EFFECTIVE June, 2012: Fees for refinancing will fall sharply, as the upfront mortgage insurance decreases to 0.01 percent of the base loan amount, from 1 percent, starting on June 11. For buyers, the upfront mortgage insurance premium will increase to 1.7 percent of the loan amount, from 1 percent, effective April 9, and annual insurance costs, paid monthly, will rise 0.10 percentage points. Those with so-called jumbo loans, those above $625,500, will see a 0.35-percentage-point jump in the annual insurance premium, effective June 1.
How this will affect your purchase thru FHA. For Example: if you are buying a house for $300,000.00 and putting the minimum 3.5% down payment today. Your new loan amount will be $ 292,395.00, which is an additional 1% of your 96.5% loan amount. But after June 11, the new loan amount will become $294,421.50 due to the MIP (Upfront Mortgage Insurance Premium) going up to 1.7%. That is a substantial hit on your monthly payment.
It’s not over! Your monthly MI (Mortgage Insurance) will now go up from 1.1% to 1.25% for 30 years loans over 78% loan to value. Using the same Example: your old MI monthly rate will be 269.88 compared to the new Monthly rate of 306.69.
Therefore again using this example to buy a $300,000.00 property after April 9 your new mortgage payments would have increased by average $45.00 per month and an increase of about $2000.00 on the mortgage balance.
On the other hand, if you are doing a streamline refinancing on an FHA loan come June 2012 the MIP and monthly MI will decrease drastically to make it worthwhile for you to refinance if you already have a higher rate FHA loan.
The Upfront Mortgage Insurance Premium will go from 1% to .01% and the Monthly MI will be from 1.1 bps down to .55 basis point. This will make it a substantial savings off total cost of refinancing. FHA streamline refinances are done without an appraisal but it should already be an original FHA loan.
The FHA announced these changes over the last several weeks; they reflect an Obama administration initiative to make refinancing easier and more affordable for the three million or so homeowners with FHA mortgages. The reduction in refinancing fees applies to those borrowers who are current on payments.
The FHA’s market share has risen sharply in recent years as sub prime lenders and others left the business during the housing crisis, or were forced out. FHA-insured mortgages represented almost a third of all mortgages in 2011, and as many as 47 percent in the second quarter of 2010, according to HUD data.
Loans insured by the FHA require only a 3.5 percent down payment for borrowers with a credit score above 580; those with a score of 500 to 580 need at least 10 percent down.
The Mortgage Market is going thru major shuffling again. More wholesale lenders are coming up with possibly more innovative ways to help homeowners finance their loans. Which is a very good sign.
Mortgage rates rose for the second week in a row, but still fairly low and still very affordable so this might be a good time to start to position yourselves to buy if you are waiting.
Housing Stats both for new homes and resells have been slowly but surely increasing due to the lack of inventory out there. We are hoping for more move up buyers to start getting into the market. This means, if they have to sell their homes to buy that will capture both the mid range prices and the lower upper range prices. These are people that have been waiting for the market to get better in order for them to list their homes average in the 2-300’s and then they might move up to buy homes in the 4-500’s ranges.
The move up buyers has been dormant the past 3-4 years due to market values declining, therefore if they come out and start to increase the housing inventory that will help the second tier of prices to move up.
I have had a big decrease in callers that are in hardship of paying their mortgages, still getting calls from homeowners that are underwater but most of them have the income to make the payments. This is a great sign hopefully I am not the only one feeling this.
I surely am very optimistic of this up tick in the real estate market and hope this will have the traction to continue its way up for the market to start to turn.
If you are still considering refinancing your loan, please consider the no cost refinancing options, Call me and I will be more than happy to discuss these options for you.
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Please send your inquiries and comments to Ken Go of 1st Innovative Finance Group at (562)508-7048 or write to[email protected].