New FHA Minimum Credit Scores Announced

Effective October 4, 2010, borrowers with a credit score below 500 are not eligible for FHA-insured mortgage financing. Borrowers with a credit score between 500 and 579 are limited to 90 percent LTV, which requires a 10 percent down payment. Borrowers with a credit score of 580 or higher are eligible for maximum financing, which requires a minimum 3.5 percent down payment.

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Debate Getting Heated on possible Elimination of the Mortgage Interest Deduction

The debate is heating up in DC regarding the possible doing away with the Mortgage Interest Deduction for homeowners.  The Pro side says by doing away with the Mortgage Interest Deduction would create a source of income for reducing the US budget deficit and they feel that the country needs to rethink its favored tax treatment of homeownership.

The other side proclaims that homeowners already pay more than their share of the income tax in the US. Many of the Pro forces are claiming that a major part of the mortgage meltdown is due to the country’s support of homeownership, when in fact it was caused by lax underwriting practices and faulty ratings by credit rating agencies of the securities backed by those mortgages.

Homeownership has always been associated as part of the backbone of our economy and doing away with the Mortgage Interest Deduction would further erode confidence not only in the housing market, but in the economy as a whole.

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Possible Changes for Reverse Mortgages

Are the upfront charges for Reverse Mortgages coming down?  The FHA isn’t talking about this too loud, but the agency may be getting ready to lessen the upfront costs of ‘Reverse Mortgages’ for some borrowers.  They are also considering reducing the amount that seniors can borrow from their homes.  The ‘Reverse Mortgage’, or ‘Home Equity Conversion Mortgage’, as it is called, is designed to let homeowners who are 62 years old or older tap into the equity of their homes.  The loans and accrued interest do not have to be repaid until the owner sells the home, dies or fails to live there for one year.  These loans have traditionally had significant upfront, and annual expenses.  There has been a trend in recent months, however, with some of the ‘Reverse Mortgage’ lenders decreasing their origination fees and closing costs.

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Debt Management

Today, homeowners and consumers are finding that because they have fallen behind on certain payments, their credit rating is showing the results which can prevent them from buying another home, or refinancing, or hindering their ability to do home improvements, etc. At this point many people search out ways to get back on track to repairing their credit.

A ‘Debt Management Plan’ is very popular and is a simple and effective way to pay your non-priority creditors. Your assigned counselor will calculate the amount you can afford to pay after giving consideration to your priority debts – mortgage, utilities, council tax etc., and day-to-day living expenses. Any money left is then deposited with the DMP administrator as a single monthly payment and then distributed to your non-priority creditors on your behalf. What are the benefits of this plan?

The ‘Debt Management Plan’ administrator will request reduced payments on your behalf, with your creditors. In many cases the creditors will also agree to totally freeze or reduce the amount of interest being charged on your accounts.
With the ‘Debt Management Plan’ you have:

• Assistance in dealing with your creditors
• Making payments you can afford and reducing your debt
• Having regular reviews of your circumstances and your monthly deposit amount changing to reflect your current situation.  Once the DMP administrator receives your monthly deposit, you have peace of mind in knowing that all of your creditors on the DMP will be paid.
(You can do a search on Google by typing in: Washington State Debt Counseling, or, Washington State Consumer Credit Counseling)

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FHA Home Financing

Many people do not know where to go to find out about FHA Home Financing and if they can qualify for an FHA loan.

The best thing to do is to call banks in your area and ask for the mortgage officer. Ask that person if they handle FHA – most banks do, but some don’t. In this case you might have to do some homework.  FHA loans have the advantage of requiring only 3.5% as a down payment, which means less cash out of your pocket (a conventional non-FHA loan would require 20% or so down. The disadvantage is that you have to pay FHA an insurance premium for the loan guarantee, which means that .your closing costs are higher, but usually not enough to offset the much lower down payment.

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