FHA Mortgage Costs Rising
Filed under FHA Articles, FHA Guidelines, FHA Mortgage Articles, FHA news · Tagged: FHA lending, FHA mortgage insurance, FHA requirements
Why would HUD decide to raise FHA mortgage costs at a time when the economy and the housing sector nationally are struggling so much? Just a few years ago, FHA home loans were considered a financing dinosaur. FHA loans were nearly considered obsolete because they were time-consuming and more regulated, and sellers were usually not comfortable with FHA financing being written into the sales contract, because they knew at the time that the appraisal requirements and timeline for underwriting would drag out the process for closing the loan. Times have changed, and FHA has automated the FHA home loan process.
Today, an FHA mortgage remains the only low down-payment lending product, requiring just 3.5% from borrowers. Just five years ago, FHA loans had a market share of only 5%. In 2010, FHA lending accounts for about 30% of all home loan originations nationally. This surge of mortgage loan volumes has increased the pressure on the FHA Mortgage Insurance Fund. FHA is required to maintain this emergency fund of reserves above 2% based on all of its insured mortgages. This year we saw the reserves fall well below the 2% minimum and HUD has been forced to take drastic steps, like tighten the FHA guidelines.
FHA Mortgage Lending Back in Style
In an effort to preserve the sacred FHA loan program, HUD announced it will be raising its annual mortgage insurance premium from 0.55 % of the mortgage amount to 0.90% (for loan to values higher than 95%) or 0.85% (for LTVs lower than 95 %). This insurance premium hike will go into effect, October 4th, 2010. In an effort to save face, FHA will be lowering their upfront mortgage insurance to compensate homeowners for their rising monthly payments. This is good news for new homebuyers because the fees are dropped to 1% of the loan amount from 2.25%. Overall, it looks to add $300 million a month to the insurance fund by taking these actions.
FHA Borrowers to Pay More Monthly
So what does that mean to FHA buyers come October? It means they will be paying more each month. For example, let’s take a $250,000 purchase. Under the current FHA mortgage insurance framework, the upfront premium would be $5,428 for a total loan amount of $246,678. The monthly mortgage insurance would be $110.57. Take an interest rate of 4.625%, and the principal and interest payment would be $1,268.27. Add the $110.57 and you get $1,378.84.
Under the new FHA requirements, the new upfront amount would be about $2,500 on a FHA mortgage loan amount of $250,000. However, the monthly insurance jumps to $180.94. Take the same interest rate, and the principal and interest payment decreases to $1,252.76. But with the higher premium, that total payment comes in at $1,433.70, an increase of almost $55 a month. To a borrower who is just barely qualifying, that can have an effect. It also puts into play taking another look at private mortgage insurance as an alternative for the borrower. These types of adjustments shouldn’t be surprising as FHA tries to adjust to the marketplace. It recently released its quarterly report to Congress, and it shows just how much FHA has become a part of the mainstream when it comes to mortgage lending.
House Raises FHA Mortgage Insurance Premiums
Filed under FHA Articles, FHA FAQ, FHA Guidelines, FHA Mortgage Articles, FHA Mortgagee Letters, FHA news · Tagged:
Yesterday, the U.S. House of Representatives approved a bill to inject finances into the FHA by approving the authority to raise FHA mortgage insuance premiums. The FHA reserves are low and it created significant cash flow problems that the government was forced to deal with. It is no secret that Federal Housing Administration is strapped for cash because all of the recent FHA defaults that continue to mount. The government also considered a measure to raise the FHA loan limits used to develop some apartment buildings. In a 406-4 vote, lawmakers approved legislation to strengthen the finances that back the FHA home loans by giving it authority to nearly triple the annual fees it charges to borrowers, known as mortgage insurance premiums. Read the original article > House Approves FHA Bill to Reestablish Finances
Will FHA Mortgage Programs Survive?
Filed under FHA Articles, FHA Guidelines, FHA Mortgagee Letters, FHA news, FHA requirements, Mortgage News · Tagged:
FHA has been in the news a lot lately. Yes, FHA mortgage rates are low, but the FHA mortgage program as a whole may be in jeopardy of existence. Many FHA blogs have posed the reality that FHA financing is at serious risk to be shut down. In this political climate it becomes obvious that anything is possible because Congress must pass bills to continue to fund the FHA mortgage programs. FHA first time home buyer loans have been promoting home ownership since the great depression. Even as we discuss their recent failures, the argument could be made that FHA is one of the most successful government initiative in the last century. Read the original article > Is FHA Mortgage Financing in Trouble?
FHA Lenders Receive Warning from Commissioner
Filed under FHA Articles, FHA Credit, FHA Guidelines, FHA Mortgage Articles, FHA news, Mortgage News, Mortgage Reform · Tagged:
The Mortgage Bankers Association reported that FHA rates should remain affordable in the near future because of concerns in Europe financial problems, but they predict rate hikes in 2011. Most real estate financial advisors agree that low FHA rates are helping the local housing communities recover. Once again HUD has come down hard on FHA lenders over fraud and disclosure negligence. FHA commissioner David Stevens stated in a MBA meeting, “This is a mortgage market surviving purely on life support and sustained by the federal government.” Stevens continued his theme of FHA mortgage reform and made an effort to persuade FHA mortgage lenders to sacrifice the commissions at this time for the good of the industry.
The government agency tightened FHA loan requirements with amendments on the FHA guidelines making qualifying more challenging for new home buyers. Read the original FHA loan article online at > Home Buying Opportunities with Declining FHA Loan Rates
Assumable Loans with FHA
Filed under FHA Articles, FHA Credit, FHA Guidelines, FHA news, FHA requirements · Tagged: FHA requirements
Did you know that FHA mortgage loans are assumable? This means that if you sell your house, the buyers could actually take over your existing FHA mortgage. Using the “assumable” function with FHA loans extends some leverage to a seller that could potentially pass on a FHA mortgage with an interest rate that is locked well below the market.
According to FHA requirements, home buyers may qualify to assume the seller’s FHA mortgage loan. This is an attractive benefit if FHA rates are higher than your existing FHA loan at the time you’re selling your home. FHA mortgage lending programs provide an important service to buyers, homeowners, and housing markets. FHA has been in the news a lot lately because HUD is looking for new opportunities to rebuild the FHA mortgage reserves.
