Lenders must be FHA approved to do FHA loans

If you are currently in the market to buy a home and plan on using FHA for your mortgage financing, keep in mind that the annual mortgage insurance will be higher for loans assigned case numbers starting April 18, 2011.

Local mortgage guy Todd Marumoto of Intercoastal Mortgage in Fairfax, VA sent me an e-mail update about this increase along with some examples of how it will impact the monthly payments of FHA borrowers. The trade off is simple to understand because FHA loans provides low down payment loans to qualified borrowers.

Todd said:

Please be aware FHA is increasing the annual mortgage insurance premium by .25% effective with FHA case numbers assigned on or after 4/18/11.  The upfront premium will remain the same.

Mortgage Insurance Premiums.
Annual Premium Loans Terms > 15-yearsLoan-to-Value

Current and Starting  4/18/11

<=95.00%              currently .85%  increasing to 1.10%

>95.00%                 currently .90%  increasing to  1.15%

How will this impact your monthly mortgage payment?

Todd’s example:

Sales Price:                  $300,000                       $300,000

Max Loan (96.50%)        $289,500                       $289,500           (before upfront mortgage insurance)

Annual Premium            .90%                             1.15%

FHA Annual MIP            $217.13/mo                   $277.44/mo

Change in payment        n/a                                $60.31/mo

Contact your local mortgage professional today to get specifics on what it takes to get assigned a FHA case number before the deadline.

Image by Steve Rhodes via Flickr

Relocation home buyers are typically surprised to learn that Northern Virginia has maximum conforming mortgage loan limits that are higher than most regions of the United States. Northern Virginia real estate ranks as “expensive” considering the region has some of the wealthiest counties in the U.S. In fact, these limits do vary region by region across the country and it is essential that you contact your local mortgage lender for the max limit in your neck of the woods.

Maximum Mortgage Loan Limits for Northern Virginia in 2011:

• Conventional High Balance Limit is $625,000  ( yes, it changed October, 2011)
• FHA High Balance Loan Limit is $729,750
• VA (Veteran’s Administration) Loan Limit with full guaranty is $818,750 (the VA limit has been lowered in 2012 to $625,500)

Of course it is important to remember that you need to financially qualify for any mortgage loan that you are interested in pursuing, and you will need good credit. Understanding your FICO Score starts with knowing what your score is because your interest rate will be 100% dependent of that number. It seems amazing that someone 20 points above you may get a rate that you would kill must beg for.

Remember that FHA mortgage loans allow for 3.5% down payments for applicants with good credit, and these loans do carry monthly insurance.

Mortgage financing is just one part of buying a home, but is essential when determining what price range or potential locations for your desired home. You will need to make some hard choices and some of my real estate clients have worked for months to get their financial house in order so they were buy a home in a particular location.

If you need to work on your home buying plan for 2011 then you should start with a thorough review of your credit report which you can do online. For more information, click here.

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I don’t usually ask for your comments right in the first sentence, but I have been talking to many clients, friends and neighbors about refinancing their home mortgage these days. And the stories have been fascinating especially since fixed rates are near 4.5% or better.

When I originally wrote the post about Virginia’s recordation tax exeption (for home owners refinance with the exact same lender) I was surprised how often that one post was viewed. And this one cost savings has been the basis for all of my starting answers to “is it a good time…” because it saves most people over $1,000.

A local real estate attorney recently (2/2011) cautioned “It’s my understanding that Fairfax County is checking the MERS website on every same-lender refi and if the website shows there is an investor (e.g. Fannie Mae) then they will not allow the reduced recording fee.”

Two interesting local refinance stories…

A couple of months ago a friend called me because Chase Mortgage (his lender) had sent him a letter stating that, because he was a good customer, that they would adjust his rate (recast) for $500. The shocking thing was that it would not require an appraisal, no new loan application or documentation was needed, and that his rate would drop over 1.5%. The offer was authentic and he signed up saving him a lot of money every month.

A neighbor came to me seeking advice. His confession of taking out a home equity line and then spending it “irresponsibly” was brutally honest. As it turned out, his loans were with Chase too. So I suggested that he contact Chase first, just to see what they could offer. And guess what, they sent him a letter agreeing to consolidate his loans at a lower rate too. he was so excited to tell me that they will save almost $500 a month.

Now, both of these people had been paying their mortgages on time and they seem like “no-haggle” refi’s, recasting really. Yes, they were living in desirable areas, Vienna, VA and McLean, VA but they were facing financial issues that could have snowballed into future problems for the bank… and they already have too many problems. But in each case the homeowner was pro-active .

It’s good business to keep existing customers

So Virginia home owners should call the 1-800 numbers on their current mortgage statements or go to their lender’s web site because, like Chase, that lender may be more flexible that you may believe. It’s worth a try.

Leave a comment about your experience refinancing with your current lender because it may give someone else the courage to take action.

The Washington Post published an article 11/4/2010 discussing how the criteria (identical lender) is even complicated for the Fairfax County clerk of the court to keep track of to make sure everything is done properly.

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David Stevens who is the Assistant Secretary for Housing – Federal Housing Commissioner had the FHA issue new guidelines on January 21, 2010 to help reshape the government insured home mortgage agency and how it offers low down payment loans to home buyers. It is a little boring or even dry for Washington D.C., but important if you are planning to use this type of financing to purchase a home.

• Impacts loans assigned on April 5, 2010 and beyond
• Upfront mortgage insurance premium of 2.25% (yes, it still can be financed)
• FICO Scores above 580 can put 3.5% down payment
• FICO Scores below 580 must put 10% down payment
• The maximum Seller concessions shall be 3% (that’s a closing cost credit to the Buyer)
• Increase Enforcement of FHA lenders (this has been going on for the last 18 months)

That is it in a nutshell, and if you want to read the HUD Mortgagee Letter 2010-2 or the HUD.GOV gripping press release then enjoy the read!

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As 2009 draws to a close, I have seen mortgage rates stay historically low and some McLean mortgage insiders forecast that they will stay low for the near term. The terrible economy has a lot to do with it… job insecurity, weak demand, and an unwillingness to enter into a 30 year relationship when rumors are easy to believe.

The truth is that if you have the job stability and some cash, then this is an amazing opportunity to buy a home.That is if you can find one that is worth buying since the supply of homes for sale is low… in Northern Virginia that is.

Today’s Home Buyers need a 5 to 10 year time horizon

So what are the rates that I see in Northern Virginia? Let’s take a look without naming names… but with 720+ FICO scores.

10% Down Payment, 30 year fixed, Sales Price up to $722,000 and the recent rate was 4.75% with 1.25 points.

5% Down Payment, 30 year fixed, Sales Price up to $438,900 and the recent rate was 4.875% with no points.

3.5% Down Payment, 30 year fixed FHA, max loan of $729,500 and the recent rate was4.875% with no points.

7-Year Conforming Jumbo ARM and the recent rate was 3.99% with no points.

15-Year Fixed had a recent rate of 4.25.

And loans up to the $1.5 million amount at rates of 5.625%!

If you currently have an adjustable rate loan tied to the LIBOR Rate, then take a look at the current 0.97% rate at BankRate.com .

I list these rates for information only and should be considered examples of mortgage rates available in Northern Virginia in December 2009. Also these are for new purchases and not for refinances which are typically slightly higher. Also, I am a licensed real estate agent and do not provide mortgages and have no affiliated business arrangements with any mortgage providers.

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This great chart came to my attention from a post Justin McHood wrote at “The Phoenix Real Estate Guy.com” and I felt it was important to share. Consumers have a resposibility to manage their credit and can get a copy of their report either through a service like Equifax or free through AnnualCreditReport.com. Requesting a report to review will not negatively impact your score, but if you apply for a new BuyMore-Card then it can be a ding. Get it?

In a recent post of mine, I mentioned how important having a 720 or better score is when trying to get a mortgage, and how a real estate client had one error repeated three times impacting his FICO Score. Once cleared his score jumped 40 points!

So let’s be careful out there during the Holiday Season in Northern Virginia and not run our cards up to the max because that will damage your score 20+ points… even if you did it by accident. There are plenty of stories out there to keep you up at night. Keep it real because you need to keep your credit reputation as good as possible in today’s world. And remember that is important to examine your ratio of available credit to used credit… an important FICO Score variable.

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So if that encouraged you to look into refinancing your home, please remember that Virginia residents who refinance with the same lender (read more) qualify for a recordation tax exemption. Compare rates but understand that this may save you some serious cash over those other lenders competing for your business.

I decided to regurgitate this post since rates have been up and down all year long, and some of you may be thinking about refinancing. There are plenty of mortgage people out there, but remember that I know some too that I am happy to refer!

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Original Post:

This is a post of special interest to many of us in the Washington D.C. metropolitan area. I was in a NVAR Finance Forum meeting discussing the Economic Summit and Sweth started to talk about the upcoming expiration of the current $ 729,750 conforming loan limit on December 1st and how it may impact the health of the Northern Virginia real estate market.

So I decided to invite him to tell the story… enjoy!

by: Sweth Chandramouli, an Alexandria, VA mortgage broker, blogger and yet another former retired high-tech guy now with Ethical Homes.com

Conforming loan limits in the metro DC area may be changing significantly in coming months, potentially dropping by nearly half by the end of the year.

The Housing and Economic Recovery Act of 2008 (HERA) increased the conforming mortgage loan limit to $417k, and also created “high-balance” conforming loans in high cost areas, which would have rates that were slightly worse than “regular” conforming loans but still better than traditional “jumbo” mortgages. The high-balance limits were based on median sales prices in those high-cost areas, and for the metro DC area, the limit for 2009 was set at $625,500. In February 2009, Congress passed the American Recovery and Reinvestment Act of 2009 (ARRA, aka the economic stimulus bill of 2009), which temporarily increased the limit for high-cost areas such as DC to $729,750.

The ARRA limits expire on 12/1/09, however, at which point the limit for the DC area will drop back down to the HERA limit of $625,500. (12/1/09 is also the deadline for first-time home buyers to take advantage of the $8000 tax credit, so first-time buyers who need loans in the $626k-$729k range should be especially motivated to close their purchases by December 1st.)

That change will affect many people in the DC area, but far more widespread will be the change that will probably occur on January 1, 2010. HERA resets the conforming and high-balance limits each January according to a specific formula; that formula does not allow the basic conforming limit to decrease from year to year, but it does allow the high-balance limit to decrease or vanish entirely, and based on current calculations, that’s exactly what will happen in most parts of the U.S., including the metro DC area–on January 1st, barring any new stimulus bills passed by Congress between now and then, any loan in the DC area above $417k will probably be treated as a “jumbo” loan with significantly higher rates and tighter qualifying requirements.

We’re going to be monitoring this situation closely, and have contacts at Fannie Mae, Freddie Mac, and in Congress who are trying to get more information on whether there are in fact any plans to enact another temporary stimulus bill that would increase the limit for 2010, but for now, borrowers should assume that the high-balance loan limit in the DC area will drop to $625,500 on 12/1/09, and go away entirely on 1/1/10.

For the detail-oriented people out there:

• HERA sets the high-balance limit at the lesser of 115% of the median MSA sales price (as published by FHFA each October) or $625,500, which means that all MSAs w/ median sales prices above $544k are capped at $625,500, and all MSAs w/ median sales prices below $363k are not considered high-cost and are capped at the regular conforming limit (currently $417k). In October 2008, FHFA’s published median MSA sales price for the DC MSA was more than $544k, so the limit for 2009 was $625,500.
• The exact FHFA numbers for 2010 won’t be published until October 2009. NAR does publish very similar statistics, however, and based on NAR’s numbers for the last quarter, as well as FHFA’s own HPI numbers, most MSAs (including DC) will have median sales prices below $363k, which is why we are assuming that high-balance loans will effectively be eliminated as of 1/1/2010.
• The exact history of high-balance conforming limits in the last few years is actually more even more complicated. In Feb 2008, Congress passed the Economic Stimulus Act of 2008, which raised the conforming limit to $729,750 in the highest-cost areas, but which expired on 1/1/2009. Also, Fannie Mae, Freddie Mac, and the lenders that work with them took some time to implement the changes in ARRA 2009, during which time the practical limit was still the HERA limit of $625,500. So the high-balance limits in the highest-cost areas such as DC were $729,750 from 2/2008-1/2009, $625,500 from 1/2009-2/2009, then legally $729,750 but still practically $625,500 from 2/2009-4/2009, and then $729,750 from 4/2009 to the present. Expect a similar series of confusing changes in late 2009 and early 2010, especially if new legislation is passed to change the limits yet again.

So after you have surfed through umpteen home-search web sites late one night, contacting a reputable lender and completing a basic loan application will get the ball rolling! I know some.

Have you been paying you bills on time?

It’s a hard-and-fast rule…

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In the Option-ARM mortgage, the borrower can decide how much she will pay each month. For example, the true Principal and Interest payment is $1,500 per month but the borrower decides to pay only $1,300 per month.

That extra $200 per month then gets added to the principal due. It adds $2,400 annually to the mortgage balance, which isn’t much when house prices are going up 10% per year.

But when the market is declining then this is a recipe for disaster. None of my clients used these mortgages and the Option-ARM product is no longer available.

OPTION-ARM’s are the single most toxic element in the existing mortgage crisis that continues to unfold across the country.

And they have tainted the reputation of traditional ARM’s… so please keep reading.

ARM is an Adjustable Rate Mortgage:

• The Interest Rate changes on a planned schedule.
• The interest rate is calculated using a specific published Index, such as U.S. Treasury or the LIBOR , that is published in The Wall Street Journal.
• On the scheduled Change Date, the Note Holder calculates a new interest rate for the mortgage by adding a specific percentage to the published Index.

The language in the Adjustable Rate Rider will read something like this:

The “Index” is the average of interbank offered rates for one-year U.S. dollar denominated deposits in the London market (“LIBOR”), as published in The Wall Street Journal. The most recent Index figure available as of the date 45 days before each Change Date is called the “Current Index”.

Before each Change Date, the Note Holder will calculate my new interest rate by adding — Two and One / Quarter – percentage points ( 2.2500%) to the Current Index. The Note Holder will then round the result of this addition to the nearest one-eighth of one percentage point (0.125%)… this rounded amount will be my new interest rate until the next Change Date.

You may not know this, but the current 1-year LIBOR rate as of 9/5/2009 is 1.27% according to The Wall Street Journal and BankRate.com.

If your 1-year, LIBOR based ARM adjusted today, using the example above, then your new mortgage rate would be 3.625%.

Here is a graph showing the history of the 1-year LIBOR Index: