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Acceptable types of Alternative Credit for FHA Mortgages

According to the HUD Mortgagee Letter 2008-11, HUD has created two groups of references that can be used as alternative credit for FHA mortgage loans. These are used when the borrower’s credit file does not have enough information to create a credit score, or when the credit file produces a score with very limited credit. HUD stressed that these are not to be considered as an alternative to “poor credit.”

Basic Guidelines for FHA Alternative Credit

There must be at least 3 references that can show a solid bill payment history. All of these should cover the payment history of the most recent 12 months. At least one of these should be from the “Preferred” Group with the focus of references being mainly in the “Preferred” group. Once all options have been exhuasted with the “Preferred” group, then references from the “Secondary” group can be considered.

The “Preferred Group”

rental housing payments (subject to independent verification if the borrower is a renter), utility company reference (if not included in the rental housing payment), including gas, electricity, water, land-line home telephone service, cable TV. If the borrower is renting from a family member, request independent documents to prove regularity of payments, such as cancelled checks.

The “Secondary Group”

insurance coverage, i.e., medical, auto, life, renter’s insurance (not payroll deducted); payment to child care providers – made to a business providing such services; school tuition; retail stores – department, furniture, appliance stores, specialty stores; rent to own – i.e., furniture, appliances; payment of that part of medical bills not covered by insurance; Internet/cell phone services; a documented 12 month history of saving by regular deposits (at least quarterly/non-payroll deducted/no NSF checks reflected), resulting in an increasing balance to the account; automobile leases, or a personal loan from an individual with repayment terms in writing and supported by cancelled checks to document the payments.

These alternative credit references must be verifiable. HUD’s preference is that they are verified by a credit reporting agency and that they create a “nontraditional mortgage credit report.” This report would be used by the lender just like a standard credit report would be used.

If a nontraditional mortgage credit report is not possible, HUD further requires that each reference be independantly verified and should be backed up by cancelled checks covering the last 12 months’ payment history.

In my next posting I will address what can be done if no references can be found, or if there no “Preferred” group references available.

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HUD Clarification on Alternative Credit

A while back, I wrote an article dicussing how FHA mortgage loans are not Subprime Mortgage Loans. Obviously, too many loan officers are not getting that point very clear in their minds. With the lack of mortgage loans available to individuals with very poor credit, many loan officers that worked strictly in subprime lending have turned to FHA as their savior. This is causing a lot of trouble and a major backlog with many lenders in their government underwriting departments.

The mess has gotten so bad with many lenders that loans can take up to 30 days just to get their government deals looked at! This includes both FHA and VA mortgage loans!

So in an attempt to help bring loan officers back to reality, HUD has released a Mortgagee Letter (#2008-11) to clarify Nontraditional Credit Verification and Evaluation. In this letter HUD addresses using alternative credit references, when they can be used and how they should be verified.

The idea is that using these alternative tradelines is appropriate when a borrower does not have sufficient credit to create a credit score. Alternative credit can also be used to help support what is considered to be a “thin” credit file where a credit score is created but based on very limited credit. HUD does clairify that if the credit is in bad shape, you can’t simply turn in a payment history for a light bill and get it approved!

“nontraditional credit reports may not be used to enhance any poor credit history on a traditional credit report.” HUD Mortgagee Letter 2008-11

Alternative credit lines must have a solid 12 month history and be one of two groups of trade line references. In the next couple postings, I will go more into what these groups are and how HUD wants these references to be verified.

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Why Charlotte NC is The Place to Buy Your First Home

Are you tired of renting? Every month you write that check for $600, $750 or over $1,000 for your rent and you have to wonder… how much home could you buy in Charlotte?

If you are thinking about buying your first home, Charlotte NC is the best bet around!

Charlotte’s real estate market is great! There is a great selection of homes available to purchase and despite the national news of falling home values, Charlotte boasts one of the few growing real estate markets in the country. So the investment you make today won’t disappear tomorrow!

Mortgage rates in Charlotte are cheap! While the entire country is still seeing great mortgage rates, Charlotte is really reaping the benefits! In addition to people buying their first home today, many Charlotte home owners are also refinancing their current mortgage. When you see mortgage refinances up, you know mortgage rates are low! And right now, you can enjoy super low mortgage rates in Charlotte.

Despite the news that it’s harder to get a mortgage today, there are still many Charlotte mortgage financing options. First time home buyers are finding it a little more tricky today, but with the right guideance and advice (from the right Charlotte loan officer of course), Charlotte home buyers can find the right mortgage product to help them get approved! FHA and VA mortgages for Charlotte are just a few of the many options available today.

So if you are still renting, you need to consider buying your first home in the Charlotte area. With a solid real estate market, great selection of homes for sale in Charlotte, super low Charlotte mortgage rates and mortgage programs designed to help first time home buyers, now is your time to buy!

Thank you Jamison Realty

In a time when you hear nothing but negative news and grumblings, there is a very bright spot… Jamison Realty. Jamison Realty is a real estate agency in the Charlotte area (located in Matthews, NC) offering both seller and buyer agency representation.

I watched as Jamison Realty renovated an older home in Matthews and loved what they have done with the place. It appears that everything was done with a great touch of class. And now I hear a new radio spot that just affirms my belief that this is a top quality agency.

Their radio ad is entitled “I’m Positive”. It speaks about the good that is going on in Charlotte real estate and does not use scare tactics or fear to get your attention. The message is upbeat and positive and from my seat it is right on the money! Click the following link to hear the ad: I’m Positive Ad from Jamison Realty

If you are looking for a positive Realtor to work with, you may want to consider Jamison Realty. If this ad is any indication as to the experience they offer, I can only imagine the positive feeling you will get. Better yet, get pre-approved for your Charlotte mortgage first, and then let’s contact Jamison Realty and get things going strong for you!

Could a “Failing Economy” be Political Hype?

Sure, I know its tough out there. Energy costs, especially at the gas pump, are eating up more and more of our money. And it seems that everywhere we turn the feeling is that we are in a recession.

However, the numbers say something different. For the past 2 economic quarters we have still seen growth in our economy. Sure it was just a small gain, but it was positive. This morning, despite economists expectations of bad news about unemployment rates, the numbers actually showed that umemployment rates fell in April! And all reports earlier late last year said we would not see the real estate housing market return until 2009, but now they are saying 3rd quarter 2008. Personally, I think the real estate market turns the tide this summer nationwide, with Charlotte real estate beginning any time.

So what does this all mean? Is it all just politics? Are we in a recession? Is the sky falling?

I have been saying for months that the sky is NOT falling. Yes, we have seen a down turn in the economy and we are all feeling the crunch. But listening to the talking heads, the politicians, and the news media (which can’t say anything good) you would think we are in another great depression!

So it makes me wonder… how much of this is spin and hype from a big year in politics? How much of this is “Bold Headlines” material, and just how much of it is reality?

For those that do not subscribe to the theory that America is falling away and that our economy is dead, now is the best time to take action. While others are sitting around moping about how bad things are, you are able to take advantage of the market and make big strides. From investments to real estate, the world lays at your feet waiting to be seized!

If you live in the Charlotte NC area for example, you are part of the best real estate market in the country. Charlotte even features the best economy in the nation. So take advantage of your opportunity and stake your claim today.

What do you think? Express you opinion now…

Federal Government Providing DownPayments?

With the Economic Stimulus Package checks being mailed out, many potential home buyers may be getting the down payment they needed to buy a home! And if you ask me, you can’t find a better use for the money!

The checks being sent out can be quite large. Most people will get $600, with married couples getting $1,200. Each dependent child will get $300 more. So the average family of 4 can stand to get a check for $1,800! A family of 5 will see a check of $2,100!

This can go a long way towards buying a home. On a $100,000 started home, a 3% down payment is only $3,000. With $1,800 coming from the government, you only need $1,200 in cash to buy your home! And with the check coming from the US Dept of Treasury, you won’t have to worry about “seasoning” the funds. (Seasoned funds are funds that you have had for at least 60 days.)

So when you are thinking about what to do with that big check from Uncle Sam, seriously consider putting it somewhere that will make a real difference in your family’s life… A home of your own.

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USDA Mortgages Can Include Repairs

If you are considering buying a home using the USDA program, there is a great feature that may help you. USDA mortgage loans for the Charlotte outlying areas will allow you to include additional funds over 100% financing to allow for repairs to a home. This is especially helpful when buying a foreclosed home that needs a little TLC.

This can vary based on the investor that will originate the USDA loan, but for the most part funds for repairs can be added to the loan, to a max of 10% of the loan amount (no more than $10,000). The repairs can not affect livablility or safety of the home.

For example, a home priced at $120,000, the max you could use would be $10,000. That money is placed in escrow with the closing attorney to be paid out once the work is complete.

There are a couple other points to consider.

The repair escrow does also require an additional 50% deposit to cover any potential cost overruns. This can not be added to the loan, but can be contributed by ANY party. In other words, if the repairs will cost $10,000, the lender will hold $10,000 in escrow and also require an additional $5,000 (50% of the $10,000) to be placed in the account as well.) That $5000 can be money you deposit, the seller is willing to deposit, or whomever. If that extra money is not used, the extra is refunded to the contributing party. However, if the actual costs runs under the $10,000 estimate that was escrowed, you as the buyer can not get that extra money back as cash. It should be credited back to the outstanding mortgage balance.

The repairs must be done by a licensed contractor and can not be done by you. The contractor will submit an itemized bid stating what it will costs and when they would have it done. Must be completed within 30 days of closing and may be extended if due to weather.

There is usually a small fee to the lender to administer, and there may be a cost from the closing attorney to manage the escrow.

Bottom line: Getting additional funds to improve the property you are buying using the USDA mortgage loan can be done, but it does require a few hoops to deal with. But with no money down, you can not beat this mortgage loan period!

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“Fire Sale” for Charlotte Firefighters

That’s right! Firefighters in Charlotte can buy a home for HALF OFF! Using the Charlotte Good Neighbor Next Door program for Firefighters, any full time Firefighter (or EMT) can buy a HUD home for 50% off the list price! And with our Firefighter Mortgage Loans, Charlotte Firefighters can save big time!

You risk your life to save and protect our community. While we can’t repay what we really owe you, the Firefighter Half Price Home program can certainly help! As a full time firefighter in Charlotte, you could qualify to purchase a HUD home for only half price and get 100% mortgage financing with only $100 down!

These special program homes are HUD foreclosed properties located within HUD’s designated “revitalization” areas. As you can see by the map (red areas) this is just about anywhere in Charlotte! Every week a new list of these homes become available for only 5 days! Using a HUD approved Realtor, you can make an offer on these homes and purchase them for only 50% of the home’s list price.

Here’s an example. A HUD home is listed at $170,000 and if offered for only 5 days through this program. A qualified Charlotte Firefighter can buy this home for only $85,000! While you must live in the home for at least 36 months, the equity you get when you eventually sell is yours to keep! That’s a nice payday!

So how do you get started?

First, you need to get pre-approved for a Charlotte mortgage loan. Our special Charlotte Firefighter Mortgage Loans will put you in position to make an offer on these special homes when they become available. Since there is only 5 days to make your offer, having the mortgage pre-approval out of the way puts you way ahead of the pack! Next, you will need a qualified HUD approved real estate agent to make the offer for you. If needed, we can help you find a HUD approved Realtor in Charlotte. Once your offer is accepted, you are on the fast track to closing. Then simply move in and enjoy your great home!

Get started now and take advantage of this awesome program for Charlotte Firefighters.

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Home Buying Program for Charlotte Law Enforcement

Police officers, Sheriff Officers and any Law Enforcement Officer in Charlotte have the unique opportunity to purchase a home for half price! That’s right… Charlotte law enforcement officers can buy a HUD home for 50% off the homes sale price!

HUD offer the Good Neighbor Next Door program to Charlotte’s law enforcement officers to help build and secure the areas they serve and protect. For example, a CharMeck Police Officer could purchase a HUD home worth $140,000 for only $70,000! And using our special mortgage programs for Charlotte police officers, you can get 100% financing with only $100 down!

These special homes are HUD homes listed in Charlotte’s “revitalization” areas (which surprsingly covers most of Charlotte) and are offered through this program for only 5 days before being opened to the general public! To jump on this special home buying program for law enforcement in Charlotte, you must use a qualified Charlotte Realtor. (we can offer a referral if you need it!)

The map below shows the areas these homes are found in. Notice the red colored areas… Most of Charlotte falls into this!

To qualify, you must be employed full time as a law enforcement officer sworn to protect and have the ability to make arrests for violations of laws. Additionally, you must be willing to live in the home for 3 years to get the 50% dicsount on the home’s price. (there are a few other details… ask for more info)

So how do you get started?

First, you will want to get pre-approved for your Charlotte Good Neighbor Next Door mortgage loan through Residential Mortgage, a HUD approved mortgage lender. Once approved you will be in the driver’s seat to make an offer on the perfect home when it becomes available. Only HUD approved Realtors can make the offer for you, so we will get you connected with the right real estate agent in Charlotte. Once you have found the right home and have an approved offer, we can close your mortgage loan in just a few weeks!

This is a unique program that offers Charlotte’s Finest the opportunity to own a part of the city they serve, and rewards them for it! Just imagine doubling your money on a home in such a short time!

So what are you waiting for? Get approved now and let’s get you connected with a HUD approved Realtor to find your Half Priced Home in Charlotte!

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Charlotte Teachers Buy Homes at 50% Off!

Teachers looking to buy a home in Charlotte have a great opportunity before them! Using the Good Neighbor Next Door program, and working with a qualified real estate agent (ask for a referral) teachers have the opportunity to pick up select HUD homes for half of the listing price!

For example, HUD lists a home for $150,000. Using this program, a Charlotte-Mecklenburg teacher can purchase that home for $75,000. After living in the home for 36 months as a primary residence, you can sell the home and make an instant $75,000! Add to that the appreciation value and you can make out big!

So what’s the catch?

There are a few things you need to be aware of. First, this must be a HUD home in an area designated as a “revitalization area.” Don’t worry… most of Charlotte and Mecklenburg county is designated as a “revitalization area!”  (see red colored area of map)  Second, it has to be a home that HUD is offering as a GNND home. These homes are posted once a week and only open for this program for 5 days! Third, you must occupy the home as a primary residence and actually live there! Fourth, you must live there for 3 years or pay back the other 50% you were discounted. And finally, you must use a qualified Realtor in Charlotte to make the offer.

Imagine buying a home for half price, needing only $100 down and getting great low mortgage rates in Charlotte! This is a great program for Charlotte school teachers to take full advantage of!

So how do you start?

First, you need to get pre-approved for your Charlotte Good Neighbor Next Door mortgage. Since the window of opportunity to snag these home is limited to 5 days, you will want to make sure you can qualify to buy one of these homes. Once you are qualified, we can connect you with a HUD approved Realtor to help you find the perfect home for half price! From there, the Realtor and I will work together to get your home purchase and mortgage loan closed quickly. Then move on in!

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