Are Mortgage Insurance Premiums Giving You A Pain? They’re Not Forever, You Know.

Mortgage-Insurance-PremiumThere are a ton of reasons that FHA loans are great. They have lower rates, they require less of a down payment, they’re easy to qualify for.

If you’re in the market for an FHA loan, you probably know all of this.

But there’s one thing–and it’s a big thing–that kind of mars all of that goodness: MIP. For those of you that don’t know, that’s MORTGAGE INSURANCE PREMIUMS. Nasty, nasty words, to be sure, but MIP is unavoidable. Or is it?

As it turns out, it’s possible to refinance that MIP right outta your hair.

The FHA’s, unlike Fannie Mae and Freddie Mac, is an insurer of mortgages. The organization has a set series of guidelines that banks can use to underwrite mortgages. When a bank issues a loan that meets these guidelines, it can be insured by the FHA, meaning that they’ll back up the bank and pay off the debt if that loan goes into default. In short, the FHA has the banks’ backs.

To get THEIR backs, the FHA has a little help of its own.

To make sure their coffers stay full and that they’re flush to handle any loan defaults–the FHA is totally self-funded, in case you didn’t know–they have something called the Mutual Mortgage Insurance Fund (MMI), which gets its money from two types of mortgage insurance premiums paid by FHA-backed borrowers. There’s up-front Mortgage Insurance Premiums and annual Mortgage Insurance Premiums. If you have an FHA loan, you’ve likely paid both types. Chances are, you didn’t like it all that much, either.

But you CAN get rid of MIP. It’s true.

There are several ways that MIP can go away on its own. Most of these, however, require lots of time. But it’s possible to refinance into a conventional loan and get rid of that MIP entirely. The things for which you qualify will vary, of course, depending on your situation. But MIP is something that can add a lot of cost to your monthly mortgage payment and if you don’t have to have it, why have it?

If MIP is a thorn in your side and you’d like to see if you can turn it into a memory, talk to your lender. Interest rates are low and there are lots of programs to help borrowers at every level.

Rates are great right now–both for new loans and for refinancing–and you should know your Ps and Qs. FHA loans offer great opportunities for buyers to get into the homes they want, but they do come with some strings. Make sure you’re educated about your options and that you get the right loan for your situation.

Talk to your lender or financial professional for guidance. Remember: you have options.

 

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Could Greater Access To FHA Loans Be On Its Way For Borrowers?

hud_logoIt’s very quiet, but there could be some good news coming down the pike for borrowers who’ve, thus far, been unable to secure financing through the Federal Housing Agency.

This week marks the National Association of REALTORS Midyear Legislative Meetings & Trade Expo, held each year at this time in Washington, DC. The meetings, unlike many of the other gatherings of real estate professionals across the country throughout the year, are focused mainly on policy and overhauling rules that, perhaps, no longer make much sense.

Today, Shaun Donovan, Secretary of Housing & Urban Development (HUD) addressed the convention at its “FHA: 80 Years & Counting–Regulatory Issues” forum. According to Mr. Donovan, mortgages made to borrowers with low credit scores are nearing an all-time low. Today, he announced plans for expanding consumer access to credit via a counseling program administered by the FHA. The program, called “Homeowners Armed With Knowledge” (HAWK), is set to launch later this year, will offer reductions in both the up-front and annual mortgage insurance premiums for borrowers who complete the program. If buyers keep their loans current and in good standing, they could see rewards in the form of loan reductions, which could add up to more than a fair amount of money for a lot of people.

“People deserve access to credit and the chance to buy a home when they are ready. We are excited about the potential impact HAWK will have on buyers,” said Mr. Donovan. “This is a win for the market, FHA, lenders, and borrowers. It will ensure that FHA will continue as a champion of opportunity for the next 80 years.”

That fees attached to FHA loans are too high are among the chief complaints lenders (as well as government officials) hear from consumers. These fees can account for upwards of 20% of a monthly mortgage payment, and they make it all that much harder for borrowers to pay down their loans or even to purchase a home in the first place.

Secretary Donovan was joined at today’s session by Carol Galante, Commissioner for the FHA. She echoed what he had to say about borrowers being “feed out” of mortgages and that it’s high time changes were made to make loans more accessible.

“HAWK will allow for real savings and give better access to FHA for many individuals,” said Commissioner Galante. She went further to say that FHA’s blueprint to expand credit access will help risk to both lenders and consumers by focusing on education and encouraging borrowers to use counseling, so that they understand the implications of buying a home and, more to the point, borrowing the money to pay for that home.

There’s sure to be much more on this subject as details are further disclosed. Today’s news, however, is really encouraging and has the potential to help more American borrowers realize their dreams of owning a home. If you have any questions about these initiatives, be sure to consult your lender. And as always, stay tuned!

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FHA Loans: What’s The Right Choice for ME?

puzzledIf you’ve been reading the news lately (and if you’re in the market for a new mortgage, you probably have been), there’s been a lot of talk about FHA loans and their benefits. There’s also been a heaping helping of discussion about their downsides.

So what’s right for YOU? 

Lots of folks, for one reason or another, have decided on FHA loans, which are mortgages insured by the Federal Housing Administration. And why not? FHA loans have a lot of benefits for homebuyers, but before you decide if it’s the right thing for you, you need to make sure you know all the facts. While FHA loans ARE terrific and can help lots of people in lots of situations, they’re not the right choice for everyone.

An FHA Loan … What Is It And Why Is It Different Than A Conventional Loan? 

An FHA loan is one that’s insured by the Federal Housing Administration. This is an agency that’s part of the HUD (the Department of Housing and Urban Development). The agency doesn’t make the loans itself, but they do insure them and they do make the rules that go along with them.

One of the reasons that FHA loans are great is that they’re insured. As a result, lenders have some flexibility in the way it can structure loans to help people with little or poor credit history; FHA loans often have better interest rates and it’s easier for borrowers to qualify. The reason the FHA got involved in home loans in the first place was to help people who wouldn’t otherwise be able to qualify for a mortgage loan to be able to buy a house and achieve “The American Dream.”

The Benefits Of An FHA Loan 

There are lots of reasons to choose an FHA loan for your mortgage. Among the biggest advantages is that you’re able to buy a home with a smaller down payment (most conventional loans require that you put at least 20% down). Since not many people have that kind of cash sitting around, this is a pretty big benefit. Looser credit requirements is another big item in the “PRO” column. Typically, a credit score of 580 or higher will make you eligible for an FHA loan. With an FHA loan, you can have a higher debt-to-income ratio. What this means is that you can have up close to 55% or so of your income committed to your debts, whereas with a conventional loan, the limit is 45%.

The Downside of FHA Loans. 

Here are the things that you should really take note of before you decide if an FHA loan is for you. There are downsides to everything; FHA loans are no different.

Remember before when we said the FHA made the rules? Well, it’s the truth. And if you want an FHA loan, you have to follow them. One of these rules is that you have to use a lender they’ve approved and also use an appraiser that they’ve approved, too.

PMI. Private Mortgage Insurance. If you get an FHA loan, this is something with which you’ll get really familiar. The security of that government-backed insurance comes with a price tag, and it’s called “mortgage insurance.” PMI costs about 1.5% of the loan balance … and you have to pay it at closing (or settlement). Also, if your down payment was less than 10% of the price of your home, you’ll have to make insurance payments each month for the duration of your loan.

The Bottom Line

For people whose credit situations aren’t great or who don’t have a lot of liquidity in their assets, FHA loans can be lifesavers. They’re easy to qualify, but there are things to think about before you sign on the so-called “dotted line.” The best thing you can do, no matter what your situation is, is to talk to your lender. They’ll be able to counsel you on the right choice for YOU. An FHA loan might be the way to go, but a conventional loan might work, too.

Get the facts. Get educated. You’ll save yourself a lot of headaches in the long run if you ask the right questions now.

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Are There Any Programs To Help First-Time Homebuyers?

FirstTimeHomebuyersSo you’re thinking about buying a home? Congratulations! Buying your first home is a big decision and one that comes with a lot of excitement, but also with a lot of responsibility.

The good news is that there are a lot of people pulling for and who want to help you!

The government–both state and federal–as well as lenders and lots of other folks, have great programs available for first-time homebuyers that could make a real difference in what you’re able to afford.

Getting Started.

Be sure to consider an FHA loan as an option for financing your new home. FHA loans offer lower down payments and don’t require the kind of credit history that many conventional loans do. You can find out more about them here.

In every state in the Union, there are several programs that can help.

There are counseling agencies that offer free or low-cost counseling to talk about buying, the repercussions of mortgages, what can happen if you default on your loan, and all sorts of things about which you might have questions as you’re getting started. They’ll also counsel you about predatory lending and the sorts of things you should look out for.

There are home ownership vouchers for people who live in public housing; there are agencies throughout the state that can talk to you to see if you qualify. Find out more about what you need to do here.

Depending on what state you live in (or the state in which you intend to buy), there are all kinds of options for programs that can help. Some states offer credits on your taxes, some offer credits at the time you go to settlement. There are often loan programs to help those people who are in lower income brackets, so be sure to check those out.

Often times, if you stay in the house you buy for at least ten years and make all of your mortgage payments, your loan will be completely forgiven (just check the rules in your state). Remember that your government WANTS to you to own your own home. They WANT to see you succeed. And they’re waiting to give you a leg up where you need. Happy home buying and good luck!

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When Should I Apply For An FHA Loan?

first_time_homebuyersAn FHA loan, especially for people who are just starting out, who might have no credit history or, perhaps, whose credit scores aren’t the best, can be a great alternative to a conventional mortgage loan.

With an FHA loan, restrictions are a bit looser and the loans generally require a smaller  down payment than a traditional mortgage.

So when is the best time to apply?

The answer is … whenever you want, really. You can apply for an FHA loan at any time during the year–there really isn’t a “best” time, as far as that’s concerned–but when you’re ready to buy a home, you should give yourself about a two-month window to get the loan approved and all of your so-called ducks in a row. In the case of making sure you’re getting the best financing and that you’re as prepared as you can be, you can’t start too early.

What should you do first?

The best thing to do–the best way to get started–is to call a lender in your area (it’s a good idea to talk to someone who knows the area where you’re looking to move) to talk about what your goals. It’s best to talk to several people to make sure you’re working with someone who’s working for you, who has a proven track record of getting things done on time, and who can actually get you the loan they say they can. Shopping for a lender is smart, and something you should get started with sooner, rather than later, if you’re serious about moving forward with a home purchase.

Once you decide on a lender, he or she will talk to you about your specific situation, make sure your credit is in order (they’ll let you know if there’s anything you should work on), and the next steps in the process.

Once your financing is in place and you know how much you can afford, it’s time to start looking for the house you want to buy. Do yourself a favor and work with a REALTOR. Talk to friends and people you trust about REALTORS with whom they’ve worked (the people closest to you will be honest with you about people they’ve worked with that they liked or didn’t like), then give those people a call. Working with a REALTOR is something you should think about seriously, because they know the legal ins and outs of the areas in which they work (real estate law can be a tricky business), they know what prices are fair (you don’t want to pay more for a house than it’s worth), and will advocate for YOU, rather than for the people who are selling houses.

TIP: Did you know that, for buyers, working with a REALTOR is something that usually comes at no cost at all?

Ask your lender and your REALTOR about first-time homebuyer programs that could help your situation, too. In each state, there are several credits available that might make a difference in what you’re able to afford.

When it comes to getting an FHA loan, there’s no “perfect” time to apply, but it’s a process that can take a little time, so you want to make sure you give yourself the time you need to make sure everything’s processed in plenty of time. With a little time, and some help from your lender, your REALTOR (not to mention your friends and family), you’ll be in great shape to get exactly the home that you want.

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