Julie Johnson » Finance

FHA Raising Monthly Mortgage Insurance

Julie — Wed, 16 Feb 2011 17:10:02 +0000

HUD recently announced that they will be increasing monthly M.I. M.I. is the fee HUD charges monthly with your payment. Currently the M.I. fee is .90% of the loan amount, but this monthly fee will increase to 1.15%. That is a .25% increase. Don’t get (M.I.P) Mortgage Insurance Premium. and M.I.(Mortgage Insurance) confused, they are different fees for FHA loans. MIP is a one time upfront fee that is charged and rolled into the note. The current M.I.P. fee is 1% of the loan amount.This is a effort by HUD to strengthen their role in providing financing for consumers. HUD claims the average home buyer will see a $35 dollar a month increase in their monthly payment.

Example:
Sales Price: $150,000
Loan Amount: $144,750
3.5% Down Payment: $5250
M.I.P.: $1,447.50
Current M.I. @ .90% = $108.56
New M.I. @ 1.15% = $138.72

There would be a difference of $30.16 a month in the payment with the change. To some this is not big deal and to others it may be.

Loosening of Lending Belts

Julie — Tue, 15 Feb 2011 06:50:13 +0000

For the past couple of years, getting a home loan has been getting harder and harder. Finally, there is some good news. Both Wells Fargo and Quicken Loans have decided to lower the accepted FICO score for an FHA loan to 580. Previously, all FICO scores had to be over 620.
This is great news as an estimated 1/3 of Americans have credit scores below 620. Now, more buyers will qualify for a mortgage to help them buy a home, and the housing market will continue to recover with even more vigor.

No Mortgage Brokers? Bad for consumers.

Julie — Fri, 13 Feb 2009 16:19:51 +0000

Mortgage Brokers are responsible for finding loan options for home buyers. They work with many banks, increasing competition, to get you the best possible interest rate. But the banks want to change this. They want to cut out what they see as a “middle man” and have their bank loan officers work with buyers directly. While this may increase bank profits, it reduces competition which will ultimately be bad for buyers.

JP Morgan Chase has already announced it’s plan to no longer use mortgage brokers, citing it’s now more than 5,000 branch offices, including 2,200 which were acquired thru their recent acquisition of Washington Mutual. According to Chase, the two main reasons they decided to not use brokers is because they believe the best way for loans to originate is through one of their loan officers and that loans originated by brokers failed at a higher rate than other loans.

Mortgage brokers disagree. Marc Savitt, president of the National Association of Mortgage Brokers, says “Mortgage brokers don’t develop their own products, their own guidelines and parameters. They take applications; Chase makes all the decisions.” He also says that if the loans did perform poorly, it was due to pressure from the banks. During the boom years, subprime loans were very profitable and banks wanted customers, even poor-quality customers.

So far, the other two big banks, Bank of America and Wells Fargo, have not announced plans to cut out brokers. According to Savitt, “They [Bank of America and Wells Fargo] said they were committed to the broker channel and would expand it,” he said. If this stands, the market place should remain fairly competitive.