FHA Reduces Monthly Mortgage Insurance
FHA DROPS Monthly Mortgage Insurance For First Time Since 2001!
There is good news for the housing market and for buyers, as the FHA is lowering its annual MIP (monthly mortgage insurance premiums) by 50 basis points (0.50%) on all new loans, which will drop the monthly FHA insurance from 1.35% to .85% of the loan balance for any buyer who puts down the minimum of 3.5%.
For example, on a $400k loan, the monthly MIP drops from $450 a month to $283, savings of $167 a month.
CALHFA CHDAP Down Payment Assistance Program Reduces DTI to 43%
The California Housing Finance Agency (CalHFA) significantly revised their guidelines to reduce how much a first time home buyer can qualify for when using their 3% California Homebuyer’s Downpayment Assistance Program (CHDAP).
CalHFA has recently reduced the max DTI from 45% to 43%. What does this mean to you as a borrower? If you qualified for a $350,000 Purchase Price at 45% DTI, you would now be reduced to a $330,000 Purchase Price at 43% DTI. That’s a big deal, especially if you are a higher purchase price.
Borrower Eligibility
Borrower Requirements
Each loan program that CalHFA offers to homebuyers can have different criteria for income limits, minimum credit scores, citizenship etc. To learn about specific requirements and benefits for each program, review the program descriptions on the Loan Programs tab.
Visit our Mortgage & Eligibility Calculators section to assist you in estimating your monthly payments, how much you can afford, and which CalHFA programs you may be eligible for.
In general these are borrower eligibility requirements for all CalHFA programs:
- You must be a U.S. citizen, permanent resident or other qualified alien.
- You will need to meet credit, income limits and loan requirements of the CalHFA-approved lender and the mortgage insurer.
- You will need to live in the home you are purchasing for the entire term of the loan, or until the home is sold or refinanced.
- CalHFA borrowers must complete homebuyer education counseling and obtain a certificate of completion through an eligible homebuyer counseling organization.
- CalHFA’s down payment programs CHDAP, ECTP and MCC require you to be a first-time homebuyer. See the definition of a first-time homebuyer.
Below is the Bulletin from CalHFA.
CA FHA Conforming / Jumbo Loan Limits Restored for 2012 – 2013
Congress agreed to restore the conforming FHA loan limits to $729,750 for 2012 and 2013 after seeing the negative impact the October 1st loan limit reduction had on the certain high cost housing markets. Restoring the FHA loan limit is considered essential to stabilizing the housing market in many high cost counties of California, as well as other parts of the nation. Loan amounts between $417,000 and $729,750 are often referred to as high balance or jumbo conforming loans.
Who will benefit most from the restored jumbo/conforming FHA loan limits in California?
1) Home buyers who don’t have a 10% or 20% down payment in high cost areas such as Los Angeles County. Now there is access to low interest rates and affordable 3.5% low down payment financing.
2) Home values and sales prices in higher priced markets will stabilize because buyers can secure larger loan amounts when using an FHA loan.
Below is the 2012 – 2013 updated FHA and Conventional loan limits by county in California.
| CA County Name |
CA FHA Loan Limit | CA Conventional Loan Limit | ||
| ALAMEDA | $729,750 | $625,500 | ||
| ALPINE | $547,500 | $463,450 | ||
| AMADOR | $462,500 | $417,000 | ||
| BUTTE | $400,000 | $417,000 | ||
| CALAVERAS | $462,500 | $417,000 | ||
| COLUSA | $397,750 | $417,000 | ||
| CONTRA COSTA | $729,750 | $625,500 | ||
| DEL NORTE | $311,250 | $417,000 | ||
| EL DORADO | $580,000 | $474,950 | ||
| FRESNO | $381,250 | $417,000 | ||
| GLENN | $287,500 | $417,000 | ||
| HUMBOLDT | $393,750 | $417,000 | ||
| IMPERIAL | $325,000 | $417,000 | ||
| INYO | $437,500 | $417,000 | ||
| KERN | $368,750 | $417,000 | ||
| KINGS | $325,000 | $417,000 | ||
| LAKE | $401,250 | $417,000 | ||
| LASSEN | $285,000 | $417,000 | ||
| LOS ANGELES | $729,750 | $625,500 | ||
| MADERA | $425,000 | $417,000 | ||
| MARIN | $729,750 | $625,500 | ||
| MARIPOSA | $412,500 | $417,000 | ||
| MENDOCINO | $512,500 | $417,000 | ||
| MERCED | $472,500 | $417,000 | ||
| MODOC | $472,500 | $417,000 | ||
| MONO | $529,000 | $529,000 | ||
| MONTEREY | $729,750 | $483,000 | ||
| NAPA | $729,750 | $592,250 | ||
| NEVADA | $562,500 | $477,250 | ||
| ORANGE | $729,750 | $625,500 | ||
| PLACER | $580,000 | $474,950 | ||
| PLUMAS | $410,000 | $417,000 | ||
| RIVERSIDE | $500,000 | $417,000 | ||
| SACRAMENTO | $580,000 | $474,950 | ||
| SAN BENITO | $729,750 | $625,500 | ||
| SAN BERNARDINO | $500,000 | $417,000 | ||
| SAN DIEGO | $697,500 | $546,250 | ||
| SAN FRANCISCO | $729,750 | $625,500 | ||
| SAN JOAQUIN | $488,750 | $417,000 | ||
| SAN LUIS OBISPO | $687,500 | $561,200 | ||
| SAN MATEO | $729,750 | $625,500 | ||
| SANTA BARBARA | $729,750 | $603,750 | ||
| SANTA CLARA | $729,750 | $625,500 | ||
| SANTA CRUZ | $729,750 | $625,500 | ||
| SHASTA | $423,750 | $417,000 | ||
| SIERRA | $304,750 | $417,000 | ||
| SISKIYOU | $293,750 | $417,000 | ||
| SOLANO | $557,500 | $417,000 | ||
| SONOMA | $662,500 | $520,950 | ||
| STANISLAUS | $423,750 | $417,000 | ||
| SUTTER | $425,000 | $417,000 | ||
| TEHAMA | $312,750 | $417,000 | ||
| TRINITY | $271,050 | $417,000 | ||
| TULARE | $325,000 | $417,000 | ||
| TUOLUMNE | $437,500 | $417,000 | ||
| VENTURA | $729,750 | $598,000 | ||
| YOLO | $580,000 | $474,950 | ||
| YUBA | $425,000 | $417,000 | ||
Changes to FHA Mortgage Insurance Premiums
The new premium amounts will be effective on all FHA case numbers assigned on or after October 4, 2010. HUD has decided to raise the annual premium and correspondingly lower the upfront premium, so that FHA is in a better position to address the increased demands of the marketplace. FHA will lower its upfront mortgage insurance from 2.25% to 1.25% (which is typically rolled into the loan amount) and raise its monthly premium from .55% to .90%. This can make a significant difference in your monthly payment, depending on the loan amount, and it can also affect a borrower’s purchasing power. The change in a monthly payment of $100 can reduce a borrower’s purchase price about $15,000-$20,000.
Below, you can see my example of the difference in monthly payments between the current MI and the increase in monthly premium using a $400,000 purchase price based on a 4.5% interest rate.
Current .55% MI New .90% MI
$400k Purchase Price $400k Purchase Price
$386k Loan Amount $386k Loan Amount
$1,955.81 P&I Payment $1,955.81 P&I Payment
$416.66 Taxes $416.66 Taxes
$70.00 Hazard Insurance $70.00 Hazard Insurance
$176.91 MI Payment $289.50 MI Payment
$2,619.38 Total Monthly Payment $2,731.97 Total Monthly Payment
That is a difference of $112.59/month and a difference of $40,532.40 over 30 years!!
In order to avoid the increase you must be in escrow and have your loan officer order a FHA Case Number before October 4, 2010.
Also, FHA now has the authority to raise the Annual Mortgage Insurance premium “at will”…up to 1.55%. I will keep you up to date with any new changes.
FHA Borrower Eligibility Under Short Sales and Short Pay Offs
Effective immediately the following eligibility requirements must be followed when a borrower has a history of:
- A previously owned property that was sold for less than what was owed (short sale) or,
- There is a principal write down of indebtedness that cannot be refinanced into a new mortgage (short pay off)
Borrowers are Not Eligible for a new FHA mortgage if they pursed a short sale agreement on his or her principal residence simply to
- Take advantage of the declining market conditions, and
- Purchase a similar or superior property, within a reasonable commuting distance, at a reduced price
Borrowers are considered Eligible for a new FHA-insured mortgage if
- They were current on their mortgage* and other installment debt at the time of the short sale or their previously owned property, and
- The proceeds from the short sale serve as payment in full
*Borrowers Current at the time of Short Sale
- Borrowers are considered eligible for a new FHA-insured mortgage if, from the date of loan application for the new mortgage
- All mortgage payments due on the prior mortgage were made within the month due for the 12 month period preceding the short sale, and
- All installment debt payments for the same time period were also made within the month due
*Borrowers in Default at the time of Short Sale
- Borrowers in default on their mortgage at the time of short sale are not eligible for a new FHA-insurance mortgage for three years from the date of the pre-foreclosure sale
*Note: Borrowers who sold their property under FHA’s pre-foreclosure sale program are not eligible for a new FHA-insured mortgage from the date that FHA “paid the claim” associated with the pre-foreclosure sale.
Refinances
To be eligible for refinancing with a short pay off, borrowers must be current on their mortgage.
FHA will insure the first mortgage where the existing note holder(s) write off the amount of the indebtedness that cannot be refinanced, if
- There is insufficient equity in the home based on its current appraised value, and/or
- The borrower has experienced a reduction in income and does not have the capacity to repay the existing indebtedness against the property
Where the existing note holders are reluctant to write down indebtedness, a new subordinate lien may be executed by the amount which the payoff is short. If payments on the subordinate financing are required, they must be included in qualifying ratios unless payments have been deferred for no less than 36 months. This policy only applies to no cash-out (rate and term) refinances with short pay offs.
If you know someone who is looking to short sale their property and purchase another, please feel free to contact me anytime.
FHA Issues Waiver of “90 Day Flip Rule”
- All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the transaction.
- The seller holds title to the property.
- No pattern of previous flipping activity in the past 12 months.
- The property was marketed openly and fairly.
- When the sales price is 20% or more over the seller’s acquisition cost, the lender must:
- Justify the increase in value (i.e. second appraisal, etc.)
- Lender to order a property inspection and provide the report to the purchaser before closing, The lender may charge the borrower for this inspection.
- Additional specific requirements for the inspection are in the notice.
- Only forward mortgages, not reverse mortgages are eligible for the waiver.
Below is a link to a Website with the FHA waiver notice that lists ALL conditions that must be satisfied to get the waiver.
Link to FHA Waiver of 90-day rule
Please feel free to contact me with any questions or concerns.
FHA Condo Spot Approvals
It seems more and more loan officers are steering away from doing FHA spot approvals on unapproved HOA’s.
Recently, I have closed two loans in Santa Clarita that required FHA spot approvals. These loans were sent to me from realtors whose lenders gave up on the loans because they required a spot approval. I wanted to share with you how I was able to obtain the spot approvals to successfully close the loans.
The first loan I closed was for a home in the Valencia area for Tesoro De Valle’s Canterbury development. I see on the MLS everyday, realtors posting “No FHA loans allowed for this complex!” With each home located only eight feet away from each other, title then confirms that this is a detached condo. The first process I took was to order a title search for the HOA showing all deeds, which provided how many FHA and conventional loans were in this complex. The complex has 166 units and 8 FHA loans. Obviously, this was below the 51% owner occupancy percentage allowed. I provided this search along with the Lender Questionnaire Form, consisting of 20 questions that the lender requires by the HOA. After many HOA fee’s later, the underwriter signed off on the spot approval condition and we were able to order the case # and close.
The next loan I closed was in Friendly Valley, also known as Friendly Village, in Santa Clarita. In this case, the complex showed up approved on HUD’s website. However, when we went to order the case number the FHA concentration was too high. After emailing HUD to investigate my situation, they told me the complex only showed 44 units and that there were 44 units with FHA mortgages on record. They also stated that their information can be inaccurate or out of date. I knew this was incorrect because Friendly Valley is a huge community. When I ordered a title search, it turns out there are 17 different HOA’s, 1233 units in the entire complex, 336 in HOA #1 and 44 FHA mortgages in HOA #1. Once, I sent the HOC (Home Ownership Center) the proof I had found, they updated their system and we were able to order the case number.
Always keep in mind that HUD’s information is not always up to date and the HOA must meet all HUD requirements for spot approval. For example, the HOA must not be in a lawsuit, 51% of the total units must be owner occupied, no single entity owns more than 10% of the total units in the project, etc. Below is the link to the Mortgagee Letter which has these requirements.
http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/96-41ml.txt
If you have a buyer looking to purchase a condo or have a loan that requires a spot approval, I am very familiar with FHA and spot approvals. So please feel comfortable contacting me anytime to discuss the steps and getting the process started.
Scott Sistilli
Sr. Mortgage Consultant
Mortgage Management Consultants, Inc
Cell. (818) 378-2694
Email. ssistilli@mmclending.com
‘A Full Service Mortgage Banking Company’
New FHA Information for Friendly Valley
Last week I closed a FHA loan in the Friendly Valley Community. Now, you might be thinking that FHA cannot be done in that community, but it is possible. While working with my borrower, I figured out why ordering the case number from FHA Connection was so difficult.
FHA Connection showed that Friendly Valley was approved but the FHA Concentration exceeded 100%. Per HUD guidelines, the FHA Concentration cannot exceed 60%. The reason the Concentration was so high was because HUD records were not updated, they believed there were only 44 units in the complex. Per title search, there are 17 different HOA’s with 1233 units total and 336 units in HOA #1, where my borrower bought. Since I provided this information to HOC (Home Ownership Center) they have now updated their system which has reduced the FHA Concentration. This means there now can be more than 100+ FHA loans done in this complex.
If you would like to check the records, the property that my client purchased was 19326 Avenue of the Oaks, Unit G. You will see the lender is my company’s name, Mortgage Management Consultants.
Most loan officers don’t know where to start when FHA connection shows an issue so make sure you are working with an experienced and dedicated loan officer. If you would like to discuss FHA more or are looking for an experienced lender, please don’t hesitate to contact me anytime.
About
Welcome, and thank you for stopping by my profile today. I am a mortgage professional, committed to providing the BEST service to my clients and establishing life long relationships based on value. Mortgage origination is my passion and I take great pride in myself and my business. My main goal is to educate and fully inform my clients on every aspect of their loan, and create a wide array of impressive, personalized marketing tools for Realtors. I put the Realtor first, and play an active role in helping them not only finance their buyer, but successfully market their listings, and provide leads. Please feel free to contact me directly at 818-378-2694.
I am proud to be apart of Sierra Pacific Mortgage, a full service direct lender providing quality mortgage lending services throughout the US. Incorporated in 1986, we are a privately held company and have originated and purchased billions in residential loans. Our high company production levels and sophisticated capital markets access allows us to deliver competitively priced products to brokers, retail originators and consumers. Steering the company’s vision and success 1986, President, Jim Coffrini, has led the company and our growing team of dedicated mortgage professionals into one of the most profitable mortgage banking firms in the industry. Goal-oriented and committed to the future of Sierra Pacific, Mr. Coffrini has built the Company upon the foundation of quality lending practices, unparalleled service, integrity and industry knowledge.
What Sets Us Apart:
• Competitive pricing and broad array of products
• Full service approach to enable you to compete for business and close efficiently and profitably
• Paperless, fast and convenient origination process
• Experienced mortgage executives and professional sales people with a commitment to your success
Accolades:
Sierra Pacific is recognized as a Top 10 (2013-Q1) Residential Lender ranked by Wholesale Volume; and a Top 30 (2013-Q1) Residential Lender ranked by Total Number of Loans. Additionally, Sierra Pacific has been recognized by Mortgage Technology Magazine as a “Top 25 Tech-Savvy Lender” 2010-2013.
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