Why do FHA loans have less foreclosures than other loans?

Long Beach CA said:
I though FHA loans are more risky.
 
Franklin Advantage:
There are several reasons that FHA (and VA) loans have lower default rates than conventional loans.

1.) FHA and VA loans have always required the borrower(s) to fully document their income. Fannie Mae, Freddie Mac Alt A, and Sub Prime loans have accepted alternate and no income verification loans.

This policy has lead to a disproportionate ratio of self-employed and commissioned borrowers with Fannie Mae, Freddie Mac and other home financing vehicles. When the economy slows down (or stops dead in its tracks), the self-employed and commission borrowers see greater volatility in their income.
 
2.) FHA and VA loans (VA loans have an even lower default rate even though VA loans require no down-payment) are assumable. This allows borrowers who are in trouble to find a buyer for their home with little costs. FHA loans do require the new buyer to qualify for the loan but their flexible underwriting guidelines do not make this difficult.

3.) FHA and VA variable rate loans are more conservative.   
   a.   FHA and VA variable rate loans have never offered deferred interest like Alt A and Sub Prime loans.   
   b.   FHA and VA variable rate loans have an annual interest rate adjustment cap of 1% where Fannie and Freddie have a 2% cap.    
   c.   FHA and VA hybrid loans (loans that are fixed for the initial 3, 5, or 7 years then become variable rate loans) have a 1% adjustment cap after the initial fixed period where Fannie and Freddie had 5% caps and Alt A and Sub Prime loans had caps as high as 7%.

4.) FHA and VA loan limits were lower than Fannie Mae and Freddie Mac. The lower loan limits made FHA and VA loans less desirable during the height of the housing bubble.

There are several additional reasons but the 1st and 4th reasons offered above are probably the main reasons for FHA and VA's current health.

http://www.f-advantage.com/fha.php
http://www.f-advantage.com/va.php

Vesting worksheet question for mortgage ownership?

Los Angeles said:
I am purchasing a home with my parents and I'm not sure how to fill this out.

My dad, mom, and I will be on the mortgage loan and I need advice on how to distribute the ownership.

My dad is an engineer and will probably retire in 5-10 years(has the highest income), My mom owns a business and she might have to close it down and owe money(has the lowest income), and I am an accountant and will not retire any time soon because I'm only 25 years old. Based on our situation, could anyone give me a detailed advice?

What is the best way to fill this form out?

Do we do Joint Tenants, Community Property, Community Property WITH RIGHT OF SURVIVORSHIP, Tenants in Common, or Other?

Franklin Advantage:
Holding title as community property (or community property with right to survivorship) is only for the married. Since you are not married to your parents, these are not options.

Holding title as community property allows either partner to pass on their half of the property to their spouse (right of survivorship) or they can will their interest to another party.

Tenants in common allows title holders to own a separate, unequal interest in the property (Mom owns 50%, Dad owns 40% of the home and you own the remaining 10%). There is no right of survivorship. If any title holder passes away, his or her interest must go through probate if a will was not left.

Joint Tenants allows all title holders to hold an equal, undivided interest in the property with right of survivorship. In Joint Tenancy 3 individuals will each own an undivided 33.33% interest in the property. If any title holder passes away, his or her interest is left to the other title holders unless a will is left leaving their undivided interest to another party.

I would suggest you hold title as joint tenants. Your title should read:
Dad and Mom, husband and wife, and You, a single man (or woman), all as joint tenants.

This will give you all an equal right to the property with rights of survivorship.

Also, I always recommend that you hold title with your name as it appears on your passport, driver’s license or any government picture ID.

http://www.f-advantage.com/articles.php