Posts Tagged Employment

Employment requirements and FHA Loans

Logo of the Federal Housing Administration.

Image via Wikipedia

With the recently high unemployment rate one question I get asked quite often is: “Have I been at my job long enough to qualify for a mortgage loan?” So here is the rundown of FHA guidelines for employment history:

The borrower should have a consecutive two (2) year history of income with the same employer. However less than two years is acceptable if changes in employers are within the same field or industry. This is common with many Union employees who may work for several contractors in a year period.

The borrower must be able to document the reason for gaps in employment of longer than 30 days.

A newly employed borrower with less than a two year history of employment can provide documentation that they were attending school or a training program for the field of work they are presently employed in. Examples of such would be an person who just got a job as an engineer and just received their degree in engineering or a mechanic that just started working for a dealership and was in specialized training for their vocation prior to their employment.

Borrowers returning to the workforce after a leave of absence must be employed by the same employer prior to their leave.

Borrowers returning to the workforce after a leave of absence and working for a different employer or field of work must wait six (6) months before they are eligible for employment.

Review your situation with your loan officer if you have any question as to whether or not you’ll qualify.

, , , , , , ,

Leave a Comment

Salt Lake City’s Mortgage Market Update for November 7, 2008

Yesterday the Labor Department reported 240,000 American jobs lost in October, plus revised the September and October reports adding an additional 179,000 jobs lost during that period; giving us the highest unemployment rate since 1994: 6.5%.  So far in 2008 we seen the elimination of 1.18 million jobs in the
United States.

Not that I hate to blow my own horn once in a while, but this is something I’ve been saying for quite some time now: the number one reason for the mortgage and credit crisis is not Adjustable Rate Mortgages (ARM) resetting, or loans being made to lower FICO score borrowers (I don’t think anyone buys a primary residence with the intention of not making payments and having to move again in a year), it’s the loss of jobs that has caused the current problems.

In a report done about 8 months ago by one of the major mortgage loan serving companies it was shown that the number one reason their borrowers were defaulting on their mortgage payment was “dramatic cut or total loss in monthly income” from the borrower losing their job, having their hours cut or from injury or illness that prevented them from working. The number two reason was divorce and adjusting interest rates on ARMs was less than 18% of all deliquencies.  Why? Because the truth is that most ARMs are tied to the LIBOR index which is a full 2-point lower today than it was 18 months ago. So many ARMs actually went down in interest rate.  Yes, some that were tied to other indexs went up, but the majority of ARMs are a margin over the LIBOR, and when it goes down so does the borrower’s interest rate.

So to fix the credit crises we first need to fix our unemployment crisis.  If people have money to spend, they will. And most of all,they can make their house payment.

Moving-on.  Stocks had their worse back-to-back days since Black Monday in 1987. And this may continue for awhile. Usually in this situation the Fed would cut the Fed Funds rate to spur investor spending, but with the target rate already at 1.00% there is nowhere for the Fed to go with it. But, as is the case, when Stocks suffer, Bonds thrive as investors run screaming from Stocks and move their money into more stable Bonds. And mortgage interest rates are based on Bonds, so as Bonds rally mortgage interest rates go down because the margin to investors is higher.

Mortgage Bonds are currently battling a strong ceiling of resistance, but should they break above the current levels it could spell some dramatic reductions in mortgage interest rates, especially here in Salt Lake City and throughout Utah, which is still one of the strongest real estate markets in the nation.  So based on that I would recommend carefully floating right now.

For Salt Lake City, UT this morning’s mortgage rates are as follows:

30-year fixed: 6.00%

20-year fixed: 5.875%

15-year fixed: 5.625%

FHA 30-year fixed: 6.00%

, , , , , , , , , , , , ,

Leave a Comment