About Government Refinance and Home Purchase Programs

Information and Updates on Government Mortgage Programs
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There was a brief summary from the AP of the changes to the FHA qualification requirements in the new bill going through the House right now. Here is an excerpt:

Legislation by Rep. Barney Frank, D-Mass., the House Financial Services Committee chairman, would relax the Federal Housing Administration’s underwriting standards to allow the hardest-pressed homeowners to qualify for government-backed loans.

That includes people who owe more than their homes are worth and are badly behind on their mortgage payments, have poor credit and devote a hefty share of their monthly income to servicing their mortgages, credit card bills, car payment and other debts.

Here’s how eligibility would change.

To get an FHA-backed loan now:

_Total monthly debt obligations (including mortgage, car, student loan and credit card payments) cannot amount to more than 43 percent of monthly gross — pretax — income.

_ Monthly mortgage payment (including property taxes and insurance) should not be more than 31 percent of income.

_Poor credit score or past delinquencies can be disqualifying factors. (New rules in effect until the end of the year allow people who fell behind after their mortgages reset or missed two or three payments to be eligible.)

To get an FHA-backed loan under Frank’s measure:

_ Monthly payment on the existing mortgage has to be at least 35 percent of income as of March 1, 2008.

_ With new loan, total monthly debt obligations could rise to as high as 50 percent (or 55 percent at the FHA’s discretion) of monthly income so long as the borrower could show that he made six months of payments on the previous mortgage on time.

_ Poor credit score or past delinquencies cannot by themselves disqualify a homeowner.

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