About Government Refinance and Home Purchase Programs

The new, lower FHA mortgage insurance rates kicked in just last week. The new FHA policy reduces the previous FHA mortgage insurance rate by more than half of a percent. For many homeowners that represents a savings of thousands per year on FHA mortgage insurance alone.

If you have an FHA loan now, the way to reduce your FHA mortgage insurance costs is through the FHA streamline program. An FHA streamline is a refinance from on FHA loan to another. It is called a streamline because the process is much simpler than a traditional refinance in that an FHA streamline does requires no appraisal and no income verification.

Contact us in the form in the sidebar today if you have and FHA loan now. With mortgage interest rates approaching all time lows, now is a perfect time to look into streamlining your FHA loan to a better rate with lower mortgage insurance.

(Note: VA loan have a similar streamline program so contact us if you have a VA loan as well.)

The FHA released the details of the new, lower cost FHA mortgage insurance program (MIP) that President Obama announced last week. The new program will begin Jan. 26, 2015 and will reduce cost of the monthly FHA mortgage insurance payments significantly.

Currently, FHA mortgage insurance on most 30 year fixed FHA loans is at a rate of 1.35% per year. With the new guidelines, the mortgage insurance rate will be 0.85% per year. On a $200,000 FHA loan, that is a savings of $84 per month, or about $1000 per year.

If you are looking to buy a home, you should be able to start the pre-qualification process now. As long as the FHA case number is pulled on January 26th or later you’ll get the new, lower MIP rate. Contact us on our home purchase page for that.

If you have an FHA loan now, this is a good time to look into streamlining your FHA loan to a lower interest rate and take advantage of the lower MIP. The FHA streamline refinance program is extremely user friendly and can result in tremendous savings. If you have a non-FHA loan now, a cash out FHA refinance can make sense as well in some cases. Contact us in the sidebar for more info on FHA refinance programs.

In a conference call with reporters Wednesday, Julian Castro, secretary of the Department of Housing and Urban Development, said that President Obama plans to announce a reduction in the monthly mortgage insurance fees for FHA loans. The FHA currently charges 1.35% per year in mortgage insurance fees. The new rate will reportedly be 0.85% per year, a full 0.5% reduction. This will be the equivalent of a 0.5% reduction in interest rates for FHA mortgage holders and could mean savings of up to thousands of dollars per year.

The announcement is expected to come from the President in a speech in Phoenix on Thursday. Many of the details of the pending change are still unknown, like if current FHA loan holders will need to refinance through the FHA streamline program to get the new lower mortgage insurance rate. But there is no doubt that this will be a boon to FHA loan holders and to potential home buyers.

We’ll keep you updated with more information as it comes out.

To learn more or to get started on a government-backed mortgage, contact us today.

While mortgage interest rates are not breaking new records this week they continue to stay down near record lows.

For FHA streamlines (FHA to FHA refinances) the interest rates have been in the mid to low threes in recent weeks. This can vary based on the age of the current FHA loan though. FHA loans that were started in the spring of 2009 or sooner have a special program that allow for lower costs. Consequently, lower interest rates are common with those loans because less lender credits are needed. For newer FHA loans (FHA loans started summer of ’09 or later) the streamline rates have been in the mid threes as well. In both cases it is common for borrowers’ break even on costs to be immediate so contact us in the sidebar today if you have an FHA loan.

On HARP loans, rates tend to be a bit higher. For significantly underwater homeowners with Fannie-Mae-backed conventional loans, most HARP refinances have been coming in between 3.875% and 4.25% in the last month or so. Part of the reason for this is that Fannie and Freddie recently raised their fees in order to remain solvent as companies. For borrowers with Fannie Mae loans who are not upside down on their first mortgage rates are better though. If you have a conventional loan see here to find out if Fannie or Freddie have backed your loan. If you do have a loan backed by Fannie or Freddie, contact us to get more info on the HARP program.

For folks with VA mortgages or with conventional loans that are not backed by Fannie Mae or Freddie Mac, rates are very low as well. VA rates tend to be very close to FHA rates and the VA-to-VA streamline program is even easier than the FHA streamline program. Rates on conventional loans where there is enough equity in the home tend to be better than HARP loan rates. Contact us in the form on the right to learn more about those programs as well.

As we discussed in our last post, the FHA is making some changes to its mortgage insurance guidelines to bolster its reserves. The details and dates of those changes are available in a new FHA mortgagee letter found here.

The first change is a small increase in the monthly mortgage insurance fees. That increase will take affect for any FHA case number that is requested on or after April 1, 2013. Any FHA application that is started prior to that date will be able to avoid that small fee increase. Further, people who have FHA loans that were started and endorsed by the FHA prior to May of 2009 will be exempt from the increase when they are streamlining to a new FHA loan.

The second change is for all FHA case numbers requested on or after June 3, 2013. After that date the monthly FHA mortgage insurance will last for the life of the loan in most cases. Currently the monthly FHA MIP can be dropped after 5 years if there is 22% equity in the home.

If you have an FHA loan (or know someone who does) contact us in the sidebar to get more info on an FHA streamline right away. While these changes won’t make FHA streamlines useless, it will be better for most borrowers to streamline before the new changes kick in.

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.

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.

Buried in a recent report from HUD was a minor bombshell of an announcement. Because of an ongoing shortfall in the FHA/HUD funds, in 2013 the FHA is likely to once again increase both the upfront mortgage insurance premium and the monthly PMI fees on new FHA loans. That announcement is big news by itself, but the bigger news is the possibility that the monthly PMI may be for the life of the the loan on new loans, rather than being for a minimum of five years like they are now.

Here is what the HUD report said:

While FHA’s 100% insurance guarantee remained in effect for the 30-year life of a loan, borrowers were only required to pay premiums for less than ten years, FHA has been left without premiums to cover losses on loans held beyond the period for which it collects premiums. This change will apply to new loans.

This change will make a massive long term difference to borrowers with FHA loans.

In the last few months rates on FHA loans have been at shockingly low rates. It has not been uncommon to see low-cost or no-cost FHA streamlines to new 30 year fixed FHA loans at rates in the mid to low 3’s recently. If you or someone you know has an FHA loan currently, contact us in the sidebar right away to look into getting an FHA streamline started while rates are still scraping all time lows and before this major change in the FHA mortgage insurance rules is implemented.

When the FHA announced that they would be increasing their upfront and monthly mortgage insurance fees it was widely assumed that FHA streamlines for FHA loans that were originated after May of 2009 would no longer make sense. But with rates testing all time lows that assumption is proving to be false in many cases.

FHA streamlines for older FHA loans remain a no-brainer
As we have discussed here in the past, for people with FHA loans that were originated and endorsed by the FHA before June of 2009 there are some extremely beneficial new rules which eliminate the upfront mortgage insurance premium along eliminating any increases to the monthly mortgage insurance fees. Streamlining these older FHA loans is normally a cost-free refinance and with rates testing all time lows this summer, getting an FHA streamline for the folks who qualify for this pre-June-09 program is usually an easy decision.

FHA streamlines for newer FHA loans can make sense too
Here is the problem with streamlines of FHA mortgages that were originated after May of 2009. First, there is an up front FHA fee of 1.75% of the loan amount. Second, the monthly mortgage insurance fees more than double. Here is and example of a $200,000 FHA loan:

– Loan amount: $200,000
– 1.75% Upfront FHA mortgage insurance fee rolled into the new loan: $3500
– Monthly mortgage insurance fee: Going from about $90/month to probably closer to $200/month

It is not hard to see why people assumed FHA streamlines of newer FHA loans were dead. The increase in monthly mortgage insurance fees tends to eat into monthly savings on a such a streamline pretty significantly. Using our example loan above, if the existing FHA loan were at 5.25% and the new FHA mortgage were at 3.75% the principal and interest payment would decrease about $200 per month. But the monthly mortgage insurance would increase by $110 per month (as noted above) so the net monthly savings would be about $90 per month. And while $90 per month in savings isn’t bad, if the balance of the loan also were to increase by $3500 it would take a long time — more than three years — to break even on a refinance like that.

So what has changed to make streamlines for newer FHA loans make sense now? The answer is this: In recent months interest rates have improved so much that some authorized lenders are now able to give enough of a lender credit to pay for that entire 1.75% up front fee along with most of the other costs of the FHA streamline on behalf of the borrower. So in the example I gave above the net monthly savings would still be about $90 per month at 3.75% but there would be no costs rolled into the loan at all so the break even on the refinance would be immediate. The long term advantages of reducing such a loan from a rate in the 5’s to a rate in the high 3’s are even more significant. That is in part because after 5 years the monthly FHA mortgage insurance fee could drop off entirely. So after 5 years the payments could decrease by another $200 per month in the example we are using.

Conclusion
If you have and FHA loan that is less that three years old there is still hope for you with the FHA streamline program. This is particularly true if your current rate is in the 5’s or higher.

Contact us in the sidebar to the right to learn more about the FHA streamline program or to get an estimate from an authorized lender. Or if you don’t have an FHA loan now contact us to learn more about the HARP program or other government-backed refinance programs as well.

In the wake of the Federal Reserve’s newly announced quantitative easing program, mortgage interest rates have dropped to all time lows again this month. There has never been a better time to refinance.

Please note that the rates borrowers see in the news apply to mortgages where the borrower has plenty of equity and excellent credit. When there is little or no equity or if there are credit problems interest rates tend to be slightly higher. For instance this week rates on 30 year fixed government-backed mortgages for folks with plenty of equity and good credit were coming in at around 3.5% (or even lower in some cases). But in cases where the home is underwater (where the borrower owes more than the home is worth) and the borrower is using the HARP program the risk is higher for the lenders so the rates tend to be higher. Still even in those cases rates are astonishingly low right now. Most HARP 2.0 loans are still coming in at rates in the very low 4’s or even high 3’s this week.

Rates on FHA streamlines have been low too. For people who have FHA loans that were started in the spring of 2009 or sooner, refinance rates have been down in the mid to low 3’s this week with no closing costs added to the new FHA loan. For newer FHA loans streamline rates have been in the mid to upper 3’s.

Beware of false advertising from lenders. Many lenders will advertise rates in the 2’s but won’t mention in the advertisements that rates that low only apply to 15 year mortgages (which have higher payments) or adjustable rate mortgages (ARM’s). If you are looking for a 30 year fixed refinance, rates are in the mid 3’s and higher.

Contact us in the sidebar to learn which government-backed refinance programs are best for your family and to get an estimate.