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FHA Cuts Annual MIP!

January 9, 2017 — Leave a comment

fha updateFHA announced this morning that it is lowering the annual premium 25 bps.  It is effective for loans with a closing or disbursement date on or after January 27th, 2017.  By making the change effective for loans closed instead of case numbers assigned, it eliminates a lot of the confusion caused in 2015 when premiums were last reduced.

How does this translate into real dollars?

In most cases 3.5% down payment on a 30yr fixed loan (less than $625,000) the current annual MIP equals 85 basis points of the loan amount (Loan Amount X 0.85%).  The new rate equals 60 basis points (Loan Amount X 0.60%).

For example – using the perimeters above, a $200,000 loan currently yields monthly mortgage insurance payment of $141.67.  Under the new rate the monthly mortgage insurance payment drops to $100.  Generating ~$500 p/yr in savings!

This is HUGE!

Here is a link to the press release:  https://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2017/HUDNo_17-003

Here is a link to the Mortgagee Letter:  https://portal.hud.gov/hudportal/documents/huddoc?id=17-01ml.pdf

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fha updateFHA published the 2017 mortgage limits this afternoon.  They follow the limits outlined in the FHFA announcement last week.

The new FHA limits apply to case numbers assigned on or after January 1st, 2017.

The new single-family “floor” is $275,665 and the new maximum loan amount in high cost areas is $636,150.


For the Dallas-Fort Worth area most counties will see an increased loan limit up to $362,250.  Just to be sure, though, here’s the link to search your specific county

FHA County Loan Limit Search


For HECMs, the maximum claim amount for FHA-insured HECMs will be $636,150.

Here is a link to areas that had increases in 2017 (including those that increased from $271,050 to $275,665):

http://portal.hud.gov/hudportal/documents/huddoc?id=limitsincreasedcy16.pdf

No areas were decreased from 2016 to 2017.  

Mortgagee Letters:

Mortgagee Letter 2016-20 (forward):  http://portal.hud.gov/hudportal/documents/huddoc?id=16-20ml.pdf

Mortgagee Letter 2016-19 (reverse):  http://portal.hud.gov/hudportal/documents/huddoc?id=16-19ml.pdf

fha updateGreat news friends – homebuyers in the DFW metro (and surrounding areas) will see increased purchasing power thanks to FHA’s decision to increase loan limits beginning his January (2016). Previously the max loan amount for Dallas – Fort Worth area was $310,500 which means buyers could buy a $321,750 home by putting the very minimum down. However, as of January 2016 the max loan amount increased to $334,650!  This means buyers can buy a $346,787 home with the minimum 3.5% down payment – an increase of $24,900 in purchasing power!! This is GREAT news!

To find out the max loan amount in your specific county follow this link FHA Max Loan Amount Search!

I’ve had several FHA questions lately so I thought I’d include some tips and rules of thumb for you to use as a reference guide. With FHA’s max loan amount increasing and conventional loan credit guidelines still a little tight FHA is becoming more and more popular.

31/43 qualifying ratios (aka Debt-to-Income ratios– this means that your client’s total debt ratiomonthly payments (those that report to the credit bureaus) + their house payment (PITI) should not exceed 43% of their GROSS monthly income.  The first number (31) represents the percentage of their income that the house payment (PITI) alone should not exceed.  These guidelines can sometimes be exceeded with an automated-underwriting decision (computer generated approval): Example, the Holmes’s earn $5000 p/mo (total farceJ) before any taxes are withheld.  In this case the Holmes’s should keep their total house payment close to $1550 and their total monthly payments (credit cards, auto & boat loans, student loans, etc.) + the total house payment close to $2150.  Again, with automated underwriting lenders can typically get outside these ratios….but these are good rules of thumb.

$334,650– this is the max loan amount in the DFW area.  Can the sales price be higher than this loan amount?

Yes, absolutely!  As long as your client has money to put towards a down payment so that the loan amount is not exceeding the max in your county, the sales price can exceed the max loan amount.  For example, you can purchase a $400,000 home with an FHA loan as long you put down enough money to bring the loan amount down to $334,650.  This works GREAT for clients that may have a few bumps/bruises on their credit report yet have a stockpile of cash for down payment.

Now, assuming they are putting the very minimum down of 3.5% they’d be able to purchase a home with a sales price of $346,787 with an FHA Loan.

Example – purchase price = $346,000….3.5% down payment = $12,110…..loan amount = $333,890

plusPLUS, the seller is allowed to pay their closing costs (as long as it’s negotiated)!

PLUS PLUS, the entire down payment can be a gift!!

Go HERE to search your specific county FHA Max Loan Amount Search!

What is the down payment requirement? – FHA requires a minimum 3.5% cash investment.  Can this be a gift?

Yes! The entire 3.5% can be a gift!

What are the non-allowables? – What dollar amount should you put in the contract for FHA non-allowables?  NONE, ZERO!  Those were the old days!  The only non-allowable is the tax service fee which is typically less than $80.  This can easily be absorbed by a lender.

Is there a minimum credit score? – Most lenders have gone to a 640 credit score requirement.  Although FHA does not have a published minimum credit score lenders have noticed a pattern of poor performance with credit scores lower than 580.  We will allow for as low as a 600 credit score on our in-house product.

According to Cole, this is GREAT news!

Newspaper  good newsIn the first Mortgagee Letter of the year FHA makes a HUGE change by reducing its annual mortgage insurance by 50 basis points across the board.  The new rate will be 85 basis points (for loans with less than 5% down payment).

Example – $200,000 mortgage with 3.5% down payment

Previous FHA monthly mortgage insurance at 135 basis points = $225 p/mo

New FHA monthly mortgage insurance at 85 basis points = $142 p/mo

See all the details here in Mortgagee Letter 2015-01

FHA cuts MI

fha loan limitsGreat news friends – homebuyers in the DFW metro (and surrounding areas) will see increased purchasing power thanks to FHA’s decision to increase loan limits beginning January 2015. Currently the max loan amount for DFW area is $287,500 which means buyers may buy a $297,900 home by putting the very minimum down. However, as of January 2015 the max loan amount increases to $310,500!  This means buyers can buy a $321,750 home with the minimum 3% down payment – an increase of $23,850 in purchasing power!! This is GREAT news!

To find out the max loan amount in your specific county follow this link FHA Max Loan Amount Search!

I’ve had several FHA questions lately so I thought I’d shoot over some tips and rules of thumb for you to use as a reference guide. With FHA’s max loan amount increasing and conventional loan credit guidelines still a little tight FHA is becoming more and more popular.

31/43 qualifying ratios – this means that your client’s total monthly payments (those that report to the credit bureaus) + their house payment (PITI) should not exceed 43% of their GROSS monthly income.  The first number (31) represents the percentage of their income that the house payment (PITI) alone should not exceed.  These guidelines can sometimes be exceeded with an automated-underwriting decision (computer generated approval): Example, the Holmes’s earn $5000 p/mo (total farce) before any taxes are withheld.  In this case the Holmes’s should keep their total house payment close to $1550 and their total monthly payments (credit cards, auto & boat loans, student loans, etc.) + the total house payment close to $2150.  Again, with automated underwriting lenders can typically get outside these ratios….but these are good rules of thumb.

$310,500 – this is the max loan amount in the DFW area.  Can the sales price be higher than this loan amount?

Yes, absolutely!  As long as your client has money to put towards a down payment so that the loan amount is not exceeding the max in your county, the sales price can exceed the max loan amount.

Assuming they are putting the very minimum down of 3.5% they’d be able to purchase a home with a sales price of $321,750 with an FHA Loan.

Example – purchase price = $321,750….3.5% down payment = $11,261…..loan amount = $310,488 ($22 under the max loan amount J)

PLUS, the seller is allowed to pay their closing costs!

Go HERE to search your specific county FHA Max Loan Amount Search!

giftWhat is the down payment requirement? – FHA requires a minimum 3.5% cash investment.  Can this be a gift?

Yes! The entire 3.5% can be a gift!

What are the non-allowables? – What dollar amount should you put in the contract for FHA non-allowables?  NONE, ZERO!  Those were the old days!  The only non-allowable is the tax service fee which is typically less than $80.  This can easily be absorbed by a lender.

Is there a minimum credit score? – Most lenders have gone to a 640 credit score requirement.  Although FHA does not have a published minimum credit score lenders have noticed a pattern of poor performance with credit scores lower than 580.  We will allow for as low as a 600 credit score on our in-house product.

clock moneyWhat are turn times?  How quickly can we close? – I would NOT write in a contract close date less than 30 days out.  FURTHERMORE, I would make sure there are plenty of days from the end of the option period to the closing date.  Most lenders will NOT order an appraisal until the option period is over and the buyers are still moving forward.  It does not do any good to have a 30 day close, with a 15 day option period.  You will probably need 15 business days from option period ending to the close date to be on the safe side.  Again, this is a general rule of thumb….for stress free home purchases, that is!

Can my client use a co-signer? – Yes, Absolutely!  Keep in mind that a co-signer/co-borrower will be treated just like the actual borrower and will need to provide all their income & asset documents.  The lender will configure a joint debt-to-income ratio based on a combination of ALL income and ALL debt.  Generally a co-signer needs to have great credit, good income, and minimal debt.

Can my client purchase without their spouse on the loan due to credit? – Yes, Absolutely!  However, FHA requires that lenders consider the non-purchasing spouse’s individual debt.  For example, if your client’s spouse has an auto loan and a few credit cards in his/her name alone, then these monthly payments will be factored into your client’s debt-ratio. Lenders MUST pull a credit history on non-purchasing spouses.

Is FHA only for first time homebuyers? – NO!  This is a common misconception.  You can use an FHA loan on your 2nd, 3rd, 4th, 5th, or 20th home.  Under most circumstances you can only have 1 (one) FHA loan at a time.

Can I refinance a conventional loan to an FHA loan? – Yes, Absolutely!  Since FHA is more forgiving (in my opinion) with its underwriting guidelines we have successfully moved families out of a high interest rate and/or adjustable rate (ARM) loan and into a low fixed rate FHA loan.

house logo with ascending arrowGreat news friends – buyers in the DFW metroplex (and surrounding areas) will see increased purchasing power thanks to FHA’s decision to increase loan limits beginning in January 2014.  Currently the maximum loan amount for the DFW area is $271,050.  With a 3.5% down payment (FHA’s minimum down payment requirement) this yields a purchase price of $280,880.  However, HUD’s Mortgagee Letter 2013-43 released 12/6 states, as of January 1, 2014 buyers will be able to purchase a $297,900 home using FHA’s minimum down payment loan.  That’s an increase of $17,000+ in purchasing power.

This is more GREAT news for our local real estate community – confirmation that DFW Rocks!

Use this link to search your specific county loan limit (remember to change the year to 2014) – Search FHA Loan Limits

For more info on this and all things mortgage and real estate related be sure to tune in to Real Time Real Estate DFW with Cole Saturdays @ 1pm on KWRD 100.7fm the Word (you can also listen online here Listen to Cole Online!

coins growing stackAs the ‘ol saying goes…what goes down must go up….er….uhm….wait a minute….do I have that backwards?  Apparently I’m not the only one who has that backwards.  Fannie Mae, one of the nation’s largest mortgage giants, will be discontinuing it’s 3% down payment loan.

How does Fannie Mae’s decision affect your local mortgage lenders?  Fannie is the mortgage godfather, setting the rules and guidelines for lenders to follow.  The majority of home loans originated by local lenders are ultimately packaged up and sold in bulk to Fannie Mae.  This ‘sale’ positions local lenders to then go out and write more loans, helping hopeful home buyers and home refinancers alike.  However, in order for Fannie Mae to purchase loans, the loans have to meet Fannie Mae’s rules, regs and guidelines.  Hence, the mortgage godfather!

Get with your local lender who should be able to share more details with you regarding the phasing out of the 3% down payment loan.  The last thing you want to happen in negotiating a contract for you or your clients is to learn the loan program selected in the third-party financing addendum no longer is available.  Ouch!

You have until November 15th, 2013 to have you/your client’s loan submitted via Fannie Mae’s DU automated underwriting system.  Next, there are additional phase out time stamps that apply to the closing/funding of the purchase loan and then delivery to Fannie Mae.

I’ve included Fannie Mae’s selling guide update here (it’s toward bottom of page one).FNMA SEL 2013-07

Is FHA’s  (Federal Housing Administration) 3.5% down payment loan going away too??? NO, I anticipate this being around for the foreseeable future.