Utah Mortgage Pro

FHA Mortgage Insurance Increasing Again April 18, 2011

 

 
We have three brand-spankin' new Mortgagee Letters from HUD (new guidelines come out in the way of mortgagee letters.)  The first of the 3 letters is the one that will affect all buyers using FHA loan products.  The monthly MI (mortgage insurance) factor is being increased once again.  Since October 4, 2010 the monthly mortgage insurance factor has been set at a rate of .90 annually.  This was a huge increase over where the monthly MI had been set at .55 annually, paid monthly prior to that date.

The new increase coming on April 18, 2011 will increase the monthly paid MI once again from .90 to 1.15, an increase of 25 basis points.

This is a quick example of how the monthly mortgage insurance is calculated and how it will break down on an average purchase price of $225,000.

Purchase price $225,000
Down Payment 3.5% ($7875)
New loan amount = $217,125
Upfront Mortgage Insurance (1%) = $2171.25
New total loan amount with upfront MI =$219,296

Principal & Interest Payment at 4.75%= $1143.95
Old Monthly Mortgage Insurance @ .90=$162.84
New Monthly Mortgage Insurance @ 1.15=$208.08

The difference in the old and new monthly MI is $45.24 per month on an average purchase price.  Just to give you an idea that is like increasing the rate by .375% on an average loan amount.  Its amazing to me that in one fail swoop FHA comes in and effectively increases every ones payments by an amount equivalent to .375% on average.  If you look at what they have done since October 4, 2011 it is even more shocking, on an average purchase price the monthly MI increase has increased the monthly mortgage payments by $109 per month which has roughly the same effect on the borrower as increasing the interest rate by .750%.

By increasing the monthly mortgage insurance premiums again it will make the same borrowers qualify for lower purchase prices thereby keeping more pressure on already pressure cooked home values. 

In my opinion HUD, which has recently reported the highest reserves in the last decade, is being very near sited by looking at increasing cash flow, this at a time when $109 per month to the average home buyer may be the difference of them buying a new home or staying where they are.

Its making the conventional MI products a lot more attractive these days, maybe that's what HUD wants???

Bottom line is this....If you are looking to buy a home this spring or summer you will need to apply with your mortgage company prior to the 18th of April.  Make absolutely sure that your loan officer has ordered your case# prior to that date if you have a property identified.

If you are planning on working with me on your financing then no need to worry, I will make sure your case# is in the file the day we have an accepted purchase contract.

Stetson Lowe - Utah Mortgage Broker

Why you need to get Pre-Approved not just Pre-Qualified for your new home

I talk to many people each week here in Utah that call and ask if they can get pre-qualified to purchase a new home.  My response to them is often the same "I would be happy to get you pre-qualified but what you really need to do is get fully pre-approved prior to beginning your home search."  The difference is simple.  Pre-qualification means that you tell me how much money you make, what your approximate credit score is, what your debt payments are each month, and how much money you have in the bank.  We also may discuss how long you have been at your current job, in the same line of work, at your current and former addresses and so forth.  Sounds pretty thorough right?  The only problem is you are telling me all of these items with out me actually verifying them with supporting documentation.

What's the big deal just take my word for it.....

Many of you are in such a hurry to move on to the house hunting that you don't want to take the time necessary to put together all of your supporting documentation i.e. tax returns, W2's, pay stubs, bank statements, etc.  The problem with this is that a good deal of the time I find that there are some minor and or major discrepancies from what people tell me and what the real story is.

Do people flat out lie?

For the most part I would say absolutely not.  It's just that people sometimes think that there credit score was 700 8 months ago when they bought that new car so it must be higher then that now.  They forget that getting a new loan can lower your score, or they may not know that their wife has added a couple thousand dollars to their RC Willey credit card balance and that has hit their credit score pretty hard.

Another thing I see all the time is someone who has worked at their job for a year or so and they get paid $36,000 per year salary and another $7,000 in commissions or bonus income.  They then tell me that they make $43,000 per year.  True.  The problem is, if I were to qualify them at $43,000 and they went out and put an offer on a home based on that pre-qualified amount they would be very disappointed when they got the offer accepted and then brought me their income documentation at which point I would have to break the bad news to them that we can only use the $36,000 base salary for qualifying as you have to have a 2 year history of overtime, bonus, or commission in order to count them for qualifying purposes.

That is just one example of things that can be missed with just a basic pre-qualification versus a full pre-approval.  There are many many more reasons to get fully pre-approved and one of the best reasons is this,

NO SURPRISES.....

If you have already taken the time to get your full income documents together and into me then I will go through it and come up with your qualifiable income.  I will then have the underwriter do the same so that we know exactly what you qualify for right down to the dollar.  We will run a tri-merge 3 bureau credit report, order verifications of employment and 4506T tax transcripts from the IRS.  We will have a full file all ready to close once you find the home of our dreams.

Using a Real Estate Agent....

I highly recommend the use of a professional Realtor to help you buy a home.  The benefits are numerous and the cost is usually FREE to you.  In Utah it is customary to have the sellers pay the buyers agent commission.  I would say in over 99 out of 100 homes sold the buyers agent commission is paid by the seller if not 100 out of 100.  So why not have an advocate on your side.  Someone who can watch out for your best interests and help to make sure that what you see is really what your getting.  Click here to see a list of my preferred agents.  I have personally worked with each one of these agents and hand picked them from 1000's of licensed agents here in Utah.

Appraisal and Title Work....

Once you find that perfect home all that is left on our end since you got fully approved is to order an appraisal and title work.  We can usually have these items back in just a few short days.  Once they come back and if everything is acceptable to you such as the title history and the appraised value, we will then hand in the full file to be underwritten in house just a few feet away from my office.  I will not send your file off to be underwritten like most banks and ALL brokers do.  I will simply walk the file over to our underwriters desk and put it in her stand up to be underwritten and approved within 24 hours.

Clear to Close....

Once your file is approved and we have met any conditions then you are clear to close.  We then order docs and make arrangements with the title company to set up a closing time.  See how easy that is?  Compare this to finding your home first and then compiling your paper work, then having us order all of the required verifications, then ordering the title and appraisal.  We can usually shave a week or 2 off of the closing time frame and make the whole process much smoother and more relaxing .

So before you start looking for your next home....

Remember to get fully pre-approved.  It makes your offer much stronger if you can tell the sellers that you are fully pre-approved and that you can close in 2 weeks versus 30-45 days like most people who will be submitting competing offers.  You can start the pre-approval process today very simply by applying online 24 hours a day at www.applywithstetson.com or call me at 801-318-4996. 

Stetson Lowe - www.applywithstetson.com - Utah's #1 mortgage professional