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A quick history lesson.  In 2008 FHA’s Annual Mortgage Insurance Premium (MIP) factor was .55 percent.  In October of 2010 it increased to .90 percent and jumped to 1.15 percent in April 2011.  As of April 2012, MIP is 1.25 percent for base loan amounts less than $625,500.  This applies to single family properties with 30 year fixed rate loans.   

In April 2012, FHA also announced they would DECREASE the Up Front Mortgage Insurance Premium (UFMIP) and Annual MIP on Streamline refinances for existing FHA mortgages that were “endorsed” prior to June 1, 2009.  Endorsed means … the loan is insured by FHA.  Here’s an example.  Let’s say you purchased a home using FHA financing in April 2009.  After the loan funded and escrow closed, the lender sent your loan package to FHA for review and to be insured.  This process can take weeks or even a couple months.  If your existing loan is within a couple months of the May 31, 2009 cutoff, a loan officer has the tools to verify if your loan qualifies.   

Now for the really good part.  The Annual MIP decreases to .55 and the UFMIP decreases to .01 percent regardless of the loan amount.  This new policy takes affect with FHA case numbers assigned on June 11, 2012.  WOW … finally a policy that will help existing FHA homeowners take advantage of lower interest rates even if the homeowner is underwater. 

If your mortgage was endorsed by FHA after May 31, 2009, the latest UFMIP of 1.75 percent and  Annual MIP of 1.25 percent will apply to the Streamline refinance.  This may not be a deal breaker.  Ask a loan officer to run your numbers and see if a refinance will save you money.  With interest rates this low it may work.               

If your property is located in California, I can help you with an FHA Streamline refinance. 

All the Best!
Barbara

 

Categories : FHA Loans
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Homeowners with an existing FHA mortgage have an opportunity few other homeowners do.  Refinance to a lower interest rate even if you owe more than the value of your home.  It’s called an FHA Streamline refinance and there is NO appraisal required.  FHA Streamline refinance is designed to lower the monthly payment on an existing FHA insured mortgage.

Top 10 Questions and Answers:

Why is it called a Streamline Refinance?

Fewer hoops for borrower to jump through.  No income documentation required.  Debt-to-income ratio is not required.  Appraisal not required.  These are all feature of a “non-credit” qualifying FHA Streamline refinance. 

Can I get an FHA Streamline Refinance if my present mortgage is not FHA?

NO.  Only homeowners with an existing FHA mortgage are eligible to apply for an FHA Streamline refinance. 

Do I have to use the same lender who is servicing my loan now?

NO.  Borrower can shop around for the best terms and fees for the new FHA loan.

Do I have to be current on my loan?

YES.  A credit report is pulled to verify no mortgage lates in the past 12 months and that borrower has a minimum credit score per lender guidelines.

How much do closing costs run?

They vary from one lender to another.  However it’s possible for a borrower to get a NO CLOSING COST loan.  We do it all the time.  No loan costs and save money on your monthly mortgage payment … that’s a no brainer!

Interest rates have dropped since I purchase my home recently.  Can I refinance to a lower rate?    

YES.  FHA has two Streamline refinance options.  A homeowner must have made a minimum of six monthly payments on the existing mortgage before applying for a “NO APPRAISAL” Streamline refinance.  If you have had your mortgage for less than six months, you can apply for an FHA Streamline refinance but an appraisal is required and the maximum loan-to-value (LTV) would be based on the new appraised value. 

Does a refinance have any impact on the FHA mortgage insurance premium I am paying now?   

Probably.  FHA’s Up Front Mortgage Insurance Premium (UFMIP) and Annual Mortgage Insurance Premium (MIP) have gone UP and DOWN in recent years.  As of April 2012 both premiums increased.  A refinance would be subject to the latest FHA mortgage insurance premiums with an exception.  If the FHA mortgage you are refinancing was insured by FHA prior to May 31, 2009 you may qualify for a reduction to UFMIP and MIP.  See details in my blog FHA Announces Lower MIP on certain Streamline refinances.“          

Can I lower my monthly payment even if the FHA mortgage insurance premium is higher? 

YES.  With interest rates currently below 4.0 percent it’s possible.  It will depend on the difference between your current interest rate and MIP factor and the new rate and MIP factor.  A loan officer can run those numbers to see what the savings is before moving forward with a refinance.    

I heard that FHA requires me to pay mortgage insurance for a minimum of five years.  What happens if I refinance? 

The clock starts over. 

Can I add or delete a borrower on the new loan? 

Yes.  A borrower can be added to the new loan without credit qualifying as long as all existing borrowers remain on the loan.  A borrower can be removed from a loan but the remaining borrower(s) must credit qualify.

 

Categories : FHA Loans
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All those in favor of paying NO monthly

MI … raise your hand!

THINK … lower loan costs

THINK … lender paid mortgage insurance (LPMI)

THINK … seller contributions can pay for borrower’s LPMI

THINK … no MI means borrower qualifies with a lower debt ratio

FHA is a great loan program for home buyers with less than perfect credit and need a smaller down payment.  However, borrowers with a 740 or higher qualifying FICO score and at least 5 percent down payment, should consider a conventional mortgage with lender paid mortgage insurance (LPMI).   

LPMI means the borrower makes a lump sum MI payment at closing and never has monthly MI.  Best of all … the LPMI cost can be paid for with seller contributions.  The LPMI cost and guidelines will vary by lender.  Our bank allows loan amounts up to $417,000 on owner-occupied purchases.  Check out the example below that compares a Conventional loan with LPMI to FHA with MI paid monthly.     

The savings is HUGE!  Especially when you consider that FHA requires the borrower to pay mortgage insurance for a minimum of 5 years.  After that it can be removed with an appraisal showing loan-to-value is 80 percent or when the loan reaches 78 percent LTV based on scheduled amortization.  That generally occurs between years 6 & 7.   

In the example above, a borrower would have to qualify with a $277 higher monthly payment.  Without MI you could qualify for a higher purchase price and still end up with a lower monthly payment. 

Find a loan officer who offers Conventional financing with LPMI and see if the program will work for you.  

All The Best!

 

Categories : Conventional Loans
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reminderUPDATE: December 10, 2012

FHA announced today they have extended the 90 flip waiver through December 31, 2014.  

 

UPDATE:  December 27, 2011

Good news as FHA extends waiver of anti-flipping regulations through December of 2012.  The new extension will permit buyers to continue to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales.

 

December 20, 2011 post

We knew it was coming but hoped  FHA would announce an extension of the 90 day flip waiver into 2012.  As of today they haven’t so here’s what you and your buyers need to know to avoid an underwriting nightmare.  

HUD announced they will accept fully executed purchase contracts dated through December 31, 2011 that involve a flip property.    

Expiration of the waiver impacts investors who buy, rehab and flip.  They will have to hold properties a bit longer and not go into contract until day 91 if they choose to accept an offer from a buyer using FHA financing.  REOs are not affected by FHA’s waiver so title does not need to be seasoned.       

We have been though this before.  It was three days before the waiver was set to expire on January 31, 2011 when HUD announced the waiver would be extended through December 2011.  History may repeat itself but for now we have to go with what we know.   

Advice for Agents

If you are listing a flip property, avoid offers from FHA buyers until seller has been on title for 91 days.  

If you are representing an FHA buyer, check title records to make sure the seller has been on title for 91 days or longer. 

I’ll keep you posted in the event FHA announces an extension. 

 

Categories : 90 Day Flip Rule
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FHA’s Annual Mortgage Insurance Premium (MIP) is increasing for a second time since October 2010.  HUD says its not because their capital reserves are hurting … it’s to stock the pot for the future.  The announcement goes on to say, “it is anticipated that this increase will have minimal impact on borrowers but will significantly strengthen the capital position of the MMIF”.   

It was October 2010 that FHA’s MIP went from .55% to .90% on a standard 30 year mortgage.  The latest increase is effective with case numbers assigned on or after April 18, 2011.    

  • MIP increases to 1.15% for LTV’s GREATER than 95% on 30 year loans
  • MIP increases to 1.10% for LTV’s EQUAL to or LESS than 95% on 30 year loans
  • MIP increases to   .50% for LTV’s GREATER than 90% on 15 years loans
  • MIP increases to   .25% for LTV’s EQUAL to or LESS than 90% on 15 year loans

Take a look at what the new policy means on a standard FHA 30 year mortgage with 3.5 percent down and the Up Front Mortgage Insurance Premium financed into the loan:

FHA case numbers are assigned when a borrower has a purchase contract accepted and their loan package is ready for submission to a lender for underwriting.  

Additional note:  the Up Front Mortgage Insurance Premium (UFMIP) remains un-changed at 1 percent of the base loan amount. 

                                           

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UPDATE:  December 27, 2011

Good news as FHA extends waiver of anti-flipping regulations through December of 2012.  The new extension will permit buyers to continue to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales.

UPDATE:  December 20, 2011

Here we go again.  FHA’s waiver expires on December 31, 2011.  No word on an extention.  See latest post on HOME page of this blog. 

UPDATE: January 28, 2011

Nothing like waiting until the last minute (3 days before expiration) to let the mortgage industry know that a highly effective policy will be continued.  Typical … but we’ll take it.  Buyers can continue to use FHA financing to purchase homes from sellers who have been on title for less than 90 days.  This includes homes being flipped by private parties.  

Reminder … most lenders impose additional underwriting guidelines for flip properties so buyers need to ask their loan officer what is required before an offer is made to prevent surprises after escrow has been opened.  

Happy buying and selling everyone!  

 

December 15, 2010:    FHA 90 Day Flip Waiver set to EXPIRE January 31, 2011

FHA’s 90 Day Flip Rule waiver implemented on February 1, 2010 is set to expire January 31, 2011.  The waiver was for one year and designed to help buyers using FHA financing to access a broader selection of homes for sale … and it worked.  In addition to foreclosure, short sale and equity seller listings, FHA buyers were able to add to their shopping cart the growing segment of homes sold by investors who were rehabbing and flipping.       

With the expiration fast approaching and no word from FHA of an extension, lenders notified us this week they have stopped accepting new FHA loan applications involving a flipped property.  At this point, my advice:

BUYERS -  before you make an offer on a home, make sure your Realtor checks to see if the owner has been on title at least 90 days and preferable 180. 

INVESTORS - who are flipping in less than 90 days, don’t accept offers from FHA buyers at this time.    

To learn more about the 90 Day Flip Rule for VA, Conventional and FHA loans, check out these additional popular blogs: 

The 90 Day Flip Rule … Some Lenders Have One While Others Don’t

FHA Takes a New Position on the 90 Day Flip Rule … its OK Now!  

FHA 90 Day Flipping Waiver … Tips for Buyers and Sellers

 

All the Best,
Barbara
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UPDATE – August 10, 2010
FHA annouced today they will move the implementation of mortgage insurance premium changes from September 7th to October 4, 2010.  Blog below has been revised.  

Original post – August 5, 2010

HUD told Congress they needed to beef up their insurance reserves and with the speed of light they got their wish.  H.R. 5981 was introduced on July 30th. It was passed by the House on July 30th and the Senate on August 4th.   

When was the last time you saw lawmakers move  that fast?

A special HUD bulletin issued August 5, 2010 announced FHA will decrease the Up Front Mortgage Insurance Premium (UFMIP) from 2.25 to 1.00 percent AND simultaneously increase the monthly Mortgage Insurance Premium (MIP) from .55 up to 90 percent.  The effective date … October 4, 2010. 

To help you get a sense of what this means for borrowers, let’s run some before and after numbers. 

Current FHA Mortgage Insurance Guidelines
UFMIP = 2.25%
MIP = .55%
 
 
 
 
New Mortgage Insurance Guidelines 
UFMIP = 1.00%
MIP = .90%

 

OBSERVATIONS

The impact of this change on a purchase price of $200,000 with 3.5% down payment and UFMIP financed into a 30-Yr fixed rate loan is:

  • UFMIP decreases $2412
  • Monthly principal and interest decreases by $12.22
  • MIP increases causing total housing pmt to increase $44.07/mo
  • Borrower’s DTI increases
  • LTV’s <=95 percent increase MIP to 85% instead of 90

If you already have an FHA loan with an interest rate at 5 percent or higher, you should talk with a mortgage advisor about refinancing.  With rates in the 4′s it’s very possible to get a refinance done with NO loan costs.  However, you should plan to bring cash-to-close to cover the impounds for property taxes and homeowners insurance.  When you refinance an existing FHA loan, a new FHA case # is ordered.  Case #’s issued on or after October 4, 2010 will be subject to the new UFMIP and MIP and could wipe out the payment savings achieved with a lower interest rate.  Ask your loan officer to run your numbers to see if an FHA Streamline refinance makes sense for you.    

Check out my other posts about FHA guidelines changes. 

Categories : FHA Loans
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