08 Jul 08 
FHA Mortgage Insurance Changes Just Made This Mortgage Over Priced!
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I always tell my clients, “FHA Mortgages are the most expensive loans to close when it comes to closing costs!”
The reason for this is that FHA has mandatory Mortgage Insurance!
FHA loans were always known for their ability to help those buyers and homeowners with low credit scores to qualify for a mortgage. The new changes will still allow for this but will make it more expensive.
This Mortgage Insurance comes in two forms:
- Up from Mortgage Insurance Premium
- Monthly Mortgage Insurance (or yearly divided up monthly)
Mortgage Insurance Premium-
This is currently running 1.5% of the mortgage balance and is typically financed on top of the max 97.15% loan to value guideline. The new FHA Mortgage rules will change this percentage to credit risk-based formula that is common for all other forms of mortgage insurance.
NEW RULE: FHA Mortgage Insurance Premiums up to 2.25% of the loan balance added to closing costs (but if can be financed)’
Monthly Mortgage Insurance-
Following the same formula that the premiums used we will see the new monthly “factors” as we call them will increase based upon your credit score. Currently we use a .005% yearly factor divided by 12 months to calculate monthly mortgage insurance.
NEW RULE: This “factor” will increase to .0055% in most instances but for those with below average credit will have it increased to over .0125%. That is a healthy increase of 2.5 times its current amount.
I guess if you have below average credit you better learn some credit secrets that will have a fast and efficient increase in your credit scores.
Don’t go blindly into a FHA mortgage just because you qualify because you can’t decrease your Mortgage Insurance after you close unless you are willing to incur the cost of a refinance.
As always, I am here to help you understand your mortgage and the process. Leave comments below and contact me via my BLOG at http://www.thelanegroup.blogspot.com for additional questions or scenarios.
What you don’t know will cost you money!
Brent Lane
The Lane Group
Tags: brent lane, closing costs, fha, fha loan, fha mortgage, fha mortgage insurance, insurance premium, mortgage insurance, the lane group
23 Jun 08 Buy and Bail: A Solution to an Upside Down Mortgage?
“I am more than $200,000 upside down on my current home and the bank won’t entertain a loan modification and I want out of this situation!”
This statement is pretty common these days.
It’s hard to see your same exact home now on the market for HALF of the price you paid for your home. It sure would be nice to have half the mortgage payment you have now for the same house!
The Wall Street Journal wrote this article that basically brought a hush, hush secret into the light. Every loan person knows how to do it! Banks turn their head and ignore the issue! Realtors practically endorse it! Now they want to change it?
If you are upside down on your mortgage and your mortgage was giving you some “issues” then there is a pretty good chance the thought to “Buy and Bail” has crossed your mind.
Buy- Keeping your current home and buying a new one
Bail- Once you close escrow on your new home you let your current home go into foreclosure.
Although the article states there are some changes being made to the guideline for lenders, I have been in and around the business on a daily basis I haven’t seen any changes as of yet!
“So what does it all mean? How can I get it to work for me?”
(Let me state something for the record, I am actually against the “Bail” part of this as I believe you need to find out every option you have before you pack up and leave)
· Understand what it takes to buy: The general rule of thumb is that you will need to buy a bigger home (in square footage) or be relocating to another part of the city or out of state in order to fall inside the guidelines. If you want a home that is equal to or smaller and you are NOT relocating then chances are you will have some trouble buying a new home.
· Bail: Accomplish this with limited impact to your credit: I know the popular choice is to go ahead and start missing payments on your home but before you do this obviously you will need to buy first. Once that is done you will need to address your mortgage company properly. One of the best ways to bail will be with a short-refinance. This is similar to a short sale but you can arrange for a negotiation with the current lender by an attorney for an affordable fee! To make this scenario that much more appealing, it is possible to have this go through WITHOUT missing any payments! I know you want to get rid of the property, so read more about a short refinance here.
· Take advantage of this window of opportunity: The rule they plan on changing will make you financially responsible for both payments on your old house and your new one.
I will leave you with this, take advantage but do so in an ethical way. The banks/lenders may not seem to be helpful on the outside but you can get them to work with you if the information is presented to them properly. Seek professional advice because that will be the difference between success and failure!
Brent Lane
The Lane Group
http://www.thelanegroup.blogspot.com
Tags: brent lane, buy and bail, home loan, loan, mortgage, short refinance, the lane group, upside down mortgage, wall street journal
