April 18th brings about an additional change with FHA. FHA will increase its monthly mortgage insurance premiums once again. The most recent change was less than 18 months ago.
This leads me to believe that FHA is still short on their reserve requirements and need to make it up in monthly premiums so are passing on additional costs to new buyers.
AS of April 18th, monthly mortgage insurance increases from .90 to 1.15 per month. This means about an extra $10/month in payment per $50,000 in loan amount. If you are looking at an FHA loan purchase, please call me and we can review the numbers in exact detail.
If you have an accepted offer before April 18th, you will be under the current FHA mortgage insurance. If you were delaying your purchase until after tax time, you may want to rethink that. There are many properties on the market, rates are still favorable- the time to purchase is now!
Please call or email with any questions. 503 385-4050 or firstname.lastname@example.org
The changes to FHA Mortgage Insurance has been delayed to October 4, 2010. It seems as if the original Sept date was too soon for IT guys to make the system changes required. This small delay gives homeowners a small reprieve. Change is coming so be prepared!
Hud announced today that as of February 1st, 2010 they are waiving the 90 day rule for sellers to be in title to a property, also know as the “flipping rule”. This is good for 1 year and does have positive influence in the market place!!
As long as the buyer and seller are not related and as long as the seller is not increasing the sales price by more than 20%, there are no other requirements or restrictions to this waiver.
If a seller has increased the price by more than 20%, the lender has to 1)document by a second appraisal what improvements were done to the home to justify the increase, 2) order a property inspection and provide it to the purchaser.
This will help more buyers to purchase these foreclosed homes in a more timely manner and will help reduce the property inventory in the market.
Finally- Hud is listening and is making sense!!
Credit scores have become an even more important factor in the home-buying or refinancing sector than ever before. Today’s borrowers must have a minimum of a 620 middle credit score, for each borrower, to obtain financing. Conventional financing (Fannie/Freddie) have just adopted this standard as well.
Rumor has it that this may jump to 640 soon for all FHA, VA and Conventional financing. Some lenders and investors have already passed this on as an “overlay”. This means that while the specific program doesn’t have that requirement the investors-the ones with the money- are making this a requirement to loan.
To obtain the very best interest rates for a conventional loan, your middle credit score must be 740. If you are applying jointly for credit then both borrowers’ middle scores must meet this requirement.
Keeping your credit on time is, now, more important than ever. We are getting close to the Christmas holiday, remember that credit card balances over 30% of your limit will also negatively hurt your credit scores as well or having too much credit. Don’t be tempted to open all the store accounts just to save 10-15% on purchases. This can be dangerous. New credit, inquiries, and too much credit can also negatively affect your credit scores.
If you are planning on home financing anytime soon, keep your holiday purchases in check. Try paying cash for gifts, staying with a budget or better yet, what about home made Christmas gifts? My parents still have some of my old homemade gifts and they treasure those more than anything we ever bought for them! Remember, it’s the thought and the spirit in which a gift is given not the expense of it that makes gift giving special!
Many have heard about the rumor that HUD and FHA will allow the use of the First Time Homebuyer tax credit for purchasing a new home. Well- yes and no. The new rules have been released and they are as follows:
Borrowers MUST have their 3.5% into the transaction, the tax credit can NOT be used for the down payment. The borrower may use the tax credit for closing costs, buying down the mortgage rate or additional down payment.
The tax credit is “purchased” by an entity or individual for no more than 2.5% of the actual credit so for example, the borrower is allowed the full 8000 credit, they will actually benefit 7800. That is a positive as those looking at purchasing this prior to HUD’s ruling were charging a killing for this! This person or entity can NOT be someone involved in the transaction.
We must document that the borrower has no other IRS obligation that will reduce their ability to receive the tax credit. We must complete IRS 5405 to determine this.
So- Good news, bad news, borrowers will still need 3.5% down, but now maybe won’t need so much in seller credit?
It has been a few weeks since I have had a moment to post anything. I apologize for that but as the lending industry is still changing on a daily basis, I must keep up.
Lenders are still trying to slow their volume by manipulating rates so that borrowers are not locking in rates. Some lender are having issues with their credit lines and either reaching their limits or having the holders of the credit lines auditing files and putting stricter restrictions on the files before they will allow the funds to be disbursed. This is a new review of files that are delaying loans even further. In the “good ‘ole days” a refinance would sign loan documents and after the required 3 day right of rescission where a borrower can legally change their mind and cancel the transaction, the loan would fund. In today’s market, this process can take 6-8 extra days to fund. Loans are still funding just be prepared for delays.
Lenders are also increasing credit score requirements even further still. I have an additional post in regards to credit scores and how to raise your scores in a relatively short amount of time.
On a positive note, Fannie Mae has relaxed a bit and will now allow up to 10 financed properties again. Investors are happy. There are new additional requirements to purchase or refinance 5-10 properties, including a new minimum credit score of 720 and significant cash reserves but it’s a start!
Also on a positive note, thanks to the stimulus package, FHA loan limits are back to 295,000 in Marion and Polk counties. This is good for several reasons. The biggest one is that FHA’s credit score requirements are lower and they have no pricing adjustments for the lower scores.
Are we seeing the end of the tightening cycle? I don’t think so yet, but I do think we will soon. It seems that our new Administration does see and acknowledge the problems, we will just see how it all plays out with the many differing opinions.
With mortgage rates dropping to record lows, it’s no surprise that more and more homeowners are looking to refinance. But while some borrowers will be able to turn these compelling rates into real savings, not everyone can get in on the action. To better understand the refinancing process, here are five things you need to know to refinance in today’s market.
1. Despite the attractive rates, you will have to thoroughly review your financial position before determining whether or not now is the time to refinance. A good rule of thumb is if your mortgage rate is a full percentage point or more higher than current rates, you should consider refinancing. If your rate is above 6 percent currently, then it is a good time to think about it.
2. While 720 is still considered by some to be a solid FICO score, it’s not good enough to obtain the best rates in today’s refinancing market, Instead, borrowers will need a FICO score of at least 740. “FICOs are everything,” Borrowers that don’t have this score can still refinance, but they will face higher rates, which may make refinancing not make sense.
3. Home equity can be another significant barrier to refinancing today. Zillow says roughly one in seven American homeowners actually have negative equity—meaning they owe more on their mortgage than their property is worth. In order to qualify for refinancing, homeowners will have to have a minimum of 3 percent equity in their homes. In addition to solid credit and home equity, you will also need to be able to document income in order to qualify for refinancing.
4. Loan fees lenders charge are another major consideration. Costs to refinance can be 2 ½ to 3% of your loan amount. The fees that you should be paying need to be low enough so that you can recoup your money through the break in the interest rate in a reasonable period of time–usually under four years. If you are planning on moving in a short time then it may not be cost effective to refinance. Borrowers have three main options for paying such fees. Those with enough cash may want to just pay the fees up front. Borrowers with less cash on hand may be able to opt for a higher interest rate instead of paying the fees. A third possibility is to have the fees tacked on to the principal of the mortgage. The key is to chat with your mortgage professional about structuring the fee payment so that it makes the most economic sense for you.
5. Be patient: The wave of refinancing applications comes amid a period of significant downsizing in the lending industry. That means there are fewer employees on hand to handle the surge in business. As a result, expect slower turn times. It can take 20-30 days to know if your loan has been approved. It can take up to 45 days to complete the entire transaction.