Tag Archives: Fha

What are the new changes to FHA home loans?

As of June 1st this year, major changes were made to the FHA home loan program and its Mortgage Insurance Premiums.  Any new FHA loan after the date is subject to higher rates on Mortgage Insurance Premiums and the duration of the MIP.

The FHA Mortgage Insurance Premium(MIP) consists of 2 parts, upfront MIP and a monthly MIP.  The rates now are 1.75% of the loan amount upfront and 1.35% per month on a 30 yr fixed rate loan amount and the monthly payment.  For example, a 30 yr fixed rate FHA Mortgage with 3.5% down payment, the numbers would look as follow:

Purchase price: $175,000-This is the average price in my market, Boise, Idaho.

3.5% down $6125,

Loan: $ 168,875

Upfront MIP, 1.75% $2955.31

Monthly MIP: 1.35%  $2279.81 per year or $189.968 per month.

As you can see, the FHA Mortgage Insurance can add a considerable amount to your monthly payment.

As if that wasn’t enough, the Mortgage Insurance is part of the loan for as loan as you have a FHA loan.  It used to drop off once you had paid your balance down to 78%.  Now the only way to drop MIP from your loan is to refinance out of the FHA loan or sell the property.

This will make conventional loans, with their 3% down payment much more attractive than a FHA Loan.

Any good loan officer will run the comparisons for a home buyer considering a FHA loan to make sure the client is getting the best possible loan at the lowest possible payment.

If you’re in the Boise, Idaho area and need a quote, give me a call.

 

 

What is the best loan for someone who has excellent credit and a large down payment?

This might seem silly to ask, but I do see people getting the wrong mortgage for their situation simply because someone told them about a special program.

If you have a decent down payment, say 20% or more, have excellent credit, and you have documentable income and assets, then you want a plain vanilla, Conventional Loan.  These loans are also called Fannie Mae Loans or Freddie Mac loans.

I have seen people seeking a VA loan because they are a Veteran and they feel they need to use their VA benefit.  VA loans are ideal for the Veteran who doesn’t have a down payment, as they can go up to 100% loan to value.  The down side is that VA charges the Veteran a funding fee that ranges from 2.35%-3.3% on top of the mortgage balance.

The same applied to FHA or USDA loans.  Yes, they are good for some people, ie first time home buyers, someone who needs help with the down payment, or some other situation.  FHA loans have Mortgage Insurance Premiums that are added to the loan balance and have a month fee as well.

Don’t get fooled by the difference in rates.  Right now the Conventional loans are about .25% higher than VA, FHA, or USDA loans.  They don’t have funding fees or Mortgage Insurance Premiums added to the loan balance or payment.

Any ethical mortgage loan officer will look at all options and make a recommendation based on your situation.  Every body’s mortgage needs are unique.

Is your lender collecting too much?

I recently had this happen with a lender who I have done a lot of business with in the past.  A number of my past clients were refinancing their VA home loans and paying off this lender with my new VA home loan from a different lender.

The old lender was trying to collect extra interest until the end of the month when we are paying them off between the first and the 14th of this month.  The correct way is to do a daily proration of the interest until the day the old lender receives the payoff.  They are not due any interest from the client as per the note they signed.

When the first of the VA loan clients were paying off their loan, the numbers didn’t add up to what we had set up.  I got to digging into the closing numbers and noticed the payoff amount was several hundred dollars higher.  After checking with the Escrow Officer to see it that is what she had been given, she said the lender stated they don’t do daily prorations of interest.  I immediately called the lender for an answer as to why they are over charging my clients.  It took several phone calls and voice mails, but I got an after hours call back.

The lender’s representative stated first that their systems didn’t calculate daily interest.  I stated there is nothing in the note that says a client is responsible for a whole months interest when they payoff before the end of the month.  After reviewing the clients note, the lender’s agent said she would manually calculate a payoff for the expected date of funding.  She also said that the loan had been placed with Ginnie Mae, a buyer of government insured notes and that GNMA demanded a full month’s interest on any note paid off.

That is their problem, not my clients.  The client didn’t take the loan with the understanding they would be charged for a full month.  It would have been different if it was a term agreed to upfront, but it wasn’t.  The lender has to pay this, not my client!

Now, there are loans that this is disclosed on, FHA loans are not daily prorated for interest due.  As a result, we try to close those towards the end of the month to best benefit the client.

I have a feeling that this lender knew what they are doing is not allowed, but doing it anyway to avoid paying out the extra interest.  They got caught, and I telling my fellow Loan Officers and Realtors about this.  I can’t imagine how many home owners have been overcharged in the past.

 

%d bloggers like this: