Garner | NC FHA Expert

Risk Based Pricing?

June 4, 2008 By Eleanor 5 Comments

fha mip

This information is about FHA PMI in June of 2008. This program has changed 8 times from 2008 to 2012. Current FHA PMI rates

You are buying a home this summer and you are LOVIN’ Life! Yippee!

Well, if you have credit scores over 640 – there’s more good news! Effective July 14 FHA will move to Risk Based MIP and your cost of home ownership will be less! What is Risk Based MIP? Well, it’s really just the FHA PMI. FHA insures mortgage loans, they don’t really “Make” loans – so this is their new Insurance Pricing.

So, what does Risk Based MIP mean and what happens if your score is NOT a 640?

Risk Based MIP means that if you are considered a lower “risk”, because your credit score is 580 (for example) then you will have a higher UFMIP. What is UFMIP?? It’s the UpFront Mortgage Insurance Premium charged on an FHA loan, and there’s a monthly fee too.

This is going up to 2.0%… meaning that if you borrow $100,000 on an FHA loan – you will also be charged $2000 in MIP. This mortgage insurance is ADDED to your loan – so your Principal and Interest payments are now based on $102,000 (base loan of $100,000 plus MIP of $2,000). If you sell the home or refinance in the first 7 to 10 years then a portion of the MIP is refunded back to you.

The most significant part of this change is NOT that the UFMIP is going up… the most significant part is that FHA is going to these steps which many see as the first in moving FHA into the “new” sub prime role. The Risk Based Matrix actually accept scores down to 525 (and lower)… although we don’t know of “Investors” who are willing to purchase loans at these low credit scores. FHA does not make loans – they only insure them.

So even though their matrix says you can have a lower score and get a FHA loan – it doesn’t mean that SunTrust (for instance) has to make loans at the lower score. Our best bet is that it will be at least 12 months before loans for people with credit scores under 580 are made.

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What is FHA PMI?? As of April 2008

April 14, 2008 By Eleanor 20 Comments

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THERE IS AN UPDATE TO THIS INFORMATION - Please click here for CURRENT FHA PMI information… We are leaving it here, in case someone received FHA’s PMI before 1/1/2010, and wants to check on that or the refund…

If you are a potential new homebuyer, you are wading into a brand new world – with it’s own language! One of the first thing you will notice is a reference to Mortgage Insurance and the debate over it’s merits.

FHA refers to default insurance as a Mortgage Insurance Premium or MIP for SHORT! It is similar to the Conventional PMI – but it’s really quite different.

fha mortgage insurance is called MIP

Current FHA guidelinesfor loans over 15 year terms / Purchases and “Non-Streamline” Refinances are:

1.750% Upfront .55 AnnualAnnual MIP will terminate when the LTV reaches 78% either by regular monthly amortization payments or additional prepayments, but not before a minimum of five years of monthly MIP payments are paid, regardless of LTV.
Example: With a $100000 loan the homeowner has a 1.75% premium added to the loan amount. So the new loan amount is $101750 and this is what the principal and interest payments are based upon. (If you move or refinance there’s a prorated amount refunded!) In addition to this, there’s a monthly amount added of .55. To calculate this, multiply $101750 by .55. which is $559.63. This is paid in 12 equal installments, so you add $49.29 to your principal and interest payment.

There are two other items to remember with FHA MIP. One is that if you are purchasing a condominium – there’s no upfront MIP (only monthly).

THE RULES ARE LIKELY CHANGING for FHA and there could be more risk based premiums. PMI (the conventional version of mortgage insurance) has already gone to this model.

For more information on FHA loans, contactSteve and Eleanor Thorne, Government loan Experts at Connect With Us on Facebook in Raleigh, NC 919-649-5058.

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FHA Repair Requirements

April 14, 2008 By Eleanor 4 Comments

FHA Repair requirements Homebuyers are looking for a deal – and sometimes you might think that purchasing a “fixer-upper” might be the best way to go!

The problem is that many sellers, including banks holding foreclosed property, might not want to accept an FHA borrower? Why? Because FHA will not take a property with a paint job like the one shown here. If you were purchasing this property, the exterior repairs would need to be done PRIOR to closing.

Most homebuyers do not want to sink money into a property they haven’t purchased yet – leaving the repairs for the seller (who often doesn’t have a ton of cash on hand, ergo this is why they are selling!).

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FHA did make some moves earlier this year that lead some to believe that it’s EASIER to get financing with FHA on an existing home… and indeed, if you are purchasing a home in fairly good shape the appraisal process is easier! Look through this list with your realtor and we believe that you will agree that a Seller of a property in reasonable repair should accept a contract with FHA financing for the borrower.

Examples of MINOR property conditions that no longer require AUTOMATIC repair for existing properties are:

Examples of Missing handrails;

Cracked or damaged exit doors;

Cracked window glass;

Minor plumbing leaks (such as leaky faucets);

Defective floor finish or covering (badly soiled carpeting);

Rotten or worn out counter tops;

Crawl Space with debris or trash;

Defective paint surfaces in homes constructed Post 1978

Examples of tests that may no longer be REQUIRED:

Wood Destroying Infestation Report-required if there is evidence of READILY OBSERVABLE ACTIVE infestation;

Well (Individual Water Test)-Required if there is knowledge that well water may be near sources of contamination;

Septic Test-required if evidence of system failure.

Don’t be confused when you hear stuff about FHA being a bad program! Get the FACTS! You MIGHT need an FHA 203K home improvement loan – ask us for details!

For more information on FHA MORTGAGES, contact Steve and Eleanor Thorne, The FHA EXPERT in NC 919-649-5058 at Connect With Us on Facebook,