Friday, January 22, 2010

FHA Mortgage Insurance is Going Up

The US Department of Housing and Urban Development (HUD), the government agency that oversees the FHA loan program, has recently announced that the up-front mortgage insurance premium that applies to FHA loans will be increasing from 1.75% of the loan amount to 2.25% of the loan amount. The change affects all FHA loans with an FHA case number assigned on or after April 15, 2010.

Although there will probably be an outcry against the change, it really has an extremely small effect on the borrower because almost all borrowers choose to finance the up-front mortgage insurance premium into their loan. For every $100,000 in loan amount, the monthly payment will go up by only $2.68 if the interest rate is 5%, and by only $2.84 if the interest rate is 5.5%. Hardly a deal killer.

Tuesday, January 19, 2010

$8,000 and $6,500 Tax Credit Form is Now Available

The IRS form to claim the $8,000 tax credit for first-time homebuyers and the $6,500 tax credit for long-time residents has finally been published by the IRS. We have the form and the instructions available on our web site.

Follow this link to our web site and click on the link at the bottom of the home page. There is also a link just below the link to the tax credit form that will take you to the instructions for completing the form.

Monday, January 11, 2010

No More Pre-Approvals???

We received a lot of calls last week from real estate agents who have been told that the new RESPA law prohibits mortgage loan originators (the new name for anyone who sells a mortgage) from issuing a pre-approval. Not true, not true, not true.

The new RESPA law prohibits a loan originator from requiring that the borrower supply supporting documentation (pay stubs, bank statements, tax returns, etc.) before issuing a Good Faith Estimate, but it certainly does not say a loan originator can’t pre-approve a borrower.

Pre-approval letters, if they are done correctly, should only be written after the loan file has been submitted to one of the online automated underwriting engines. Fannie Mae, Freddie Mac, FHA, and VA all make this software available to originators. If the borrower has told the originator the truth about their income, assets, etc. (and any good loan officer can very quickly determine if a borrower is telling the truth), then the pre-approval will be legitimate. If the borrower is lying, then the pre-approval will not be legitimate. Same as always – absolutely nothing has changed.

So don’t listen to anyone who tells you that pre-approvals are a thing of the past. The new GFE is different than it was before, but it’s just a new form. Let the complainers fade away.

Tuesday, January 5, 2010

Tax Credit Reminders

As we get ever closer to the end of the stimulus money, there will undoubtedly be another surge in home sales related to the IRS tax credit. Here’s what you need to know about the extension of the tax credit.

• It is for principal residences only. No second homes and no investment properties.
• First-time homebuyers (buyers, and if married, their spouses, who have not owned their main home within the last 3 years) can get up to $8,000.
• Existing homeowners, who have owned and lived in their home for 5 out of the previous 8 years, can get up to $6500.
• The 8-year period ends on the date of closing.
• Existing homeowners do NOT have to sell their current house – they can rent it out or keep it as a second home.
• You must have a signed contact dated no later than April 30, 2010.
• You must close on the house no later than June 30, 2010.
• The tax credit does not have to be paid back unless you stop using the house as your principal residence or sell it within 3 years of buying it.