FHA Lowers MIP Rate Which Could Boost Home Sale

In a letter from the U.S. Department of Housing and Urban Development (HUD), dated January 9, 2017, HUD has announced the reduction of annual Mortgage Insurance Premium (MIP) rates for homes closed on or after January 27, 2017. This will save borrowers money on their monthly payments which can lead to bigger savings and better financial well-being for homeowners. It will also allow for more families to get into the home of their dreams.

How does FHA Mortgage Insurance Work?

When a borrower applies for an FHA loan, they are able to make a down payment of as low as 3.5% of the home’s purchase price. For any loan in which the borrower cannot put a full 20% down payment, they are required to pay mortgage insurance, which is generally added to their monthly mortgage payment.

Since FHA loans are insured and backed by the US Government, the mortgage insurance paid by the borrower will reimburse the lender in the event that the borrower cannot make their monthly payment and go into default.

FHA Passes Down Mortgage Insurance Savings

The money which borrowers pay towards their mortgage insurance goes into FHA’s Mutual Mortgage Insurance Fund (MMIF), a pool of funds designed to aid lenders in the event of another housing market crash. According to HUD officials, the MMIF has grown in value significantly since 2012, by $44 billion, as evidence of an increase in quality lending and a decrease in borrowers defaulting on their loans.

Therefore, due to the increased pool of funds in the MMIF, HUD has chosen to reduce the annual MIP rates, lowering its annual rate by 25 basis points, or 0.25%. This will lower the typical FHA house payment by an average of $500 per year in 2017. That’s more than $41 per month for the average borrower! Homeowners taking out larger loans will see even larger savings.

Here is a chart from the official policy change letter by HUD, showing current annual MIP as well as the new reduced premiums which will soon take effect.

Who Will this Effect?

This new FHA discount on MIP affects all FHA Title II forward mortgage programs, with terms greater than 15 years and closing on or after January 27, 2017. This new change will not affect Single Family forward streamline refinances which were endorsed on or before May 31, 2009. It will also not affect Section 247 mortgages (Hawaiian Homelands).

Going Forward

Now that the cost of an FHA loan is going down, more borrowers and their families should be able to qualify for an FHA loan. This could incentivize more first-time homebuyers to enter the housing market.

If you or your clients have questions about how this may affect their home loan, or if they are interested in taking advantage of the new lower MIP, give The Polder Group at Summit Funding a call. We would love to help!

New Year’s Financial Resolution 2017

 

The New Year is here! And with it, comes a chance for everyone to make a fresh start. An important change that many people make in this season is one which will improve their financial situation. Everyone should set at least one financial goal in 2017 to keep them on track with specific and tangible objectives.

New Year’s Financial Resolution

In Fidelity’s 2017 New Year Financial Resolutions Study, they found that out of the people who were “successful at keeping their financial resolution, 66% also said they were in a better financial situation than last year, compared to 38% of those who didn’t come as close to achieving their resolution.” Setting financial goals can make a difference for anyone committed to their future financial success.

Financial goals may include:

  • Paying off debt
  • Saving for retirement
  • Building an emergency fund

In a time where interest rates are low, and housing prices are high, refinancing can help pay off debt, or kick-start retirement saving or an emergency fund.

Term and Rate Refinance

A term and rate refinance will allow the borrower to refinance only the term and the rate of their mortgage. This refinance replaces the loan terms with a new interest rate and payment term. This could significantly lower monthly payments, allowing borrowers to save money over the long term.

Cash-Out Refinance

With cash-out refinancing, the mortgage is refinanced for more than is currently owed, and the borrower pockets the difference. They then make mortgage payments on the new loan amount. With this option, the borrower can pay off large amounts of credit card/car/student loan debt, or they could place a lump sum in retirement or an emergency fund for savings.

If used wisely, a home loan refinance could use home equity to lead borrowers to a more stable financial future. If you know of clients who are considering a home loan refinance, give The Polder Group at Summit Funding a call! We would love to reach out to them.

Fannie Mae and the new Trended Credit, what it means for you

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Recently, Fannie Mae, one of the main guarantor’s of conforming mortgages, enhanced its underwriting system, Desktop Underwriter. This new version, Desktop Underwriter 10.0, analyzes a borrower’s credit using a new tool called “trended credit”. It requires trended credit data to be taken into consideration when underwriting a single-family mortgage transaction. Desktop Underwriter’s evaluation is fair and impartial, applying the same criteria to every mortgage loan application considered.

What is Trended Credit Data?

Trended credit data is a deeper view of the borrower’s credit history. It provides lenders with a 24-month history of a borrower’s credit payments including balance, credit limit, scheduled payment and actual payment. This helps lenders determine whether a potential borrower will be high or low credit risk, based on how they already manage their lines of credit.

An individual who pays more than their minimum payments on their monthly debt is more likely to be a “lower risk” than someone who only makes the minimum monthly payments.

Trended data has been used by credit card and finance companies for years but until now, it has not been widely used in the mortgage industry.

Trended data will only be used with conforming Fannie Mae loans at this time.

What are the benefits of Trended Credit Data?

The new enhancement will help creditworthy borrowers to gain access to mortgage credit and lasting homeownership. It will benefit borrowers who regularly pay off their revolving debt, increasing the possibility of being approved by the Desktop Underwriter 10.0. Those who would have barely missed the minimum requirements may now be approved.

We are always happy to bring you the latest news on the mortgage industry to keep you and your client’s informed. If you have any questions on how this might affect you and your clients, please give The Polder Group a call today. We would love to hear from you.

Bloomberg Ranks Tucson #3 Fastest Job Growth

The Tucson area could see job growth double this year from 2015 levels, signaling Tucson’s grand come back.

Bloomberg Markets has ranked Tucson #3 Metros with Fastest Job Growth. This is huge for our city and the real estate market!!

Jed Kolko, an economist who specializes in U.S. cities and the future of work, points out that mid-sized cities, such as Tucson, Arizona and Seattle, Washington, continue to see fast growth, but the San Francisco Bay area has fallen out of the top 10.

Check out Bloomberg Article Below:

http://www.bloomberg.com/news/articles/2016-08-19/these-are-the-cities-with-the-fastest-and-slowest-job-growth-in-america

Whether Your Client Is Buying Or Selling A Home

Whether your client is buying or selling a home, the appraisal is an essential step in the transaction, so it’s important to set realistic timeline expectations. Summer is a very popular time of the year to buy or sell a home, with the sheer number of appraisals being ordered it is creating increased appraisal timelines and possibly higher “rush” prices.

Who controls the appraisal due date?

Mortgage banks set the due date for the appraisal, but this doesn’t mean the date will necessarily be met. Often, the original date must be modified, which in turn, will delay the actual closing date.

The closing date can sometimes be unintentionally delayed by the real estate agent and homeowner if they do not return the appraiser’s request for an appointment in a timely manner. We understand that a homeowner may believe that in order to increase the value of their home, the entire house must be spotless and may cancel an inspection in order to get the cleaning done. But right now, appraisers are so busy that if that one opportunity is missed to schedule an appraisal, they will fill that slot with other appointments.

How long does an appraisal take?

Everyone in the industry is currently at the mercy of the appraiser’s schedule. In the past, appraisers could perform as many as four inspections in a day. Add an additional day for writing the report and the appraisal could be completed within two or three days. Unfortunately, with today’s complex regulations and requests for additional information, this time has been stretched to up to a two to three weeks from the time of inspection to the completed report. For commercial properties, this time frame can extend to a month or more.

There is also a shortage of experienced appraisers and they are all overloaded with work. A borrower can put a rush on their appraisal costing upwards of an extra $200-300, but when there is a rush on every appraisal, the prices for a timely appraisal can get even steeper. Warn your clients that this is a possibility, but ensure them that we will all be doing our best to get them into their home as soon as possible.

How should you prepare your client?

At the beginning of the sales process, discuss the appraisal process with your client so there are no surprises. Be honest with your client about possible appraisal turn times and the costs associated with a rush order. And let them know that a spotless house won’t sway an appraiser to increase the home value.

All lenders are experiencing the same delays this summer so it’s extremely important to set realistic expectations with your client to ensure they understand how important it is to accommodate the appraiser’s schedule in order to close their financial transaction.

We are always here to help you foster your client relationships; providing top notch customer service. Call, Text or Email “The Polder Group” (520) 495-0222

What Are The Risks of Not Doing A Home Inspection?

In a competitive market where homes have multiple bids, home buyers wanting to sweeten their deal can be tempted to cut certain contingencies in order to make their offer stand out to the seller. However, the risks of waiving a home inspection contingency could be more devastating to the buyer than just losing the home to another bidder.

What is a Home Inspection Contingency?

A Home Inspection Contingency permits a buyer to enlist a home inspector to look over the home for damages before the deal closes. On the chance that real issues are found in the home, the purchaser has the privilege to negotiate with the seller for repairs or retreat from the deal totally. If a buyer opts out of the home inspection, sellers may be drawn to this offer because they can sell the home “as is” and they are not responsible for issues that aren’t obvious. But this also means that the buyer is purchasing the home “as is” and has no way of knowing what they are in for until they are the new owners of the home.

Common Home Inspections Include:

  • Structure
  • Exterior
  • Interiors
  • Roofing
  • Plumbing
  • Electrical
  • Heating and Air Conditioning
  • Ventilation and Insulation
  • Fireplaces

Inspectors don’t only look at the unseen parts of a home; they can provide an in-depth analysis which can pinpoint things that may become a problem down the road. A costly roof repair may not be necessary immediately, but it makes a big difference to know how soon it will need to be repaired or even replaced.

Warn your clients that most experts recommend always getting a home inspection. If borrowers waive the inspection, they could easily end up with a home which requires thousands of dollars’ worth of repairs. Unfortunately, by this point they won’t be able to back out or ask the seller for help with repairs.

Buying a home is a major financial undertaking. We strive to educate clients and referral partners on all aspects of a home finance to help alleviate concerns and ensure a smooth home financing process.  Call The Polder Group At Summit Funding Today!

How And When Private Mortgage Insurance May Be Canceled

Private Mortgage Insurance (PMI) is required for many home buyers who do not have the full 20% down payment to purchase a home. It costs between 0.20% to 1.50% of the balance on your loan each year, based on the borrower’s credit score, down payment and loan term. The annual cost is added to the monthly mortgage payment.

What is PMI?

PMI is insurance which reimburses the lender in the case the borrower defaults on the home loan. It also allows borrowers to refinance their home even if they do not have 20% equity. This is not the same as homeowners insurance, and this insurance does not pay the mortgage if a borrower loses their job. This is simply a way for your client to get into a home without needing to put 20% down to purchase a home.

How do I cancel PMI?

According to the Homeowners Protection Act, a borrower has the right to request the cancellation of their PMI on the day the mortgage falls to 80% of the original value of their primary residence. However, there are other important criteria which must be met to cancel PMI:

  • PMI cancellation requests must be in writing.
  • Homeowner must be current on mortgage payments with a good payment history.
  • Homeowner may have to show there are no other liens on the home (for example, a home equity loan or home equity line of credit).
  • An appraisal may be required to demonstrate the loan balance isn’t more than 80% of the home’s current value.

We are always here to help foster your client relationships and assist in their continuous education. If you have any questions, call or email The Polder Group with Summit Funding!

Qualifying for a Mortgage with Student Loan Debt

Qualifying for a mortgage with student loan debt is a common obstacle among the American Millennial population. Millions of American Millennials (born between the early 1980’s and early 2000’s) are faced with high amounts of student loan debt but are eager to purchase their first home and move on to the next stage of their lives.

According to a study by The Institute for College Access & Success, the average amount of student loan debt in the United States is $28,950, and some states have an average of over $33,000. There is no doubt that student loan debt can have a negative impact on these young adults looking to purchase a home in the next few years. However, the situation may not be as dire as it seems.

There are two main ways borrowers can lessen the impact of student loan debt on their finances:

1. Fix or improve Credit/FICO score

Making a late payment, or missing one altogether can negatively affect a borrower’s credit score, limiting their ability to qualify for lower interest rates and loan programs. On the other hand, on-time student loan payments can help positively increase a borrower’s credit score and help build their credit, increasing their ability to qualify for more affordable loans. Keep in mind these steps to improving credit.

2. Decrease Debt to Income (DTI) ratio

When qualifying borrowers for a loan, Lenders do not focus on the total debt burden but instead look at a borrower’s Debt to Income Ratio (DTI ratio). The DTI ratio is a percentage which compares the sum of all of the monthly payments a borrower makes, divided by their total gross monthly income. The lower the ratio, the easier it will be to qualify for a loan. If your borrowers’ DTI is higher than 36%, they may want to consider taking steps to reduce it.

  1. Increase monthly payments- extra payments can help lower overall debt quicker
  2. Avoid taking on more debt- reduce the amount charged to credit cards and avoid new loans
  3. Postpone large purchases until you have more savings
  4. Recalculate DTI monthly to keep track of your progress

Important: Get Pre-Approved

Meeting with a mortgage banker get pre-approved will help the borrower understand potential that issues might occur when purchasing a home. This will also help them to recognize their goals and know what to shoot for when saving money and reducing their DTI ratio.

Don’t let your first-time buyers perceive student loan debt as a major obstacle to qualify for a mortgage. Have them meet with a Loan Officer from “The Polder Group” early in the process to alleviate concerns, and obtain an accurate picture of their ability to qualify.

 

POTENTIAL SAVINGS FOR PROACTIVE HOMEOWNERS

Homeowners financing a home with less than 20% down payment are required to pay for mortgage insurance. While lenders must automatically cancel private mortgage insurance (PMI) when the outstanding loan balance drops to 78% of the home’s original value, many homeowners are unaware that they can request cancellation a little earlier; potentially saving them money!

PMI monthly costs vary, depending on the size of the down payment and credit score and can be expensive for consumers. The Homeowners Protection Act requires that homeowners have the right to request their lender cancel PMI once their loan-to-value has reached 80%; much sooner than waiting for it to cancel automatically at 78%. Homeowners that meet the required criteria could potentially save themselves money on their monthly payments.

The Consumer Finance Protection Bureau (CFPB) has been cracking down on mortgage servicers that fail to provide notice to borrowers or have “excessive delays” in processing borrower PMI cancellation requests. If eligible, borrowers can request a PMI cancellation by contacting their mortgage payment servicer.

Unfortunately, PMI cancellation does not apply to FHA or USDA government backed loans. They require payment of mortgage insurance premiums for the entire life of the loan. The mortgage insurance cannot be cancelled; instead, homeowners would need to refinance their loan into a conventional mortgage.

If you or your clients have questions regarding mortgage insurance or other home financing needs, don’t hesitate to contact us. Learn more about potential tax deductions on mortgage insurance premiums.

Tips for successful Homebuyers

The recent National Association of Realtors 2015 Profile of Home Buyers showed 95% of first-time home buyers and 86% of repeat buyers financed their home purchase. Clients in the market for a new home can increase their chances of a successful home buying transaction by following some of these tips.

Check Credit Reports

Credit reports can affect a client’s mortgage rate and ability to qualify for home financing. It’s important they review their credit report for any errors and take measures to boost their credit score if needed. Homebuyers can always check their credit report for free here.

Get Pre-Approved for a Mortgage

Before clients start a home search, always meet with a mortgage lender to get pre-approved. It will not only strengthen their offer, it helps clients understand their buying potential and helps real estate agents define the field of eligible properties that they can afford. Know the difference between a pre-approval and a pre-qualification!

Boost the Budget

Beyond helping clients create a budget for a home within their range, consider also looking for ways that could help reduce some of the costs. Seller or lender credits or grant funds can help offset closing costs or help with larger down payment funds, possibly expanding their search options.

Resale Value

The average person moves 11.3 times in their lives so it’s also important that clients consider the resale value when looking at homes. While a client may purchase their home as a long-term investment, keep in mind that they may one day need to sell it.

Buying a home is a major financial undertaking. Summit strives to educate clients and referral partners on all aspects of a home finance to help alleviate concerns and ensure a smooth home financing process. Contact us today!