Real Estate Insider Blog
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For most Americans, the purchase of a home is made possible with a mortgage. However, saving a 20 percent down payment is an unattainable goal for many would-be buyers in areas with high home prices. Compounding the challenge are strict underwriting requirements, including some that were put into place to protect the housing market from a crash. Underwriting is the process mortgage lenders use to determine whether to approve a loan, based on the borrower’s risk profile.
The Federal Housing Administration, or FHA, loan program was created to help Americans buy homes following the Great Depression, and it remains a popular choice for people who need an affordable mortgage option. FHA loans are a popular solution because they allow for smaller down payments, while also resolving some of the underwriting challenges borrowers face. FHA mortgages are made by lenders and insured by the Federal Housing Administration, a U.S. government agency. With a government guarantee, the lender can offer more flexibility in its underwriting requirements, including credit guidelines and the size of the down payment.
“If a borrower has good credit but limited cash on hand, other government-backed loans are available for less money down,” says Stephen Moye, senior loan officer for Citywide Home Loans. “For a borrower with a bankruptcy, foreclosure or other credit issue, the FHA loan has a much lower barrier to entry.”
This guide ...
Very soon, the mortgage, real estate, and legal industries face the largest change in federal mortgage disclosure requirements in more than 30 years. On August 1, the forms that have become second nature for generations of loan originators, attorneys and borrowers—including the Good Faith Estimate (GFE), HUD-1 and Truth-in-Lending—will disappear for new transactions. In their place will be two completely new forms and a new set of requirements for how and when they are provided to borrowers.
Given the magnitude of the change, we want to help our clients prepare for the shift.
Pursuant to the Dodd-Frank Act, the Consumer Financial Protection Bureau (CFPB) has integrated the mortgage loan disclosures under two Federal statutes: the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act of 1974 (RESPA). The new TILA-RESPA Integrated Disclosure Rule (also called TRID) replaces the four existing disclosures for closed-end credit transactions secured by real property with two new forms:
A Loan Estimate that must be delivered or placed in the mail no later than the third business day after receiving the consumer’s application, and
A Closing Disclosure that must be provided to the consumer at least three business days prior to consummation of the transaction.
CFPB also released guidance for complying with the new requirements when they come into effect for all applications received on or after August 1, 2015. (Lenders ...
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