TAG | fha loans
FHA Home Loan applications surged dramatically last month to 246,406. That figure increased from 163,467 for the month of February. These figures were released by HUD on Wednesday. The increase in FHA Loan applications is believed to be a result of the $8000 home buyer tax credit expiration at the end of this month. The FHA endorsed 132,301 mortgages in the month of March. The delinquent FHA Mortgage rate also declined in March to 8.8%, which is down from 9.8% in February. If you are looking to purchase a home using an FHA Loan in the near future, you had better hurry. To be eligible for the $8K tax credit you must have a signed purchase agreement by April 31.
In the current lending environment, it can be difficult or even impossible for previously qualified people to get a home loan. One of the most flexible mortgage programs available today is FHA Loans. Although, FHA loans offer many rules and guidelines that borrowers must meet in order to obtain an approval, there are a few big pointers that you can use to get a general idea if you qualify. To qualify for an FHA loan, you will need the following to meet the following conditions:
- You almost certainly will need credit score of 620 or higher.
- You will need to make enough documented income to exceed the debt ratio requirement of 31/43. This means that your housing expense shouldn’t be more than 31 percent of your income and your total expenses shouldn’t be more than 43 percent of your income.
- The property must have the equity to hold the desired loan amount up to 96.5% on purchases and 97.75% on refinances.
If all of the conditions above are true for your transaction, you will have a much better chance of getting your FHA loan approved.
Starting in April, the Up-Front Mortgage Insurance Premium (UFMIP) has been increased to 2.25% of the loan amount, up from 1.75%. This increase applies to all purchase and refinance transactions, including streamline refinance. This fee was raised by HUD to help address the budget deficit of the immensily popular FHA loan programs.
While the UPMIP is paid at closing, it may be financed into the loan amount so that it does not add quite the increase in closing costs to the borrower. For example: If the original loan amount is $100,000, the new total loan amount after the included UFMIP would be $102,250 and could be financed for 30 years or 15 years, depending on the desired FHA Loan program.
The Federal Reserve is in the process of ending its purchase program of GNMA Mortgage Backed Securities that has been responsible for the recent streak of the lowest mortgage interest rates on record for FHA loans.
The Federal Reserve Bank is poised to pull the money off the table that has helped sustain the ailing real estate sector, $1.25 trillion to be exact, by March 31, 2010.
If you are considering a fha mortgage loan and you are on the fence about when to act, now is the right time. Rates are not likely to be this low much longer.
Beginning this summer, sellers will not be allowed to give as much help to buyers to pay their closing costs when purchasing with an FHA Mortgage. The maximum allowed amount of seller assistance will drop to 3 percent of the sales price, down from the current 6 percent. This change will bring FHA into conformity with industry standards on 3% seller concessions.
New borrowers who get an FHA Mortgage Loan will soon have to pay a higher initial mortgage insurance premium (MIP). The new premium will be 2.25 percent of the total amount of the loan, up from the 1.75 percent that has been set nearly a year earlier.
In December of 2009, the FHA was insuring 5.8 million homes that had a total loan balance of greater than $750 billion. More than 500,000 of the loans were seriously delinquent and heading toward foreclosure. Many of these bad loans were made in 2007 and 2008 as the market was plummeting.
The initial MIP increase will go into effect this spring.
Effective February 1, 2010, home buyers will now be able to purchase properties that have been “flipped” in the previous 90-days with an FHA Mortgage Loan. This will assist FHA Loans in having a very significant role in helping the housing market stabilize, providing liquidity in the mortgage market, and increasing mortgage credit, both nationally and in those states suffering the most from the subprime mortgage meltdown. Waiver Specifics
In recent testimony during a hearing before the House Committee on Financial Services, HUD Secretary Shaun Donovan outlines several new policies in FHA to address the quality of the existing portfolio, improve the performance of future books, and return the capital reserve to above the legislated 2 percent level, while also ensuring that the FHA continues to contribute to the nation’s housing recovery.
An initial measure is to reduce the maximum permissible seller concession from its current 6 percent level to 3 percent, which is in line with industry norms, and we will continue to consider additional reductions. The current level exposes the FHA to excess risk by creating incentives to inflate appraised value.
Secondly, to protect the fund from the riskiest borrowers, the FHA will for the time being also raise the minimum FICO score for new FHA borrowers.
The FHA is currently analyzing what this floor should be, including the relationship between FICO scores and downpayments to determine whether FHA should increase FICO minimums in combination with changes to other underwriting criteria for lower downpayment loans.
Third, the FHA has made the decision to exercise our authority to increase the up-front cash that a borrower has to bring to the table in an FHA mortgage loan – to make sure that FHA borrowers have more “skin in the game” and a stronger equity position in their loans. There are several ways to accomplish this, and so the FHA is currently analyzing various options to determine which is the most effective and consistent with our mission.
Finally, the FHA is examining the FHA mortgage insurance premium structure to determine whether an increase is needed and, if so, whether it should be the up-front premium, the annual premium or both. Our current up-front premium of 1.75 percent is below the statutory cap of 3 percent, while the annual premium is currently at the statutory maximum. To protect against future uncertainty in market conditions, the FHA is requesting authority from Congress to raise annual premiums, as this is one of the most effective means of raising capital for the fund with the least impact per borrower.
Corresponding to the Janurary 1st overhaul of RESPA regulations, the Good Faith Estimate and the HUD-1 settlement statement for mortgage loans, HUD announced today that it was raising the allowable origination fee for lenders and removing the 1% origination fee cap that was in place.
Does this mean that the total fees to get an FHA Home Loan are going to go up? Not necessarily. This cap was removed, in part, due to the fact that new RESPA rules removed Lender’s ability to charge many of the fee’s that accompany the “Standard” origination fee, such as processing fees, administrative fees, underwriting fees, wire transfer fees, etc.. To simplify these fees to the borrower, it appears that HUD had the intent of removing this cap on origination to allow for all fee’s to be grouped into one single origination charge and presented to the borrower as a bottom line figure that can be easily compared with offers from other mortgage lender’s. Read More
The U.S. federal government is slowly extracting itself from the MBS market for home loans, closing out several emergency measures put into place in the throes of distress last year to prevent a collapse of mortgage finance.
According to a recent WSJ online article, The Federal Reserve’s $1.25 trillion program to purchase mortgage-backed securities, considered the most critical support, will draw to a close in the first quarter of 2010. Fannie Mae, Freddie Mac and Ginnie Mae will then be without a government buyer of last resort for their home loans for the first time since the mid-1990s and will have to rely solely on private investors.
Simply put, this means that interest rates can not remain at their present levels for much longer. If you are on still on the fence about a refinance or home purchase, the time to move is now. Learn more about Home Mortgage Loans, FHA Loans, USDA Loans, VA Loans and Jumbo Loans and Conventional Loans at www.loans-101.com.
