Default
When no payments made after 60 to 90 days... 30 for FHA loans
Front-End Ratio Equation
Monthly housing expenses/gross monthly
... [Show More] income
Front-End Ratio maximums
28% or less - conventional loan
31% or less for FHA, 30% or less for rentals
Back-End Ratio (Debt-to-Income) Equation
total monthly debt expenses/gross monthly income
Back-End Ratio Caps
36% for conventional loans and renters, 43% for FHA, 45% for Energy Efficiency Mortgage loan
Four C's of Credit
Character, Capacity, Capital, Collateral
Monthly housing expenses - PITIA
Principal, Interest, Taxes, Insurance, Association dues and special assessments
Interest only Terms
Only pay interest in monthly payments - good for fluctuating income, but can make payments on principal when they can
FHA loans good for:
those who do not qualify for conventional because of flawed credit history, bankruptcy, high debt-to-income ratios, or limited funds for down payment & closing costs
USDA loans
United States Department of Agriculture - Rural development program
USDA guaranteed loans are for
those who make less than 115% of Area Median Income, or AMI, no funds for down payment, and without adequate housing.
USDA Direct loans are for
those who make less than 80% of AMI, unable to obtain other financing but have reasonable credit... loans can go for up to 33 or 38 years
Mortgage Insurance
Protects lender if you stop making payments, Required if down payment is less than 20% of home value
2nd Mortgage - "Piggy back"
assures 1st mortgage is only 80% of sales price -- will mean higher interest rates and more fees
Loan to Value Ratio -- LTV Ratio
% calculated by dividing the amount of outstanding loan amount by the value of home
Lender must terminate PMI when LTV ratio reaches:
78% OR at midpoint of loan, i.e. 15 years of 30 year mortgage
Adjustable Rate Mortgage
30 year, interest rate set for 1st 5 years then adjusts annually
ARM good for:
Those who have $ for down payment, wants lower interest rate for few years and may not own home for more than 5 years
Federal Housing Choice Voucher Program - Section 8 - Distributed by local Public Housing Agency, or PHA
Family income must be lower than 50% of AMI, Voucher must pay 30% of gross income, family pays the rest
Redlining
Illegal Practice of refusing to make loans because of predominant race, color, national origin, religion, sec, disability or familial status of the residents in the neighborhood [Show Less]