FHA Trims Waiting Period for Borrowers Who Experienced Foreclosure

The Federal Housing Administration (FHA) is allowing borrowers who went through a bankruptcy, foreclosure, deed-in-lieu, or short sale to reenter the market in as little as 12 months, according to a mortgage letter released Friday.

Borrowers who experienced a foreclosure must wait at least three years before getting a chance to get approved for an FHA loan, but with the new guideline, certain borrowers who lost their home as a result of an economic hardship may be considered even earlier.

For borrowers who went through a recession-related financial event, FHA stated it realizes “their credit histories may not fully reflect their true ability or propensity to repay a mortgage.”

In order to be eligible for the more lenient approval process, provided documents must show “certain credit impairments” were from loss of employment or loss of income that was beyond the borrower’s control. The lender also needs to verify the income loss was at least 20 percent for a period lasting for at least six months.

Additionally, borrowers must demonstrate they have fully recovered from the event that caused the hardship and complete housing counseling.

According to the letter, recovery from an economic event involves reestablishing “satisfactory credit” for at least 12 months. Criteria for satisfactory credit include 12 months of good payment history on payments such as a mortgage, rent, or credit account.

The new guidance is for case numbers assigned on or after August 15, 2013, and is effective through September 30, 2016.



Economic Update

Weekly Mortgage News

Housing starts rose almost 6% last month. Building permits were also up, which is a good sign for future activity. 

Last week’s reports on inflation showed that it remains tame by historical standards, new jobless claims hit a new low and Retail Sales increased for the fourth month in a row.

Bottom Line for Mortgages

Rates did edge higher last week on positive economic news, but they still remain very attractive.


Why Buying A Home is a Good Idea #1

The Best Investment

As a fairly general rule, homes appreciate about four or five percent a year. Some years will be more, some less. The figure will vary from neighborhood to neighborhood, and region to region.

Five percent may not seem like that much at first. Stocks (at times) appreciate much more, and you could easily earn over the same return with a very safe investment in treasury bills or bonds.

But take a second look…

Presumably, if you bought a $200,000 house, you did not pay cash for the home. You got a mortgage, too. Suppose you put as much as twenty percent down – that would be an investment of $40,000.

At an appreciation rate of 5% annually, a $200,000 home would increase in value $10,000 during the first year. That means you earned $10,000 with an investment of $40,000. Your annual “return on investment” would be a whopping twenty-five percent.

Of course, you are making mortgage payments and paying property taxes, along with a couple of other cost. However, since the interest on your mortgage and your property taxes are both tax deductible, the government is essentially subsidizing your home purchase.

Your rate of return when buying a home is higher than most any other investment you could make.


Mortgage Update

Weekly Mortgage News

CoreLogic issued their Home Price Index Report for June. In Kansas and Missouri, home prices rose between 3-5%, including distressed sales. Take those out and prices improved 5-8%, compared to last year (8.0% growth in KS, 5.2% in MO)

Also making news last week were several Fed board members speaking in-favor of “tapering” bond purchases (QE3,) which have helped keep interest rates low for an extended period.

Bottom Line for Mortgages

With our economy growing below 2% annually, the Fed’s decision to “taper” bond buying – which would likely accelerate rising mortgage rates – will hinge on economic reports between now and September. 


“In the end we …

“In the end we only regret the chances we didn’t take, the relationships we were scared to have and the decisions we waited too long to make. There comes a time in your life when you realize who matters, who doesn’t, who never did and who always will. So don’t worry about the people from your past, there’s a reason they didn’t make it to your future.”

– Unknown

Mortgage Update

Weekly Mortgage News

Two things helped rates improve last week:

1) The Fed’s monetary policy statement re-affirmed the Fed’s intention to keep buying mortgage bonds at an $85 billion a month clip.

2) And the Jobs Report showed fewer than-expected jobs were created in July.

Bottom Line for Mortgages

The Fed’s “wait and see” policy, less-than-stellar job growth and a positive report on home prices make it a great time to get pre-qualified.