Lender Implode Meter!

With the “Lender Implode” (lenderimplode.com) meter currently at 128 this week (was at 116 last Friday), and with drastic changes in the Sub-Prime and Alt-A market, what are the options for you “credit challenged” buyers? I’ll give you a hint, there are two answers, and both have 3 initials.

Give up?

FHA and PMI are the answers you’re looking for.

Here’s the scoop…

FHA: In the past, many people viewed FHA contracts as a pain due to stricter appraisal guidelines and Underwriting criteria. Well a lot of that has changed; actually it changed back on 12/19/05.

FHA terms allow for some credit challenges, somewhat weak credit scores or no score, and little down payment (3%).

PMI: In years past PMI was a “four letter” word, but the days of the 80/20 combo loans are all but gone. People used to do this type of transaction to avoid PMI, but today you will see it more and more. Here is why it’s not necessarily a bad thing.

*PMI on loans originated in 2007 are now tax deductible in 2007 if you make under $100,000
a year. This is new as of this year.

*PMI can be dropped in the future, without refinancing, as long as there is 20% equity and the client has no late payments on the mortgage. While an 80/20 was typically refinanced a few years later incurring additional closing costs and starting over at 30 years, again.

*A client with credit issues is much more likely to have their loan approved if it has PMI because the lender is protected by the PMI Company against a loss.

*Lender Paid Mortgage Insurance (LPMI), is now available for those that qualify. There is no monthly PMI paid by the client at all, and this option is cheaper than the 80/20 combo loan.