loophole that allows me to do conventional? If not I still want to see what you guys think about the numbers under my situation.

 

This is my situation:

- short sale in november 2011

- 680 credit score (thanks for advice was able to take out some disputes)

- 130K price

 

 

These are the numbers my mortgage person is offering under FHA:

- APR: 5.472%

- Finance charge 122,382

- Amount Financed: 123,982

- Total of Payments: 246,364

- Interest Rate: 3.875%

- Principal and Interest: $600

- Estimated Taxes and Insurance: 534

 

Not happy about the upfront 1.75 MIP Fee, but next november I will qualify for a conventional so I might look to refinance if the rates look appealing. Any advice will be greatly appreciated. I could wait and get another house maybe next november but with this house I could have roommates that will basically pay for all my expenses and the street has the space with just the right layout to accommodate all the cars, sweet!

 

Thanks and Happy New Year!

[Stevelgar]

Conventional might be possible based on reason for the short sale

I have attached a link for Fannie guidelines on the subject.

FHA deals looks decent. Rate could be a little lower but not bad.

https://www.fanniemae.com/content/fact_sheet/derogatory-credit-event-fact-sheet.pdf

[Brian B The Loan Professor]

In most cases if you were behind on payment at the time of the short sale it is considered the same as a foreclosure - most banks wont consider a short sale unless you are behind so it is a common scenario - in that case the quickest product available is fha - the 1.75% is the cost of business - it stinks but affords you the chance to get in the door - everything looks good on the quote

B

[usermi]

Thanks for the responses guys, do what would constitute extenuating circumstances? Funny that early last year I got a conventional loan and now I can't, we must have a comedian making these laws!

[usermi]

Talked to 2 lenders, one (quicken loans) didn't even know that if there are extenuating circumstances for the short sale it could be 2 years instead of 4 year wait, the other one said that it's very difficult and would have to be something really major. Is this really that difficult to qualify for the 2 year rule or it's just to much of a hassle for them that they don't want to even try?

[Brian B The Loan Professor]

Talked to 2 lenders, one (quicken loans) didn't even know that if there are extenuating circumstances for the short sale it could be 2 years instead of 4 year wait, the other one said that it's very difficult and would have to be something really major. Is this really that difficult to qualify for the 2 year rule or it's just to much of a hassle for them that they don't want to even try?

I would say it is very difficult - you would have to present a very compelling case (death of primary wage earner as an example) before I think you would have any hope - the underwriters are afraid of the loan being rejected and tend to be conservative -

 

B

[usermi]

Thanks Brian, I think I won't even bother pushing that then and just proceed with the FHA loan, my hope is that in 10 months when my 4 year wait is up the rates are still reasonable enough to do a refi.

[Brian B The Loan Professor]

Thanks Brian, I think I won't even bother pushing that then and just proceed with the FHA loan, my hope is that in 10 months when my 4 year wait is up the rates are still reasonable enough to do a refi.

You are welcome - they will allow shorter time with larger down payments - but getting an exception is tough

[usermi]

Thanks Brian,

 

So what would be your recommendation, a 15 year or 30 year fixed FHA? My mortgage person is pushing the 30 year saying that the 15 is not worth it b/c of the rate, my plan would be in 10 months to refi if the rates make sense.

 

Thanks.

[Brian B The Loan Professor]

Thats a personal decision - do a side by side comparison - if the plan is to refi asap then it wont really matter much - the PMI is a little different with a 15 if you put more down so look into that and see if it helps you -

 

B

[usermi]

Thanks, was just curious why she's pushing the 30 instead of 15, will talk to her about and ask for details. Another question, the amount of the PMI gets adjusted as I lower the balance of the loan? (basically the PMI decreases over time?)

 

Thanks.

Edited January 5, 2015 by usermi

[Brian B The Loan Professor]

30 would be a lower dti - if things are tight this may be why??

[usermi]

could be, things are not tight for me but maybe in their calculations they're taking into consideration something that I haven't and it's tight for them, not sure, have to ask her what is my ratio. Thanks again Brian.

[Nickspen13]

Hi guys,

 

Well, I've been trying to buy a house, I was shooting for a conventional loan but just found out that since I had a short sale I don't qualify for a conventional per new rules (funny, earlier in the year I was able to do conventional, who's making these rules? lol), lender said FHA will work. Is there any loophole that allows me to do conventional? If not I still want to see what you guys think about the numbers under my situation.

 

This is my situation:

- short sale in november 2011

- 680 credit score (thanks for advice was able to take out some disputes)

- 130K price

 

 

These are the numbers my mortgage person is offering under FHA:

- APR: 5.472%

- Finance charge 122,382

- Amount Financed: 123,982

- Total of Payments: 246,364

- Interest Rate: 3.875%

- Principal and Interest: $600

- Estimated Taxes and Insurance: 534

 

Not happy about the upfront 1.75 MIP Fee, but next november I will qualify for a conventional so I might look to refinance if the rates look appealing. Any advice will be greatly appreciated. I could wait and get another house maybe next november but with this house I could have roommates that will basically pay for all my expenses and the street has the space with just the right layout to accommodate all the cars, sweet!

 

Thanks and Happy New Year!

Whats the difference between APR and interest rate, and what leads to this?

[Brian B The Loan Professor]

 

"Whats the difference between APR and interest rate, and what leads to this?"

 

Rate is the percentage you lock in - APR is a calculation used for comparison sake - it calculated actual costs and factors in the cost of the rate etc

 

FHA will always have a higher APR because of the upfront PMI - that cost is factored in to the apr

 

 

[Nickspen13]

 

"Whats the difference between APR and interest rate, and what leads to this?"

 

Rate is the percentage you lock in - APR is a calculation used for comparison sake - it calculated actual costs and factors in the cost of the rate etc

 

FHA will always have a higher APR because of the upfront PMI - that cost is factored in to the apr

 

 

 

gotcha, so with an FHA loan while your Interest rate is lower, your APR(which is what you are actually paying, at least untill you get to 80% LTV) is the "real" number

 

If you have say 12-15% down is it best to look for a conventional loan and then try and get the home appraised when you may have hit the 80% ltv number

[Kuuner]

Thanks for the responses guys, do what would constitute extenuating circumstances? Funny that early last year I got a conventional loan and now I can't, we must have a comedian making these laws!

These aren't "Laws" you are referencing. These are agency guidelines. You had a shortsale. You can spin your wheels all you want trying to adjust a lender's loan program to fit your situation but it's often better to adjust your situation to fit the lender's program (READ: wait for the amount of time the guidelines say you have to wait). You've not provided your "Situation" so one can assume it's not a very compelling reason for pushing for an exception. Instead of complaining about MI, be glad there is a program available for you in the first place considering you caused a lender to take a loss on a loan in 2011. While i'm sure it's the lender's fault, or Bush's fault and not your fault for why you did a short sale, you did one and you now have a loan program available for you. If you want to purchase a home, and you want to do it now, go with what's available.

 

Also, NO. MI doesn't get adjusted as the balance decreases. While yes, the actual amount that will go to pay MI will adjust as the balance goes down, the percentage stays the same.

Edited January 6, 2015 by Kuuner