Is It Time To Refinance?

September 18, 2010 By Leave a Comment

Many of the people we are talking with WANT to refinance – but they figure it’s probably not worth it. Generally those sentiments run from two different camps, either the homeowner is concerned that they have no equity in the home to refinance (and don’t want to pay closing costs out of pocket), or they just figure they have a pretty good rate now, and don’t see a big difference from 5.75 to “whatever the mortgage rates are down to now.”

So let’s talk about what you SHOULD consider with a refinance…

The most fundamental consideration in whether a homeowner should refinance an existing mortgage is the break-even point, which means how soon the cost of the refinance will be recaptured through lower monthly payments. In general, most homeowners are looking for a three year recapture period.  If you are not going to recouperate in that time period… it might not make sense.

CHECK OUT INFORMATION ABOUT THE NEW HARP 2.0 REFINANCE PROGRAM

FOR UNDERWATER HOME OWNERS in North Carolina!  AVAILABLE MARCH, 2012

[Read more...]

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

Property Requirements on FHA

August 26, 2010 By Leave a Comment

We’ve talked to several people in the last couple of days who want to purchase homes using FHA’s 3.5% down payment program… and they are trying to purchase some “unusual” properties. (Click here for more on 2010 Appraisal Requirements)

Here are some GENERAL notes:

  • FHA 203K loans: These loans are “construction loans” that FHA makes.  If you have a $100,000 property… and you make $30,000 in repairs, you need to make a downpayment of 3.5% of $130,000.  Now there’s more to the program – but the main thing to remember is that FHA IS FOR OWNER OCCUPIED LOANS ONLY.  If you are not going to live in the property – it’s not going to work.
  • TRI-PLEX:  An FHA loan on a TriPlex means that there are 3 units TOGETHER on one foundation… not 40 acres with 3 buildings on it.  I know that’s confusing, but that’s the way FHA rules on what a Tri-Plex is.
  • Property with more value in the LAND than the house. This probably isn’t going to work.  FHA is in the business of making HOME loans.  They don’t really like deals with more value in the LAND (then they consider it a LAND loan).  I personally refer those folks to their local USDA Home Loan office, to see if they can help them.
  • Underground Homes, Log Cabins, Geodesic Domes, Mobile Homes, and Tree Houses:  It’s really hard to get FHA to make loans on these properties.  If you have a NEWER Manufactured Home, in NC BB&T might be a good place to start… if it’s older, and on a permanent foundation – we recommend starting with Wells Fargo.  That’s not to say that you can’t finance any of these kinds of property with FHA… just that you need to be in an AREA where there are recently sold, similar properties for comparable sales.

If you are considering a home loan in NC, and you want to get a FHA Mortgage Loan, Call Steve and Eleanor Thorne, FHA Experts 919-649-5058

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One Borrower Has Income One Borrower Has Credit Score

August 18, 2010 By Leave a Comment

When one borrower has most of the income… the other borrower has good credit scores… there ARE options for purchasing a home. Look at the question we had yesterday:

“We want to purchase a home, and I want to know if we can get it.  My husband currently has a mid credit score of 538,  and mine is 678.   He makes about 52,000 and I make 25,000.  I’m still in graduate school full time.  We saved  $4,000 for closing cost so far.  We want the house by the end of October 2010 Can we get a loan?”

Option 1:

Purchase a home using FHA, and have a non-owner occupied co-borrower on the loan with the borrower who has good credit scores. If you know that you can make the payments on your own, then having a parent, or other family member, on the loan will not be a burden to them.  After you’ve made 12 months of payments (and by all account mortgage interest rates will still be low a year from now) you can refinance the loan and take the family member(s) off. [Read more...]

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Filed Under: FHA Mortgage Loans, First Time Home Buyer Tagged With: , , , , , , , , , , , , , , ,

First Time Home Buyer Raleigh NC FAQs

August 14, 2010 By 1 Comment

We work with a TON of First Time Home Buyer’s, and we often find that they need the same basic information to avoid costly mistakes:

- I’m paying $1250 a month in Rent, can I keep my house payments at that same dollar amount? Great News!  When you buy a house, you can get a raise!  (for more info click here).

-  Can I buy a house if I’ve had some credit Boo-Boos? Okay this is tricky – but the answer is YES!  It’s just a matter of how long it will take to get your scores up to 620 (OR 580 if you qualify for NC Housing Finance Agency Money!).  We have a TON of information on Credit Scores, and how to get them higher!  Click here! [Read more...]

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FHA Home Loans for Single Parents

August 14, 2010 By Leave a Comment

With the Economy in a “slump” statistics show more and more families have a single parent.  If you are in this situation, and want to purchase a home, there are some very specific details you should know:

  • FHA requires a 3.5% Investment into the Property, which is lower than the 5% charged on most Conventional Loans.
  • The down payment for a FHA loan can be a gift (for more info about FHA Down Payment requirements click here).
  • FHA loans, in today’s lending environment generally require 12 months of clean credit, and a credit score of at least 620.
  • FHA will consider part time jobs if you’ve only had that part time job for 18 months – most other underwriting requires you to have a 24 month history of working 2 jobs. (and let me just say, if you are a single parent working 2 jobs – God Bless you! WOW! Talked to a Dad today who is doing that!)

CHILD SUPPORT or Alimony

You have to have evidence that you have received child support, on time, for a year for it to count as income. One of the most common problems we see is when a mom will get a child support check, cash it, and deposit part of the check into their account.  In order to have EVIDENCE that you are receiving that income, we need to have bank statements that reflect the entire “check.”  We suggest that mom’s deposit the child support check into their account at the same time each month.  DITTO with Alimony.

We must have evidence that you will receive Child Support or Alimony for at least 3 full years after the date of closing.  Let’s say you receive $300 for each of your 2 children until they are 18.  So if you have a child who is 12 and a child who is 16 – we would only count the 12 year old’s portion of your support in qualifying you for the mortgage.

If you PAY Child Support or Alimony… we are only going to count that payment against you (like a car loan) if you have more than 9 months of payments left per your agreement.  If you are behind on Child Support or Alimony, and the court is garnishing wages for those payments, we would need 12 months history of that “work out” being made on time.  You will need a credit score of at least 620.

Non-Occupying Co-Borrower

You can purchase a home without being married to the other borrower. You could buy the home with your parents (for instance), and they would not have to live in the home. We would take all of their income, all of your qualifying income, all of their debts and all of your debts, and see what the ratios look like.  Having someone purchase the home with you helps from an Income Qualifying standpoint.  Having someone else purchase with you will not help a single parent with CREDIT issues.

Purchasing a home with someone who is NOT a family member would require that the other person live in the property with you. Again, you take all of their income, all of their debts and add it to yours… and their credit needs to be at least as good as no late payments in the last 12 months and at least a 620 credit score. (Don’t have a 620 score yet?  Click here for tips you can start doing today to improve your credit score! 8o))

RoomMates

We are seeing a ton of single parents who are living with OTHER single parents.  If you HAVE a roommate, or if you are GOING to have a roommate – it is very very difficult for us to count that income.  If the roommate is not going on the mortgage loan with you, 99% of the time we can not count that rental income.

Previous Mortgage

If you and your Ex owned a home, and the mortgage was NOT in your name – there’s nothing to worry about.

If you owned a home, and the mortgage was in BOTH names, and you Quick Claim Deeded the Property over to your Spouse… you are STILL responsible for the mortgage.

If the Seperation Agreement says that the SPOUSE is responsible for the mortgage payment -and you were ON the mortgage loan… you are STILL responsible for the mortgage. Unless you have been TAKEN OFF of the mortgage – let’s say the other person refinanced the mortgage and took your name off, or if you sold the home, you are still responsible for the mortgage.

If there was a Short Sale, or Foreclosure on that home, and you were on the mortgage, (even if you did not live there at the time and you the separation agreement said you were not responsible for the mortgage) click here for more details and time lines.

HERE’S THE GOOD NEWS!

Less income, in today’s real estate market – buys MORE home. With Interest rates in the 4% range, and home prices coming so far down – a parent who makes $38,000 with no more than $350 a month in debt can purchase a home in Raleigh with 4 bedrooms, a 2 car garage, in a NICE neighborhood for around $200,000.  The TOTAL payment, Taxes, Insurance, Mortgage Insurance, Homeowner dues and ALL on one we looked at for a mom yesterday was $1050 a MONTH!

So, if you make $35,000 – and receive $300 a month in child support… you could purchase a nice home, and you could GET a room mate to help you make your payments!  NOW really is a great time to purchase a home!

If you are a Single Parent, interested in buying a home, call Steve and Eleanor Thorne at 919-694-5058.  Each situation is different.  Let us help you with a plan that will mean you can purchase a home! We know the FHA guildelines in NC and we love helping people buy a home for their family!

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FHA PMI Changes 10/4/2010

August 13, 2010 By 2 Comments

FHA Continues to make changes to their PMI Rates.  Because of the number of defaults – the monthly rates and the upfront rates for FHA Mortgage Insurance continues to change.  We keep this information on the site for folks who received a FHA Mortgage loan on, or around October of 2010.  We do have the most up to date information on the rates – in the event you are CURRENTLY looking for a FHA mortgage loan and want to know what the FHA PMI rates are today.

For about the 5th time in the last 36 months FHA is changing the way it charges Mortgage Insurance.  While this is a pretty major shift in the Way Mortgage Insurance is calculated for FHA, it’s only about a net $20 per $100K borrowed difference.

HISTORY of FHA’s PMI (Mortgage Insurance)

First off, it’s not called PMI. FHA doesn’t MAKE mortgage loans, they insure them.  The mortgage insurance that they charge is referred to as MIP (cleaver I know, Mortgage Insurance Premium).  I refer to it in my blog posts as FHA’s PMI... well because from a Consumer’s standpoint it works just like PMI, and most people are familiar with that term.

MIP has been charged TWICE to borrowers for YEARS. FHA collects an UpFront Mortgage Insurance Premium that’s gone from 1.5 to 1.75 t 2.25 to 1% of the loan amount.  In years past they’ve refunded part of this UpFront Premium… so if you took out a loan in say 2002, and then you paid that loan off through a refinance in 2004… you received a substantial chunk of that premium back.

Then the Economy went south, and with the changes they made in 2008, they did completely away with the refund…

The other way FHA collects the premium, is in the MONTHLY MIP premium.  In year’s past, that MIP collected on a monthly basis for loans with less than a 5% downpayment was.55%.  For loans where the borrower made more than a 5% downpayment, the MIP was .50%.

How These Changes Compare to the new October 2010 MIP Rates

Okay, because I can pretty easily do the math in my head, let’s compare the “old” rates for FHA Mortgage Insurance to the “new” rates based upon a $100,000 sales price with a “fictitious” mortgage interest rate of 4.25%.

DownPayment Upfront MIP Monthly MIP Loan Amount
With Upfront MIP		 Total Payment
with MIP		 Difference
NEW Method of Calculating MIP
3.5% 1% $75.75 $97,465.00 $555.22 + $24.60
5% 1% $67.96 $95,950.00 $539.97 + $21.64
OLD Method of Calculating MIP
3.5% 2.25% $45.22 $98,671.00 530.62
5% 2.25% $40.47 $97,137.00 518.33

These numbers, at $100,000 Sales Price don’t look that dramatic…  Let’s take the same format, and change the Sales Price so that we can take advantage of the maximum Loan Amount for Wake County, NC $295,000.

So with a Sales Price of $305,000 the numbers look like this…

DownPayment Upfront MIP Monthly MIP Loan Amount
With Upfront MIP		 Total Payment
with MIP		 Difference
NEW Method of Calculating MIP
3.5% 1% $222.95 $297,268.00 $1685.33 + $66.93
5% 1% $210.56 $297,268.00 $1672.94 + $67.08
OLD Method of Calculating MIP
3.5% 2.25% $137.93 $300,947.00 $1618.40
5% 2.25% $125.39 $300,947.00 $1605.86

Well… what do you know?  It’s STILL not that dramatic a difference.  I know my peers are on Facebook, and sending around video saying that this is a “Tax” on home owners.  It’s not.  It’s a way for FHA to get the cash flow they need, while mortgage loans are defaulting.

HERE’s what I think is interesting! You can buy a house with 2723 square feet, in Raleigh, 4 bedrooms, with a 2 car garage built in 2009 for $219,000. With these new FHA calculations, and with today’s interest rates, your down payment is $7,665 (this can be a GIFT) and your TOTAL monthly payment, including Homeowner dues, and taxes and insurance and EVERYTHING is still less than $1050 a month!

If you have pretty good credit (scores above 620) and not more than $350 a month in debt – a family making only $38,000 a year qualifies for this house! Now THAT my friends, is something to get excited about!

If you are considering a FHA mortgage loan in NC, and you want more information about qualifying for a FHA mortgage loan in Cary or Raleigh NC  - please call Steve and Eleanor Thorne, Mortgage Banker in Cary 919-649-5057.  We know FHA Mortgage Programs, and we have the best Mortgage Rates available!

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Income Qualifications FHA Mortgage Loans in NC

July 29, 2010 By 2 Comments

FHA Mortgage Loans are generally easier to qualify for than a more Conventional Home Loan from Fannie Mae or Freddie Mac.  

Specific income qualifications we use to qualify borrowers for mortgage Loans:

  •  FHA allows us to “count” part time income if you have more than an 18 month history of working 2 jobs. 

We can also count tips, as long as you report them! 

Many people in North Carolina working in the IT field are working on long term contracts, they are not actually the employee of the company where their office is.  If you’ve been working on contract for over 18 months we can generally get the loan approved (takes some extra work!).

If you are laid off every year at the same time, we can still get your loan approved.  We just got a loan approved for a guy who works at a local University in their food services department.  Every year, right after graduation in May, he’s laid off.  In August, he is rehired.  He’s done this for 5 years.  Once he receives his August paycheck (in a few weeks) we will be able to close his loan!  We could count his unemployment AND his regular income from the University / State to qualify him!

Using Rental Income to qualify for a FHA mortgage Loan can be tricky – if this is the situation you are in, please click here for details.

One of the first questions we will ask when we speak with you… is how much of your total income you feel comfortable spending on housing. This ratio of Gross Income to Housing Expense helps the lender decide whether you can comfortably afford a home.

When you are qualifying for a loan, a we will use your gross income. That means all the money you earn before taxes, including overtime, commissions, dividends and any other sources. Again, we are looking for the income BEFORE insurance and any money goes out to 401K. If you receive Social Security or Pension income – we will gross that income UP for qualifying!

Your total monthly housing expense as a percentage of your monthly income is called the housing expense (a.k.a.: front-end) ratio. FHA wants a ratio of about 29% of your income to your house payment (including the mortgage, property taxes, mortgage insurance, hazard insurance and any Home Owner Association Dues).

Calculate what your new monthly mortgage payment should be by using the formula:

Gross Monthly Income multiplied by 29% = Maximum TOTAL Mortgage Payment.

Especially in situations when someone is just entering the job market the 29% of gross income just doesn’t “buy” the house of your dreams!  That’s one of the benefits of easier qualifying guidelines for FHA home loans! To qualify, you’re allowed to spend up to 34% of your income on your house payment, as long as everything else in your application shows that you can handle the “stretch.” (READ, as long as you don’t have a ton of other payments, like a $500 car payment!) 

Another thing the FHA Mortgage Underwriter will look at in considering your loan for approval is the difference in your housing expense now to the expense you’ll have if you buy a home. The smaller the increase, the stronger your application looks. So if you are paying $1000 now and your new payment will be $1400, that’s probably okay if your housing ratio is not too high.  If you are paying $1000 a month now, and your new payment is going to $1800… and you have a fairly high housing ratio… we are going to look and see that you have been SAVING money every month at $1000.  We can use that information as a reason to make the loan!

If you have questions about qualifying for a FHA Mortgage Loan in NC, and you are looking for the BEST Mortgage Rates – please call Steve and Elaenor Thorne, 919-649-5058.  We are Professional Mortgage Planners with over 20 years of experience closing FHA Home Loans in NC!

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FHA Appraisal Requirements 2010

July 7, 2010 By 1 Comment

Earlier this year, FHA clarified who was qualified to perform an appraisal.  This seems kinda’ silly, because the appraisers must be on the FHA Appraiser’s Roster… but with the HVCC ruling in May of 2009, big banks started using “management” companies to handle the appraisal process.  The companies quickly became a profit center for the big banks, and that’s when the fun began.

In the fall of 2009, it was not at all surprising for an appraiser from Burlington, NC to be “assigned” a FHA appraisal for a property in Raleigh, NC!  In the Mortgagee Letter 2009-28, FHA clarified the following for the “management” companies:

An appraiser who is primarily experienced in appraising detached, single family dwellings in one market may lack the knowledge, experience and/or sources for obtaining market data that will enable the appraiser to perform quality appraisals on condominiums or manufactured homes in the same market or detached, single family homes in another market a short distance away.

The valuation principles for appraising all residential properties are essentially the same no matter the market in which a property is located, however not all appraisers are knowledgeable and experienced or have access to sources of data for all markets. A lender must not assume, simply because an appraiser is state-certified, that the appraiser is qualified and knowledgeable in a specific market area. It is incumbent upon the lender to determine whether an appraiser’s qualifications, as evidenced by educational training and actual field experience, are sufficient to enable the appraiser to competently perform appraisals before assigning an appraisal to them.

If you are considering a purchase or refinance in NC, please call Steve and Eleanor Thorne, Certified Mortgage Planners, 919-649-5058.  The good news is that Fannie and Freddie just made a similar ruling about appraisals, for more information please click here.

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FHA Guidelines on New Jobs

June 28, 2010 By Leave a Comment

Maybe you just graduated from College – or maybe you have been out of work and are so excited because you finally got a job!  YEAH!  You have a new job, and now you want to get a new house!

Well – go ahead and buy a house.  If you are getting a FHA Mortgage Loan, you will need to have at least 30 days of paystubs before you can close.  So if you have a change in employment of any kind… this applies. (read don’t change jobs while you are in process!)

For most loan programs, we just need ONE paysub, but for FHA we need a full 30 days of paystubs… this really doesn’t make sense sometimes. We have a customer that just graduated from Vet School, she’s worked as an Intern for 2 years (so it’s not like it’s her FIRST job)!  She wanted to purchase her first home, and close for the tax credit.

Well, her new job doesn’t start until July 1st.  If she could get a “non-revocable” contract, then I think the underwriter would have allowed it to close… but who is going to give someone a “non-revocable” contract!?!?  I mean we didn’t just find this out, we knew it within 3 days of taking the loan application, but still, I’ll  bet there ARE tons of people who are trying to close in time of the Tax Credit, and for some small little reason they can’t.

If you are ready to purchase a home in NC, and you are looking for a FHA loan – give us a call!  We know the FHA guidelines, and if there’s a way to make your situation work, we’ll help you get closed!!  Steve and Eleanor Thorne, Mortgage Banker in Cary , 919-649-5058.  We answer First Time Home Buyer Questions!

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DRATS! FHA is Getting More Expensive!

June 15, 2010 By Leave a Comment

FHA Continues to make changes to their PMI Rates.  Because of the number of defaults – the monthly rates and the upfront rates for FHA Mortgage Insurance continues to change.  We keep this information on the site for folks who received a FHA Mortgage loan on, or around June of 2010.  We do have the most up to date information on the rates – in the event you are CURRENTLY looking for a FHA mortgage loan and want to know what the FHA PMI rates are today.

 

As we reported in April, Washington is trying to offset the costs of FHA foreclosures… and so it appears that FHA mortgage Loans are going to get more expensive. Many folks don’t realize that FHA doesn’t really MAKE loans… they just INSURE them.

Last week, the House of Representatives gave the FHA power to raise the monthly mortgage insurance premiums it charges to its borrowers. This bill passed almost unanimously, and although it doesn’t force FHA to raise the monthly fees, it still means that these loans will likely be more expensive later this year.

Currently, monthly mortgage insurance premiums are 0.55% of the unpaid loan balance, divided by 12. The recently approved Federal Housing Administration Reform Act provides for an increase in monthly premium of up to 1.55 percent..

Again, the bill does not force FHA to charge the full 1.55 percent, and FHA officials believe that an increase to 0.90 percent would be sufficient to currently cover the cost of these loans.

Here’s the impact on a 200,000 loan:

  • Current Premium (0.55%) : $91.67 monthly mortgage insurance premium
  • Expected Increase (0.90%) : $150.00 monthly mortgage insurance premium
  • Maximum Increase (1.55%) : $258.33 monthly mortgage insurance premium

No doubt, a fairly large increase, like this,  in monthly mortgage insurance premiums will reduce home affordability for buyers in North Carolina and strain some household budgets as people decide if it makes sense to refinance!

FHA charges mortgage insurance two different ways. It charges a monthly fee, and it charges an upfront fee. (for more click here).  FHA’s upfront mortgage insurance changed earlier this year to 2.25%.  This means that if you are borrowing $100,000 your loan amount is $102,250 with the upfront mortgage insurance.  Because higher monthly insurance premiums are expected to cover the default costs,  FHA indicated that it plans to reduce its upfront mortgage insurance premium paid at closing from 2.25 percent down to 1.000 percent.

This makes sense, because homes in many parts of the country are going to lose some of their value in the next 12 to 18 months.  Why would you want to go INTO a deal with that much additional costs? On the same $200,000 mortgage, a move like that would reduce the upfront cost by $2,500.

Bottom line, if you are considering a FHA mortgage – you might want to move quickly, because it’s going to get more expensive!  Call Steve and Eleanor Thorne, Mortgage Banker in Cary , 919-649-5058.  Certified Mortgage Planners in North Carolina!

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