Advantage Lending Corp BLOG

Recently FHA announced that it will be increasing the programs down payment requirements, increasing the Up Front Mortgage Insurance Premiums (UDMIP) it charges and lowering the amount of seller credits that a borrower may receive to offset their closing costs.  With all these changes many potential home buyers will no longer be able to qualify for a FHA loan which is the second lowest down payment program available, which currently is only a 3.5% down payment.  After April 5th this year some borrowers will have to come up with as much as 10% down for this very same loan. 

Although FHA is changing, Rural Housing loans backed by the USDA are not!  Rural Housing still allows borrowers to buy a home without a down payment, and will allow 6% seller concessions to pay for the buyers closing costs.  Many times borrowers buying a home with a Rural Housing loan get into the home with little to no money out of pocket.  So for now, the zero down home loan is here to stay!

The long awaited 2010 GFE is here and is now required to be issued on all residential mortgage transactions beginning January 1^st 2010.  The newly revamped Good Faith Estimate is supposed to clearly show potential borrowers what their costs and rate would be.  Two new additional items that are now included in the 2010 GFE are the transfer taxes and owners title policy.  Although it is normal and customary for the seller of the property to pay both these items, it is now required to be disclosed to the buyer at the time of the mortgage application. 

The new good faith estimate does a good job letting the mortgage applicants know what the lump sum of all possible costs may be for a specific transaction, but it fails in other critical areas.  First, nowhere in the 2010 GFE does it let the borrower know how much money they will need to bring in to closing.  Next it does not show the borrower what their combined mortgage payment will be (Principal + interest + taxes + insurance).  Lastly there isn’t even a place for the borrower to sign the 2010 GFE. 

The new 2010 GFE is also now binding.  What this means to the consumer is that your rate or costs will not increase at all from this initial GFE.  What this means to the lender is that they have gotten to be razor sharp with knowing every cost (80% of them third party fees) or they will end up paying them on behalf of the borrower  / seller if they are above what was stated in the initial 2010 GFE.  Basically this means to a lender “Pad it or Pay it”.