The Federal Housing Administration plays a critical role in the nation’s housing financing system, providing safe, affordable mortgage financing to consumers in all markets during all economic conditions, the National Association of REALTORS® said in testimony today.
Click to read more: REALTOR® Magazine-Daily News-FHA Plays a Critical Role in Home Financing.
If you applied for a new FHA mortgage today, you may have noticed the upfront mortgage insurance has been reduced from 2.25% to 1%. That being said, your monthly premium has moved from .55 to .90. To learn more about the FHA Mortgage Insurance contact your Maine Mortgage Broker or Maine Mortgage Banker today.
FHA has announced it will make changes to it’s Mortgage Insurance Program. These changes will take effect for all new FHA case numbers issued as of October 4, 2010.
FHA loans require both an upfront mortgage insurance fee and a monthly mortgage insurance fee. The FHA has announced a change to these fees for all new FHA case numbers issued as of October 4th. 2010
The Upfront insurance fee is financed into your loan, added to the base loan amount once your down payment is deducted.
FHA case numbers can be ordered once a contract to purchase has been made and the loan application is signed.
Current FHA Policy, through October 3rd, 2010
Upfront mortgage insurance 2.25%
Monthly mortgage insurance 0.55%
New FHA Policy, as of October 4, 2010
Upfront mortgage insurance 1.0%
Monthly mortgage insurance 0.90%
What effect this will have to a borrower: While the loan amount will be lower due to the reduced Upfront MI cost, the monthly payment will be higher.
Typical loan scenario for a home price of $200,000
Net increase of (3.73%) $40.76 in your monthly payment.
Sales Price: $200,000 less FHA required down payment of $7,000 (3.5%) =
Base loan amount of $193,000
Current MI policy: $193,000 + Upfront mi 2.25% ($4,342) = total loan amount of $197,342
$197,342 @ 4.5% 30 year fixed rate = monthly principal & interest payment of $999.90 + monthly mi at .55% is $91.67 for a total of $1,091.67
New MI policy $193,000 + Upfront mi 1.0% ($1,930) = total loan amount of $194,930
$194,930 @ 4.5% 30 year fixed rate = monthly principal & interest payment of $987.68 + monthly mi at .90% is $144.75 for a total of $1,132.43
FHA loans have been a great way for Maine homeowners to qualify for high loan to value mortgages. With these new changes, look for Private Mortgage Insurance companies to become very aggressive with perhaps much lower monthly mortgage insurance rates.
To learn more about FHA and Private mortgage insurance, contact your Maine Mortgage Specialist today.
FHA Underwater Refinance Option Now Available
In an effort to help responsible homeowners who owe more on their mortgage than the value of their property, the U.S. Department of Housing and Urban Development today will begin providing an additional refinancing option for underwater borrowers. Originally announced in March, this enhancement of Federal Housing Administration (FHA) refinance program will offer certain ‘underwater’ non-FHA borrowers who are current on their existing mortgage and whose lien holders agree to write off at least ten percent of the unpaid principal balance of the first mortgage, the opportunity to qualify for a new FHA-insured mortgage.
The FHA Short Refinance option is targeted to help people who owe more on their mortgage than their home is worth – also known as being ‘underwater’ – because their local markets saw large declines in home values. As announced earlier this year, this change as well as other programs that have been put in place will help the Obama Administration meet its goal of stabilizing housing markets by offering a second chance to up to 3 to 4 million struggling homeowners through the end of 2012.
Participation in FHA’s short refinance program is voluntary and requires the consent of all lien holders. To be eligible for a new loan, the homeowner must owe more on their mortgage than their home is worth and be current on their existing mortgage. The homeowner must qualify for the new loan under standard FHA underwriting requirements. The property must be the homeowner’s primary residence and the borrower’s existing first lien holder must agree to write off at least 10% of their unpaid principal balance. In addition, the existing loan to be refinanced must not be an FHA-insured loan, and the refinanced FHA-insured first mortgage must have a loan-to-value ratio of no more than 97.75 percent and a combined loan-to-value ratio no greater than 115 percent.
To facilitate the refinancing of new FHA-insured loans under this program, the U.S. Department of Treasury will provide incentives to existing second lien holders who agree to full or partial extinguishment of the liens. To be eligible, servicers must execute a Servicer Participation Agreement (SPA) with Fannie Mae, in its capacity as financial agent for the United States, on or before October 3, 2010.
WASHINGTON – The Obama administration is trying to jump-start its sputtering attempts to tackle the foreclosure crisis with an effort to assist homeowners who owe more on their properties than their homes are worth.
The Federal Housing Administration will allow lenders to give these borrowers refinanced loans if the lender agrees to forgive at least 10 percent of the original mortgage amount.
The plan, which was announced in March, is being made available starting Tuesday.
The FHA said in a document published last month that between 500,000 and 1.5 million homeowners are projected to be helped.
However, the Obama administration’s previous efforts to stem foreclosures have fallen far short of expectations. Analysts at Barclays Capital estimated last month that the refinancing program would only aid between 200,000 and 300,000 homeowners.
As of the end of June, there were 11 million U.S. homes, or 23 percent of those with a mortgage with so-called underwater mortgages, according to real estate data provider CoreLogic.
Document Checklist and Instructions
A properly documented loan application makes your loan process go smoothly. This checklist will help you gather your paperwork.
Complete and sign the residential loan application, Form 1003, and the attached loan info sheet, credit authorization and fair lending notice. Page 4 of the application is a continuation page in case you need additional space for your assets or liabilities. If you make a mistake while filling out the application cross it out, and make a change. Do NOT use whiteout.
If you are salaried: provide W-2′s for the previous two years and one month of paystubs. If you are self-employed, provide tax returns for the previous two years, including all schedules, and a YTD profit and loss statement. (Note: provide copies of all requested documents. Do not provide original documents.)
If you own rental property, provide recent rental agreements and tax returns for the previous two years, including all schedules.
To speed up the approval process, provide bank statements for the most recent three months, and recent statements for stock, mutual funds and IRA/401K accounts.
If you are requesting a cash out refinance, provide a letter explaining how you will use the refinance proceeds.
If applicable, provide a copy of your divorce decree and settlement agreement.
If you are NOT a US citizen, provide a copy of your green card (front & back). If you are NOT a permanent resident provide a copy of your H-1 or L-1 visa.
If any borrower has filed bankruptcy, provide the Discharge Notice, Filing and Schedule of Creditors.
If you are applying for a home equity line of credit or loan (second loan), also include your first mortgage note. (This should be with your closing loan documents.)
By providing all documentation early, you make your mortgage specialist job much easier and ensure there are no issues before closing.
FHA 203(k) Home Improvement Mortgage
You just love the house, except for the leaky pipes. Or maybe the kitchen is too small. Perhaps it needs a new roof or siding. For the house that’s almost perfect, a Maine FHA 203(K) loan is the perfect solution. An FHA 203(k) Mortgage is a mortgage and home improvement loan all in one. Now you can buy or refinance a property that needs renovation, repair or remodeling and easily finance both the purchase and the improvements in one simple easy step.
With An FHA 203(k) Mortgage you can:
· Remodel the kitchen or bath
· Renovate or add a room
· Paint the house or add siding
· Add a porch, deck or patio
· Replace a leaky roof
· Put in new flooring, carpeting or tiling
· Conserve energy with new windows
· Update wiring, plumbing or heating
· Plus much more
Call Seth Jacobs in Portland, Maine today to discuss the FHA 203(K) improvement loan. 207-321-5347 or 888-775-4200 ext 271!
Due to market changes, mortgage pricing has improved. Call 888-775-4200 today to lock in!
What is an FHA loan?
In the wake of the housing bubble’s collapse, FHA loans have taken on renewed importance for today’s mortgage borrowers.
Simply stated, an FHA loan is a mortgage insured by the Federal Housing Administration, a government agency within the U.S. Department of Housing and Urban Development. Borrowers with FHA loans pay for mortgage insurance, which protects the lender from a loss if the borrower defaults on the loan.
Because of that insurance, lenders can — and do — offer FHA loans at attractive interest rates and with less stringent and more flexible qualification requirements.
6 facts all buyers should know about FHA loans.
1. Less-than-perfect credit is OK
The FHA doesn’t mandate a minimum credit score, according to Vicki Bott, HUD deputy assistant secretary for single-family housing. Instead, each borrower’s creditworthiness is considered in context. Some leeway is allowed, even for borrowers who’ve filed for bankruptcy.
That said, however, lenders can overlay their own requirements on top of the FHA’s guidelines. Some lenders might require a minimum credit score. Ask prospective lenders about such a requirement if your credit is less than perfect.
“Lenders underwrite FHA loans to ensure that the customer has the willingness and capability to repay the loan, but we do have flexibility beyond pure credit score to look at the borrower’s financial situation,” Bott says.
2. Minimum down payment is 3.5 percent
The FHA requires a down payment of just 3.5 percent of the purchase price of the home. That’s a fraction of the percentage typically required on most other loans and should be a huge attraction to first time home buyer.
Borrowers can use their own savings to make the down payment or other sources of cash include a gift from a family member, or a grant from a state or local government down payment assistance program.
3. Closing costs may be covered
The FHA allows home sellers, builders and lenders to pay some of the borrower’s closing costs, such as an appraisal, credit report or title expenses. For example, a builder might offer to pay closing costs as an inducement for the borrower to buy a new home.
Lenders typically charge a higher interest rate on the loan if they agree to pay closing costs. Borrowers can use the good faith estimate of closing costs — commonly known as the GFE — to compare interest rates and closing costs on different loans and figure out which option makes the most sense.
4. Lender must be FHA-approved
Because the FHA is not a lender, but rather an insurance fund, borrowers need to get their loan through an FHA-approved lender (as opposed to directly from the FHA). Not all FHA-approved lenders offer the same interest rate and costs — even on the same FHA loan. Shopping around can benefit you.
5. Mortgage insurance is a must
Two mortgage insurance premiums (MIP) are required on all FHA loans: The upfront premium is 2.25 percent (up from the original 1.75) of the loan amount, and the annual premium is 0.55 percent of the loan amount. The upfront premium must be paid when the borrower gets the loan but can be financed as part of the loan amount. The annual premium is paid in chunks of 1/12th of the total along with each month’s mortgage payment.
Many borrowers feel the FHA loan may be more expensive. However, borrowers need to compare the FHA-insured loan to a loan that’s not FHA-insured (and consequently requires a much larger down payment). In many cases, the FHA loan is still the best choice.
6. Extra cash is allowed for repairs
The FHA has a special loan product for borrowers called the 203k. The purpose of this loan is to provide extra cash to make repairs to homes that need renovation. The chief advantage of this type of loan, is that the loan amount is based not on the current appraised value of the home but on the projected value after the repairs are completed.
When applying for a Maine Home Loan, it’s very important to start putting together all of the documents needed to be approved for your loan. Long gone are the days of no doc/limited doc home loans. Borrowers now must provide much more information to prove to your Maine Mortgage Specialist that they do qualify for a new purchase or refinance transaction. Here is a simple checklist of documents you will need when applying for a new Maine Home Loan.
_____Last Two Pay Stubs, Borrower and Co-Borrower
_____Last Two Months Bank Statements (Originals, All Pages, not off the internet)
_____Most Recent Asset Statements (Money Market. 401K, etc Originals, All Pages)
_____Last Two Years W-2s, Both Borrowers
_____A Copy of Your Driver’s License, Borrower and Co-Borrower
_____A Recent Utility Bill(s), Showing Borrower and Co-Borrower on the Bill
_____Last Two Year’s Tax Returns, Federal Returns Only, All Schedules
_____Corporate Tax Returns and K-1s if Applicable
_____Copy of Borrower and Co-Borrower’s Social Security Cards
_____A Recent Mortgage Statement
_____A Recent Tax Bill
_____A Recent Homeowner’s Insurance Bill and Policy Number or
_____The Name, Address and Telephone Number of Your Insurance Company
_____A Copy of the Deed
_____Statements for All Debts Being Paid Off at Closing
_____Purchase & Sale Agreement
Mortgage lenders require borrowers to provide documentation to verify identity, property information, income and equity/down payment. These documents are known as conditions that the borrower must satisfy in order to receive a full-fledged mortgage approval (up until that point, the mortgage that you are offered is referred to as a “conditional approval”). When you are asked to provide certain documents – such a job letters, purchase contracts or bank statements – it’s important that you provide complete and accurate documents in a timely manner.