Rates Going UP!

Few people realize that FHA actually has two forms of Mortgage Insurance that you pay when using them.  Read on to realize.

Frequently Asked Questions

term definitions below…MIP = Mortgage Insurance Premium, Annual Mortgage Insurance = is a sum of insurance calculated over 12 months that you pay monthly, Up Front Mortgage Insurance = is a lump sum of mortgage insurance that you can roll into the loan (for other FHA basics):

How can I avoid being included with the new changes effective April 9?  Your lender needs to order your FHA case number on or before April the 8th.  To order a case number, you must have a property address, so if you haven’t found a property, you are likely going to be under the new FHA MIP plan.  (MIP=Mortgage Insurance Premium)

How much is the monthly portion, better known as the Annual Mortgage Insurance, increasing?  If you are putting down 5% down payment or less and using a 30yr fixed FHA loan, the new rate will increase from 1.15% to 1.25%.  That is an increase of .1%.  If you had a $100,000 loan amount, then that will increase your payment by about $8 a month from where it is now.  If you have a $200,000 loan amount, it’s about $16 more a month.  So, not a big increase.

How much is the Up Front Mortgage Insurance Premium increasing on the new plan?  The Up Front Mortgage Insurance Premium is increase from 1% to 1.75%.  This portion of mortgage insurance is typically rolled into the loan and therefore will minimally influence your payment.  Although, the increase is pretty significant.  For a $100,000 loan, that would increase your loan by an additional $750 compared to the previous amount, and $1500 increase if your loan was $200,000.

Please feel free to call me directly if you have more questions, or would like me to give you a free loan prequalification.  My number is 469-450-2723.  Or, click on the Apply Today tab at the top right of this site, and I’ll receive your private information directly.

A close friend in Highland Village was building onto his current home and using a true home improvement loan.  His intentions after building on to his property was to refinance his current loan, which was used to buy the home, and the new home improvement loan, all into one new loan.  His home improvement loan lender advised him that he could do this, because he could essentially have a 95% loan to value.  (My point here)  Well, when using a purchase loan or a rate and term refinance loan where you are are paying off only a loan or liens that were used to buy the home, YES, you can go up to a 95% loan to value.  On the other hand, when you are paying off a true home improvement loan, the guidelines will  only let you go up to 85% loan to value…this is called a “Fannie Mae cash-out” rule, because the 2nd lien is a true home improvement loan.  Long story short, now that the add on is done, my friend reconnects with this bank to get the refinance, and they now are realizing that they can not go above 85% and are acting like this is not their problem.  The truth of the matter is, if they would have done their research before putting a plan of action together for their client/my friend, they wouldn’t be in this situation.

The rules of a Fannie Mae cash-out refinance, where you are paying off a true home improvement loan, you can not take the loan to value or combined loan to value over 85%.  This is different than a Texas a(6) cash-out, where money was actually used for debt consolidation and/or the cash was given to the borrower to do with as he pleased.  In the home improvement loan, money is distributed directly to the companies that are improving the house, so the cash did not go through the hands of the borrower…Texas a(6) cash-out rules only allow 80% LTV.

Here is where the problem lies in this story.  Typcially, when you build onto your property and use a loan to do it, you might use a temporary loan that allows you to take out draws of money at different times during the process to pay the contractor in different stages of the build.  Once the build job is complete, those lenders like you to pay that loan off with a permanant loan.  That being said, my friend is going to have a hard time finding a mortgage that will now let him pay off this temporary loan, and the temporary lien holder wants it paid off.

You have been talking to your lender and there is a chance they got you into a sticky situation by not researching the difference, or maybe you have just been listening to them talk about it, and mortgage language mine as well be Martian Language.  There is a difference between a home improvement loan and Texas Cash-out, and you need to know. (there are many reasons WHY you need to know, and you can call me if you are concerned, but below I’m just explaining the actual difference)

Here are the difference of  a TRUE Home Improvement Loan vs Texas Cashout in layman’s terms:

• Texas Cashout Home Loan- If you used the equity from your home to pay down debt (credit card, car loan, student loan, pay day loan, etc.) or you received a check upon refinancing to do with the money what ever you wanted essentially.  This was a Texas Cash-out Home Loan and now anytime you use your home for lending purposes, the title company will show a document that says your house falls under this guideline.  The terminology we use in the industry, “once a cash-out always a cash-out”.  You’ll never be able to borrow against your property more than 80% of it’s appraised value…this is a Texas Law.
• Home Improvement Loan- this is a loan typically taken out against a home after the home is already built and moved into where the money actually taken out, NEVER TOUCHED THE HANDS OF THE HOME OWNER.  If you were adding a pool to the home, the title company or bank wrote checks directly to the pool company putting in the pool.  If you were building a wing onto your home  and increasing the square foot of your home, the title company or bank send the building contractors draws of money for the work.  This would be a TRUE Home Improvement Loan

1. This program was designed solely for homeowners that originally bought their home, and their loan was underwritten through a Fannie Mae mortgage…most conventional lending programs are Fannie Mae and Freddie Mac
2. Why this program is unique, you might ask?  The make up of the loan was designed to help those homeowners who have loan amounts equal to or greater than what their home is worth, typically due to the falling price of homes in America.  Regarding my mention of the “equal to or greater” comment, that is not a must, because a home owner might have a loan amount just under the appraised value, and get the same benefit.
3. You have heard the mortgage advertisements on TV and radio.  Rates are still at historic lows.  The government is using this refinance product to help provide relief to those families who have high loan to values as I mentioned in #2 above.  Normally, in a refinance, closing costs are rolled in, but when you have no equity, you either do not meet underwriting guidelines and flatly can not refinance, or you barely have the equity to  refinance but do not have the extra equity to roll in closing costs and can’t very well afford to come out of pocket either.  This program allows for SUPER HIGH LOAN TO VALUES…you can actually have a loan amount greater than the value of your home.
4. What is the biggest benefit in this refinance program?  Wait for the delivery!!!(:  You get the same low rate as if you had loads of equity in your home.  Yeah, you will drop your payment like crazy.

Apply Now Online for Free with me for a Fannie Refinance Plus Mortgage!

Call me directly if you prefer voice to voice and I’ll do the look up for you, for no cost.

More on the Fannie Refinance Plus.

See if your home is eligible for a Fannie Refinance Plus.

Just a mortgage teezer for you, the HARP program revamp is right around the corner too!!!  It’s more aggressive than the Fannie Refi programs.

So, when is the best time to refinance?

If the change in rate or shortening the number of years in which you are refinancing is all worth it, you might REALLY think about refinancing in the early months of the year, like January through March because your property taxes will have been paid.  The reason this is significant has to do with how a refinance is set up.  When you are paying your taxes and insurance in your monthly payment, along with your principle and interest, you are what is called, escrowing.  Wiki defines escrow as “It is best known in the United States in the context of real estate (specifically in mortgages where the mortgage company establishes an escrow account to pay property tax and insurance during the term of the mortgage)”.  When you escrow, your lender will require you to have 2-3 months of taxes and insurance in your escrow account as a padding to protect you in case your taxes and insurance costs go up…and they will.  If you are refinancing for example, in June, they’ll also want to collect up front, January through June taxes, because they will need to have that amount in there for when your taxes are due.  In that example, you will be making a monthly payment toward those taxes from July through December, so when your property taxes are billed, you’ll have the entire years worth in there.  Why is this significant when refinancing?  If you do not choose to pay that escrow setup out of pocket, then you will have to roll this into your new loan, along with the fees associated with the loan.  This means, you’ll increase your new loan and end up paying interest on your new escrow account for the duration of your new loan.  When you refinance in the early months of the year though, you only have to put in the padding of 2-3 months, and maybe 1 or 2 months, because you’ll be making the monthly payment to compensate for the rest of the year.  Make sense?  On a $200,000 home, taxes average about $383 a month, so if you were refinancing toward the end of the month, say September, you would have 3 months of padding/reserves, and then Jan-Sept (9 months).  That is 12 total months total between padding and remainder of the year, and at $383 per month, that is $4,600.  You can see how that adds up pretty fast.

If you are looking for the safest lender with some of the best rates and fees in the industry, give me a call or email me…Brad Lynch aka Your Mortgage Guy For Life.  You can get my number and email by clicking on the Contact Us tab at the top of this page.  Contact Flower Mound and Frisco Mortgage.

You want to know, “what are mortgage rates like today”?  They are low!  Ok?  Enough “foolery”.  Here are some real details and facts.

NOTE:  Before I post these rate…by law, for me to post a rate on public media, I have to accompany rate with additional information…this is because there has been so many slick, high pressure sales type people out there that have caused a ruckus in our industry.  That being said, I’m just going to list two options, 30yr fixed and 15yr fixed conventional rates.  Although, we handle a huge volume of FHA, VA, and USDA loans.

These mortgage rates were derived using good credit scores, 90% or lower loan to value, and a 30 day lock term.  Today is Wednesday November 2, 2011!

30yr fixed rate: 

•  3.75% INTEREST RATE costing .625% in “points” (APR=3.916)…the APR is not your interest rate, but the annual percentage rate.
• 3.875% INTEREST RATE with a lender “credit” of .25%  (APR=4.042)(lender credit means multiply .25% by your loan amount and we give you this much money toward your closing costs at closing)

15yr fixed rate:

• 3.25% INTEREST RATE costing .25% in “points” (APR=3.5)…the APR is not your interest rate, but the annual percentage rate.
• 3.375% INTEREST RATE with a lender credit of  .125% in “points” (APR=3.578)…(lender credit means multiply .125% by your loan amount and we give you this much money toward your closing costs at closing)

Our total of lender fees are $1,585.  I have nothing to hide, because I do not mass market and my rates and fees are always some of the most competitive around in my experience.  Well over 95% of my business in the last 9 years has come by referral.  You can search this blog that I write myself, and find that this is the ONLY rate related post I’ve ever made.

Call me if you would like me to prequalify you or present you a refinance offer.  Please be aware, I am a personal mortgage banker/broker type loan officer and I do not work leads or cold prospects on a daily basis.  That being said, you’ll get my best offer on my first presentation, and if that isn’t good enough, then I won’t be the guy you use.  Please keep that in mind, because this makes your life easier, and mine.  If you are wondering about my credintials, I have one of the best mortgage testimonial pages around.

Call me at 469-450-2723 or email me at Brad@yourmortgageguyforlife.com

If you would like to fill out an online application that I personally own and comes directly to my personally owned email inbox, you can click on mortgage online application.  (you’ll have to give permission to get into that site because it is a secure site that encrypts your personal information)

1. Title Company fees - typical itemized fees subtotal an amount equal to or less than $700 (not including Title Policy) See below about the specifics of the title policy
2. Appraiser fees - appraisals can cost as little as $300 and as much as $475 plus an appraisal request fee of up to $50
3. Lender fees - typical lender fees will subtotal from $1,100 – $1,800 (not including any points you choose to buy the rate down)
4. Government fees – subtotal of recording and so forth $140 or less
5. Surveyor fees - if you need a survey, and sometimes the seller has a previous or in refinance situations, you have the original that works fine, survey’s cost $375 -$450

Above are a list of actual “costs”.  This does not include setting up escrows, or prepaid interest that you pay at closing from the day you close to the end of the month, and it doesn’t include any home owner insurance costs.  The above is simply costs associated with the fees of the transaction. 

Title Policy is a title cost, but it is a regulated amount that you pay no matter what title company you go to.  Rule of thumb for this fee is tough, but for the simple plugging in of a number, take 1%-1.25% of your loan amount and add that fee in.

That should do it!  Just as a disclosure, it is not advised for you to try and manage each itemized fee from each entity, and that is why I did not write this post in such a way.  Each entity has a subtotal of fees they need to collect to cover their costs and commissions, and managing costs by comparison on line items is not going to help you.  This post is just for the purpose of lining you up with a cost tool to maybe help you self diagnose your need for a refinance.  For more questions, and for some of the most competitive rates and fees for your refinance, contact me.  I love refinance business.

Flower Mound and Frisco FHA home buyers and refinance prospects have many times wondered about this topic.  To answer that straight out, YES, your mortgage insurance premium monthly will go away. 

 Mortgage Insurance falls off or goes away, depending on some different variables:  Loan to value, loan term (30yr, 20yr, 15yr).  In a previous post, I labeled it just perfect,

For FHA loans of 15yr terms or more, you must have an LTV of 78% or you could say that you have 22% equity, before your MIP will go away.  On the contrary, if your LTV reaches this point before you have been in the loan 5 years, then you have to wait until you have had the loan for 5 years.  If you have an FHA loan that is 15yrs or less, the MIP falls off when the LTV is 78% and no time in the loan is required.

The Federal Housing Administration, or as you probably know it, FHA, determines when your loan is at 78%.  They will use the lesser of the sales price or loan amount from the time that you bought the home.  If you feel like you have reached this point, it would be best for you to contact FHA directly and bring it to their attention and request that your MIP, or Mortgage Insurance premium be removed.

Important final note about this subject.  In a 30yr FHA mortgage, you must have your loan for at least 5 years regarless of your loan to value, before you MIP can fall off.  If you have a 15yr mortgage, there is no time of seasoning required before you can drop the MIP, and it is solely determined by the aforementioned details.

If you are looking to buy a home or refinance, and you think that FHA is the way for you, please contact your Flower Mound Mortgage or Frisco Mortgage consultant.  Our rates and fees are some of the best in the market.

Other helpful FHA Links:

Most Recent FHA Changes,  FHA Seller Contribution

Should I go FHA or Conventional?  What’s the difference between FHA and Conventional mortgages?

FHA is a government loan that allows for the least amount of down payment.  In most cases, FHA mortgage rates are a little lower than conventional, but FHA also comes with a monthly mortgage insurance premium.  FHA allows for a minimum down payment of 3.5% and allows the seller to pay 6% closing costs.  Conventional lending will allow for a minimum down  payment of 5%, and if you do not put down 20%, you pay a monthly Private Mortgage Insurance.  If you are looking for the lowest payment and can’t put down 20%, FHA will in most cases provide you the lowest payment.  If you can put down 5%, the higher payment option, is getting a 80% first conventional lien, and a 15% 2nd lien.  Why would you choose the higher payment option?  Typically, you can get the 2nd lien in a 15yr fixed, so you can fast forward the knocking down of principle in that second lien, if you are willing to go that route.