I don’t know about you, but I’ve been chomping at the bit to know how people who are buying, are financing these purchases. It’s a monumental task to wade through the detail on this. I probably should have waited a week to get all of the September closings into the mix from the last few days. But I just couldn’t wait another day! The suspense was killing me.
I used all sales from one city on the Eastside, closings from 8/1 through end of September, purchase prices of $400,000 or less. For confidentiality reasons, since I am revealing mortgage data, I will not name which city I used. Too easy to trace some of these to the actual purchaser. I think it will be important to track over the next 6 months, how these percentages change, particularly with regard to FHA and financing for purchases with less than 20% down.
Here are the results of approximately 60 closings. Another 25 or so did not have the data recorded yet as to the mortgage amount and type. I’ll pick those up in the next analysis.
1) 41.5% were 20% down or more. Most exactly 20% down.
2) 25% were 100% financed. Interesting note: 75% of the ones with 100% financing were done as ONE loan. No second mortgage. So PMI may be back in a big way. (private mortgage insurance instead of a high rate 2nd mortgage, for the amount financed representing over 80% of the purchase price.) unless these programs waived PMI. In any event, one loan and not two, as has been customary for quite some time now. Big shift.
3) 15% were 10% down. 75% of those were also done as one 90% loan and not two, as in 80% and 10%. Again…big shift.
4) 10% were 5% down. Half done as one loan, and the other half done as two loans.
5) 5% were cash purchases.
6) 3.5% were FHA. The amount financed on these were both 98.4% of sale price, and not 97%. Important to note, as we tend to say that FHA is 3% down, but it really doesn’t work quite that way in reality. One was sale price $274,000 with a financed amount $269,766. The other was sale price $213,000 and financed amount $209,709. More like 1.6% “down”. I vaguely remember this from “the old days” but time for everyone to get up to speed on FHA and review some actual closing statements regarding how FHA really works at the end of the day. While only 2 of 60 were financed using FHA, we should be seeing many more of these. So we all need to get a lender in to explain FHA financing to the agents, in minute detail, with real closing statements as samples, NOT GFEs!
The under $300,000 market looks good with a 3 month supply in escrow…but something tells me a lot of these won’t close, due to financing, unless a lot of agents get up to speed on how to finance these really, really FAST! Inventory also looks OK, with less than twice that amount on market, but if we can’t close out those in escrow, there’s not much hope for the existing inventory either, especially if 2/3rds of those in escrow come back on market…which they easily could. I say at least 1/3 of these will not close. I’m thinking it will actually be half to 2/3rds that will not close. Mainly because in escrow represents three times the average per mo. that closed in the last two months! So my guess is that many of these are in closing date extensions, trying to figure out how to finance.
The key to the next six months will be everyone getting totally up to speed on FHA and FAST! If the low end can’t move in the first quarter, because agents don’t understand FHA or alternative financing, 2008 is in big trouble. Old saying: “As goes the low end (in the 1st quarter), so goes the year.”
I’m pushing all of our agents in that direction, to help the industry and consumers. Focus on the low end and totally “get” how to finance it, for people with little money down. The better we handle this, the better the market will be. Every broker should be having seiminars on FHA and minimum down financing, and not waiting to see how the market does without our influence. The best agents need to go down to the low end price-wise, and focus on helping this market move, and not leaving the cheap seats to those least qualified to juggle the financing piece of this low end market.
Fewer sales failing on financing in the under $400,000 market will be THE key to Seattle’s holding on to its preferred market position nationally. Don’t let Seattle down. Roll up your sleeves and get down there where it really matters. The first time buyer market. DO NOT leave that market to inexperienced newer agents, without a lot of support.
It’s a darned shame escrow can’t intervene and help with this too. Not a good time for them to be “neutral parties”. They are the ones with first hand knowledge of which lenders are closing, and which aren’t. I’ll give you a few clues:
Bank of America closed about 20% of the zero down, one loan, 100% financing.
Wells Fargo closed about 15% of the zero down, two loan 100% financing.
Countrywide, First Horizon, American Mtg Network, Choice Lending, Gn Mtg LLC, Mortgageit Inc., Planet Financial, Mtg. Network Svcs., Liberty Financial, Rainland – all of these closed one or more those 100% financed in the last 60 days. FHA – Wells Fargo.
I’m not recommending these lenders, and don’t even know many of them. Just reporting who seems to be getting the job done. I’ll try to pick up the last week of September, those not yet updated in the County records data, in a week or so.
Hi Ardell,
I agree and I have been pushing people to get up to speed on FHA. I personally love FHA. It is full doc, requires the buyer to have some money. FHA has a minimum safety standard of the home being purchased.
As for the 1.6% thing. The way it works is 3% is a required down payment AND there is a one time upfront MI Premium UFMIP. That can be financed and is added after the ratios have been done.
The actual formula is mind boggling or at least it use to be. Most loan officers could not explain it.
Now that FHA is roaring back those that understand it can help their Buyers AND Sellers. I don’t know how your MLS is ours has a finance terms that are being accepted. Conv, FHA, VA, Cash other… When agents search for properties, they will enter the criteria in, which I don’t suggest. I recommend knowing what FHA standards are and make offers and educate the listing agent and the seller, especially if the market is sliding a little a seller will be glad to have you present an offer.
One other item about FHA, there are (I am not sure if they did away with it) certain closing cost that the buyer cannot pay. So loan officers of course interpret that as seller must. Which is not the case, Buyer Cannot, means Lender will? It is a cost of doing an FHA loan.
Hey! Why does that pingback say Michael Fowlkes write my post? Who the heck is Michael Fowlkes?
I agree Rob, and I “remember” the formula, but not accurately enough, and so need to brush up on it. I DO remember that you had to review actual closing statements and not Good Faith Estimates to “get it”, so that will give us a head start.
Though that B of A 100% option may have no PMI, if it is their “Too good to be true” loan that some of my clients used. Clearly worth checking into for people with good credit. It won’t be ALL about FHA. Conventional sources will also work for many. But I heard an escrow agent, who has been in the business for 26 years, say the other day that direct lenders are being used most often right now. Too much uncertainty to have the file passed to the actual lender in the last week of escrow.
I’m wondering if 3% turned into 1.6%, if they drop the 3% to 1.5%, where will the actual cash outlay fall under the formula? Probably darned close to zero.
Agents need to be experts at financing REAL FAST! He who writes the offer, needs to know the detail and certainty of closing, like “the good old days”.
Ardell, LPMI and SPMI are huge with 100% down financing. No need for monthly PMI. I tend to prefer LPMI since the interest is tax favored and we don’t know if congress has extended the pmi tax write off beyond 2007 yet…plus the tax payer cannot make over $100k if they want to deduct the pmi.
I did a post at RCG re: LPMI a few months ago: http://www.raincityguide.com/2007/05/11/lpmi-pmi-and-8020-mortgages%e2%80%a6oh-my/
“B of A 100% option may have no PMI” this is the LPMI I’ve been referencing since May. BOA does not have the scoop on anyone…they just have more marketing power.
With regards to the lenders you’re showing, does your data source reveal if thats who the mortgages were brokered to or where they were originated from? Some of the sources you refer to are only available via a broker.
Second mortgages are less available. Wells Fargo stopped offering them to brokers as of Friday. (They’re pulling back supporting mortgage brokers and supporting their retail side instead as is other banks, like WaMu). Loan to values are more strict with second mortgages.
Ardell, I’ve done two post on FHA here at RCG:
FHA Secure: http://www.raincityguide.com/2007/09/07/fhasecure-a-helping-hand-for-those-who-did-not-refinance-in-time/
FHA 411: http://www.raincityguide.com/2007/05/04/fridays-rates-and-fha-4-1-1/
I’m happy to do another one. 🙂 Our company has been a FHA lender for 30 years. (We do VA, too).
Rhonda,
The data sources would not indicated who the were brokered through, but where they originated from, so this list would be as important to Brokers as it is to Consumers who use brokers.
I know in the past, in complexes that were difficult to finance, knowing who the loans were placed with in recent history, was very helpful to brokers. Same in this case, though clearly this list is not complete. I can do some others, but as you can imagine, this research took many hours to compile, so it’s a start and by no means complete.
Rhonda,
Sorry if I missed this detail in your FHA posts, but what score are they looking for these days?
The kind of detail needed for the type of informative post I have in mind, can only come from reviewing five or more closing statements. Any way you can get those to me, blocking out the confidential info like name and address, and any other confidential data?
I know that there are people who know, but the consumer really needs to know more up front than is presented in those posts from a few months ago. As do agents. Let me know if you can figure out a way to convey the actual numbers on both the buyer and seller side of the HUD 1, for actual closed FHA sales from the last 30 days or so, without revealing anything about the parties or address or even City or County. Just the actual numbers from closings.
Thanks.
FHA is not credit score driven.
FHA is full doc: the homebuyer documents everything.
Self-employed people who say one thing to the IRS and say another thing on a stated income or no doc loan won’t be able to go FHA.
I know the rate isn’t credit score driven, but surely there is a minimum score to qualify…no?
I recently closed an FHA refinance with scores in the mid 500s–95% LTV with a conforming rate. FHA has not changed from the posts I did a few months ago. It’s the same old loan. FHA Secure is different, but that’s just for refi’s–not purchases (and that post is recent).
I’ll do a new post on FHA. It’s a great program. I’ll also do one regarding FHA Seller costs. I think Sellers and Agents become hesitant about FHA–it’s a solid loan.
Ardell, not really (regarding credit scores), it is credit history driven..so in the last 12 months, if someone has late payments they may not qualify.
It’s likely if someone has a credit score below 550, their credit history is not going to be great.
Another bonus with FHA is that if a loan receives a “refer” (is declined from the automated underwriting system) it can be manually underwritten by a real live human (we have two FHA/VA approved underwriters on staff).
I’ll also do a post on VA loans…we can currently lend up to $417,000 with zero down and no pmi. They are the original zero down loan. They are in the process of removing the loan limit! If your client has served in the military, they could qualify for zero down loans over the conforming loan limit with a conforming rate! Is that hot or what???
Maybe I should save this for my post…condos need to be FHA/VA approved for those respective loans…or a “spot approval” is a possibility.
Rhonda,
You mean like the good old days before FICO became KING KONG? WHOOPEE!!!
VA is hot, but not as readily applicable as FHA. Is the FHA limit going to be increased soon? Is it still $357,000 or so?
Spot approvals are going to be necessary in many cases, as many complexes haven’t bothered to get FHA approved, since subprime was so readily available when these were built. Newer ones anyway, and many condo conversions as well.
We’ll also need to go to 45 to 60 day escrow periods for those that need spot approvals, I expect.
You can still do 100% financing with Fannie and Freddie products. They’re just not available for subprime borrowers.
Current King/Snohomish/Pierce County Limits:
1-Fam: $362,790
2-Fam: $411,950
3-Fam: $500,500
4-Fam: $577,500
As long as the buyer is occupying one of the units (2-4 fam) they can have owner occupied rates using FHA with minimum down.
Umm…did I say FHA is hot? 😉
Ardell said:
” . . . It’s a darned shame escrow can’t intervene and help with this too. Not a good time for them to be “neutral parties”. . . ”
Ummm, excuse me here, but the whole purpose of having an escrow company is precisely because they ARE a neutral party.
Are you suggesting that escrow companies change their rules in some sort of attempt to keep the RE market going?
I think if a family is having trouble with their lender and the loan docs are not getting to closing, and it is obvious it’s not going to happen, the escrow company being able to suggest a lender who closed a loan on a similar basis recently, would be helful to those people.
#10 –Ardell,
It is not score driven.
BUT
that does not meant bad credit history is OK, a low score because the lack of credit is OK, For the score translation to the non score language.
If you have a history that is full of lates and charge offs it will certainly prevent you from getting an FHA loan.
So they look at the history not the number. Which means you can use alternate trade lines, like utility bills. You need two trade lines.
One of the cool parts about FHA is that the rules are written in concrete. So if you know some of the little obscure nuances you can actually have an underwriter reverse a decision by showing them the rule.
Agent and Loan Officers get familiar with the Mortgagee Letters http://www.hud.gov/offices/hsg/mltrmenu.cfm these are the rule changes.
The underwriters along with the Loan Officers and REALTORS that have not done FHA deal in any quantity in the last 3-5 years will sometimes need a refresher course. Especially if you look at how many Mortgagee Letters were written in the last 3-5 years. If they are going on memory that may not be such a good thing.
To add the Rob’s comment, FHA will also consider why the credit is negative and make exceptions, such as medical collections.
Ardell, I’m wondering what your source was for lenders. I checked on one of them and MortgageIt is only wholesale on the West Coast (anything showing as MortgageIt would be originated from a mortgage broker).
Rob,
Thanks for the info. Very helpful. I think if the FHA loan limit matched the VA limit, we’d be OK. Does VA historically have a higher loan limit than FHA?
Another important note, listing agents of lower priced condos who get up to speed on FHA will be great, but they should not forget to make sure that the owner can finance their leg-up purchase, which is less likely to be within FHA guidelines. Hopefully the equity in the condo/townhome is enough to put 20% down on their leg-up single family home purchase, when added to savings. Otherwise you could be making people homeless by figuring out how to sell their current property via FHA.
It will be part of the agent for the seller’s duty to make sure the owner is pre-approved to purchase, before the property receives and offer and is in escrow. Unless the seller is planning to rent and not buy.
Rhonda,
The source is that available through the mls, which accesses the recorded info via Realist. It would be the lender as recorded, so brokers can see where the loan was placed at the end, and consumers can ask the brokers where they place the loans. While I have never sold a coop, being able to see who funds those is important, and getting a glimpse into who the lending source is on those is very helpful. Same may currently be true for FHA loans, but will be less important as more and more lenders get approved to do FHA, and have more experience with doing them.
Of particular importance will be the few brokers that only do subprime. I don’t want to name those here, but I remember a situation where a buyer who wasn’t subprime chose a broker who only did subprime. We had to get an extension and switch brokers. The broker had been recommended to the buyer by a family member who apparently was subprime, but our client wasn’t.
One problem with some broker processes is if the underlying lender doesn’t see the loan package until the end. Not all have in house underwriters or equal services regarding certainty early in the loan process.
Can you explain why some brokers collect the entire package, and it doesn’t get to an underwriter until the week of closing in some cases, while others pass it through the underwriter early in the process? I think that also involves situations where the property appraised, but someone else is asking for a desk or field review of the appraisal as a funding condition a few days before closing.
Rhonda,
One of my agents listed a condo yesterday and made sure to put FHA as a funding option in the mls onthe listing.
Could you post a link to a source that shows which complexes are currently FHA approved? Seems to me that the HOA Boards can institute the process of getting approved. Is that costly or inordinately difficult?
Perhaps some lenders can volunteer 20 minutes or so at HOA Board meetings to explain the importance of getting FHA approved, and how they do that. Clearly the Boards should be made aware of how this step could enhance the values of the condos for all owners.
Would that be something they might hire an attorney to handle?
Rhonda,
Regarding your #4, seems hard to believe they won’t extend the write off of PMI past 2007 with everything else that is going on. Would be nice if they did that ASAP. Have you seen anything at all that suggests this is at least being strongly considered at present?
Hi Ardell,
Here is the link to the HUD website where anyone can search for an FHA-approved condo complex:
https://entp.hud.gov/idapp/html/condlook.cfm
FHA has requirements such as a certain percentage of units must be owner-occupied.
No, I haven’t seen anything to indicate congress will extend this as of yet. It could be a last minute move. And, there are still other options besides the monthly pmi as I mentioned at #4.
FHA approved condos: https://entp.hud.gov/idapp/html/condlook.cfm
You have to be careful using this link. It might appear a condo is approved by the check mark saying the search was successful. I recommend verifying the condo is approved with a lender who is FHA approved.
If there are too many rentals, which can be the case with lower priced condos, the condo will not be FHA approved.
Ardell notes:
“Of particular importance will be the few brokers that only do subprime. I don’t want to name those here, but I remember a situation where a buyer who wasn’t subprime chose a broker who only did subprime. We had to get an extension and switch brokers. The broker had been recommended to the buyer by a family member who apparently was subprime, but our client wasn’t.”
I would particularly like to hear from Rhonda on this because I’ve heard Rhonda say over and over again that consumers ought to ask for a referral to a mortgage professional from their friends and family.
Ardell’s experience resembles many that I have personally heard about directly from consumers. Thanks, Rhonda! 🙂
“Can you explain why some brokers collect the entire package, and it doesn’t get to an underwriter until the week of closing in some cases, while others pass it through the underwriter early in the process?”
This is just how some lenders operate. Personally, I don’t leave things unchecked until closing. I try to have the u/w sign off on as much as possible in the beginning.
“It would be the lender as recorded, so brokers can see where the loan was placed at the end, and consumers can ask the brokers where they place the loans.”
Some mortgage brokers do not close in their own name (for example, if they are not correspondent). Therefore, they would close in the name of who the loan is being brokered to. The list you have in your post is not 100% where the loans were originated from. Most loans do wind up at the big banks you’ve referenced and often times, brokers and correspondents receive better pricing than going directly to the source (especially since a correspondent is taking the risk, we’re compensated w/better pricing).
Lynee and Tim:
“It’s a darned shame escrow can’t intervene and help with this too. Not a good time for them to be “neutral parties
Ardell notes:
“One problem with some broker processes is if the underlying lender doesn’t see the loan package until the end. Not all have in house underwriters or equal services regarding certainty early in the loan process.”
I can only guess that perhaps the loan had been submitted to many lenders for approval, or that the consumer had not given the broker all the necessary documents. Remember, we’ve shifted away from no doc loans. More time is needed now to gather, assemble, and submit loan packages whether the underwriter is located here or in another state.
Most all small mortgage brokerage firms do NOT have in-house underwriting, which is generally defined as an actual human underwriter, paid on a w-2 as an employee, with full benefits, and so forth, who does NOT report to the sales manager. I have heard WAMB quote estimates that over 50% of the mortgage brokers in WA state pay their people only as 1099 contract workers.
A medium to large sized correspondent lender such as Rhonda’s mortgage broker, Mortgage Masters, DOES have compliance, auditing, and underwriting located right there in the main branch.
Thanks, Jillayne. 🙂 Consumers should ask for referrals from people they trust and respect, including family and friends. And also CPAs, Financial Planners, etc. Once they receive the referrals, they should talk with each LO to learn about their business practice. Some important questions would be:
What type of mortgages do you specialize in?
Are you approved to do FHA/VA mortgages?
Can you provide Fannie Mae/Freddie Mac financing?
Do you guarantee your closing costs in section 800 of the GFE?
Just to name a few…I have more sample questions for selection a LO here: http://www.mortgageporter.com/reportingfromseattle/2007/01/how_to_pick_a_l.html
I’m running late to head out to my nephew’s birthday party. Both of my sisters are Wholesale AEs for major lenders (one works for MortgageIt, which is why I new they don’t have retail here). 🙂
True. But they likely need it more at the end, as they most often already have a lender in mind at the time they open escrow. They don’t know they need a referral until the first one isn’t closing at the end.
I’m thinking if someone is trying to go conventional with a broker who can’t do FHA, and the conventional route isn’t working, maybe escrow could at least tell the agent for the buyer that an FHA approved lender “might” help. Again, this wasn’t needed in the past, so we all need to think about how we will handle these things in the present and future. And these answers will not necessarily be based on historical scenarios.
Seems we may have to go to 45 day escrows as the norm, vs. 30 day escrows, to keep the panic level down. That might help, especially when they are written as 30 day and not accepted by the seller for a week of counters. That 30 day becomes 21 days real fast.
A good time for agents to not be too stingy when writing offers regarding the number of days to process the loan.
Geez, Jillayne…you’re going to make me late the b’day party! 🙂
This is also why I stress that especially now, buyers get
preapproved well in advance… do your homework selecting a lender and then get ready to do some elbow grease to gather all of your documentation to become preapproved. The more documentation and higher your credit scores are, the more options and better selection of programs you will have.
Ardell, I’ve been receiving referrals from other lenders who know that Mortgage Master does FHA/VA loans.
Your post makes a solid point that Realtors should learn more about FHA…including asking their preferred LOs if they have the capability of doing FHA/VA financing.
I really must run now!!! 🙂
Hi Ardell,
Yes, the landscape is changing. Congress is working on FHA reform. It looks as if loan limits will rise (good for our area) and down payment qualifications will drop, and other reforms to make FHA desirable. We’ve had a couple of discussions on the FHA over on the Seattle Real Estate Professionals Blog. Here are the links.
This post address some of the FHA reforms:
http://blog.seattlepi.nwsource.com/realestate/archives/122040.asp
Larry Cragun does a nice job of outlining benefits
http://blog.seattlepi.nwsource.com/realestate/archives/122249.asp
Remember readers that with an FHA loan, we’re talking full documentation with homebuyers qualifying at an amortized interest rate and acceptable debt-to-income ratios.
FHA does not immediately translate into “anyone can get a loan” again, nor should it.
Another nice feature about the FHA loans is that a non-occupant co-borrower may be included and still get the owner-occupied rate. This can be a great advatage to first-time buyers that are a little short on incomes to qualify – their parents can help! (If they believe in the kids committment to making the payments!)
Re. Jillayne’s comment: “Self-employed people who say one thing to the IRS and say another thing on a stated income….”
People who stated income above what they report to the IRS and signed a 4506 better make their mortgage payments on time. It’s amazing to me how many don’t see this as a form of fraud…signing a loan application and a 4506 and then pumping up their income. Larry Cragun hit the nail on the head with this post: http://blog.seattlepi.nwsource.com/realestate/archives/121538.asp
#21
As for VA Loan Limits compared to FHA. Yes typically they have. One thing though, FHA limits are regional (hopefully that is going away). Right now in Salt Lake County our limit is $362,790. we have a county to the west of SL that is very small and lower priced. Because of their size they are lumped in with Salt Lake’s price (85% of their inventory) while the county to the south has higher prices than to the west and yet they have lower loan limits.
Back to VA, they have another whole set of nuances to navigate. Their funding fee is high, but no MI and is guaranteed by the US Gov. No problem selling that loan on the secondary market.
They do not use appraisals, I believe it is called an Estimate of Reasonable Value. You do not have a choice of appraisers (that may have changed)
Note of caution to REALTORS and buyers. If you are doing a VA loan ask the Loan Officer how many VA Loans they have done. If it is less than six or seven, ask them to kindly refer you to someone that has more experience.
VA has a funny twist detail. Don’t remember what it’s called. But they look at expenses that other lenders don’t. I remember one that almost failed because of the guys train fair to work every day.
Thanks for the response, Rob.
Our local VA limits for home buyers is $417,000. This is zero down financing. The funding fee is high, however as Rob mentioned, you have no mi and close to conforming interest rates.
Rhonda,
I tried to put down an actual example of monthly payment. cash needed to close and income needed to qualify for an FHA purchase of $300,000. I’m rusty on MIP. Is it all up front and financed or is it in the monthly? Is it optional?
Hi Ardell,
Here is a link, showing an example of the old-fashioned, non-computerized way that you and I use to calculate FHA MIP in the 1980s:
http://www.bartaustin.com/lasvegas/mip-calculation.html
Thanks Jillayne. I’m going to see if I can dig up a couple of actual closing statements for an FHA Loan.
I was wondering if FHA was pushed aside for so long because no one makes as much money off of them. Does the Broker make less for an FHA than an LPMI?
Rhonda will have to answer the question about LPMI/
In terms of why FHA was pushed aside, NAMB (Nat’l Assoc of Mtg Brokers) is very proud in quoting statistics that mortgage brokers originate well over 50% of all loans in the U.S.
Most mortgage broker firms in the US are small, one or two-person shops, that sprung up during the run-up in prices. They lived and breathed subprime refi-churning where they could maximize the allowable yield spreads and fees with minimal state/federal oversight. Small mortgage brokerages often are not able to become FHA-approved unless they’re part of a large, net branch brokerage firm and even then, the LO would be required to transfer the file to the main office.
Simply said: FHA = red tape, actually knowing how to do simple math such as calculate MIP premiums and debt-to-income ratios, and…..the broker paying employees on a W-2. Most brokerage firms pay their LOs as 1099 contract workers and as such, they’re ineligible to become an FHA approved mortgage broker.
FHA was pushed aside when the mortgage broker community grew.
Watch for political pressure from NAMB to relax the standards for lender FHA approval.
Ardell: I just finished one here in Hillsboro – my client went thru the “Acorn Program – B of A”……no hitches until pre-lim came out & apparently this was a townhome, with lot #, acres….so, my client needed to purchase an individual home owners policy for structure & contents……we are still trying to figure out what HOA covers….LOL!
When I read this post and thread I can’t help making the analogy of trying to “help” an intoxicated person that is being refused alcohol at regular bars to find an alternative outlet that will serve him. Perhaps the best help instead is to just let him go home and come back when he is in a better condition to consume?
Ardell, sorry I’ve been away..I’m feverishly working on my future RCG FHA posts. 🙂
FHA has both upfront and monthly pmi. If your buyer is going “minimum down” for the FHA purchase, in our area the base loan amount would be 97.15% (loan amounts over $150k).
$300,000 x 97.15% = $291,450
291,450 + 1.5% upfront mi= $295,921
291,450 x 0.5% = $1457.25 / 12 months = $121.38 monthly mi
Using the rates I quoted on Friday, the p&i would be (assuming that we’re financing the upfront mi):
$1870.42 p&i, plus
121.39 = $1,991.81. Taxes and property insurance still need to be factored in.
FHA was not pushed aside due to how much a mortgage broker makes on them. They’re really about the same as far as income.
Why I did fewer FHA loans over the past couple of years was because the Consumer would elect not to do them. If you’re comparing a zero down to a 3% down program, you’re probably going to opt for the zero down and keep the 3% in your bank for savings (hopefully). 3% equity does not amount to a hill of beans.
Plus, with the recent FHA changes, the upfront MI is no longer refundable as it once was. The monthly MI cannot be dropped until the mortgage payer has had the FHA mortgage for 5 years (most other lenders require a shorter term for seasoning).
It’s all about explaining to the consumer what their options are AND if they were working with a Mortgage Professional who had the option of FHA financing. If they were working for a Mortgage Broker paid via 1099s (I’m paid via a W2, so we have FHA), as Jillayne mentions above, and FHA is not an option, that consumer will not be presented that as an option. They’ll only know about the subprime or ALT-A products.
Also, at least on the Eatside, the low loan limits prevented pretty much all residential from using FHA. As Rhonda pointed out, 80/20 0 down loans ruled the day.
Flex 100 is still available, too…you’re limited to the conforming loan limits and you would not have to keep your sales price at 100% of the LTV.
***Potential New FHA Guidelines***
It’s called the “Expanding American Homeownership Act of 2007” under House of Representatives Bill HR 1852.
I’ve read through the bill, and you may too: http://www.govtrack.us/congress/billtext.xpd?bill=h110-1852
Or, you can just note some highlights below (in no necessary order):
1. 560 FICO score introduced as a measure of risk (higher mortgage insurance premiums may apply to FICO’s under 560)
2. Zero Downpayment options possible for people who’ve not owned a home in the last 12 months (mortgage insurance premiums of 0.75% per year instead of currently 0.5% and the financed insurance may be 3% instead of the current 1.5% for higher risk/ lower-none downpayment options)
3. 40 YEAR LOAN TERMS (wow….maybe one day we’ll get to the European 50 year am’s eh?)
4. 97.75% LTV instead of the current 97.15% Loan-To-Value (unless a first-timer as above = 100% LTV maybe)
5. Homebuyer Counseling required (this is GOOD, even though it can require more time for closings)
6. NEW LOAN AMOUNTS of 521K – 729K (depending upon high cost areas, which includes Seattle-Tacoma-Bellevue). This is either 125% of area median house price of 175%. They have not specified what areas are allowed which: 125% or 175%. Either way, this will rock Jumbo Loan Pricing….PERIOD.
There you go. Email me with questions.
Ciao!
-David
David, do you know when the ***potential new FHA guidelines*** may become a reality?