FHA Changes June 2013 = Bad News for Home Buyers
Please don’t shoot the messenger, but I feel obligated to let you know that the FHA changes June 2013 are going to leave a lot of people in a bad spot in years to come. As some of you may recall, I mentioned some huge changes to FHA mortgage insurance premiums last month and this was the big whopper!
For those of you too pressed for time to sort through that article, I’ll give you the cliff notes. When you get a new FHA mortgage loan you have to pay something called mortgage insurance premiums. It’s a requirement on most FHA loans to insure the bank against you defaulting on your mortgage; a necessary evil of offering such low down payment options to home buyers at lower credit standards, as FHA does.
As it stands now, you would only have to pay these mortgage insurance premiums on a monthly basis (roughly $220/month on a $200,000 FHA loan with a 3.5% down payment at purchase) until the loan amount reached 78% of the original purchase price of the home, for a minimum of five years. At today’s interest rates, if you didn’t make any additional payments to your mortgage, your loan amount would hit that point about 9 years into your loan.
What does this mean? This means that right now, in this example, after 9 years your mortgage payment would decrease by $225/month! That’s because the FHA mortgage insurance is currently removed automatically!
So, what are the FHA changes June 2013?
Well, as of June 3, 2013 FHA will make most people pay mortgage insurance forever!
See this chart below and you’ll understand what we mean:
So, how can I lock in before the FHA increases June 2013?
In order to ‘lock in’ the current FHA MIP guidelines, you will need to acquire an FHA case number prior to June 3, 2013. This is a number issued by FHA to a specific borrower and a specific address.
How can I acquire an FHA case number before June 3, 2013?
All you have to do is find the home you’d like to purchase and fill out a fast quote request (good for those just needing more info) or complete a full mortgage application (more for those that have made up their mind and want to get a case number ASAP). At that point, you’ll be contacted to collect the information needed to obtain your FHA case number and ensure you don’t get stuck paying FHA Mortgage Insurance Premiums forever!
HAVE QUESTIONS? E-mail Jason directly!
What is a Mortgage PreApproval?
A mortgage pre-approval is the process in which a potential home buyer completes a loan application and provides the necessary documentation to verify that they can indeed be approved for the mortgage they seek.
Why is my pre-approval useless?
As per the definition above, before getting preapproved for a home loan, a lender or broker should check all of the ‘necessary’ documentation along with the full mortgage application before issuing a mortgage pre-approval letter or certificate. This is not the case in most instances.
Reason #1 – Your lender is just too busy
From the eyes of a mortgage professional, it is much easier to complete a refinance transaction than a purchase. That is just the reality of the business. From the point that you get pre-approved for a loan, it could be as long as 6 months to a year or more before you actually end up finding the home you want and fully applying for the new home loan.
Most loan officers or mortgage ‘professionals’ do not want to invest the time or money (yes, it costs money to pre-approve people… the right way) into such a long term prospect that will inevitably require a lot more attention than a simple refinance. But, at the same time, they don’t want to give up that business. Their answer? Pre-approve everyone and deal with it later! The problem here is, you guessed it, that most of those ‘pre-approved’ buyers don’t really qualify and will spend thousands and countless time to later be disappointed.
Reason #2 – You weren’t completely honest
- Honest Abe
Let’s face it, it stinks to get denied for anything. Rejection is the worst, especially when you want something very badly. Combine that with the fact that buying a home could be the most important decision you face in your life, and you have a pretty high stakes game at hand. It may be tempting to tell a little white lie about your wife’s past foreclosure, or leave out the fact that you write off most of your income, for example.
The important thing to remember here is that by not being completely honest with your loan officer or bank, you are not avoiding denial; you’re simply just delaying it (and costing your family valuable time and money all the while).
Some of the most common fibs are:
- Length of time at your job
- Actual income vs. taxable income (banks will qualify you off of your adjusted gross income, not just the gross)
- Previous foreclosures or bankruptcies
Remember, your mortgage broker or banker needs all of the information up front to be able to accurately pre-approve you for that new home purchase. If not, you could end up spending hundreds or even thousands of dollars on wasted appraisals and inspections for a home you may not qualify for.
Reason #3 – Your pre-approval is from an online lender
It doesn’t take a rocket scientist to figure out that someone hundreds or thousands of miles away may not be able to present the best loan options for you and your family in Florida. How could they? They aren’t even familiar with the area you live in. You would not believe the horror stories I hear from Realtors about deals that didn’t close because of a lazily written pre-approval from an online lender.
Buying a home is a very personal and intimate process. You need someone local that could meet you in person and go over any and all questions you may have. Don’t become a statistic, become a supporter for local business and deal with a professional who cares about you and your family.
Reason #4 – Your income and assets haven’t been verified
This I see ALL the time! If your lender hasn’t asked you for your tax returns, pay stubs and bank statements…you are not pre-approved! There are just so many variables to be considered in the mortgage approval process these days that taking an application just isn’t enough any more.
Here are some very common reasons an originally pre-approved loan would be denied down the road:
- The tax returns show ‘unreimbursed employee expenses’ (these have to be deducted from your total income used to qualify)
- There is a business on the tax return showing a loss (this too will be deducted from any income used to qualify)
- Pay stubs show a 401k loan, alimony or child support payments not previously disclosed (usually the borrower forgets to mention it)
- Bank statements have too many large, unexplained deposits or fail to show sufficient funds to close
The bottom line
There are just way too many things that can go wrong when obtaining a mortgage preapproval. Please make sure that you choose a professional that is very thorough; it may seem like a pain at first to collect all of the necessary documents, but it truly will save you tons of money and headaches later down the road.
As I always say to my clients, “I can tell what you’d like to hear or I can tell you the truth and actually get you into a home of your dreams… the choice is yours”; although honestly, we never let them go with the first option. It’s our job to make sure your home purchase is successful and that is a job we take just a bit more seriously than our ‘competition’.
Find out the exact 3 credit scores the banks use to qualify you…right now!
Florida Mortgage Rates Update
In case you hadn’t heard, Florida mortgage rates are shooting up faster than a 4th of July firework right now. This comes in light of some ‘positive’ economic data and speculation that the end of government stimulus is at a near.
A stimulus, in this broad sense, is when the government takes actions to try to stimulate the economy and get it moving in the right direction. When it is believed that the country is back on the right track, typically the stimulus will be ended and the country’s economy left to grow organically. Basically, Uncle Sam was helping to hold current mortgage rates down for a while and is now most likely going to ‘back off’ and let the market determine the interest rates.
So what are the current rates now?
The good news is that Florida mortgage rates are still incredibly low so it isn’t too late if you’re looking to buy or refinance your home. The key is to try to get yourself locked in as soon as possible. You do not want to leave anything to chance with such a volatile market, especially since it could mean the difference between you getting approved or denied for the loan; which leads us to our next point…
Why else is it important to get the best rate?
Not only does the interest rate directly affect how much you pay every month for you home, but it also impacts a very important figure that your very loan approval hinges on; your Debt-to-Income Ratio (‘DTI’ for short). Debt to income is calculated as follows: monthly gross income/monthly debt. Most home loan products have a certain maximum allowable DTI (somewhere between 30-55% of your gross income, depending on the lender and product). Since increasing your interest rate would also increase your monthly mortgage payment, it will raise your debt-to-income ratio and make it even more difficult to get a loan.
What can I do to get the best rate now?
Fill out an application with a local mortgage company and see what your options are now, before it’s too late. You may be one of those people that are right on the borderline for loan approval and a cheaper Florida mortgage rate may be just what you need to get it done!
When presented with your options, ask how soon you can lock your interest rate in. Depending on the circumstances, you may want to have all of your loan documentation put together already to expedite the process and ensure you lock that rate in as soon as possible.
See current FHA mortgage rates
Learn about the FHA streamline refinance
Current FHA Mortgage Rates
HOME BUYER ALERT! FHA Changes June 2013 … Forever!
One look at the current FHA mortgage rates and it’s not difficult to see why everyone is rushing to their local banks to apply for a new, Florida FHA mortgage.
Looking for Current FHA Mortgage Rates?
Remember the day a few years ago when a mortgage broker called you up and said you could refinance down to a 6% rate? You were ecstatic and jumped at the chance! Now, like so many other things, that rate is a thing of the past and desperately needs a face lift.
Prospective home buyers
Remember when homes cost twice what they do now and finding an affordable one was nearly impossible? In today’s real estate market, it is true it may take some legwork to find the right home, but the American dream of homeownership has truly never been so obtainable. How, you ask? Because of how low our current FHA home loan rates are, of course!
Let me elaborate… The combination of factors that we are currently experiencing in today’s housing markets is actually quite remarkable. Never before in history has there been such an intersection of affordable home values and rock-bottom interest rates, creating a perfect environment to take advantage and jump on the homeowner bandwagon.
Want to learn how to Get Rid of FHA PMI ?
All about FHA PMI
( or FHA MIP, more accurately )
Most people refer to it as PMI, which is short for Private Mortgage Insurance. The truth of the matter is that when speaking in regards to an FHA mortgage in particular, it is actually MIP, or Mortgage Insurance Premium.
“Private” mortgage insurance (PMI) polices are used for conventional mortgages with less than 20% down, while MIP is a premium charged specifically on FHA loans to insure against the borrower’s (yours) default (non-payment) on the mortgage.
FHA PMI is a necessary evil.
It allows banks to issue low down-payment FHA loans to borrowers that otherwise wouldn’t qualify under the more stringent conventional lending guidelines. Without having an insurance against people not making their payments, banks would not give loans with such little down payments as 3.5%, thereby eliminating a huge portion of the home buyer’s market right now.
OK, back to the FHA Mortgage Insurance premiums…
There is an up-front premium to be paid and a monthly (or more accurately, annual) as well. Currently, the up-front FHA MIP for new, 30 year FHA loans with 3.5% down is 1.75% of the loan amount. The annual MIP factor would be 1.25% of the loan amount. So, for example, on a $200,000 loan amount you would pay $3,500 (200,000 x .0175) up-front MIP at closing. In addition, there would be an MIP premium added onto your monthly mortgage payments of $208.33 (200,000 x .00125 annual MIP / 12 months in a year). These are standard fees and set forth by FHA themselves, they do not vary from FHA lender to FHA lender.
Want to find out how much your new FHA mortgage payments will be? Click HERE!
How to Get Rid of it!
OK, now that we have a pretty good idea what it is and why we need it, how can we avoid it?!
Well, as of right now, you could get a 15 year FHA mortgage and put 22% down and avoid mortgage insurance altogether, but even that changes in June (click here for more information of the FHA increases for April 1, 2013 and June 3, 2013). Besides that, most all FHA loans start with MIP, so the real question you should be asking is how can I get rid of it?!
The best thing about FHA mortgage insurance is that it’s automatically cancelled once your loan reaches 78% loan-to-value ratio!
For example, if your loan balance reaches $78,000 and your original purchase price or appraised value was $100,000 when you got the loan. Sounds awesome, right?
The catch is, that on 30 year FHA loans, there is a 60 month minimum requirement, meaning you have to pay mortgage insurance for a minimum of 5 years!
On a typical 30 year FHA loan with a 3.5% down payment and no additional payments made, it would take a little less than 9 years to reach that point.
Tips to avoid unnecessary FHA Mortgage Insurance Premiums
- Switch to a biweekly payment plan once your new loan is originated; this will shave 2 years off the previous calculation and make the 78% point around 7 years!
- Think about a 15 year loan. Until June of this year, if you get a 15 year FHA mortgage and put 22% down, you can avoid FHA MIP altogether!
- Take a ‘conventional’ approach by comparing an FHA loan with other low down payment conventional options. They can go as little as 3 or 5% down and almost always have lower mortgage insurance premiums. (These are typically harder to qualify for and may require a stronger credit profile, but a lot of people are getting approved lately)
Subprime Mortgages : Whatever happened to them?
Oh the bittersweet memories of subprime mortgages. Remember the good ol’ days when you could get a million dollar home with no money down and no income verification? What about the enticing 1% ‘option arm’ loan program that so many people opted for back in the day? Who knew so many people would be tricked into loans with terms they didn’t or couldn’t comprehend. I’ll bet that even you, the reader, were duped at some point!
The banking industry finally got wise after everyone stopped making their payments and tightened up on some guidelines. The problem is that they are giving the impression that it’s impossible to qualify for a loan these days. So that leaves us with the question; whatever happened to subprime mortgages? They are still around! They’re simply disguised as traditional loan programs and require a little more homework on your end. For example, did you know?
- A USDA mortgage loan allows for borrowers to purchase a home with NO down payment (that’s not a misprint, 0% down). So will a VA loan for veterans!
- An FHA mortgage still requires a 3.5% down payment, but you can use a gift from a family member for the funds. In addition, some banks will go as low as a 580 credit score.
- Conventional loan programs can require as little as 3% down and have much lower mortgage insurance than FHA mortgages.
Being a mortgage broker when I was younger, I can still vividly remember receiving the ‘rate sheets’ each morning via fax and seeing the different loan-to-value ratios and credit score requirements of each subprime mortgage lender. It was a glorified spreadsheet, basically. Back then, you could typically lend someone with a 500 credit score about 75% of the value of a home at about a 7 or 8% rate (not an actual rate quote, just an example). Someone with a 600 credit score could even qualify for 100% financing at some lenient backs at a rate of maybe, say 6.5-7%. How does that compare to now? Well, now you can get about 65% of the value of a home with a 500 score at about 8 or 9% interest (not an actual rate quote, just an example) with some private hard money lenders out there. In addition, you can still get 100% financing with a 600-640 credit score on a VA or USDA loan at an interest rate starting with a 3! (not an actual rate quote, just an example).
The bottom line is that if you want a home bad enough and you’re willing to work for it, there may be a loan program in place for you. Money talks when it comes to getting financed, so the more you have to put down, the better your chances of approval. But, if you have been making your payments on time, qualifying for a no money down home loan could be way easier than you think.
Subprime mortgages may be the dinosaurs of the lending world, but their spirits will live on forever as long as the US government still plays an active role in the mortgage markets. The United States is founded upon principles such as the dream of homeownership, and the government seems intent on making that dream possible for as many people as possible, as long as its economically feasible to do…
Interested in some of the above-mentioned loan programs? Fill out the fast quote request below to learn more!
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Freddie Mac HARP 2 Update
Purchase Florida Mortgage is once again proud to announce that we are your go to Florida lender for the Freddie HARP 2 upside down refinance. We have expanded our approval guidelines and are looking to refinance as many current Freddie Mac customers as possible.
Click here if YOU have you been denied for HARP 2
As you may have already realized if you do have a Freddie Mac owned mortgage, it has been nearly impossible to refinance your underwater home up to this point. Not anymore! Check out these our newly expanded underwriting guidelines below:
Unlimited Loan-to-Value Ratio on Primary, Secondary and Investment Properties!
That means it doesn’t matter how upside down you are! Owe twice or three times as much as your home value? No problem!
No appraisal necessary
We only write Freddie HARP 2 refinance loans with an ‘appraisal waiver’
Condos are eligible!
This is huge! Most lenders will not do the condo/Freddie Mac combination
Borrower may only fund 5,000 or 4% of the loan amount, whichever is less in closing costs.
This is a Freddie Mac guideline. Depending on your current taxes and insurance as well as a few other factors, you may still be able to come to closing with $0
FIND OUT IF YOU QUALIFY FOR FREE! ONLY TAKES 2 MINUTES!
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This program will not last forever and just like every other loan program is offered on a first come, first serve basis. Enter your information above to request a fast rate quote and find out the Purchase Florida Mortgage difference! What’s the difference? We actually WANT you to get approved for your Freddie Mac HARP 2 home loan!
FHA Makes Two HUGE Changes
Well, the Federal Housing Administration (FHA) is at it again. In an effort to reduce the amount of risk exposure the federal organization has in the housing markets, they have agreed to make some pretty hefty changes to FHA loans moving forward. The most notable changes include:
- Increase in monthly mortgage insurance premiums (MIP)
- Elimination of MIP removal at 78% loan-to-value ratio
Now, let’s take a closer look at exactly how these changes will affect the typical Florida homeowner or buyer.
Increase in Monthly Mortgage Insurance Premiums
Mortgage insurance is an insurance policy that a mortgage bank requires if you are putting less that 20% down or have less than 20% equity in your home. This policy is intended solely for the bank’s benefit to protect them from default and is in addition to any homeowner’s (sometimes called hazard) insurance. There are two parts to FHA mortgage insurance, the up front premium and the monthly premium. The up-front premium is a one time charge and the monthly premium is charged (you guessed it!) monthly.
Currently, if you were to buy a home using a 30 year FHA loan, you would have to pay a 1.75% up-front MIP charge in addition to a 1.25% monthly MIP charge.
So, if you were taking out a $200k loan, you’d be looking at an up-front (added on top of your loan amount, no need to pay out of pocket) MIP charge of $3,500 (1.75% of $200k) and a monthly premium of $208.33 ($200k x .125 / 12 months).
After April 1, 2013 most FHA loans originated will have an increase of .10 % (from 1.25% to 1.35%), meaning higher mortgage payments and reduced maximum qualification amounts for future Florida home buyers.
Elimination of Automatic MIP Removal
The way it is currently, FHA loans only keep the monthly mortgage insurance premiums until the FHA loan reaches 78% loan-to-value ratio (LTV). If you originally purchased a $200,000 home with a 30 year FHA mortgage, once your loan balance reaches $156,000 (78% of the original $200k), you’d no longer have to pay mortgage insurance! This is a very joyous occasion for most FHA borrowers and typically results in a dramatic drop in payment.
Effective June 3, 2013, FHA is removing this automatic removal of monthly MIP and making it so that it never cancels! This change is HUGE as it could cost you and your family tens of thousands of dollars in unnecessary insurance premiums.
How to Beat the Changes
If you are looking to refinance or purchase a home for the lowest payment possible, it is in your best interest to do so immediately to avoid these FHA changes. FHA is the go-to program for most first time home buyers and makes it much easier to get into a home than a lot of other loan programs. Don’t stand on the sidelines as interest rates increase and loan programs change and disappear. Now is the time to act, now is the time to beat the FHA changes! Apply right now to reserve your spot in the old FHA guidelines.
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Here’s your HARP 2 refinance …WAIT .. Not so fast!
If you are like so many other disappointed homeowners in America, you may have recently been denied for the new Home Affordable Refinance Program (HARP 2 for short). The bad news is that unfortunately, that time you spent with the other bank is lost. The good news is that your hope of refinancing into an awesome new rate may not be! How?
It’s quite simple really. When contemplating a refinance, most homeowners believe it is safer to go to a ‘big bank’ (you know, the type with ATM branches and feel-good commercials). The truth of the matter is that these lenders will most likely make you wait upwards of four to eight months for a loan decision; and even worse is that the decision will probably be DENIED.
GET A FREE SECOND LOOK ON YOUR HARP 2 APPLICATION – YOU MAY GET APPROVED!
Why are the banks denying applications for HARP 2?
Why in the world would the banks NOT want your business? Actually, they do! They just prefer to have your business at the much higher interest rate what you could refinance into. So, they combine this little fact with the truth that most people will not bother applying to another outside lender, and viola! They now have a customer locked in for life at an interest rate higher than the interest rate a new customer would have; so they can keep raking in the profits!
Can I even go to another bank to apply? Can’t I only do the HARP 2 with my CURRENT lender?
Not true!!! Another common misconception that these larger financial institutions are creating is that you HAVE TO refinance with the bank that has your loan now. This is simply not the case. As a matter of fact, you’ll most likely get a much better deal from a new bank that is FIGHTING for your business! Ah, America, the great land of opportunity and friendly competition.
So, what are you suggesting I do at this point?
Don’t take no for an answer! Fill out the FAST QUOTE form below and we’ll tell you for sure if it is possible for you to get approved with the HARP 2 refinance program!
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Sounds good, but what’s the catch?
There is none! It’s free to get a second review on your HARP 2 loan application. Why get a second look from me? Because my bank doesn’t have all of the extra red tape (referred to in the industry as ‘layered guidelines’) that these big banks do. WE DON’T CARE HOW UPSIDE-DOWN YOU ARE – THAT JUST MEANS YOU’LL BENEFIT EVEN MORE!