FHA Guidelines

FHA Increases Annual Mortgage Insurance Premiums Again

In case you missed the big event on April 18th, FHA administered an increase to the Annual Mortgage Insurance Premiums for all forward mortgage terms as instructed in Mortgagee Letter 11-10. You may be wondering why FHA would increase their fees again considering they raised fees last fall.

Per a legislative mandate in section 202 of the National Housing Act to ensure that FHA’s Mutual Mortgage Insurance Fund remains financially stable, an increase in the Annual Mortgage Insurance Premiums was required due to growing utilization of the FHA home loan in real estate transactions especially in Northwest Indiana and the surrounding Chicago suburbs. 

The increase by FHA to the Annual Mortgage Insurance Premiums is only 25 basis points (bps) and it should be noted that the Upfront Mortgage Insurance Premium remains unchanged at one percent of the loan amount. In the chart below you can see the actual increase that transpired on April 18th.

Although FHA calculates mortgage insurance premiums on an annual basis, a borrower actually pays mortgage insurance premiums back on a monthly basis. What kind of impact could this have on your monthly FHA home loan payment in Northwest Indiana and the surrounding Chicago suburbs?

Even though FHA has slightly increased their fees yet again, the FHA home loan is still a great value for home buyers and homeowners looking to refinance. If you are ready to begin your discussion on how an FHA home loan could still benefit you, complete your secured online FHA home loan application today!

FHA Guidelines

2011 FHA Maximum Loan Limits – Why You Need to Know

Every year around this time, lenders receive confirmation of the coming year’s Fannie Mae and FHA maximum loan limits. Prior to the real estate bubble it was always a forgone conclusion that the Fannie Mae and FHA maximum loan limits would increase as this was a natural function of increasing home prices.

In the past several years however there has been a fear that the Fannie Mae and FHA maximum loan limits would be decreased as home prices have plunged and stagnated throughout country and even right here in Northwest Indiana.

Surprisingly, both 2011 Fannie Mae and FHA maximum loan limits remained unchanged from 2010. More attention historically speaking would have been given to the Fannie Mae maximum loan limits.

In 2011 much of the talk will be about FHA insured home loans as the home loan pendulum has swung from conventional loans to FHA loans. To illustrate this fact here is a look at the latest trends.

“FHA loans were the most common type of loan, with 43 percent of buyers choosing this option… More than half of first-time buyers (56 percent) chose FHA loans…”

*Profile of Home Buyers and Sellers 2010 – National Association of Realtors

If FHA loans are becoming such a large piece of real estate finance options, you might want to know how it could affect you as a home buyer, a homeowner who wants to refinance or as a homeowner who desires to sell their home.

Understanding how much the FHA maximum loan limit is not as simple as you might think unfortunately. There is not just one FHA maximum loan limit. Besides the maximum loan limit variance between a single family home and a four-family home, property location is the most important criteria.

FHA maximum loan limits are geographically based and whether or not that region is declared as a standard FHA Forward area, a low cost area (floor), a high cost area (ceiling) or a special exception area (i.e. Alaska, Hawaii, Guam and Virgin Islands). Different FHA maximum loan limits also apply to Home Equity Conversion Mortgages (aka. reverse mortgage) and the HOPE for Homeowners program.

Not only do FHA maximum loan limits vary by region, but more importantly they will vary by county. For instance, the FHA maximum loan limit for a single family home in Porter County Indiana is $410,000. Meanwhile in the adjacent county of La Porte County Indiana the FHA maximum loan limit for the same home is only $271,050.

If you are in the process of buying a home, selling a home or refinancing your home in Northwest Indiana, please contact us to learn how the 2011 FHA maximum loan limits could impact your next real estate decision.

FHA Guidelines

New FHA Mortgage Insurance Premiums Start October 4th

For the second time this year, the FHA is modifying their guidelines on mortgage insurance premiums.

Beginning with FHA case numbers issued on or after October 4, 2010, the FHA is changing its upfront and annual mortgage insurance premium structure.

Under the new terms, assuming a 30-year fixed rate FHA mortgage with at least 5 percent equity:

• Upfront MIP drops to 1.000% of the amount borrowed from 2.250%
• Annual MIP increases to 0.850% of the amount borrowed from 0.500%

For homeowners in Valparaiso Indiana and everywhere else, this switch in MIP decreases the upfront cost of an FHA-insured mortgage, but increases the loan’s long-term costs.

Using a $100,000 mortgage as an example, upfront MIP falls to $1,000 from $2,250; monthly MIP jumps to $70.83 from $41.67. The FHA expects the change will yield an additional $300 million in premiums monthly.

The update is a huge win for the FHA whose reserve funds are self-proclaimed to be “perilously low”.  The extra monies should help recapitalize and stabilize the government group.

The FHA is on pace to back 1.7 million loans this year.

For the majority of refinancing FHA homeowners and home buyers in Valparaiso Indiana, the MIP change is neither good nor bad — the borrowing landscape will just looks a bit different.  Yes, FHA home loans will cost more to carry each month, but also they’ll be less expensive to procure. It’s a trade-off and you can apply math formulas to solve for the best time to apply FHA. 

It may be wise to get your FHA case number before October 4, for example, depending on your time frame in the home and the expected life of the mortgage. Or, it may be better to wait until after October 4 to apply.

If you’re unsure of how the new FHA mortgage premiums will impact your application for an FHA insured mortgage, be sure to call or email me for help.

NOTE : The FHA originally announced an implementation date of September 7, 2010. It was subsequently amended to October 4, 2010.

FHA Guidelines

6 Things You Need to Know About New FHA Home Loans

With the passing of H.R. 5981 and the resulting Public Law 111-229, FHA was given authority to change the amount charged to borrowers for both the Up Front and the Annual insurance premiums it requires to insure home loans.

These FHA Mortgage Insurance Premium changes are outlined in Mortgagee Letter 2010-28 and become effective for all FHA case numbers assigned on or after October 4th, 2010.

Here are the 6 things that every home buyer or homeowner refinancing needs to know about changes to FHA Mortgage Insurance Premiums:

1. The Up Front premium is now 1.0 % for all standard FHA programs (purchase money mortgages, full credit-qualifying refinances, streamline refinances)
2. The Annual premium is now .90% for LTVs GREATER than 95% on 30 year loans
3. The Annual premium is now .85% for LTVs EQUAL to or LESS than 95% on 30 year loans
4. The Annual premium is now .25% for LTVs GREATER than 90% on 15 year loans
5. The Annual premium is now .00% for LTVs EQUAL to or LESS than 90% on 15 year loans
6. These premiums apply to purchases, regular refinances and streamlines

Please note that this new law also gives FHA the authority to raise the Annual premium at will up to 1.5% for LTVs at or below 95% and 1.55% for LTVs more than 95%.

Change is inevitable – except from a vending machine. - Robert C Gallagher

If you’re uncertain as to how the new law and changes to FHA Mortgage Insurance Premiums could affect your ability to buy a home or refinance your existing home, contact me for a free mortgage consultation.

FHA Guidelines

FHA Monthly MIP Approved To Triple In Cost to Borrowers

Starting sometime later this year, the monthly cost to carry an FHA-insured mortgage is expected to rise.

In a near-unanimous vote, the House of Representatives gave the FHA power to raise the monthly mortgage insurance premiums it charges to its borrowers.

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, among other details of the bill.

Despite the ability to charge 1.55 percent, FHA officials say an increase to 0.90 percent would be sufficient to self-insure its loans.

In everyday terms, assuming a $200,000 mortgage, the math to a homeowner looks as follows:

• 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

An increase in monthly mortgage insurance premiums will reduce home affordability for buyers in Chesterton Indiana and strain household budgets. 

The news isn’t all terrible, however.

Because higher monthly insurance premiums are expected to pad the FHA coffers sufficiently, the FHA has said it plans to reduce its upfront mortgage insurance premium paid at closing from 2.25 percent down to 1.000 percent. 

On the same $200,000 mortgage, a move like that would reduces closing costs by $2,500.

The bill awaits companion legislation in Senate and final approval into law, but considering the House’s lopsided vote Thursday, it could happen rather quickly.  If you’re planning to buy or refinance a home using an FHA mortgage, you may find that waiting to take the next step could be a costly one, long-term.

The FHA insured close to a quarter of all mortgages made in the first three months of 2010.

FHA Guidelines

RUSH: FHA Closing Costs Rise 0.5% on Monday, April 5th

Starting Monday, April 5, 2010, getting an FHA mortgage will be more expensive for borrowers in Northwest Indiana and throughout the country.

In new guidelines set forth earlier this year, the FHA announced plans to raise additional revenue and reduce the overall risk of its mortgage portfolio. 

The changes include the following:

1. Increase Upfront Mortgage Insurance Premiums from 1.75% to 2.25% for everyone
2. A plan to reduce seller concessions from 6 percent to 3 percent
3. An increase in minimum downpayment for FICOs 580 or lower

For your own loan, to avoid being subject to higher loan costs, make sure to have your FHA Case Number assigned prior to Monday, April 5, 2010.  That means you’ll want to give a full mortgage application before the weekend so your lender can register your loan in time for the deadline.

But don’t leave your application to the last minute.

Friday is Good Friday so most banks will be closed. Your true FHA deadline, therefore, is Thursday April 1.

Also worth noting is that the FHA isn’t done with its changes.

In its policy statement, the group also announced its plans to petition Congress to raise monthly mortgage insurance premiums.  The FHA’s formal request, in summary:

1. Raise monthly premiums by roughly 0.35%, or $29 per $100,000 borrowed per month
2. Lower upfront mortgage insurance premiums by 1.25%, or $1,250 per $100,000 borrowed at closing

For now, the request is neither approved nor acknowledged by Congress. It’s merely a request. And in the event that Congress does approves it, the FHA reserves the right to change its projections.  Either way, it means higher costs for consumers. 

The best plan, therefore, is to get your FHA mortgage into underwriting ahead of the switches because borrowing money will be harder, and more costly.

Contact James K Barath in Northwest Indiana to Qualify for Your FREE FHA Home Loan Approval Today!

FHA Guidelines

The Real Deal Behind the New FHA Guidelines

The mortgage lending landscape in Northwest Indiana changes a lot just like the weather.  Rates and guidelines are in constant flux, and it creates preparedness challenges for buyers that aren’t paying in cash.

The loan you get today won’t always be the loan you get tomorrow.

Because of how frequently bank rules are changing, it can be hard for laypersons to distinguish between mortgage fact and fiction of “what’s coming next”.

Recently, we saw this with respect to FHA home loans.

January 20, 2010, the FHA issued a press release with new lending guidelines.  Specifically, it announced 3 changes that will be effective starting April 5, 2010:

1. Upfront mortgage insurance premiums increase from 1.75% to 2.25%
2. Allowable seller concession reduced from 6% to 3%
3. FICO scores of 580 or lower are subject to a minimum 10% downpayment

But, also in its official statement, the FHA announced it would ask Congress for permission to raise monthly mortgage insurance premiums.  This is where the rumors started.

Nestled on page 348 of the Budget of the United States Government, Fiscal Year 2011, in a section titled Special Topics, there is a 1-paragraph notation that details the FHA’s petition. 

1. Raise monthly premiums by roughly 0.30%, or $25 per $100,000 borrowed per month
2. Lower upfront mortgage insurance premiums by 1.25%, or $1,250 per $100,000 borrowed at closing

For now, the request is neither approved nor acknowledged by Congress. It’s merely a request. And in the event that Congress does approve it, that doesn’t mean that FHA has to stand by its initial projections.

Truth is, about the only thing we know about the future of FHA lending is that, come April 5, 2010, borrowing money is going to be tougher, and more expensive. These are the facts as we know them today.

Homebuyers in Chesterton, Crown Point, Highland, Munster, Portage, Saint John, Schererville and Valparaiso should plan accordingly.

Contact Benchmark Mortgage in Northwest Indiana to Qualify for Your FREE FHA Home Loan Approval Today!

FHA Guidelines

Is That A Mortgage Approval Or Just An Illusion

The economy’s improving but lending standards are not. Nationally and in Northwest Indiana, banks are making mortgage approvals harder to come by.

Underwriting guidelines are tightening.

The data comes from the Federal Reserve’s quarterly survey to its member banks.  The Fed asks senior bank loan officers around the country to report on “prime” residential mortgage guidelines over the most recent 3 months and whether they’ve tightened.

For the period October-December 2009:

• Roughly 1 in 4 banks said guidelines tightened
• Roughly 3 in 4 banks said guidelines were “basically unchanged”

Just 2 of 53 banks said its guidelines had loosened.

Combine the Fed’s survey with recent underwriting updates from the FHA and generally tougher standards for conventional loans and it’s clear that lenders are much more cautious about their loans than they were, say, in 2007.

Today’s home buyers and would-be refinancers in Chesterton, Crown Point, Highland, Munster, Portage, Saint John, Schererville and Valparaiso face a bevy of new borrowing hurdles including:

• Higher minimum FICO scores
• Larger downpayment requirements for purchases
• Larger equity positions for refinances
• Lower debt-to-income ratios

So, if you’re on the fence about whether now is a good time to buy a home, or make that refi, consider acting sooner rather than later.  It doesn’t necessarily matter that mortgage rates are low, or that there’s an up-to-$8,000 home purchase tax credit for households that qualify.  With each passing quarter, fewer and fewer home loan applicants are eligible to take advantage.

Contact Benchmark Mortgage in Northwest Indiana to Qualify for Your FREE FHA Home Loan Approval Today!

FHA Guidelines

New FHA Guidelines Will Be Tougher and More Expensive

Securing an FHA mortgage is about to get more expensive.

In a statement issued Wednesday, the Federal Housing Authority outlined policy changes to its mortgage assistance program. The shift is meant to both reduce the government group’s portfolio risk while strengthening its overall financials.

For consumers in Northwest Indiana, the changes mean higher costs.

As listed in the official announcement, there are 3 major guideline updates for the FHA:

1. Upfront mortgage insurance premiums are increasing to 2.25% from 1.75%
2. Minimum downpayments for applicants with sub-580 FICOs are rising to 10 percent
3. Seller concessions are being limited to 3%, down from today’s allowable 6%

Furthermore, FHA has appealed Congress to raise an FHA borrowers’ monthly mortgage insurance premiums.

To read the FHA’s statement, it’s clear what the group is trying to balance.  On one side, the FHA wants to provide affordable financing to families that need it. That’s its mission statement. On the other side, though, the FHA must manage the risk that comes with insuring lesser-quality loans.

To that end, FHA is stepping up its enforcement of “bad lenders” in hopes of stopping problems where they start.

Also in its new policies, the FHA is introducing a “termination clause”. If banks or loan officers that produce more than their fair share of bad loans, they lose their right to originate FHA mortgages.

As a result, homebuyers in Chesterton, Crown Point, Highland, Munster, Portage, Saint John, Schererville and Valparaiso should expect tougher FHA underwriting in 2010. Not because the FHA says so, necessarily, but because banks don’t want to do “bad loans”.  Lenders are incented to turn down at-risk applicants and, already, we’re seeing examples of this. Despite FHA allowing 580 FICOs and lower, many banks have made 620 their minimum.

Some have other guideline overlays, too.

The FHA’s new guidelines don’t go into effect until spring.  So, between now and then, the old guidelines will apply.  Therefore, if you know you’re going to need an FHA home loan in the next few months in Northwest Indiana, consider moving up your time-frame.

If nothing else, you’ll save some money at closing.

Contact Benchmark Mortgage in Northwest Indiana to Qualify for Your FREE FHA Home Loan Approval Today!