USDA Guarantee Fee Update 8/23/2010

August 24, 2010 by 1 Comment

The Single Family Housing Origination Department of the USDA Home Loan Program announced yesterday that they should have their computer systems up and running to accommodate the changes required by Congress in their fees.

Since the end of May, USDA has been issuing “Conditional” approvals… and because of that, Wells Fargo, Bank of America (and many, many others) are not doing USDA Home Loans.

We are still closing these loans... here’s what the directive says:

Rural Development also is working on a more complete system upgrade to accommodate all provisions of the new law. We expect this full enhancement to be completed as early as possible next fiscal year. While the 3.5 percent up-front fee is sufficient at the current subsidy rate, we must be prepared to make adjustments in later years using the new authority for an annual fee to maintain a zero cost program. We appreciate your role as a lender in responsibly servicing loans in the SFHGLP portfolio and helping us maintain a successful program.

So here’s the headline folks… USDA has the authority to give a lower guarantee fee to “poorer families.”  They also have the authority to charge an ANNUAL (monthly) Mortgage Insurance Fee... they are NOT doing it right now, but reserve the right to do so in the future.

Almost all parts of our state qualify for the USDA Home Loan Program, which offers 100% no money down financing. You will need to meet the income requirements (which vary by county) and you need to have a credit score of at least 620.

If you are considering a USDA Home Loan, Call Steve and Eleanor Thorne, Mortgage Banker in Cary , 919-694-5058.

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DRATS! FHA is Getting More Expensive!

June 15, 2010 by 1 Comment

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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Better Move Fast Premiums Going Up

March 31, 2010 by Leave a Comment

April 3rd is the last day to get the cheaper mortgage insurance premiums /financing rates for FHA loans.

As of April 4th, MIP, or FHA’s version of  PMI/ mortgage insurance, rises from 1.75% to 2.25%, for any application submitted for loan approval.

Buyers have 75 days after application to go to settlement to have the lower rate apply.

For the math challenged, that translates to $1,500 on a $300,000 note – almost reason enough to stop negotiating and make that offer.

If you are looking for the best FHA rates – call Steve and Eleanor Thorne, FFIS, 919-649-5058.

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FHA PMI update

October 20, 2008 by 2 Comments

This is an update to an earlier post reagarding FHA’s version of Mortgage Insurance (which is sometimes referred to as PMI).

As we mentioned, FHA mortgages have a one-time mortgage insurance premium, known as upfront mortgage insurance. The cost of this insurance has bounced around alot this year – and is NOW 2.25% of the loan.

This upfront fee is non-refundable.  There’s also a monthly fee that’s based upon several things, but will generally run .55% of the loan amount.  If you live in the property for more than 5 years, and you have a 20% equity gap – the monthly amount can be dropped just like with it’s conventional counter part – PMI.

The program is similar to the USDA and VA programs.  Both of those loan programs have a type of mortgage insurance (called a Guarantee Fee), that’s non refundable.  The biggest difference is that FHA also has a monthly fee collected.

The common belief that the monthly mortgage insurance on a FHA loan is very expensive is wrong.  Unlike a Conventional Loan, no matter how much you put down, it’s either .55 percent of your base loan amount. When you compare this program to a Conventional Loan Program that requires PMI, you would need to put down at least 10% down in order to get to .52 percent.

These PMI amounts are accurate for Condos, 203k loans – or regular 203b FHA loans.

For more info – call Steve Thorne, Corporate Investors Mortgage Group, 919-649-5058 – FHA Mortgage Loan Specialist!

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What is FHA PMI??

April 14, 2008 by 21 Comments

fha loans

THERE IS AN UPDATE TO THIS INFORMATION – Please click here for CURRENT MIP information… We are leaving it here, in case someone received MIP 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 guidelines for 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, contact Steve and Eleanor Thorne, Government loan Experts at Corporate Investors Mortgage Group in Raleigh, NC  919-649-5058.

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Mortgage Insurance vs Default Insurance

April 14, 2008 by 12 Comments

mortgage rates caryMortgage Insurance, Default Insurance, Homeowners Insurance, Mortgage Life Insurance… it can be confusing!!

Homeowners policies and Mortgage Life Insurance (issued by companies like State Farm) have been around for a long time – and protect you as a consumer against catastophies like hurricanes or disability.

As a general fule of thumb mortgage insurance (for conventional loans) are required for loans with less than 25% equity in the property.  For government loans - you can count on having Mortgage Insurance no matter how much equity you have in the home.

Mortgage Insurance and Default Insurance are virtually the same thing. They are called by different acronyms, dependant upon the mortgage loan program you are using to finance your home.  It was put into place in the early 1970s to protect lenders against giganitc losses created by large numbers of foreclosure (like the economic conditions we find ourselves in today!) Mark Flanders, of Spokane wrote a great article on potential ways to AVOID paying PMI – although these options are quickly going away.

Conventional loans refer to mortgage insurance as PMI, and can be financed, paid by the Lender, or paid on a monthly basis.  Here’s some more information…

  1. One-Time Financed mortgage insurance. We recommend this mortgage insurance product on a regular basis.   A discount is offered in the mortgage insurance rate as the PMI company receives full payment “upfront.”  The premium is added to the loan balance, however it doesn’t adversely affect your equity position, as there are provisions for refunding pro-rated monies back if you sell or refinance.  There are also tax advtanges as your loan amount will be higher.
  2. Lender Paid Mortgage Insurance. If you elect this program, the lender will pay for your mortgage insurance by giving you a higher interest rate. There are times when this might be a good choice (depending on your goals and how long that you will be in the house) and there are times when Investors offer “specials” making this one of the best options. As a borrower who might need PMI – always consider what the TOTAL payment will be.  This payment is often the lowest of the option available – and again you receive the tax advantage of paying slightly more interest.
  3. Monthly mortgage insurance. The “oldest” form of PMI is the monthly paid insurance.  As with all of these programs, the insurance rate is determined by program, FICO and overall investment in the property.  This insurance is the only one (mentioned here) that you can have removed once you gain the required equity in the property. It is also generally the most expensive on a monthly basis.

This is important to understand, especially if you are considering a REFINANCE!

If you are interested in learning more about Mortgage Insurance, or getting pre-qualified for a loan in Raleigh, contact Steve and Eleanor Thorne, Corporate Investors Mortgage Group in Cary, NC, 919-649-5058  We offer the BEST Mortgage Rates!

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