Week 2 – FHA Rates & MI As we move another week into the series comparing loan programs, we continue to explore the Pros and Cons of FHA. This week, in this video, i talk a little bit about the rates that are generally associated with FHA financing, as well as the Mortgage Insurance. Mortgage insurance is a really hot topic in conventional financing, but generally stressed a little less in FHA financing, although it carries a more severe up front financial obligation and MI (mortgage Insurance) for the life of the loan. For more info on FHA loans, or to ask any questions on this Video, email me at Scott@GreenMeansGrow.com For up to date rates, and mortgage calculators, you can download my Mortgage App for free at https://svanvugt.mortgagemapp.com/#
The Skinny on Mortgage Insurance Did you know that any time you put less than 20% down, loans will carry some form of Mortgage Insurance? This is true for all loans except for VA Loan products (another reason VA is a great option if you qualify for it). Mortgage Insurance (or MI) can be paid either on a monthly basis, buried in the rate, or some times in one lump sum. There are different ways to pay your MI, but one thing is for certain, if you are putting less than 20% down on a home, you’re paying MI one way or another. If you want all the ins and outs of MI, and what option might be best for your specific situation, email me Scott@GreenMeansGrow.com Or Download my app at https://svanvugt.mortgagemapp.com/#
Remember the good-old-days of using a second loan to eliminate mortgage insurance? If you have sought out home financing for a purchase or refinance within the last seven years you may not. That’s because in our current lending environment anyone with less than 20% down must pay a monthly mortgage insurance premium. If you don’t know by now mortgage insurance insures the lender against losses in case of borrower default and in the pre-housing-bust era that ended in 2007 people seeking a mortgage with less than 20% down for a purchase (or 20% equity for a refinance) would obtain a second mortgage to avoid paying a monthly mortgage insurance premium. As the market shifted in the middle of 2007 and lenders tightened guidelines mortgage insurance became the norm. Until now. Second loans are making a come back and we now have the ability to finance a purchase up to 90% financing and a refinance up to 85%. See the table below for an example of what a purchase with one loan with mortgage insurance looks like compared to a purchase with two loans. One loan w/ Mortgage Insurance Two Loans Purchase price $500,000.00 $500,000.00 1st loan amount $450,000.00 $400,000.00 2nd loan amount n/a $50,000.00 1st loan payment $2,149.00 $2,149.00 2nd loan payment n/a *$167 MI payment $259.00 n/a Total monthly payment $2,408.00 $2,316.00 *fully tax deductible The two-loan option not
Ok, obviously you want to get the best rate, lowest costs, and right loan term on your new loan. But are most loan hacks forgetting to ask the most important most important mortgage planning question? If your goal is to save money, then the question you need to ask yourself is – How long will you have the loan? It seems simple right? But when I meet with folks they often tell me that the most important thing to them is to get the lowest rate possible. Well of course that’s a great thing, but is it always? The truth is that the lowest rate possible could actually cost you more money than a higher rate. It’s true! This is true in a number of diffent aspects of your loan – The cost or credit of a given rate The term of the loan Mortgage Insurance Let’s look at a quick example just on the last one here, Mortgage Insurance. We have loan programs that we offer No MI even with less than 20% down. Great, right? Yes, in some cases… In some not so much. On a $250k loan, with 10% down a loan WITH MI with have a higher initial monthly payment, but a lower interest rate. So which one is better? Well for the first handful of years the No MI structure wins due to the low initial payments. However,
There are many phrases in life that when uttered immediately evoke a fearful response. Phrases like “last call”, “consult your doctor”, “I need to talk to you”, and “you’re the father”. “Private Mortgage Insurance” is another one people don’t like. In fact, they hate it with a passion. I should know, I pay it every month and it hurts to see that money go towards “nothing” every time I make a payment. Many people believe PMI is unavoidable unless you have 20% down. And for the most part they have been right. Until now. Right now there are at least two alternatives to trudging through your house payment each month carrying with it the dreaded mortgage insurance premium. In fact there has never been a better time to look at Lender-Paid Mortgage Insurance or even the “Up Front Mortgage Insurance” option. See the table below for these two alternatives. While these loans still technically include private mortgage insurance they are vastly superior to the monthly PMI premium. The first table is the Lender-Paid option and the second table is the Up Front option: Roll Into Rate Paid Upfront BPMI MI Buster (LPMI) DIFF BPMI
HUD mortgage insurance reductions will be rolling out this fall and as a person who currently has an FHA loan and pays a hefty MI premium every month I know I’m interested to see if I qualify for part of this improvement myself. So I guess this post if as much for me as it is you. That’s new. The reductions will help first-time home buyers who haven’t bought yet the most. It’s important to know that you are considered a first-time home buyer after 3 years of not owning a home so these MI improvements are not exclusive to people who have never owned a home. Here are the details: First timers looking to buy in this fall or later must take 6 hours of home counseling classes. Upon completion they will receive a reduction of .5% to the Up Front Mortgage Insurance Premium paid at closing. The current UPMIP is 1.75% so after the reduction the premium is reduced to 1.25%. The will also receive a reduction of.10 to the annual MI. The current rate is 1.35% so after the reduction the rate drops to 1.25%. And the best part is that first timers who complete a post-closing class will receive another reduction of .15% to the annual MI taking the rate from 1.25% to 1.10%. For a $350,00 property financed with an FHA loan and the
Short Sales, they happen. And if they happened to you in the last few years this post is for you. On Aug 15th the seasoning requirement will go from a 24 month period in some cases to a mandatory 4 years for conventional financing. What that means to you? If you were trying to avoid the higher monthly mortgage insurance that is tied to FHA financing and were planning on buying a home using conventional financing and a larger down payment, and have a short sale inside of four years, your time is running out. If you fall into this four year window where you’ve had a short sale, and were thinking about refinancing or buying a home, there has never been a better time to reach out and see how this change in lending guidelines is going to affect you. If you have any questions, e-mail me or call at; Scott@GreenMeansGrow.com 858.273.3663 ext
The GreenHouse Group is excited to announce we now offer conventional financing up to 90% LTV with no Private Mortgage Insurance. The loan structure is a 1st & 2nd combo using our available second-mortgage product. The loan structure will be 80/10/10 which means an 80% first mortgage, a 10% second mortgage, and 10% down payment. Here are the features of this loan product as well as some guidelines: Primary owner-occupied properties only – no second homes or investment properties Single family detached properties only – no condos or attached units Purchase transaction only – no refinances 740 minimum credit score Both fixed rates and adjustable rates available To find out more contact me directly by clicking on my name to send me an email or feel free to call my direct line. David Hughson 858-863-
For most of you LPMI or BPMI is just one more cluster of capital letters in a sea of acronyms. However, if you are looking into a refinance or purchase, odds are you’ve asked about it. Mortgage Insurance is one of those things no one likes. It’s an added expense with no benefit to the borrower, and if you’re coming in with less than 20% down, you’re stuck with it. So how great is it when someone tells you they can do your loan with only 5% down and no MI (mortgage Insurance). The truth here is if someone is telling you they can do the same loan with no MI with under 20% down, they’re being a bit misleading. This is one of those moments where if it sounds too good to be true, than it probably is. These programs, which are generally accompanied by some sort of clever name such as “The Economic Opportunity Program” are simply programs where the lender agrees to pay the mortgage insurance and in turn they give you a higher rate than you qualify for. These are called Lender Paid Mortgage Insurance Programs (LPMI). As with every program, there are pros and cons. And ultimately, whether or not the program is right for you it is based on your goals with the home, and your priorities. A higher interest rate with no
Since the reduction in loan-to-value limits eliminated 2nd mortgages for home buyers with less than 20% down mortgage insurance has been a necessary evil for anyone looking to finance more than 80% of their purchase price. As a result mortage insurance has been a staple of the lending world since 2008. If you don’t know already mortgage insurance is an insurance policy taken out by the lender on the borrower to prevent financial loss is case the borrower defaults on the loan. Borrower-paid mortgage insurance or BPMI is the most common mortgage insurance policy. With this option the borrower makes monthly premium payments to their lender as part of their regular monthly payment and the lender forwards the premium on to the mortgage insurance company. Many people are unaware that there are several other types of mortgage insurance policies from which to choose. There is Lender-paid mortgage insurance or LPMI, one-time single premium mortage insurance payment options, and there are even hybrid options that allow a combination of a one-time single premium and monthly premium payment. To date the borrower-paid option has been the best choice. The two biggest reasons are first, the mortgage insurance eventually cancels and second, like mortgage interest it has been tax deductible for many home owners. Until now. In 2014 it is no longer tax deductible and the lenders offerring the LPMI option are
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