FHA Mortgage Insurance Premium To Rise April 18, 2011

The FHA annual mortgage insurance premium is set to rise by .25% for any loan case numbers assigned after April 18, 2011.

Bob Mowrey, from Corridor Mortgage Group, let me know just what this could mean to FHA buyers.

On average, he says, this would mean that buyers will pay an extra $30/month. For a $300,000 loan, the difference in payment would be about $60/month.

FHA Homebuyers need to have their contract on a house in place, their loan in motion, and the FHA loan case number assigned prior to April 18, 2011 to qualify for the .25% lower mortgage insurance premium amount.

Please contact me for more information and details on the FHA mortgage insurance premium changes, and how they may affect your homebuying power!

Why the Housing Market Bottom May Be Here

Many buyers and sellers are trying to time their sale or purchase based on whether they feel house prices may have hit the bottom or if they will fall further.

According to a recent USNews Money report, the housing market bottom may already be here. Why?

• Some areas show homes are undervalued, and increases in prices have already been seen. I know that a house that just came on the market nearby me in Towson sold in less than a week — with a large number of showings, and possibly multiple contracts.

• Affordability is great:  Interest rates as well as home prices have been low. Interest rates have been showing an upswing recently, so that affordability index may fall.

• Economic Factors are improving: Consumers are spending, larger companies have more money to hire, which will bring more demand to the real estate market. The foreclosure market, which, due to the subprime lending debacle, really came to a head in 2010 due to many of those loans hitting their 5 year-ARM mark, and made those mortgages unaffordable. Though 2006 still had some of those easier lending stipulations, many foresee the worst of that wave being behind us, and credit being eased a little as banks own less inventory.

Add onto these indicating factors that the FHA annual mortgage insurance premium will rise .25% for any loans having their FHA case number assigned after April 18, 2011, and you have many buyers needing and wanting to get into houses now, before that change happens.

Economists do predict that mortgage credit will open up a little more as we hopefully get further from the foreclosure crisis, which will open the door for some buyers to return to the market. What may happen, though, is that interest rates will rise a bit, possibly keeping prices a little lower than normal.

Contact me for Baltimore County real estate market information. I can help you figure out where your home falls in the housing market!

Will FHA Be Flexible with Seller Closing Cost Assistance?

Will FHA be flexible with seller closing cost assistance?

That is possible, according to a report from National Mortgage News late last week.

FHA guidelines have changed, and more changes are on their way. Beginning Monday, October 4, the new FHA changes take effect, including lower upfront mortgage insurance premium and higher monthly insurance premiums.

In July, HUD asked for consumer comments on their proposed changes, including the lowering of allowed seller closing cost help from 6% down to 3%. The major problem with reducing seller closing cost help is that in Maryland, closing costs are very high. Many times buyers need 4-5% above the required 3.5% down to help them close on the house, since most FHA homebuyers do not have much money to put down, many times their reason for using an FHA insured loan. By reducing the closing cost assistance down to 3%, many buyers would be disqualified from being able to purchase homes, and this could hurt the Baltimore housing market tremendously.

Though I understand the need to lower seller concessions, hopefully the amount will not be reduced as drastically as originally planned.

Maryland FHA homebuyers should take advantage of the low prices, high inventory, and high seller contribution allowance before any more planned changes go into effect. Contact me and I can help you navigate your way through the FHA mortgage process before there are more modifications!

New FHA Mortgage Changes H.R. 5981

Beginning October 4, 2010, new FHA Mortgage changes will be coming through, due to bill H.R. 5981 signed into law August 11.

Thank you to Dan Plunkett with Prosperity Mortgage, who clarified the changes in H.R. 5981:

The new FHA Mortgage changes include a reduction in the upfront mortgage insurance premium (also known as Upfront PMI) from 2.25% to 1%. The monthly mortgage insurance premium will rise from .50% to .85% on loans with more than 5% down over 15 years. It will rise from .55% to .90% on loans with less than 5% down (which many FHA loans are, since their minimum downpayment is only 3.5%).

Dan states that the amount borrowed will be lower, but the increased monthly mortgage insurance premium could effect approvals when the borrower is close in their income-to-debt ratio for qualifications.

It also will mean that monthly mortgage payments, in general, will rise for FHA loans.

Buyers wanting to take advantage of the FHA loan standards as they are need to be under contract and make loan application by the end of September, to ensure they have their case number assigned prior to October 4. Contact me today to take advantage of the FHA loan guidelines as they stand now!

New FHA Changes May Be Coming Soon

New FHA changes may be coming soon as HUD asks for consumer input on three issues that would affect borrowers.

I wrote about these possible changes in January, in my post “More FHA Changes to Happen Mid Summer.” Also in January, HUD made major changes in FHA fees and upfront mortgage premiums. These changes are to keep the FHA afloat to be able to continue to insure mortgages.

HUD released a letter Thursday asking for public comment, and posted the three questions for comment in the next 30 days on their website:

Question 1:

Update the combination of credit and down payment requirements for new borrowers. New borrowers seeking FHA-insured financing will be required to have a minimum FICO score of 580 to qualify for FHA’s flagship 3.5 percent down payment program. New borrowers with credit scores of less than a 580 will be required to make a cash investment of at least 10 percent. Borrowers with credit scores of less than 500 will no longer qualify for an FHA-insured mortgage.

Essentially, if you have a low credit score, you would need to put 10% down rather than the usual 3.5% FHA financing minimum downpayment. This appears to be due to the large number of lower credit score borrowers defaulting on their FHA insured mortgages. The higher downpayment would give FHA more to work with should they need to foreclose on the FHA mortgaged home.

The good news is that the originally proposed increase for all FHA borrowers to 5% is not one of the questions posed.

Question 2:

Reduce allowable seller concessions from six to three percent. Allowing sellers to contribute up to six percent of the home’s sales price to offset a buyer’s costs exposes the FHA to excess risk by potentially driving up the cost of the home beyond its appraised value. Reducing seller concessions to three percent will bring FHA into conformity with industry standards.

This is the one that many of my clients in the past would have had issues with. Maryland closing costs are very high, and many borrowers need approximately 4-5% to cover the additional closing costs in addition to downpayment. This could really cause a big problem with Maryland FHA borrowers.

Question 3:

Tighten underwriting standards for manually underwritten loans. When using compensating factors in the underwriting process, lenders will be required to consider those factors which are the best predictive indicators of loan performance, such as the borrower’s credit history, loan-to-value (LTV) percentage, debt-to income ratio, and cash reserves.

This one would be the easiest change, because loans that must be manually underwritten tend to have big reasons that the digital systems would not allow them to go through.

What are your thoughts on the proposed changes?

Would any of these FHA changes prevent people you know from buying a home? It is very likely!

The one that concerns me the most is #2. The high Maryland real estate transfer tax rates are already an issue, and without a seller concession to help with the majority of the closing costs could make homeownership for many an impossibility.

Contact me today to take advantage of the FHA loan guidelines as they stand now, before any of these proposed changes may go into effect.

FHA Mortgage Insurance Premium Goes Up April 5, 2010

Besides the tax credit deadline looming on April 30, another significant deadline is even closer — beginning April 5, 2010, the FHA Up Front Mortgage Insurance Premium is going from 1.75% up to 2.25%. April 5, 2010 is NEXT MONDAY!

I wrote about the rise in FHA Upfront Mortgage Insurance Premium on January 21, and time is now running out to get under contract before this change happens.

For any case numbers originating on or after April 5, the MIP will be 2.25%. This Friday, April 2, 2010 is Good Friday, so banks are closed.

This means for buyers to get the 1.75% premium, they need to be under contract and have all of their paperwork to their mortgage professional by Thursday, April 1, 2010 at the latest. (No joke!)

An example of what this means is that for a $200,000 loan amount, the current up front mortgage insurance premium to use FHA would be $3,500. As of next Monday, for the same loan it would be $4,500, costing a buyer $1,000 more.

Down the road, there are also expectations of reduced seller concessions and higher downpayment requirements for FHA borrowers. This means to buyers who are considering using FHA to obtain their loan should hurry to get the benefits as they stand currently!

Nine Weeks Left in Homebuyer Tax Credit Extension — Will It Be Extended Again?

A discussion I have been involved with here in the Baltimore area about the crippling snow and the effect on the Baltimore real estate market has people in the real estate world wondering if the homebuyer tax credit may be extended again.

On Monday, the Wall Street Journal wrote an article about the credit, and how lobbyists are gearing up to try to have it extended.

In the northeast, the sheer fact of houses not being able to be shown for the majority of a month due to the snow is a big part of the issue.

Other areas of the country make the point, as recounted in the Wall Street Journal article, that banks often are often taking a long time to approve short sales. I personally have found that this delay creates the issue of buyers who qualify for the credit not considering these homes as options.

It will be interesting to see if it will happen. Washington stated that it would not be extended further, and I can understand if that does not happen. Without the urgency of it ending, the credit cannot do its’ job, which is to help people get into homes.

The other looming deadline we have right now is the upfront Mortgage Insurance Premium for FHA loans, and the fact that that rate is going up from 1.75% to 2.25% for loans whose case numbers are assigned after April 5, 2010. This means that buyers desiring to use FHA financing should be pushing to have a home under contract by the third week in March, giving them about three weeks from now, to ensure their case number is assigned prior to April 5, 2010.

Two very important deadlines are looming, and I will be following how the Baltimore real estate market responds to them.

Baltimore Real Estate Market Third Week of February 2010

As we enter the fourth and final week of February, I am reminded as to where the market was last year at this time versus this year.

I have seen showings become more frequent in the past week and the excitement over spring’s arrival in the next few weeks definitely brings people out to look.

The snow storms we had this month really put a halt to the market, as some homes were inaccessible (all of them for a long period of time) until just recently.

February is not notoriously a great time to sell your house. Often times people wait “until spring” to make sure the snow is over and the buyers are out looking.

This year we have the First Time Homebuyer Tax Credit end looming, and sellers are taking notice and attempting to get their homes on the market. The other driving force we have right now is the April 5, 2010 deadline for FHA to avoid the higher up front mortgage insurance premium.

It appears that tomorrow we will have heavy rains which should melt a lot of snow, and may cause some flooding. These are issues that sellers most likely usually don’t have to handle, and buyers need to be aware that these are highly unusual circumstances.

Many gutters have fallen, and one of my clients, who is making a claim on his gutter system said that his insurance company told him they are declaring the Baltimore area a “disaster area”. This means that roofers are overwhelmed and not available, which means this rain tomorrow and possible snow Thursday could be big problems for many Baltimore homeowners who no longer have their usual defense against water coming into their basements and main levels on their homes.

Sellers have to be aware of what is happening, and be prepared. Buyers need to be understanding and patient, and realize that these homes most likely do not usually let the elements enter!

Hopefully March will bring us much needed warmer weather so Baltimore homebuyers can get out and take advantage of these credits and lower upfront PMI, and sellers can have their homes returned to their usual states.

More FHA Changes to Happen Mid Summer

On January 20, I wrote about the new likely major FHA loan changes that were being announced.

One of those changes is going into effect on April 5, 2010, as I wrote on January 21, with the upfront mortgage insurance premium being raised from 1.75% to 2.25%.

A press release was placed on the hud.gov site on January 20 about the new changes, but was not widely distributed.

It does reiterate that the downpayment will still remain at 3.5%, which is a big relief for homebuyers wishing to use FHA insured loans to buy their homes. It had been proposed that the downpayment be raised to 5% of the sales price of a home.

The major component that FHA homebuyers need to be aware of is that sellers will only be allowed to give 3% in closing cost help to a buyer, rather than the 6% they are currently allowed to give.

From the hud.gov website:

Reduce allowable seller concessions from 6% to 3%

• The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.

• This change will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.

This may take a buyer from being able to buy a home to not being able to afford the closing costs associated with purchasing one.

In 2009, I saw many contracts with 4% in seller concessions, because closing costs in Maryland are fairly high. The minimum in closing costs for buyers is the 3.5% downpayment, plus an additional 4-5% in transfer taxes and costs. What many buyers have been doing is making an offer and asking for help from the seller to cover the majority of that 4-5%. This will no longer be the case, making many buyers possibly short 1-2% to close.

What this means for buyers who wish to use FHA insured financing is that they need to move quickly to avoid the higher upfront PMI and be able to take advantage of the possibility of between 4-6% in closing cost help from sellers who are willing to do so.

Contact me today to get your financing in place with a qualified FHA approved lender so you can take advantage of the FHA regulations as they currently stand!

HUD Temporarily Waives FHA 90 Day Policy to Move Foreclosed Homes

In an attempt to move foreclosed properties more quickly, HUD has temporarily waived the 90-day ownership guideline, making these foreclosed properties available to FHA homebuyers.

RISMedia reports that:

In today’s market, FHA research finds that acquiring, rehabilitating and reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.

This comes just before FHA’s announcement of their likely fee hike coming down the pike, helping to soften the blow of the new regulations & fees.

Buyers who have been considering foreclosed properties but could not use FHA insured financing can now, which is great news. Hopefully many of these qualifying buyers will get in to these homes with this change before the first FHA fees go up on April 5, 2010.

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