My How Times Have Changed… Or Have They?

Some perspective on the loan origination business, from a veteran MLO

 

This June marks my fortieth year in the financial services industry.  It is interesting, how much that we think has changed, remains the same (or perhaps, should be).

 

  • The first company that I worked for, had an “internal”      scoring system. We gave points to an application, based upon length of      time on the job, length of time in the residence, type of job, payment      history, our past experience with the customer, savings history and      whether or not they were currently a homeowner. In order to even process      the loan, we had to have a minimum credit score. If they did not meet the      minimum credit score, we were encouraged to meet with the customer face to      face, and explain to them what they could do to be approvable in the      future.
  • In 1974, we decided (finally) that it probably made      good business sense to grant loans to individuals regardless of what their      future “child bearing” plans were, and whether or not, the wife planned to      continue employment.
  • We tried to establish what was a stable monthly income,      by averaging overtime and bonuses over two years.
  • We allowed that issues could arise with credit; but, we      wanted to determine if it was a recurring issue, or, a one-time problem      that had been resolved.
  • We calculated ratios and the borrower’s ability to pay,      based upon the stable monthly income. We determined that it was a “high      ratio” at 38%.  If a borrower went over 40%, they would have to have      very strong compensating factors, like high residual income, and strong      savings pattern.
  • In 1974, the minimum down payment was 3% on FHA, 5% on      conventional. This remained the case until 2009, when it changed to 3.5%      for FHA.
  • The most popular mortgage instrument was a thirty year      fixed rate loan.
  • Loans with pre-payment penalties were non-existent.
  • Since most loans were originated by local financial      institutions, very few loans ever had “points” or origination fees.      Basically, there was a small processing fee, title and recording fees, and      that was it!
  • Since most loan officers were employees of their      institution, the company was responsible for the education and training of      their employees.

 

Of course, there are a few changes. What might take fifteen minutes for a computer to send across country is now done instantaneously; we now have computers to retype an application when changes occur, and, the novel idea of taking a Polaroid picture of a property has now been replaced by a standard of digital pictures, internal and external, as well as the comparable sales.

 

There are a few things that came and went into fashion during that time, pagers gave way to cell phones, faxing gave way to emails, and, sending out information about your company is now done via social media.

 

One of the recent changes for a loan officer is “cross qualification”.  In its purest form, this service, offered by a loan officer is designed around adding value to the listing agent’s tool box, as they struggle to provide value added service to the real estate transaction.  In its most perverted form, it is a loan officer attempting to steal a deal from a hard working loan officer that has strived to serve their customer, and does not want to stand in the way of their client successfully negotiating a sale on their dream home.

 

Let me state, it is very important for listing agents to obtain cross qualification from loan officers that they have worked with in the past, and therefore can know and trust their expertise.  With current standards, it is imperative that your seller enter into a contract that they know through an independent third party, that the transaction will close.  And, it is equally important that the loan officer doing the cross qualification provide value to the transaction in helping the seller obtain the maximum sales price, as they help the seller sort through, the best price offer on the property, by giving the listing agent, quality feedback on each buyer.

 

Recently, I had a friend from a competing lender that was doing the cross qualification on a loan our company had originated. When we sent over the “cross qualification” documentation, she indicated to me that their company’s maximum debt ratio on an FHA loan was 50%.  The buyers ratio that I was submitting for cross qualification, was at 51%. She suggested I re-run the approval on a 5/1 loan, to get the ratios under 50%, so that they could do the formal cross qualification through their company. This is two professionals, acting collegiately, to serve a mutual customer  base, that is the seller (listing agent), and buyer.  Whenever our company does a cross qualification, we ask for documentation and information that will allow us to verify the correct lending decision has been made by THEIR lenders standards, not just our internal standards. Still, it is important for you as the loan officer, to clarify to your agent, what the standards your company might have, as it relates to providing the financial resources to this sale.

 

When you do a “cross qualification” I would suggest you do the following (and if you company has requirements, suggest they work to this standard)

  • Approach the transaction with the desire to help the      listing agent complete a sales transaction at the highest sales price for      the seller.
  • Request copies of current 1003, AUS, current pay stub,      and, in the case of self-employment, tax returns, from the existing      borrower; or with authorization, their loan officer.
  • If you have concerns,  point out the potential      pitfalls to the application when discussing with your listing agent.
  • Work hard to develop a rapport with the buyer’s agent      by offering to work with their existing loan officer.
  • Always request copies of information with identifying      information “blacked” out.
  • Speak with the potential buyer to confirm their      information, and insure that underwriting standards can be met.
  • Work to develop a close rapport with the loan officer      who has the buyer. At the very least, your regional manager, or recruiting      officer, will appreciate that you have treated your “competition”       with respect, and, you might have a friend that can help you with your      buyer in the future. If you are in the business as long as me, that is      very likely!

 

When done properly, cross qualification can be a service to the listing agent, and, help to insure that you receive your share of referrals from that agent, and that office. It can help you to add to your list of referral partners, by treating the buyer’s agent, and their lender with respect, and not “transactional” .

 

Happy originations!

John Osslund
Integrity 1st Mortgage – President

April 18, 2014 by · Leave a Comment

If You….

 If You…

 If you like a challenge
And can solve problems
If you can be flexible
And learn new things quickly,
If you have a network of people
And you would like to meet more
If you are driven to succeed…
                                            Then maybe my friend
                                            We could hire YOU!

Integrity 1st Mortgage is always looking for talented individuals, who have a strong network of people with which to do business. We are a direct lender, with in house underwriting. We are also nimble enough to adapt to our ever changing business. Licensed in Arizona, California and Michigan, we have the key to your success!

June 11, 2012 by · Leave a Comment

Do I or Don’t I? That is a loaded question when it comes to Credit!

As Loan Officers, we are frequently asked by our clients, “What can I do to improve my credit score?”. There are many Do’s and Don’t of Credit, which will not just to raise your score, but just as importantly, it will help you to make sure you don’t lower your credit score! I have a passion for helping my clients improve their financial situation before, during and after the loan process. I hope that this information will help;

Do:

  • Stay Current on Existing Accounts – One 30 day late can cost you!
  • Continue to Use your Credit as Normal – If it appears you are changing your credit pattern, it will raise a red flag and your score could go down.
  • Call your Loan Officer before life changing events to discuss – Call before making any address or credit changes that may affect your score or balances. This is especially important now because we must run credit just before the close of escrow to ensure that no new credit has been obtained: and that balances on existing credit haven’t increased.
  • Disclose all debts and payments. Make your Loan Officer Aware of any debts that may not appear on your credit report. We must account for all liabilities for which you are responsible. If you are purchasing multiple properties at the same time, even if they haven’t closed yet, or have just closed, those must be disclosed on your loan application; or they could hold up your closing or even prevent it.

Do NOT:

  • Apply for new credit. Every time you have your credit pulled by a potential creditor or lender, it can affect your credit score and we must include the new debt on your application; no matter when in the process you get it. This includes co-signing for a loan for someone else.
  • Pay off collections or “charge-offs”. If you want to pay off old accounts, do it through escrow. Be sure to request a “letter of deletion” from the creditor.
  • Close Credit Card Accounts. If you close a credit card account, it may appear that your debt ratio has gone up. Closing a card will affect other factors in the score, including credit history.
  • Max out or over-charge credit card accounts. Try to keep your credit card balances 30% or more below their limit during the loan process – less than 50% of the limit is best. If you pay down balances, do it across the board on all credit cards.
  • Consolidate your debt. When you consolidate all of your debt onto one or two credit cards, it will appear that you are “maxed out” on that card and your credit score will be penalized.

If you have any questions about the Do’s and Don’t of Credit during the loan process, please call Lisa Amato, Vice President/Branch Manager – Integrity 1st Mortgage, at (480) 244-6490.

December 14, 2010 by · Leave a Comment

Seven Things Your Agent Should Know About Your Mortgage Approval

While many experienced real estate agents have a general understanding of the mortgage approval process, there are a few important details that frequently get overlooked which may cause a purchase to be delayed or denied.

New regulation, updated disclosures, appraisal guidelines, mortgage rate pricing premiums, credit score, secondary approval layering, rescission deadlines, property type, HOA insurance requirements, title and property flip rules are just a few of the daily changes that can have a serious impact on a borrower’s home loan financing.

With today’s volatile lending environment, it’s obviously important for home buyers to get a full loan approval which clearly defines all contingencies that pertain to each unique home buyer’s scenario prior to spending any time looking at new homes with an agent.

Either way, we’ve listed a few of the top things your agent should keep in mind while showing you new properties:

Caution – Agents Beware:

Property Type –

High-Rise, Condo, Town House, Single Family Residence, Dome Home or Shoe House… all have specific lending guidelines that can influence down payment, credit score and mortgage insurance requirements.

Residence Type

Need to sell one home before moving into another? Is a property considered a second home if it’s in the same city?  What if I’m buying a home for my children to live in, it is still considered an investment property?

These are just a few of several possible residence related questions that should be addressed by your agent and loan officer at the initial loan application.

Rates / Locks

Mortgage Rates are typically locked for a 30 day period, and one of the only ways to get a new rate is to switch mortgage lenders.  Rates also have certain adjustments for property / residence type, credit score and down payment which could have a big impact on monthly payments and therefore approvals.

A 1% increase in rate could literally mean the difference between an approval or denial.

Headline News / Employment

Underwriters watch the news as well.  Borrowers who work in a volatile industry during hard economic times may have to jump through a few extra hoops to prove that their employment and income is secure.

Job changes, periods of unemployment or property location in relation to the subject property are other things to consider that may cause a speed bump in the approval process.

Title / Property Flip –

A Flip is considered a property that has been purchased by an investor and quickly sold to a new buyer within a 30-90 day period.  Generally, an investor will do a little rehab work, fresh paint, landscaping…. and try to re-sell the property for a significant profit margin.

While it seems like a perfectly fair transaction, many lenders have strict guidelines in place that prevent borrowers from obtaining financing on properties that have a previous owner with less than 90 days of documented ownership.

These rules change frequently, and are specific to particular property types, so make sure your agent is aware of all the boundaries associated with your approval letter.

Homeowner’s Association Insurance

Some lenders require Condos and Town House communities to have sufficient insurance and reserves coverage pertaining to specific ratios on units that are owner occupied vs rented.

It may also take a few weeks and cost up to $300 to receive an HOA Certification, so make sure your Due-Diligence period is set accordingly in the purchase contract.

Appraisal Ordering Procedures

Appraisal ordering guidelines are changing quite frequently as regulators implement many new consumer protection laws created to prevent future foreclosure epidemics.

Unfortunately, some of the new appraisal regulations have proven to slow the home buying process down, as well as confuse lenders about the true estimate of neighborhood values.

VA, FHA and Conventional loan programs all have separate appraisal ordering policies, so make sure your agent is aware of which loan you’re approved for so that they document any anticipated delays in the purchase contract.

For example, if an appraisal takes three weeks and the average time for an approval is two weeks, then it probably isn’t smart to write a purchase contract with a four week close of escrow.

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Related Articles – Home Buying Process:

April 1, 2010 by · Leave a Comment

Do I Need To Sell My Home Before I Can Qualify For A New Mortgage On Another Property?

Although every situation is unique, it is not uncommon for homebuyers to qualify for a mortgage on a new home while still living in their primary residence.

Perhaps you are outgrowing your current house, or have been forced to relocate due to a job transfer?  Regardless of the motivation for keeping one property while purchasing another, let’s address this question with the mortgage approval in mind:

So, Do I Have To Sell?

Yes. No. Maybe. It depends.

Welcome to the wonderful world of mortgage lending. Only in this industry can one simple question elicit four answers…and all of them may be right.

If you are in a financial position where you qualify to afford both your current residence and the proposed payment on your new house, then the simple answer is No!

Qualifying based on your Debt-to-Income Ratio is one thing, but remember to budget for the additional expenses of maintaining multiple properties. Everything from mortgage payments, increased property taxes and hazard insurance to unexpected repairs should be factored into your final decision.

What If I Rent My Current Property?

This scenario presents the “maybe” and the “it depends” answers to the question.

If you’re not quite qualified to carry both mortgages, you may have to rent the other property in order to offset the mortgage payment.

In that scenario, the lender will typically only count 75% of the monthly rent you are proposing to receive.

So if you are going to receive $1000 a month in rent and your current payment is $1500, the lender is going to factor in an additional $750 of monthly liabilities in your overall Debt-to-Income Ratios.

Another detail that can present a huge hurdle is the reserve requirement and equity ratio most lenders have. In some cases, if you are going to rent out your current home, you will need to have at least 25% equity in order to offset your payment with the proposed rent you will receive.

Without that hefty amount of equity, you will have to qualify to afford BOTH mortgage payments. You will also need some significant cash in the bank.

Generally, lenders will require six months reserve on the old property, as well as six month reserves on the new property.

For example, if you have a $1500 payment on your old house and are buying a home with a $2000 monthly payment, you will need over $21,000 in the bank.

Keep in mind, this reserve requirement is incremental to your down payment on the new property.

What If I Can’t Qualify Based On Both Mortgage Payments?

This answer is pretty straightforward, and doesn’t require a financial calculator to figure out.

If you are in this situation, then you will have to sell your current home before buying a new one.

If you aren’t sure of the value of the home or how your local market is performing, give us a ring and we’ll happily refer you to a great real estate agent that is in tune with property values in your neighborhood.

…..

As you can tell, purchasing one home while living in another can be a very complicated transaction.  Please feel free to contact us anytime so we can review your specific situation and suggest the proper action plan.

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Related Articles – Mortgage Approval Process:

April 1, 2010 by · Leave a Comment

What Do Appraisers Look For When Determining A Property’s Value?

Most people are surprised to learn what appraisers actually look at when determining the value of a real estate property.

A common misconception homeowners generally have is that the value of their home is determined after the appraiser has completed their physical property inspection.

However, the appraiser actually already has a good idea of the property’s value by the time they have scheduled an appointment to stop by the property.

The good news is that you don’t have to worry so much about pushing back an appointment a few days just to “clean things up” in order to help influence the value of your property.

While a clean house will certainly make it easier for the appraiser to notice improvements, the only time you should be concerned about “clutter” is if it is damaging to the dwelling.

The Key Components Addressed In An Appraisal

The Site:

Location, view, topography, lot size, utilities, zoning, external factors, highest and best use, landscaping features…

Design:

Quality of construction, finish work, fixed appliances and any defining features

Condition:

Age, deterioration, renovations, upgrades, added features

Health & Safety:

Structural integrity, code compliance

Size:

Above grade and below grade improvements

Neighborhood:

Is the property conforming to the neighborhood?

Functional Utility:

Is the property functional as built – style and use?

Parking:

Garages, Carports, Shops, etc..

Other:

Curb appeal, lot size, & conforming to the neighborhood are obvious to the appraiser when they drive down into the neighborhood pull up in front of your home.

When entering your home, they are going to look at the overall design, condition, finish work, upgrades, any defining features, functional utility, square footage, number of rooms and health and safety items.

Be sure to have all carbon monoxide and smoke detectors in working condition.

Since the appraisal provides half the weight in any credit decision involving the security of real estate, the appraisal should be done by a qualified, licensed appraiser whom is familiar with your neighborhood, and the type of home you are buying, selling or refinancing.

If you’re interested in what specifically appraisers are looking for, here is a copy of the blank 1040 URAR form that is used by every appraiser in the country.

Related Update on HVCC:

Appraisers hired for a mortgage transaction on a conforming loan are chosen from a pool of qualified appraisers at random. Neither you nor your lender has the flexibility of deciding which appraiser will inspect your home.

This recent change was brought on with the Home Valuation Code of Conduct HVCC, and is effective with conventional loans originated on or after May 1, 2009.

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Related Appraisal Articles:

March 29, 2010 by · Leave a Comment

Where Does My Earnest Money Go?

Hey, I gave my real estate agent a $5000 Earnest Money Deposit check… Where does that money go?

A basic and very obvious question that most First-Time home Buyers ask once their purchase contract gets accepted.

According to Wikipedia:

Earnest Money – an earnest payment (sometimes called earnest money or simply earnest, or alternatively a good-faith deposit) is a deposit towards the purchase of real estate or publicly tendered government contract made by a buyer or registered contractor to demonstrate that he/she is serious (earnest) about wanting to complete the purchase.

When a buyer makes an offer to buy residential real estate, he/she generally signs a contract and pays a sum acceptable to the seller by way of earnest money. The amount varies enormously, depending upon local custom and the state of the local market at the time of contract negotiations.

An Earnest Money Deposit (EMD) is simply held by a third-party escrow company according to the terms of the executed purchase contract.

For example, there may be a contingency period for appraisal, loan approval, property inspection or approval of HOA documents.

In most cases, the Earnest Money held by the escrow company is credited towards the home buyer’s down payment and/or closing costs.

*It’s important to keep in mind that the EMD may actually be cashed at the time escrow is opened, so make sure your funds are from the proper sources.

The Process:

  1. Earnest Money is submitted to an escrow company with the accepted purchase contract
  2. At the close of escrow, the EMD is credited towards the down payment and / or closing costs
  3. If there are no closing costs or down payment, the EMD is refunded back to the buyer

Who Doesn’t Get Your Earnest Money:

  • Selling Real Estate Agent – A conflict of interest
  • Sellers – Too risky
  • Buying Agent – They shouldn’t have your money in their account

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Related Articles – Closing Process / Costs

March 28, 2010 by · Leave a Comment

Renting vs Buying A Home

Buying a home versus renting is a big decision that takes careful consideration.

While there are several biased sources that can make arguments for or against owning a home, we’ve found that most home buyers base their ultimate decision on emotion.

Yes, there are some tax advantages of owning real estate, as well as the potential to earn equity or pay a mortgage note off after several years.

However, let’s address some of the more obvious topics of discussion first.

Benefits Of Renting:

Lower Acquisition Cost –

Unless you’re able to qualify for a mortgage loan with zero down and have your closing costs paid for by the seller, a typical investment to purchase a home is around 3.5% – 7% of the purchase price for down payment and closing costs on an FHA mortgage, and an average of 13% – 23% for a home secured by conventional financing.

Compared to the cost of about 1-3 month’s rent payment, it’s obvious that renting a home makes financial sense in the short-term.

Lower Qualifying Standards –

While the FHA and other government insured mortgage programs have more flexible credit / qualifying guidelines than most traditional home loan programs, there is certainly a lot less paperwork and personally invasive probing required by most landlords and property management companies.

Generally proof of employment / income and a decent credit history (or a good explanation) is needed to rent a home.

Freedom To Move –

It’s easy to find a home through a reputable property management company, move in that weekend and then leave a year later when the rental contract expires.  Not being tied down by a long-term mortgage liability is ideal for people new to a community, in a career that keeps them on the go or for parents with children that prefer a certain school district.

Plus, if you’re planning on moving in the next 3-5 years, then it may become cost-prohibitive due to the amount of equity you’ll have to gain in the short-run just to cover the cost of paying an agent, buyer closing costs, transfer taxes…. so that you can at least break even at closing.

Less Maintenance and Cost –

If something breaks, a simple call to the property management company will generally solve the issue in 48 hours or less.  Plus, renters don’t have to carry expensive homeowners insurance, pay property taxes or worry about interest rates adjusting.

Benefits of Owning:

Pets Are Allowed –

Well, according to the rules and regulations of your county or neighborhood HOA, you can pretty much have as many domestic and exotic pets without having to pay extra deposits.

It may seem like a funny benefit to mention first, but the millions of dog and cat lovers would definitely rank this towards the top of their list.

Pink and Purple Walls –

Yep, you can paint the inside of your house any color you choose.  And depending on whether or not there is an HOA in place, you could probably do the same thing on the home’s exterior.  Landscaping, flooring, built-in shelving… it’s your property to renovate and grow in.

Peace-of-Mind and Security –

The only way you would be forced to move is if the bank forecloses on your property due to a default in mortgage payments.

So basically, you don’t have to worry about a landlord’s financial ability to make mortgage payments on time. Plus, you can stay in your own property as long as you wish.

Tax Benefits -

The US government has created certain tax incentives making it possible for many homeowners to exceed the standard yearly deduction.

*Disclosure – Check with your CPA or Tax Attorney to verify your own unique filing scenario*

The following three components of your home mortgage may be tax deductible:

a) Interest on your home mortgage
b) Property Taxes
c) Origination / Discount Points

Stability -

Remaining in one neighborhood for several years lets you and your family establish lasting friendships, as well as offers your children the benefit of educational continuity.

Appreciation of Property -

Historically, even with other periods of declining value, home prices have exceeded consumer inflation. From 1972 through 2005, home prices increased on average 6.5%, according to the National Association of Realtors®.

Forced Saving -

The monthly payment helps in repayment of the principal amount. Also when you sell you can generally take up to $250,000 ($500,000 for married couple) as gain without owing any federal income tax.

*Disclosure – Check with your CPA or Tax Attorney to verify your own unique filing scenario*

Increased Net Worth

Few things have a greater impact on net worth than owning a home. In a comparison of renters versus homeowners, the Federal Reserve Board of Consumer Finance found that the average net worth of renters was just $4,000 compared to homeowners at $184,400.

While the available tax advantages and potential for earned equity are generally highlighted by most industry professionals as the top reasons to own real estate, it’s important to remember that markets go through cycles.

However, owning real estate that appreciates more than the rate of inflation may help contribute towards your overall investment portfolio, provided your maintenance and mortgage costs are kept low.

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Related Articles – Home Buying Process:

March 28, 2010 by · Leave a Comment

What Does Title Insurance Protect Me From?

By including title insurance when purchasing property, your title insurer takes on accountability for legal expenses to defend your property title, should it ever be challenged.

Many different occurrences can come into play to warrant the need for title insurance.

The title company responsible will then take on the legal expenses to defend the property for as long as you are in possession of an interest in the property under the title.

If the defense is not successful, you will be reimbursed for any loss of value of the property.

Common Things Title Insurance Covers:

1. UNDISCLOSED HEIRS, FORGED DEEDS, MORTGAGE, WILLS, RELEASES AND OTHER DOCUMENTS

2. FALSE IMPRISONMENT OF THE TRUE LAND OWNER

3. DEEDS BY MINORS

4. DOCUMENTS EXECUTED BY A REVOKED OR EXPIRED POWER OF ATTORNEY

5. PROBATE MATTERS

6. FRAUD

7. DEEDS AND WILLS BY PERSON OF UNSOUND MIND

8. CONVEYANCES BY UNDISCLOSED DIVORCED SPOUSES

9. RIGHTS OF DIVORCED PARTIES

10. ADVERSE POSSESSION

11. DEFECTIVE ACKNOWLEDGEMENTS DUE TO IMPROPER OR EXPIRED NOTARIZATION

12. FORFEITURES OF REAL PROPERTY DUE TO CRIMINAL ACTS

13. MISTAKES AND OMISSIONS RESULTING IN IMPROPER ABSTRACTING

14. ERRORS IN TAX RECORDS

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Related Articles – Closing Process / Costs

March 28, 2010 by · Leave a Comment

Understanding the FHA Mortgage Insurance Premium (MIP)

* Disclaimer – all information in this article is accurate as of the date this article was written *

The FHA Mortgage Insurance Premium is an important part of every FHA loan.

There are actually two types of Mortgage Insurance Premiums associated with FHA loans:

1.  Up Front Mortgage Insurance Premium (UFMIP) – financed into the total loan amount at the initial time of funding

2.  Monthly Mortgage Insurance Premium – paid monthly along with Principal, Interest, Taxes and Insurance

Conventional loans that are higher than 80% Loan-to-Value also require mortgage insurance, but at a relatively higher rate than FHA Mortgage Insurance Premiums.

Mortgage Insurance is a very important part of every FHA loan since a loan that only requires a 3.5% down payment is generally viewed by lenders as a risky proposition.

Without FHA around to insure the lender against a loss if a default occurs, high LTV loan programs such as FHA would not exist.

Calculating FHA Mortgage Insurance Premiums:

Up Front Mortgage Insurance Premium (UFMIP)

UFMIP varies based on the term of the loan and Loan-to-Value.

For most FHA loans, the UFMIP is equal to 2.25%  of the Base FHA Loan amount (effective April 5, 2010).

For Example:

>> If John purchases a home for $100,000 with 3.5% down, his base FHA loan amount would be $96,500

>> The UFMIP of 2.25% is multiplied by $96,500, equaling $2,171

>> This amount is added to the base loan, for a total FHA loan of $98,671

Monthly Mortgage Insurance (MMI):

  • Equal to .55% of the loan amount divided by 12 – when the Loan-to-Value is greater than 95% and the term is greater than 15 years
  • Equal to .50% of the loan amount divided by 12 – when the Loan-to-Value is less than or equal to 95%, and the term is greater than 15 years
  • Equal to .25% of the loan amount divided by 12 – when the Loan-to-Value is between 80% – 90%, and the term is greater than 15 years
  • No MMI when the loan to value is less than 90% on a 15 year term

The Monthly Mortgage Insurance Premium is not a permanent part of the loan, and it will drop off over time.

For mortgages with terms greater than 15 years, the MMI will be canceled when the Loan-to-Value reaches 78%, as long as the borrower has been making payments for at least 5 years.

For mortgages with terms 15 years or less and a Loan -to-Value loan to value ratios 90% or greater, the MMI will be canceled when the loan to value reaches 78%.  *There is not a 5 year requirement like there is for longer term loans.

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Related Articles – Mortgage Approval Process:

March 28, 2010 by · Leave a Comment