If you were listening to the housing news last week, you probably heard a number of reports about lending changes that were announced by the Federal Housing Administration (FHA).  While many f the news reports were confusing, the truth is pretty clear, and isn’t as bad as some people may have heard.

Overall the measures are intended to help the FHA better manage its risks and strengthen its capital reserves, while still providing home loans to the nation.  The good news, as FHA Commissioner David Stevens stated recently, is that “by continuing to provide affordable, responsible mortgage products, FHA will support the housing market’s recovery” and “remain the largest source of home purchase financing for underserved communities.”

What’s Changing?

If you or someone you know is considering an FHA loan, some of these changes may affect you.   Here’s a clear, concise rundown of the major changes and what they mean:

1.  Increased mortgage insurance.  The mortgage insurance premium (refered to as private mortgage insurance by many people) will be increased from 1.75% to 2.25%.  This change will add some cost to purchasing a home, but will not overburden consumers since the mortgage incsurance is paid over the lfe of the loan, rather than upfront at closing.

2. new down paument and credit score requirements.  According to the new policy, homebuyers who have a credit score of at least 580 may still be able to purchase a home with 3.5% down, but those with credit scores of less than 580 will be required to put down at leat 10%.  This change is designed to help the FHA balance its risk while still providing affordable downpayments for consumers with a history of good credit and responsibility.

3.  Reduced seller concession.  Basicly, this change means that the person selling the home will now only be able to offer the homebuyer 3% to help defray closing costs, as opposed to 6% under the previous law.

In addition to these changes, the new policies  contain a series of new measures aimed at increasing lender enforcement.

These changes will become effective on April 5, 2010.  The bottom line is that the changes will impact some homebuyers more than others.  But in the end, the FHA is still committed to providing affordable home loans.

If you’re concerned about your credit score or are worried about what these changes may mean to your specific situation, please call or email to schedule an appointment.  There are many different programs available for homebuyers, so finding the right plan for you just requires a short discussion about your goals and financial picture.

Courtesy of Kristy Bryant, Bank of Missouri

It is really no surprise that the Obama administration’s loan modification program for at-risk homeowners has been a failure. Many would probably argue that it is a failure because of the government’s handling of it. I argue differently. I believe it’s the banks faults, and I have a really good reason to believe such. My own bank is screwing up my own refinance, and it’s getting to the point where I am ready to jump ship and go elsewhere.

With the Obama plan, the government gives private banks incentives to refinance loans and make interest rate modifications so that current homeowners, many of which owe more on their homes than they are worth, can take advantage of today’s lower interest rates. Truly, today’s rates are historically low, and refinancing from a variable rate as high as 10-12 percent into a fixed 5 percent loan can lower monthly payments by hundreds of dollars. The program, known as the Home Affordable program, is especially great because it doesn’t require a homeowner to have any equity in the house, and it does not require private mortgage insurance if home equity is less than 20 percent, as is typical with conventional financing.

So far, only a paltry sum of struggling homeowners have been able to permanently modify their loans…something like 31,000 or so, out of hundreds of thousands, if not millions, of homeowners that could save money and potentially avoid foreclosure under the program. My own refinancing experience suggests that banks themselves are to blame. First, let’s explain my circumstances.

1. We have excellent credit. My wife’s FICO is around 800, mine is 820.

2. We have equity in our home. We originally bought in summer 2007, and put 20 percent down. That has been eaten away a bit, to be sure. Market price of our home is now probably $30 more than we owe, which means we have a little less than ten percent equity. The point here is that we are not underwater on our mortgage.

3. We have full documentation. My wife’s employment is proven by paystubs, tax returns, W-2s. My income is proven by tax returns, pay stubs, 1099s.

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With mortgage rates at all time record lows and homes at incredibly bargain prices, increasing number of homebuyers are trooping to their local mortgage services. For those of us who have cash to purchase homes outright, these could be the most opportune time to buy.

Most home purchases however are channeled through mortgage firms and banks. A 20% percent down payment on the property and good credit score is the most ideal method for landing the best deals on a monthly mortgage. These does not only give you the flexibility of choosing the best plan but also gives you the lowest interest rates on the market.

With the volatility and uncertainty of the current real estate market, banks and mortgage services has been asking prospective homeowners who can’t put the 20% down payment to avail of a Private Mortgage Insurance. However, there are other options also available for making that 20% percent down payment without getting PMI.

Piggyback loans on the other hand give us the option of making that 20% down payment, like your mortgage application it also comes with an interest; but comparing it with PMI’s it is significantly lower and cheaper in the long run.

What are Private Mortgage Insurances or PMI’s?

Mortgage service providers require homeowners who wish to obtain loans which are more than 80% of their homes market value to have Private Mortgage Insurance or PMI. They require this as insurance for lenders who may be considered high risk borrowers. This allows homeowners to purchase that dream house with as little as 3% or 5% down payment and without having them wait for years to accumulate the 20% down payment. It is important to note that PMI’s are not tax deductible so actual costs are carried on to your monthly payments.

Tip:

Another way of eliminating PMI is to prove that your house has greatly appreciated. If you’re planning a purchase a home whose market value was posted at $200,000 then you are required to place a down payment of 20 percent of its value or $40,000 to avoid PMI.

If at any case you fail to pay the required 20 percent down payment and were paying PMI for mortgage you could still wave your PMI. This could be done by proving that your homes market value has since appreciated from its original value.

If your home’s purchase value for example was $200,000 but has since increased to $300,000 you may qualify for negotiating your PMI payments. This is because your original loan which covered for a home which was $200,000 is no longer 80 percent of the existing homes value.

What are Piggyback Loans?

A Piggyback loan is when a homeowner makes a loan on an existing home as a form of additional down payment for the new home. This is done in order to get the 20% down payment required for the new home; thus avoiding PMI payments.

If a homeowner owns another property, in this case her previous home, a loan is made on the home in order for the homeowner to get the 20% down payment target. The good thing about piggybacks is that they are tax deductible and payments made on this loan can be used in tax reports. So the logic for making this is that you get tax deductions with your primary mortgage and you also get a tax deduction with the second mortgage, the piggyback.

The only setback for this is just like your private mortgage, your second mortgage could also be foreclosed. Piggyback loans’ interest rates are usually higher than similar mortgage loans for the primary mortgage.

How does PMI increase your monthly payment?

On average, a 1% or 0.5% on the mortgage loan is placed. On a $200,000 mortgage this would amount roughly to $2,000 a year. This will be on top of your monthly payment that includes both payment on principal and the interest or roughly an additional $200. Private Mortgage Insurance is not tax deductible, if you are making $2,000 payments yearly just for PMI, this translates to a $30,000 total for a 15 year loan.

Making the Choice

Making that 20% down payment is still the best move. A good decision would be to get a piggy back loan or a second mortgage if you have another home. Making another loan on your house is not totally getting its market value but just enough to make up the 20%.

Piggyback loans are often called 80-10-10 deals. 80 percent being the loaned amount, 10 percent for your actual down payment and 10 percent for the piggy back loan. It is always wise to crunch those numbers just to get what would get you the best deal. A piggy loan does not always add up to a lesser monthly payment as getting a second mortgage also requires having an interest. Do the simple math, plus having a mortgage on your second home could also expose you to another foreclosure.

Reported by REOProteams

For more information on the latest and hottest deals or how we at REOProteams.com could help you please email us at info@REOproteams.com or visit us at www.reoproteams.com or LVbargainproperties.com

Certainly by now, you have heard that a few people have refinanced their mortgages, taken advantage of the lowest mortgage rates in history and are currently saving hundreds of dollars per month (thousands of dollars per year, thousands and thousands over the life of the loan, etc).   What you may not realize is that now could be your best time to take advantage of crazy-low interest rates because it may be your best chance to qualify.  That’s right . . . if you wait any longer to refinance your mortgage, you may not qualify!

And here are a four reasons why:

1. Program guidelines are changing.  As an example, in the past few days, the guidelines for an FHA streamline refinance have changed essentially taking the “streamline” out of the process.  A FHA to FHA refinance used to be a mortgage-history only qualifying loan (no employment, no income and no assets required).  Now, these types of loans require proof of employment, proof of assets and a minimum credit score requirement (in addition to a 12 month perfect mortgage history payment).

2. Your home value is changing.  As more borrowers find themselves in trouble financially and more homes go in to forclosure and as those homes are sold by banks, the comparable sales for your neighborhood will likely go down.  And because the loan-to-value (the proportion of your loan balance in relation to your property value) drives the PMI (private mortgage insurance), helps determine your available interest rate, and is factored in by 2nd mortgage companies processing subordination requests, every dollar in an appraisal counts.  Some homeowners may not qualify for financing at all depending on how far their property value may have dropped.

3. Your credit score is changing.  More and more credit companies are lowering credit limits on credit card accounts and home equity lines of credit.  As this happens, the proportion of your credit balance to available high credit increases (your card balance is now closer to the high credit, or closer to being at the maximum limit).  This proportion is used in the calculation of a credit score and as the balance moves over 30%, 50% and 75%, your credit score increases each time.  So even your balances stay the same, a dropping high credit, could translate in to a dropping credit score . . . and a lower credit score = a higher interest rate.

4. Interest rates will be changing.  Mortgage rates are historically low for one reason and one reason only.  The US Government is buying mortgage-backed securities (MBS).  The US Treasury has been purchasing $14 to $20 billion dollars per WEEK in mortgage backed securities in order to drive mortgage rates down.  This trend is set to continue with a gradual reduction until the scheduled end date of March 2010.  Once they withdraw from the MBS market, most assume that mortgage rates will go back to their previous levels of 5.75% to 6.25%.  Others, more fearful of inflation (the enemy of long-term mortgage debt) think mortgage rates may go even higher than that after March 2010.

This week mortgage rates came very close to their lows for the year.  If you have been “thinking” about refinancing your mortgage, but have not yet taken advantage of (literally) the lowest rates in history, now is the time.  So if you are thinking, “If this is it . . . pleeeease let me know . . . “  — this IS it, and I am letting you know.  Thanks Huey.

P/S — I know the music video would have been better, but it is “unable to be embedded”.  So if you are in need of seeing the video, check it out here.  : )

Getting refinance second mortgage can be beneficial to some homeowners and may not be for others. It depends upon certain factors like

• How mush money does the person owe to the house?
• How much the house is worth?
• For how long the person plans to stay in the house?
• The type of loan on wants to avail.
• The cost of refinance.
• The reason for mortgage refinancing.

There are some benefits of second mortgage refinance, such as

• One can get away from the costly private mortgage insurance.
• One can combine first and the second mortgage and make one convenient monthly payments.
• One can avail lower interest rates.
• It can lower one’s monthly payments.
• To get new monthly term that can suit one’s present financial situation.
• One can avail cash out refinance mortgage benefits.

After a careful study on the requirement of the second mortgage and knowing the benefits of it, one can decide to opt for refinancing the second mortgage. There are some easy steps to follow to avail the loan easily.

• One should decide the benefits that one can get though refinancing. One can use mortgage calculators that are available online.
• The financial conditional of the borrower should not be bad. One can begin by getting one’s credit report. If the report is negative that is if the person holds bad credit, one should work to improve the credit score. To do so one can add some money to one’s saving account.
• It is advisable not to approach many lenders for loan. However, one should find three lenders, to get information one second refinance mortgage. One needs to find out refinance mortgage rates, details about the loans, loan term, and lending fees.
• Compare interest rates of different lending institutes. One can choose the best option that suits one’s requirement.
• Inquiring about the closing cost is also important. There are many lending institutes that provide mortgage refinance online. Hence one can inquire as well as avail loan through the internet.
• Before signing the papers, it is important read the term papers carefully. Make sure that the terms and conditions are suitable to the borrower.

There are some tips that a borrower can use to refinance 2nd mortgage:

• One can negotiate with the lender to get to get some reduction in the fee associated with the loan amount.
• It is advised not to accept the first loan that is offered. One should make comparison between several lending institutes.
• While getting home mortgage refinance, try to get the lowest possible rates. The higher the interest rate, the higher will be the monthly payments.