Below is an email I received yesterday from the lender who assists most of our buyers.
Christine really pays attention to what is happening in the industry and makes sure our clients don’t miss out on opportunities to save money. She passes on information to us all of the time…but I thought this announcement was one everyone should hear.
From Christine Menker-Wilson:
I wanted to reach out to you to update you on recent announcements made by HUD.
We have some not-so-good news but also some VERY good news to pass on to you.
First, the not-so-good news.
HUD has announced that on all FHA case numbers obtained on or after April 9, they will be raising the upfront mortgage insurance premium from 1% to 1.75%.
This is a fee that can be financed into the loan.
What does this mean? It means that a borrower purchasing a home now for $150,000 would have had a base loan amount of $144,750, an upfront mortgage insurance premium financed into their loan of $1,447.50 and a total loan amount of $146,197.
For this same sales price of $150,000, after April 9, this same borrower will now have a base loan amount of $144,750, an upfront mortgage insurance premium financed into their loan of $2,533.13 and will then have a total loan amount of $147,283.
Essentially, FHA borrower’s will owe more on their home under the new fee structure.
In addition, HUD is raising the monthly mortgage insurance premium by 10 basis points per month.
What does this mean? On the same $150,000 sales price scenario for a borrower obtaining a 30-Year Fixed Mortgage, their payment will increase by approximately $13.31 per month.
MY ADVICE: If you have a borrower needing FHA financing that is ready to write an offer, write the offer ASAP so that we, as you lender, can request the FHA case number from HUD no later than April 4.
There have been occasions when we order case numbers and we don’t receive the case number back from HUD the same day… or even the next day. So submit the contracts no later than April 4 so we can provide financing under the less expensive fee structure.
Now, the VERY good news.
So many borrowers who took out an FHA loan in the past have been precluded from refinancing their homes due to the rising cost of monthly mortgage insurance.
When borrowers obtained their original loan, the monthly mortgage insurance wasn’t that expensive. Under the current fee structure (which is about to go up…see above), the monthly mortgage insurance cost has doubled from what it once was.
So even though we can offer an interest rate that is much lower than the rate on their current mortgage, the monthly mortgage insurance cost on the new loan is so much higher than on the old one, it offsets any savings they would have received by getting a lower interest rate.
HUD has announced that for Streamline Refinance transactions that are refinancing existing FHA loans that were endorsed prior to May 31, 2009, the mortgage insurance premium will drop back down to 55 basis points per month (half of what the cost is currently).
Anyone who obtains a FHA refinanced loan with a case numbers assigned on or after June 11, 2012 is eligible.
This means that people interested in reducing their FHA mortgage payment can take advantage of today’s low rates with a monthly mortgage insurance premium that is comparable to what they already have.
Remember, we have to wait until June 11 to order the case numbers but if we start the process now, the loan can be processed more quickly once we have the case number.
Christine Menker-Wilson is a Senior Mortgage Banker with Realty Mortgage Group. Christine offers a no-fee refi for Arch City Homes clients and friends with refi’s of $150,000 or more (restrictions apply). Christine’s industry requires us to share her NMLS: 238373 and License: 10-730-MLO.