FHA Adding Capital Fast Enough?

September 27, 2010 by Leave a Comment

David Stevens, the head of FHA answered questions last week about weather or not his agency would need a “Bailout” from taxpayers. FHA doesn”t make loans, but they insure them, and with so many people without jobs, and properties being foreclosed on… that insurance fund has been tapped into pretty hard.

That’s one of the reasons FHA requested a change in the way MIP is charged.  Those latest, changes go into effect next week.

“If the fund has not gone negative and continues to remain positive it will be thanks to the quick actions of this committee and Congress giving us more authority and actions of this administration,” Commissioner David Stevens said in response to a question at a hearing of the House of Representatives Financial Services Committee.

He went on to tell the Committee:

The FHA is “running on its own. It is financially sound. It is below the minimum capital requirement, so we need to increase that capital but it is not (now) requiring a bailout. We will know more when the actuarial study is complete,” later this fall.

If you are considering a FHA Mortgage Loan in NC, call Steve and Eleanor Thorne, NC FHA Experts 919-649-5058  These changes could definitely make a little less attractive for some folks considering a FHA Streamline Refinance

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Congress Making Changes to FHA Mortgages

April 30, 2010 by 2 Comments

The House Financial Services Committee acted yesterday to move forward H.R.5072, “FHA Reform Act of 2010″ which, in part, makes a move to raise the ceiling on annual FHA mortgage insurance premiums.

FHA does not make mortgages loans, they INSURE them. As an INSURANCE Agency, they are required to hold reserves against any claims  - and because the national default rate is still very high, they’ve had tons of claims.  They are required to hold a 2% capital reserve rate, and it had fallen to .53.

FHA’s Mortgage Insurance Premium is kinda’ like PMI.

Earlier this year Congress approved changes to increase the UpFront Mortgage Insurance Premium (MIP) FHA charges to 2.25%. They also changed the amount of Seller Contributions to 3% (from 6%).  The latest changes will increase the amount of MONTHLY Mortgage Insurance Premium (MIP) higher, in a gradual process.  FHA says it will increase the monthly MIP to an annual rate of @1.5%.

This will affect the “affordability factor” of purchasing for buyers. Currently, a FHA mortgage of $290,000 has a monthly MIP payment of $132.91.  When the MIP is increased to the full 1.5%, that same $290,000 loan will have a monthly MIP charge of $362.50.

If the full Congress approves the annual increase, FHA will then shift some of the upfront premium to an annual premium to reduce the burden on borrowers at closing.

Either way – the cost of borrowing from FHA is going to be more expensive over time – and borrowers will be looking for property that is $30,000 to $40,000 LESS than the properties they are purchasing now. That’s important to remember for those of us working with First Time Home Buyers!

The GOOD NEWS is that it looks like the provision to force FHA downpayments from 3.5% to 5% was dropped. We’ll continue to monitor this.

If you are considering a mortgage loan in North Carolina, and you want more details on FHA  Mortgage Loan Guidelines – please call Steve and Eleanor Thorne, FHA Mortgage Loan Specialists!  We have over 20 years of experience providing homebuyers with the BEST mortgage rates available!

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PMI For VA Loans??

July 15, 2009 by 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!$8000 Tax Credit Update~

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.

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New FHA Insurance Premiums

August 28, 2008 by 3 Comments

THIS POST IS DATE SPECIFIC… note that FHA has changed it’s MIP charges 4 times between 2008 and 2010.  We are leaving this time sensitive data up as a point of reference for people who purchase during that time.  Depending on when you closed, the amount of your refund could be different!  For specific questions, please contact us at 919-649-5058

August, 2008

Several months ago I shared with you the “newest” Risk Based Pricing for FHA Mortgage Insurance (MIP).  Well… that’s changed, again.

With the new Housing Bill, Congress “outlawed” the Risk Based Pricing Model FHA had in place… so now FHA has a NEW PLAN for MIP!  Effective October 1, 2008 the MIP will be calculated at this model:

Upfront premium

Ø     Purchases and credit qualifying refinances:   1.75% upfront.

Ø      Streamline refinances:  1.5% upfront

With respect to the upfront premium, there are no differences for mortgage term or LTV.

Annual Premium

Purchases, Credit qualifying and Streamline Refinances

1.      Greater than 15 year term mortgages

Loan-to-value (LTV) ratio                              Annual premium

Greater than 95%                                         .55

Less than or equal to 95%:                           .50

2.      15 year or less term mortgages

Greater than 90% LTV                                   .25

Less than or equal to 90%                           None

If you are considering a purchase in the RTP area, or need to be pre-qualified for a mortgage loan, please call Steve and Eleanor Thorne, Corporate Investors Mortgage Group 919-649-5058

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