Something doesn't make sense about FHA loans. The FHA guarantees the
loan, so the lender shouldn't care much what the borrower's credit
score is. But that implies people with extremely bad credit should be
able to get FHA loans easily. But if that were true, why would there
be so many companies advertising bad-credit mortgages? How could they
possibly compete against FHA loans? People have to pay much higher
interest to get a bad-credit loan, so why would anyone ever apply for
one, instead of just getting an ordinary FHA loan, with much lower
interest rates?

Ralph wrote:
Something doesn't make sense about FHA loans. The FHA guarantees the
loan, so the lender shouldn't care much what the borrower's credit
score is. But that implies people with extremely bad credit should be
able to get FHA loans easily. But if that were true, why would there
be so many companies advertising bad-credit mortgages? How could they
possibly compete against FHA loans? People have to pay much higher
interest to get a bad-credit loan, so why would anyone ever apply for
one, instead of just getting an ordinary FHA loan, with much lower
interest rates?

To get an FHA loan you need above average credit and below average income.
Someone with a high income who doesn't pay their bills on time doesn't
qualify.

To get an FHA loan you need above average credit and below average income.
Someone with a high income who doesn't pay their bills on time doesn't
qualify.

WRONG!

Regards,

Scott Miller
National Commercial and Residential Lender/Broker
Carteret Mortgage
1.877.716.6495


www.RealEstate-IQ.com
www.EZMortgageLoanz.com

Ralph wrote:
Something doesn't make sense about FHA loans. The FHA guarantees the
loan, so the lender shouldn't care much what the borrower's credit
score is. But that implies people with extremely bad credit should be
able to get FHA loans easily. But if that were true, why would there
be so many companies advertising bad-credit mortgages? How could they
possibly compete against FHA loans? People have to pay much higher
interest to get a bad-credit loan, so why would anyone ever apply for
one, instead of just getting an ordinary FHA loan, with much lower
interest rates?

That is a great question!

While FHA is not credit score sensitive it is credit history sensitive;
individuals that have gone through a bankruptcy or foreclosure are not
qualified.

There are two other reasons why more loan officers don't recommend FHA
loans when they would best serve the borrower:

- The FHA caps lending fees; in other words, the FHA dictates how much
a loan officer can make. There is more money to be made in subprime
loans.
- Not all loan officers are allowed to offer FHA loans. The bank must
meet certain guidelines in order to offer FHA loans to the general
public.

A couple of reasons why borrowers elect not to use FHA:

- The borrower must be MIP (FHA equivalent to PMI) even though the loan
to value is below 80% (with conventional loans, a borrower is allowed
to refinance to eliminate PMI; FHA has tighter guidelines on this
matter)
- FHA caps lending limits which might not cover the entire purchase.

I recommend FHA loans to all of my credit challenged clients; I may not
make as much money at the end of the day, but the reward of helping
someone when their "chips are down" in getting a competitive loan that
they don't need to refinance in 6 months is satisfying enough.

Regards,

Scott Miller
National Residential and Commercial Lender/Broker
Carteret Mortgage
1.877.716.6495


www.RealEstate-IQ.com
www.EZMortgageLoanz.com

Scott gave you pretty good info about fha loans, but he was incorrect.
You can qualify if you have had a previous bankruptcy. you have to
have been discharged for a certain amount of time with no negative
history after the bankruptcy. Also, many people choose not to use FHA
loans if they need to purchase a house that is more expensive. For
example, someone on the west coast will probably not use FHa loans
because the housing market is very expensive for even small house. in
summary, FHA is a great option if it is right for you and your
situation.

Aprill Smith


Ralph wrote:
Something doesn't make sense about FHA loans. The FHA guarantees the
loan, so the lender shouldn't care much what the borrower's credit
score is. But that implies people with extremely bad credit should be
able to get FHA loans easily. But if that were true, why would there
be so many companies advertising bad-credit mortgages? How could they
possibly compete against FHA loans? People have to pay much higher
interest to get a bad-credit loan, so why would anyone ever apply for
one, instead of just getting an ordinary FHA loan, with much lower
interest rates?