Archives for March 2010

More Changes Coming to FHA Insured Mortgages

Federal Housing Commissioner David Stevens has released a letter confirming that the upfront mortgage insurance premiums on FHA insured loans will increase effective on case numbers issued on April 5, 2010 and after.  Most FHA transactions will see an increase of 50 basis points to 2.25%.  Currently the upfront mortgage insurance premium (which is typically financed–added to the loan) is 1.75% of the loan amount.  This was issued in a Mortgagee Letter in late January and is "old news". 

His letter also provides notice that other changes that were discussed by HUD earlier (but not included in that mortgagee letter) will be posted in the Federal Register soon and will go into effect this summer.

What will impact most FHA borrowers this summer is the decrease in allowed seller concessions.   Currently FHA allows sellers to pay up to 6% of the sales price towards allowable closing costs.  In a few months, this will be reduced to 3%.  

Also this summer, FHA will require borrowers with a credit score of less than 580 to have a 10% down payment.  Most lenders, including Mortgage Master, have a minimum credit score of 620 currently for FHA loans.

Commissioner Stevens also addresses a recent announcement:

FHA has waived the regulation that prohibits the use of FHA financing to purchase properties that are being resold within 90 days of previous acquisition.  The waiver of regulation took effect for all sales contracts executed on or after February 1, 2010.

A Mortgagee Letter which will have more details, will follow and there are certain conditions that must be met for a property to be eligible for the property waiver.

As you can see, mortgage guidelines are still very much in a tightening mode.  It's hard to say just how long this trend will continue or how long it will last.

It’s Not You, It’s Your Neighbors

Mortgageporterhome One of the most challenging aspects with refinancing homes in the Seattle area is the appraisal.  It doesn't really matter what you paid for it or how much you love your home.  What is probably going to impact the appraised value of your home the most is what your former neighbors have sold their homes for. 

If your neighbor had to drastically drop their sales price to sell their home, it may impact your home value.   The closer their home is located to your home and the more similar to your home, the more weight that home will have as a "sales comparable" to the appraiser. With fewer sales for an appraiser to rely on for sales comparables to your home, it can make it even tougher.  

Appraisers today need to ideally find three – four recently sold homes in your neighborhood to create a value for your home.  They also need to comment on the real estate market and how long homes are typically staying listed.

When I'm helping a home owner who's considering refinancing their home in Washington, I'll do my best to review recent sales in their area and I tell you, it's not an easy job!   At the very least, I'll share what I find with the home owner so they can have a rough idea of what the appraiser may be viewing as well.

If you get a low appraisal, thanks to HVCC (and NY Attorney General Coumo) your mortgage originator cannot order a new appraisal as that's considered "value shopping".   Worse case scenario, if a home owner does not qualify for a home affordable refinance after discovering the appraised value is lower than expected, they may be out the cost of the appraisal (typically around $500).

As home sales pick up and sales prices begin to rise, appraised values will eventually pick up.  Remember, an "appraised value" is different than how you value your home and it's reflective–it will change up or down over time.  Unless you are selling or refinancing your home, what it would "appraise for" doesn't really matter.