Wanting a small FHA Loan for HUD foreclosed house

[Anonymous]

Here is my situation yes my credit is bad.  A number of major health issues over the last few years.  I talked with a loan broker who pulled my credit for a mortgage loan.  My scores are EX-582, EQ 562, and TU 534. ( real fico scores from mortgage broker)  All old collections even though they are reporting them as open/installment and in the last few months even though they are well over 2 years old.  Total collection amount on 11 accounts is 6k.  Only one of these 11 accounts is less then 2 years old for a tiny amount.  Can provide a copy of the credit report if that would help. 

TOTAL ACCOUNTS:           EX                                      EQ                                            TU

Count                            15                                     10                                              15 Balance                                 $25,030.00                       $20,593.00                                $25,989.00

Current                                  2                                       2                                                1

Delinquent                       0                                       3                                                0                                         Other                                     2                                       0                                                0

( I know this does not provide a lot of credit detail in this previous summary.)  

$19,000 is a secured installment loan I am not responsible for.  Quit Claim Deed from 1996.  Always payed ontime.

I currently have 1300 in non garnishable wages a month.  Fixed income.

Do not owe any back taxes anywhere.  No judgments.   All credit card collection but one ( Cash Call  ewww)

Also want to add, have 2 and half years of ontime rent payment history I can provide, same for my cell phone, and cable bill.  No other utilities in my name.

The House I am wanting is a HUD foreclosed home.   The HUD price I would I have to pay is 19,000.  I have $1000.00 plus a $14,000.00 grant to put down/ principal payment.  The FHA loan would only be $4000.00.  It has to be an FHA in order for me to get the grant.  It also has to have an FHA loan, to get the grant.  The down payment/repair grant will be structured as a 2nd lien with a gradual 5 1/2 year forgiveness.  The HUD actual home value right now is $38,000.00. 

Any ideas suggestions.  I am trying to get my credit scores up as quick as possible through disputing etc.  Not sure how efective I will be.

Thanks

Any

Message Edited by mtrai on 04-22-2009 01:45 PM

Message Edited by mtrai on 04-22-2009 01:47 PM

[ShanetheMortgageMan]

Hi Amy, as you realize your scores will need to improve in order for you to obtain a mortgage these days.  620 is the industry standard, although there are a handful of lenders which will go to 600.  The other issue is obtaining a mortgage loan for $4k, that won't happen as the fees on it would be almost half of the loan amount, and they are illegal to charge, so since a lender won't do a loan for free then the loan won't be made. 

[Anonymous]

HUD will pay the closing cost.  The actual loan could be up to 18,900.  With 14,000 paid on the closing day to buy down the principal.

Message Edited by mtrai on 04-23-2009 09:48 AM

[ShanetheMortgageMan]

Doesn't matter who pays the closing costs, they are still charged and included in the APR.  An $18,900 loan is more likely, but anything under $20-25k is still real hard to find.  I'd start with local lenders though as if the home value's in your area are near $20k then odds are banks are used to lending on smaller loan amounts.  Then at closing you could use the funds to pay down the balance as you say you'd have that option to do.

[Anonymous]

Thanks shane...actually the homes in this area are around 60 to 85k.  This is a HUD forclosed and presently HUD values it at 38K, but only asking 19k With the NSP grant program discount.  It needs some work.  Mostly stuff that can be deferred that I can be done over time, only 3 items need immediate attention, new water heater, replace the coil in the Central AC unit outside, and replace the main electric wire from the meter to the house.  It was vandalized for the metal.  All the Appliances were taken as well, but I have all that in storage.  LOL.  So trying to figure how the best approach to try to get a FHA mortage, as that is the requirement of the NSP grant program for my state.

It seems to me, a lender would be willing to lend 4 or 5k since there would be a 79% downpayment, and the value of the house is about 900% more then the loan.  I am new to to all this, so I must be missing a few things or not understanding.  I found a lender who could do it, and understand the programs involved, but not with my credit score.  I am not sure if I could convince a lender to do a manual underwriting, or if that is even an option.

Thanks

[ShanetheMortgageMan]

In theory you are correct, the LTV on the transaction is a lender's dream... the house itself, well, not so much but I'll address that in a second.  But the issue is the low loan amount, the limit of APR affecting fees (prepaid finance charges, PFC for short) is limited to 8%.  8% of $5k is $400.  A lender's underwriting fee is a PFC and is usually more than $400 in itself, the title company's closing fee is a PFC and is usually a few hundred... so you have an illegally made loan right there, or you have to find servicers who'd work for free, not too likely.  However to address the condition of the home you'll likely to need some sort of rehab loan, such as an FHA 203k.  The 203k has a $5k minimum for improvements, so you might have to do a litle more than the water heater, AC coil, electric wire, and some appliances... but you can also do more than $5k in case it needed new paint, making the home more energy efficient, flooring, etc.  You could "improve" the home so much that it increases the loan amount to a level where all minimum APR affecting PFC's can be charged, therefore no one would be providing services for free, and it'd be more likely the loan could be done.

You can find out more about FHA's 203k loan at http://www.hud.gov/offices/hsg/sfh/203k/203kabou.cfm