Getting A Mortgage

Please don't let the idea of obtaining financing for your home intimidate you. Our professional and courteous staff is looking forward to the opportunity to assist you in meeting your home buying and refinance goals.

We encourage all of our home buying clients to consider taking a home buyer education course. You'll find a online home buyer and down payment assistance course here, in addition to local home buyer education opportunities here.

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Home Buyer News

FHA Home Loans

1st Continental Mortgages is HUD approved to originate FHA Loan Products.

So, what is an FHA Loan? An FHA loan is nothing more than a Conventional Loan insured by HUD. The benefit to home buyers is the fact credit qualifying does not consider credit scores, but considers credit quality only. This coupled with showing the underwriter the right compensating factors, allows great flexibility in the underwriting decision and gets loans approved.

We say with confidence, and experience, that if the Loan Makes Sense and you are a FHA Qualified home buyer there is no reason you can't get approved, regardless of "Credit Score"!

How can We say this? We have closed many clients with 30 year fixed rate loans at 5.5% to 6.5% whose credit scores ranged from 500 to 550. The keys to success?

We put together loan packages that gave the underwriters every reason to approve the loans. This could not have been done had my clients not followed my instructions or had the loans not made sense.

In addition, the FHA Home Loan allow both down payment assistance and seller concessions. Utilizing both options, you can in fact do a "No Money Down", FHA mortgage loan. Just ask some of my clients!

FHA loan qualification are what We like to call shades of Gray. Many lenders make up their own rules based on the type of loans they want to service. We work hard to insure underwriting gives heavy weight to the "HUD Guidelines".

These guidelines were designed to help those who have the ability to pay, but lacked the "picture" one might normally want in a conventional mortgage loan, to achieve an opportunity at home ownership at conventional mortgage rates.

Did you know:

According to Fannie Mae, 50% of sub-prime borrowers could have qualified for lower-cost, conventional Mortgage Loan financing, saving them each an average of $200,000 over the life of a 30-year loan.

Source: 08/13/2003 MMag 308_034

The novice mortgage loan officer fails to understand the importance of presentation and will "slap" a package together, submit it and call it a day.

Worse, are mortgage brokers who can't do an FHA mortgage and relegate these clients unnecessarily to SUB-PRIME status. Just as bad, are brokers and LENDERS who "Quietly" cut clients off based on CREDIT SCORES.

SUB-PRIME lending is the TRUE exception to mortgage lending, NOT the rule.

If you've had credit issues in the past, or find yourself being quoted higher than market rates via the Conventional loan route, We encourage you to contact me at 1st Continental Mortgages! You just might fit within the FHA loan qualifications.

There are many "myths" - information about FHA loans with regard to who should and should not participate in the HUD program and the process for qualifying. We attempt to break down those myths with information. It's our goal to show you why there are many reasons to do an FHA loan, and even more reasons to do an FHA loan with 1st Continental Mortgages.

• We look at credit not credit scores:

  • Neither the lack of traditional credit history nor the lifestyle of the borrower may be used as a basis for rejection

  • Collections: Based upon the surrounding circumstances, and as determined by our underwriter, these do not necessarily have to be paid.

  • Judgment: Are required to be paid off before the mortgage loan is eligible for insurance. However, exceptions can be made if the borrower has been making regular timely documented payments and the creditor is willing to subordinate the judgment to the insured mortgage.

  • Foreclosure: A borrower whose previous residence or other real property was foreclosed on, or who has given a deed-in-lieu of foreclosure with the previous three years is not generally eligible. Exceptions can be made based upon extenuating documented circumstances.

  • Chapter 7 Bankruptcy: Will not disqualify a borrower if at least two years have passed since the bankruptcy was discharged

  • Chapter 13 Bankruptcy: A borrower paying off debt under Chapter 13 may also qualify if at least one year of the pay out period has elapsed with satisfactory payment performance and the court approves the borrower entering into a mortgage transaction.

   

• Aliens: FHA will insure mortgages made to lawful permanent resident aliens under the same terms and conditions as a US citizen.

• No Income Restrictions

• Higher Ratios: HUD's standard ratio guidelines are 29% of your gross income for housing and 41% of your gross income for housing plus other creditors. Borrowers may, at the underwriters discretion, be allowed to extend beyond these ratios based upon sufficient compensating factors.

• Down Payment: The minimum down payment is approximately 3%. While credit quality can affect this qualifying requirement, the typical borrower only needs the standard HUD guideline of 3% to be approved.

• Gifts: 100% gift funds are acceptable. The donor may be a relative of the borrower, the employer or labor union, a governmental agency, a not for profit private organization, or close friend with a clearly defined interest in the borrower. No repayment of any gift may be expected or implied. Sellers are allowed to pay all closing costs on behalf of the borrower up to 6% of the purchase price.

• Reserves: There are no reserve requirements for one and two-family until residences. Three months reserves are required for three and four-family unit residence's.

• MultWe -Family: Three and four family unit residences, regardless of occupancy status, must be self-sufficient. The maximum mortgage is limited so that the ratio of the mortgage payment divided by the monthly net rental income does not exceed 100%. The net rental income is the appraiser's estimate of fair market rent from all units (including the unit chosen by the borrower for occupancy) less the allowance for vacancies and maintenance which is 15%. 85% of the rental income that is expected from the non-occupied units is added to the borrower's income for qualifying purposes. Down Payment is calculated the same as single-family units.

• Overtime, Bonus and Part-time Income: Overtime and/or bonus income received for a period of less than two years is acceptable where the underwriter determines that there are reasonable expectations of it's continuance. An earning trend over the period of time of receipt must be established and analyzed. Part-time income means income from jobs taken in addition to the normal regular employment to supplement the borrower's income. The same rules apply for determining using it as a part of qualifying.

• Extended Absence from Workforce: In some cases, the borrower may have recently returned to the work force after an extended absence. The borrowers income may be considered effective and stable provided the borrower has been employed in the current job for 6 months or more and the borrower can document a 2 year work history prior to the absence from the work force.

• Rental Income: Rental income from relatives residing on the premises is acceptable provided the rental income is shown on the borrower's tax returns.

• Cash Saved at Home: Borrowers who meet the "cash borrower" profile (no traditional credit, no bank accounts, etc) who have saved cash at home and are able to adequately demonstrate the ability to do so are permitted to have this money included, with satisfactory explanation, as an acceptable source of funds to close a mortgage loan.

• Child care expenses are NO LONGER included as debt.

• Non Occupant Co Borrowers: When there are two or more borrowers, but one or more will not occupy the property as a principal residence, the maximum mortgage is usually limited to 75% loan to value. However, maximum financing is available for borrowers related by blood or for unrelated individuals that can document evidence of family type, long-standing and substantial relationship not arising out of the loan transaction. Qualifying is determined by the underwriter.

• Assumable: All FHA loans are assumable

• Electronic/Online Payroll: 1st Continental Mortgages, and the industry as a whole, recognize that some employers use online payroll for pay stubs and W-2's. These types of documentation are acceptable.

• Rate Adjustments: There are no rate adjustments "penalties" for higher loan to values with FHA fixed rate loans. The rate, is the rate, is the rate.

• Secondary Financing: Secondary financing is not allowed with an FHA loan. The only acceptable second mortgage is with an approved HUD gifting agent such as down payment assistance provided by a gov't agency in the form of a "silent" second mortgage. Piggie Back seconds/HELOCS are simply not allowed.

• Home Inspection: A home inspection may or may not be required on a property based upon various factors. Typically you will find it is not required, but is recommended on any existing residence more than 5 years old.

• Pest Inspection: A termite inspection is required for all existing properties.

• Closing Costs: Closing costs charged to the borrower are restricted and may in fact be less than conventional closing costs dependent upon your lender or broker.