Club Chaos Agents - All Things Hollish, Wacked, and Jacked

 

How many people love helping others?  How many like to be in front of their clients, especially when you can offer them a service that could possibly be like a one stop shop kind of place.  Something like Progressive insurance, to where you can buy and compare all at once.

Well, thanks to listening to Ken Cook's BlogTalk radio show, RE Tech Radio, he had an excellent guest on his show today. Scott Oakley from Connect My Buyer.

How does it work? This service allows you to help your buyer connect their utilities and services, such as gas, electric, television, phone, and other home services.  Read more from the site : How it works

 

This site not only gives discounts to the new homeowner, but it could allow you to make some extra money on the side by putting these buyers in touch with Connect My Buyer.

You might ask yourself, what's the catch???

There really is no catch. The site and service that it provides is free to both you and to the consumer. Because Connect My Buyer deals with 20,000 + clients daily, it can offer such discounts from these services to the consumer.  And they can even pay you for passing these clients onto the company. It's very simple, because they set up an 800# that you pass along to your buyer which keeps track of who you pass along. What's also very unique is that Connect My Buyer always you to create a flyer that you can pass along to your buyer, which introduces them to the site and to it's services. 

 

Here is an example of the flyer. (sorry if it's a little blurry)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As you can see within the flyer, that it gives you difference services, their contact information and best of all, some prices to compare. And what's nice about this set up is that you can add your own service providers such as... lawn care service, home repair person, home improvement person, day care, pest control, etc, etc.

 

Click here for - Connect My Buyer's FAQ section -

 

 

Overall... I think this is very cool and can be very helpful, especially for those buyers that are from out of town.  Now, get working on your flyers.

 

UPDATE : everyone, please read this comment.  There is some good information by a realtor that gives good insight about this company and what they offer... and it makes sense...  Please read : Comment # 35 - Good insightful info -

 

~ ENJOY ~

 

 

 

Click the box above to take you to today's talk show

 

 

 

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For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

 

FHA first shared these changes on August 4th, after it had been approved by Congress and then the President signed off on it on August 11th. FHA has finally come out with the mortgagee letter, ML 2010-28, which puts it officially in writing now.

This mortgagee letter is effective on FHA loans in which the case number is assigned on or after October 4th, 2010. This policy will increase the monthly mortgage insurance and decrease the mortgage insurance premiums for purchase money and refinance transactions, to include FHA streamline refinances.

 

 

 

So what are the major FHA changes regarding mortgagee letter 2010-28? - For terms greater than 15 years -

• LTV's <= 95% will increase the monthly fee to 85 bps  >> Old monthly fee was .50 bps
  

• LTV's >   95% will increase the monthly fee to 90 bps  >> Old monthly fee was .55 bps 

 

And lastly, it will reduce the Upfront Mortgage Insurance Premium, UFMIP, from 225 basis points to 100 basis points.

 

 

How will this affect new homebuyers?

3 quick examples (these examples are putting the minimum down payment of 3.5%)

• On a $275,000 mortgage – the change in payment would be about $70 higher a month

• On a $200,000 mortgage – the change in payment would be about $45 higher a month

• On a $125,000 mortgage – the change in payment would be about $27 higher a month

 

Buyers Beware - If you have your eye set on a specific home, or are negotiating on a property, or are very serious about buying soon, you will have 31 days to make a mortgage application before these new changes take place.

 

 

FYI in regards to Charlie Ragonesi's  comment, #4 - I still don't think that this will move buyers from FHA loans to conventional loanss.  Here is my reason why... please read : FHA loans vs conventional loans  - The buyer's buying power will only decrease by about $10,000 or so. 

 

 

These 2 posts I wrote previously below go into more details about the changes and showing more detailed figures.

 

• Bill H.R. 5981 passes - FHA Mortgages to increase it's annual mortgage insurance premium

• STOP TAXATION? - The new changes for FHA loans are being called : The New Homebuyer Tax

 

 

 

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- Conventional Loans - 203 k loans -

- FHA Home Loans - Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

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_____________________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

 

FHA loans have been one of the main focal points in today's real estate transactions. Two main reasons for this is that it comes to the down payment and the credit scores. In the past, some loan officers were using other types of financing that were easier for them, but not suited best for the borrower. What I do hate hearing is that FHA mortgages have taken the spot of the subprime loans. This is not true at all. This statement is very misleading. Many subprime loans should have gone FHA and that is just a fact. 

But why are FHA loans getting bad press now, stating that they are the most defaulted loans recently?  Read this : We should ABOLISH FHA loans... Even with 10% down and credit scores less than 680, FHA mortgages in many cases will be the best mortgage for you.

As I have stated many times, a lot of it comes down to your goals, when determining what mortgage would be better for that specific borrower.

 

 

Just about a month ago, FHA got it's approval to increase the monthly mortgage insurance while decreasing the upfront mortgage insurance. Many thought that this would make FHA loans more even with conventional loans. Please read : FHA mortgages new mortgage insurance changes - One main factor not mentioned when most people bring this topic up is that it's still hard in many cases to get mortgage insurance on a conventional loan if your credit scores are under 680. You also need to be careful of the rumors circulating around FHA loans regarding the new monthly mortagge insurance changes.

 

The example below is based on a $250,000 purchase price with 5% down. One reason why conventional rates are a little higher in this scenario as in FHA rates is because Fannie Mae and Freddie Mac have added penalties per se. If you are putting down less than 30% and your credit score is less than 720, certain fee penalties would apply to you, which would increase your rate and or points.  The FICO (credit score) that I am going to use is 659 and I will still show in this example that FHA loans are cheaper, even with 5% down and the new increase in monthly mortgage insurance.

 

 

***And keep in mind, some lenders have penalties on FHA mortgages with credit scores under 660 or can't do them. And many lenders can't do FHA loans under 620. Just beware of those that promise you a mortgage with scores under 620. It can happen, but they aren't as easy as advertised. Please read - Credit scores/FICO scores - I need a 700 credit score? ***

 

 

 

 

 

 

 

 

 

 

Disclaimer :  These rates are examples of today's pricing, and the spread shown in the example is real with the same profit margin for both sides. The conventional rate also includes the penalty for the 659 credit score, hence why the interest rate is much higher.

 

 

Some of you might be saying that you will be adding $2,375 onto your principal balance if you did the FHA mortgage because of the FHA one-time mortgage insurance premium. This is correct and I don't want to confuse you with more numbers and charts. But here is a quick breakdown. If you kept your house for 5 years, you would have saved $5,629 in payments. Subtract the Upfront Mortgage Insurance premium from the monies saved in 5 years and you have saved a difference of $3,254!!!   And one other thing that is very small, but still makes a difference. You will be subtracting a few more dollars per month from your principal because your interest rate is lower, which would offset the interest that you would write off on the 5.00% rate. Just something else to remember, but consult your tax consultant or CPA. And as I showed above, you would have reduced your principal balance by $4,508 more in 5 years on the FHA loan scenario.

 

IMPORTANT REMINDER : Mortgage Insurance on conventional loans can be harder to obtain nowadays. The scenario above could only be done by some mortgage insurance companies if your credit score was a 680 or above. The monthly mortgage payment reflected above for the conventional scenario would be this exact monthly payment for a credit score of 680.

 

FHA Myth - Some people, including loan officers, without doing the math, will say that FHA loans are more expensive because of the Upfront Mortgage Insurance. Because in this scenario, you are adding $2,375 to the FHA loan and because of the new monthly mortgage insurance change. This kind of mortgage myth needs to be squashed on all levels.

 

 

 

For more FHA loans vs conventional loans comparisons :

• FHA loans vs Conventional loans - A true numbers comparison with 5% down -  12-20-08 -Using a 710 credit score
  

• FHA loans vs Conventional loans - A real comparison with 5% down - 11-15-08 - Using a 659 credit score
  

• FHA Loans vs Conventional Loans - 20% down - A Rude Reality Check -  04-03-09  - Would you believe that FHA loans could be cheaper even with 20% down?  Come see why and how.

• FHA Loans vs Conventional Loans - 5% - 4 comparisons that you need to know - 05-02-09 -Comparing a FHA loan against 3 types of conventional loans with different types of monthly mortgage insurance. Guess who won while still using a 679 credit score.....

• FHA loans vs Conventional loans - Knowing the true comparisons - 07-10-09  - A great comparison with a 679 credit score and 5% down.  This example will still show that even with a better than average credit score, that FHA loans are still better in many cases.

• FHA loans vs Conventional loans - Things you need to know with 10% down, especially in regards to Condos - 09-19-09 -

• FHA loans vs Conventional loans - Even with 20% down, FHA loans could be better - 05-23-10 - Knowing your goals are very important and this should be talked about, even if putting 20% down.
  

• FHA loans vs conventional loans - Why FHA home loans in New Jersey can be better with 5% down - 07-11-10 - There is a huge savings by using FHA loans with a credit score of 679 and 5% down.
  

 

Donw Payment Series - A Must Read -

• FHA loans vs Conventional loans - A real comparison with 20% down - Part 1 of 3 - 01-28-10 - Not much of a difference, unless you stay in the house for more than 5 years. Hence why a loan officer should be talking about your goals. So very important, yet many dont ask.

• FHA loans vs Conventional loans - Don't be cash poor!! - Part 2 of 3 - 01-29-10  I want to show even a bigger difference if you put less down. And even if you decided to put less than 10% down, because cash is king now. You can't predict even next week. And keeping in mind of some misleading rumors, that you need more than 10% down to buy a house.
  

• FHA loans vs Conventional loans - Get a bang for your buck - Large down payments aren't always the best way - Part 3 of 3 - 02-01-10 - Some great examples of having cash left over and not really affecting your monthly mortgage payment. And that you will have cash left over for emergencies. Keeping in mind that cash is king.

 

 

• And sellers, don't listen to your agents on how bad FHA loans are.

 

 

 

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- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- FHA Home Loans - Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

Follow me on:

 

 

_____________________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

 

 

Wanting the best deal is usually on most peoples minds when heading into a purchase of any type. We all love deals, sales, getting the best. And sometimes to brag about such deals.  Back in 1993, I still can remember a Veteran that wanted a VA loan, yet we had to try to put him into a FHA loan because of his credit. Then that became a problem because he wanted the same deal that his neighbor was getting, who was also getting a FHA loan, but I told him that he had too wait 6 months or so. And back then, credit scores didn't even exist. But he had an employment issue, having 5 different jobs in 2 years with less than perfect credit.

One key point to remember through this whole post, Not one borrower is the same. Even though these two pears look the same from the outside, they aren't the same. You can argue taste, texture, and color, just as a few differences.

Another key point?  "interest rates change daily" and "home values can change".

 

 

 

As we look into real estate and mortgages, how many times did someone say these key phrases??..........

  --   Well, my neighbor sold their house for $325,000 and I should be able to get the same since we have a similar house.

Okay, so let's look at the differences.

• Does your house have upgrades?

• Is one lot larger than the other?

• Is one house in average condition and the other in excellent condition?

• Does one have a superior view than the other?

• How long ago was that sale? 3 months ago? Values can change...
  

 

  --   My co-worker just got a 4.50% interest rate with no points and I know it's still out there, so I want that.

How could this be so different for so many?  I'll name just a few reasons why.

• Did you see the good faith estimate?  It could have many fees on it. You need to compare apples to apples.

• What was your co-worker's credit scores?

• How much money are they putting down?

• Are they getting a FHA loan or a conventional loan or a VA loan?

• What was their debt-to-income ratios for qualifying with income?

 

 

 

Summary : All fingerprints are not the same. This goes the same for those selling homes or trying to buy home or refinance a home. Not one home is exactly the same. Not one borrower is exactly the same with credit or scenarios. What you need to do is be able to pick a real professional and not a wanna be. Please read :  Are you begging me to lie to you?

One excellent reason why it can be even more confusing when it comes to FHA loans, when they can be manually underwritten. Compensating factors can make a borrower a better credit risk at times, and scenarios can change quickly.

Overall, there are too many variables when selling homes, buying homes, or trying to obtain mortgage financing for these homes. This is more true in today's market, considering the major changes that have taken place. You have a friend or family member in the business?  This doesn't even mean that you will get the best deal. Besides, define best, it might not be the same with your friends or family member. And what about this part...  did your friend or neighbor leave something out?  How do you know. Did they pay extra somewhere else?  Keep in mind, not everyone is upfront and or ethical. Do you want reality or fluff & deception?

 

 

 

• Shopping for mortgages - It's not like shopping for cars

 

 

 

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- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- FHA Home Loans - Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

Follow me on:

 

 

_____________________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

 

The President officially signed Bill H.R. 5981 on August 11th, 2010 which became public law.  I wrote about the actual changes to FHA loans and how it will affect borrowers as of October 4th, 2010.  Please read :  Bill H.R. 5981 passes - FHA Mortgages to increase it's annual mortgage insurance premium 

There has been a main problem in regards to the information being supplied since this bill was passed by the Senate, which was on August 4th, 2010. I have read several blogs out on the internet both by AR members and the news media stating that the monthly mortgage increase has been raised to 1.55 basis points. This is correct and incorrect. Read below...

 

 

 

The following summary below was written by the Congressional Research Service.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Yes, congress passed the monthly mortgage insurance to 1.55 basis points.  But this is a cap and not the actual amount that FHA is prepared to use on all FHA loans for now.  The new monthly mortgage insurance rates will be either .85 or .90 basis points, all depending on the amount of your down payment., which I explained in this post. FHA Mortgages monthly mortgage insurance changes - effective October 4th, 2010 -

But if you read some of these other posts, they don't explain it this way. Some give examples of the mortgage payments of like $167 more a month on a $200,000 mortgage, which is based on 1.55 basis points. If you actually use .90 basis points, that mortgage payment now increases only to $59 more a month.  Sorry folks, but that is a huge and misleading difference of $108 a month and could scare possible buyers away if not properly educated about this new change for FHA loans.

Keep in mind though, FHA will not need the approval from Congress to ever change these rates as long as they don't exceed 1.55%. 

 

 

Another thing, HUD has not released a FHA mortgagee letter as of yet. But FHA did announce this as a press release with a FHA letter.  FHA Mortgages - change in mortgage insurance  Any and all FHA case numbers assigned on and or after October 4th, 2010 will be subject to these new changes.

 

 

3 quick examples :(both examples are putting the minimum down payment of 3.5%)

• On a $275,000 mortgage - the change in payment would be about $70 higher a month

• On a $200,000 mortgage - the change in payment would be about $45 higher a month
  

• On a $125,000 mortgage - the change in payment would be about $27 higher a month
  

 

 

These FHA Loan changes are the same, no matter what state you reside in.

 

_____________________________________________________________________________________________________

 

                  

                                                                                                           FOLLOW ME ON FACEBOOK

 

 

- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- FHA Home Loans - Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

Follow me on:

 

 

_____________________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

 

Shop till you drop - this might not be wise advice when shopping for a mortgage

 

I wanted to bring up this topic because it still happens more than it should. I know we all want the best deals, but anyone can make general promises on the phone or on paper.

Shopping for a mortgage in New Jersey is not easy and it's not like shopping for a car. A car is a car, but ones service could be better.  And one could argue that most mortgage companies should have the same interest rates and mortgage programs. But there are way to many unknowns upfront that can change interest rates. In my opinion, those that don't want to ask all of the appropriate questions upfront and educate you about the different types of programs, generally just want to get you in the door and then worry about everything later.  Yes people, this still happens, even after several changes in the last year that try and protect the consumer when applying for a mortgage.

 

 

 

 

I read this comment from a realtor -  "I tell my clients to shop loans and make sure the lenders provide the information about costs and fees associated with the loan.  I think that is a service to my buyers."

I am sorry, but this kind of statement is like pointing a gun at your head that holds 6 bullets, yet 3 bullets are loaded. Your chances of being shot are 50%. Just like when shopping with to many lenders, that it could increase your odds of not getting the right information or misleading information and rates/fees.

 

 

 

 

Here are two quick stories -

1.  I had a realtor that decided to give me a chance, yet she told me that she had 2 very good loan officers that she recommends all of the time because they were excellent and that they closed her deals. After speaking to this borrower, who already spoke to the other 2 loan officers, I realized that this borrower was never explained on how adjustable rates worked.  Yet he was sold on an adjustable rate, because the rate itself was very attractive.  The funny thing was that I was about 1/4 percent cheaper in interest rate and $1,000 cheaper in points on the fixed rate. But on the 5 yr arm, this lender was beating me out by 3/8 of a percent. He chose the loan officer with the lower rate, even though he thanked me for educating him on adjustable rates, going over his goals (which neither loan officer did), and just for the fact that I taught him about refinancing in the future. See, he was under the impression with FHA loans that if he refinanced 4 years later, as long as he had 20% or more equity, that he wouldn't have monthly mortgage insurance. This is 100% false on FHA loans. But see, I went into great details, knowing what he was trying to accomplish in the future, and because we went over his goals. Yet this was never talkied about by the other two loan officers.

End Result - 1 day after he applied with this lender, rates began to drop. By the end of the week, I was barely 1/8 of a percent higher in rate, yet this other loan officer never offered a lower rate since rates dropped. Yes, many loan officers/lenders can offer you good rates and such, but at what price to the borrower. And sometimes these costs could add up as future costs and not as present costs, hence why goals are important. And in my opinion, this realtor really wanted to give out 3 names just to protect herself. If you really trust one person, there is no need for 2 other names.

 

2.  A person that I have know for 3 years has said all along that I was his guy.  He trusted me and such. I have done over 5 pre-qual letters for him in the last 4 months. Well, that turned quickly and he ended up using another loan officer that his realtor pushed, because the other lender made it look like I wasn't doing my job. He told the borrower that we didn't order the appraisal as of yet and his total costs were $800 cheaper than me. I tried to explain that I always try to be on the high side. Besides, I had no lender fees, so I knew this couldn't be true.  Also, the loan officer had offered a lower rate after I told the realtor what I was giving the borrower.  But wait, the borrower was floating and I wanted to surprise my so-called friend later on with a lower rate. 

The end result? I could have given this borrower a 1/4% less in rate.  And wait, just yesterday he was told that he needs $400 more at closing tomorrow for escrows.  hhhhmmm - Who lost here?  We both did. But I just called this person and told him to fight it at closing tomorrow, because the lender didn't disclose the new update 3 days prior to closing. He was appreciative, even though he went some where else.

 

 

 

Conclusion - All the reason why shopping for mortgages in New Jersey with many lenders could backfire on you or just hurt you overall.  I wrote a series about this. So who do I trust?

• TRUST - Find a trusted realtor or loan officer - Who defines trust ???

• Would you rather work with a Marketing Guru or a Real Professional?

 

• To be an EXPERT or not, what is thy question?
  

 

• What is Transparency?? Best Mortgage Rates/Online services/Real Estate Services - (Part 1 of 2)

• Transparency in Real Estate/Mortgages - Interview your Realtor or Loan Officer - (Part 2 of 2)

 

 

Some important reading - Some changes in the last 12 months by the government, trying to protect the consumer when it comes to shopping for mortgages. But has it really helped as much?

 

• The MDIA - The Mortgage Disclosure Information Act - Effective July 30th, 2009

 

• Good Faith Estimates Explained - FHA Loan Good Faith Estimates - Understanding the whole process - Part 1 of 2

 

• Good Faith Estimates Explained - Changes for the WORST - Detailed changes - Part 2 of 2

 

 

- I wrote about this same topic on October 25th, 2006 -

• Shoppers that shop themselves right out of the market……

 

 

_____________________________________________________________________________________________________

 

                  

                                                                                                           FOLLOW ME ON FACEBOOK

 

 

- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- FHA Home Loans - Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

Follow me on:

 

 

_____________________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

 

Just last week, Assistant Secretary for Housing and Federal Housing Commissioner David Stevens announced that FHA was changing their annual mortgage insurance plan. - FHA announcement - I wrote about it here : HR Bill 5981 - FHA mortgage insurance.

We now have some groups and people announcing these FHA Loan changes as a tax. Think Big Work Small released their version in this video on Monday. New Homebuyer Tax Starts September 2010 - 08.09.10  - Brian Stevens, from TBWS states this... "A tax that furthers HUD's Agenda." Sounds scary, right?  Because it sounds like the government is taxing us more. But this kind of wording irks me and can make it sound a lot worse than it is, or a lot more expensive. Let me further explain.

 

 

UPDATE : as of 8/10/10 - HUD has announced to make this new change effective October 4th, 2010 -

 

 

I do know where Think Big Work Small is going with their argument in regards to what HUD stated. HUD made this statement in January 2010.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In regards to HUD's statement above, I think I was one of first to question HUD's statement back in January and then I argued this in more detail in this post.  HUD - Don't insult my intelligence about new FHA Loans changes - We can argue HUD's statements until we are blue in the face.

But my concern with others stating that this is a Homebuyer Tax is that I call this a 'spin on words'.  Can we call it a tax?  Sure, I will give everyone that. But why are we calling it a tax.  Are we trying to make the government look bad? Is that person or group trying to make a name in the news by coming up with an interesting subject line or title? Hey, I will admit, I love stirring the pot, to get recognized.  But one thing I dislike are those that stir the pot but offer no solutions. If you read many of my posts over the years, I might knock on something, but I try to look at it from both sides and come up with solutions.

 

 

 

 

So let's take it a step further. Could I make this statement and be 100% correct?  If FHA loans were to disappear tomorrow, would our economy crumble to the worst ever? I would say yes and I think many would agree with me. I wrote many reasons why FHA loans should not be abolished. - Should we abolish all FHA loans? - So FHA has raised their monthly mortgage insurance premiums and lowered the upfront mortgage insurance premium. Should we tax the tax payer?  Should the government print more money to pay for this?  Or should we just pass this along to the borrower?  I would say no, no, and yes.  My question to you... aren't we trying to stimulate the economy? Yes, and to allow FHA mortgages to crumble would defeat this easily.

 

 

 

 

Summary :  In many cases, the grass is always greener on the other side.  Yes, we can complain that the new changes on FHA loans will hurt buyers than help them. But if the mortgage insurance fund wasn't replenished and we lost the ability to do FHA loans, then what would happen?  How about this question. How come many haven't complained about the extremely high pricing hits on conventional loans with LTV's less than 80% and credit scores below 720? If I put 5% down and have a credit score of 679, my penalty would be 1.75 pts.  And don't forget that the mortgage insurance factor on that scenario is much higher than on FHA loans. That is if you could even qualify for mortgage insurance.  Most won't go below a credit score of 680.

 

 

 

FOOD for thought : Remembering the '90s. Many of you might not know or remember, but the one time mortgage insurance premium was once 300 basis points while the monthly mortgage insurance was 50 bps. Really quick.....

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As you can see, your total loan amount would be even more prior to 2000. Now, if I had to choose on how to make some of these changes to FHA mortgages, I would go back to the old, because as you can see, your total payment wouldn't be as much. But FHA is hoping that people hold onto these newer mortgages longer, to recoup more money. As I mentioned in this post, HR Bill 5981 - FHA mortgage insurance, FHA would add about $2,500 more if you held onto the loan for 7 years.

So how do you look at this?  Which would you prefer? What would you call this whole traffic jam of mortgage information?

 

 

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For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

FHA first proposed the monthly mortgage insurance changes in the beginning of 2010. Bill H.R. 5981 was first passed by the House in the spring and was just passed by the Senate the other day.  What does this bill do for FHA mortgages? They have projected that it will yield approximately $300 million per month to the FHA insurance fund.

So what are the new FHA changes? - For terms greater than 15 years -

LTV's <= 95% will increase the monthly fee to 85 bps

LTV's >   95% will increase the monthly fee to 90 bps

And lastly, it will reduce the Upfront Mortgage Insurance Premium, UFMIP, from 225 basis points to 100 basis points.

The plan is to go into effect by September 7th, 2010 on all FHA case numbers. FHA gives it's reasons to this new plan. FHA letter from David H. Stevens

 

UPDATE : as of 8/10/10 - HUD has announced to make this new change effective October 4th, 2010 -

 

So what do the actual changes mean to the average borrower that will rely on FHA loans when purchasing a new home or refinancing?

                - The Old Plan -

LTV's <= 95% the monthly fee is 50 bps

LTV's >   95% the monthly fee is 55 bps

 

 

Example of the changes regarding the FHA monthly mortgage insurance known as MMI or annual mortgage insurance premium and the FHA upfront mortgage insurance premium known as UFMIP.

UPDATE BELOW in chart - The 2nd column, the upfront mortgage insurance premium, is usually added into the base loan amount. In this scenario, that is what I did. It's not actually a cash savings out of pocket, but just a reduction in the new loan amount.  I guess it wasn't clear, because a few people said that this whole change was going to help those with less money out of pocket. The buyer still needs 3.5% out of pocket, which is the down payment.

 

 

 

 

 

 

 

 

 

 

 

As you can see, it would be much cheaper monthly with the old plan, even though you pay $3,317 more upfront, on top of your loan. This can also be a tax write off since it's included in your principal. Your break even point on this type of scenario is 47 months, which is roughly 3.9 years. After this break even point, you would have started to spend more money in reality. This is how FHA will increase it's mortgage fund. As you can see, it won't be increased as quickly upfront, but over a longer period of time. So if you held onto this mortgage for 7 years, you would have spent approximately $2,522 more.

Now, there are several other factors to consider when reviewing this kind of information.  Just for the fact that your original balance on the loan will be $3,317 lower and in 7 years, still be that much lower. And as I mentioned, you would have a little more of a tax advantage on the higher balance though.

All I wanted to do was to present the basics of FHA loans and not get into the extreme details on how one could show either side. What could this do to a potential home buyer?  It could reduce your purchasing power. In this scenario, if you had originally qualified for a $275,000 loan with qualifying ratios of 31/43, what would your new purchase price be.

 

 

- New Purchasing Power after September 6th, 2010 -

With the new FHA monthly mortgage insurance and the FHA upfront mortgage insurance premium changes, your purchasing value would drop approximately $10,000, a purchase price of $265,000. Now, these are just averages, because this will all be based on the actual purchase price. Meaning if values are higher or lower, the total amount could change some. But this should give you a good understanding of what changes lie ahead for FHA mortgages in the near future.

 

 

UPDATE : Travis Newton did a similar post, using a $200,000 purchase price and as you can see, the mortgage payment inceased by $45.29/month.   Notice *** FHA Changes

 

UPDATE : as of 8/10/10 - HUD has announced to make this new change effective October 4th, 2010 -

 

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_____________________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

 

Facts & Numbers vs Assumptions - Part 2

 

 

I love what I do and I love crunching numbers, sometimes being creative and finding a way to maximize my clients cash assets, putting them in a good financial position for years to come. Meaning that I like to act like a financial planner, making sure that the borrower doesn't always use all of their assets, especially in today's market.

Before you continue with this post, you will need to read part 1, Planting Seeds in the Borrower's Head. If you want the cliff notes version, read the next few sentences below.

I truly believe as a loan officer, that I do my job as well as I can, with pride and satisfaction. That a realtor should not give mortgage advice deeper than the basics. The basics would be to know what programs are good in your area, and that you ask a few simple questions to make some determinations. Other than that, the realtor should not get into the rates and down payments. I hope to explain better below.

 

 

 

So what am I questioning?  It's when a realtor makes a statement such as this one.  "home buyers can receive 6% closing help with 10% down.  Which benefits our buyers more, making a larger down payment or paying their cash for closing costs???" - How about possibly neither, which I will show below. The last comment was followed with this kind of comment. - "The lower interest rates often offered with 10% down compared with FHA may make the conventional more attractive. " These same statements are mentioned in part one and written by Lenn Harley.

If you remember the title of Part 1, it was Planting seeds in the borrower's head. Read my conclusion in part 1. I truly believe when you talk about such statements, that you could be planting a seed in the borrower's head. This could confuse the borrower or even worse, make them choose your thoughts without knowing the details.  Let me show you what I am talking about.

 

 

Key Important Points -

• If the property is in a distressed area (declining market), the maximum LTV is 90%, which means you have to put 10% down.

• The monthly payments on the conventional loans can increase or decrease depending on the credit scores.

• Each scenario is the same profit margin. You would need a credit score of 720 + to avoid any pricing penalty.

• Most PMI companies won't go below a 680 credit score.  There are a few that could go down to 660, but depending on the status of the lender with that MI company. But in all honesty, FHA loans would be the best option once you go below a 680 credit score. So why even bother with details.
  

 

The scenarios used below are based on a mid credit score of 699.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Now, there are a few other scenarios, such as lender paid mortgage insurance (LPMI) or 80/10 or lender paid closing costs (which you increase the interest rate which pays for some closing costs), and a few other mortgage insurance programs. But I just wanted to give you an idea on the statements that were mentioned above and how one needs to be careful in what they state to the buyer.

On another note, FHA is trying to reduce the seller help from 6% to 3%.  HUD seeks public comment on three main issues for FHA loans.  In the examples above, I decided to pretend that FHA's seller help was reduce to 3%. 

 

Reminder : - Comparing 10% down conventional with 3.5% down FHA - In regards to the money that you don't use on the FHA loan, you either save it as cash on hand or you could invest it. You can usually get a 6% to 7% return on your money. If you have a decent idea or work with a good financial planner, you could get 9% to 10%. If you really know what you are doing and or are aggressive, you could get like 12% return. And please don't read into those that sell you the idea to pay down your house off in half the time. There are some scams out there. They work, but not as advertised.  Secondly, you will be writing off less interest if you pay off your house quicker. And the interest write off on the interest rate itself, depending on your interest rate, might not be as much as you think. Just food for thought and showing the complexities when comparing different types of mortgages.

 

 

Key Important Reminder -

Lender Overlays and different PMI companies (private mortgage companies) have different guidelines and rules. Also, when doing a conventional loan with MI, you will also have to send the file to the MI company to be underwritten.  So even if your company says yes, the MI company could still say no. On FHA loans, it's just underwritten once.

 

 

 

Conclusion : Many would think and or assume that with 10% down on a conventional mortgage, that it could be cheaper in interest rate and in payment than on a FHA mortgage with 3.5% down.  And in some cases, even though your down payment is more with a conventional loan, it could cost you more out of pocket or possibly more within the price of the home because some sellers will tack on the seller concessions onto the price. And look at the fact that you added about $6,000 of upfront mortgage insurance on the FHA loan, yet the FHA loans look to be cheaper all the way around. And you can compare the principal balances after 5 years and how much cash that you kept in your pocket with a lower monthly payment. Food for thought.

Cash is King - I highlighted the FHA loan scenario with 5% down. As you can see, the mortgage payment would actually be about $30 less than when putting 10% down. What I hear so many people focus on is the fact that they don't want to be underwater on the property.  People, buying a home is suppose to be an investment and in many cases, a long term investment. This is a whole other topic, but it needs to be discussed. You just never know what will be around the corner and having a larger savings could save you down the road. I wrote an excellent series on this topic.  Click on the Cash is King link.  Part 2 of 3  -

Numbers don't lie, uneducated facts or assumptions do.

 

 

UPDATE : I had originally worked on this post starting at 3:30 am this morning and had most of it done by 7 am. But I didn't submit it because I had to check out one issue and then the day got away from me.  But Mr. Stevens of FHA has announced new upfront mortgage insurance changes and changes for the monthly. In my opinion, the 5% comparisons, FHA loans will still be the best option, even with a credit score of 699 or less. In regards to the 10% down on conventional loans?  The payment might be better by $100, but still keeping in mind that you are keeping $13,000 in your pocket.  You need to think of the trade off and your future. Here is the link to the letter from FHA.  Bill approved to give FHA the ability to change upfront and monthly mortgage insurance.  I will be writing about this tomorrow and giving examples.  thanks

 

 

• The Mortgage Hype that seller concessions on Conventional loans could be the better play than on FHA loans - Planting Seeds in the Borrower's Head - Part 1

 

• The Mortgage Hype that seller concessions on Conventional loans could be the better play than on FHA loans - Facts & Numbers vs Assumptions - Part2

 

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                                                                                                           FOLLOW ME ON FACEBOOK

 

 

- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- FHA Home Loans - Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

Follow me on:

 

 

_____________________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

Planting Seeds in the Borrower's Head - Part 1

 

In regards to the world of mortgages, can one be more confused now then ever before? You betcha...  As many of us know, FHA is now trying to reduce the seller concession from 6% to 3%. I wrote about it here : HUD seeks public comment on 3 issues for FHA loans & Solutions for these FHA loan changes.

Let's take this up a notch now. Just the other day, I wrote a post about some listing agents not accepting offers for FHA loans and or VA loans for various reasons. There could be several ways to look at this... but there is more.

My post is sparked by a post that Lenn Harley wrote yesterday; Lenn just had a Eureka moment!! Conventional financing may permit more seller incentive than FHA. Now, don't get me wrong. I respect Lenn and many of her opinions. I will agree with the first part of her post, in regards to the questions that were asked. But I have to disagree with the 2nd part, because in my opinion, a realtor should only discuss the very basics. Lenn points out that she is looking at the forest while I look at the twigs. Well, it's my job to look at the twigs when discussing such issues when it comes to the different types of mortgages. And I believe that Lenn was looking at some of the branches when giving her opinions, and not the forest.

 

 

 

Let me define what should be the forest for the realtor. What should a realtor know and how far should they go.

A realtor should know that there are FHA loans, VA loans, Conventional loans, USDA loans, and any special kind of grant programs or state mortgage programs in their area. The realtor should know the function of each loan. And in my honest opinion, they should stop there.

 

 

So if a borrower came to you with a loan officer already, you might want to stick to the basic questions. This would be my opinion of what a forest would be for that realtor.  One of your questions to the borrower is asking them if they are military or ex-military. If they say yes, you then ask them if their loan officer went over VA loans and compared them to conventional & FHA loans. Or if you are predominantly in an area where USDA loans are accepted, you ask the borrower if this option had been presented to them. If you are a realtor like Lenn Harley, to where you have your buyers fill out a buyer's financial statement and you see good assets, you ask them if the loan officer went over various methods of financing.  Such as putting 5% down to 10% down, and comparing this to a conventional loan or an FHA loan.

Here is where I run into the problem of a realtor taking this a step further. Lenn mentions this in her post.

"Our home buyers can receive 6% closing help with 10% down.  Which benefits our buyers more, making a larger down payment or paying their cash for closing costs???"

Why I am upset about such a statement is that there are still way to many unknowns. And if you as a realtor make this suggestion and make it sound like the answer would be to put 10% down so you as the buyer can get the seller help of 6%, this could be a huge mistake. I know Lenn's statements are general and she even says this, but I think that can cause more problems than good. And if the loan officer doesn't know any better, how can you as a realtor know what is better then?

Here is another general statement that Lenn makes.  "The lower interest rates often offered with 10% down compared with FHA may make the conventional more attractive."

In my opinion, this is just an assumption that could very well play tricks on the borrower's mind.  I will tell you why some of these statements can create more problems than one would think. If the borrower starts to believe everything that the realtor says, and I end up crunching some numbers that actually make sense and explain this to them, they might still turn down my suggestions.  Even if I show them on paper. Yes, this has happened before.

 

 

Conclusion : Trust me, I understand what Lenn is saying and trying to do. But in my opinion, if you go below a certain point as a realtor when explaining their financing options, could you actually hurt the situation more than help it. I say yes.  And yes, we will have some bad loan officers in this business, period.  It's a fact.  But if you think something doesn't sound right, you just seek other like-minded mortgage professionals that you trust. But don't take it in your own hands to get into more specifics. That is why I do mortgages for a living, full time, and nothing else. I don't give opinions based on assumptions, I give facts based on collecting facts. And yes, in my opinion, there is a huge difference. What people need to understand is that a borrower's decision could be influenced because of what they heard from their realtor, just like when borrowers tell you that their dad tells them to pay no points, or to put 20% down to avoid mortgage insurance. It happens.

 

Part 2 - Facts & Numbers vs Assumptions -

In part 2 tomorrow, I am going to dissect the differences of putting 10% & 5% down on conventional loans with different credit scores and showing the difference on FHA loans with 3 1/2% down and those same credit scores. I want to introduce different reasons to why even with 10% down and getting the seller to pay an additional 3% could be worse for the buyer, such reasons to make you think otherwise.

 

 

• The Mortgage Hype that seller concessions on Conventional loans could be the better play than on FHA loans - Planting Seeds in the Borrower's Head - Part 1

 

• The Mortgage Hype that seller concessions on Conventional loans could be the better play than on FHA loans - Facts & Numbers vs Assumptions - Part2

 

_____________________________________________________________________________________________________

 

                  

                                                                                                           FOLLOW ME ON FACEBOOK

 

 

- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- FHA Home Loans - Mortgages -

 

Experience & Knowledge at its BEST !!!

 

 

Follow me on:

 

 

_____________________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc