Mortgage - FHA News Plus
Mortgage General News
All things "mortgage" are changing and this is almost as frequently as every week. These changes are to in some way help stabalize the mortgage industry again. Will it? That is hard to answer because there are many mortgage professionals who are upset with the new GFE (good faith estimate), and other issues. These mortgage people are indicating it is still not an understandable document for the borrower and that it has not in any way made the charges different for the borrower. It seems to me that the charge should be regulated more efficiently.
In saying that; sometimes the people that make up these new documents do not deal with the client on a day to day basis. Therefore, unless they are in the field to use the new document which are suppose to more understandable for the client; how do they know it is without a trail period. I like the old GFE because it was one document and it was explainable in my opinion and I always did explain the fees. Obsiously, it has not helped much to date. From what I have researched; the GFE is a bunch of needless paper to give the borrower (several pages). They do not have a clue as to why the fees are clumped together as they are and what its purpose really is....need I say more. (I have a copy of the new GFE and I have reviewed it myself and it would take a mortgage professional to really understand the benefit; if there is one). I do not intend to sound negative but it seems most of the professionals out there are very negative about this new document that HUD has enforced.
Having given only a little news about this; borrowers should be very aware of all cost that goes into the purchase of their home. It is okay to question; the more questions you ask, the more you know. Know what they are charging you for your loan. Know what the origination fee entails. Get the loan officer to break it down for you. Know what the closing agent is charging and some will charge more than others. You have a choice for whom you want to close your loan. The Loan Officer can make suggestions and they must be approved with the specific company you are using but you do have a choice.
This will increase the total mortgage amount and the monthly payment amount.
It was recently that I post some of the changes that FHA has decided to make on one of my blogs that gave some of the most important FHA loan financing changes. Those were the changes to the upfront MIP (mortgage insurance premium) which will now be 2.25% of the base loan amount; up from the 1.75% previously. The downpayment structure is changing slightly. They will still allow 3.5% for those borrower’s with certain credit scores but those with low scores will be required to make a 10% downpayment. Last but not least, at that time was the allowable seller paid closing cost was being decreased from 6% to 3%; to allow FHA to become more industry standard.
Please note that FHA (Federal Housing Administration) does not make the loan, as neither do Fannie or Freddie; they only make the guidelines and FHA insure a portion of the loan and they allow the approved banks and mortgage companies to deliver loan pools to them to free up money to make more lending. In short, the loans are sold to Fannie and Freddie for what they call servicing release premiums.
Now, since the initial post the upfront MIP guidelines have already changed. At the present there is FHA Reform Act Bill, is making its way through Congress and it advises of an increase to the annual (monthly premium) from .50 and .55 to 1.50% and 1.55%;15 and 30 years loans respectively. It appears this will go forward without many rejections per my updates with NAMP. The latter could pose a very unique problem for first time homebuyers who have a problem with their payments increasing by 1% over and above previous guidelines.
FHA has reported that they insured one half of all mortgages for first time homebuyer that has been made recently. FHA and other government back loans account for 47% of all mortgages in the first week in April, 2010.
When I write about the mortgage new within our America; I do so with honesty and constructive advice. I do not intend to sound negative about an Industry that I worked in for 30+ years. But, I also know that there are many defects still, in the way that all of this detailed information is presented to the prospective homeowner and that all of the important issue have not been resolved. My concern is for safe lending practices.
No profession is ever perfect but with the vast amount of mortgage defaults and mortgage companies which have been called on the carpet even recently; it is wise to make sure you know your lender is reputable.
More General News
Just in case you have not read the latest news about Fannie and Freddie; it seems that the Republicans are insisting that a bill be passed to phase out these agencies as they currently are; (they are now in the governments control) within the next few years. Who is the back up; no one knows it seems other than they are proposing to break the companies down into similar companies of five instead of two. Stating this will give more diversity and competition. From where I sit; FHA is becoming more and more like these entities everyday, but they say they are still for the moderate to lower income population. Of course; the bill may not go through so this is speculation but still news.
What this tells me. FHA has forever made loans for the borrower who could not afford a 5% downpayment structure, and especially with the 5% percent having to be from their own funds. First Time Homebuyers have a problem with this and FHA has always allowed for the 3.5% to be gifted by a relative with a very minimum from their own funds. Conventional lending does not allow this.
FHA does allow for somewhat lower credit score, options for downpayment structure, and certain financing options to include but not limited to this example: a parent can qualify for an adult child who has little or no income and not live in the property.
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