First time buyers often have little to no credit depth, lower credit scores and a limited amount of resources for the down payment and closing costs. FHA mortgages addresses each one these issues. Let’s start with credit depth. Often a first time buyer is younger and hasn’t had the time to establish the traditional trade lines that an older borrower may have such as repayment history of student loans, car payments, and credit cards. FHA underwriting guidelines allow for what we term “non traditional credit” to be used. Non traditional credit is where a person is obligated for repayment, but the repayment history isn’t necessarily reported on the credit report. Examples include rental payments to a landlord, cellular phone bills, utility bills like gas/electric and cable TV bills.
Credit scores are always important and used in underwriting loans. FHA allows for scores as low as 580. In certain circumstances, they may even go below this number with a file that warrants an exception if the file is manually underwritten. Today we are finding most conventional mortgage guidelines are requiring a 620 credit score or higher. FHA is moving towards risk based pricing. This means lower credit scores will have to pay a higher mortgage rate but the tradeoff is homeownership will still be possible. Another HUGE advantage of FHA is that they allow for a non occupying co-borrower to go on the loan and qualify with the borrower. Together, all borrowers become one for underwriting purposes. This means we take the income and credit of the co-borrower and combine it with that of the owner occupant borrower. We always default to the lower of the combined credit scores for underwriting. Imagine the possibilities of a self employed or non employed borrower combined with a much stronger co-borrower with a strong income.
Lastly, let’s address money for the down payment and closing costs. Currently, FHA 203B loans require borrowers to put 3% of their funds into the transaction. The minimum down payment is 2.25% and the other .75 percent would be for a contribution towards closing costs or escrows for the total of 3%. Here’s the good part-the 3% can be a gift from a relative or a qualified charity. Many of the down payment assistance providers (DPA) such as Nehemiah and Genesis are able to make the down payment a reality. The underwriting provisions regarding charity down payment providers are changing. I suggest you act quickly if you intend to explore that option.
Minnesota mortgage broker Venture Development is owned by John Mazzara http://www.ventureloanapp.com 952-285-4319. We are located in Edina Minnesota and service the Twin Cities (Minneapolis/St Paul) and Greater Minnesota. We provide MN mortgage loan financing to buyers for relocation, move up buyers, investment property purchase, home equity lines of credit, second homes, new construction, rehab financing, reverse mortgage purchases, major remodeling, refinancing, debt consolidation, no closing cost loans, adjustable rate financing, VA financing, FHA, ARM’s, interest only, conventional fixed rates-30 year, 20 year, 15 year, 10 year. John also is a RE/MAX real estate broker associate at http://www.selling.mn Besides beginning your online search immediately, you will be able to do research on the Cities surrounding Minneapolis/St Paul such as Eden Praire, Richfield, St Louis Park, Savage, New Hope, Robbinsdale, Maple Grove, Plymouth, Prior Lake, Eagan, Mendota Heights, Minnetonka, Lake Mtka, Lake Minnetonka, Lake Calhoun, Lake Nokomis, Lake Harriet, Lake Of The Isles
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