- No appraisal is required
- No income documentation is needed
- No asset documentation is needed
- Usually, the 30 year fixed rate for an FHA loan is lower than conventional loans (usually!)
- FHA loans never have a prepay penalty
- Qualifying guidelines are less restrictive than other loan types - for example, you can have a 585 credit score and still possibly qualify for an FHA loan
- The down payment requirement of 3% (3.5% as of January 1, 2009) is lower than the conventional down payment requirement of 5%
- If you currently have an FHA mortgage, if interest rates drop, you can participate in the FHA streamline program and take advantage of lower rates without having to fully re-qualify for a new loan.
- Your current mortgage payment must be more than 31% of the your gross monthly income.
- You must not have misrepresented your income on your original loan application.
- You must be able to qualify for a new FHA 30-year fixed rate based upon your current documented income.
- You will be required to share in future home appreciation with the FHA.
- The new FHA mortgage loan will be a maximum of 90% of the home’s current appraised value. All second mortgages or any other liens on the property will need to be extinguished — usually meaning that the 2nd mortgage holders will have to agree to a loss of principal.
- The program is completely voluntary; lenders are not required to participate.
- The program is a voluntary program for lenders to participate in
- Lenders will reduce the amount of money that they are willing to accept to pay off your current mortgage (this has become known as a “short-refinance”)
- A new mortgage will be issued by the new lender based on your current homes value
- FHA will share in the appreciation of the home, not the lender who took the loss
- FHA will collect a 3% “exit fee” when you sell the home or refinance it
- There is no official list published of lenders who are participating in the program
- There is no standardized method of working with these lenders — so each scenario with each lender is handled on an individual basis
- There is growing sentiment among the lenders that any other loss mitigation method (loan modification or workout) is financially better for the current lender than the Hope for Homeowners program
- For all FHA loans that are “full doc” refinance or purchases, the new UFMIP amount will be 1.75% of the loan amount.
- For all FHA Streamline refinances, the new UFMIP amount will be 1.5%.
- For all FHA Secure refinances, the new UFMIP amount will be 3%.
- For loans with an LTV greater than 95% and terms longer than 15 years, the new factor will be .55%.
- For loans with an LTV less than 95% or below and terms longer than 15 years, the new factor will be .50%.
- For loans with an LTV greater than 90% and a 15 year term, the new factor will be .25%.
- For loans with an LTV at 90% or less and a 15 year term, there is no monthly mortgage insurance.
- For FHA Secure loans, the new factor is .55% for loans with an LTV over 95% and .50% for loans with an LTV less than 95%.
- VA loans do NOT have a prepayment penalty and MAY be assumable in certain situations.
- Full income/asset documentation is required
- You can get a VA loan for a new single family residence home, condominium or manufactured home (with or without the lot)
- A VA loan requires a funding fee that can either be paid by the borrower or may be allowed to be financed into the loan. This funding fee may also be waived under disability guidelines established by the VA.
- For the official service requirements and periods of eligibility, go here to see if you qualify.
- Good credit (doesn’t have to be perfect credit, but your credit score is a factor)
- Sufficient income to support a monthly mortgage payment
- Valid Certificate of Eligibility (COE)
- Purchase must be your primary residence
- Down payment Assistance: prohibited on decisions on and after 10/1/08, defined as the date we sign the MCAW or – for AUS loans – the date of the last updated AUS run. So even on manual underwrites, the final adjusted numbers must be finalized by 10/1/08.
- New borrower investments will be 3.5% (96.5% LTV, regardless of loan size)
- UFMIP will change; new amount still to be determined, anticipated by 10/1
- The recent risk-based UFMIP will continue thru 9/30 case assignments, with the new ones starting with cases assigned on and after 10/1
- Monthly MIP will continue to be 0.55% for >95% LTV, o.50% for <=90% LTV
- Mortgage limits: $270,050 is the standard limit across the country, with higher amounts allowed county-by-county up to $625,500, not to exceed 115% of area median home prices
- Condo requirements will be streamlined, and will include ability for lenders to do project approvals
- Appraiser roster eligibility – will require appraisers to be state-certified, not just state-licensed.
- Numerous changes on HECMs, including maximum fees, prohibiting cross-selling, and will begin a “HECM for Purchase’ program.
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FHA Streamline Program: No Appraisal Required
One of the benefits of the FHA loan program is that when interest rates dip, you can easily take advantage of lower interest rates without having to completely re-qualify for a new loan.
If you are currently in an FHA loan and your interest rate is over 6%, it currently makes financial sense to speak with your mortgage professional about the FHA Streamline program.
The FHA Streamline program is one of the few loan programs that are available where you can refinance and get a lower the interest rate on your home and:
The main requirements for the FHA Streamline program are that (1.) you have a good “mortgage rating” — meaning that you have made your monthly payments on time and (2.) that if you participate in the Streamline program, it will put you in a better financial situation (read: lower your interest rate).
When speaking with your mortgage professional, ask them about the FHA Streamline With No Appraisal program and what it takes to qualify for it.
You may be surprised at how easy it is to lower your interest rate and save money each month on your mortgage payment.
Arizona FHA Loans: 5 Advantages To FHA Loans
I was recently asked by someone “what are the advantages of getting an FHA loan”? and after giving a couple of advantages, I thought it might be helpful to make a short list of advantages of getting an FHA loan vs other loan options.
5 Advantages To FHA Loans
Are there other advantages to having an FHA loan? Probably, but these are 5 simple advantages that came to mind this week. With the reduction of loan programs over the last year, it is no wonder that many people are choosing to obtain an FHA-insured mortgage.
FHA Hope For Homeowners or FHA Short Refinance?
Many, many people each week call us who currently owe more than their house is worth asking about the FHA Hope For Homeowners program.
The bad news for these homeowners is that the FHA Hope For Homeowners program seemingly doesn’t really exist (not one was done in the month of October in the entire US).
So if you currently owe more than your house is worth and are not late on your payments, you may want to consider another option — an FHA Short Refinance.
An FHA Short Refinance works exactly like a short sale, except you as the current owner stay in your home rather than sell it to someone else. Your current lender agrees to accept less than you owe and you get a new fixed rate FHA loan with an affordable payment.
There are real reasons that lenders are willing to accept a short payoff for an FHA Short Refinance. For example, who would be willing to pay more for the home after a foreclosure: an investor looking for the best deal in town on a foreclosure or the current home owner? Or another possible reason that a lender may be willing to accept a short payoff is for a quick profit on a mortgage they just bought for pennies on the dollar of what you currently owe.
So.
If you owe more than your house is worth, have good credit and are not late on your payments, we may be able to help you get your lender to agree to accept less than you currently owe when you get your new FHA loan.
Before you decide whether or not a FHA short refinance is right for you, be aware that there are fees associated with the transaction regardless if your current lender agrees to write down your principal balance or not. These fees include a credit report fee ($25) and a processing fee ($495) and possibly an appraisal fee ($350) which can all be refunded to you in the form of a credit at closing if we are successful.
There is no guarantee of success and based on what we are learning from our friends who are doing these, we estimate about a 50% chance of success.
If you are interested in learning more about whether or not an FHA Short Refinance is right for you, email or call us and we will get you a packet of information to get you started with the process.
Reverse Mortgage Fees To Decrease Starting November 1
For seniors who are interested in getting a reverse mortgage, starting November 1 they will be able to access more money and pay lower fees thanks to housing legislation passed earlier this summer.
The vast majority of seniors age 62 or older (90%+) who get a reverse mortgage go through the FHA Home Equity Conversion Mortgage (HECM) program. Prior to November 1, seniors could borrow against the lesser of either their home’s value or a limit that ranges from $200,000 to $362,790, depending on location.
But effective November 1, the limit is slated to rise to $417,000 nationwide under the new rules which means that seniors will be able to access more of the equity in their home and turn it into cash.
Another benefit of the recent legislation changes is that seniors who borrow more than $200,000 will pay less in fees when going through the FHA HECM program. Homeowners currently pay a 2% origination fee on HECM reverse mortgages and under the new law, they will pay 2% on the first $200,000 and 1% on the rest with the total origination fees not to be more than $6,000.
Who is should consider a reverse mortgage?
According to Susan Wachter, a professor or real estate at the University of Pennsylvania’s Wharton School of Business:
“There is a niche household a reverse mortgage is exactly right for and that person knows they want to stay in their home until death, and they really need the cash to allow them to do so.”
FHA Hope for Homeowners Program, Is It Real?
More and more people are contacting us asking about the newly-announced FHA Hope for Homeowners program and how to qualify, what will work and won’t work with the guidelines, etc.
The good news is that FHA has issued a few press releases about the program and we have some high-level guidelines to look at as we begin to work with people to help them get qualified.
The bad news is that many lenders and investors have not yet put their guidelines in place and so we caught in this cycle of “maybe this will work” but not knowing for sure and often times many lenders are not sure what they can and can’t do.
As a result, we have yet to *complete* an FHA Hope for Homeowners loan — although we have a few at various stages of the origination process.
Is the FHA Hope for Homeowners program real?
Yes, we think so.
Is Hope for Homeowners the right program for you?
Maybe, maybe not.
Many of the people we talk to may be able to realize more benefit from a short-refinance than they would benefit from a Hope for Homeowners loan and so we are working with lenders to do a short refinance when possible.
How does a short-refinance work?
Think short-sale except for rather than sell your home to someone else for less than you currently owe, you just refinance it and your current bank excepts less than you currently owe.
Short refinance, Hope for Homeowners, loan modification, short sales.
In today’s mortgage world, those are the three most common things that we seem to be talking with people about.
Which one is right for you?
It depends on things like whether you want to live in your home or just get rid of it. Or whether or not you are current on your house payment. Or who your current lender is. Or whether or not you currently could qualify for a new loan.
As always, we are available to share our experience and help you through the process.
FHA Hope For Homeowners Program - How It Works For Arizona Homeowners
We have talked to many people recently about the new FHA Hope for Homeowners program and how it works.
The objective of the program is to help homeowners who are in a negative-equity (they owe more than the house is now worth) situation and may be in a toxic adjustable rate mortgage, get a fixed rate FHA mortgage loan they can afford.
The key elements of the FHA Hope For Homeowners loan program include (this is not an all-inclusive list):
If you think you meet the above criteria and decide to engage us to work with you to get qualified, these are the things that you can expect:
Once you confirm that your current lender is participating in the program, the next step is qualify for your new loan. You will need to have documented income and assets, there is no longer such a thing as “stating your income”. Once we have determined that you can qualify for a new FHA fixed rate loan, we will proceed to the appraisal stage.
You will need to pay for an appraisal on your house which is usually between $350 and $400. You will also need to pay for your credit report which is approximately $25. The appraisal is a very important step in the process since the offer to the current lender is going to be based on the current appraised value of your home.
Upon approval by your current lender for them to accept a short-payoff under the Hope for Homeowners program, we will proceed with the loan as normal on our side.
This process is somewhat case-by-case and is not standardized by any means. Each lender is different and has a different process of getting these approved. The biggest key if you are interested in the Hope for Homeowners program is to not delay finding out if your lender is participating and if you can qualify!
FHA Hope For Homeowners Program
When the Housing and Economic Recovery Program of 2008 was passed in late July, we wrote about the Hope for Homeowners Program. Some of the highlights of the program include:
Are lenders happy with this program? Ummm…. It doesn’t look like it.
According to the Assistant Secretary for Housing at HUD Brian Montgomery:
“I think lenders will be enthusiastic about the program but they have other things they’d like to do before they do a principal write down”.
What are the signs that lenders are less-than-excited about the Hope for Homeowners program?
Even Sheila Bair, who heads the Federal Deposit Insurance Corporation, praised the FHA program but said that few borrowers with IndyMac, the bank that the FDIC took over in July, would use it.
She said that her responsibility to maximize profits for the investors would probably limit the number of IndyMac borrowers who would take advantage of the Hope for Homeowners program.
Don’t be surprised if you are interested in participating in the Hope for Homeowners program and you end up getting a loan modification or loan workout from your lender.
FHA Up Front Mortgage Insurance Premuim (UFMIP) Changes
Yesterday, the new FHA Up Front Mortgage Insurance Premium amounts were announced and will be effective October 1, 2008. This makes for the 2nd change this year in the amount of money it costs a borrower up front to get into an FHA loan.
Back in June, we wrote about the UFMIP changing as of July 14. As a result of the new housing Bill passing into law in late July, the amount that a borrower will pay for UFMIP is going to change again. Effective October 1, 2008 the UFMIP calculations are going to be:
In addition to the UFMIP changes, there are also changes to the monthly mortgage insurance factors for FHA loans. Monthly mortgage insurance is calculated by taking the factor and multiplying it by the loan amount which will give you the total annual amount and then divide by 12.
There has been a fairly technical debate as to whether “risk based premium pricing” has merit or not going on for years. I thought it was interesting that just as risk based premium pricing was implemented, it was “outlawed” and replaced with a simple system that doesn’t take into account a borrowers FICO score as the risk based premium pricing schedule did.
What does this mean in simple terms to the people who are wanting to get an FHA loan?
In short: if you have great credit and want to get an FHA loan, you are going to pay slightly more than you would under the risk based method. If you have poor credit and want to get an FHA loan, you are going to pay slightly less than you would under the risk based method.
And no matter what, regardless of credit score, everyone is going to pay slightly more when getting a full-doc FHA loan than they would have paid in the system prior to the July 14th implementation of the risk based premium pricing method.
While on the surface, that may not make any sense — the underlying math and logic behind the math is more complex — which I would be happy to discuss with you if you really want to know!
Are you a Veteran or Active Military? A VA Mortgage Might Be Right For You.
VA loans were designed to help veterans of the armed services, either currently serving in active duty or in the reserves, as well as their spouses. In order to qualify for a VA loan, a veteran must meet the eligibility guidelines set by the Department of Veterans Affairs. VA Loans enable veterans that qualify to put no money down on a mortgage loan up to $417,000.
VA Loans are guaranteed by the Department of Veterans Affairs (the maximum guaranty is equal to 25% of the Freddie Mac conforming loan limit for a single family home. In 2008 this limit is set at $417,000 for all states except in Hawaii, Alaska, Guam and the U.S. Virgin Islands where the limit is set for 2008 at $625,500).
Some quick information about VA loans:
2008 Funding Fee Schedule:
|
Loan Category |
Active Duty and Veterans Rate |
Reservists and National Guard Pay |
|
Loans for purchase or construction with down payments of less than 5%, refinancing, and home improvement. |
2.15% |
2.40% |
|
Loans for purchase or construction with down payments of at least 5% but less than 10%. |
1.50% |
1.75% |
|
Loans for purchase or construction with down payments of 10% or more. |
1.25% |
1.50% |
|
Loans for manufactured home. |
1.00% |
1.00% |
|
Interest rate reduction loans |
0.50% |
0.50% |
|
Assumption of VA-guaranteed loans. |
0.50% |
0.50% |
|
Second or subsequent use of entitlement with no down payment |
3.3% |
3.3% |
VA Loan Eligibility
With the many upcoming changes to the FHA programs, it makes more sense than ever to find out if a VA loan can save you money when buying your new home. Call me anytime!
FHA Conference Call Regarding HR3221
I just received an email from the Risk Manager at our company and he was part of a conference call today with FHA regarding HR3221. Here is a rundown of the biggest issues raised on the call today with some of the answers to questions people are having.
To quote our Risk Manager “…Expect numerous Mortgagee Letters as these are implemented…”
More to come — and beware — the below information is uber-mortgage-geek-speak!
Normally, I don’t like to include uber-mortgage-geek-speak on the blog, but with so many changes coming out between now and 10/1, I thought I would pass them along as I see them.
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