Guarantee Fee | NC FHA Expert

FHA Lending Sign Of Weak Housing Market?

May 26, 2010 By Eleanor Leave a Comment

FHA has money to lend, and boy is it flying out the doors! David Stevens, the agency’s head is quoted in Bloomburg as saying, “FHA lending last quarter may have topped the combined volume of government-supported Fannie Mae and Freddie Mac in a home-lending market that’s still a government-financed market.”

Is that GOOD news? Well, apparently not. Mr. Stevens told the Mortgage Bankers Conference the week before that:

“This is a market purely on life support, sustained by the federal government,”

“Having FHA do this much volume is a sign of a very sick system.”

I like David Stevens. He’s a true Mortgage Banker, and he has been open and “transparent.” But I’m wondering if he’s not perpetuating some of conversation on the Hill about needing more Mortgage Insurance (Guarantee Fee) for USDA Home Loans!

We do not need to be causing these huge alarms right now Dave! Shhhhh!

The April Housing numbers were released today – and they were the best in 2 years… but the tax credit ended in April, and most anybody who knows anything about anything believes that’s why April was so good!

If you are looking for a mortgage lender in NC – please call Steve and Eleanor Thorne, Mortgage Banker in Cary 919-649-5058

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USDA Home Loans Could Be Getting More Expensive

April 20, 2010 By Eleanor 5 Comments

4/20/10 – As we’ve mentioned (a couple of times) USDA Single Family Rural Development Home Loan Program is running out of money… WHEN that magic date is – we don’t know… But we know it’s coming in the next few weeks.

The Hombuilder’s Association of America is in Washington this week to discuss (read they are begging Congress) ways to get more money to the program FAST! No wonder – it’s a zero down payment loan, and it’s the hottest mortgage product we have! (Guidelines are pretty strict read here if you’ve had a foreclosure or bankruptcy)

Last week two members of the House proposed legislation that would continue the funding… but both bills add requirements that would force lenders to raise the rates for these loans! 8o((

Rep. Shelley Moore Capito (R, WV) the ranking Republican member of the House Financial Services Subcommittee on Housing and Community Opportunity, late Tuesday introduced legislation that would increase the current 2% guarantee fee to between 3% and 4%.

Separate legislation was recently introduced by Rep. Paul E. Kanjorski (D, Pa.), chairman of the House Financial Services Subcommittee on Capital Markets. That version has the lender paying a 3.5% upfront fee when the loan is issued, while authorizing an annual assessment of .5% of the outstanding balance.

Neither program places additional cost on the taxpayers.

The next step is discussion at committee level before a final bill is moved to the House floor. That’s expected to happen quickly, given the money is quickly dwindling during the key Spring selling season.

Okay so WHY does Congress feel that it is necessary to either add a downpayment requirement and/or increase the Guarantee Fee?

These are ZERO Downpayment loans (for current guidelines click here) that have to be located in a more rural area. There are income requirements… these are not $750,000 loans in Los Angeles (where FHA has way high loan limits). For the most part, these are $200,000 to $300,000 loans made to people living in outlying areas who are blue collar workers. They have 2 or 3 jobs, and they are conservative, and the USDA Home Loan program has a LOW default rate!

I’m hopeful that Congress gives the program more money – and I hope upon hope that they don’t make it more expensive!

If you have questions about taking advantage of the USDA Home Loan program in NC – call us. We can tell you exactly what’s happening now! Steve and Eleanor Thorne, USDA Mortgage Specialist, 919-649-5058

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Filed Under: USDA Home Loans Tagged With: $8000 tax credit, FHA LOANS, first time home buyer, first time home buyer tax credit, first time homebuyers, guarantee fee, steve thorne usda mortgage, usda home loan, usda home loan guidelines, usda home loans

USDA Home Loans have PMI?

August 24, 2009 By Eleanor 4 Comments

USDA loans are the coolest loans on the planet right now, and most people don’t understand that it has a form of mortgage insurance…

Mortgage Insurance does not pay your mortgage off when you die (well, maybe there’s a kind that does, but that’s not what I’m talking about). The PMI-type mortgage insurance is default insurance. It covers a small portion to the bank if you default on the loan.

With Conventional loans, it’s referred to as Private Mortgage Insurance, or PMI. This insurance generally cost @ .58%of the loan amount on a monthly basis (assuming you have 10% to put down and really good credit scores).

FHA has Mortgage Insurance Premium, or MIP, which is 2.25% of the loan amount PLUS a monthly amount of .90% of the loan amount (think it’s kinda’ expensive?).

VA has a Guarantee Fee. So if you are Veteran using your VA benefits the fee could be as much as 3%! (For details click here).

USDA Home Loans also have a form of default insurance (PMI), and it’s a Guarantee Fee. The actual dollar amount is a rather complicated formula, and it ends up being about 3.5% – but most people use 3.5% as a rule of thumb for prequalifying purposes. (updated 5.27.2010 from 2% which is what they charged earlier) USDA Home Loans are AFFORDABLE!

Note that starting October 1, 2011 USDA Home Loan will change it’s PMI calculations. Starting in October – there will be a 1% upfront fee and a MONTHLY CHARGE!

If you want more information about USDA Home Loans in NC - please call Steve and Eleanor Thorne, 919-649-5058. We are Mortgage Lenders in the Triangle that specialize in these types of mortgage loans. Ask us about your Tax Credit! We have the lowest rates!

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PMI For VA Loans??

July 15, 2009 By Eleanor Leave a Comment

Veteran’s have a great benefit with VA Financing. It’s a 100% loan, and in most cases, the seller can pay for closing costs. It’s a conservatively underwritten loan, so there Uncle Sam Wants YOU to buy a house! is little chance that 5 or 6 years from now a Vet is going to be in trouble with a mortgage that they can’t afford!

All mortgage products that have less than a 20% downpayment have some sort of “Mortgage Insurance.” I call it “Default Insurance,” because it really benefits the bank – in the event of foreclosure, the bank gets a small amount of money to cover some of their costs (It’s not a policy that pays the mortgage off in the event of death).

PMI is what most of us have heard this “Default” Insurance referred to. For FHA Mortgage Loans, it’s called MIP (click here for details), and USDA Home Loans have a Guarantee Fee, which serves the same default insurance purpose.

Veteran’s Administration Mortgage Loans also have a Guarantee Fee. Here are some basic guidelines regarding how much your fee might be:

A basic funding fee of 2.0 percent must be paid to VA by all but certain exempt veterans. A down payment of 5 percent or more will reduce the fee to 1.5 percent and a 10 percent down payment will reduce it to 1.25 percent.
A funding fee of 2.75 percent must be paid by all eligible Reserve/National Guard individuals. A down payment of 5 percent or more will reduce the fee to 2.25 percent and a 10 percent down payment will reduce it to 2.0 percent.
The funding fee for loans to refinance an existing VA home loan with a new VA home loan to lower the existing interest rate is 0.5 percent.
Veterans who are using entitlement for a second or subsequent time who do not make a down payment of at least 5 percent are charged a funding fee of 3 percent.
Veterans who are classified by the VA as disabled will have a percent (down to zero) of their fee waived.

Why would a Veteran make a Downpayment??? Because, with the cost of the “traditional PMI” the reduced Funding Fee is much C-H-E-A-P-E-R!

We love making loans to Veterans! If you have questions about purchasing a home in Cary, NC using VA financing, or refinancing your VA mortgage please call Steve and Eleanor Thorne, 919-649-5058.