Today’s Rate vs. Today’s Rates – Mortgage as a Second Language

The mortgage industry is almost cruelly filled with nearly impossible jargon.  Most of it is inconsequential from the consumer’s perspective and only serves to make communication easier for industry insiders.  However, when it comes to the concept of choosing an interest rate from your lender par rate, buy ups, buy downs, discount points and lender credits are a must know. Definitions: Today’s Rate – “Today’s Rate” is a myth perpetrated as a reality.  It is something the mortgage lending industry came up with because it’s an intellectually condescending industry that doesn’t believe that its clients can do math or understand …

Your Monthly Housing Payment Beyond Principal Interest Taxes and Insurance: Utilities

Nobody wants to be house poor.  Therefore, understanding what your mortgage payment will be when buying a house is only part of what should be considered when contemplating one’s housing costs.  Getting quotes on phone service, security systems, internet and cable are easy enough but utilities like heating and cooling costs can be a little trickier.   Taking these costs into consideration is important though because miscalculation can lead to unexpected payment shock.  Should that payment shock occur, it’s often too late to do much about it so it’s necessary to be proactive. Some of the required seller disclosure items are …

Fannie Mae Increases Down Payments on MyCommunity® and Standard Loans

In another backward-thinking move, Fannie Mae has very subtly announced that they will be increasing their down payment requirements by decreasing their maximum Loan to Value Ratios for MyCommunity® mortgages and for standard mortgages on 1-unit primary residences effective on or after the weekend of November 16, 2013.  The previous allowed down payments were at 3% based on a Loan to Value Ratio (LTV) of 97%. The difference between 95% LTV and 97% LTV financing may sound slight but on a macroeconomic level, it’s huge.  It will postpone purchases for multitudes of buyers; particularly first time homebuyers who might find …

Planning Your Home Purchase With a Mortgage Recast

Often times, seemingly in a fantasyland, home buyers might want to buy their new home first non-contingent on a home sale and sell their retained home shortly after moving into their new one without a financial inconvenience.  They might want to do this to get a better price due to negotiating from a position of strength or it might simply be a matter of logistical convenience.  Whatever the reason, the difficulty arises when they want to use the equity from the home that they’d be selling to achieve a lower payment on their mortgage for their new home.  Most would …

A Permanent Extension of the Private Mortgage Insurance Deduction?

The tax deduction on private mortgage insurance has been bounced around like hot potato ever since 2007. The problem with the lack of predictability in tax deductibility of mortgage insurance is that when people are make decision on which of the four types of mortgage insurance they want on their loan, it’s typically with long term considerations in mind.  This lack of certainty has turned some mortgage insurance decisions into guesswork.  To date, the tax code has provided no long term predictability to aid the consumer in this important and difficult decision. With the help of Senators Debbie Stabenow and Mike …

Buying a Home & Getting a Mortgage with a H-1B Visa

These days, any time a lender sees a square peg and a round hole, they tend to run for the hills.  In the case of homebuyers seeking a mortgage with H1B visa status, too often this is the case.  If they’d patiently take the “outside in method” of loan structuring (start with Fannie Mae/Freddie Mac, then check mortgage insurance guidelines and then reference the lenders underwriting guideline overlays), they’d find that these waters are not that hard to navigate and that round hole isn’t as round as it may appear. An H1B visa is a work permit issued by a …

How to Choose and Calculate Your Private Mortgage Insurance (PMI)

Saving an eighth of a percent on interest rate can save a little on your monthly payment and shopping around on closing costs can save a little on your down payment but perhaps the most overlooked and costly mistake when buying a home is not choosing the right mortgage insurance if the down payment is less than 20%.  The wrong decision on this choice can cost thousands of dollars. Let’s take a generic purchase of 200,000 dollars with the minimum down payment and compare them but before that, here are some definitions that you’ll need: Borrower Paid Monthly Mortgage Insurance …

FHA Seller Paid Closing Costs to be Reduced

To much fanfare, FHA announced measures to better protect their insurance fund in a recent Final Ruling published in the Federal Register.  Slipped in as a footnote to this announcement was a declaration that FHA is deaf to the concerns of the real estate industry.  They are taking aim to again attempt to reduce the allowable seller paid closing costs.  Make no mistake; they wouldn’t be doing this twice if they didn’t fully intend to see it through this time (regardless of industry feedback). First, a little history (with a touch of nerdy stuff).  On July 15th of 2010, FHA …

Fannie Mae Homepath Mortgage Loans…NO Appraisal, NO MI and NO Condo Certification!

Fannie Mae HomePath Mortgage Loans… NO Appraisal, NO MI and NO Condo Certification! Looking for a fix up property… with mortgage financing readily available? You believe you are either a handy person when it comes to home fix up projects or maybe you know someone who is handy. Shopping for foreclosed homes seems like a great idea for you, as foreclosed properties are the properties most likely to have some fix up projects that need to be completed. This is a great idea, right up until you are not able to get financing on that foreclosed property. You may qualify …

Do I Need to be Late on My Mortgage to Qualify for a Short Sale? – Don’t Take Yes for an Answer!

I have a lot of people call me to get pre-qualified to purchase a home using FHA financing after a short sale. Early on, not a lot of these scenarios panned out but these days, more and more of them do. When they don’t, the number one reason is because they took bad advice from a party to their short sale transaction. That advice? “Mr. and Mrs. Short Seller, you need to be late on your mortgage to qualify for a short sale.” This is often false and has devastating consequences. In many cases, proving imminent danger of default is …

What are Compensating Factors When Qualifying for a Mortgage?

Although we wouldn’t know it from watching the six o’clock news, mortgage underwriting guidelines and mortgage insurance underwriting guidelines have been in a pattern of loosening, not tightening.  This trend started in late 2009 and continues today with such examples as lower minimum credit scores for mortgage underwriting guidelines and fewer declining markets for mortgage insurance guidelines.  As this has happened, another trend has emerged.  The phrase “underwriting exception” is coming back in practical contexts rather than a nostalgic reference to days gone by.  These days, underwriting exceptions are more and more common where a mortgage loan file has “Compensating …

FHA Premium Rate Increase Makes PMI a Better Option for Many Borrowers

The Federal Housing Administration (FHA) implemented a 25 bps increase to its annual premium rates on April 18, resulting in a payment increase for FHA borrowers. With this change, RMIC (an iLoan preferred mortgage insurer) offers equal or lower monthly premium rates on all LTVs with no upfront premium. RMIC Monthy PMI vs. FHA MIP · Lower Total MI Premiums 30-Year Fixed · Purchase1 Unit Primary Residence Loan Amount £ $417,000 > 95% LTV · 35% Coverage 95% LTV · 30% Coverage FICO 720+ FICO 700+ RMIC FHA RMIC FHA Upfront — 1.00% — 1.00% Year 1 1.15% 1.15% 0.94% …

Fannie Mae Guideline Changes – Gifts, 97% Financing and Mortgage Insurance

There has been some recent excitement about Fannie Mae (FNMA) changing her guidelines on down payments and allowing gift funds as an acceptable form of down payment in lieu of a borrower’s own funds. Before we all get excited about FNMA getting a little FHA in her with respect to gift funds, we need to realize that the guidelines for mortgage insurance and FNMA are not aligned. So long as they aren’t, this change will only have minimal effect. This chart outlines the new accepted forms of down payment from FNMA’s perspective: Here’s the Fannie definition of acceptable donors for …

FHA vs. Fannie Flex 97 for Low Down Payment Buyers

For those of you who are such industry dinosaurs that you remember how to do a FLEX 97 loan with Lender Paid Mortgage Insurance (LPMI), you’re in luck because, aside from 95% conventional with single premium financed mortgage insurance (SPMI), the time has come where this is the best high loan-to-value product for purchases. Soon, allowable seller concessions for FHA loans will be lowered from six percent to either four or three percent. When that happens, there will nearly no instance where FHA is superior to this loan product choice.  Take a 200000 dollar purchase for a buyer with a …

Buying a Home after a Short Sale – Don’t Believe the Naysayers

I’ve written on this subject before but I want to be more thorough this time. There have been too many articles put out lately that discourage people from contemplating a home purchase after doing a short sale. These articles express cynicism about home sellers’ financial habits and cynicism from Realtors as well. Most Realtors doing short sales know how to cover the bases for their client to make sure they’re in a good position to buy a home down the road. Further, in my area (Saint Paul, MN), nearly 1 in 10 homeowners in the twin cities are upside down on their …

Monthly Private Mortgage Insurance – It Doesn’t Make Any Sense. . .

Few know that there are more than 22 different types of private mortgage insurance that can be used what a homebuyer puts less than 20% down on a conventional loan.  Most assume they’ll be saddled with monthly mortgage insurance which, more often than not, makes the least mathematical sense.  A different application of private mortgage insurance to a conventional loan can reduce monthly payments, add tax advantages, increasing a homebuyer’s purchasing power and save many thousands of dollars. As though there isn’t already enough to know, real estate professionals need to know the differences between the mortgage insurance providers (i.e. …