FHA to Increase Fees on Mortgages!

Difficult news for FHA clients.  As home prices climb on the San Francisco Peninsula, saving money for your down payment feels like a heroic act.  FHA offers low down payments, 3.5% of the purchase price, but now the strings attached are growing tight.  Please enjoy this article from CNNMoney.

FHA to hike premiums on mortgages

The Federal Housing Administration, which is the largest insurer of low-down payment mortgages, announced that it will raise premiums by 10 basis points, or 0.1 percent, on most of the new mortgages it insures.

Making sense of the story

  • A borrower opting for a 30-year, fixed-rate mortgage who puts down 5 percent or more will now pay an annual insurance premium of 1.3 percent of their outstanding balance. Someone who puts down less than 5 percent will pay a premium of 1.35 percent.
  • The FHA said it also will raise premiums for borrowers with jumbo loans – loans of $625,000 or more – by 5 basis points, and increase the minimum down payment requirement on these loans to 5 percent from 3.5 percent.
  • Additionally, the FHA said it will require most buyers to pay insurance premiums for the life of their loan. A policy that was put in place in 2001 allowed borrowers to cancel premium payments once their debt fell below 78 percent of the principal balance. One exception will be for borrowers who put more than 10 percent down at the time of purchase.
  • Other new policies include a requirement that any mortgage for an applicant with less than a 620 credit score and debt-to-income ratio above 43 percent must be underwritten manually. Lenders who want to issue loans to these applicants must be able to adequately document why they decided to approve the loans.

The FHA also decided to put new restrictions on reverse mortgages, no longer permitting retirees to take such large, upfront payments.

More on this story from CNNMoney

By Les Christie @CNNMoney

Government-insured mortgages are about to get more expensive.

Translation: A borrower opting for a 30-year, fixed-rate mortgage who puts 5% or more down will now pay an annual insurance premium of 1.3% of their outstanding balance. And someone who puts less than 5% down will pay a premium of 1.35%.

The agency said it will also raise premiums for borrowers with jumbo loans — or loans of $625,000 or more — by 5 basis points, or 0.05%, and increase the minimum down payment requirement on these loans to 5% from 3.5%.

FHA said it will require most buyers to pay insurance premiums for the life of their loan. A policy that was put in place in 2001 allowed borrowers to cancel premium payments once their debt fell below 78% of the principal balance. One exception will be for borrowers who put more than 10% down at the time of purchase.

Additional new policies include a requirement that any mortgage for an applicant with less than a 620 credit score and debt-to-income ratio above 43% must be underwritten manually. Lenders who want to issue loans to these applicants must be able to adequately document why they decided to approve the loans.

The agency also decided to put new restrictions on reverse mortgages, no longer permitting retirees to take such large, upfront payments.

The changes are an effort to reduce the agency’s exposure to risky loans and bolster its financial reserves, which have been depleted due to high delinquency rates from the mortgage crisis. The agency did not say when the new rates will take effect.

Last spring, FHA increased both premiums and upfront costs on mortgages. Such hikes make it tougher for mortgage borrowers — especially first-time purchasers who can’t afford the large down payments most private lenders require today, according to Jaret Seiberg, a Washington policy analyst for Guggenheim Partners. “They are the ones most likely to turn to the FHA for credit,” he said.

And that could have a negative impact on the housing market overall. “You can’t have a healthy housing market without a constant influx of first-time buyers,” said Seiberg.

I read this article at: http://money.cnn.com/2013/01/31/real_estate/fha-mortgage-premiums/index.html?iid=HP_LN&hpt=hp_t2

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NEWS – Changes in Conforming Loan Limits on the Horizon

There’s been a lot of talk in the news lately about the conforming loan limits on mortgages being lowered.  This affects all buyers, but in particular those in high price areas like the San Francisco Bay Area, where they will face higher down payments, higher mortgage rates, and stricter loan qualification requirements if conforming loan limits on mortgages backed by the Federal Housing Administration (FHA), Fannie Mae, and Freddie Mac are reduced beginning October 1, 2011.

Despite the Obama administration claiming it will support a one-year extension of the current higher loan limits, on July 1st Bank of America lowered their loan limits for all new loans and other banks will soon follow suit.

Background 

The current loan limits have been in place since February of 2008, when they were passed as part of the Emergency Stimulus Act.  Housing conditions have not improved enough to warrant letting the limits drop. Unless Congress acts, these loan limits will drop to 115% of the local area median home price.  For the San Francisco Bay Area the decline in loan limits would be more than $104,000 from the current loan limit of $729,750 to $625,500.

Housing Markets are Rebounding, but the Recovery will be Slow.

With tight underwriting constraining mortgage availability, lowering the FHA/Fannie/Freddie loan limits will only further restrict liquidity. Even with the current higher limits, borrowers are finding it more and more difficult to obtain affordable mortgage financing. Making the current limits permanent at levels appropriate in all parts of the country will provide homeowners and homebuyers with safe, affordable financing and help stabilize local housing markets.  It will allow homebuyers in higher cost areas (such as the San Francisco Bay Area) to have access to affordable mortgage financing and not find it necessary to fall into a Jumbo Loan category with even higher interest rates.

The Caton Team, as well as other REALTORS® nation-wide, have contacted Congress and communicated clearly that a housing recovery depends on keeping mortgages affordable and that Congress needs to prevent these lower loan limits from taking effect.

We’ll keep you posted on what transpires as the weeks progress.  We’ve got our fingers crossed too.

We are dedicated to our industry and making the American Dream of home ownership attainable for all.  What can we do for you?

Got Questions?  The Caton Team is here to help.  Email us at Info@TheCatonTeam.com or visit our website at http://thecatonteam.com/

Please enjoy my personal journey through homeownership at http://ajourneythroughhomeownership.wordpress.com/