About Government Refinance and Home Purchase Programs

Today the FHA announced planned changes that will increase the costs of FHA loans going forward. First, the monthly mortgage insurance premium on new FHA loans will increase once again. The plan is to raise the annual MIP by 0.10%. Second, as we previously reported, the FHA will begin requiring their monthly mortgage insurance premium to continue for the life of the loan. Currently FHA monthly MIP payments can be dropped after five years when more than 22% equity is reached in the home. When these changes are implemented that will no longer be the case for all new FHA loans.

The FHA will give official guidance on the timing of these changes in the next few days. But we know already that anyone with an FHA loan should contact us immediately to look into an FHA streamline to a lower interest rate while rates are still near all time lows and before these new costs are implemented.

In his first term, President Obama went to great lengths to try to help the ailing housing market recover by sponsoring or supporting several government refinance assistance programs. The primary refinance program of the Obama administration, the Home Affordable Refinance Program or HARP program, has proven to be a great success after a rocky start. Other programs, such as the FHA streamline program and the VA IRRRL program, have also been very successful over the last four years. In addition, the efforts of the Federal Reserve to keep interest rates low have allowed millions of Americans to refinance to record low rates over the last four years.

While there are not a lot of new government refinance programs on the immediate horizon, it is not too late to take advantage of the record low interest rates and current programs. With President Obama still at the helm the current refinance programs are unlikely being shut down any time soon.

However the clock is ticking on these record low interest rates. Most pundits are predicting that interest rates will be rising over the next 12 months and it is not unlikely that rates will continue rising over the next several years. So if you would like to take advantage of the government sponsored refinance programs and historically low rates available contact us now in the sidebar. There may never be a better time than now.

We have spent a lot of time writing about FHA to FHA streamlines here in the past but there is also a streamline program for borrowers who currently have VA loans. The program is officially called the IRRRL program and it is very much like the FHA to FHA streamline program. Borrowers who have VA loans now can trade their current VA loan in for a new VA loan at a lower rate. With interest rates on VA loans hovering near all time lows lately now is a great time to get a VA IRRRL/streamline.

The advantage of this VA streamline program is that borrowers who have even average credit or better do not need to prove their income levels or assets to qualify. Further, the IRRRL program works no matter how underwater the VA mortgage is right now. There is normally a 0.5% VA funding fee rolled into the new loan for VA IRRRL loans, but that funding fee is waived entirely for disabled veterans. If you have a VA mortgage, contact us in the sidebar right away to learn more about this VA-to-VA streamline, or IRRRL, program.

The FHA streamline program is not new. FHA streamlines are refinances from one FHA loan to a better FHA loan. They are called streamlines because the process is streamlined; no appraisal required, no income verification required, no asset verification required. The primary requirements are that the borrower has decent credit and no 30 day mortgage payments in the last 12 months. The FHA knows that they are already co-signed on current FHA loans so their attitude is that if Jane Public can afford her FHA loan at, say a 4.5% rate, Jane can afford it even more easily at a 3.5% rate or lower.

For FHA loans that were started after April of 2009 the monthly mortgage insurance payment normally increases with a streamline. (Not so with FHA loans older than that.) But in most cases, the monthly savings from the lowered interest rate is so high that the overall payment still drops pretty significantly even with the higher PMI. The other benefit of streamlines is that in most cases borrowers skip at least one payment and get a refund for everything in their current escrow account which means borrowers normally break even on any FHA fees added to the loan on day one.

The other good news (for now) is that the FHA monthly mortgage insurance can drop off entirely after 5 years. The current FHA rule is that FHA/HUD mortgage insurance is due on the loan for at least 5 years. However, when the 5 years is up if the loan balance drops to 78% of the appraised value of the home on record with the FHA the monthly MI will drop off entirely. For instance, if the home were appraised at $200,000 in 2008 when the home was purchased with an FHA loan, that is the value on record with the FHA even for families who streamline now. This is important because there are rumors that the FHA might soon change the 5 year, 78% rule and make the monthly MI last for the life of the loan.

So if you have an FHA loan, contact us in the form on the sidebar now. Rates are still hovering near all time lows and the rules for streamlines are extremely borrower-friendly still.

The fiscal-cliff-aversion bill that passed congress late last night had some good news for folks with government-backed mortgages. One of the stipulations of the bill was a two year extension of a 2011 provision that allowed mortgage insurance (mip or pmi) to be tax deductible. The provision mostly applies to borrowers who claim less than $100,000 in income. Borrowers at that income level or lower can deduct 100% of the mortgage insurance they pay upfront in a refinance or that they are paying on a monthly basis. This tax deduction will last through the end of 2013 at least. Borrowers who claim more than $100,000 in taxable income may also deduct some, but not all of the mortgage insurance paid.

This news is especially good for folks who have FHA loans now. If you have an FHA loan, contact us in the sidebar to learn more about the FHA streamline program right away. Or if you have any loan with mortgage insurance, 2013 is a great year to refinance. Not only are rates still near all time lows, but any money that goes toward mortgage insurance is tax deductible for now.