Bad News- can someone please help me out? Brokers esp.! (loan, escrow)

[Mrs.Bewitched]

My BIL was going to get me pre-approved for a loan. He's been a broker for a couple of years in PA, and just got licensed in FL. However, he isn't licensed for FHA. He only really mentioned 2 things to me: Fannie Mae and FHA, and FHA is out.

He told me that FHA is my best bet and to go to someone else, because in FL they don't offer 100% financing anymore.

Here's my situation: I want to get a mortgage and naturally put as little down as possible. Not because I don't have money in the bank, but because I would rather use it on new furniture, cleaning up the new house, cleaning up the house we're renting and will be leaving...I'm a teacher, hubby is a mailman, my credit's OK- in the 600 somewhere, higher end, don't know about hubby...used to have bad credit about 4 years ago but paid off all debt and hasn't touched fell back on anything.

I really don't know what to do. I don't know whether to go to like a BOA, or to go to a mortgage broker, go to a bank, go to one of those larger realtor companies that does anything.....can someone help me? I don't even know what I'm asking...

[renriq02]

Most retail banks dont do FHA.
Finding a broker will be your best bet.

Here are the reasons why.
1. FHA doesn't have a credit score requirement but most lenders do.
Every lender has a different tier of scores, and a broker can help you find the right lender.
2. Most lenders do not peform 'manual underwrite' FHA.
This is a very important part of FHA. If your loan is declined by the 'automated system', then it's normally declined by most lenders.
If the lender does 'manual underwriting', then they can look for compensating factors to give you an approval.
3. Brokers can shop your rate with multiple FHA lenders to give you a great deal.
4. Brokers have a lot more experience with FHA loans then banks do.

[ChipL]

mrshvo - for you, FHA, FHA and for your third option, FHA. FL is such a beat up market, mortgage-wise. Let's put your credit issues off to the side for now as renriq02 laid out how FHA makes sense for your credit.

Most of FL is in a declining market status which means that there is a 5% lowering of available lending, ie, 100% programs will only to to 95%. Some banks in FL are protecting themselves even further by lower these programs by 10%...ouch.

On top of that, mortgage insurance for conventional products are going up and are tiered to credit score...the lower the score the higher the mortgage insurance.

And on top of that, conventional rates are beginning to also be tiered by score...the lower the score, the higher the rate.

None of the above issues are affected by FHA. Whether your score is 580 or 780, the rate stays the same, the mortgage insurance stays the same and the down payment is FL is still 2.25%.

FHA has another great thing going for it. With a little negotiating by a good agent and a seller who just wants to get the hell out (hey, it's a buyer's market..take advantage of it!), seller contributions can be used to pay closing costs AND the downpayment. That's not happening with a conventional loan.

In the mortgage world, the new catch-phrase is "FHA is the new subprime" (actually, it's the original subprime). Now that FHA loan limits have been increased, I see FHA as the "new conventional". Right now it is by far the most superior loan out there.

By the way mrshvo, I'm curious....is it Mrs hvo or Mr shvo?

[Mrs.Bewitched]

It is MRS. HVO

Thank you for your assistance. I just didn't know who to go to. I read somewhere that BOA has something called "teacher flex" or something like that where you could possibly get 100% financing....but I am going to assume that is for someone with stellar credit.

Now, my BIL gave me this estimate for FHA:
On a $200,000 mortgage for FHA you will need:



1.5% upfront Mortgage Insurance: $3,000

3% down: $6,000

Title Insurance: approximately: $1,500

Other title fees: approximately: $1,000

Misc. Lender fees: $800



Approximate total cash reserves needed: $12,300 (-3% sellers assist = $6,300 needed)

You will also needed escrow reserves for taxes and insurance

This upfront mortgage insurance, is that something that would be in the closing costs so i can get sellers assist? And it is only 3% as compared to other loans where can't sellers just pay for all closing?

Thanks so much for all of your help!

[mystree]

We went through Wells Fargo and our mortgage consultant hooked us with an FHA loan.

[mystree]

FHA has another great thing going for it. With a little negotiating by a good agent and a seller who just wants to get the hell out (hey, it's a buyer's market..take advantage of it!), seller contributions can be used to pay closing costs AND the downpayment. That's not happening with a conventional loan.

That's what we did,we just offered a bit more for the house to off set that.

[ChipL]

On an FHA down payment has to come from the buyers own funds BUT! you can use a DPA, which is down payment assistance, as long as the seller agrees in the contract, this way they can pay for your closing costs through the contract, and your down payment through the assistance. It's normally like a 495 charge to the seller for participation but that is a way you can get your downpayment paid. Another option allows for a gift, so if you have a family member (or boss) who is willing to "gift" you the money they can give it to you on FHA.
The 1.5 up front mortgage insurance is most often rolled on top of the loan amount and really should not be included in the "money to close" calculations.
The escrows will though, especially in FL, rates are so high, so you want to get a good idea of a years worth of insurance is so that you know.
And most brokers will be able to handle FHA for you. so call around...

[Mrs.Bewitched]

Thanks ChipL. What are escrow reserves? Is this just an amount I need to have in my own bank account, or is this more $$ I will have to pay along with the down payment (if I don't get assistance), or will it be in the closing? Thanks!

[renriq02]

The MIP is rolled into the loan amount
It's actually 2.25% ($4500)
Title insurance is going to be the same with any lender...
You can shop around for a title company the same as you would shop for a lender.

Escrows are amounts that are collected upfront.
1. Hazard/wind/flood insurances will need 2months escrow.
Lenders collect this in case the premiums go up. It's easier to bill you per month than to have you pay taxes/insurances in a single period.
2. They also collect escrows because the borrower may forget to pay or may not be willing to pay. The city/county can foreclose on your home for as little as the annual property tax amount. If the house gets burned down or hurricane comes through, the lender wants to make sure that the balance will be able to be paid.

If the seller can pay 3%, and with your 2.25% down payment...it maybe all you will need.

Originally Posted by mrshvo

It is MRS. HVO

Thank you for your assistance. I just didn't know who to go to. I read somewhere that BOA has something called "teacher flex" or something like that where you could possibly get 100% financing....but I am going to assume that is for someone with stellar credit.

Now, my BIL gave me this estimate for FHA:
On a $200,000 mortgage for FHA you will need:



1.5% upfront Mortgage Insurance: $3,000

3% down: $6,000

Title Insurance: approximately: $1,500

Other title fees: approximately: $1,000

Misc. Lender fees: $800



Approximate total cash reserves needed: $12,300 (-3% sellers assist = $6,300 needed)

You will also needed escrow reserves for taxes and insurance

This upfront mortgage insurance, is that something that would be in the closing costs so i can get sellers assist? And it is only 3% as compared to other loans where can't sellers just pay for all closing?

Thanks so much for all of your help!