First Time Home Buyers » FHA

FHA MIP New Premiums Effective April 18, 2011

Admin — Fri, 04 Mar 2011 13:47:56 +0000

FHA mortgage insurance premiums are changing for the third time in the past year.

Effective for all case numbers assigned on or after April 18th, an FHA loan will be more expensive.

The annual mortgage insurance premium (MIP) is equivalent to a conventional loan’s private mortgage insurance (PMI) on many levels.

The increase is equal to 25 basis points or 0.25% and applies to all FHA borrowers in the same way. If you have an existing FHA loan, your current MIP payment will not change.

MIP is a percentage and is paid monthly. So, a $200,000 loan is going to have 0.25% in annual increase or $500. The monthly payment would go up by 1/12th of that, or $41.67/month.

This change is largely driven by the large and rapid growth in the use of FHA financing. In 2006, FHA was 4% of the purchase money loans and just 2% of the purchase money in terms of dollars. In 2010, it was 19%. The full FHA report is here.

Rapid growth stretches capital and that’s what is happening now. By law, the FHA must maintain certain levels of reserves.

Thus, your new premiums are all .25% higher and are as follows:

15-year loan term, loan-to-value > 90% : 0.50% per year
15-year loan term, loan-to-value <= 90% : 0.25% per year
30-year loan term, loan-to-value > 95% : 1.15% per year
30-year loan term, loan-to-value <= 95% : 1.10% per year

There is no change planned to the 1 percent upfront mortgage insurance premium (UFMIP) charged by the FHA.

Loans for first time home buyers getting expensive

Admin — Fri, 25 Feb 2011 14:38:16 +0000

HUD has more changes coming for FHA loans. The MIP factors are going up by 0.25% across the board in April and this directly hits the most common loan program for first time home buyers.

MIP is paid monthly. It has roughly the same impact as mortgage rates themselves going up by .25%.

Compared to November’s all-time lows, buying power has been reduced by over 10% in just four months.

We’re using 5% as the comparison rate. Candidly, that’s fairly optimistic. This could be an even wider gap by the time April rolls around.

We’ve used a $300,000 purchase price to end up with a $289,500 base loan amount.

The mortgage insurance change alone equals $60 per month. Coupled with about a $120 per month increase due to mortgage rates, we’re seeing a monthly payment that is $180 per month higher.

Over 10 years, that’s a $26k+ difference.

You can still save the .25% in MIP just by securing your loan on or before the close of business April 15th. As far as mortgage rates go…they’re not going back to 4.3% anytime soon. It actually looks like 5% may be a distant memory soon enough.

If you’re buying a home, you’re much better off doing it sooner rather than later.

Click the read more button to see the full set of assumptions and tables.

Assumptions

These are the values used in this loan comparison. To update any values, go here

Comparison Term (Years):	10
Property Value:	$300,000.00
FICO:	720

Input	Then	April
Loan Type	FHA	FHA
Loan Term (Years):	30	30
Loan Amount:	$289,500.00	$289,500.00
Interest Rate:	4.300%	5.00%
UFMIP:	1.00%	1.00%
MI Factor:	0.900%	1.150%
Closing Costs ($):	$0.00	$0.00
Closing Costs (%):	0.00%	0.00%

Monthly Analysis

Based on the information provided, this table shows the monthly payments for principal, interest, and mortgage insurance
(if applicable).

Loan & Payment Summary	Then	April
P&I Payment	$1,446.98	$1,569.64
Mortgage Insurance	$219.30	$280.21
Monthly Payment	$1,666.28	$1,849.85
Monthly Savings	$183.58	$0.00
Total Loan Amount:	$292,395.00	$292,395.00

Full Mortgage Analysis

Over the comparison term of 10 years, this table reviews the true cost of the loan over time in a way that monthly payments cannot. We remove the principal portions of payments to isolate the cost of interest, mortgage insurance, and any closing costs to calculate the total cost over time.

Real Cost Analysis	Then	April
Total Payments	$194,517.52	$215,596.75
Principal Payments	$59,725.99	$54,554.87
Interest & MI Payments	$134,791.00	$161,041.00
Remaining Balance	$232,669.01	$237,840.13
Total Cost	$137,686.00	$163,936.00
Total Savings	$26,250.00	$0.00

Mortgage Rate Predictions: Week of June 1, 2010

Admin — Tue, 01 Jun 2010 12:53:39 +0000

For the first time in five weeks, both conforming and FHA Chicago mortgage rates rose. The all-out global financial crisis was downgraded to a somewhat global financial crisis and we saw stocks gain at the expense of bonds, including mortgage backed securities.

Last week’s interest rates moved higher largely because concerns moved lower.

Mortgage Rate Predictions: Week of June 1, 2010

This week could be even worse.

In addition to the release of May’s jobs report and consumer confidence data, fears of broader economic slowdown appear to be easing.

As the week goes on, we see report after report and all of them are highly influential.

Tuesday: Consumer Confidence. This is linked to the economy since 70% of the economy is based on consumer spending. High confidence = good economy = worse mortgage rates.

Wednesday: Pending Home Sales and Auto Sales for last month. Both are “big ticket” items and are therefore tied to consumer confidence. High sales of big ticket items = high confidence = good economy = worse mortgage rates.

Thursday: Jobless claims. This isn’t a big report, but will be watched as a forecasting tool for Friday’s big dog of the week.

Friday: Non-Farm Payrolls. April was a net 290k gain. May, economists are thinking we might see 500k. As evidenced by the graph, 500k doesn’t even fit. If job growth even comes close to the 500,000 marker, mortgage rates could zoom higher. Again, employed consumers are confident consumers and high confidence = good economy = worse mortgage rates.

Mortgage rates moved higher last week but are still very low. One of these weeks will be “that week” when the whole mortgage rate game changed. If you’re thinking about refinancing, stop. Call us. It’s time.

FHA Up-Front Mortgage Insurance – Up 0.5% Monday, April 5, 2010

Admin — Tue, 30 Mar 2010 08:45:00 +0000

The changes to the FHA up-front mortgage insurance premiums starts on Monday, April 5th.

There were three big announcements from the FHA early this year including:

UFMIP (Upfront Mortgage Insurance Premiums):

2010 FHA Guidelines Make Borrowing Tougher And More Expensive

Admin — Thu, 21 Jan 2010 09:45:00 +0000

FHA Home Loan Approval Changes

Securing an FHA mortgage is about to get both more expensive and more difficult.

The policy statement hit yesterday and the Federal Housing Authority outlined policy changes to its mortgage assistance program.

Changes to loans for first time home buyers

Admin — Thu, 21 Jan 2010 14:47:11 +0000

The most common first time home buyer loan program has become the FHA 30 Year Fixed in the past year or so.

In a statement issued yesterday, the Federal Housing Authority is changing the home loan approval guidelines and FHA loans will get a little more expensive.

In total, this is designed to reduce the overall risk of their portfolio and strengthen their overall financials.

For first time home buyers, the changes mean higher costs.

There are 3 major guideline updates for the FHA as listed in the official announcement:

Upfront mortgage insurance premiums are increasing to 2.25% from 1.75%
Minimum downpayments for applicants with sub-580 FICOs are rising to 10 percent
Seller concessions are being limited to 3%, down from today’s allowable 6%

Additionally, the FHA has appealed to Congress to raise an FHA borrowers’ monthly mortgage insurance premiums.

They are clearly trying to balance two competing objectives: First, provide affordable loans to people that need it and, second, manage the risk that comes with insuring lesser-quality loans.

The most appealing change is the inclusion of a “termination clause” to remove the lenders who create a disproportionate amount of the bad loans. That will help create a better overall loan pool (the good), but also mean that many lenders will have FHA home loan approval guidelines that exceed the minimum standards. An example of this is that the FHA will buy a 580 FICO loan, but most lenders are requiring a 620 FICO or higher.

The new guidelines don’t go into effect until spring. So, between now and then, the old guidelines and lower MIP charges will apply.

HUD Lifts 90 Day Seasoning Requirement for FHA

Admin — Tue, 19 Jan 2010 07:00:00 +0000

HUD Lifts 90 Day Seasoning Requirement for FHA

The Department of Housing and Urban Development had already lifted the “seasoning requirements” for FHA financing on bank foreclosures.

The Return of the Chicago 2-Flat

Admin — Mon, 28 Sep 2009 12:00:00 +0000

There was a great article in the Chicago Tribune about five or six years ago. It spoke of the incredible values of the Roscoe Village 2-flat and how it had been a tried and true starter home for generations in Chicago. The rent would subsidize the mortgage and appreciation would compound on a larger home value.

Fast-forward to three or four years ago, prices had skyrocketed as investors were buying 2-units with as little as 5% (eventually 0%!!!) down. The values weren’t as extreme as before. In fact, many were selling for more than the value of the cash-flow of the building. Many first-time homebuyers opted for the condo. It made sense.

Fast-forward to about one year ago: Rates were high, uncertainty was high, and the housing market had years of unsold inventory sitting idle. Values, values everywhere and nary a loan in sight.

Fast-forward to today: The Existing Home Supply has dropped significantly, the $8,000 tax credit continues to push a surge in home purchases, and mortgage rates continue to hover near 5%.

Home supplies are off 23% since November of 2008. We are consistently hearing that the remaining condominium inventory looks like a shopping rack after a massive sale. Thin.

If the 23% most desirable homes are now gone, where are all the values hiding?

Well, if what caused the quick drop in real estate prices was the lack of mortgage financing options effectively freezing the housing market, has the 2-flat become the savvy option again?

The supply has certainly not been picked through as hard as the condo market. While Fannie Mae has tightened up many guidelines, they’ve hit two groups the hardest:

Credit scores between 620 and 739 have varying levels of extra fees
2-Units: now require a 20% down payment

This is a staggering reversal from Fannie Mae and has significantly reduced the amount of competition in the 2-flat market.

Enter the FHA 2-Unit

The FHA 2-Unit still only requires a 3.5% down payment. The rent from the subject property can be included in loan qualification calculations. The mortgage insurance varies from .5%-.55% based on down payment. The mortgage rates are not as credit-driven as Fannie Mae’s.

At today’s mortgage rates, rent of roughly $550/month supports roughly $100,000 of loan and mortgage insurance payment. A rental unit earning $1100/month supports nearly an additional $200,000 of loan and mortgage insurance payment. For many of our recent home loan approvals, the combined debt-to-income ratio was actually LOWER on the 2-unit than the condo.

While FHA Condominium Approvals are changing, the condo approval issues remain the same: Are there adequate reserves? Are there too many FHA loans in the building? Are there too many investors in the building? Is there too much commercial square footage? These are not questions for a 2-flat buyer.

Is a 2-flat the right option for you?

I saw something on CNN this morning: 63% of Americans said their personal finance habits would change “permanently” based on the lessons of this past year. Let’s protect our homes the way a home ought to be protected.

To make the 2-flat a conservative option, I’d assume 25% vacancy on the rental unit. That is to say, can I comfortably stomach the payment on my income plus 75% of the rental income?

To make the repairs and maintenance more easily budgeted, I’d set aside 1% of the value of the home annually for repairs. At some point the expenses will arise, this allows you to sleep easier.

To help me expect the unexpected, I’d reach six months principal, interest, taxes, and insurance in cash or equivalent as fast as possible.

Is the 2-flat a good idea? Yes, it’s a great idea. The difference between a great idea and a great decision depends on the planning and team of professionals. If you need a referral of a qualified Realtor who understands the multi-unit market or a financial planner to discuss the impact on your finances, contact us.

Taylor, Bean & Whitaker – FHA FAQ's

Admin — Sun, 09 Aug 2009 14:34:00 +0000

The federal goverment suspended the third-largest issuer of FHA loans – Taylor, Bean, & Whitaker (TBW). They funded $17 billion in the first half of the year and estimates put 20,000-30,000 loan applications in limbo.

Here’s a quick attempt on the FAQ’s:

Q: Did you use Taylor, Bean & Whitaker?

No. Zero loans with us are impacting by this news.

Q: Taylor, Bean & Whitaker is my lender. What do I do now?

Nothing changes. The mortgage contract survives the shutdown of TBW’s future lending. Continue making your payments to the address provided on the dates required until you hear differently in writing.

Q: My loan is in underwriting / cleared to close / scheduled to close. Is everything fine?

No. TBW has no capability to fund a loan and that loan application is no longer advancing.

Q: I closed and funded my home purchase last week, am I okay?

Yes. Purchase loans that have funded are fine. Pay attention to your mail as you may be receiving notification via USPS mail regarding any future changes of payment address.

Q: I closed on a refinance with TBW last week and it was scheduled to fund this week, am I okay?

No. TBW is no longer funding mortgages. Refinances have a three-day right of recission between closing and funding. If you signed your paperwork at the title company on July 31, August 3, or August 4 your loan will not fund. You’d need to start a new FHA mortgage application.

Q: Okay, I get it–any loan in process is terminated. What do I do?

Start over. Question #1 in today’s market should be: “Do you fund your own loans at closing or does the end-lender?”

This not only influences the approval and underwriting control, but in today’s market (with 30,000 new FHA loans being resubmitted) it helps avoid a 60 day re-processing time.

Q: What’s the fastest way to get approved for a new FHA loan?

FHA Rates v Conforming Rates

Admin — Wed, 01 Jul 2009 18:00:00 +0000

The mortgage rates for FHA and conforming loans have moved closer recently.

When we look at someone with perfect credit, single-family home and a 10% down payment, these loans are currently offering essentially the same rates in the low 5′s.