Utah Mortgage Pro

Utah Down Payments

How much of a down payment do I need?

By far the most common question I receive from borrowers. In Utah we have several answers to that question. You have No Down Payment options such as Utah Housing loans, USDA rural development loans and of course for our military personnel you have the VA loans, all of which require no down payment. Credit score requirement are a little different for each loan and there are some income limitations but for the most part with a 640-660 fico score you will be able to qualify for one of the no down payment options.

Then you have your FHA and Conventional (Fannie Mae & Freddie Mac) loan options as well. FHA currently is requiring 3.5% minimum down payment while conventional lenders are requiring a minimum of 5% down payment here in Utah and across the country. Mortgage insurance is the biggest difference with conventional and FHA loans. FHA at the time of this post is requiring a 1% upfront mortgage insurance premium and a 1.15% annual mortgage insurance premium billed monthly. Conventional mortgage insurance differs for every fico score range and loan to value but with a 720+ fico and 5% down payment a typical mortgage insurance premium is .67% annually which is billed monthly. FUN STUFF huh.

Now that the government has come together and agreed (hopefully) upon a resolution to the debt ceiling issue we have been facing this last month, it looks like we can all get back to focusing on the economy once again and getting this housing market back on track. Home prices in Utah have been stabilizing, in fact in a recent conversation I had with Kevon Inouye a local appraiser here in Orem, Utah he said depending on the city he is seeing stable home values and sometimes he is seeing increased values making it hard for him to support or justify a home purchase price. That was music to my ears when he made that comment about our market. We can all hope that will continue as we wade through the majority of the foreclosures and short sales.

Adam Weston of Rese Realty in Pleasant Grove, UT was telling me last week that it seems like every well priced home either bank owned, short sale or market sale has multiple offers on it within the first 2 weeks. He expressed the frustration of once again trying to educate buyers on the fact that if they don't put forth their best offer first they will probably miss out on the home. Buyers are now used to hearing story's about how their brother in law was able to haggle with the sellers or bank for weeks (being the only offer on the table), they were able to have the take it or leave it mentality with the sellers knowing that they were in the drivers seat.  "It is going to be a whole reeducating process all over again with buyers teaching them that the pendulum is swinging back to the sellers side with more offers coming in the buyers no longer hold all of the cards."  Says Weston

If there is 1 thing that I have learned in this business it is that the Real Estate Market in Utah is always changing. There is always going to be something new to educate borrowers and buyers on whether you are a real estate agent or mortgage loan officer, there is always a new rule, regulation, economic factor or market swing to take into account. If you are standing still in this business then you are getting left behind!!

Cheers to keeping you informed and in the drivers seat.

Stetson Lowe - Utah's Mortgage Expert - 801-318-4996

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

Saratoga Springs, UT - Rural Devlopment Loans - USDA

 
(A view from Saratoga Springs looking back over Utah Lake at Mt. Timpanogos)

Saratoga Springs, UT

What is the USDA Rural Development Loan?  Many of you have been asking the same question.  It sounds like a loan that an egg farmer would take from the government to improve his chicken coops, and in some cases that may happen on the commercial side.  What many people are now finding out is that the USDA also lends on residential homes located in what is deemed to be rural areas.

Many Utah residents can benefit from these loans as over 2/3rds of Utah is deemed to be "rural".  If you are looking to buy a home in Utah county in one of the following cities then pay close attention as this loan may be your very best option.

Saratoga Springs, Eagle Mountain, Payson, Elk Ridge and Santaquin are all found in the eligible areas for USDA home financing.  Click this link to view the map and read more details on USDA loan programs.

The USDA mortgage is much like FHA in that it does require an upfront fee.  In the case of the USDA loan it is called a guarantee fee instead of FHA's terminology which call's it upfront mortgage insurance.  Ultimately it is the same thing.  The upfront fee from both loans is essentially pooled in a fund that is used to guarantee the lender/investor against any future losses on the loan in case of default by the borrower.

The guarantee fee for new USDA loans is 2% of the loan amount.  In the case of a $200,000 loan the borrower would pay a $4000 one time upfront fee to the USDA to guarantee their loan.  The nice thing about the USDA loan is that much like FHA you are allowed to finance the fee into your loan.  This loan already allows for 100% financing for credit qualifying borrowers whose job history and debt and income are in line with the underwriting requirements.  This is a true 102% loan to value loan when you take in to account the fact that you can finance the 2% guarantee fee above and beyond the price of the home.

What an amazing option for those that have little or no down payment.  If you can save enough money for an earnest money deposit you can be on your way to home ownership.  Debt to income ratios on this loan are lower then conventional and fha loans so you may not qualify for quite as much home with the USDA loan but the USDA loan does not have monthly mortgage insurance so your monthly payment is also lower then it would be on a conventional or fha loan which does require 3.5% or 5% down respectively.

If you are looking to buy a home in Utah County and down payment is an issue, consider the USDA rural development loan, it just might be the ticket you are looking for.

Remember the USDA loan can be used in parts of if not all of Saratoga Springs, Eagle Mountain, Spanish Fork, Payson, Elk Ridge and Santaquin.  If you don't have a down payment, don't give up looking all together tell your agent you would like to expand your search into one of these beautiful cities.  Then lets get you pre-approved for a USDA Rural Development loan today.

Stetson Lowe - www.utahloantips.com

FHA Increasing Upfront Mortgage Insurance Premium

 

This just in....

FHA is going to increase the upfront mortgage insurance premiums on all purchase, streamline and full credit qualifying refinances to 2.25% that is up from 1.5 and 1.75% currently.

For those of you who don't know what upfront mortgage insurance is, it is a premium paid to HUD to insure a portion of your loan against the borrowers defaulting.  For example the FHA insurance may guarantee the first 30% of the loan value against any loss including interest.

So when you buy or refinance your home using an FHA loan you now pay and will continue to pay a big chunk of that loan upfront to FHA to go into this insurance pool.

It must be that all of the foreclosures have finally drained the tank putting FHA into the RED therefore causing them to up the upfront premiums to help beef back up the reserves to protect against further losses.

My clients already were feeling the pain from the increase from 1.5% of the loan amount to 1.75% which took place about 18 months ago.  Now FHA is taken it to them once again.  It has always been and will continue to be my opinion that it should be a sliding scale based on the borrowers past credit history.  This premium should not be a one size fits all approach with the borrowers with a 800 fico being charged the same amount as the borrowers with a 620 fico.  Everything does not always have to be equal in life, if you take good care of your creditors and pay your debts on time always you should be rewarded, I have always felt.

Apparently the folks in Washington DC don't feel the same as they are sticking to their equality for all home owners with this latest increase.

I think that part of it is rubbish. 

I have posted the text from the official mortgagee letter from today January 21, 2010 below.

Thanks,

Stetson Lowe - Security Home Mortgage - Orem, UT 801-318-4996

 

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

WASHINGTON, DC 20410-8000

ASSISTANT SECRETARY FOR HOUSING-FEDERAL

HOUSING COMMISSIONER

January 21, 2010

MORTGAGEE LETTER 2010-02

TO: ALL APPROVED MORTGAGEES

SUBJECT: Increase in Upfront Premiums for FHA Mortgage Insurance

Effective for FHA loans for which the case number is assigned on or after April 5,2010,

FHA will collect an upfront mortgage insurance premium of 2.25 percent. This policy change will

increase premiums for purchase money and refinance transactions, including FHA-to-FHA credit-qualifying

and non-credit qualifying streamlined refinance transactions.

Programs Covered by Insurance Premiums Shown Below

The upfront and annual premiums and the requirements described in this Mortgagee Letter

apply to all mortgages insured under FHA's Single Family Insurance Programs except those listed

below:

- Title I

- Home Equity Conversion Mortgages (HECMs)

- Hope for Homeowners (H4H)

Section 247 (Hawaiian Homelands)

Section 248 (Indian Reservations),

- Section 223(e) (declining neighborhoods)

- Section 238(c) (Military Impact areas in Georgia and New York)

Upfront Premiums

FHA will charge an upfront premium in an amount equal to the following percentages of the

mortgage:

• Purchase Money Mortgages and Full-Credit Qualifying Refinances = 2.25 percent

• Streamline Refinances (all types) = 2.25 percent

• HOPE for Homeowners (Delinquent Mortgagors) = 2.00 percent

• Home Equity Conversion Mortgages = 2.00 percent

www.hud.gov espanol.hud.gov

Annual Premiums

Annual premiums will not change at this time.

For FHA traditional purchase and refinance products, the annual premium, shown in basis

points below, is to be remitted on a monthly basis, and will be charged based on the initial loan-to value

ratio and length of the mortgage according to the following schedule:

• HOPE for Homeowners (delinquent mortgagors)

In accordance with guidance issued in Mortgagee Letter 2009-43, HOPE for Homeowners

borrowers will pay 75

basis points (.75 percent of the base loan amount), regardless of the loan to-

value ratio, which is collected monthly.

• Home Equity Conversion Mortgages (HECMs)

The annual premium for all HECM borrowers is

50 basis points (.50 of the outstanding

mortgage balance) and is collected monthly.

First-Time Homebuver with HUD-Approved Pre-Purchase Counseling

The National Housing Act, as amended by the Housing and Economic Recovery Act in

2008, authorizes upfront premiums of up to 3.00 and authorizes premiums of up to 2.75 percent for

first-time homebuyers who complete HUD-approved pre-purchase counseling. Since the upfront

premium rate of 2.25 percent remains below the statutory cap, no variable rate for counseled firsttime

homebuyers is provided for under this Mortgagee Letter.

If you should have any questions concerning this Mortgagee Letter, call 1-800-CALLFHA.

Persons with hearing or speech impairments may access this number via TDD/TTY by calling 1-

877-TDD-2HUD (1-877-833-2483).

Sincerely,

David H. Stevens

Assistant Secretary for Housing-

Federal Housing Commissioner

The Lowe Down - by Stetson Lowe

Tonight as I sit here and unwind from yet another hectic day in the office I felt impressed to get out the laptop and share some insider mortgage insite.  There is so much going around out there about the mortgage industry and today's economy but I am going to hit you plain and as simple as I can, and I will not patty cake you.

I had a very candid conversation today with an executive from a national bank.  One of the biggest in the US today.  It was interesting to hear his point of view and to see what we agreed on and to see what we admittedly disagreed on as well.  One of the most interesting facts he brought to my attention today was in regards to the Fed's "setting the rate" so to speak in the bond market.

This is something that the government did in the student loan sector of the banking world some time ago and it has all but alienated all of the lenders from that industry so that now the government is the only player in the game.  They are standing there holding the bag on almost all student debt today which makes the industry far less competitive and all but impossible to navigate for borrowers.  You see it is not worth it for private investors and banks to play along with the government in a game that is rigged.  One where it is hard to turn a profit and the red tape and bureaucracy force the lenders to spend more then they earn just to stay compliant.

This fiscal policy has failed miserably and yet the talking heads in DC seem to think that this same policy should be adopted in the mortgage industry as well.  Yeah that usually works, if at first a policy doesn't succeed do it again in another industry?? Whatever...

Back to the Feds setting the rate.  This is where they are basically buying coupons (bonds) at a certain rate no matter what the market is dictating that day or no matter what supply and demand are bearing.  Essentially falsely inflating or deflating the rates for that day in an attempt to "set a target rate".  It has been proven that our market is much more effectivein setting its own rates from day to day and from week to week then the government falsely trying to replace supply and demand.  I'll take free and open markets any day of the week for a healthy economy.  I am not saying that there is not a need for the government to sure up a badly damaged credit market, I just think they may be going about it the wrong way.

What I am seeing in the wholesale and retail markets is Banks so unsure what the feds next move is that they are loosing interest in the game all together.  I believe that it was Chase that all but completely pulled out of the mortgage business at the end of January.  They are "over it" so tospeak in all the games and tricks that the government is trying to pull.  Basically saying "we are out" let us know when things get back to normal and then maybe if we feel like it we may jump back in at that point.  Until then we can more then replace our mortgage income by buying up troubled banks for pennies on the dollar and then selling off their assets piece by piece making billions of dollars, oh and by the way we will take a multi billion dollar line of credit from the government to help us do this if they are stupid enough to give it to us.

We now have 28 major players left in the Mortgage Market.  Just over 2 years ago there were over 200 lending institutions, private equity firms, insurance companies and more fighting over these bundles of loans....fast forward to today there are 28.  Less demand means over abundance of supply, couple this with Fannie and Freddie changing their guidelines almost every single month and mortgage insurance companies announcing at the drop of a hat that they will no longer insure mortgages with this credit score or that loan to value and you have what we are facing today, banks that are so gun shy that they are going to get stuck with loans that are unsellable on the secondary market, uninsurable thereby making them unsellable, or with rates that are far to low to attract any buyers in a market that has had less and less interest domestically and internationally.

I hope that this has shed some light on what is really going on in the mortgage market today.  Why yields are at or below all time lows yet the yield spreads are as large as they have been in a decade. And why underwriting times are longer and longer and why you hear it is harder to get approved today for a loan then even 2-3 months ago.

2003 was the largest mortgage origination year ever with over 4 trillion dollars in mortgages originated during that year alone.  It is predicted that if rates stay low there will be a demand for 15 trillion dollars in mortgages to be originated between refinances and purchases this year (2009) in the US.  That is 4 times the all time record and with only 1/10th of the banks actually funding loans compared to 2003.  The numbers don't add up and something has got to give or we will see 4-5 month turn times to close a loan...it feels like a train wreck waiting to happen.

If I were the one setting policies I would see how we could make the mortgage market more attractive to investors with incentives, warranties and tax cuts.  I certainly would not be competing with or falsely setting a market to the detriment of that market.  Hey but that's just me.

The key to obtaining financing this year is going to be working with someone that will help you navigate through these treturous waters that are the mortgage industry today.  I am here to help, so give me a call 801-318-4996 or email me at stetsonlowe@gmail.com and we can get the ball rolling right away.

Dedicated to giving you the inside scoop.

Stetson Lowe - The Mortgage Insider - www.utahloantips.com