Monday, October 14, 2013

FHA Loan Now and Conventional Loan Later?

As you probably know by now, mortgage insurance never goes away with FHA loans, unless you put 10% or more down.  Even with 10% or more down, it still lasts for 11 years.  This rule went into effect in June, and it really makes FHA loans pretty unattractive for a lot of people.  

The one real big advantage of FHA loans is that everyone pays the same interest rate, regardless of credit scores.  With conventional loans, the lower your credit score, the higher your interest rate, which makes conventional loans pretty unattractive for a lot of people.

Buyers and agents are always asking us if it makes sense to get an FHA loan to buy a house, and then refinance out of the FHA loan once the borrower's credit scores are higher.  

Although that might seem like a good idea, we never recommend that anyone plan to finance their house with that plan in mind.

Here's why:
  • When you refinance (regardless of the type of loan) there are closing costs involved.  The closing costs for a refinance are no cheaper than they are for a purchase, so you would in effect be paying twice the closing costs if you go into a purchase transaction with the intent of refinancing out of the original loan.  That is a complete waste of your money.
  • There is no guarantee that your credit scores will be higher in the future.  If you don't pay your bills now, why would you suddenly start paying them after buying a house?
  • There is no guarantee that interest rates will be low enough to save you any money at all when it comes time to refinance.
  • No one knows what the underwriting guidelines are going to be when it comes time to refinance.  You might not even qualify for a refinance.
Bottom line is that you should never get a loan with the intention of getting out of that loan and getting another loan to save money. You might not be able to do it.

There are many unethical lenders who will tell you that getting an FHA loan and then refinancing out of it into a conventional loan is a good plan.  They are mistaken, and they tell you it's a good idea so they can double their income by selling you two loans.  It is a horrible plan, unless you have a very strong appetite for risk, and you don't mind losing money if your gamble doesn't pay off.

Have questions about anything related to a mortgage?  Give us a call and see why they call us The Mortgage Experts.  

Getting a loan approved is easy - if you know what to do.  The Mortgage Experts know what to do!!!  Call us if you want to use the best lenders in Colorado!  

Make sure you check out our web site:

By the way, don't forget to refinance your current mortgage.  Rates are very, very low right now.  Don't miss out!  Call us today to get the details for your particular situation.

Tuesday, October 8, 2013

October 8 Update: Government Shutdown and Loan Closings

Here is the latest information about how the government shutdown is affecting loan closings.

The IRS is not processing requests for tax transcripts, which are normally required to be in the loan file before the loan can be underwritten.  However, lenders are temporarily underwriting loans without having tax transcripts in the file.  Most lenders are allowing loans to close without the transcripts, but a few are still requiring the transcripts to be in the file before issuing the final approval.  Just about all lenders are now requiring that copies of the borrower's actual tax returns (not the tax transcripts) be in the file before they will approve the loan.

All loans are run through various fraud databases (this is not new - it has been going on for years).  If an alert is issued after the fraud check, saying that the Social Security number of the borrower might be fraudulent, then almost all lenders are requiring a Social Security verification before allowing the loan to close.  The problem is that the Social Security Administration is not processing the verifications.  So, for the time being, if a lender needs to verify a borrower's SSN, the loan cannot close.  Almost all lenders are following this policy, although a very few are not.

The only loans that are completely stopped are USDA rural loans.  Conventional loans, FHA loans, VA loans, and CHFA loans are proceeding normally, with the exception of the tax transcript and Social Security number issues.

Have questions about anything related to a mortgage?  Give us a call and see why they call us The Mortgage Experts.  

Getting a loan approved is easy - if you know what to do.  The Mortgage Experts know what to do!!!  Call us if you want to use the best lenders in Colorado!  

Make sure you check out our web site:

By the way, don't forget to refinance your current mortgage.  Rates are very, very low right now.  Don't miss out!  Call us today to get the details for your particular situation.