Do Your Research

By admin | October 11, 2008

Before you’re issued a driver’s license, you have to take a test. And whether you study by reading a manual or getting behind the wheel with a knowledgeable adult, you must first do your research, right? Otherwise you could end up in all sorts of problems, such as failing the test or even worse — getting in a car accident.
The same goes for getting a home loan.

The economy has taken quite the hit, and although finances are tight, people still want to purchase homes. An especially appealing option is an FHA loan, which does not require the borrower have stellar credit or a substantial down payment. Now the word is out, and FHA loans are on the rise. But borrowers beware: Experts are urging that you be on the lookout for lenders without much experience in issuing FHA loans, because although they might tell you what you want to hear, what they’re not telling you is that they haven’t even read the manual. Some of them might not even have a copy.

Before the market fell and was still in a semi-reasonable state, many lenders weren’t dealing much with FHA loans and only had a handful of FHA specialists. Now suddenly more and more people are looking to finance their home with an FHA loan, and these lenders had to compensate in order to handle the demand — the result is more loans issued under lenders lacking significant FHA knowledge.

But don’t worry — if you’ve done your homework and are confident with the lender you’ve chosen, then you should be in for a smooth ride.
Daniel Jacobs, the chief executive of 1st Metropolitan Mortgage Co. said: “FHA loans will perform better than subprime loans have for one major reason: The agency requires borrowers to document their income and occupy the home, so it excludes speculators, who played a significant role in subprime defaults.” In other words, if the underwriter doesn’t find that you meet the criteria, then you won’t be issued a loan. Which might not sound like a good thing, but trust me — it is: You don’t want to end up like the many people who were issued subprime loans when they shouldn’t have been issued a loan at all. So before you get in the passenger’s seat, make sure that the driver has read the manual and knows to first release the parking brake.
Bottom line — do your research.

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