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How to finance and refinance Everett real estate.

Friday, February 19th, 2010

Why Yield Spread Premiums can be a good thing for the consumer

YSP (yield spread premium) or also called rebate is very useful tool in financing or refinancing Everett real estate. For example I just did a refinance using an FHA mortgage. I used the YSP to pay for my clients closing costs. I saved him a ton of money, and didn’t take a bunch of his equity to make the loan.

I used the YSP to save my client money, lower his payment and save his equity. Some politicians want to eliminate the YSP because they don’t understand its uses. I am writing this blog to try and explain how this is extremely useful to the consumer. When you limit the consumer’s choices you always increase his costs.

I will try to keep the technical stuff and the numbers down but in a discussion like this it is hard to do. But here is how an FHA mortgage with a rebate can be used to refinance Everett real estate.

My client has a $425,000 payoff. His current payment is $3331.00 and that is principle, interest, taxes and insurance. He has an adjustable loan and his payments are going up. So he asked me to see if I could come up with a way to lower his payments and keep the cost down.

An FHA mortgage is the only one he qualifies for because of current market conditions. You see just like everyone else he has lost equity in his home due to market conditions. FHA mortgages allow a refinancing of your Everett real estate up to 96.5% of it’s current value.

We came to the conclusion that the value of his property is around $440,000.  At that value if I am using an FHA mortgage we are limited to a maximum of $430,100 as a new loan amount. If I could not use a YSP to pay for the loan costs I could only do an FHA mortgage if we could get an appraisal for $445,525. We might get that value and then again we might not.

I was able to get him a new loan for $422,000 by using the rebate (the YSP) and paying my clients closing costs with it. His new payment is $3017.95 and saves him $313.05 per month. With all fees he has a payback of 14 months. His loan is a fixed 30 year FHA mortgage at 5.375%.

If we had to get his loan without any rebate (YSP) his new interest rate would be lower at 4.875%. And his new loan would have had a monthly payment of $2964.63 per month but with a monster catch. You see his new loan amount would have been $435,500 and the payback period would have been over 49 months.

So you see here with the YSP we have a new loan at a lower loan amount and a slightly higher interest rate. But we didn’t take anywhere near as much of his equity to pay for the loan costs.

We saved him $13,500 in equity by using the rebate or YSP to pay for the loan costs.

YSP or rebate is a great tool for refinancing Everett real estate and in combination with a FHA mortgage can save you lots equity.

Jim Johnson and comments are always welcome.

Everett Mortgage on Line

Posted in Everett real estate, FHA Mortgage | 2 Comments »

FHA Mortgage rates to Rise

Monday, February 8th, 2010

Everett Mortgage Expect higher Interest Rates Soon

As of March 1st expect FHA mortgage rates, VA mortgage rates, and all other long term interest rates to rise. Expect prices for homes for sale in Everett to fall. I am not Chicken Little and saying the sky is falling but there is going to be some very dark clouds coming soon. Here is why. The Federal Reserve Bank (the Fed) will no longer be buying Mortgage Backed Securities (MBS) on the open market. I know you are saying how is that going to effect FHA mortgage rates?

Well a lender makes a 100 or a 1000 home loans and then packages them into a MBS. They sell that MBS on the open market. The price the open market is willing to pay is what determines what interest rate will be charged on the mortgage. If the interest rate on a particular VA mortgage or an FHA mortgage isn’t high enough the MBS will not get sold and that’s not good. Banks only make their outrageous profits if they churn your money several times. Remember that the deposits they use to make an FHA mortgage or a VA mortgage is your money. Simply lending it out once isn’t enough they have to lender it out several times over but that’s another story.

The Fed has been buying MBS with below market interest rates and in doing so they have kept the interest rate below market. You the taxpayer have been subsiding the mortgage market. I’ll bet you didn’t know that did you?  When the Fed stops buying the open market must buy the MBS or the entire housing industry will come to a screeching halt. To sell the MBS banks will inevitably have to charge more interest.

Now why will prices fall on homes for sale in Everett? The price a home can sell for has a great deal to do with mortgage money liquidity. If interest rates are up that means a buyer with a limited budget can not buy as much home as before. If I have a $1000 a month maximum payment I can buy more home at 5% than I can at 6.5%.

So when the fed stops buying MBS on March 1, 2010 expect prices to fall on homes for sale in Everett. Expect interest rates to increase on all FHA mortgages, VA mortgages and all long term projects.

Jim Johnson and comments are always welcome.

Everett Mortgage on Line.

Posted in FHA Mortgage, Homes for Sale Everett, VA mortgages | 4 Comments »

Everett mortgage-Obama Tax Credit just hot air

Sunday, February 7th, 2010

Another Useless Idea

Will the new jobs tax credit affect Everett real estate? Will it help with homes for sale in Everett?  Will it change an FHA mortgage rate?

I am sorry Mr. President but the new credit will not help. I think this is nothing more than a publicity stunt. Unless this is truly the hand of someone so ignorant of how jobs are created that Mr. Obama doesn’t realize this will not make a single new hire happen.

Unfortunately here is what will happen. If you are in business a tax credit of $5000 plays no part in the decision you make on whether you hire or not. You have to have the business sales to justify the cost of the hire. If I have the sales then I will hire if I don’t $5000 will not make me hire. All the other terms and strictures are nonsense.

Let’s review the “benefits” of the credit and see if it will affect Everett real estate. Let’s see if FHA mortgage rates will go down. Let’s see if this will produce jobs and help homes for sale in Everett. The 2 main ideas are as follows:

1)      Businesses will receive a $5,000 tax credit for every net new employee that they employ in 2010. The total amount of credit will be capped at $500,000 per firm, to ensure that the majority of the benefit goes to small businesses.

2)      Small businesses will be reimbursed for the Social Security payroll taxes they pay on real increases in their payrolls. Specifically, firms that increase wages, expand hours or hire new workers would get a credit against the added payroll taxes that result. This bonus would be based on Social Security payrolls, so it would not apply to wage increases above the current taxable maximum of $106,800.

Look carefully at item number 1. As I stated above there is no reason or justification to hire unless the sales are already there. So any hire will have happened regardless of any credit. This is another drain on tax receipts with no benefit to the taxpayer.

Item number 2 is just another federal giveaway that doesn’t improve or enhance hiring. Again this is another drain on tax receipts with no benefit to the taxpayer.

This tax credit is just another useless giveaway that accomplishes nothing. It will not help improve the market for homes for sale in Everett. It will not improve FHA mortgage rates and it will not help Everett real estate.

Jim Johnson and comments are always welcome

Everett Mortgage on Line.

Posted in Everett real estate, FHA Mortgage, Homes for Sale Everett | 6 Comments »

New FHA Mortgage Rules

Saturday, January 30th, 2010

FHA Mortgages now allow flipping

The FHA mortgage has now become much more useful because they will allow a new mortgage on a rehabilitated home. The term is called flipping. Buying a home and then flipping it before 90 days have elapsed. Prior to this ruling a buyer had to hold a property at least 90 days before an FHA mortgage could be obtained for a new buyer. FHA has signed a waiver that takes effect on February 1, 2010 and is limited to sales meeting the following conditions:

1)     Of course all transactions must be arms length for all parties. This will be determined using some of the following practices. The seller should hold title, the seller / property should not show a pattern multiple transfers within the last 12 months and the property was marketed openly.

2)     In situations where the properties sale price is equal to or greater then 20% above the acquisition cost the waiver and a new FHA mortgage could be issued only if the lender justifies the increase in value with a second appraisal and documents the costs (labor and materials) incurred to improve the property and the appraiser includes the documentation with the appraisal. The lender must also provide an inspection report to the purchaser but it doesn’t necessarily need to be a 203(k) consultant doing the inspection.  The inspector must also be an arms length participant in the transaction. The inspection must be a full top to bottom structural inspection. The inspection must include at a minimum the foundation, floors, ceilings, walls, roofs, all exteriors, appurtenant structures such a decks, balconies, walks and driveways and include the  insulation and ventilating systems.

3)     The waiver is for forward mortgages and doesn’t apply to reverse mortgages or an HECM (Home Equity Conversion Mortgage) used for a purchase.

FHA / HUD has found that many buyers of REO and foreclosed properties have the means to buy repair and resell quickly. Because of the dramatic increase in foreclosures the 90 days rule was inhibiting the sale of some of these homes. By allowing new FHA mortgages on these homes FHA hopes to help improve the resale market.

Jim Johnson and comments are always welcome.

Everett Mortgage on Line

Posted in FHA Mortgage | 6 Comments »

FHA Mortgages to Cost More

Saturday, January 9th, 2010

Lets strangle the real estate market some more.

The FHA mortgage is the only game in town. FHA is considering ways to reduce its foreclosure rate. But FHA walks a fine line here. That’s because the main reason we even have the FHA mortgage is to encourage low income home ownership.

While an FHA mortgage is designed for low income and / or first time buyers it has become a major player in the home loan business. Just a few years ago, in 2006 to be exact, the FHA mortgage amounted to only 3% of the total mortgage loans made. Now they are 30% of the Everett real estate market and growing. If it were not for FHA mortgage financing there would be no real estate market as there would be no liquidity to finance a sale. The Obama administration has no stomach for increasing the down payment requirements for FHA mortgages and with good reason. The recovering real estate market could take another stumble and bring the entire economy down again if this isn’t handled exactly right.

There have already been major changes in how the FHA mortgage is underwritten.

Early last year the supposed “FHA Down Payment Assistance Plans” were eliminated. These plans were a sleazily way to get around the 3% down payment.  It has been proven that unless a home buyer has “skin” in the game they are much more likely to default than someone who put their own money into the purchase. It used to be that the majority of FHA foreclosures were traceable back to these Zero Down Plans. Currently there are two major reasons for defaults. They are job loss and upside down property values.

I think that increasing the minimums for FHA financing is not the right thing to do. If you look at the loans currently being underwritten there are few defaults. It is the older loans underwritten under the old rules that are causing the problems. The FHA mortgages that are defaulting are not the recent ones they are the ones written between 2005 and 2008 during the height of the market boom. Some recent home loans may be in trouble if the home value has fallen or the buyer has lost their job. But those types of defaults, those losses, are what FHA mortgages were designed to accept.

Last spring FHA increased its minimum down payment from 3% to 3.5%. It also increased its Up Front Mortgage Insurance (UFMIP) from 1.5% of the loan amount to 1.75% of the loan amount. They also increased their monthly mortgage insurance premium. They also raised the minimum credit score from 560 to 640. All this was done during the worst downturn since the early 1970’s. Many industry experts think this made the recession deeper than it had to be.

I think the way to approach this is to modify how the 3.5% down payment is allocated. I think the 1.75% UFMIP should be paid out of the down payment. That way the insurance fund is fully financed. It would matter little in the overall transaction if the down payment is 1.75% as opposed to 3.5%. You can also increase the monthly mortgage insurance without greatly hurting the buyers purchasing power.

Any way you handle it the FHA mortgage must remain stable or we risk another serious downturn in the whole economy.

Posted in Everett real estate, FHA Mortgage | 7 Comments »

Everett mortgage: 5 Things to look for when buying your first Home

Monday, November 30th, 2009

The smart way to use your VA mortgage or your FHA mortgage

These ideas work for California real estate and Everett real estate. Before we even start looking for homes for sale Everett I will assume you have done what I call the 3 basic tasks you need to do before buying your first home.

  1. You have found a good loan officer and have qualified for a VA or FHA mortgage. The reason I suggest a VA mortgage is because it is the only true zero down mortgage available without heavy restrictions. Now if you don’t qualify for the VA mortgage you should be able to qualify for a FHA mortgage. The FHA mortgage has the lowest down payment (3.5% of the purchase price) and is the easy to qualify for.
  2. Next before anything else I suggest you see a qualified tax professional. The reason I suggest this is because if you have never owned a home before you will be surprised at the tax benefits of home ownership. Tax planning is always best done before the act not after.
  3. Find a good real estate agent. Be sure that the agent knows the area you are considering.

1) Ask you agent to look for a neighborhood in transition. Usually your best bargains for a home for sale in Everett are in neighborhoods in transition. Now what exactly is a neighborhood in transition? The first thing is how many of the homes look to be rental as opposed to owner occupied? If you really want to know that here is a simple way. Have your agent ask a title insurance company for an area report of owner occupied vs. non owner occupied homes. In the report they will have dates of sales recordings. This way you can get a feel for the way the neighborhood is going.

2) Next really look at the homes in the area. Look for well kept yards, signs of home remodeling, new paint, new roofs, etc. Does the neighborhood have CCR’s? CCR’s are codes, covenants and restrictions. In Everett there is the historic area. In this area you have to maintain your home in certain ways. In an larger area developed by a single developer you will usually find CCR’s. These can be minor to major restrictions. If you are buying a Condo there are ALWAYS CCR’s.

3) Another source of information is the local police records. These records can show which way crime is going. Usually owner occupied homes will have a lower crime rate than rentals, for obvious reasons. Look for bars on windows and doors.

4) Just because a home for sale in Everett isn’t listed doesn’t mean you can’t buy it. When I go shopping for real estate bargains I look for homes owned by very long term owners. Retired people who may be snowbirds or simply not able to keep a home up anymore just might be open to an offer.

5) How about expired listings, there are plenty in California real estate. In this market many homes haven’t sold for various reasons. Here is when you can find so interesting bargains. Here is when creative financing can occur. If the seller is wiling you can actually buy a home without a formal loan. I don’t recommend this unless you have the help of someone experienced in this. This is true sweat equity. This is the way I bought my very first home in West Lynn OR. I bought it then fixed it up and got formal financing later.

You are allowed only one VA mortgage at a time. The same is true with an FHA mortgage. Use them wisely and they will make you a lot of money.

Comment and suggestions are most welcome.

Jim Johnson

Posted in California Real Estate, FHA Mortgage, Homes for Sale Everett, Mortgage Everett, Mortgage Fraud, VA mortgages, mortgage | No Comments »

Everett mortgage: More Government screw ups

Monday, November 23rd, 2009

More Government Interference in the Real Estate Market

or

The LAW of unintended consequences

HVCC (Home Valuation Code of Conduct) was supposed to help with inflated appraisals. It was supposed to keep appraisers from being pressured by lenders. Instead it killed the real estate market. It lead to fewer choices for the consumer, lower fees to appraisers, non certified non professional people doing appraisals and many more unforeseen consequences. It practically killed the conventional mortgage market.

Now we have more government interferences. And we will have more unforeseen consequences.

Since the real estate bubble collapse FHA mortgages have saved the American economy. The share of purchase applications for government-backed loans by the Federal Housing Administration and other agencies surpassed 40% in August, up from 38% in July and 32% in August 2008.  That’s the highest share that the MBA has measured since February 1991. That was just before the subprime mortgage boom.

Without the FHA mortgage there simply would be no real estate market. And now the fools in Washington want to “fix it”. The very people who are responsible for the mortgage meltdown are now going to fix the only thing that is keeping our economy going. Here’s what they are considering:

  • It is true that FHA mortgage insurance funds are below federal mandated minimums but this is really an accounting issue. It is not a solvency problem. It is true that some FHA mortgages are behind or into foreclosure. But so are many prime conventional loans. A vast majority of these bad loans were the result of a ZERO down scam type of FHA mortgage. These loans were called Nehemiah or Hart or some other name but allowed for a FHA mortgage to be used without any money from the buyer. These loans are no longer allowed.
  • Currently if you have at least 620 (and most lenders are going to 640) credit and 3.5% down you can buy a home with an FHA mortgage. Until early this year FHA rules allowed a buyer to qualify with a credit score as low as 560 in some cases. Now it’s 620 and more often 640. So now a buyer needs pretty good credit to buy. Critics say the credit score should be increased but that defeats FHA’s purpose and that is to serve the marginal buyer. A 620-640 score is not a bad score. Critics also say 3.5%  isn’t enough “skin in the game” and want to increase the down payment. Some want 5% and few even want 10%. I want you to know that raising the minimum down payment would defeat the basic idea of an FHA mortgage.
  • Currently there are 2 different types of mortgage insurance on every FHA mortgage. First there is UFMIP (Up Front Mortgage Insurance Premium) and is 1.75% of the loan amount. This is up from 1.5% at the end of last year. Next there is a MI (Monthly Insurance) and this is .5% or .55% of the monthly payment depending on the amount of down payment. Here I think we can tweak some. We can raise the UFMIP or increase the monthly MI or increase both. Please remember that increasing these fees will lower the loan amount that a buyer can qualify for. This will lower the amount of home they qualify for. I believe that minor adjustments here is the only way to improve the insurance coverage without screwing up an already fragile market.
  • Next some would cut the amount a seller can contribute to a buyer for closing costs. Again this is short sighted. Currently a seller can give back to a buyer up to 6% of the purchase price for closing costs. Usually closing costs will run around 3.5% +/-. Well any good loan officer will use the extra money to buy down the buyers’ interest rate and make the loan / home even more affordable to the buyer.
  • Next some say we should toughen the credit standards. Well the free market has already done that. Because the buyers of mortgage backed securities (MBS) will not buy a loan that has credit score of less than 620 there is no need to do this. In fact the market has said that unless the buyer has a 640 score most will not buy the MBS.

So I say to the guys who screwed this up in the first place keep your mitts off and let the free market do it. Just as they should have done right from the start. Every time the government gets involved they screw it up. I mean EVERY SINGLE TIME.

Jim Johnson

As Featured on ArticleCity.com

Posted in FHA Mortgage, Homes for Sale Everett, Mortgage Everett, VA mortgages, mortgage | 3 Comments »

Everett mortgage: The smart way to buy your first home.

Saturday, November 21st, 2009

I am going to suggest you see not one or two professionals at first.

I am suggesting three.

  1. The first person you should see is a professional lender. Find one you can trust. I believe that the lender who has to tell you everything is more trustworthily than one who doesn’t. I suggest you use a mortgage broker and not a mortgage banker. Here is why. Bankers don’t have to disclose nearly as much as a broker does. That means a banker can hide fees and YSP from you. I know you are asking what is a YSP? A Yield Spread Premium is a rebate the lender pays for your loan. If the going interest rate is 5.25% but the mortgage banker gets you to take a 5.5% loan he gets money on the backside of your loan. The mortgage banker doesn’t have to tell you about that money. If a mortgage broker has you take a 5.5% loan he at least has to tell you what he is making on the backside. You see mortgage bankers have a very powerful lobby in Washington DC. Brokers don’t. There really are very good reasons why YSP are allowed. For example suppose you have your down payment but not much more. Suppose your real estate agent wasn’t sharp and didn’t get the seller to pay your closing costs. A loan costs anywhere from $5000 to $10,000 and sometimes more. A good lender will use the YSP to pay those costs for you. There are other reasons for a YSP but we will save that for another time. Your lender will tell you how much you qualify for and thereby how much home you can afford. I suggest you might try one of two lenders. Cheapest is almost always just that the cheapest and nothing more. In lending just as in life you get what you pay for.
  2. The next person you should see is a tax professional. Tax planning is always best done before the fact and not after it. A tax pro will be able to tell you how a purchase will impact your personal tax return. A good tax pro will also be able to pick up the “fees” the lender will charge. You see many of the fees lenders charge on a purchase are named one thing but are really interest in disguise. That interest in disguise becomes a major deduction in the first year of your purchase. A good tax pro will tell you how to increase your take home pay to make buying your first home much easier. Because interest is deductible and rent isn’t a home payment is not the same as a rental payment. So $1800 in a home payment is usually about the same as $1500 in rent. A tax pro can explain and show that to you.
  3. Now you finally get to your real estate agent. A good agent will listen to you and show you a home you can afford. A good agent is more interested in making you happy than in their commission. There might be an exact home out there waiting for you. Then again there might not be. Pick a neighborhood in transition. If the right home isn’t available wait and it might appear. A proactive buyer might look at the cosmetic fixers in the right area. A proactive buyer might actually approach some of these absentee owners and make a lowball offer and find thereby find a heck of a bargain. Just because a home isn’t on the market right now doesn’t mean it’s not available for the right price. If you find an interested seller have your agent do the negotiating because that’s what they do. Just because you don’t find the right home right away don’t give up. Many buyers look for months to find the right bargain.

In previous posts I mention how to look for a neighborhood in transition.

Also how to tell if that neighborhood is actually in transition. Buying your first home should be an adventure, it should be fun. Have lots of fun.

Jim Johnson

Posted in FHA Mortgage, Mortgage Everett, Real Estate Agents, VA mortgages, mortgage | No Comments »

Everett mortgage: No Recovery Without Jobs

Thursday, November 19th, 2009

Foreclosures on prime mortgages insured by the Federal Housing Administration rose to three-decade highs in the third quarter, driven by the biggest job losses since the Great Depression.

One out of every six FHA mortgages was late by at least one payment and 3.32 percent were in foreclosure, the highest for both since at least 1979, the Mortgage Bankers Association said today. The delinquency rate for prime fixed-rate mortgages, considered home loans with the least risk, rose to 5.8 percent and the foreclosure inventory rose to 1.95 percent, the highest since at least 1972.

Homeowners are falling behind on their mortgages as the U.S. has lost more than 7 million jobs since December 2007, driving the unemployment rate to 10.2 percent in October, it’s the highest rate since 1983. Declining home prices in most markets also are preventing many owners from selling their properties. Many are just walking away and leaving the keys on the counter.

If you do not have a job you can’t pay the mortgage. Without a job even food becomes a problem. The bottom line is without jobs nothing happens.

The share of all types of mortgages with one or more payments overdue climbed to a record seasonally adjusted 9.64 percent in the third quarter. The foreclosure inventory increased to 4.47 percent from 4.3 percent. Both were the highest in 37 years of data. REO (Real Estate Owner by banks) property is a hidden force that will delay the recovery. Many estimate that more than 600,000 foreclosed homes fall into this category. These are properties that the banks took back and have not put on the Market yet. I think they are waiting to see if the markets recover so they can sell them at a better price. Thus avoiding showing the huge loses if they sold right now.

The percentage of mortgages on which foreclosure actions were started was a record 1.42 percent. New foreclosures on prime fixed-rate mortgages  increased to 0.71 percent from 0.67 percent, while FHA mortgage foreclosure rose to 1.31 percent from 1.15 percent.

Sub prime adjustable-rate foreclosures starts dropped to 4.92 percent from 5.52 percent and the total foreclosure inventory for the types of loans that sparked the global financial crisis rose to 24.7 percent from 24.4 percent.

Defaults on FHA mortgages, which require down payments as small as 3.5 percent, may create another lending crisis, Toll Brothers Inc. Chief Executive Officer Robert Toll said yesterday.

“It’s a definite train wreck and the flag will go up in the next couple of months: Bail us out. Give us more money,” said Toll, the head of the largest U.S. builder of luxury homes. But I don’t think so. FHA mortgage requirements are much higher than the sub primes were.

FHA’s Reserve Ratio Falls but that is only part of the story

The FHA’s insurance reserve ratio fell to 0.53 percent, the lowest level in history, and more steps are needed to shore up the agency that guarantees one of every five single family loans. That ratio, the one in five, is growing larger ever day. But FHA has other reserves that are at all time highs.

While the insurance fund’s capital ratio is at an all-time low those who say FHA is the next sub prime- mortgage crisis are wrong. The quality of the loans FHA insures is actually very good.

A report yesterday showing an unexpected drop in housing starts. This highlighted how the property market remains reliant on government support to sustain a recovery. Just how unexpected could it be, the damn credit was set to expire at the end of November.  I always wonder why a drop or an increase in some economic indicator is so unexpected. Aren’t these the “experts”. Homebuilding virtually stopped as builders waited for the Obama administration to extend an $8,000 housing tax credit for first-time buyers. The credit helps but many think that the credit only accelerates purchases that would have been made regardless of the credit. The credit has been expanded to a $6500 credit for “move along buyers.” I see this as the only real tax benefit that our government has done that will help the economy.

Builders broke ground about 529,000 homes at an annualized pace in October, down 11 percent from the previous month and the fewest since April’s all-time low.

I think it is obvious that there will be no lasting improvement of our economy until we have a job recovery.

As Featured on ArticleCity.com

Posted in FHA Mortgage, Mortgage Everett, mortgage | 2 Comments »

Everett mortgage: FHA Mortgage Facts

Thursday, November 19th, 2009

Why does it seem that an FHA mortgage is so expensive? Because it is more expensive than a conventional mortgage.

There is a reason why it is more expensive than a conventional mortgage. On every FHA mortgage there are 2 different mortgage insurances charged. The first is called the Up Front Mortgage Insurance Premium (UFMIP). Currently that is 1.50% of the purchase price. Plus there is a monthly insurance premium. That amount is .005% of the loan amount. So in effect you pay insurance on insurance. This is how it works.

Buyer A buys a home for $200,000 even. The UFMIP is 1.5% of the purchase price so that makes the loan amount $203,000. Now let’s say the terms are a 30 year fixed FHA mortgage at 5%. That makes the principle and interest payment = $1089.75. Now an additional monthly insurance premium (MIP) is (calculated by $203,000 X .005 / 12 = $84.58) added to your monthly payment.

So you can see that you really are paying insurance on insurance.

Why would you want this mortgage? Well there a several reasons the foremost is that it’s the only one available. Unless you have sterling credit and / or you have 20% down an FHA mortgage may be the ONLY way you can buy.

Right now if you have 620 credit or better and 3.5% for a down payment you can get an FHA mortgage. You will have to jump through a whole bunch of hoops but you will get one in the end. Many lenders are going to increase the credit score minimum to 640 and have already done so. But there are still a few lenders who will do a 620 score.

There is talk of upping the UFMIP and the monthly MIP. FHA is, like every one else, experiencing an increase in delinquencies and foreclosures. One out of every six FHA mortgages is late by at least one payment and 3.32 percent were in foreclosure, the highest for both since at least 1979. If you don’t remember 1979 it had the worse economy since the great depression. The delinquency rate for prime fixed-rate mortgages, considered home loans with the least risk, rose to 5.8 percent and the foreclosure inventory rose to 1.95 percent, the highest since at least 1972.

Homeowners are falling behind on their mortgages as the U.S. has lost more than 7 million jobs since December 2007, driving the unemployment rate to 10.2 percent in October, the highest since 1983. What they are not telling you is that the real unemployment rate is closer to 17-19%. Declining home prices in most markets also are preventing many owners from selling their properties.

So as I have been saying this market and this economy will not recover until we have jobs. I mean is that so hard to figure out.

Jim Johnson

Posted in FHA Mortgage, Mortgage Everett | 1 Comment »

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