Posts Tagged ‘metro Atlanta FHA limit’

Discussing mortgage options

December 3, 2014

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Now that we’ve talked about the aspects of a mortgage payment, let’s focus on the mortgage options. There are so many mortgage options from which to choose – how do you decide which loan is best for you?

To contact any of us at Dunwoody Mortgage Services, click here!

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The refinance boom is dead, but why?

August 18, 2014

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As many in the industry know, refinances dwindled in 2014. Freddie Mac recently stated the “official” end to the refinance boom after the second quarter 2014. Freddie Mac goes on to say the purchase market has increased drastically this year, and the industry is now in its first dominated purchase market since 2008.

Realistically, Freddie Mac’s announcement is about a year behind. In early May 2013, interest rates began to rapidly climb. By the time the dust settled in mid June, rates had jumped over 1.25% from the low 3’s to the mid 4’s for a 30 year fixed rate loan. From the beginning of 2013 through the end of May 2013, refinances were over half of my business each month. Since June 2013 through August 2014, refinances only account for 20% of my business.

But why?!? Interest rates are still low. What many do not know is rates improved in 2014 and are currently lower than they were at the end of 2013. Also, some homeowners are still underwater in their homes. Don’t forget that HARP (Homes Affordable Refinance Program) still exists. Qualifying homeowners can refinance regardless of how far underwater they may be.

Rates are not as low as they have been now compared to early 2013. That doesn’t mean you should write off the possibility of refinancing altogether. If your home is in the state of Georgia, shoot me a quick email. We can talk about the pros and cons of refinancing by answering a few questions. You never know until you ask.

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FHA 203k Streamline

July 15, 2014

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Over the past couple of months, I’ve closed a couple 203k streamline loans. I figured now is a good time to talk more about the program itself.

The 203k Streamline loan rehabilitation loan from FHA that allows a borrower (purchase or refinance) to put a little bit of “tender loving care” into a home that needs some updating. There are two versions of this loan. Let me talk about both so there is no confusion.

The first version is simply called the FHA 203k loan. There is no cap on the amount of work that can be done to the home (so long as the home appraises high enough). The borrower can also make structural changes to the home. This loan program takes a longer time to get through underwriting and may require multiple appraisals. This adds up to making it a 45-60 day closing time frame.

A quicker way is using the FHA 203k streamline program. The Streamline version has a cap on the amount of work that can be done. The program also requires a 10% contingency reserve in case the work goes over budget. The cap is $35,000, and 10% of that amount is $3,500. Since almost every one chooses to finance the 10% contingency reserve, that leaves roughly $31,500 for the renovations. Once the work is complete, any excess funds left over in the contingency reserve will be deducted from the loan amount.

The advantage of using the Streamline version is it allows for a quick closing time (around 30-40 days), and an easier time through underwriting. The main drawback is the cap on the amount of money that can be used for renovations.

Here are some bullet points about the FHA 203k Streamline:

  • allows up to $35,000 worth of work that can be done on the home (roughly $31,500 if financing the 10% contingency reserve)
  • the Streamline program allows for a variety of items to be repaired/replaced/updated (roof, windows, siding, flooring, fixtures, appliances, HVAC, etc.).
  • the Streamline program will not allow any structural changes to the home. This means walls cannot be taken out to open up the floor plan.
  • other allowable improvements can include mold remediation, lead-based paint stabilization, septic system repair/replacement
  • borrowers can choose to add exterior decks or patios
  • money can also be used to modify a home for persons with disabilities

As you can read, there are a lot of advantages and goals that can be accomplished using the 203k streamline loan. If you are buying a property in the state of Georgia, and would like to know more, contact me. We can talk about the details of the program and see if the FHA 203k Streamline loan will fit your needs.

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Loan Prequalification – Credit

June 3, 2014

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While summer has begun, it won’t be too long before people begin to plan on buying a new home for the fall… a chance to be in a new home for the Thanksgiving… the holidays… New Years. The fall may seem like it is far off, but it will be here before we know it.

For the month of June, my posts to The Mortgage Blog will focus on the four aspects of buying a home. We’ll start today with a qualifying credit history/credit score.

When it comes to credit scores, there are different requirements based on the loan program being used. For the most part, borrowers use either a Conventional loan or an FHA loan to buy a home. I will focus on these to loan programs.

– Conventional loans require a minimum credit score of 620. There is not a specific trade line requirement for conventional loans. You don’t need a certain amount of active credit accounts, nor do these accounts need to be open for a specific period of time. Speaking specifically about credit scores, as long as a borrower has a 620+ credit score and receives an Approve/Eligible through Automated Underwriting, they are good to go!

– FHA loans technically require a 580+ credit score to receive the maximum financing allowed under FHA guidelines, but it is tough to find a lender who will do an FHA with a credit score that low. There are lenders who will approve an FHA with a credit score as low as 600, but most lenders require a 640+ credit score. In addition to the credit score, FHA loans requires a minimum amount of trade lines (credit accounts) on a report. While a borrower doesn’t need 2 active trade lines that are a year old, they need to have 2 trade lines that are/were active for at least 12 months in the past 3 years. Note that student loan payments that are in deferment or authorized user credit card accounts do not count toward the 2 trade line requirement.

As you can read, a perfect credit score isn’t required to purchase a home. In fact, a credit score of 620-640 would be considered “poor” by online credit agencies. As we’ll discuss next week, a 620 credit score with only a 5% down payment can get you into a new home.

If you are reading this and thinking about a new home for the holidays, I would be happy to help you get the process started. Contact me today. if you are buying a home in Georgia, I can help you buy that home!

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FHA to lower max loan amounts

December 10, 2013

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At the beginning of 2013, I wrote a blog post mentioning how the government wants to pull back (not out) of the mortgage industry in terms of the number of loans they insure. One way they hope to accomplish this (as mentioned in the post earlier this year) is to increase the mortgage insurance premiums on FHA loans. See the link above for the full post.

Another sign the government is attempting to scale back is the recent announcement that FHA maximum loan amounts will be reduced. Expect to see the counties with the highest FHA loan limits of $729,750 to reduce by roughly 14% to $625,500. The reduction in other areas/counties of the country has yet to be determined. FHA also announced that areas where the housing market has not recovered as much will not see a reduction in the maximum loan amount.

This is actually a good sign for the housing market and mortgage industry overall. The government stepped in and expanded the availability of FHA loans during the housing crisis. Now that housing prices across the country are recovering and loan guidelines have loosened a bit for conventional loans, FHA insured loans are not as critical to the housing market.

With those two things in mind, the goals of FHA right now are to:

  • reduce the number of loans they insure
  • replenish their reserves that were depleted due to all of the foreclosures
  • concentrate on borrowers that are still underserved

How does this news impact those looking to buy a home? First, realize that a LOT has changed in terms of FHA loans, minimum down payments for conventional loans, minimum credit score requirements for both FHA and conventional loans, etc. In short, if you haven’t spoken with a licensed mortgage originator about the changes, an FHA loan may not even be the best avenue to explore anymore.

Second, expect a rush of buyers into the market this coming year. In the metro Atlanta area, there was a housing shortage for almost all of 2013. Now is the time to plan and get prequalified to get a jump start on the housing market for 2014. If you are buying in the state of Georgia, contact me today to get the prequalification process underway.

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FHA changes begin April 1st

February 12, 2013

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As you may have heard OR read on this blog, FHA announced changes to their loans. Those changes take place on all case numbers assigned on or after April 1, 2013. Does this mean you need to be closed on a home by the end of March.

In the words of Lee Corso – not so fast my friend!

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The changes that increase the monthly mortgage insurance rate AND make the mortgage insurance permanent are for all loans with case numbers assigned by April 1st. That doesn’t mean you need to be closed by that date. Ideally, you need to be under contract by Monday, March 25, 2013 so your lender can order your case number. Under this scenario, you should have a case number before April 1st.

Typically it takes 24-48 hours to get a case number back, but there could be a rush on case number orders due to the April 1st deadline. To ensure you get a case number assigned before April 1, 2013, be under contract by March 25th. Have your lender order the case number ASAP, and you should have it back by the end of the week.

This means you don’t have to find a home and be closed in roughly 45 days from now. What it does mean is you have six weeks to get prequalified, find a home, make an offer, and get under contract. You can close after April 1st and still get the current mortgage insurance terms and guidelines for your FHA loan.

Looking to buy a home in the state of Georgia? Contact me today, and I can help y0u get started with the prequalification process.

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FHA changes officially announced

January 31, 2013

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As I mentioned earlier this month, FHA has indeed announced changes to their guidelines. While FHA was approved by Congress to increase their monthly mortgage insurance rates by roughly 60%, the actual increase wasn’t that severe. Don’t get too excited though. There is one change that isn’t going to be very popular at all.

The announced changes include:

  • Monthly mortgage insurance for borrowers making the minimum down payment will see the monthly mortgage insurance rates increase from 1.25% to 1.35%. On a $200,000 that works out to about a $17 per month increase.
  • The biggest change is that mortgage insurance will be required for the life of the loan. Mortgage insurance will no longer fall off of the loan once you have 22% equity. You’ll pay monthly mortgage insurance for 30 years on a 30 year fixed FHA loan unless you make a 10% down payment when you buy the home (if you can make a 10% down payment, you more likely to be better off going conventional).
  • Borrowers with a credit score less than 620 and a debt to income ratio higher than 43% will require manual underwriting for approval along with a letter from the lender explaining why this borrower was approved. Individuals looking to buy a home that fall into this category will be hard pressed to find a lender who will process their loan.

As expected, these changes make conventional loans look way more attractive. For example, let’s assume you are looking to buy a home and have a credit score 720 or more. With today’s PMI rates, the monthly mortgage insurance on FHA loans is twice as much than conventional loans with a 5% down payment.

Let’s use a $200,000 purchase price again and compare FHA and conventional loans:

  • The FHA down payment is only $7,000, but the monthly mortgage insurance is $220 per month.
  • The conventional loan down payment is a little higher at $10,000, but the monthly mortgage insurance is $107. That is a savings of $113 per month (over $1,300 per year).

Why the changes? It is twofold. First, FHA is looking to raise money because their reserves are exhausted. Increasing mortgage insurance and requiring it for the life of the loan would help replenish their reserves that have been severely hurt by the foreclosure crisis over the past few years.

The second reason is to reduce the number of FHA loans they insure. By making it more expensive to use an FHA loan, it will steer borrowers to conventional loans – which is the goal of the government so they do not have to insure as many mortgages as they are currently funding.

The moral of the story – if you are looking to buy a home using an FHA loan, you want to get started and closed before these changes take effect. If you are buying in the state of Georgia, I can help you get started with the prequalification process today. Don’t delay as these changes are coming!

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Coming soon – FHA changes

January 7, 2013

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I’m sure no one saw this one coming (lots of sarcasm here).

For the past several years, FHA has annually increased their monthly mortgage insurance. Toward the end of 2012, as posted here on this blog, FHA was given the approval to dramatically increase their monthly mortgage insurance. It seems the probable increase isn’t going to be that bad.

The actual proposed changes include increasing the monthly mortgage insurance from 1.25% of the loan amount annually to 1.35%. That isn’t a huge change. The BIG change is this…

Currently FHA mortgage insurance falls off once a borrower has paid at least 60 mortgage insurance payments AND has 22% equity in the home. Moving forward FHA loans could require mortgage insurance for the life of the loan. If approved, it doesn’t matter how much equity you have in your home, you’ll be paying mortgage insurance as long as you have the mortgage.

That is a dramatic change. Why would FHA be considering a change this dramatic? As with most things in life, it all has to do with money.

Also discussed on this blog, FHA exhausted its reserves toward the end of 2012. This doesn’t mean FHA can’t function. What it means is they don’t have the reserves the government say they “should” have  based on the amount of FHA loans they have financed. FHA is still funding loans and running its day-to-day operation. They are just lacking reserves.

Well, one way to get rid of this problem is making mortgage insurance payments never go away. That would certainly help. It isn’t official yet, but once FHA officially announces their changes, I’ll be here to update you.

In the meantime, if you are thinking of buying a home and needing to use an FHA loan to do it, now is the time to get going. We don’t know the exact changes, but we know the terms will be worse than they are today. If you are buying a home in Georgia, contact me to get the prequalification process underway.

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Why the MI increase on FHA loans?

October 2, 2012

Since my last post, I’ve received a few emails inquiring why FHA continues to increase the mortgage insurance on their loans. Does FHA even want to lend money anymore?!? I’ve blogged about some of the reasons for the changes in a few posts over the past year. Here is a consolidated version of those posts for easy reading.

  • First and foremost, FHA is running out of money. They are at the lowest point ever in their history, and it isn’t getting better. Since FHA fully guarantees the loans they issue, with all of the foreclosures, the “bank” is running out of money. FHA has always been self funded. Given the current state of the federal budget in D.C., now isn’t the time to look for a handout. So they will raise money the only way they know how – by increasing the monthly mortgage insurance premiums.
  • FHA wants to go back to being the niche program they were AND designed to be in the mortgage industry. Prior to the housing burst, FHA made up less than 10% of the originated mortgages. During the past few years, they have climbed to as much as 50% of the loans being originated. FHA never intended their loans to be used in this way. By increasing the monthly mortgage insurance, it makes conventional loans with 3% or 5% down look much more appealing.
  • Eventually, the government wants private lenders to begin working their way into the mortgage industry. If the monthly mortgage insurance is raised to 2.05% (up from its current 1.25%), at some point other companies will come in and say “we’ll do that deal, but only charge 1.50% annually on mortgage insurance…” or something along those lines. Ideally, this would happen to FHA and conventional loans so the government doesn’t have to keep backing Fannie and Freddie either. At this point, we are a long way from this taking place. That said, could this be the start of moving the mortgage industry in that direction?

While there are a few reasons for the increase, the most pressing reason is the lack of money to fund FHA. If they run out of money, then FHA loans go away entirely. While the government would like to see the number of newly originated FHA loans decrease, having FHA eliminated all together isn’t their goal. By increasing the monthly mortgage insurance, it should increase the money coming into FHA’s coffers while probably reducing the number of buyers using FHA loans to purchase their home.

Hopefully this post has shed some light on why FHA has annually increased their monthly mortgage insurance.

Another increase to FHA mortgage insurance?

September 20, 2012

You know FHA mortgage insurance is high when the monthly premium and mortgage rates are both in the 2’s! Yes, that is right. FHA mortgage insurance premiums may increase again. I say “may” because we do not know for sure whether or not they will be increased. What we do know is that Congress approved a measure that will allow FHA to charge up to 2.05% for their annual mortgage insurance premiums.

Is 2.05% annually a lot? Yes, yes it is. That would be about double the cost of monthly mortgage insurance for conventional loans with 3% down (that program carries the highest mortgage insurance rates for conventional loans). It would also be the largest one time increase in the last several years. Here is a quick review of FHA mortgage insurance rates over the past few years using a $200,000 loan for comparison:

  • in 2008, the annual mortgage insurance rate was 0.50%, or $83 per month
  • in 2009, it increased to 0.55%, or $92 per month
  • in 2010, the increase went to 0.90%, or $150 per month
  • in 2011, mortgage insurance increased again to 1.10%, or $183 per month
  • the last increase was in 2012 when it jumped to 1.25%, or $208 per month

Just to put that into perspective, the monthly mortgage insurance in 2008 was $83 per month. For the same loan amount, it is now $208 per month. That is an increase of $125 per month.

What does 2.05% look like? For a 200,000 loan, the FHA monthly mortgage insurance would be $341 per month! Also, the latest act of Congress requires a minimum amount of 0.55% for FHA loans. Homeowners who bought a home with a 15 year fixed mortgage and a 22% down payment were exempt from the monthly mortgage insurance. This may no longer be the case.

Again, I’ve used the word “may” several times in this post because nothing is written in stone. All Congress has done is said that FHA can choose to increase mortgage insurance rates to 2.05% and establish a minimum on all FHA loans. As of this post, nothing has been officially announced.

What should you do? If you were thinking of buying a new home using an FHA loan, it would be a very, very good idea to buy that home prior to any additional changes taking place to the monthly mortgage insurance. With an annual increase each year for the past four years, one thing we know for sure is that FHA will increase it. The question is “when”, not “if.”

Looking to buy in the state of Georgia? If so, I’d be glad to help you get prequalified and ready to make an offer. Contact me today to get started!