Posts Tagged ‘Home’
Should You Take Out An FHA Mortgage?
September 8th, 2011 | 
Author: I get a lot of people asking me ”should I take out an FHA mortgage.” The short answer is “it depends.”
FHA mortgages provide many benefits over conventional mortgages; however, the FHA mortgage is designed for a certain borrower profile.
An FHA mortgage would be the right mortgage if you’re buying a new home and you only want to put down 3.5% as a down payment. This doesn’t always apply to first time home buyers. FHA mortgage are available for those who’ve already owned a home before – however, you cannot use a FHA mortgage for a second home or rental property.
A conventional mortgage requires 5% down payment and very good credit scores.
An FHA mortgage allows you to have mediocre credit.
In the “old” days, credit scores weren’t even a consideration for a FHA mortgage. Now most lenders won’t do a FHA mortgage with credit scores below 620. It’s going to be tough to qualify for a conventional mortgage with a 620 credit score.
An FHA mortgage would be the right mortgage if you’ve filed bankruptcy between 3 and 7 years ago. You won’t be eligible for a conventional mortgage with a bankruptcy filing within the past 7 years.
If you want to take the maximum mount of cash out of your home, the FHA mortgage will allow you to take cash out to 85% of the value of your home. On a conventional mortgage, your capped at 80% of the home’s value.
So, in conclusion, if you’re credit profile is good, you have equity in the home (if you’re refinancing) or if you’re putting down more than 5% on a home purchase, it is cheaper for you to go into a conventional mortgage.
I talk to borrowers who have great credit scores and have a relatively low loan to value ratio who are advised by loan officers or mortgage brokers to take out an FHA mortgage. WRONG ADVICE.
Either the mortgage loan officer doesn’t know what they’re doing or they’re trying to maximize their commission (as they will be paid more on an FHA mortgage) – all things being equal.
Again, the mortgage terms are better on a conventional mortgage (which is a mortgage that is bought by Fannie Mae or Freddie Mac) if you have a good credit rating and equity in your home.
For those of you who have filed bankruptcy between 3 and 7 years ago, have mediocre credit or have little equity in the home, the FHA mortgage is the better loan type.
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Posted in Fha, FHA Information, Fha Mortgage | 
Tags: federal housing administration, FHA, FHA mortgage, fha mortgages, Home, mortgage, refinance | 
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Mortgage FAQ – How Do I Apply For A Mortgage And What Goes On During The Mortgage Process?
A lot of people ask me, what is the mortgage process or how does the process work? The mortgage process is simple yet complicated. Huh? What does that mean?
The first thing that is done is that you complete a mortgage application. The application is called a Uniform Residential Loan Application also known as a Fannie Mae 1003 form. The application is 4 pages and takes about 15 inutes to complete.
It can be completed by hand, over the telephone (while talking to a loan officer or mortgage broker), or online.
After the application is completed, your credit report will be pulled, appraisal ordered, and supporting paperwork collected.
The supporting paperwork includes last 30 days paystubs, last 2 yeasr W-2s and /or tax returns (depending on whether you’re self employed or own invesetment property), and copies of the last 2 months bank or brokerage account statements.
Note that you will be asked to pay for the appraisal out of pocket and upfront. The reason is because the lender doesn’t want to be on the hook for the appraisal fee if the loan doesn’t close.
Once the mortgage application is completed and the supporting paperwork is collected, the interest rate may be locked.
The mortgage rates are usually locked for 30 days as this is how long it’ll take to close the loan. If it’s very busy it may take 45 or 60 days. If this is the case, the rate lock will be made for 45 or 60 days.
So the application is completed, the rate is locked and the supporting paperwork is submitted.
Next, there are a number of mortgage disclosures that have to be signed and returned to the lender. Most lenders won’t submit the loan to mortgage underwriting without the disclsoures as they will be out of compliance with RESPA (Real Estate Settlement and Procedures Act), which governs the mortgage industry.
Once the disclsoures are signed, and appraisal is completed, the loan will go to an underwriter.
At this point the mortgage loan application is complete. The underwriter will begin to underwrite the loan.
While he or she is underwriting the mortgage, a mortgage loan processor (who works with the underwriter), will request a title search from a title company and make sure the home has dwelling or fire insurance.
The underwiter – at their discretion – may request additional paperwork from you or ask you to write a letter of explanation about a credit inquiry or what you’re doing with the cash you’re taking out of the home (if this is what you’re doing).
Once all conditions have been cleared by the underwriter, the title work is reviewed by the title officer and underwriter, the dwelling insurance has the new lenders name listed on the policy as a mortgagee, the loan will be cleared to close. This is “music to everyone’s ears.”
When the mortgage (and I use mortgage and home loan interchangably although technically they’re not), and I’ll explain this in another post, is cleared to close by the underwriter, the loan is transferred to a “closer.”
This person will prepare the closing package (which is the mortgage, note, and other mortgage disclosures and papers) and send it to the title company. The title officer will print it out.
You will either go to the title company to close or a notary will come to your home to close. Yea! Finally!
Here are the parties involved in the mortgage process.
1. the borrower
2. the seller (if it’s a purchase transaction)
3. the realtor (if it’s a purchase transaction)
4. the loan officer or mortgage broker
5. the mortgage processor
6. the mortgage underwriter
7. the appraiser
8. the title officer
9. your insurance agent
10. the mortgage closer or mortgage funder
You see there are many parties involved the transaction so you see how a problem can arise. There are lots of “cooks” in involved.
It’s essential that all parties communicate effectively for the process to go smoothly – usually it does but we’ve all experienced times where we’ve hit “turbulence” during the process. Now you know why.
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Mortgage Services ALERT. Mortgage Rates Unchanged. August 31, 2011
Amazing, August 31 already! The summer is over, kids are back to school and football season is upon us.
The last day of August shows little movement in the mortgage bond market as mortgage bonds opened flat this morning.
Mortgage rates are unchanged from yesterday’s pricing.
This morning’s Mortgage Backed Securities Weekly Mortgage Application Survey shows seasonally adjusted mortgage applications decreased 9.6 % last week. This is an interesting statistic as mortgage rates are very, very low.
The unadjusted Refinance Index was down 12.2 %, while the unadjusted Purchase Index decreased 1.3 %.
My only take on this is that people may be vacationing and not thinking about refinancing thier mortgage.
The seasonally adjusted refinance and purchase indexes were -12.2 % and -0.9 %.
The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.32 % from 4.39 %, with points increasing to 1.3 from 0.88 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans, according to the data.
“Accounting for the increase in average points paid, effective mortgage rates were little changed last week.
Refinance application volume declined for a second week from recent highs, despite rates staying near a 10-month low, while purchase volume remained near 15-year lows,” said Mike Fratantoni, MBA’s Vice President of Research and Economics.
The fact that purchase applications remain down suggests to me that people are still insecure about their employment as now is a good time to buy a new home. Mortgage rates are low and home values are down to 2003 levels.
The ADP employment report released this morning shows nonfarm private payrolls increased 91,000 from July to August on a seasonally adjusted basis.
The change from June to July was revised down to 109,000 from 114,000. According to the report, “the trend in employment moderated somewhat in August at a pace below what would be consistent with a stable employment rate.” No surprise there.
The Challenger job-cut report released this morning showed layoff announcements slowed in August to 51,114 from July’s 66,414. This follows three consecutive months where layoff announcements had increased.
This could portend a strong showing for Friday morning’s job’s report. This can be a volitile day for mortgage rates. If you float into Friday, be ready!
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Posted in Mortgage, Mortgage Rate, Mortgage Rate Update (by date), Mortgage Rates, Refinance |
Tags: FHA mortgage, Home, jobs report, loan, mortgage, Mortgages, non farm payroll report, Rates, refinance, refinancing, yale roth |
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FHA Mortgage FAQ – What’s The Difference Between An FHA Mortgage And Conventional Mortgage?
A lot of mortgage questions I get are about FHA mortgages.
People I talk to do personalized rate searches then ask what’s the difference between an FHA mortgage and conventional mortgage? A natural question for someone shopping for a mortgage.
The first question I ask is “how’s your credit”?
For someone who has poor credit, an FHA mortgage may be a less expensive loan type.
If you have good credit, a conventional mortgage is a better mortgage. It’s that simple – really.
Also, if you have little equity in your home, FHA may be a better mortgage. Equity, by the way, is the difference between the current mortgage balance and what the home is worth.
FHA will allow you to finance a mortgage to 96.5% of the home’s value with mediocre credit. Still pretty good.
On a conventioanl mortgage, you can get 97% financing; however, your credit will have to be over 720.
If you want to take cash out of your home, FHA will allow you to go to 85% of the value of your home, while you’re capped at 80% for a conventional mortgage. The reason your capped at 80% is because it’s going to be tough getting a private mortgage insurance PMI company to write private mortgage insurance while FHA (or HUD) will insure the loan to 85% cash out of the home’s value.
Another difference that used to be in the favor of FHA is the mortgage insurance premium.
FHA mortgage charges a 1% upfront mortgage insurance premium MIP that is added to your loan amount.
So on a $200,000 loan, the upfron mortgage insurance premium will be $2000. Oh, by the way, you have to pay that no matter what the loan to value LTV ratio is.
FHA also charges a monthly MIP.
The monthly MIP premiums have increased as of April 2010, making them almost prohibitive.
Again, it doesn’t matter what the loan to value ratio is, you have to pay it for 5 years and you need 22% equity in the property before it can be removed.
On a conventional mortgage, there is no upfront mortgage insurance premium.
You will have to pay monthly PMI if the loan to value ratio is over 80%; however, you can request the mortgage servicer remove the PMI after 2 years and you have 20% equity in the property.
So, in conclusion, if your credit scores are good and you have equity in your home, a conventioanl mortgage would be a less expensive mortgage.
If your credit scores are mediocre and you have little or less equity in your home, a FHA mortgage may be better.
You can do a personalized rate search in the blue Amerisave Mortgage box on the right side of the screen.
It’ll show you conventional and FHA mortgage options, the differing mortgage payments as well as the FHA mortgage upfront and monthly mortgage premiums amounts. It’s a great tool.
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Posted in Fha, FHA Information, Fha Mortgage |
Tags: FHA mortgage, fha mortgages, Home, mortgage, mortgage rates, Mortgages, Rates, refinance, refinancing, yale roth |
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Mortgage Services ALERT! Mortgage Rates Rise. August 29, 2011
I don’t know about you, but it was hard to wake up this morning.
Not the Monday morning blues per se, it’s just getting my kids ready for school and racing around to make sure we’re not late for the bus, cooking breakfast, etc. etc.
I have to wait for next Sunday to relax a bit. Oh well…
The mortgage rate roller coaster ride continues as mortgage bonds opened lower this morning pushing mortgage rates downward a bit.
The Bureau of Economic Analysis released personal income statistics for July 2011 this morning. The report met market expectations for a 0.3 percent increase in income and beat market expectations for spending with a 0.8 percent increase.
On the inflation side, which directs mortgage rates, the price index component of the report showed a 0.4 percent increase, following a 0.1 percent increase in June.
The report shows that the consumer is not on the sidelines though job growth would certainly help increase these numbers.
This week is full of economic data with the Case/Shiller Home Price Index (which measures home sales/appreciation/depreciation), ADP Employment (which is a big Fed inflation measurer), productivity and manufacturing data, as well as the official Employment report for July adding to the normal weekly data.
The employment data will be out on Friday, so you may want to consider locking your rate before this economic indicator is released. Just depends on what you tolerance for risk!
I’m going to be updating my soon and am really excited about it. It’ll give you the opportunity to ask me any mortgage related questions, allow you to get a second opinion, check to see if you’re getting ripped off, or just get valuable and honest information.
I’ll keep you posted. In the meantime, if you haven’t looked into saving money on your mortgage or home loan, do a personalized search on the blue Amerisave box on the right side of the page. It’ll show you current mortgage rates, mortgage payments, and the fees (or no fees).
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Posted in Mortgage Rate, Mortgage Rate Update (by date), Mortgage Rates, Refinance |
Tags: FHA mortgage, fha mortgages, Home, loan, mortgage, Rates, refinance, yale roth |
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Mortgage Services ALERT. Mortgage Rates Drop. August 26, 2011
I don’t know about you, but TGIF!
Mortgage backed securities opened higher this morning pressuring mortgage rates down.
The Bureau of Economic Analysis released its second estimate of U.S. GDP for the 2nd quarter of 2011 this morning with some not so surprising news.
The report revised Q2 GDP from 1.3 percent growth to 1.0 percent growth. A sluggish economy indeed.
This was more or less in line with market expectations of a revision to 1.1 percent growth.
There is little market change on the news as it appears most participants are awaiting Fed Chairman Ben “Helicopter” Bernanke’s speech at 10a.m. EST.
Mortgage rates are very low, including rates on the FHA mortgages.
Do a personalized rate search on the blue Amerisave window to see the mortgage rates for the conventional and FHA mortgages.
It’s free, takes no more than 10 seconds to see the rate results and will also show you mortgage payment and closing costs.
That all the information you need to see whether you’ll be able to save money.
more to come…
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Posted in Interest Rates, Mortgage Rate Update (by date), Mortgage Rates, Refinance |
Tags: fha mortgages, Home, loan, mortgage, mortgage rates, Mortgages, Rate, Rates, refinance, yale roth |
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Mortgage Services ALERT. Mortgage Rates Holding Steady. August 25, 2011
Mortgage bonds opened flat this morning. As a result mortgage rates are unchanged from yesterday.
Initial Jobless Claims increased 5,000 to 417,000 from last week’s revised figure of 412,000, according to the U.S. Dept. of Labor.
This is higher than the market consensus of 405,000. The four-week moving average was 407,500, an increase of 4,000 from last week’s moving average.
According to the report, there were 8,500 claims last week and 12,500 from two weeks ago related to the Verizon strike which has
now ended.
There are still a lot of people unemployed out there.
Overall there has been little bond market reaction to the report.
Despite the unemployment numbers, mortgage rates, are very low right now.
If you are employed and want to save money and haven’t recently refinanced your existing mortgage, now is the time.
Once we see some inflation come back, mortgage rates and interest rates in general are going to rise.
Just what we need, inflation. It seems that there is already inflation out there as the cost to live continues to go up. No? Sure feels that way to me.
See if you can save money by refinancing your current mortgage.
Do a personalized rate search on the blue Amerisave box on the right side of the page. It’s free and it’ll show you the current mortgage rates, proposed mortgage payments and costs (or no costs) to refinance.
No personal information is needed and it probably takes less than 30 seconds to get the mortgage rate information you’re looking for. It’s a great tool. Take advantage of it!
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Posted in Home Loan, Interest Rates, Mortgage, Mortgage Rate Update (by date), Mortgage Rates, Refinance |
Tags: Home, Interest, loan, mortgage, mortgage rates, mortgage services, Mortgages, Rates, refinance, refinancing, yale roth |
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