Changes to FHA’s Mortgage Insurance
August 11, 2010 by Kaveh · Leave a Comment
FHA recently announced that they will be changing their Up Front Mortgage Insurance Premiums (UFMIP) as well as their monthly Mortgage Insurance Premium(MIP) starting with FHA case numbers assigned on and after October 4th of this year. Currently, the UFMIP premium is 2.25% of the base loan amount and the monthly MI is .55% of the loan amounts (for LTVs 90% and higher). The new premiums are going to be 1% for the UFMIP and .85 to .90%, respectively.
What does this mean to you as a home buyer? At first glance, it may look like a good move for the home buyer. The up front mortgage insurance is 1.25% lower, therefore, the total amount that will be financed is lower. You would think that this would mean your monthly payments will be lower. Well, not really. Here is a breakdown of what your monthly payments would be for a $400,000 purchase with 3.5% down.
$400,000 Purchase
| Current FHA w/2.25% UFMIP & .55 MI | New FHA w/1% UFMIP & .9% MI | |
|---|---|---|
| Loan Amount | $394,685 | $389,860 |
| Principle & Interest Payment | $1942 | $1918 |
| Mortgage Insurance | $181 | $292 |
| Hazard Insurance | $75 | $75 |
| Property Taxes | $417 | $417 |
| Total | $2615 | $2702 |
What does all this mean and how exactly does it affect you? Well, as you can see, with the new FHA, your total loan amount and principle and interest payment will be lower, however, your monthly mortgage insurance goes up. Even with the lower loan amount, your total monthly payments are going to be higher by $87. This will affect how much someone qualifies for. If you are already pushing the debt-to-income ratios with the current guidelines, guess what, you will be exceeding them with the new guidelines and that means you will have to lower your purchase price to qualify.
So what do you need to do? Well, if your looking at purchasing a home, you will need to be in contract by October 3rd and your lender will need to get an FHA case number for you by then. One day late, you’re under the new guidelines.
If you’re looking to refinance, start now. With interest rates at historical lows, there is no reason for you to wait. Get the process started so that you can get a case number with the current guidelines.
If you have any questions about these changes, please feel free to contact me directly.
Financing Flipped Properties with 20% or More Appreciation
June 22, 2010 by Kaveh · Leave a Comment
There are many challanges that homebuyers face in todays market. We’ve gone from a market where guidelines were very loose and almost anyone could obtain a loan to where now we ask for everything under the sun including DNA from all borrowers, their kids and grandkids. (kidding on the DNA but we’re close. 
)
One of the big challanges has been finding financing for properties that were recently purchased by an investor at a steal and where they are now flipping the property for a profit. In most cases, the investor had gone into the home and updated the property. Sometimes just some simple TLC and other times a full blown remodel of the kitchen, bathrooms, etc. The problem with these transactions is that they are taking place within 90 days of the previous sale and banks were wondering how/why there was such an appreciation in a short period of time.
Lenders started to shy away from financing these properties. Some of the thinking behind it had to do with the amount of appreciation in just 90 days. (The price the investor purchased for and the price they are selling for) The fear was that this was artificially driving up the home prices and the true value of the home may be less.
I’m glad to report that I can now provide financing for these homes. As always, there are some guidelines that we must follow but all in all, they’re not bad. Here are some of the highlights:
- 680 FICO score
- Property inspection must be done and ordered by us. The inspector may not be affiliated with the transaction or party to the transaction in any way. Nor may they receive any referral fees for the inspection. All repairs listed on the inspection must be completed prior to close. The inspection must include:
- The property structure, including the foundation, floor, celing, walls and roof;
- The exterior, including siding, doors, windows, appurtenant structures such as decks and balconies, walkways and driveways;
- The roofing, plumbing systems, electrical systems, heating and air conditioning systems;
- All interiors; and
- All insulation and ventilation systems, as well as fireplaces and solid-fuel-burning appliances.
- The appraiser must justify the increase in value with supporting documentation which verifies that the seller has completed a sufficient legitimate renovation, repair and rehabilitation work on the subject property to substantiate the increase in value or, in cases where no such work is performed, the appraiser provides appropriate explanation of the increase in property value since the last transaction.
- Two appraisals are required. The value will be based on the lower of the two appraisals.
- Arms length transaction
- No dual agency
- Subject must be listed on MLS
- Contract must be dated after the seller took ownership
If you have any questions, please give me a call.
More Changes Coming: 2nd Credit Check at Closing
May 18, 2010 by Kaveh · 3 Comments
As a mortgage professional, when I meet with a client and pre-approve them, one of the things that I always bring up is a basic, common sense advice that yet needs to be reiterated because, as I’ve found out over the years, is not always common sense to everyone. That advice is that the client not go out and start shopping for new furniture, appliances, car, etc. just because they are now “pre-approved.”
The pre-approval is based on the client’s financial situation at the time of application. In the current market, a home buyer can submit an application for a loan today and be pre-approved yet it may take them 30, 60, 90 days or more to find their new home. Some people think that just because they are pre-approved, that they can now go out and apply for new credit at Home Depot or the local furniture store and start purchasing (ie: putting it on credit) items that they will need for their new home.
When we pull a credit report, that report is good for 90 days. We would not re-check the clients credit if the transaction closed within the next 90 days and some people knew this. They would not heed our warning and go out and purchase a new car, new furniture, appliances, even change their job and place their pre-approval (and earnest money deposit) at jeopardy. Read more
95% Financing w/MI Now Available
I’m excited to report that I now have conventional loan program with mortgage insurance to 95% financing. Previously, the only option available for home buyers with less than 10% down payment were FHA loans. Today, that has change. This new program allows up to 95% fin
ancing on loans up to $417,000. The minimum credit score that is required is 680 and the max debt to income (DTI) ratio is 41%.
Although FHA loans are great loans, there have been some recent changes to their guidelines including increasing the Up Front Mortgage Insurance Premium (UFMIP) to 2.25%. FHA loans also require homeowners to keep the monthly mortgage insurance for 5 years no matter what the loan to value is. With this new program, I can offer a great alternative.
If you have any questions or if you would like to run a side by side scenario between the two loans, please contact me.
Mortgage Rates May Be Okay After Fed Pull Out
April 12, 2010 by Kaveh · Leave a Comment
One of the fears that we in the mortgage industry have had over the past few months was what would happen to mortgage rates once the Fed’s program to purchase $1.25 trillion of Mortgage Backed Securities (MBS) ended. The Fed’s program was put into place in September of 2008 and it recently ended on March 30, 2010. When the Fed originally started the program in 2008, the 30 year fixed conforming rate was at about 6.48%. Since then, we’ve seen rates drop to the high 4%’s and are currently sitting in the low 5%’s.
With the Fed’s program ending, the fears were that rates would move higher, and they did at first. (My estimate is that the 30 year fix will be at about 6% by years end)
Over the last week or so, we’ve seen rates settle a bit and claw back from their highs. Today, PIMPCO’s Scott Simon, one of the most respected bond dealers, stated in a Bloomberg article today that “If and when we see mortgages cheapen, we expect to see private institutions stepping in to buy,” Simon said. “Lower- priced homes bottomed last year. Higher-priced homes should bottom later this year.” This is good for home buyers and mortgage rates. The fear that there were no private investors to purchase MBS’ and keep rates relatively low has softened. Although this will be something we’ll have to wait and see but this is encouraging. Read more
$18,000 Home buyer tax credit
March 31, 2010 by Kaveh · Leave a Comment
Californians have a brief window of opportunity to receive up to $18,000 in combined federal and state homebuyer tax credits. To take advantage of both tax credits, a first-time homebuyer must enter into a purchase contract for a principal residence before May 1, 2010, and close escrow between May 1, 2010 and June 30, 2010, inclusive. Buyers who are not first-time homebuyers may use the same timeframes to receive up to $16,500 in combined tax credits if they are long-time residents of their existing homes as permitted under federal law, and they purchase properties that have never been previously occupied as provided under California law.
Under the federal law slated to soon expire, a first-time homebuyer may receive up to $8,000 in tax credits, and a long-time resident may receive up to $6,500, for certain purchase contracts entered into by April 30, 2010 that close escrow by June 30, 2010. Additionally, under a newly enacted California law, a homebuyer may receive up to $10,000 in tax credits as a first-time homebuyer or buyer of a property that has never been occupied. The new California law applies to certain purchases that close escrow on or after May 1, 2010 (see Cal. Rev. & Tax Code section 17059.1(a)(4)). California law generally allows buyers of never-occupied properties to reserve their credits before closing escrow, but buyers seeking to combine the federal and state tax credits will not be able to satisfy the timing requirements for such reservations (see Cal. Rev. & Tax Code section 17059.1(c)(1)(A)). Other terms and restrictions apply to both tax credits. For more information, please check out this link: (2010 Tax Credit for New Home / First-Time Buyer) or feel free to give me a call.
Your Short Sale Just Got Shorter!
February 11, 2010 by Kaveh · Leave a Comment
A short sale is not quite what the name claims to be. A short sale is when a home owner sells their home for less than the amount they owe on the property. The bank who has the loan on the property, must approve the sale and is willing to take a loss on the loan. This approval by the bank can take several weeks to several months. And if they do approve the sale, they typically ask to close in 2-3 weeks.
We (Mason McDuffie Mortgage) recognize how much time a short sale can take from contract to close. So instead of waiting to underwrite a file until we receive the bank’s short sale approval, we have decided to change our internal process to serve you better.
Mason McDuffie will now underwrite short sale purchases that are 100% complete credit files, prior to receiving the pending short sale approval back from the bank/lending institution. Once the bank approval is received, we will then order the property appraisal, do a quick final review and we’re headed to docs. By making this change alone, we expect to shave approximately 2 weeks off the process to meet your COE dates on time, or before!
Mason McDuffie wants to be your Short Sale Solution by staying one step ahead of the competition! Please call or email me today to find out more about our process and how we can help you close your short sales faster!
FHA Financing With No Seasoning
February 10, 2010 by Kaveh · Leave a Comment
As I mentioned on January 15th, FHA has dropped their 90 day flipping rule on purchase transactions. We’ve finally receive guidelines from our investors ad what they are going to be requiring. Here are some of the main details:
- Must be an arms length transaction
- Dual Agency – Separate listing and selling companies, exceptions may be considered on a case by case basis
- Two appraisals and other underwriting conditions may apply
- Contract must be dated after the seller took ownership Read more
Singing to Market Your Listing
January 30, 2010 by Kaveh · 2 Comments
I’m a member of the Real Estate Marketing Association (RMAToday.com) that meets once a week on Thursdays. This is a networking organization in which real estate agents present new properties to the market that are going to be on broker tour that day, discuss what their wants/needs are in regards to buyers and sellers and we also discuss what is going on in our industry. It’s a great way to start off your day and be able to network with other professionals in the real estate, mortgage lending, title, insurance industries.
On Thursday, one of the presenters was Dick Vesperman with Keller Williams in Danville. He was presenting a new property that was coming to the market. He is known for his unique way of presenting his properties. See the video below, sorry that it is out of focus.
Say What? A Simple Explanation Of The Federal Reserve Policy Statement
January 27, 2010 by Kaveh · 2 Comments
The Federal Open Market Committee voted to leave the Fed Funds Rate within its target range of 0.000-0.250 percent.
In its press release, the FOMC noted that the U.S. economy “has continued to strengthen”, that the jobs markets is getting better, and that financial markets are supportive of growth.
There was no mention of the housing market’s strength. The last 3 statements from the Fed included that specific verbiage.
It’s the fifth straight statement in which the Fed spoke about the economy with optimism. This should signal to markets that 2008-2009 recession is over and that economic growth is returning to U.S. economy.
The economy isn’t without threats, however, and the Fed identified several in its press release, including:
- Credit remains tight for consumers
- Businesses are reluctant to hire new workers
- Housing wealth is down
The message’s overall tone, however, remained positive and inflation appears is still within tolerance.
Also in its statement, the Fed confirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period” and to wind down its $1.25 trillion commitment to the mortgage market by March 31, 2010. This is noteworthy because Fed insiders estimate that the bond-buying program suppressed mortgage rates by 1 percent through 2009.
Mortgage market reaction to the Fed press release is, in general, negative. Mortgage rates are rising this afternoon.
The FOMC’s next scheduled meeting is March 16, 2010.
