Tired of Paying FHA Mortgage Insurance?

Many Maine homeowners ask me how they can remove FHA monthly mortgage insurance premiums with their mortgages.

FHA insures mortgages so that lenders will be encouraged to make more mortgages available for people. The FHA mortgage insurance agreement is between FHA and the mortgage company, so you must contact your mortgage company and ask them what they require to drop the insurance. Most mortgage companies will want you to have a substantial amount of equity in your home.

If the periodic (monthly) mortgage insurance premiums are paid up for an FHA case before schedule (i.e., accelerated payments were made and the unpaid principal balance is 78% or less), the month and year the last monthly insurance premium is assessed (final bill date) can be changed by the servicer or holder of the mortgage.  However cancellation of the monthly premium can only be used for active risk-based cases that have a closing date after December 31, 2000 and a case number assignment date before June 3, 2013 and meet the eligibility requirements described in Mortgagee Letter 2000-46 (with Attachment).

For mortgages with an FHA case number assignment date on or after June 3, 2013, the FHA insurance can be terminated by the servicer or holder if the mortgage is paid in full before the maturity date.

To learn more about FHA mortgage insurance or anything mortgage related, reach out to me today  – seth@northstarmortgage.net  207-831-1903

3 Tips To Sidestep These Common FHA Loan Hang-ups

FHA loans are becoming increasingly popular these days as potential homeowners are not able to qualify for mortgages from traditional lenders. The FHA insures these high-risk loans, in turn allowing borrowers with low down payments and less than perfect credit to purchase homes and bolster the housing market.

However, getting through the loan process with the FHA is more difficult than with a traditional lender, and you may need to cope with some of these common loan hang-ups.

Property Condition

You can’t buy just any property with a FHA loan. The appraiser must deem it to be livable, without any conditions that could jeopardize health or safety. If the home has chipping paint, a leaky roof, or a wobbly banister, the financing could fall through.

Sometimes you can get the seller to make the needed repairs to pass inspection, but in other cases, you may have to go an alternate route. The FHA 203K streamline loan allows you to borrow up to $35,000 over the purchase price of the home for repairs and updates. It’s important to check with your local mortgage lender to determine any specific local FHA 203k loan details.

Low Appraisal

In addition to inspecting the property, appraisers also estimate its market value. These estimates are based on the property’s features and a comparison to similar properties that have sold recently. If the appraisal is low, the FHA loan funding could fall through because the FHA will not let you borrow more than the home’s appraised value.

Rather than trying to scrape together a bigger down payment, just take the information to the seller to renegotiate the purchase price. The seller will likely recognize that other buyers would be in the same boat, leading the seller to agree to a lower purchase price.

High Debt-to-Income Ratio

Your FHA loan may encounter a snag in the underwriting process if your total debt payments, including your new mortgage, would be a high percentage of your income.

Often you can make up for a high debt-to-income ratio with other compensating factors, like a larger down payment or a cash reserve of several months of mortgage payments. For more information on common FHA loan hang-ups feel free to contact your trusted mortgage professional today.

Reasons Why You Should Consider Refinancing Your Mortgage

Refinancing a mortgage is a golden opportunity to lock in today’s low interest rate for the next 15 or 30 years. While interest rates now are still low, there’s a good chance they will be heading up in the coming months.

The Fed won’t maintain the current bond purchasing level forever, and just as rates spiked when the Fed hinted the bond purchasing would change, rates will spike even more when purchasing levels actually do change.

As interest rates remain very low for 30-year and 15-year mortgages, homeowners can benefit greatly from a refinance. Several types of people in particular should consider refinancing.

Carrying A High Rate

Anyone with an interest rate well above today’s level should think about a refinance. Unless the homeowner is planning to sell within the next few years, a refinance will almost always save money in the long run if the rate can be lowered by at least a percent.

Switching From FHA To Conventional

Given that FHA mortgages now carry mortgage insurance premiums for the life of the loan, it makes a lot of sense for borrowers to switch away from them when they can. Refinancing may be possible once the homeowner has built up enough equity to qualify for a mortgage from a traditional lender, without the burden of mortgage insurance.

ARM Coming Up On Adjustment

The low rate of an adjustable rate mortgage sticks only for the first few years of the mortgage. After this point, the rate adjusts each year based on market trends.

Rather than paying the adjusted rate, which is almost always higher, homeowners can refinance into a new fixed rate mortgage to lock in one of today’s low fixed rates for the duration of the mortgage.

Cash Out To Consolidate Debt

Homeowners carrying high-interest debt, like credit cards and personal loans, can often benefit from consolidating it into their mortgage. As long as they maintain at least 20 percent equity in their home, they can get a cash-out refinance for an amount higher than their current mortgage balance.

They can then use the difference to pay off high-interest debt. For more information about refinancing your mortgage feel free to contact your trusted mortgage professional.

What Is A Mortgage Pre-Approval?

What Is A Mortgage Pre-Approval?When you are purchasing a home, your broker may recommend you obtain a mortgage pre-approval before you find the home of your dreams.

There are some benefits to being pre-approved before you find a home, but oftentimes, people confuse pre-qualifications with pre-approvals.

So the question many buyers have is what exactly is a mortgage pre-approval?

In a nutshell, it’s when the lender provides you (the buyer) with a letter stating that your mortgage will be granted up to a specific dollar amount.

What Do I Need For Pre-Approval?

In order to obtain a pre-approval for your home purchase, you will have to provide your lender all of the same information you would need to show for qualifying for a mortgage.

This means providing tax returns, bank statements and other documents that prove your net worth, how much you have saved for your down payment and your current obligations.

What Conditions Are Attached To A Pre-Approval?

Generally speaking, a pre-approval does have some caveats attached to it. Typically, you can expect to see some of the following clauses in a pre-approval letter:

  • Interest Rate Changes – a pre-approval is done based on current interest rates. When rates increase, your borrowing power may decrease.
  • Property Passes Inspection – your lender will require the property you ultimately purchase to come in with a proper appraisal and meet all inspection requirements.
  • Credit Check Requirements – regardless of whether it’s been a week or six months since you were pre-approved, your lender will require a new credit report. Changes in your credit report could negate the pre-approval.
  • Changes In Jobs/Assets – after a pre-approval is received, a change in your employment status or any assets may result in the pre-approval becoming worthless.

Getting pre-approved for a home mortgage may allow you more negotiation power with sellers and may help streamline the entire loan process.

It is important however to keep in mind there are still things that may have a negative impact on actually getting the loan.

It is important to make sure you keep in contact with the lender, especially if interest rates increase or your employment status changes after you are pre-approved.

Overpay On Your Mortgage Or Add To Your Savings, This Is The Question

Overpay On Your Mortgage Or Add To Your Savings, This Is The QuestionSo you find yourself with a little bit of extra money – perhaps due to a raise, an inheritance or an unexpected windfall?

Should you put all of your money toward paying down the mortgage on your home? Or would you be better off placing your extra cash into a savings account?

Deciding whether to pay down your mortgage or add to your savings is a complex choice and it depends on a number of factors in your personal financial situation.

Here are some of the things that you will need to consider when making the decision:

How Much Are Your Savings Earning?

Take a look at the savings accounts where you are keeping your money and assess the interest that your savings are earning. Is your money earning more in savings than you would save by paying down your mortgage earlier?

Does Your Mortgage Have Overpayment Penalties?

Some mortgage lenders will charge you a fee if you try to repay your mortgage earlier than the agreed upon term. Check with your lender to find out and calculate whether the extra costs will outweigh the benefits you get from overpaying your mortgage. If they do, put your windfall in savings instead.

What are Your Other Debts?

It doesn’t make sense to be overpaying on your mortgage if you have a lot of credit card debt that is charging you an enormous amount in interest. Prioritize your high-interest debt first before you think about overpaying on your mortgage.

Do You Have An Emergency Fund?

You should always have an emergency fund in cash that will protect you from having to use expensive credit card debt if an unexpected payment comes up such as a burst pipe or a flat tire on your car or if you lose your job.

A good rule is to have the equivalent of three to six months of savings in a bank account just in case you need it. This is a first priority and only when you have this emergency fund established should you consider overpaying on your mortgage.

These are just a few of the important factors that you should consider when deciding whether to overpay the mortgage on your home or place the money in savings. For more information, contact your trusted mortgage professional.