CHFA is Changing Their Credit Score Minimium 0
This came in from CHFA today:
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Important Program Update |
October 28, 2011 |
| New Credit Score Floor to go into effect January 1, 2012Effective for Reservations made after January 1, 2012, CHFA’s Home Finance programs will no longer be available to borrowers with credit scores below 620. CHFA’s mission has been and continues to be to create a process which not only allows people to achieve homeownership but provides them the education and resources to be successful homeowners, as long as they choose to be. In today’s environment, CHFA believes it is in the interest of potential borrowers and our organization to serve borrowers who have achieved a credit score of 620 and above.CHFA will continue to accept Reservations for borrowers who have no credit score and require use of alternative credit. The RISC Scorecard will remain a requirement for borrowers whose loans are manually underwritten for any reason, and borrowers with credit scores from 620 through 659 where the DTI exceeds 43%. | |
So if you have a creedit score under 620 you need to either raise up above 620 by Januaty 1, or You will not be considered for a home loan. Call with any questions. Mark
Mortrgage Insurance, MIP vs PMI 0
In the lending business there is 0ne thing that every one hates…Mortgage Insurance …well except for those companies that sell it. So I get asked all the time “why do I have to pay that, what does it do for me? My only answer is that it’s the price you have to pay for not saving up 20% of your home purchase. The are two kinds of Mortgage Insurance: MIP stands for Mortgage Insurance Premium and it applies only to FHA loans as they are insured by the Federal Government. PMI stands for Private Mortgage Insurance and applies to Conventional loans only as that insurance is purchased from, you guessed it, Private Mortgage Insurance companies.
Back in the 1930′s, most banks would only lend 80% or less of the value of the home (LTV). The FDR addministration made passed a law that allowed banks to lend up to 97% LTB. But the banks still needed something to offest the risk of that 20%. So Mortgage Insurance was created to help offset that risk. Unfortunately, the buyer has to pay the premium on an insurance policy that protects the lender if you, the buyer, stop making your payment. Does’nt seem fair but it is what it is.
So any loan over 80% of the purchase of a home will have MI. If it is an FHA loan the MIP that you pay is fairly high and has very little flexibility when it comes to the amount that you have to pay. It does not matter what your credit score is you will pay the same rate.You also have to pay a one time Up Front Mortgage Insurance Premium (UFMIP) that can be rolled into the loan. You pay a little bit less if you have a little more to put down then the standard 3.5% down and there is a huge reduction if you choose a 15 year fixed as opposed to a standard 30 year FHA fixed.
If you have a conventional loan then the lender can shop around with various PMI companies to get the best deal. The better your credit, the better the Monthly PMI rate you can get and they tend to be quite a bit lower then FHA MIP rates. There is no UFMIP with a normal convnetional loan but you will have the monthly PMI. If you want to pay an UFMIP on a conventional loan then you can and depending on the program, that one time payment will make is so that you don’t pay the monthly MI premium.
The basics are this. If you have low credit scores and you don’t have 20% down then an FHA loan with the MIP is best. If you have good to excellent credit then a convnetional loan and the PMI could be best.
By the way, Dont get fooled by lenders that say that they don’t charge PMI. Generally they have to make it up somewhere, so they charge a higher interest rate to cover it.
As always feel free to comment or contact me with any questions. Mark
