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Catherine Slussler's Blog

By Cat Slussler | Agent in Katy, TX
  • 2012 FHA guidelines - A must read for those buyers worried about their scores

    Posted Under: Home Buying in Conroe, Financing in Conroe, Credit Score in Conroe  |  April 20, 2012 12:44 AM  |  719 views  |  No comments

    FHA Loan Guidelines in 2012

    There’s an abundance of misinformation online today, with regard to FHA loan guidelines. You’ll find conflicting information about down payments, credit scores, debt ratios, and every other aspect of the lending process. This leaves home buyers scratching their heads (and sending us a steady stream of emails). Here’s what you need to know about FHA guidelines in 2012:

    1. Down Payment Guidelines

    When using an FHA mortgage loan to buy a house, you will have to make a down payment of at least 3.5%. There is a lot of Internet “chatter” right now about HUD’s plans to raise the minimum down payment to 5%, in order to replenish its reserve fund. But so far, this is only speculation. There have been no official announcements on this subject. And even if they do decide to make such a change, it probably would not take effect in 2012.

    Nearly all of the lenders we spoke to felt confident the 3.5% down-payment requirement would stay in effect for the rest of this year.

    If your credit score falls below 580, you might have to make a down payment of 10%. HUD’s official policy states that “borrowers with less than a 580 FICO score will be required to put down at least 10%.” But, as you will soon see, this requirement is something of a moot point. Mortgage lenders impose their own (often stricter) requirements on top of the minimum guidelines established by the FHA.

    2. Credit Score Guidelines

    Of all the FHA loan guidelines mentioned in this article, the down-payment requirement is the one most firmly set in stone. Credit scores are a different story. Here, much depends on the particular lender you use.

    Some of the lenders we spoke to set the bar at a 620 FICO credit score, for all of their mortgage products. Some had a lower minimum for FHA loans, as compared to conventional loans. Others were willing to go as low as 580, as long as the borrower has stable employment and income. Quicken Loans, for example, says that borrowers “may now qualify for an FHA loan with a credit score of 580 and above.” So the standard will vary based on the lender you use.

    We also spoke to a representative from Wells Fargo (the nation’s largest mortgage lender). In 2011, the New York Times reported that Wells Fargo was offering FHA loans to borrowers with scores as low as 500. This would have marked a significant divergence from the 600-and-up crowd. So we asked them about this. Here is what a representative told us about their FHA loan guidelines:

    Wells Fargo Quote
    Other large lenders had similar standards. Chad Baker, a loan officer with Prime Lending, told us that his company “will provide FHA financing down to a credit score of 600,” adding that “there are mortgage banks that are providing FHA financing below a FICO score of 600.” So a score of 600 or higher was the closest we could come to a general consensus. But again, it all depends on (A) which bank you use and (B) how well you measure up in other areas.

    3. Debt-to-Income Guidelines

    This is one of the hazier guidelines for the FHA program. There seems to be a lot of leeway, with regard to the maximum allowable debt ratio. We will get to that in a moment. But first, a quick definition is in order.

    The debt-to-income (DTI) ratio shows how much of your monthly income is going toward your debts. For example, a DTI of 30% would suggest that you are using 30% of your income to pay your debts. As far as FHA loan guidelines are concerned, there are two DTI ratios. The front-end ratio only includes your housing-related debts, such as your mortgage payment. The back-end ratio combines your housing debt with all of your other debts — credit cards, car loans, etc.

    Lenders tell us that the combined number (the so-called back ratio) is most important, when it comes to being approved for an FHA loan. This is the one that takes into account your housing costs as well as your other debts. Some said 43% was the maximum allowable back-end ratio. Others said they’ve seen borrowers get approved through automated underwriting systems with combined DTI ratios close to 50 percent.

    Of all the FHA loan guidelines covered in this article, this is the hardest to pin down. My advice is for borrowers to keep their back-end ratios below 43%. If you do that, you shouldn’t have any trouble qualifying for an FHA loan (as long as you meet all of the other guidelines mentioned above).

  • The importance of pre-qualification

    Posted Under: Home Buying in Montgomery County, Financing in Montgomery County, Credit Score in Montgomery County  |  April 19, 2012 7:31 AM  |  602 views  |  No comments

    Most sellers are making this a MUST nowadays to be pre-qualified before you can even make an offer on a home.  This only makes good sense.  Being pre-qualified tells the seller you a serious buyer and not just a "looker."  Also getting pre-qualified lets the buyer know the amount of loan he/she can obtain to purchase a home.  Why would anyone want to look at a $200,000 home, fall in love with it only to be disappointed that they would not get financed for it. 

    If there are credit issues, start cleaning them up before you pre-qualify.  There are some reputable companies out there that can assist you in the credit clean-up process. 

    If you are a buyer that wants to own a home, the time is to start now when the rates are low.  They won't be this low forever. 
  • Financing option for income restricted individuals/families.

    Posted Under: Home Buying in Montgomery County, Financing in Montgomery County, Credit Score in Montgomery County  |  April 17, 2012 12:12 AM  |  623 views  |  No comments

    Most people are income restricted, just at different levels of restriction. No matter what level you are at, the majority of people still want to own their own home, but they just don't know where to start. If you are willing to move out of the metropolitan area (not necessariliy in the boondocks either), then it is quite possible you could qualify for a USDA home loan. Most times, there is 0 downpayment, too! Below is the site that you can go check out to see if you qualify for such a loan. They even consider "blemished" credit. If you think you might be interested in something like this, the first step is to see if you and the area you would like to move to qualifies.  Most of Montgomery County, Texas qualifies as areas for a USDA loan.  The second step would be to pre-qualify with a USDA approved lender.  The third step is to contact a real estate agent to help you find a home that qualifies for a USDA loan.


    Have a blessed day!

    Catherine Slussler
    Keller Williams Realty - The Woodlands, TX

  • The Woodlands Upcoming Events

    Posted Under: Entertainment & Nightlife in The Woodlands  |  April 16, 2012 10:32 AM  |  488 views  |  No comments
    How about a tailgait party at the Jimmy Buffet concert on June 2, 2012. Sounds like something I might want to put on my calendar.  Get your parrot hats out and check it out!

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