Fha Mortgage Loan Nc | NC FHA Expert

FHA PMI Changes 10/4/2010

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!

Income Qualifications FHA Mortgage Loans in NC

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!