FHA Refinance Incentive

President Obama announced a new major FHA change last week that generated a lot of press and has a lot of substance.  Home owners who purchased prior to May 31, 2009 using FHA financing will be allowed to refinance at an up-front mortgage insurance (MIP) factor of only .01% and an annual MIP factor of only .55%. Note in segment below that these factors are increasing by significant amounts in just a few weeeks so this will equate to HUGE savings for any eligible home owner.  This is a big deal equating to a savings of $100 a month on a $150k loan!

FHA Incentive to Finalize Contracts By April 6th

As announced last week, effective with all case numbers assigned on or after Monday, April 9th (originally reported as Apr 1st), FHA up-front mortgage insurance (MIP) is increasing from 1% to 1.75% and FHA monthly MIP is increasing from 1.15% to 1.25%. These increases will add $11 to a buyer's payment on a $100k purchase, $17 a month on a $150k purchase, and $23 a month on a $200k purchase.  This is not great news for the FHA buyer but creates quite an incentive for the home to be selected, contract finalized, and the FHA Case # ordered by Friday, April 6th.

FHA Commentary Period Now Open Regarding Maximum Seller Paid Concessions

FHA is taking comments through March 26th on the FHA proposal to limit maximum seller paid concessions from 6% to 3% or $6000, whichever is greater.

Click here to submit your comments on the reduction of seller concessions

At first glance, this proposal appears to be bad news because of how important it is to minimize an FHA buyer's cash out of pocket.  However, upon closer examination, the overriding $6,000 cap actually increases the limit that the seller can pay on transactions under $100k, so it's not all bad and actually better for lower-priced homes.  For example, the limit increase to 8% on a $75,000 home!

HARP 2.0 Rolling Out on March 19th

A reminder that the government-sponsored HARP 2.0 program is rolling out on March 19th.  This will enable current home owners with loans owned by Fannie Mae or Freddie Mac who purchased prior to May 31, 2009 to refinance despite the current value of their home. The two big changes moving forward are that the program allows for an unlimited loan-to-value and allows for the current level of PMI to be maintained if PMI currently required.  Second mortgages can't, however, be rolled into the new loan.  These are huge changes and will enable many more home owners to refinance.

This information was provided by:

Nancy Greive, Fairfield Mortgage

Perhaps making it more feasable for homeowners to refinance and afford to stay in their homes will help decrease the number of future foreclosures. Only time will tell, but this seems like a step in the right direction.

Contact Lisa Ethridge with any questions.