2016 Timeshares Foreclosure – FHA Guidelines
We live in Florida, the Timeshare capital of the US. For anyone who has endured time share presentations in Florida you are fully aware how popular a timeshare week near Disney in Orlando or Fort Lauderdale-Miami are. The presentations brag about everything even the wildlife (Gators). Timeshares were even more popular prior to the 2008 Real Estate and Mortgage meltdown. Many timeshare property owners had to go through foreclosures. Timeshare loans are not considered mortgage under 2016 FHA Guidelines but they are considered consumer loans. If you were one of many advised that you do not qualify for an FHA loan due a mandatory waiting period after a timeshare foreclosure you have been misinformed. There are some mortgage brokers and loan officers that are still giving out this incorrect information.
2016 FHA Guidelines – Credit Disputes
Here are a few examples of FHA Guidelines updates for 2016
- Credit Disputes on Non-Medical collection accounts with an outstanding unpaid balance that totals $1,000 or greater is not acceptable. Many consumers do credit disputes with the hope of deleting derogatory and inaccurate information on their credit reports. Unfortunately having a credit dispute on a non-medical collection account with outstanding balances is not allowed
- Credit Disputes on charge off accounts on any balance is not allowed. Just like a dispute on non-medical collection accounts with a balance greater than $1,000 will immediately stop the mortgage approval process until the credit disputes have been retracted.
- Credit Disputes on non-medical collection accounts that have zero balances may be questioned and probably will is not a No GO !
- Credit Disputes on medical collection accounts, no matter how much the outstanding unpaid balance will also be allowed.
When applying for a mortgage loan and you retract a credit dispute, you credit scores will definitely drop. Mortgage Brokers and Mortgage Loan Originators should not issue pre-approval letters unless the borrowers credit report has been thoroughly reviewed. Make sure there are NO credit disputes on non-medical accounts or any charge off accounts.
Down Payment – 2016 FHA Guidelines
The FHA (Federal Housing Administration) is a part of the United States Department of Housing Urban Development also commonly known as HUD. There are two things that home buyers will need to have for a home purchase.
- FHA affords opportunity for the American Dream of Home ownership with as little as 3.5% down and a lenient FICO Credit qualification requirement. Borrowers can qualify with credit scores between 500-579 to purchase a home with 10% down payment. For a FICO score of 580 or higher a minimum of 3.5% down payment. FHA also allows for home buyers that do not have enough down payment to accept gift funds from a family up to the full 100% of the required 3.5% required to be used for the down payment money.
- Home buyers will also need closing costs on a home purchase. However, there are some lenders that can arrange for lender’s credit towards closing cost. My Team occasionally offers lender’s credits with a small adjustment to the interest, usually 1/8 to ¼ of a point.
2016 FHA Guidelines – Sellers Concessions
Home buyers may struggle to come up with the down payment money required for the purchase but there are closing costs on a home purchase that will need to be paid for and just prior to the closing the funds to close will be verified.
- FHA allows for home sellers to cover part or all of the home buyer’s closing costs by offering sellers concessions up to 6% the maximum allowed for sellers concessions.
- FHA does not allow for any money to be kicked back to the home buyer, so it is key that sellers concessions not be wasted, so any overage in sellers concessions is normally used to buy down the interest rate on an FHA mortgage.
2016 FHA Guidelines – FHA Loan after Forclosure, Deed in Lieu of Forclosure, Short Sale
- Mandatory three year waiting period to qualify for a FHA loan after the date of the sherriff’s sale and or the date the deed of the property was transferred out of the homeowners name an into the lender and/or the new home buyer after a forclosure and / or deed in lieu of foreclosure.
- Mandatory three year waiting period to qualify for a FHA loan after a short sale. The start date of the waiting period starts from the date of the short sale and is reflected on the HUD Settlement Statement.
2016 FHA Guidelines – After FHA Loan Modification
A Mortgage Loan Modification is when a homeowner has made an agreement with their lender due to extenuating circumstances to restructure their mortgage, where the final outcome was a modification of the original mortgage loan agreement (often referred to as the note). There are various types of mortgage loan modifications.
- The lender (homeowner’s mortgage holder) may just add the mortgage payment that were in arrears to the balance of the homeowner’s mortgage loan balance
- Mortgage lender may reduce the mortgage rate of the current mortgage rate to lower the mortgage payments making it more affordable
- Mortgage lender can discount the mortgage loan balance due to the property being underwater, or upside down, meaning the loan is more than current real value. Therfore reducing the monthly P.I.T.I. (Principle, interest , taxes and insurance)
- The Mortgage lender may do a combination / or all of the above.
- There is a mandatory one-year waiting period to qualify for a FHA Loan and no late payments in the past 12 months following a loan modification.
2016 FHA Guidelines – Mortgage Overlays.
The overview of 2016 FHA guidelines listed above are broken down in a manner for ease of checking them off. Should you meet all of these requirements there should be no reason you cannot qualify for a FHA Loan and perhaps move from Renter to Homeowner. However, there are many mortgage lenders that have Mortgage overlays. Overlays are guidelines set by their own financial institution that sets higher standards above minimum FHA Guidelines. This is perfectly legal and any FHA approved mortgage lender can set higher lending standards than those set by FHA. In fact most banks require a 640 FICO score for FHA mortgage borrowers even though FHA minimum requirement is a 580 FICO for a minimum 3.5% down payment towards a home purchase. Another higher standard common with banks is they will not approve a borrower with outstanding unpaid collection accounts, including medical collection accounts and charge off accounts. FHA does not require the borrower to pay off outstanding unpaid collection accounts. The Larry Stepp Team is part of Gustan Cho associates and if you are being denied a mortgage and meet all the minimum FHA requirements. I am pleased to state we are a Team of Mortgage Loan Originators specialize in FHA loans with not mortgage lender overlays. We also have affiliation with Credit Repair specialist. The Larry Stepp Team at Gustan Cho Associates are available 7 days a week, holidays and weekends. Here is my contact information.
Larry Stepp 407-922-4755 LarryS.HomesNetwork@gmail.com