I encourage anyone who is considering buying a home to start the preapproval process as soon as possible. Regardless of if you’re not planning on buying for a year or you think your credit, income and assets are prefect – you never know what underwriters may find lurking in your application.
FHA Streamlined Refinance: Credit vs Non-Credit Qualifying
July 25, 2012 by 10 Comments
With an FHA streamlined refi, most folks have the misconception due to the program name “streamlined” that the refinances are close very quickly and are a slam dunk with little to no paperwork. While they do close quicker than a typical refinance since more often than not, you’re not waiting on an appraisal, if you’re going for a lower cost or better rate, you’re probably opting for a “credit qualifying” FHA streamlined refi. What’s the difference?
FHA streamlined credit qualifying basically means that the borrower is providing income and asset documents, just like a regular refinance. By providing documentation that shows they actually qualify for the new mortgage, lenders provide preferred pricing. Since it is a “manual” underwrite (a real human is underwriting the loan and not a computer program) the debt to income ratio is limited to 45%.
FHA streamlined non-credit qualifying is when income documentation is not provided and not stated on the loan application. The borrower’s income is not a consideration. Because of the higher risk, the rate or pricing is often slightly higher.
EDITORS NOTE: Rates quoted below are expired (years old!!)…for a current mortgage rate quote for your home in Washington state, click here.
Right now (July 25, 2012 at 11:00 am) I’m working on a quote for an FHA streamlined refinance for a home located in Seattle. The rates quoted below are based on mid credit scores of 680 – 720 with no appraisal and the base loan amount is $289,000.
FHA credit qualifying 30 year fixed: 3.375% (apr 4.548) priced with just over 1 point in rebate credit which will cover closing cost and some of the prepaids/reserves. Principal and interest payment is $1300.01.
FHA non-credit qualifying 30 year fixed: 3.750% (apr 4.934) priced just under 1 point (about 0.25% difference in fee) which covers closing cost and some of the prepaids/reserves. Principal and interest payment is $1361.82.
NOTE: for a current rate quote on a home located anywhere in Washington state, based on today’s pricing and your scenario, click here.
What type of supporting documentation is required? This is in additional to a complete loan application and credit report.
Non-credit qualifying:
- Copy of your existing mortgage Note
- Copy of your mortgage statement (we need to document a “Net Tangible Benefit”)
- Bank statement (all pages) if funds are due at closing. Large deposits may be required to be documented.
- Drivers license
- Social security card
- Payoff obtained from escrow company documenting that the current month’s mortgage payment has been made
Credit qualifying: all the above, plus…
- last two years W2s
- last two years tax returns (if self employed)
- most recent paystubs documenting 30 days of income
- most recent bank statements (all pages) documenting at least funds for closing. Large deposits may be required to be documented.
Additional documentation may be required depending on your personal scenario.
Whether you opt for non-credit qualifying or credit qualifying is your choice and depends on your financial scenario. When rates and pricing are the same for both scenarios, most would opt for “non-credit” qualifying. Since recent changes with how HUD prices FHA mortgage insurance for some loans, there has been major changes with which banks are offering FHA streamlines and how they’re pricing them.
If I can help you refinance your FHA loan on your home located anywhere in Washington state, please contact me.
What Do You Need for a Preapproval?
February 16, 2012 by 5 Comments
If you’re considering buying a home, many real estate agents and/or sellers will require a preapproval letter. A preapproval letter is different than being “prequalified”. Being prequalifed means that you have provided verbal information to a mortgage originator to get an idea of what you qualify for. Being preapproved means that you are providing documentation that supports the information you have provided. Income, employment, assets and credit are verified for a preapproval.
Some preapproval letters aren’t worth the paper they’re written on. Especially if the mortgage originator you’re working with does not require supporting documentation before preparing the letter. If you have not provided supporting documentation (listed below) to your mortgage originator – you’re probably just prequalified and not actually preapproved.
Here is a list of documents you may be required to provide in order to obtain a preapproval:
5 Ways to Derail Your Loan Approval
January 27, 2011 by 2 Comments
You’re getting ready to buy a home or refinance your home with your closing day around the corner when your mortgage originator contacts you to let you know there may be a problem. Some issues may not revealed until days or sometimes weeks into a transaction. Anytime documentation is provided to the mortgage company, it has the potential to raise more questions or require more documentation to satisfy underwriting guidelines. Here are five situations to be aware of that can cause headaches during the loan process.
What Determines How Much Home You Qualify to Buy: Part 1 – Your Payment
November 27, 2010 by Leave a Comment
Preapproval letters typically begin stating that a home buyer has been qualified or preapproved to buy a home priced at specific amount. What it really boils down to is how much mortgage payment the home buyer qualifies for based on the borrowers monthly income and the debt to income ratio that is being allowed by the program guidelines. Your proposed mortgage payment determines the loan amount that you’re qualified for. Add the funds to cover your down payment less the closing cost and you’ll have the sales price.
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