FHA Loans and FHA Mortgages

How many times do we use the phrase, "I am so busy, there is not enough time in a day". As a professional mortgage banker, helping people with FHA loans and Conventional loans, I have been very busy the last few months. And there are times, no matter what month or time of day, I am beyond busy. At times, I will admit, I will ask someone if I can call them back in a few minutes, maybe an hour later, or that night. Sometimes, I will just ask them if I can speak to them tomorrow. I have always believed in setting my clients expectations to a certain level, no matter how good or bad the news is.

But are you the other type of person that is not organized, who always says you are extremely busy, but you aren't doing much? Or you just get to people after you are done lounging at work? A huge pet peeve of mine is when a consumer tells me that they spoke to a loan officer who never gave them a good faith estimate. I tell them to call that person up and ask for it. That loan officers response is that they will send it out soon. 3 days later, nothing. The consumer's answer?  "ah, they must be busy".  No, no, and triple no. You are never that busy. I can't stress this enough to all consumers out there. There is busy and there is poor execution.

As always, there are many kinds of busy. But what do you put up with?  If you don't know any better, do you just sit back and wait?  Do you call back that same day?  The next day? Yes, I think so many of us demand service now, same day service, and sometimes will let the other party know this.  But does this force others to give you answers quickly, that might be incorrect, because you expect things in "now mode"?  Does this result in poor service?  Do you respect someone that gives you an answer that you don't want to hear?  Which may result in costing you more money in the long run, because you went to a "yes sir" type of person? 

Overall, when it comes to mortgages and real estate, if you are speaking to a professional, they will be upfront with you.  If you are the type of person that can't except that answer and seek help elsewhere, remember, it might come back to haunt you. Yes, we all want your business, but at what price to you, the consumer.  Keep in mind, some of these red flags also. It may save you thousands of dollars. Consumers need to be aware of these Red Flags !!!

The one million dollar question.  Should you talk to a realtor first and find out what houses you could buy or should you speak to a loan officer first to get your financing options in place? 

   --   Speak to a loan officer first.  Time again, I get consumers coming to me after they found a house and need to settle on it prior to being qualified for a mortgage.  Don't you want to know what your payment is?  What it might cost you at settlement?  Never assume.....

Just a FYI :  FHA loans might even be your easier way into a home nowadays. I still have some loans officers that tell me differently or the consumer differently.  There are now even penalties if you have a credit score below 720. Yes, 720.  If your lender is not FHA approved, how do you know that you are getting the nest possible mortgage? Besides, FHA loans are another way to get into the home with little or no money out of pocket.

Overall, you need to have a slight understanding of what types of mortgages are out there as you speak to a loan officer. So, now onto the top 10 questions that should be asked when being pre-qualified for a mortgage.

PS....   Top 10 lists or in this case, the top 6 list, usually start with the higher number first and work their way backwards. But I wanted to emphasize what was truly important.

 1. What kind of mortgage payment would you be comfortable with monthly, to include your taxes and homeowners insurance.  (In my 15 year opinion, this is and should be the most important question.) Don't get hung up with interest rate. An order taker, your basic loan officer, makes you focus on this instead, because anyone can give you a rate.

 2. What are your goals for purchasing this home or for refinancing?  Do you plan on being in the house for 5 years?  10 years?  Have kids in school?  Have kids going to college?  Will you be retiring soon?  Financial planners ask these questions and so should a mortgage loan officer. Why?  A certain mortgage program might be better suited for you. Paying points vs not paying them could be important.  The Myths behind ZERO point mortgages instead of paying points upfront...... 

 3. Good Faith Estimates  :  My biggest pet peeve in the business. If a loan officer takes the time to pre-qualify you by asking you questions and pulling your credit, and they end up giving you a rate, payment, and how much you need to close, they should be able to supply you a good faith estimate within that next hour.  Why can I say this?  Because in order for them to give you rate, payment, and your total costs, they would have had to plug this into their system.  If it takes them more than 24 hours, this is a major red flag. (it's at their finger tips and most people have e-mail or fax machines)

 4. Asking the consumer basic questions such as :  your income, assets (cash on hand - how much you want to use and what you would have left over), if you rent or own, etc, etc

 5. Asking you if you have ever had any bankruptcies & foreclosures, because they always don't show up on credit, but would show up on title.

 6. Asking if you pay or owe child support.  Or if you receive payments for alimony or child support.

      Conclusion :  Keep in mind, any time that you speak to a loan officer, they should ask you these questions. Otherwise, that what and or fees that were quoted, usually won't mean a thing. It only takes about 15 to 20 minutes, which if done properly, will make your transaction much smother.  Print these questions out to follow along when speaking to your loan officer. Don't hesitate to ask them why they didn't ask you any of these questions, but were able to quote you rates and programs. And here is a must read : Consumers need to be aware of these Red Flags !!!!

Nehemiah programs are just one form of a down payment assistance program. You can use these in conjunction with FHA loans. There are other down payment assistance programs such as AmeriDream, Genesis, and a few others.

Lately I have been reading a few blogs that state that these down payment assistance programs are like laundering money. Okay....  I'll talk about this in a few. Other blogs have talked about how bad the Nehemiah program in itself is bad. The reason why is because it's more expensive than other DPA programs. Okay?  I'll talk about this soon.

So, what about those that say these DPA's are like money laundering. Well, HUD says that you, the borrower, can get 100% of your monies gifted to you. These gifts can come from a family member or a non-profit organization. Okay, sounds good. Believe it or not, the DPA companies are non-profit. So, why is it labeled as illegal? Someone's opinion? One argument that I have heard is that these non-profit companies are making money off of the borrower. A small measly $500?  Then Mr. Borrower, save the money to put down on the house. Me?  I think it's a great program if used correctly.

Which gets us to the second part, that the Nehemiah program is more expensive than AmeriDream, Genesis, and a few others. Okay?  What, an extra $100 to $200?  I have had much success with Nehemiah and I have learned in life...."don't fix it if it's not broken".  Right?  Or do you take that risk for a $200 savings. Sure, some of you have had some success with the other programs. I just won't risk it.

As it stands, the Down Payment Assistance programs have helped over 600,000 families since 1997. I will agree that some institutions have abused this type of program. Meaning that the appraisal of the property was sometimes in question, when the lender would try and push the value of the home, so it would include everything that the borrower would need for both down payment and closing costs. And then there are some that argue the reason why these DPA's are being shut town because of tax implications.

Overall, I have my various opinions on these types of programs. There could be an argument made that a homebuyer with no sweat equity, has nothing to really lose in the whole transaction. And my bigger concern in regards to this is if properly set up, a homebuyer could realistically come to the closing table with no money out of pocket because of these DPA programs. And there have been many times to where that buyer won't even have $500 saved up after closing. This leaves the homebuyer in a precarious position because no matter what kind of home that you are buying, new or old, things happen. There will be times when you will need money to fix the house or to buy a new appliance. 

On the flip side, these types of DPA loans have put many worthy buyers into homes that were very deserving. My job is not to pass judgment amongst any buyer. My job is to properly educate the homebuyer in their decisions and to make sure that I give them a respectable mortgage, to ensure that they understand the whole mortgage/home buying process.  

Knowing that this has not been resolved hurts a lot of us in the today's industry. But we just have to keep moving along as business as usual, until a decision is rendered. For any of your mortgage needs, please make sure that you speak to a mortgage professional who is on top of these chain of events. Someone that not only knows their mortgage products, but who understands today's market.

FYI -  These down payment assistance programs are not limited to first time homebuyers.  Nor do you need to qualify for them. Just as long as you are approved for a mortgage.

For more information, I wrote a more detailed blog on Nehemiah and how to get into a house with little or no monies.  You can use FHA Nehemiah and these other down payment assistance programs for both FHA mortgages and conventional loans.  Do you truly think that FHA/HUD would want to see these programs disappear?  No...

Creative FHA financing -- No money out of pocket from the buyer!!! -- Part 1