FHA Mortgage Insurance Increasing October 1, 2008

August 27, 2008 by 3 Comments

This is another result of HR 3221, I mentioned in an earlier post that the ceiling was raised for how much could be charged for FHA upfront and monthly mortgage insurance…I recently learned the actual details.

Upfront mortgage insurance will increase from 1.5% to 1.75% for purchases and refinances (not FHA streamlined).  Streamlined refinances will be 1.5% and FHA Secure will be 3.0% (hopefully you refinance before you need FHA Secure).

Monthly mortgage insurance will be 0.55% for loans with less than 10% down (or over 90% loan to value) and 0.50% for loan to values equal or greater than 90%.

Currently we have risked based pricing in effect through the end of September 2008 which rewards down payments and better credit scores.

Based on a 90% loan to value and 680 mid score purchase with a loan amount of $400,000, here’s how now and October 1, 2008 compare (using rates I posted Monday for example sake only–this is NOT a rate quote):

FHA case numbers issued NOW through September 30, 2008:

Upfront MI = 1.25%. 400,000 x 1.25% = $5,000.  Adjusted loan amount (FHA upfront mortgage insurance may be financed) = $405,000 @ 6.5% for 30 years = principal and interest payment of $2559.88.

Montly mortgage insurance (referred to as annual MIP) is 0.50% = 400,000 x 0.50% = 2000.  2000 divided by 12 months = $166.67.

Total payment not including taxes and insurance = $2726.55

FHA case numbers issued October 1, 2008 and later (at least until the moritoriam is over on September 30, 2009):

Upfront MI = 1.75%. 400,000 x 1.75% = $7,000.  Adjusted loan amount = $407,000 @ 6.5% for 30 years = $2572.52.

Monthly mortgage insurance based on this example is the same 0.5% = $166.67 (monthly mortgage insurance is calculated off the base loan amount and not the adjusted loan amount).

Total payment not including taxes and insurance = $2739.19

$12.64 a month may not be enough to have you jump off the fence to buy a home or refinance if the above scenario resembles you.  I know that I would rather have the lower financed upfront mortgage insurance ($2000 lower based on this example).

I prefer the risk based pricing model.  It makes the most sense to me.  Reward more down payment and higher credit and compensate HUD for taking on loans with higher risk (lower down payments and lower credit scores).

FHA’s popularity continues to grow with convetional (Fannie/Freddie) guideines tightening and with the risk based pricing increasing.   Do make sure that your Mortgage Professioanal is qualified and approved to do FHA loans–not all originators are.

Filed Under: FHA, Legislation, Mortgage Insurance

The Ruby Room

August 24, 2008 by Leave a Comment

I just received an invite from on of my clients to attend a fashion show at The Paramount.  This isn’t just any fashion show–it’s for The Ruby Room.   The Ruby Room is a local non-profit that helps provide teens in financial need with gowns, shoes and accessories for their high school prom.   

The event (which is The Ruby Room’s only fundraiser) takes place September 6, 2008 from 7:00-11:00 pm.  For more information or to purchase tickets, click here and create memories for a young lady by helping her attend her high school dance.   

Filed Under: Charity

How Will the New Jumbo Limits Impact You?

August 21, 2008 by Leave a Comment

If you’re buying a home $520,000 or below over the next year, you won’t really be impacted by the reduced FHA Jumbo and Conforming Jumbo limits.   However, if you’re considering buying a home with minimum down, you’re losing $45,000 of financing power on January 1, 2008 with a $522,100 loan limit.

I wrote an article at Rain City Guide in June about how much home $17,550 can buy you in King, Pierce and Snohomish County with the current loan limit of $567,500.  The answer: $585,000 utilizing a FHA Jumbo.   Once the new loan limit is in place for our region, the most you can buy with minimum down will be closer to $540,000.   Although the new minimum required investment at 3.5% (effective October 1, 2008) will increase the amount required to $18,900 (based on a $540,000 sales price).

Want to do conventional 20% down and stay away the "true jumbo" rates by utilizing the maximum conforming jumbo?  Currently, a sales price (or appraised value in the case of a refinance) of $709,000 will get you pretty close to the existing limit at $567,200.  As of January 1, 2009, that sales price (or appraised value) is reduced to $652,500 for a loan amount of $522,000.

Refinances may also be impacted depending on what the payoffs are on the existing balances and if it’s classified as a "cash out" refinance (second mortgages not obtained from when you purchased your home is considered cash out) which have tougher guidelines than a "rate term" refinance.  Underwriting guidelines continue to tighten and will continue as well.

As always, I highly recommend that if you are considering buying or refinancing in the next year, to contact a local Mortgage Professional at your earliest convenience.   The loan limits may not even impact you, it’s never to early to prepare considering our current climate. 

Filed Under: FHA, Jumbo/Non-Conforming, Refinance, Residential Purchase

Extensions: When Your Time is Up on Your Lock

August 20, 2008 by 2 Comments

moneyclockmortgageporterWhen you lock in a mortgage interest rate, it is for a specific period of time, such as 30, 45 or 60 days. Your mortgage professional should make sure it is for an adequate amount of time to close the transaction. If it’s a purchase, the lock may be for a few days after the transaction and if it’s for a refinance, 30-45 days should be plenty of time in a “normal” market for the lock period. Purchases, depending on the type of transaction can be closed from two weeks or more (or more is preferred, less can happen too).

[Read more…]

Filed Under: Interest Rates Tagged With: ,

FHA Mortgage Insurance Premiums to Increase October 1, 2008

August 19, 2008 by 1 Comment

Yep…another bi-product of HR 3221, The Housing and Economic Recovery Act of 2008.  We don’t have the final figures yet…this should be coming out any time from HUD.  The ceiling for FHA’s upfront mortgage insurance will increase after October 1, 2008 from 2.25% to 3% for 30 year fixed programs. 

Currently FHA’s mortgage insurance is risk based (tiered based on credit score and loan to value).  This will be put on hold beginning October 1, 2008 through September 30, 2009.  During this time, FHA’s mortgage insurance will be a flat fee.

I will update you as soon as information becomes available.  HUD should be issuing a Mortgagee Letter with the final rules in the next 30 days.

Other posts regarding HR 3221:

FHA Minimum Down Payment Payment Increasing January 1, 2009

Down Payment Assistance Programs Days Are Numbered

First Time Home Buyer Tax Credit

Conforming/FHA Jumbo Loan Limits to Decrease January 1, 2009

Filed Under: FHA, Mortgage Insurance

Don’t Forget to Vote Tomorrow

August 18, 2008 by Leave a Comment

Vote

Just a friendly reminder that tomorrow you can should vote in Washington State’s Top 2 Primary.   

This election will determine which two candidates will advance to the November General Election. 

So vote…and vote often! 

For more information, click here.

Filed Under: Legislation

JP and Gertrude’s Big Day

August 17, 2008 by 2 Comments

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Today in Fremont amongst hundreds and hundreds of Patches Pals and politicians…JP  and Gertrude’s statue was unveiled to the delight of many.   Pat Cashman did a great job as the narator for this event.

The statue has all ready raised $78,000 for Childrens Hospital and will continue to do so when Pals make donations into the ICU2TV portion of the statue. 

There were so many fans there (most with red noses) that I was not able to get a great shot of the new statue…I plan on visiting again soon.

You can check out more photos from today by clicking here.  (Also included in this photo set are photos taken from when the original statue design was unveiled).

Filed Under: Just for Fun, People, Seattle

Gifts from the Bank of Mom and Dad – Part 1: FHA

August 17, 2008 by Leave a Comment

Home buyers using FHA to finance the purchase of their home can get help from family members towards the down payment and closing costs in the form of a gift.  NOTE:  With the passage of HR 3221, parents will actually be able to contribute towards the down payment and closing costs as a loan instead of a gift (more info to follow–this is not in effect until October 1, 2008).

Both FHA and conventional mortgages allow for gift funds; they have different requirements.  Part 2 of this post will address gifts when conventional financing is involved. 

FHA Gift Requirements…create a paper trail.

HUD wants to make absolutely sure that gift funds are NOT from the seller, real estate agents, builder or anyone who has an interest in the transaction.   Although to the gift giver (donor) this seems invasive, the donor must prove that the funds they are giving are their own and they must sign a Gift Letter that includes the gift amount and that no repayment is required. 

If the gift funds are already in the home buyer’s account:

A copy of the canceled check (front and back) from the donor will be required along with a copy of the home buyer’s deposit slip or bank statement that shows the deposit.   If the donor is not able to provide a copy of the canceled check, they will need to provide other evidence that the funds were theirs (such as the bank statement showing the funds being withdrawn from their account).

If the funds are to be provided at closing to the escrow company:

When the gift funds are from a certified check, cashiers check or money order; the donor must provide a copy of the withdrawal document or canceled check, copy of the check and a copy of their bank statement showing the with drawl of funds.

If the donor borrowed the gift funds, they must provide evidence of where the funds came from and that they did not come from a party who has an interest in the transaction (seller, real estate agent, builder, etc.).

“Cash on hand” is never an acceptable form of gift funds.

Documentation and creating a paper trail is the key with gift funds.   Gift funds can go towards both the down payment and closing costs for an FHA buyer.  Seller contributions are limited to actual closing costs and prepaids (and cannot go towards down payment) after the buyer has met the minimum required investment (3% until December 31, 2008; then the minimum required investment is 3.5% for the buyer).

Gift funds are not limited by family members; employers and charitable organizations (as long as they are not funded by the seller after October 1, 2008) are also permitted to contribute gift funds with FHA financing.  Family members may include brothers, sisters, aunts, uncles–even close family friends as long as the relationship can be documented.

Gift donors may want to check with their Tax Advisor to make sure they avoid paying gift tax (currently $12,000 per parent/donor per child/family member).  For example, two parents (Mom and Dad) could gift $12,000 each for a total of $24,000 for to a child per year.  If the Bank of Mom and Dad want to gift to their daughter or son in law as well, the gift amount could go up to $48,000 without incurring gift tax.  (Again, always check with your CPA or tax advisor).   

If you’re considering FHA financing, check HUD’s site to make sure your lender is FHA approved–many are not.  Mortgage Master is a HUD approved Direct Endorsed FHA lender with FHA underwriters at our location.  Be sure to ask your Loan Originator how long they have been originating FHA loans.  I have been helping home owners with FHA financing for over eight years.   

Do you have questions about financing your home located in Washington State?  Please contact me.

Filed Under: FHA, Underwriting and Qualifying Tagged With: , ,
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