Exciting news for Potential FHA loan Borrowers From a Real Estate Agent Perspective

You may have heard recently in the media or even read it on a news, mortgage or real estate website.

HUD also known as the U.S. Department of Housing and Urban Development announced new lower premiums on the common fee of Mortgage Mortgage Insurance or to some often referred to as PMI.

Just a little rundown. If you take out a FHA Loan to secure the financing on your home, you have what’s referred to as MIP aka Mortgage Insurance Premium attached to your loan on a annual (it’s broken down monthly in your mortgage payments) basis and upfront fee.

Essentially, the upfront fee was 1.75% of your loan for loans issued on a 30 year note. This amount can be paid at closing by you, the borrower along with your other closing costs associated with your loan including your down-payment funds or it can be rolled into your loan (at lender discretion) instead. So to give you a rough estimate of that amount. Let’s say you are doing a loan for $100,000 and on that your down payment would be 3.5% or $3,500 on a FHA loan. With the MIP upfront fee of 1.75% (current rate prior to change effective January 26, 2015), that would leave you having to bring $1688.75 + 3500 for a total of $4,688.75 to closing and that’s before any other closing fees like appraisals, title work, home warranty, or escrow funds. And on your monthly loan payments say at a 4.75% Annual Percentage Rate, that tacks 1.35% or for the example given $108.56 on to your Principal & Interest would be $512.20, and that total doesn’t include your Taxes and Home Insurance which all comprises your mortgage payment. Those totals so far monthly would be $620.76 again not including your taxes and insurance that would be required as part of your monthly payments.

Confused much? I hope not this is just a rough estimate to show you the effect of the current 2013 MIP Upfront and MIP Annual fees on your mortgage payment each month and closing on your loan.

WHO WANTS THAT?

Now with the proposed announced change, that fee has now been changed to 0.85% on the annual MIP amounts. So for that same loan in the example above your Principal and Interest would be $512.20 but now your monthly MIP would be roughly $71. So under the proposed new changes your payment would $583.20 before taxes and insurance. That new $38 difference can mean a lot to FHA borrowers especially when you look at it over the life of the loan or on a 30 year basis. That would be essentially saving roughly $13,680 over 30 years in a fee that doesn’t apply towards the principal balance of your overall loan.

Dramatic Difference in Payments Right?

That now makes the FHA more affordable to first time home-buyers and those holding loans issued in the last 36 months. And it could result in reductions for those existing FHA borrowers serving to put money back in their pockets each month or they can take a hint and apply it to their principal each month and pay down their mortgages quicker.

Take a look at this past post I did as well regarding money and home purchases.

If you are interested in purchasing a home using the FHA low down-payment program of 3.5% down for St. Louis Real Estate email me at tamara@realestatestlouisnow.com or call me at 314.660.9709

Or use the confidential form below to reach me:

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Home Buyer This One’s for You!

Have you or are you currently on the hunt for a new home and just couldn’t quite get to a starting point. Or maybe you are like I used to be, you grab the publications out of the grocery store entrance then come home look at them all only to discover you’re no further along in the search than when you didn’t have the publications. So your next step is, you drive around looking at homes with For Sale signs in the yard. You find one you want to see, called the number of the sign and hear “Sorry that house is under contract and we are not taking backup offers”. <<<<<<< Put's you back at square 1 all over again…(Long Sigh).

Let’s just say this is a big decision and doing it the long way will only serve to slow you down. Stop that back and forth. I am writing this to give you a surer way to start your search, make a list of must haves vs wants in your next home, what steps to take before you being that house hunt and then how that timeline will progress once you find the home you want to call your own.

As I am sitting here writing this, there are over 3000 “active” listings in just St. Louis County along, not including St. Louis City or St. Charles. What does that equate to you? Stop driving from house to house, sit down and make a list of houses you want to see, you can start on my website, Homes in St. Louis you can even set up alerts so that you know the moment the houses that meet your criteria comes onto the market.

But on to the meat and potatoes!

Here is a list of the way your path should begin:

  1. Find a Real Estate Agent
  2. Make a list of wants vs needs in your next home
  3. Obtain a Pre-Approval not a Pre-Qualification (most sellers want to know that you can obtain financing not that just your income says you can)
  4. I will give you access to view houses that are currently on the market and will setup appointments for you to view them based off your schedule
  5. You have located the “One”, now it’s time to write an offer
  6. If you offer is accepted, you will provide an Earnest Money Deposit
  7. If your offer is rejected, you may receive a Counter Offer from the Seller. You can negotiate until you both arrive at agreeable terms and have both accepted the new terms. 
  8. Here is where you will setup Inspections (termite, pest, survey, title, home), this is where things are uncovered or learned about the house. Not all of them are required but I do suggest them so that you know fully what is there with the Seller’s Disclosure  (if provided)
  9. You then progress to removing each of the contingencies that were called for in the contract or you may amend the original contract if you disagree with things learned.
  10. Start looking into Insurance, you may need Hazard and/or Flood, depending on where your house is located. You want to make sure this is all done and ready by the time you make it to the last phase, closing.
  11. On to Financing, this is where you will actually apply for the mortgage. The lender will pull your credit report, order appraisal on the house, and verify information from your application. 
  12. The mortgage application is sent through Underwriting, this is where your application is triple checked and the Lender may come back with conditions that must be met before a final loan commitment is given. (This is where you may have to explain or write letters as to what’s on your credit report, or may have to pay some things off on your credit to move forward).
  13. Once all of this is done, the Lender can reject or approve your loan. If approved, you are issued a Loan Commitment. 
  14. All information is then passed along to the escrow, title or closing agent that will handle your final closing. That means the lender will send over their information, insurance sends over theirs, Home Warranty is ordered (if seller offered or buyer purchased). Closing date is scheduled and time slot picked for closing.
  15. 24 hours to 48 hours prior to closing, you will get what is referred to as a HUD-1, this details all costs with final numbers and should be checked for possible errors or omitted costs. You can then proceed to getting your certified funds check or setting up a bank wire transfer (personal checks are not accepted).
  16. During the last 24 hours before the closing, your final walk-through will be scheduled. This is where you would go to the house, check to make sure that things that were offered in the contract were left behind and that there is no damage to the house or that it’s in the same condition as when you first viewed it (minus the seller’s personal possessions if it was occupied when you viewed it).
  17. THE FINISH LINE:  Congratulations you are at the closing, this is where you do the bulk of the work, you will be signing documents left and right. But you know that you have made it through the toughest parts.
  18. You are handed your new keys at this point and can get the moving van rolling on your possession date! (Sometimes its the same day as the closing, if you negotiated that during the contract).
Here is a Home Tour Comment Sheet to carry with you when viewing houses, it helps you sort through wants and needs and take notes on the properties that you have viewed. Print out several copies to have one for each property to sit down and reference when you’re ready to decide on the one that you want to put the contract in for.

Pre-Approval for your Mortgage or Not?

When you are going to purchase a home there are a few things you want to make sure you understand. You will most likely need a home loan to complete the purchase, most of us don’t just have the money laying around to do so with cash. I know if I did, I would be building my house from the ground up.

This is where banks, credit unions, mortgage brokers and loan officers come into play. Before starting your home search, you need to really know how much you can afford financially to stay within your desired budget. This amount would be your bottom line which would include Principal, Interest, Taxes and Insurance most often referred to as P-I-T-I. This will be the total amount you are paying monthly to afford that beautiful home that you desire.

You can start at point A, pre-qualification to get to point B, pre-approval. Or skip A and go straight to B, saving yourself a few minutes out of your search.

You can start with a pre-qualification if you are just wanting to get a general ideal of where you stand, this part doesn’t require much. You will likely be on the phone with the loan officer a few minutes or do it online yourself. You will enter or be asked general questions about how much you make annually from your business or job, how much debt you have and how much you have in assets like retirement accounts. From there they give you a ballpark figure about how much you qualify.

Hence the statement, pre-qualification. It doesn’t involve pulling your credit or asking for documentation at this point. Also, going house-hunting with this figure firm in mind can lead to let down later and that’s where the actual pre-approval comes into play trust me it will save a few miles on your car and your mind.

Pre-approval is a much more rigorous process. Don’t let that scare you off and here’s why.
The pre-approval actually gives the lender the go ahead to pull your credit, ask for documentation of income, debts and assets. This is usually your official mortgage starting point when you are really ready to jump out there and make that journey into home-ownership. This shows the REALTOR® that you are searching in the right price point for your home and serious. In fact, studies show that most REALTORS® won’t begin showing you homes until you get to this point.

Pre-approval means you have sat down and know that you can purchase the house and avoid driving all over town looking at houses and find the one you love….only to apply for the mortgage and it’s over your head budget wise. It essentially says that the lender is offering you a mortgage conditioned on the information you provided and that you find a home that fits into that amount.
This gives you less downtime as well, with the pre-approval, the process shortens from contract to close on your home because the lender has committed to loaning you the money.

Most people going out house-hunting find out the hard way. They start looking at houses and find that treasure and then put in a Residential Sales Contract (hopefully with a Buyer’s Agent representing them). The Buyer’s Agent will usually make that offer on the house contingent on financing. What that means is, you will go through with the purchase if your loan is fully approved by your chosen lender. So should you skip the step of pre-approval and go straight into applying for the mortgage after you have a contract on the house, you may find out that the house you want cost $130,000 but the lender only approved you for $80,000 towards that price. You would be short on the agreed sales price $130,000 (price)-$80,000 (loan amount) =$50,000 shortage. Unless you can get the home seller to drop the price down and renegotiate the price down to $80,000, you would have to come up with the $50,000 if you really want that specific house. Now don’t get me wrong some people have saved that or close to it, but did you?

There goes that house slipping away. There are other parts of the lenders process that can cause it to become a dream once known such as a low appraisal that comes in below the purchase price.

Bottom line this one of the main reasons why it’s important to start your house search with a pre-approval in hand from your lender. Save yourself an unrealistic and dreadful home search. There are many lenders that you can contact, in fact I would suggest get at least 3 quotes.

If you need assistance with the process you don’t have to go it along, visit my website St. Louis Homes for Sale I will place you in touch with lenders who can talk with you about the difference in a Pre-qualification vs Pre-approval.

New Mortgage Rules Officially Named "Qualified Mortgage" and What that Means for YOU the Consumer!

You may have read a lot or heard a lot regarding the new mortgage rules and how that will lend credence to your first or next home purchase. Read on to find out how this affects you and what protections it offers:

Visit houselogic.com for more articles like this.

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