It’s official: HUD issues Mortgagee Letter Confirming Changes to FHA Mortgage Insurance

February 1, 2013 by 2 Comments

I’ve been writing about pending changes to FHA insured mortgage loans regarding the mortgage insurance premiums. Yesterday, HUD issued Mortgagee Letter 2013-04 which makes the proposed changes “official”. 

We’ve been anticipating changes to how long mortgage insurance will remain on an FHA insured loan as well as increases to FHA’s mortgage insurance premiums.

It’s no surprise that FHA will increase annual mortgage insurance premiums (paid monthly). The first increase goes into effect with case numbers issued April 1, 2013 and later.

  • 30 year fixed with loan to values of 95% or lower will increase to 130 bps (from 120)
  • 30 year fixed with loan to values greater than 95% will increase to 135 bps (from 125)
  • 30 year fixed FHA Jumbos with loan to values of 95% or lower will increase to 150 bps (from 145)
  • 30 year fixed FHA Jumbos with loan to values greater than 95% will increase to 155 bps (from 150)
  • 15 year fixed with loan to value of 78.01% – 90% will increase to 45 bps (from 35)
  • 15 year fixed with loan to values greater than 90% will increase to 70 bps (from 60)
  • 15 year fixed FHA Jumbos with loan to values of 78.01% – 90% will increase to 70 bps (from 60)
  • 15 year fixed FHA Jumbos with loan to values greater than 90% will increase to 95 bps (from 85)

NOTE: in the Seattle – King County area, FHA jumbos are loan amounts from $417,001 to $567,500.

But wait… there’s more!! 

Effective on case numbers issued June 3, 2013 and later, 15 year fixed FHA mortgages with a loan to value of 78% or lower will have annual mortgage insurance of 45 bps. Currently these loans have zero annual mortgage insurance. 

Want to save on your FHA mortgage insurance? Act quickly!! Click here for a mortgage rate quote for homes located anywhere in Washington state.

FHA streamlined refi’s where the current FHA mortgage was endorsed prior to June 1, 2009 are exempt from this adjustment. These loans still qualify for reduced mortgage insurance premiums.

Per the mortgagee letter, this will be effective on case numbers issued June 3, 2013 and later, FHA insured mortgages will change when mortgage insurance can be terminated. Most FHA loans will have mortgage insurance for the term of the mortgage for loans with case numbers issued June 3, 2013 and later. 

Here is a chart from HUD comparing “previous” (in effect now until the new regulation) and “new” (in effect with case numbers issued June 3, 2013 and later).

FHA Annual Premium Cancellation
FHA Annual Premium Cancellation

If you are considering an FHA insured mortgage and would like to have mortgage insurance that one day drops from your mortgage payment – you have a couple months left to do so. The FHA Case number is typically (but not always) ordered at application. 

I am happy to help you with your FHA purchase or refinance on your home located anywhere in Washington state. I have been originating mortgages at Mortgage Master Service Corporation since April 2000, including FHA loans.  

Filed Under: FHA, Mortgage Insurance Tagged With: , ,

Buying a 2-4 Unit Home using an FHA Mortgage

January 31, 2013 by 13 Comments

mortgageporter-seattle-duplexEDITORS NOTE: This post was written in 2013. FHA loan limits have changed as well as the interest rates posted below. Please see the bottom of this web page for current FHA loan limits. If I can provide you with a current rate quote for your home in Washington, please click here.

If you are considering buying a duplex, triplex or fourplex and you’re going to live in one of the units, FHA is a possible mortgage option.

[Read more…]

Filed Under: FHA, Investment Property Tagged With: , ,

Heads up! HUD issues Press Release with upcoming changes to FHA Mortgages

January 30, 2013 by Leave a Comment

Today HUD issued a press release confirming pending changes to help bolster FHA’s capital reserves.

“These are essential and appropriate measures to manage and protect FHA’s single-family insurance programs” said Galante.  “In addition to protecting the MMI Fund, these changes will encourage the return of private capital to the housing market, and make sure FHA remains a vital source of affordable and sustainable mortgage financing for future generations of American homebuyers.”

Some of the changes to take place with HUD have already been announced. Here are a few points from today’s press release

  • FHA annual mortgage insurance will remain on the mortgage for the life of the loan. This is the mortgage insurance that is paid monthly. Once this goes into effect, home owners will need to either refinance to a non-FHA loan or pay it off to no longer have mortgage insurance. 
  • Mortgage insurance is set to increase. The annual mortgage insurance (remember, this is the one that is paid monthly) is set to increase by 0.10 basis points. FHA Jumbos will see an increase in the mortgage insurance by 0.05%.
  • FHA Jumbo’s will have a larger down payment requirement. Currently a home buyer can do as little as 3.5% down on all FHA insured mortgages. Once this goes into effect, the minimum down payment for an FHA jumbo will be 5%. In the greater Seattle area, loan amounts over $417,000 and up to $567,500 are currently considered “FHA Jumbos”.
  • Manual underwrites for credit scores below 620 with debt to income ratios over 43%. Currently, I believe the lowest credit score our company can do for an FHA insured mortgage is 640.

We are waiting for HUD to issue Mortgagee Letters before this goes into effect. 

Stay tuned!

Filed Under: FHA Tagged With: , , ,

How much home do I qualify for with a $70,000 down payment?

January 24, 2013 by Leave a Comment

I’m working with a couple in Seattle who would like to buy a home. They have excellent credit (scores of 740 or higher) and are planning on using $70,000 for their down payment and closing cost. They want to know how much home they can buy based on their down payment.

The following rate quotes are effective as of January 24, 2013 at 12:20 pm. Rates change constantly, for your personal rate quote for a home located in Washington state, click here.

Conforming High Balance allows them to buy a home priced at $576,000.

The conforming loan limit in Seattle/King-County is currently $506,000. Using a conventional mortgage, they could buy a home priced at $576,000. 

Current mortgage rates for a 30 year fixed conforming high balance ($417,001 – $506,000) based on this scenario is 3.750% (apr 4.094).  

3.750% is priced as close to “par” as possible meaning there is as little rebate credit or discount points priced with the interest rate. We could adjust the rate slightly higher to create more rebate credit to help pay for closing cost or we could reduce the rate by paying more in discount points. 

The loan to value based on a sales price of $576,000 and loan amount of $506,000 is 87.874% which means the Seattle home buyers will have private mortgage insurance (pmi). For this client, we’re opting to include the pmi in their mortgage payment instead of paying it as an upfront additional closing cost or doing “split premium” mortgage insurance.  

The principal and interest payment is $2,343.36 plus private mortgage insurance of $282.52 gives us a “PIMI” payment of $2,625.88. Property taxes and home owners insurance are additional.

The Seattle home buyers will negotiate the seller paying for remaining closing cost and prepaids/reserves estimated at $7900, leaving their amount due at closing very close to $70,000.  If the sellers opt to not pay for closing cost and prepaids, the buyers can use rebate pricing (slightly increasing the mortgage rate) to offset the cost.

FHA allows them to buy a home priced up to $637,500.

FHA mortgages in the Seattle/King County area have a loan limit of $567,500. With a down payment of $70,000 they could buy a home priced up to $637,500. The big difference between FHA and conventional financing is the mortgage insurance. FHA has both upfront and monthly mortgage insurance. 

The current mortgage rate I’m quoting for their FHA scenario is 3.375% (apr 4.059%).

This rate is priced with a little more rebate to help reduce closing cost. If the Seattle home buyers want a lower rate with less rebate credit, they certainly can opt for that. Mortgage rates are not locked until we have a bona fide contract and the rates will be “floating” while they shop for a home.

The principal and interest on this rate and loan amount is $2,552.80 with mortgage insurance at $562.43 providing a PIMI payment of $3,115.23. Property taxes and home owners insurance are additional.

After the rebate credit, if the buyers negotiate the seller paying the remaining balance of their closing cost, prepaids and reserves in the amount of $4,000, the buyers will need around $70,000 for funds due at closing.

VA loans allow them to purchase up to $780,000 with a “VA Jumbo” loan.

The VA zero down loan limit in Seattle is $500,000. When a loan amount exceeds the limit, eligible Veterans can have a down payment based 25% off the difference between the sales price and loan amount.  

For example, a sales price of $780,000 less $500,000 loan limit = $280,000. $280,000 x 25% = $70,000 down payment.

The current rate I’m quoting for this VA Jumbo 30 year fixed loan is 3.250% (apr 3.379).

The principal and interest payment on this loan is $3,136.31. There is no mortgage insurance on a VA loan. Property taxes and home owners insurance are additional. 

If the seller pays for $4500 of the Veteran’s closing cost and prepaids, then the amount due at closing will be around $70,000.

USDA loans are not eligible in the Seattle area because it’s not a rural area.

If you are interested in buying a refinancing a home located anywhere in Washington state, I’m happy to help you. I’ve been originating residential mortgages at Mortgage Master Service Corporation since April 2000. 

Filed Under: Fannie, Freddie and FHFA, FHA, Residential Purchase, VA Mortgage Loans Tagged With: , , , , ,

2013 FHA Loan Limits for Washington State

December 9, 2012 by 2 Comments

HUD has confirmed that 2013 FHA loan limits will remain unchanged from 2012. 

King County, Snohomish County and Pierce County

  • 1 Unit: $567,500
  • 2 Unit: $726,500
  • 3 Unit: $878,150
  • 4 Unit: $1,091,351

Benton and Franklin Counties:

  • 1 Unit: $275,000
  • 2 Unit: $352,050
  • 3 Unit: $525,550
  • 4 Unit: $528,850

Chelan and Douglas Counties:

  • 1 Unit: $342,700
  • 2 Unit: $438,700
  • 3 Unit: $530,300
  • 4 Unit: $659,050

Clallam County:

  • 1 Unit: $384,100
  • 2 Unit: $491,700
  • 3 Unit: $594,350
  • 4 Unit: $738,650

Clark and Skamania Counties:

  • 1 Unit: $418,750
  • 2 Unit: $536,050
  • 3 Unit: $648,000
  • 4 Unit: $805,300

Island County:

  • 1 Unit: $381,250
  • 2 Unit: $488,050
  • 3 Unit: $589,950
  • 4 Unit: $733,150

Jefferson County:

  • 1 Unit: $437,500
  • 2 Unit: $560,050
  • 3 Unit: $677,000
  • 4 Unit: $841,350

Kitsap County:

  • 1 Unit: $475,000
  • 2 Unit: $608,100
  • 3 Unit: $735,050
  • 4 Unit: $913,450

Kittitas County:

  • 1 Unit: $328,750
  • 2 Unit: $420,850
  • 3 Unit: $508,700
  • 4 Unit: $632,200

Mason County:

  • 1 Unit: $310,000
  • 2 Unit: $396,850
  • 3 Unit: $497,700
  • 4 Unit: $596,150

San Juan County:

  • 1 Unit: $593,750
  • 2 Unit: $760,100
  • 3 Unit: $918,800
  • 4 Unit: $1,141,850

Skagit County:

  • 1 Unit: $373,750
  • 2 Unit: $478,450
  • 3 Unit: $578,350
  • 4 Unit: $718,750

Thurston County:

  • 1 Unit: $361,250
  • 2 Unit: $462,450
  • 3 Unit: $559,000
  • 4 Unit: $694,700

Whatcom County:

  • 1 Unit: $375,000
  • 2 Unit: $480,050
  • 3 Unit: $580,300
  • 4 Unit: $721,150

Adams, Asotin, Cowlitz, Ferry, Garfield, Grant, Grays Harbor, Lewis, Lincoln, Okanogan, Pacific, Pend Oreille, Spokane, Stevens, Whakiakum, Walla Walla, Whitman and Yakima Counties:

  • 1 Unit: $271,051
  • 2 Unit: $347,009
  • 3 Unit: $419,425
  • 4 Unit: $521,250

Related post: 2013 Conforming Loan Limits for Washington State

Filed Under: FHA Tagged With: , ,

HUD extends FHA’s Flipping Waiver through 2014

December 4, 2012 by 1 Comment

HUD recently announced they will extend the “anit-flip waiver” through December 2014. Without this waiver, home buyers would not be able to use FHA financing for homes that are considered being “a flip” ( a property that is quickly resold at a much higher price).

From the Federal Register:

Prior to the waiver, a mortgage was not eligible for FHA insurance if the contract of sale for the purchase of the property that secured the mortgage was executed within 90 days of the prior acquisition by the seller, and the seller did not come under any of the exemptions to this 90-day period specified in the regulation.

Through the regulatory waiver, FHA encourages investors that specialize in acquiring and renovating properties to renovate foreclosed and abandoned homes, with the objective of increasing the availability of affordable homes for first-time and other purchasers, helping to stabilize real estate prices as well as neighborhoods and communities where foreclosure activity has been high. The waiver is applicable to all single family properties being resold within the 90-day period after prior acquisition, and is not limited to foreclosed properties. Additionally, the waiver is subject to certain conditions, and mortgages must meet these conditions to be eligible for the waiver.

The Waiver continues to be limited to sales meeting the following conditions:

  • All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
  • In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the Waiver will only apply if the lender meets specific conditions and documents the justification for the increase in value.
  • Seller must be by the owner of record
  • Property may not have been a repeatedly “flipped” over the past year
  • Property was marketed openly and fairly
  • The Waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program. [Reverse Mortgages]

When a home is being resold 20% or higher than what the seller purchased the property for in less than 90 days, often times a second appraisal will be required and the seller will need to show documentation to support the increased value in the home, such as receipts for the improvements made. A property inspection report will also be required by the lender to assure the quality of the improvements made to the property. Any health or safety issues disclosed by the property inspection will need to be corrected.

If a home has been re-sold withing 91-180 days at more at 100% or more than the seller’s acquisition cost, the same conditions will apply.

NOTE: If a second appraisal is required, the home buyer is not allowed to pay for it per HUD. And you can pretty much count on that second appraisal being required. Thanks to LO Comp being passed by the Fed in 2010, your friendly mortgage professional is not allowed to pay for the appraisal either.  

Investors (aka Flippers) who are reselling in a short period of time for a much higher amount than their acquisition cost should be prepared for the cost of the second appraisal when the buyer is using a FHA mortgage for financing. They should also retain detailed records of improvements (including all receipts) when they’re planning to quickly resale a home. The seller’s acquisition cost is the sales price of the home, plus the seller’s closing cost, including real estate commissions. It does not include any repairs. 

If you are considering buying a home located anywhere in Washington State, I’m happy to help you! Click here for a mortgage rate quote for homes located anywhere in Washington.  I’ve been originating home loans at Mortgage Master Service Corporation since April 2000, including FHA insured loans.

Filed Under: FHA, Residential Purchase Tagged With: , ,

FHA Mortgage Insurance Increasing in 2013

November 27, 2012 by Leave a Comment

Last week I shared with you part of HUD’s plan to no longer allow FHA mortgage insurance premiums to terminate to help improve their financial stability. This would be effective for loans guaranteed by HUD in 2013. 

HUD also announced in their report to Congress, their plans to increase the MIP (mortgage insurance premiums) paid on FHA insured loans by an additional 0.10 basis points (or 0.1% of the loan amount). From HUD’s press release:

In 2013, enact an increase of 10 basis points or 0.1 percent to the annual insurance premium paid by borrowers on new FHA loans. This premium increase is expect to add $13 per month for the average borrower and will strengthen FHA’s capital position without limiting access to credit for qualified borrowers.

In the greater Seattle area (King, Pierce and Snohomish Counties), the FHA loan limit (as of today) for a 1-unit single family dwelling is $567,500.  An increase of 0.1% for this loan amount would cost an FHA borrower an additional $47.29 per month.

If you are considering an FHA mortgage for your refinance, I highly recommend you do so as soon as possible while your mortgage insurance premiums may still be cancelled instead of for the life of the loan AND before the mortgage insurance premiums are increased.

If your home is located anywhere in Washington state, where I am licensed to originate mortgages, I can help you! 

Filed Under: FHA, Mortgage Insurance Tagged With: , , ,

FHA Mortgage Insurance to remain on loans FOREVER

November 20, 2012 by 11 Comments

HUD has announced in their Annual Report to Congress Regarding Financial Status of the FHA Mutual Mortgage Insurance Fund Fiscal Year 2012, their plan to revise the cancellation of FHA mortgage insurance premiums. This is set to go in effect on new FHA insured mortgages sometime in 2013. 

From HUD’s report:

Under a policy change made in 2001, FHA has been cancelling required mortgage insurance premiums (MIPs) on loans for which the outstanding principal balance reaches less than 78% of the original principal balance. However, FHA remains responsible for insuring 100% of the unpaid principal balance of a loan for the entire life of the loan, such loan life often extending far beyond the cessation of the MIP payments. As written, the timing of MIP cancellation is directly tied to the contract mortgage rate, not the actual loan LTV. The current policy was put in place at a time when it was assumed that home price values would not decline, but today we know that LTV measured by appraised value in a declining market can mean that the actual LTVs are far lower than amortized mortgage LTV, resulting in higher losses for FHA on defaulted loans. Analyses conducted by FHA’s Office of Risk Management projects lost revenue by approximately $10 billion in the 2010-2012 vintages as a result of the current cancellation policy. The same analyses also suggest that 10%-12% of all claims losses will occur after MIP cancellation. Therefore, beginning with new loans endorsed after the policy change becomes effective later in FY 2013, FHA will once again collect premiums on FHA loans for the entire period during which they are insured, permitting FHA to retain significant revenue that is currently being forfeited prematurely.

With FHA running out of funds, they are having to take measures to protect this mortgage program. You can also expect to see mortgage insurance premiums (upfront and annual) to increase in addition to FHA mortgage premiums remaining on the life of the loan. 

What does this impact you?

If you currently have an FHA mortgage, your mortgage insurance premium that you pay monthly is still set to drop off (cancel) once your principal balance reaches 78% of the loan to value and a minimum of 60 mortgage payments have been made. 

However, if you currently have an FHA mortgage in the mid-to-high 4% range and you have been considering an FHA streamlined refinance, you need to act quickly. 

If you are considering buying a home and you are planning on using FHA for financing, be prepared to have the FHA mortgage insurance remain on the loan until you either sell the home or can refinance to  a conventional mortgage.

If you are interested in buying or refinancing a home anywhere in Washington state, I’m happy to help you!

Filed Under: FHA, Mortgage Insurance Tagged With: ,
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