FHA ends policy of charging extra interest

 Loan Programs, Residential Mortgage  Comments Off on FHA ends policy of charging extra interest
Feb 132015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

For loans that closed after 1/20 of this year, FHA is ending its policy of charging a full month of interest when you pay off the loan. Here’s how this has worked in the past. With other loan programs, when a homeowner sells a home, the seller pays interest up until the date of closing. However, sellers with FHA loans had to pay interest through the end of the month of sale. Thus, if the sale closed at the beginning of the month, the seller could lose several hundred dollars, even though the FHA loan had been repaid in full. As a result, home sellers with FHA mortgages often scrambled to close their sales at month end to limit the amount of extra cost.

With the change, the FHA loan program falls in line with the rest of the industry and, more importantly, comes into compliance with recent government regulations.

It’s important to remember that the change applies only to new loans, those that closed after 1/20 of this year. For loans from previous years, the old rule still applies.

Fewer financing options for flipped houses

 Investment, Loan Guidelines, Loan Programs, Residential Mortgage  Comments Off on Fewer financing options for flipped houses
Jan 192015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

If you rehab homes, your pool of potential buyers decreased at the beginning of the year. Buyers using FHA financing now cannot contract to buy your rehab until you’ve owned it for at least 90 days. FHA has never been a big fan of house flipping due to fraudulent flips that saddled it with big losses in years past. During the housing recession, FHA waived its rule against property flips allowing rehabbers to flip properties in 30 days.

But, the waiver expired on Dec 31st. For any purchase contract signed after that date, the old 90-day rule applies. FHA says the dangers of house flipping outweigh the benefits for first-time and minority homebuyers – those dangers being that flippers will sell poorly renovated homes at inflated prices to unsuspecting buyers. Of course, FHA ignores the fact that it doesn’t take 90 days to rehab most homes, and the rule reduces the number of quality, affordable homes available for these same homebuyers.

On a positive note, you still can sell to buyers using conventional financing as Fannie Mae and Freddie Mac only require a seller to own a home for 30 days.

Does lower MI make FHA better than conventional loan?

 Loan Programs, Residential Mortgage  Comments Off on Does lower MI make FHA better than conventional loan?
Jan 102015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

The folks over at FHA probably shuddered in Dec when Fannie Mae and Freddie Mac announced they were lowering their min down payment to 3%. Buyers with stronger credit already were shunning FHA. Its only advantage was its lower down payment requirement, and that now was gone.

But FHA is fighting back. It announced this week a reduction in its mortgage insurance rates. (If FHA, Fannie, and Freddie all weren’t owned by the government, you’d think capitalism had broken out.)

The change leaves FHA looking good again. For a $200k home purchase, the monthly payment for an FHA loan would be roughly $100 lower than for a conventional loan. The difference is the result of the lower MI rate and lower interest rates for FHA loans. This analysis assumes a buyer with a 720 credit score.

The two remaining advantages for conventional loans are a slightly lower down payment – $1000 lower in this case – and lower total mortgage insurance. FHA still requires up-front MI, and its monthly MI lasts for the life of the loan. For conventional loans, MI automatically ends after about 11 years.

FHA lowers mortgage insurance rates

 Loan Programs, Residential Mortgage  Comments Off on FHA lowers mortgage insurance rates
Jan 092015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

FHA officially announced today it’s lowering its max monthly mortgage insurance premium from 1.35% to 0.85%. That’s great news for folks looking for a low down payment loan. The change is effective for FHA loans registered on or after Jan 26th.

But, what if you have an FHA loan already in process? Can you take advantage of the lower MI rate? Yes, you can. FHA says that for the next 30 days it will allow lenders to cancel active registrations – FHA calls them case numbers. Once the case number is cancelled, your lender can re-register your loan with the lower MI rate.

The MI rate change only applies to loan terms greater than 15 years. The MI rate for 15-year loans remains 0.45% for down payments of 10% or more and 0.7% for smaller down payments.

Act quickly if using USDA home loan

 Loan Programs, Owner-occupied, Residential Mortgage  Comments Off on Act quickly if using USDA home loan
Nov 122014
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

If you’re using a USDA RD loan to purchase a home this fall, Fri, Nov 21st is a very important date. At the close of business that day, USDA will stop accepting applications for the remainder of Nov. If your loan has not been approved by USDA, you will need to sign new application documents, and the effect could add a week or two to your loan processing time.

USDA has adopted new regulations for its RD program, and it doesn’t want to maintain two processing systems. Thus, it will stop taking applications after next Fri and clear out its queue. This may not be a trivial task given the backlog of applications in some areas. On Dec 1st, USDA will start accepting applications under the new regulations.

If you have a pending application, check with your lender on its status. If your lender needs any documentation from you, act on that request urgently. The new regulations aren’t likely to harm your chances for approval, but if you have an early Dec contract date, the delay in processing could bust your closing.

Payoff your FHA loan on the first of the month

 Loan Programs, Owner-occupied, Residential Mortgage  Comments Off on Payoff your FHA loan on the first of the month
Oct 222014
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

For those with an FHA mortgage, an unpleasant surprise may await when you sell your home. FHA charges interest one month at a time. That means even if the sale closes on the 15th of the month, FHA calculates the mortgage payoff through the end of the month. For a $200,000 loan balance, Uncle Sam is going to dip his hand into your pocket for another $400.

This practice runs contrary to that for VA and USDA loans and for conventional mortgages. When the Consumer Financial Protection Bureau released its Qualified Mortgage rule, it labeled the practice a pre-payment penalty and instructed FHA to do away with it. FHA finally is going to end the practice next year. For all loans closed after Jan 21st, the payoff will include only interest through the funding date.

USDA delays new rural maps

 Loan Programs, Owner-occupied, Residential Mortgage  Comments Off on USDA delays new rural maps
Sep 262014
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

The federal government’s fiscal year ends on 9/30, and as is typical in recent years, Washington passed a Continuing Resolution (CR) rather than pass the various spending bills necessary to fund the government. In that CR is a provision that extends the use of the current USDA maps that define property eligibility for its housing programs. So, if a home is eligible today, it will remain eligible until the CR expires. And it’s entirely possible that when Congress finally passes a USDA spending bill, some legislator will slip in a provision to extend the current maps again. That said, if you’re eyeing a property that would have been ineligible on 10/1, I wouldn’t wait. Start the homebuying process now so you can take advantage of the benefits of a USDA mortgage.

USDA mortgage maps changing Oct 1st

 Loan Programs, Owner-occupied, Residential Mortgage  Comments Off on USDA mortgage maps changing Oct 1st
Sep 102014
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

The USDA Rural Development loan is a great option for homebuyers in rural locations. It requires no down payment and has lower monthly mortgage insurance than an FHA loan.

The USDA’s definition of rural may surprise you as it includes many of the exurbs of the major TX cities. As of Oct 1st, that definition narrows a little as USDA is releasing new eligibility maps based on recent census data.

The main changes I noticed were the expansion of ineligible areas in Pflugerville, Round Rock, and San Marcos in the Austin area and Denton and McKinney in the DFW area. In addition, the ineligible area on the west side of Ft. Worth expanded significantly. However, you’re still going to find some subdivisions on the outskirts of these cities are eligible. The maps changed little in the San Antonio and Houston metros. I included a link at the end of my blog to the USDA eligibility Web site where you can compare the old and new maps for yourself.

USDA bases property eligibility on the date it receives your loan file. For most lenders, this will be a couple weeks after loan application. So, if you’re buying a home using the old maps, you need to act soon to beat the changes.

USDA mortgage eligibility Web site.

USDA raising monthly mortgage insurance rate

 Loan Programs, Owner-occupied, Residential Mortgage  Comments Off on USDA raising monthly mortgage insurance rate
Sep 042014
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

The USDA RD loan is a great option for homebuyers in more rural locations. The loan requires no down payment and has much lower monthly mortgage insurance than an FHA loan.

Unfortunately, the gap between the two will close a little this year. For all loan commitments after 9/30, the USDA is increasing its monthly MI rate from 0.4% to 0.5%.

That still makes it a bargain compared to FHA. While USDA does have a higher up-front fee, 2% vs. 1.75% for FHA, look at the difference in monthly payment between the two. For a $150k FHA loan, the monthly payment including mortgage insurance would be about $863. For a USDA loan, the payment would be about $757, more than $100 less.

If you’re thinking about using a USDA loan, be aware that USDA bases the fee increase on the date it commits to the loan, not the date you apply. You probably should make your loan application no later than next week if you want to beat the deadline.

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