Warning.. Warning…
FHA credit scores have changed for the most part. I just had a client tell me the other day that her loan officer, who she knows and trusts, is trying really hard to make the loan work. Okay, so what are your credit scores? "512/530/548"... rut row. And they are trying what? Trying hard? At this moment, there are only a few investors that will go below 580. But from what I know, it's really tough under 580. Most lenders are at 620 or above. There are a few at 600 and just a few that will go down to 580 credit scores for FHA loans.
So, borrower beware. If your loan officer isn't telling you the straight scoop or warning you now, if you are on the bubble, you might want to find a mortgage professional. The easiest excuse to deny you is, "well, credit scores, aka fico scores, just changed, sorry."
I have three major pet peeves !!!!!
- Good faith estimates (this link tells you what to look for and how to read a Good Faith Estimate)- If a loan officer qualifies you and you don't get a good faith estimate soon or within 24 hours, that should be a read flag. Once they give you a payment and closing costs, they already have it in the system. Which means that they can e-mail that to you at that exact moment. Please read how important this is. Good Faith Estimates - Did you get one?
- Closing time frame - It doesn't take 30 to 45 days to close a FHA loan. I just closed one in 5 business days, from start to finish. Do we like 30 days from start to finish to close a FHA loan? Yes, many of us do. But they can usually be done in 15 to 25 days. If a loan officer or a realtor tells you that FHA loans take way to long, then they either don't know what they are talking about or aren't experienced.
- Credit score changes - I have read several blogs stating that credit scores will change across the board on a certain date. This can only be done by HUD or Congress. Lenders/Investors change them when they want to, but not together. It just doesn't work this way. And HUD or congress hasn't announced any changes.
Summary : You really need to listed to the person that you are speaking to, listening for key words or phrases that could be red flags. I had a potential client the other day who spoke to another loan officer before myself, in which he was very close in going with him. I asked him what rate he was getting and he said that the loan officer was giving him 5.0%, but he'll try for 4.875%. Huh? Try, it's either there or not... it's literally 5/8 of a point worse to get 4.875% as of that day. On a $200,000 loan, just that extra 1/8 of a percent would cost you an extra $1,250. It sounds great when your loan officer says that they will try, you believe them. But this is the reality of it.....I told the client that he was told what he wanted to hear, because he doesn't know any better and that it sounded good.
When a loan officer doesn't take the time to explain things in detail or to educate you, I have a problem with that. When we educate you, you can become dangerous with accurate information. You know how to shop better. But why would you want to then shop someone that was upfront with you and explained everything in detail. Lastly, if the loan officer quotes you rates and fees, but never goes over the lock-in procedure at that time, those quotes and or good faith estimates don't really mean anything. Just think about that. Good luck..
Tomorrow's blog is going to be about FHA credit and the updated versions of what is happening and what isn't.
- FHA Loans - USDA Loans - VA Loans -
- Energy Efficient Mortgages -
- Conventional Loans - 203 k loans -
- Mortgages -
Experience & Knowledge at its BEST !!!
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For more information on FHA loans, please go to this link. The FHA Expert
For more information about the 2008-2009 Tax Credit for First Time Homebuyers : 2008 Tax Credit
For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!
Copyright © 2009 by Jeff Belonger
Jeff, I am not in mortgage industry. But I heard Sun Trust did the same thing..raised the credit score limit.
Jeff this could be a series of blog posts. There is so much going on with even the government loans. All the more reason to work with a mortgage professional who is full time and going to keep you up to date during the whole process. A client told me the last loan officer they worked with told them he "lost" their documents and loan file. Can you imagine??
Anyways, the guidelines are getting tougher to keep up with. But there is still money to lend and loan to get approved! Good luck and let me know if you find that one below 550.
Jeff - Always good info to warn the consumer about, especially about the credit scores. I only have one lending source left that will go to 580 and I suspect that at some point, they, too, will probably follow the lead that every other lender has done.
However, having said that though, with a little time and energy on the borrowers part, many 580 scores can be improved to a 620 or better. In my nearly eight years in business, I have umpteen examples of people I've helped to improve their scores. So, I know that in your 16 years of experience that you have probably helped a small nation get approved by helping them with improving their scores.
At this point, we need to be educating people on how they can improve their scores, especially the ones who are on the fringe of qualification requirements. Just my .02.
Great Blog! Most consumers do not understand the mortgage process for purchases, good to know you are there to educate them.
Great blog. I had a lender try to plant a seed of suspicion with a client because I told them they needed to get their hands on the good faith estimate. I was trying to negotiate the seller paying their closing costs, but the lender didn't want to give me the GFE for fear of me helping them shop the loan!!!! My philosophy - give your clients what they need. They'll appreciate it and come back to you. Thanks!
RITU..... . many investors/lenders are raising their credit scores. I know Sun Trust did last week and a few more this week. Right now, there are hardly any at 600, let alone 1 or 2 down to 580. 620 is about the norm right now, depending on who you deal with.
NAOMA..... . yes, this could be an semi-long series of blogs. But I will just keep it to two. Losing the documents? Ouch... I have never done that in 16 years. I know people make mistakes, but that could be a costly one. That happened to my dad twice, before I got into the mortgage business.
Hey, you asked to let you know if I find someone below 550.. what about below 580.. lol Do you know anyone going below even that?
DONNE.... . I think it's always good to keep addressing this info and warning people. The good faith estimate stuff really gets under my skin. But many consumers don't know any better or see that as a red flag. We need to keep talking about this. And in regards to the credit scores and helping people with that? I have many, but I usually pass them off to my credit expert person, who is really, really good and affordable. I know enough to get by, but I would rather have them go to a professional.
MARTINE.... . yes, many consumers don't know about the mortgage process. And those that think they do, usually get burned. I am all about education... Thanks for the compliment.
DEANNA.... . The good faith estimate has to be my biggest pet peeve, besides those that bait and switch. And I agree with your philosophy.. and thanks for the polite compliment.
Jeff, Just dropped to read your post. I am going to subscribe right now to your blog as you are always very informative. Can you do one on spot condo approvals for FHA. Whey does not FHA become more pre-active or pro active in this area. The old condo complexs where few young clients want to live are on the list. Most likely has not been updated in 10 years.
Hi Jeff - Your warning regarding credit scores is very valuable information. Thanks for keeping us informed.
I like the, "I'll try," pet peeve. You don't only hear that in lending!
Jeff- They are always telling us that the FHA loans take 45 days! I say no way! We won't take those offers, then they just lie and ask for an extension the day before closing! You know!
ERIC.... . thank you very much for those polite words. I need to practice what I preach.. and I tell people, keep pushing me and I'll have to lie or mislead you like the others. And I just won't do it..
In regards to the condos and FHA approvals, I'll do a blog on this over the weekend. It gets semi complicated.thanks
MARLENE.... . thanks.. I hope many see this. I am getting tired of those blogs telling everyone that it will be changed across the board. That is so wrong and misinformation. As I mentioned, lenders don't make the change across the board between themselves, HUD or congress would do this.
FRAN.... . I would believe it that you hear that in many professions. But it's easy for me to relate to that when talking about the mortgage industry and loan officers would tell the borrower that they would try for the lower rate for them. You have to be kidding me. Obviously they aren't explaining how the market works and how rates work... and the lock-in procedures then. That is so misleading... thanks
KATERINA.... . It basically comes down to the reason because those lenders don't know how to process loans and probably because many of them are probably brokers, which means that the company that they are selling those loans to has to underwrite it... and those companies are behind in time frame. But I even know some brokers that can do FHA loans quickly also. 45 days is way too long, even when I use to swamped.
Good post and so true. After 20 years in real estate, I can't count the amount of times that a home buyer was over promised and was undelivered. The promising the loan program and lower interest rate is probably the ones I hear the most. There is a mortgage company in my area that will promise a 1/4 rate lower then all of the other lenders. They'll explain to the homebuyer that they are a small comapny and do not have the overhead lik ethe big companies. When the buyer gets to closing the interest rate is hardly ever the lower amount.
Question I was asked this morning: if a first time buyers buyes a duplex will FHA use the rent of one unit to qualify your purchase if you live in the other unit? kindly email jroosevelt@kw.com
CHRIS.... . it just drives me nuts. I know people make mistakes, but much of that was on purpose. It's basically called a bait and switch. And to say that you are a small company with little overhead in the mortgage business, cracks me up. Sure, some can cut corners, but it wouldn't lower rates by a 1/4%, that's for sure. On a $200,000 loan, that is another $1,000 in profit in many cases. Besides, you still have rent and processors. A banker has underwriters and closers... but they also get extra percentages on the back end, to usually compensate for these costs. thanks for your feedback.
JANICE.... . I already replied to your e-mail. I basically said that you can use the rental income from the 2nd half of the duplex to help qualify. But when it comes to 3 units & 4 units, the property must be self-sufficient. Keep me posted if you need any help. thanks
Hey Jeff: As always great consumer information. I believe that we cannot provide enough information for consumers. There is so much information floating around - good, bad and down right ugly! By continuing to provide information week after week, in the markets we serve, hopefully, the consumer will end up on the winning end of the transaction and get the professional service they deserve.
I have to tell you about a recent example - Purchase loan was done with CWBC - FHA - My colleague approached the customer for a mortgage review and suggested a streamline refinance - Please keep in mind that we have great customer relations, but Mr. Customer decided to call CWBC to see what they would offer (regardless of the relationship, it appears that Mr. has a trust issue due to the industry shot falls over the past few quarters). Anyway, CWBC initially offered a rate a bit lower that ours and they bit. We explained the RED FLAGS to Watch Out for, bla, bla, bla.....
Here is the bottom line - When they got to the table, CWBC charged them over $10,000 in closing costs, (keep in mind that closing costs typically run about $1200) 2% of which was for discount points (which was no discount) and their rate ended up being .25 higher that originally quoted..... The borrowers just lost $10k equity in their home!
After the fact, they shared their story with us... This is so unfortunate. We MUST continue to educate. Jeff, thank you for your continued efforts in educating and providing valuable information. Make it a great day.....
Once again a good informative post Jeff. Thanks.
Hey Jeff... just checked out your outside blog... very nice!
Jeff,
And I just have a silly question, or perhaps suggestion, but do you send this to your sphere, just a newsletter with links to your updates perhaps....for as much as I bookmark your posts to share this information it seems this would be invaluable.
Hey Jeff, didn't read all the comments, but I do have one lender, a very common one that will still do FHA under 580. Who knows how much longer that will last but I just had a closing last week with a borrower who had a 554 mid fico. The LTV was under 80% so that really is probably the only reason why it still worked. I don't know if you want me posting lender names here so just let me know if you need to know. Thanks Jeff!
GWENN..... . it actually could be call the okay, the ugly, and the ugliest... lol I have never had to educate consumers more just in 2009 than I have in all of 2008. And I did a lot of explaining and educating in 2008. I was talking to another loan officer today, who said that he thought all the turds left the business already. This industry will always have those that lie, bait & switch, or mislead. It's just the nature of this business to have loan officers around that just don't care.
Overall, as you stated in your Countrywide example, we must always educate. Not everyone will listen to us, but when we step in and try to help, and then things go wrong, we are still the bad guy many times. This business can be a lot tougher than what many think. The problem is that they compare it to selling cars at times....thinking that if it doesn't go well, that you can give new floor mats or extend a warranty. Those aren't really freebies, because if I am buying a great car, the warranty isn't going to mean as much to me as it would if I had to lower someones rate or absorb the fees. That's another long story and I am just venting. Sorry that we couldn't talk much today, but glad that you called. thanks
NICK & TRUDY.... . thank you very much and thanks for stopping by.
ERICA.... . thank you, I am extremely happy about it. ANd I would love to talk to you about it, because I have plans with it, to be able to include certain realtors with it. PS.. what happened to you last week? you pwe me now... lol I'll explain later...
REBECCA.... . lol... I am laughing because I need to do that and a few other networking things... I am so behind on that stuff. I just have two basic links in all my e-mails and I need to do a campaign. Maybe we can talk about it later.. thanks
MARK..... . hhhmmmmm.... I actually have one lender that I can still go to 500 on.... but here is the issue, we don't underwrite the loan, so I lose full control. Hell, there are lenders that can go to 600 and they still drop the ball at the end. In regards to the scenario that you sent me and with that 565 credit score... or 556... you had a 68% LTV... those are just things I am not going to right about. That is a 1 in a million type of loan. Most others won't fit something with less than a 580, not in today's market. I have a competitor that promised a client of mine with a 535 credit score, that they could do the deal and it's been 35 days now... and she has a 86% ltv... and a late in the last 12 months on the mortgage. It just won't happen in today's market. Again, another reason why I won't put out there that I can still go down to 530 and or 500... and because those could change at a blink of an eye. I use that for a back up. thanks the feedback.
Excellent post Jeff.
We still have plenty of folks trying to sell prime and FHA that have hung on to long to the subprime way (throw it up on the wall and we will see what sticks)
Tony
But why would you want to then shop someone that was upfront with you and explained everything in detail
Great statement, this is how I think as well. Your pet peeves hit the nail right on the head. I have so many clients who have shopped around a lot and don't have a GFE to prove anything. It makes me think, what else is that broker lacking if they don't know the legal compliance of working in the mortgage industry. Thanks for the great info
HI Jeff your blog is very informative and I think that yeah! there alot of misinformation out there. With all the guidelines changing and just trying to catch up with the latest is like running a marathon. I get questions from clients all the time of what one loan officer from another and how they can vary.
Being in the industry for 26 years and having to speak with the consume on how much they are misinformed is so heart breaking. As far as I know most lenders are at a 600 credit score for the new FHA guideline that just changed. There might be a few lenders that still have it.. but they will go away soon.. as everyone will follow. How does one bookmark you blog?
Maryann Sumaraga
http://www.homeloans-4u.com/blog
Thanks Jeff for your post. It answered questions for me and the links will prove to be very helpful to me.
TONY.... . there are so many that think FHA is the next subprime.. that really ticks me off. It's those same people that sold subprime over FHA, because it was easier and quick, but the borrower could have gotten a better rate and terms. Sad, but it happened.
KRISTINA.... . thanks for the compliments. I know many of us think like this. Just this past week, I have been after a borrower that I did their purchase for 14 months ago. They have a 6.5% rate and they tell me that they trust me. I got them from blogging and then they tried another lender that was giving them 7%, yet told them that I couldn't get them 6.5%. Well, 14 months later, they want to do a cash out of 8k and their payment is still going to be about $40 cheaper... I locked them in, but they played around for a few weeks. Well, they called me up and said that they will now go with me and that they had to be upfront with me. They have a niece that is a processor for a loan officer and they finally got a GFE. They not only were charging a 1/2 pt more than me, but $1,700 in fees. Well, it's a shame, because I had to add another 1/4 of a point onto their fees now, to extend my rate lock. But hey, now they should really trust me, right? lol This is my 2nd loan with them and they have shopped me a total of 3 times. That should be a very good record.
MARYANN..... . Yes, things are changing rapidly. And the good ones will stay on top of these changes. And if I am not sure, I ask.... thanks.. in regards to how to bookmark a blog? Right below my blog, before the comments, you will see an envelope, the word bookmark, and a red flag. Just put your cursor over bookmark and click on it.. it will bookmark it for you and put it in your bookmark section. thanks
SHELLEY.... . my pleasure and I am glad that this helped some. Thanks for the kind thoughts...
Jeff,
But why would you want to then shop someone that was upfront with you and explained everything in detail
It does make you wonder why, but some will anyway. Sometimes they hear what they want to hear. That is a pet peeve of mine.
Jay
JAY.... . there will always be someone that wants to hear what they want and just because someone else told them so. Sometimes it's a tough lesson to learn. thanks
i was in the process of getting a fha loan when my mortgge broker advised me that my credit score drop to 616. the lender has put my file in suspenseuntil i can get my score back to a 620. i missed my closing date. What can i do?
ALICIA.... I need to know a little more than that. I am assuming that this is a purchase? Or is a refinance. What state are you in? Please e-mail me at jbelonger@ihmci.com thanks, jeff
I have been reading your information and it has been very helpful. Very recently my husband and I were trying to buy a HUD foreclosure with the $100 down FHA loan an adorable home for $47500 appraised for $70000 in East Tennessee. They were using my husbands credit as my score was a little bit lower than his. His middle score was a 580. A week or so before we were to close our loan officer informed us that the score requirements had changed to 600 and 620. She tried everythig she could do to make it work but we lost out on buying the home. Now we are trying our best to raise our scores to qualify again as the home is back on the market. Any suggestions?
PAGE.... first off, ALL lenders will use the lower middle score of two borrowers. So your previous loan officer lied to you on that. Yes, many lenders have gone to 600 and 620, but your loan officer lied a 2nd time. Because most investors that I know, when they did make the credit score change, as long as it was assigned a FHA case number prior to the change, they gave most mortgage companies about a month to close the loan. That was just an excuse to use, because even if the credit scores didn't change, they weren't going to be able to do your loan. This is just my assumption. I did see one company make a change and only give like 2 days to close and 10 days to fund, but still, I would bet there was something else that would have kept you from closing. My main suggestion, when you do get your scores up, to use someone else, not your last loan officer. I could always recommend someone. But to prove my point, they would have received an updated letter from that investor that raised the credit scores and you would see what I was talking about. Overall, she said she tried everything just to keep you calm and to keep your trust. You should hear all the excuses that I hear. But it's easiest when you can blame it on the credit scores.
On another note, you can e-mail me at jbelonger@ihmci.com to give you some good ideas to get the credit scores up. But I need to know more about your credit information to give you the correct advice. thanks