How to: Calculate FHA Mortgage Insurance Premiums
(Effective: October 1, 2008 through September 30, 2009)
The following tables are a reference to be used when calculating up-front and monthly mortgage insurance premiums for FHA loans:
Up-Front Mortgage Insurance Premiums (UF MIP):
Loan Type Rate
Purchase - 1.75%
Rate/Term Refinance (full qualifying) - 1.75%
Cash-Out Refinance - 1.75%
Streamline Refinance - 1.75%
Monthly Mortgage Insurance Premiums (MMI):
Loans for over 15 years
LTV - Rate
≤ 95% - .50%
> 95% - .55%
Loans for 15 years of less
LTV - Rate
≤ 90% - None
>90% - .25%
Example Calculation:
For the following example, we will use a $100,000 loan borrowed on a 30-year term used to purchase a home. Our loan to value ratio in this example is 97%:
Up-Front Mortgage Insurance Premium: $100,000 × 1.75% (.0175) = $1,750
This will be the amount that is added to the base FHA mortgage and financed into the loan.
Monthly Mortgage Insurance Premiums: $100,000 × .55% (.0055) = $550
$550 ÷ 12 = $45.83
This will be the amount that the borrower is responsible for paying as a part of the mortgage payment each month.
Friday, July 24, 2009
Tuesday, June 30, 2009
$8,000 Tax Credit Available to First Time Homebuyers
There has never been a better time to buy your first home! The Federal government is currently offering a tax credit of up to $8,000 for qualifying first-home purchases between January 1, 2009 and December 31, 2009.
Following are some of the restrictions for the tax credit:
~ The home purchase must occur between January 1, 2009 and December 31, 2009 and can be a new or resale home
~ Must be considered a first-time home purchase; a first-time homebuyer is defined as someone who has not owned a home during the 3 year period prior to the home purchase
~ The tax credit is for 10% of the home’s purchase price to a maximum of $8,000
~ The credit is reduced for borrowers with a Modified Adjusted Gross Income of $75,000 for single taxpayers and $150,000 for married taxpayers. The credit is eliminated for single taxpayers with a Modified Adjusted Gross Income of more than $95,000 and married taxpayers with a Modified Adjusted Gross Income of more than $170,000.
~ The homebuyer must use the home as a primary residence for at least 3 years
~ All principal residences are eligible including single family homes, condominiums, townhomes and manufactured homes
~ It is possible to take the tax credit early and apply it to your down payment or closing costs. It may also be possible to amend your 2008 tax return to reflect the credit. Consult a tax professional for more information on these options.
This is an overview of some of the restrictions of the current First Time Homebuyer Tax Credit.
*We ask that you please consult a tax professional prior to making a purchase decision.
Monday, December 22, 2008
First-Time Home Buyer Tax Credit Available Until July 1, 2009
The Housing and Economic Recovery Act was signed into law by President Bush on July 30, 2008. A key part of the legislation is the First-Time Homebuyer Tax Credit. Under the law, first-time homebuyers are eligible for a tax credit of 10% of the price of the home they purchasing up to $7,500. There are income limits of $75,000 for an individual and $150,000 for a family. Individuals earning up to $95,000 and families earning up to $170,000 are still eligible for a reduced credit. Keep an eye out for additional programs that become available to help stimulate the housing economy.
Mortgage Rates Hit Historic Lows!
As you may have read in the paper or seen on TV, the United States Treasury has taken a major step toward resolving the financial crisis by buying large quantities of mortgage backed securities (MBSs) from lending institutions. This creates a sense of demand for the MBSs and in turn drives up their value. Mortgage interest rates work in reverse of the value of MBSs. So – when MBSs are valuable, mortgage rates tend to fall. This is exactly what we are experiencing right now. As of 12/16/08, our 30 year fixed is at 4.875% and our 15 year fixed is at 4.75%. Historically, these are some of the lowest mortgage rates we’ve ever seen.
We have even heard talk recently of the Treasury creating a program that will provide incentive for banks to offer loans to consumers at 4.5%. As of now, this program is slated to be available only to those purchasing homes and not refinancing. The funds aren’t currently available and many people believe they won’t be until after President-Elect Obama takes office.
For those who recently purchased a home, you are eligible for a refinance after 90 days.
We have even heard talk recently of the Treasury creating a program that will provide incentive for banks to offer loans to consumers at 4.5%. As of now, this program is slated to be available only to those purchasing homes and not refinancing. The funds aren’t currently available and many people believe they won’t be until after President-Elect Obama takes office.
For those who recently purchased a home, you are eligible for a refinance after 90 days.
Monday, November 10, 2008
Fannie Mae/Freddie Mac Under Government Control
On September 7th, 2008 Treasury Secretary Henry Paulson and Federal Housing Finance Agency (FHFA) Director James Lockhart announced that the U.S. Treasury would take control of battered mortgage kingpins Fannie Mae (FNMA) and Freddie Mac (FHLMC). It is estimated that Fannie and Freddie back over $5 trillion in home mortgage loans which account for about half of the nation's outstanding mortgage debt. With the loss of a number of mortgage companies over the last few years, Fannie and Freddie have come to be relied upon as nearly the only source of funding for consumers wishing to purchase homes. Combined, the two have lost over $12 billion in the last year due to mortgage defaults. Prior to the announcement, stock prices of the two had fallen over 80% on the year.
Under the new plan, Fannie and Freddie will be supervised by FHFA. Treasury will offer support by purchasing mortgage backed securities from and lending money for additional home loans to the mortgage giants. In hopes of stabilizing them, Treasury and FHFA will assume some ownership of Fannie and Freddie by purchasing stock in them.
Many experts believe this will be a band-aid fix to get the companies through the rest of 2008 and into 2009. Thereafter, the fate of Fannie and Freddie will be in the hands of the new administration.
UPDATE: So far, this move has not reduced the cost of borrowing for consumers. Interest rates have actually inched up slightly since the announcement. Of course, there are many other factors in play so this program can't necessarily be at fault for the rise in interest rates. Hopefully the markets will begin to steady as we enter 2009.
Under the new plan, Fannie and Freddie will be supervised by FHFA. Treasury will offer support by purchasing mortgage backed securities from and lending money for additional home loans to the mortgage giants. In hopes of stabilizing them, Treasury and FHFA will assume some ownership of Fannie and Freddie by purchasing stock in them.
Many experts believe this will be a band-aid fix to get the companies through the rest of 2008 and into 2009. Thereafter, the fate of Fannie and Freddie will be in the hands of the new administration.
UPDATE: So far, this move has not reduced the cost of borrowing for consumers. Interest rates have actually inched up slightly since the announcement. Of course, there are many other factors in play so this program can't necessarily be at fault for the rise in interest rates. Hopefully the markets will begin to steady as we enter 2009.
Tuesday, August 26, 2008
Relief to Struggling Homeowners!
On August 6th 2008, President Bush signed into law a new bill that aims to bring relief to struggling homeowners across the nation. The measure attacks not only the current crisis but also has pieces that aim to avoid the same problems in the future. The bill includes measures to establish an affordable housing fund financed by Fannie Mae and Freddie Mac; tighter government regulation on Fannie and Freddie; neighborhood grants; loan-limit changes; a pre-foreclosure counseling fund; tax cuts; and an expansion of housing credit programs. So what are these various aspects all about?
Immediate Relief to Struggling Homeowners
This new bill will allow homeowners struggling with mortgage payments to refinance into more affordable government backed mortgages rather than lose their home to foreclosure. It is believed that these government-backed mortgages will have looser qualifying criteria than a typical conventional or FHA mortgage.
More Government Power – Tighter Regulation
The United States Treasury will be given the power to extend an unlimited line of credit to Fannie Mae and Freddie Mac (Government Sponsored Entities or GSEs), the largest mortgage purchasers in the secondary mortgage market who have run into liquidity issues of late. The two GSEs currently back or own half of the nation’s total outstanding mortgages. As a result of these liquidity issues, the GSEs have been unable to lend and homeowners have been restricted in the amount of mortgage credit available. The credit line was previously capped at $2.25 billion. The unlimited line of credit is expected to remain in place until at least the end of 2009. With government help comes tighter regulation, it appears that the Treasury Department will step in and act as somewhat of a regulator to Fannie and Freddie.
Neighborhood Grants
In an effort to avoid further deterioration of the communities hit hardest by foreclosure, the new legislation will provide $3.9 billion for neighborhoods to buy and repair properties that have already been foreclosed on.
Permanent Loan Limit Changes
The measure also calls for a permanent increase to the loan limits that Fannie Mae and Freddie Mac will purchase to $625,000. It will also allow FHA to back mortgages up to 15% higher than the median home prices in certain areas. These changes are expected to open up financing options for a larger pool of homeowners specifically in high cost areas of the country such as California and Florida.
Other Key Parts of the Bill
$180 million has been devoted to pre-foreclosure counseling to struggling homeowners. This is an important part of the bill as it aims to help educate homeowners and hopefully avoid many of these problems in the future. Also in the plan is an effort to stimulate the housing industry by expanding the low income housing credit and making credit of up to $7,500 available for first time homebuyer assistance.
How About Some Numbers?
The new housing relief bill aims to help approximately 400,000 homeowners – many of whom are upside down on their mortgage (owe more than their home is worth) – a result of loose lending guidelines and a declining real estate market. It has been estimated that up to $300 billion has been allocated to the Federal Housing Administration (FHA) to back these new refinanced mortgages. Of course, before being approved for a refinance, the borrower would need to show that they can afford the new loan and their lender must agree to take a loss on the existing mortgage.
It has yet to be determined if this new law will aid in recovery of our housing industry but it appears that this is certainly a step in the right direction. It is important that our law makers have not only taken measures to relieve the current crisis but have also put safeguards in place that will hopefully avoid this same collapse in the future.
Immediate Relief to Struggling Homeowners
This new bill will allow homeowners struggling with mortgage payments to refinance into more affordable government backed mortgages rather than lose their home to foreclosure. It is believed that these government-backed mortgages will have looser qualifying criteria than a typical conventional or FHA mortgage.
More Government Power – Tighter Regulation
The United States Treasury will be given the power to extend an unlimited line of credit to Fannie Mae and Freddie Mac (Government Sponsored Entities or GSEs), the largest mortgage purchasers in the secondary mortgage market who have run into liquidity issues of late. The two GSEs currently back or own half of the nation’s total outstanding mortgages. As a result of these liquidity issues, the GSEs have been unable to lend and homeowners have been restricted in the amount of mortgage credit available. The credit line was previously capped at $2.25 billion. The unlimited line of credit is expected to remain in place until at least the end of 2009. With government help comes tighter regulation, it appears that the Treasury Department will step in and act as somewhat of a regulator to Fannie and Freddie.
Neighborhood Grants
In an effort to avoid further deterioration of the communities hit hardest by foreclosure, the new legislation will provide $3.9 billion for neighborhoods to buy and repair properties that have already been foreclosed on.
Permanent Loan Limit Changes
The measure also calls for a permanent increase to the loan limits that Fannie Mae and Freddie Mac will purchase to $625,000. It will also allow FHA to back mortgages up to 15% higher than the median home prices in certain areas. These changes are expected to open up financing options for a larger pool of homeowners specifically in high cost areas of the country such as California and Florida.
Other Key Parts of the Bill
$180 million has been devoted to pre-foreclosure counseling to struggling homeowners. This is an important part of the bill as it aims to help educate homeowners and hopefully avoid many of these problems in the future. Also in the plan is an effort to stimulate the housing industry by expanding the low income housing credit and making credit of up to $7,500 available for first time homebuyer assistance.
How About Some Numbers?
The new housing relief bill aims to help approximately 400,000 homeowners – many of whom are upside down on their mortgage (owe more than their home is worth) – a result of loose lending guidelines and a declining real estate market. It has been estimated that up to $300 billion has been allocated to the Federal Housing Administration (FHA) to back these new refinanced mortgages. Of course, before being approved for a refinance, the borrower would need to show that they can afford the new loan and their lender must agree to take a loss on the existing mortgage.
It has yet to be determined if this new law will aid in recovery of our housing industry but it appears that this is certainly a step in the right direction. It is important that our law makers have not only taken measures to relieve the current crisis but have also put safeguards in place that will hopefully avoid this same collapse in the future.
Tuesday, June 10, 2008
How do you prove your income to an underwriter?
How is useable income calculated and what sort of documentation do underwriters typically require?
This answer can vary greatly depending on your employment status. Are you self-employed? Are you an employee of a company? Are you retired? Let’s look at the characteristics of each.
Self-Employed
If you are self-employed, there are several different tax structures that you might choose for your company. You might elect to be treated as a C-Corporation, or an S-Corporation, a Limited Liability Company (LLC), or a sole proprietorship. For the sake of simplicity, we will include independent contractors (those receiving a 1099) in the self-employed category. Your company organization and tax structure will ultimately determine how you verify your income to an underwriter. However, in general you will want to plan on producing signed business and personal tax returns with all supporting schedules for the most recent 2 years. For self-employed borrowers, an underwriter will use the adjusted gross income reflected on the tax returns to calculate the debt-to-income ratio.
Employees
If you are an employee of a company, plan on providing your W-2s for the 2 most recent years and paystubs to cover the most recent 30 days. An employee’s income is the amount listed on the W-2 as gross wages.
Retirees
Retirees living on a pension or social security benefits will likely be required to show proof that the benefits will last a lifetime (typically a letter from the awarding authority will suffice). They may also be asked to show a paystub to cover the most recent 30 days. Retirees use the total income reflected on their W-2 or reward letter. For social security benefits and benefits that are not taxed, underwriters will calculate income using 125% of the monthly income. In other words, if your benefit is $2,000/month, the income you will list on your loan application is $2,500 ($2000 x 1.25).
For additional documentation questions check out
the loan checklist at http://noblelenders.com/checklist.php
This answer can vary greatly depending on your employment status. Are you self-employed? Are you an employee of a company? Are you retired? Let’s look at the characteristics of each.
Self-Employed
If you are self-employed, there are several different tax structures that you might choose for your company. You might elect to be treated as a C-Corporation, or an S-Corporation, a Limited Liability Company (LLC), or a sole proprietorship. For the sake of simplicity, we will include independent contractors (those receiving a 1099) in the self-employed category. Your company organization and tax structure will ultimately determine how you verify your income to an underwriter. However, in general you will want to plan on producing signed business and personal tax returns with all supporting schedules for the most recent 2 years. For self-employed borrowers, an underwriter will use the adjusted gross income reflected on the tax returns to calculate the debt-to-income ratio.
Employees
If you are an employee of a company, plan on providing your W-2s for the 2 most recent years and paystubs to cover the most recent 30 days. An employee’s income is the amount listed on the W-2 as gross wages.
Retirees
Retirees living on a pension or social security benefits will likely be required to show proof that the benefits will last a lifetime (typically a letter from the awarding authority will suffice). They may also be asked to show a paystub to cover the most recent 30 days. Retirees use the total income reflected on their W-2 or reward letter. For social security benefits and benefits that are not taxed, underwriters will calculate income using 125% of the monthly income. In other words, if your benefit is $2,000/month, the income you will list on your loan application is $2,500 ($2000 x 1.25).
For additional documentation questions check out
the loan checklist at http://noblelenders.com/checklist.php
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