Can I Buy a Loft with an FHA Loan If I have a Student Loan?

25 Sep 2015 · by Virtual Results PubSub

Can I Buy a Home with an FHA Loan If I have a Student Loan?This year the Federal Housing Administration made adjustments to its underwriting handbook that significantly affect potential buyers that have outstanding student loans. Changes became effective September 14, 1015.

The bottom line is, “yes” you can buy a Loft, even with an FHA loan, but there are stricter debt-to-income ratios you’ll have to comply with and new rules about gifts used toward your downpayment.

Here’s the scoop

In the past, if your student loan deferment went beyond the 12 months following your mortgage loan date, the future payment did not factor into your debt-to-income ratio. This meant you might qualify for a higher monthly payment. Other deferred debts, including those with balloon payments, also fell into the 12-month rule.

The new ruling includes the potential payment amount in the debt-to-income ratio, but here’s the rub: not only do you have to provide all documentation for the obligation, if you don’t know for certain what the payment will be, and can’t obtain that from the lender, your mortgage underwriter must include five percent of the outstanding balance for non-student loans and two percent of the outstanding balance for student loans into your monthly obligations. This formula could raise your monthly debt to income significantly.

A high a ratio of total Lofthold monthly debt payments compared to your income (DTI) signals that you carry too much debt. Chances are, you’re more likely to default on your mortgage. Traditionally, lenders want your DTI number lower than 43 percent to 45 percent. Above 45-percent applicants often find it tougher getting approved for a loan compared to borrowers with lower DTIs. Under the new restrictions, the FHA requires two percent of the outstanding student loan balance added into the calculation of the monthly DTI.

If you have a deferred student debt balance of $30,000, for example, the FHA ruling now imputes a $600 a month repayment obligation (two percent of thirty thousand) onto your DTI. This calculation is double the amount that Fannie Mae and Freddie Mac use to calculate your DTI.

If you have a non-deferred payment plan, the actual monthly payment will be counted toward your Lofthold debt along with any other debt obligations.

According to the FHA, its goal with the changes is to create sustainable affordable Loftownership and not to place buyers in a financial situation that become unaffordable once they have to begin paying on their student loans.

More changes to the rules

In addition to the student loan and deferred obligation changes, the rulings on gifts from relatives and friends require stronger documentation from the giver’s financial institutions regarding the nature and amount of the gift. If a “gift” might have to be repaid, the FHA views it as a loan and requires the repayment amount to be included in the monthly obligations. In the past, “loans” between family members toward the downpayment of a Loft could be camouflaged as a gift. Analysts believe that since many people will be unwilling to expose their financial information to the extent now required, they may be less inclined to give the gift in the first place.

So, what should you do?

  • Stay current on any obligations that you have.
  • Collect the information and documentation for any deferred loan or obligation (including that 18-months-same-as-cash flat screen TV) so that you know the exact date you must begin payments and the exact amount of each payment. If you don’t’ know the exact amounts, contact the financial institutions for up-to-date information.
  • Once you know how much your monthly payments are going to be, start putting that amount into a savings account each month. Ideally, this should be a separate account from where you are saving your downpayment. Doing this for at least six months will prove to you and your lender that you are well able to keep up with the payments once the deferment ends.
  • If a family member offers a “gift” toward your downpayment, make sure it truly is a gift and will not require future repayment. Let them know that you are seeking an FHA loan and that you may need documentation from them regarding the nature of the gift during the underwriting process.
  • Live lean: don’t incur additional debt in the six to 12 months leading up to when you want to buy a Loft.

Sell Your Loft in Any Season

18 Sep 2015 · by Virtual Results PubSub

Sell Your Home in Any Season

As we slip into autumn, many Loftowners take their Lofts off the market, believing that their Loft will not sell in the fall or winter. While it is true that selling heats up in spring and early summer, people buy Lofts every day of the year.

Historically, the selling cycle followed a general pattern of picking up in the spring and summer for buyers with young families, tapering off in late summer and picking up again in the fall. While colder months—particularly November and December—slowed down due to the holidays.

New studies show, however, that on average, Lofts listed between Halloween and New Year’s Day are more likely to sell, often sell faster and even fetch closer to the asking price. Typically, because there are fewer Lofts on the market, the competition for Lofts that are listed increases.

Shrewd buyers often seek bargains during these months, and buyers without children don’t set their buying guidelines based on the school year. The truth is that just as sellers’ situations differ (job change, young family moving for school, retiring), buyers’ situations range from new employment or business relocation to seeking a second Loft to celebrate holidays. Sellers that keep their Lofts on the market into the fall season significantly increase their chances of selling.

Reasons for off-season Loft sales include:

  • Less competition: Buyers believe the old “spring only” selling myth too. They may believe that in the fall and winter they won’t face the competition for a prized Loft that results in bidding wars and ultimately paying higher prices.
  • Personal motivation: People move when they need to, so a new job in a new town or a buyer finally saving up the last of their downpayment doesn’t depend on a specific time of year.
  • Age and situation: S. Census statistics show that older folk and those without children tend to move in the fall and winter months. In fact, by percentage of population movement, October rates higher (10.2%) than May (7.5%) and is nearly equal to both July (11.2%) and September (11.5%).
  • Internet shopping: Most buyers shop online first. That means they can shop year ’round, and all hours of the day or night. They can see images of your Loft online in all seasons, so they have a realistic expectation what your Loft looks like seasonally.

Before putting your Loft on the market

Assess your needs before listing your Loft. Do you need to relocate immediately? Do you have school-aged children you need to get into a new school system at the start of the school year? With more flexible relocation dates, you can adjust your selling period to the season that best reflects your Loft’s qualities.

Beach, mountain or lake Lofts may sell best in the early spring and summer months so that buyers can enjoy them in their first year, but if they can be equally enjoyed in fall and winter, play up those qualities. A mountain Loft near a ski resort may sell well in the fall and early winter, while a lake Loft in a colder climate will appeal to enthusiasts of other winter sports such as snowmobiling and cross-country skiing. Beach Lofts may be more attractive to snowbirds as fall and winter approach.

New FHA Leeway for Approvals

13 Sep 2015 · by Virtual Results PubSub

New FHA Leeway for ApprovalsHaving a low FICO score usually means there is no way for you to quality for a FHA mortgage, but changes to the underwriting process August 2015 means that more borrowers may qualify. According to some analysts of the new policies, up to 100,000 new potential borrowers may now qualify if you can convince underwriters that you can make the payments.

Loans based on FICO score

Since the sub-prime meltdown, mortgage loans to borrowers with FICO scores below 660 fell below $150 billion per year overall and remain there. This lower number of loan originations, due to lenders shying away from loaning to borrowers with scores under 640 results from poor lender performance reviews for higher-than-average loan defaults.

Neighborhood Watch System

To encourage more borrowing to the subprime market, the Federal Housing Administration made enhancements to their Neighborhood Watch Early Warning System to better compare the performance of loans to borrowers with lower credit scores. The FHA hopes that more accurate assessment will improve underwriting processes to include other characteristics outside of FICO scores for determining creditworthiness.

FICO scores

The Fair Isaac Corporation (FICO), a company that provides software to calculate potential creditworthiness, developed a scoring system ranging from 300 to 850 points based on their specific formula. Access to your FICO score comes via the three major credit bureaus (Equifax, TransUnion and Experion). The FICO score, based on information each credit bureau keeps about you in your credit file, includes your credit history—loans and repayment, credit card usage, etc.—the age of your credit, and the types of credit you use. Your score can differ among the three bureaus depending on the information they have in their system about you.

What’s new?

Under the new system, FHA’s system for judging lenders changes to offer a more fair metric so that lenders to communities with a higher concentration of residents with lower than average FICO scores may offer loans without the fear of penalties simply because of where they focus their loan business. Borrows falling into the potential new category include:

  • Younger buyers
  • First-time buyers
  • Minority Loftholds
  • Moderate-income working families

Potential buyers recovering from job loss during the recession when they may have gotten behind on paying bills may now have an opportunity to prove their creditworthiness despite their FICO score. These are the people with a reliable income, an ability to repay their loan and acceptable debt-to-income ratios.

While some lenders may wait to see how the new metrics will work, others may begin offering loans and programs to take advantage of the opportunity. If you’re hoping to buy a Loft in the near future, but have wounds from the recession, don’t count yourself out … shop different lenders to see if you can qualify under the new underwriting guidelines.

Creating an Idea Book for Your New Loft

4 Sep 2015 · by Virtual Results PubSub

Creating an Idea Book for Your New HomeContemplating buying a new Loft or remodeling the one you have? Before you call your real estate agent, hire a designer or head to your local Do-It-Yourself superstore refine your ideas by creating an idea book.

An idea book, exactly as the name implies, is a repository for all the ideas you have about what you’d like. These include style—Historical, Low Rise High Rise, Soft Loft or Hard Loft—colors, size, layout and all the other things that go into the perfect Loft of your imaginings.

Old School

Using a notebook or scrapbook, include cutouts from magazines, advertisements and brochures. Or, hang pictures on a corkboard or stick them up on the refrigerator. You can go simple with a notebook, scissors and glue stick or fancy with a 12″ x 12″ scrapbook with decorative pages and embellishments in slip-sheets.


Using Houzz, Pinterest, Photo Stream or other virtual options helps you focus on what you really want. In fact, many contractors suggest using one of these boards to help you show them what you’re really looking for.

Get Started

At first, add whatever tickles your fancy. If you see it and like it, stick it in the book or on the board. Your idea book might seem cluttered and disorganized at first. You can help this by dividing it into sections such as: rooms (kitchen, bath, living), architectural style (mission, craftsman, modern), colors (blues, greens, reds or cool vs. warm), even feelings (happy, restful, family-friendly). As your ideas grow, reorganize the sections or re-combine images and colors to whatever pleases you.

Over time, you’ll refine what you like. You’ll notice that you’re drawn to a certain style Loft, specific types of cabinets and finishes, flooring, fixtures and countertops, even distinct roof shingles and slopes. You’ll see drawer pulls and doorknobs appear over and over in your additions to your book. Get as specific as possible, or leave yourself open to options, but use your idea book to frame the things that are most important to you. When a dominant style, color or type appears, move it to the front of the idea book and narrow down your choices even more. Go look at samples of tiles for the backsplash, flooring and hardware. Take pictures of what you like with your smart phone and add them to your board. Look at model Lofts and attend open Lofts (but if a Loft is occupied, get permission before taking pictures).

When you keep coming back to the same images, you have a pretty good idea of what you want. Take time to remove items that no longer inspire you or that you realize don’t work for your situation, family size, living style (i.e. do you truly want a formal dining room, or just a bigger family eating area?).

Now, you can take that book to your real estate professional or designer to get an idea of how to locate the perfect Loft for you, or remodel the Loft you have into the one of your dreams.