FHA’s Time to Shine
To reach a wider market, consider adding Federal Housing Administration loans to your product line
By Julie Krause, chief operating officer, NetMore America Inc.
As the mortgage market reels
from its latest upheaval, many
mortgage brokers still have a stable product to offer their clients: Federal
Housing Administration (FHA) loans.
The FHA offers a range of products for
many borrowers. Owner-occupants, as
well as owner-occupants with a non-occu-pying co-borrower such as a relative, can
obtain an FHA loan. There are no income
limits, geographic restrictions, or dis-tressed- or declining-market definitions.
Plus, FHA loans represent an affordable
option for many homebuyers, especially
first-timers.
For success with FHA, brokers must
understand the basics. Partnering with an
experienced FHA lender can help.
see reduced documentation requirements.
And if a loan receives a “refer” decision, it
doesn’t mean that it can’t be done; it simply
has to be underwritten manually. Therefore, working with an underwriter who understands how to underwrite an FHA loan
manually can be the difference between a
loan being approved or denied.
Reaching out
With home prices slipping and interest
rates at current lows, many potential borrowers can enter the market with an FHA
mortgage.
The FHA even allows borrowers who
don’t have FICO scores to get a loan. For
these borrowers, you must develop a nontraditional credit history, a necessary task
when working with many underserved
borrowers today. A knowledgeable lending partner can help you learn how to do
this properly.
In addition, you can finance manufactured housing with FHA loans, provided
the home was built after June 15, 1976; is a
least 400 square feet; and sits on a permanent foundation.
As you plan your next move in today’s
mortgage market, pay special attention to
FHA opportunities and the lenders who offer FHA insights and assistance. The coming year is sure to offer plenty of options
for growing into this space.
Affordability
Even with the Housing and Economic
Recovery Act of 2008’s increase, the downpayment requirement for FHA loans remains low at 3. 5 percent. Although the
housing bill prohibits seller-funded downpayment assistance for FHA loans, funds
still can come from a relative’s gift. In addition, interest rates for FHA loans compare
favorably with conventional financing.
Further, the FHA offers cash-out refinances to as much as 95-percent loan to
value (LTV) and rate-and-term refinances
to as much as 97-percent LTV. It also allows subordinate financing to remain in
place regardless of the combined LTV.
Underwriting
Brokers might have misconceptions about
working with the FHA. Processing an FHA
loan is no more time-consuming than
conventional financing. You just need the
proper upfront disclosures, and you must
order the appraisal through the FHA Connection Web site, https://entp.hud.gov/clas.
This is where lending partnerships can
be helpful. Ask your lending partner about
its background with the FHA and how it
can help you better understand the risks
associated with underwriting these loans.
As you discover some of the FHA’s nuances, your lender’s knowledge can help
you navigate the process.
Also, automated underwriting can still
be used with FHA financing. With Fannie Mae Desktop Underwriter or Freddie
Mac Loan Prospector approval, you may
Julie Krause is chief operating officer for NetMore
America Inc. She has more
than 36 years’ mortgage-banking experience and
received one of the first
Computer Homes Under-
writing Management System numbers in the
Northwest. Krause’s previous roles as vice
president of operations with Mann Financial,
owner of Residential Mortgage Co., and owner of
her own consulting firm make her a solid expert
in government lending and the development of
efficient and effective lending operations. Reach
her at Julie.Krause@NetMoreAmerica.com.
