FHA Changes Loom

FHA is making changes to the structure and pricing of their Mortgage Insurance Premiums. The FHA Reform Bill was signed by President Obama on August 12, 2010 and gave HUD permission to increase annual mortgage insurance premiums. These changes will go into effect October 4, 2010.

These changes will only effect new FHA borrowers. Borrowers in existing FHA loan products do not have to worry about these changes, unless they are looking to refinance after October 4th.

What does this all mean to a potential FHA borrower? Basically, the price of monthly mortgage insurance is going up; thusly, the borrower's total monthly mortgage payment is going to increase. A homebuyer using FHA financing is going to find that their overall borrowing power will be reduced.

With the new guidelines, on a typical FHA purchase loan with the required 3.5% down, the annual mortgage insurance premium will be .90% of the base loan amount(current rate is .55% of total loan amount). If a borrower puts 5% or more down, the annual premium will be reduced to .85%.

Also, if a borrower arranges a 15 year term, and has 10% or less down, the annual premium will be .25%.

FHA will be reducing the required Upfront Mortgage Insurance Premium (UFMIP) from the current 2.25% to 1%.

Here is a sample loan scenario:

$100,000 purchase price, 30 year fixed FHA financing with 3.5% down payment

The borrower would need a $3,500 down payment. The borrower will have to pay a 1% UFMIP of $965, which will be added to the loan amount and amortized over 30 years. The total loan amount would be $97,465.

The annual mortgage insurance premium is .90% of $96,500 which is $72.37 per month.

Using the current calculation of annual mortgage insurance premium (at the .55% rate) the monthly payment in this scenario would have been $45.22. the increase to the borrower in this example is $27.14 per month.

The larger the purchase price and loan amount, the greater the impact these changes will have on a borrower's monthly payment.

Even with the upcoming changes, FHA financing is still a great option for a low down payment purchase. Please contact me, and I will explain the full impact of these changes in detail: (513) 520-6044 or bahale1@gmail.com

Ohio Housing Finance Agency has revised interest rates for first time homebuyers - great rates, great programs!

4.75% for loans without 2.5% assistance grant
5.25% for loans with 2.5% assistance grant
4.50% for Ohio Heroes without 2.5% assistance grant
5.00% for Ohio Heroes with 2.5% assistance grant
4.75% for Grant for Grads 2.5% assistance grant

This is a 30 year fixed rate. FHA/VA/USDA-RD loans are eligible. Effective 7/8/2010.

Please contact me for specific program details. Call me at (513) 520-6044 or email: bahale1@gmail.com

Grant Funds Available For Homebuyers in OH, KY and TN

If you are a homebuyer that is frantically trying to save enough for the required down payment for the purchase of your new home, you may be able to qualify for a grant up to a maximum of $5,000, based on documented need. The Federal Home Loan Bank of Cincinnati has made a total of $200,000 available through the "Welcome Home" program. Funds are available for homebuyers purchasing in Ohio, Kentucky, and Tennessee. There are restrictions including loan and income limits. Homebuyers have to have at least $500 of their own funds and if he or she is a first time homebuyer, complete a homebuyer counseling program. The funds are distributed on a first come, first serve basis, so they are expected to run out quickly. Home buyers must have a fully-executed purchase contract, signed loan documentation, and all corresponding income and asset documentation to register for funds. Please contact me immediately if you are interested at bahale1@gmail.com or (513) 520-6044.

What To Expect When Applying For A Mortgage Part 2

Locate Your Relevant Documentation

Being prepared for your conversation with your mortgage consultant is crucial to getting the most out of your experience. Before contacting your mortgage consultant, gather the following documentation:

• 30 days of recent pay stubs
• 2 years of recent W-2s
• 2 months bank statements, checking and savings
• 401K/IRA statements
• Bankruptcy filing and discharge, if applicable
• Divorce decree/separation agreement, if applicable

You may need additional documentation, especially if you are a first-time homebuyer, self-employed, or a veteran applying for a VA loan. Your mortgage consultant will advise you specifically in those cases.

Some of these items you may not have readily available, so you may have to contact previous employers, banks and others to obtain this information. This may take additional time. Also, some banks charge for reprints of bank statements.

Just remember that you will need to keep track of any new pay stubs, bank statements and anything else your mortgage consultant asks for during the loan process, so don’t throw anything away – and stay away from the shredder!

If you would like a more detailed list of documentation that is specific to your situation, please contact me at bahale1@gmail.com or (513) 520-6044.