For folks who want to buy a house right now, but have less than perfect credit scores, and need to qualify with a non-owner occupying co-borrower a FHA Home Loan Program in North Carolina may be the best option. The FHA Loan offers very low mortgage interest rates, because they are guaranteed against a loss by the Bank due to foreclosure.
FHA covers the Bank against defaults through an Insurance program that we call FHA PMI. The Mortgage Insurance program is under constant review from Congress, because no one wants to have to put more money into a program that is suppose to be “self sufficient.”
Understandably, FHA’s Insurance fund has been depleted with the record number of foreclosures in the US during the past 4 or 5 years. Each time the funds get to a low point, they are forced to make changes to the FHA PMI program. Some of the changes made were to tighten underwriting procedures, to prevent more foreclosures. Other changes affected the FHA PMI rates being charged.
In a report last week we learned that FHA’s underwater again. With it’s last report to Congress, they added some ideas that would help them get to a more “stable” situation… they are going to raise FHA PMI rates by a minimum of .10% and they are going to cancel the ability for FHA PMI to “fall off your loan.” Currently, after 60 payments, if you have a loan to value ratio below 78% you can have the FHA PMI payments cancelled.
With an FHA Streamline Refinance, FHA homeowners are required to “restart” their respective mortgage loans – meaning you don’t get credit for those 2 or 3 years of mortgage payments you’ve already made, or the Upfront FHA PMI premiums you paid when you took the loan out. This means that with each new FHA Mortgage (or refinance) you pay a new FHA PMI fee on an “Up Front” basis, and you start paying the monthly fees all over again based upon their fees at the time.
FHA homeowners have witnessed rising PMI rates since 2008 as FHA’s reserve fund began to dwindle — the result of a high number of loan defaults. The FHA has raised its mortgage insurance schedule 5 times in 5 years – and the FHA PMI rates 2013 are going up again!
Here is how FHA MIP schedules have changed since 2008 for borrowers making 3.5% downpayments on a purchase, and for refinances with less than 5% equity :
- January 2008 : 0.50% annual FHA PMI plus 1.50% upfront PMI added to loan balance
- October 2008 : 0.55% annual FHA PMI plus 1.75% upfront PMI added to loan balance
- April 2010 : 0.55% annual FHA PMI plus 2.25% upfront PMI added to loan balance
- October 2010 : 0.90% annual FHA PMI plus 1.00% upfront PMI added to loan balance
- April 2011 : 1.15% annual FHA PMI plus 1.00% upfront PMI added to loan balance
- April 2012 : 1.25% annual FHA PMI plus 1.75% upfront PMI added to loan balance
- January 2013: 1.35% annual FHA PMI plus 1.75% upfront PMI added to loan balance
Despite rising FHA PMI rates, however, the FHA Streamline Refinance program remains a “great deal”. The market has improved to a point where FHA mortgage rates are low enough (for some of those who have an endorsement date after June 1, 2009) to offset rising FHA PMI.
If you received your FHA Mortgage Prior to June, 2013 you can have your FHA PMI cancelled under certain circumstances. If you took your FHA Loan after June of 2013, and you make less than a 10% down payment – the FHA PMI premium is no longer cancelled – you have it until you either refinance to a different type of mortgage loan, or you pay the loan off. If you make at least a 10% down payment, the FHA PMI must stay in place for at least 11 years, and you reach a LTV of 78%.
Steve and Eleanor Thorne 919-649-5058. We’ve saved some families this year over $320 a month! That’s a RAISE, or a Car Payment! So, call us, and let’s see if it makes sense for you to refinance! We offer today’s best rates!