FHA Loans to Carry a Higher Price Tag

The FHA insured Single Family loan program is getting a face lift once again! Three big changes with two important dates to remember:

The first phase is in effect for case numbers assigned on or after April 1, 2013 for purchase and refinance transactions. Streamlines are also included in the increase unless the loan being refinanced was endorsed on or before May 31, 2009. The annual Mortgage Insurance Premium (MIP) will rise by either 5 or 10 basis points depending on the loan-to-value (LTV)... in turn inflating the monthly mortgage payment. This somewhat minimal increase is not unusual from the hikes we've seen over the last few years as HUD has tried to back fill its insurance fund. 

Case numbers assigned on or after April 1st, 2013:

(1 bp is equal to one hundredth of a percentage point)

The second MI change is to the duration of the premium and goes into effect for case numbers assigned on or after June 3rd, 2013. A dramatic makeover that will keep the MI in place for the life of the loan when less than 10% is put down. Currently the premium is set to automatically cancel once the LTV reaches 78% after a minimum of 5 years. 

Case numbers assigned on or after June 3rd, 2013:

By removing the cancellation factor HUD would stand to collect a tidy sum. On an average sized loan of $250,000 and a minimum 3.5% down, the cost over 30 years adds up to $33,835. The cost analysis is from a marketing piece done earlier in February, although the rate and/or fees may vary the principal idea remains the same. The "Forever MI" will apply to purchase loans and refinances, streamlines included, over a 90% loan-to-value.  HUD is also removing the annual MIP exemption for loans with terms of 15 years or less and/or those with a loan-to-value of 78 percent or less at origination.

Case numbers assigned on or after June 3rd, 2013:

There are a few exceptions to each phase as they roll out...

April 1st changes to the MIP Increase excludes:

• Streamline refinance transactions of existing FHA loans that were endorsed on or before May 31, 2009 (see ML 2012-04)
• Title I
• Home Equity Conversion Mortgages (HECM)
• Section 247 (Hawaiian Homelands)
• Section 248 (Indian Reservations)

June 3rd changes to the MIP duration change excludes:

• Title I
• Home Equity Conversion Mortgages (HECM)

FHA will continue to remain a viable choice for credit challenged home buyers looking for a low-down loan program. However, I would advise better planning if you could qualify for an alternative loan program...an ounce of prevention is worth a pound of cure. To apply for this or any other loan program contact me today.

Additional information:

HUD Mortgagee Letter 2013-04

Oregon Mortgage ConneXion -Search Label FHA

2013 USDA Income Limits

USDA published the income limits today for its Rural Development aka Single Family Guaranteed Loan Program. The 2013 Income Limits vary by county and are based on the size of the household. The property must also lie within the eligible rural boundary as defined by the USDA. The income contingent loan program remains a popular choice in the Northwest for first time home buyers with the potential to purchase a home with little to no money down. The income limits also apply to borrowers looking to refinance an existing USDA guaranteed loan. For more information on this or any other loan program contact me today! 

Additional Resources:

Oregon Mortgage ConneXion -USDA

USDA Rural Property Lookup

2013 VA Loan Limits and Program Highlights

The 2013 county VA loan limits have been published... see link at the bottom.

The VA Loan is a great choice for qualified Veterans as they typically carry a lower APR than most other mortgage programs available. It is important that your Loan officer know the loan program well, it is easy to run into trouble in underwriting that could ruin your chances of getting approved. Don't be afraid to ask how much experience they have with VA Loans upon application. 

Some highlights of the VA loan program include:

Purchase Loans:

• No down payment may be required. *Depending on loan limits and entitlement. 
• Up to 4% of closing costs can be paid with seller concessions *this may include other debts owed by the Veteran.
• Funding fee from 1.25% (regular military with 10% down) to 3.3% for subsequent use.

VA Streamline - IRRRL (Interest Rate Reduction Refinance Loan): VA to VA

• Funding fee of only .5%
• No credit report, appraisal, nor income verification may be required.
• The loan to value will allow for up to 100% or more. *Lender requirements may vary
• Notes: The new loan amount must be less than the original plus "allowable" closing costs. There is an exception to this if your loan is delinquent so that late charges and/or legal fees can be included. Your payment is only allowed to increase if you are refinancing out of an ARM. Funding fees may be financed if loan limits allow.

VA Cash-Out: Regardless if you are taking cash out or not, go figure.

• Funding fee of 2.15%, 2.4% for Reserves/National Guard, or 3.3% for subsequent use.
• Loan to value up to 90%
• Loan being refinanced does not have to be a VA Loan.

Other perks:

• Never any PMI (private mortgage insurance).
• Loan amounts up to $417,000, higher limits available in certain counties around the states. *Funding fee included.
• Flexible underwriting, we will leave it at that, too many what ifs, ands, or buts.
• All VA loans may be assumed by another qualified Veteran with only a .5% funding fee.
• Veterans with a service connected disability of 10% or more the funding fee is waived.
• Jumbo loans available *Down payment equates to 25% of the VA county loan limit or 25% of the loan amount, whichever is less.
• Construction, and Manufactured Home Loans are also available, other restrictions apply.

To apply for a VA loan you'll want to provide a copy of your DD214. Your lender can request your  Certificate of Eligibility or COE for you electronically, no need need to make a special trip.  To apply for this o any other loan program contact me today!

Additional Resources:

OregonMortgageConneXion.com: Labeled VA Loans

2013 County Loan Limits - VA Loans

Understanding Your Credit Score

Your credit rating will determine the interest rate you pay not only on consumer loans, but also the premiums on homeowners and auto insurance, and lately more employers are considering your credit history to determine your eligibility for employment. Credit scores may range from the 300 to 850 and is commonly referred to as a FICO score. This formula is used by the each of the reporting agencies which vary slightly and is why they use three merged reports when applying for a mortgage. Equifax, Experian, and TransUnion keep these formulas "secret" but they all share the same major components.

1) Payment History: Simple, pay on time every time. If you have not in the past the sooner you start the better. Public records such as a bankruptcy and foreclosure will hurt you the most. Judgments and collections will also take a big bite out of your score followed by slow pays. Derogatory information will carry less weight over time as long as you develop good credit habits going forward.

2) Capacity: The balance owed vs. the credit limit. Being maxed out will hurt you just as much as slow pays if not more. Ideally you would want to pay your balance each month. You also want to make sure you don't have too much credit available, but be careful if you decide to close any accounts, make sure it has a zero balance and is not one of your long standing accounts.

3) Longevity: The length of time your accounts have been established. You want to show a good payment history over a length of time. Rolling credit card balances every 6 months or so to keep the teaser rate might save you money but you are hurting your score in the long run.

4) Types of accounts: You will find trade lines categorized into 4 groups, Mortgage, Installment, Revolving, and Open-end accounts eg. mobile phone and utilities in some states. A good balance between the types of accounts is needed to keep your score up. Your history on a mortgage trade line will have a more positive impact on your rating while a signature loan with those nameless "financial institutions" will have a more negative one.

5) Inquiries: How many times in the last 12 months and for which types of accounts are you applying? Creditors are weighted by their type of credit they offer. Mortgage or auto inquiries within a 30 day period are counted as only one inquiry. Even more interesting an inquiry at a credit union will have less of a sting than an inquiry at that nameless "financial institution".

Most importantly make sure that all of the information on your credit report is accurate. You can obtain all three free at freeannualcreditreport.com it will not include your score unless you opt to pay for it. Contact the creditors directly and ask them to correct any incorrect information. If that doesn't help you may file a dispute with the agency reporting it. Disputing accounts on your credit bureau can throw up red flags and may cause delays in your mortgage application due to lender guidelines. Please consult with a mortgage professional before disputing any information on your credit report if you are considering applying for a mortgage in the near future. Ask for letters from the creditor or agency and be sure you keep all documentation relating to the correction to serve as proof should the error turn up again. A rapid re-score is often used when timelines are short and you need a quick boost to your score to qualify you for certain mortgage programs. 

If you want to keep tabs on your score you may subscribe with any of the agencies for a monthly fee, shop to see which of the programs work best for your needs and goals. You also can also purchase score simulating software and play with different credit scenarios. If you are a Costco member I highly recommend you try their service Identity Guard which includes monthly monitoring with scores, fraud alerts, a score simulator, and identity theft protection all for a reasonable price. Monitoring your credit is beneficial for your wallet in the long run and will also help protect you from the devastating affects of any fraud. If you are trying to recover from bad credit because life happened the good news is all you need is a little discipline and time. 

2013 USDA Rural Home Loan Funds Available

Just in from USDA Rural Development:

FY 2013 Funds Available! Funding for Rural Development’s Single Family Housing Guaranteed Loan program is now available for fiscal year (FY) 2013.  The funding received is based on a Continuing Appropriations Resolution 2013 (H.J. Res. 117). Loans that were issued Conditional Commitments “subject to” commitment authority will be obligated on the Agency’s Guaranteed Loan System (GLS). 

This is good news for this who had refinances or purchases on hold until this funding came through. Some lenders do have the capability to fund these with only the conditional commitments from USDA; it is very common to hear funds are exhausted so check to see if your mortgage lender will honor these. The funds for 2012 had not experienced nearly as long of a dry spell as years past due to recent increases to the guarantee and annual fees. We are good for hopefully another year!

To apply for this or any other loan program contact me today!

USDA Rural Shrinks Eligible Areas and Increases Fees.

Update: "USDA has recently announced that the transition to using data from the 2010 Decennial Census will be implemented on March 27, 2013. Until that time, and unless specifically directed otherwise, Rural Development programs will continue to use the population data from the 2000 Decennial Census for program purposes." 
USDA Rural Development - http://www.rurdev.usda.gov/orsfh.html - 10/05/12

Effective October 1, 2012 the areas served by the popular USDA Rural Development home loan program which enables low to moderate income earners 100% financing will reduce its eligible property areas. The change comes mostly due to higher populations in areas based on 2010 US Census data but also due to the expiration of Grandfather Clauses by RHS or because its county has been designated as part of an MSA (Metropolitan Statistical Area). Preliminary areas in Oregon and Washington slated to lose eligibility are:

 Cities                                                                             County                      Population

*the above is a draft and is subject to change

Although this serves as a blow to those areas previously served the USDA Rural program will continue to be a smart financing option for those looking to purchase a new home in the outlying communities. To see if the USDA Rural is available your your desired location follow this link to check property eligibility.

Also effective October 1st the USDA Rural Annual Fee will increase from .30% to .40% on all new loans originated and on refinance transactions the upfront Guarantee Fee will increase from 1.5% to 2%. The increases are necessary to ensure sustainability within the popular loan program.

To apply for this or any other loan program contact me today!

HARP 2.0... A Success Story

When Home Affordable Refinance Program (HARP) was solidified in March 2009 there were plenty of skeptics. As each phase rolled out many still set up camp in the mindset that HARP was nothing but hype. There were only a sprinkling of qualified borrowers, in fact, FHFA estimated that 894,000 borrowers were successful with a refinance as of August 31, 2011 when "HARP 2.0" was announced. This number pales in comparison to the estimates that were originally projected that HARP could help. 

"The Home Affordable Refinance program will be available to 4 to 5 million homeowners who have a solid payment history on an existing mortgage owned by Fannie Mae or Freddie Mac, but have a loan-to-value ratio of 80% to 105%." -FHFA 

No matter what we call it... HARP, Refi Plus, Expanded Refi Plus, or even Freddie Relief we hadn't seen much evidence HARP was getting the job done. Starting out we were capped at 105% then saw an increase 125% a year later. Each of these limits seemed generous enough however we found it tough to place loans because most lender overlays required the same servicer in order to refinance. I had turned borrowers away more than I could get them approved. With each expansion that came more underwater borrowers were able to take advantage of the program but the program still fell short. Now that it has morphed into HARP 2.0 the unlimited loan to value is making a little more headway. 

One of my borrowers is testimony to the history of HARP. She stuck it out with me through the years as we patiently waited to afford her a lower mortgage payment. We tried at first but with the lender paid MI she would have to deal her current lender. She applied with them and was denied because her LTV was at 107% bu their standard which was just 2% over what the current guideline was. A year later we had the same issue... just barely edged out, we were beginning to think it was a conspiracy. This spring the stars aligned, lenders were now allowing the lender paid MI certs to be transferred and 2.0 was set to roll out in March. Finally, we got our appraisal waiver and the MI transfer!! With a few bumps to get past and long turn times in underwriting we got through it. We funded her refinance a couple of weeks ago and the savings, huge... Nearly $500 per month! Needless to say she is relieved.

Still many are left in the boat she was in, waiting... now for HARP 3.0. My last post on #MyRefi sets the wheels in motion for the next journey. The goal is to expand HARP to include loans not currently backed by Fannie Mae or Freddie Mac. This is gaining speed thanks to the help of social media over the last few days and please don't get me wrong it is a great idea. We should aim to help as many people as possible, yet I have concerns with the promise of less red tape and lower fees. HARP will have to mimic the Government Streamline products if there are to be less hoops to jump through, a tough pill for investors to swallow. Unfortunately with lower costs will come a rise in rate... originating, processing, underwriting, docs, closing, and funding takes people and that labor isn't free... it has to come from somewhere. #justsayin

To apply for this or any other loan program contact me today!

Additional Resources:

FHFA Press Release March 2009 -Report 4

FHFA Press Release March 2010 -HARP Extended

FHFA Press Release March 2011 -HARP Extended

HARP Release Oct 2011

FHFA Home Page

Know Your Options

Making Home Affordable

Disclaimer: Freddie Mac and Fannie Mae have adopted changes to the Home Affordable Refinance program (HARP) and you may be eligible to take advantages of these changes.  

If your mortgage is owned or guaranteed by either Freddie Mac or Fannie Mae, you may be eligible to refinance your mortgage under the enhanced and expanded provisions of HARP.

You can determine whether your mortgage is owned by either Freddie Mac or Fannie Mae by checking the following websites:

www.freddiemac.com/mymortgage or 

http://www.fanniemae.com/loanlookup/

The White House Goes Viral with #MyRefi

A Facebook friend posted this White House InfoGraphic on my wall with the comment:

"Hopefully this would work for all of us and at a decent (affordable) closing cost! Corri Baber Klebaum - what do you know about this?" 

My reply: 

"There ARE already programs in place to help underwater borrowers refinance under HARP. FHA just reduced the fees for Streamlines endorsed before 5/31/09. USDA Streamlines and VA Streamlines are business as usual too! Appraisals are not required in most of these cases. The "red tape" will be there but if you are working with the right people hopefully it is an easier process. We have to make up for all the loose underwriting before the bubble burst to help build a better foundation today so we stand better off in the future. The proposal is to expand HARP to include loans not already owned by Fannie or Freddie. This is where we are having to turn folks down if they are underwater.

ps. It's an election year ;)"

#MyRefi I love it... Let's get people talking about this! Not for the sake of your candidacy but for the people who have options NOW! Great let's make it easier to get a refinance but let's be realistic... I talk to people everyday who could save hundreds on their monthly payments but are too scared to make a move. Let's make sure that we aren't going to get in over our heads again and go right back to square one. Refinancing IS a great tool not only to save money but to help you leverage your equity position for future goals. Make sure you aren't acting on a whim and look at the whole picture. A sound decision will stand the test of time, a hash tag from the White House... #forgettable. 

To apply for these or any other mortgage program contact me today!

FHA Streamline Refinance Fee Reduction

Effective for FHA Case Numbers assigned on or after June 11, 2012 the Upfront Mortgage Insurance Premium or UFMIP was reduced to a mere .01% while the annual MIP (collected monthly) was lowered to .55% of the new loan amount for loans endorsed by the FHA on or before May 31, 2009. This has proved to be an enormous relief for many borrowers. Borrowers who could not qualify for an FHA Streamline Refinance simply because the previous increases to the Mortgage Insurance structure did not realize a "net tangible benefit". This benefit is defined loosely as reducing the payment by 5% or refinancing from an adjustable rate mortgage (ARM) in to a fixed rate. 

If you are considering a Streamline refinance I will share my 2 cents:

1) RUN... don't walk! They have changed this fee so frequently who knows how long this will stick.

2) Watch your endorsement dates! I have already seen a few borrowers who thought they were in the clear with the loan closing date however the FHA took a while longer to endorse the note. IF you are left out in the cold see #1... it could always change again for the better. 

If you would like to apply for this or any other loan program contact me today!

Additional resources:

Search Label: FHA

HUD Mortgagee Letter 12-4

Oregon VA Loan Lowers Rate Adds 20 Year Term

The ORVET Home Loan Program lowered their rate... again. They have also added a 20 year term in addition to the 30 year and 15 year options. This loan program is not the same as the VA Home Guaranteed Loan Program but is underwritten, funded, and serviced by the State of Oregon ODVA through a special federal bond. The ODVA loan program is a close match to a conventional loan in underwriting, requires mortgage insurance if not putting 20% down, and allows loan limits up to $417,000. The loan is available to eligible active duty veterans for the purchase of a primary residence. The ODVA Loan carries no funding fee, typically offers a rate below market, and even lends on manufactured homes. Added benefits include payment re-amortized with a principal reduction of $3000 plus and optional loan cancellation insurance.

You can find the current rate and additional program information at the the OR VET Home Loan webpage.

To apply for this or any other loan program contact me today.