For the second time this year, the FHA is modifying mortgage insurance.

Beginning with FHA case numbers issued on or after October 4, 2010, the FHA is changing its upfront and annual mortgage insurance premium structure.

Under the new terms, assuming a 30-year fixed rate FHA mortgage with at least 5 percent equity:

• Upfront MIP drops to 1.000% of the amount borrowed from 2.250%
• Annual MIP increases to 0.850% of the amount borrowed from 0.500%

For homeowners in Blue Ridge,  Blairsville and everywhere else , this switch in MIP decreases the upfront cost of an FHA-insured mortgage, but increases the loan’s long-term costs.

Using a $100,000 mortgage as an example, upfront MIP falls to $1,000 from $2,250; monthly MIP jumps to $70.83 from $41.67. The FHA expects the change will yield an additional $300 million in premiums monthly.

The update is a huge win for the FHA whose reserve funds are self-proclaimed to be “perilously low”.  The extra monies should help recapitalize and stabilize the government group.

The FHA is on pace to back 1.7 million loans this year.

For the majority of refinancing FHA homeowners and home buyers, the MIP change is neither good nor bad — the borrowing landscape will just looks a bit different.  Yes, loans will cost more to carry each month, but also they’ll be less expensive to procure. It’s a trade-off and you can apply math formulas to solve for the best time to apply FHA.

It may be wise to get your FHA case number before October 4, for example, depending on your time frame in the home and the expected life of the mortgage. Or, it may be better to wait until after October 4 to apply.

If you’re unsure of how the new FHA mortgage premiums will impact your mortgage, be sure to call or email your loan officer for help.

NOTE : The FHA originally announced an implementation date of September 7. It was subsequently amended to October 4, 2010.

Starting sometime later this year, the monthly cost to carry an FHA-insured mortgage is expected to rise.

In a near-unanimous vote, the House of Representatives gave the FHA power to raise the monthly mortgage insurance premiums it charges to its borrowers.

Currently, monthly mortgage insurance premiums are 0.55% of the unpaid loan balance, divided by 12.  The recently approved Federal Housing Administration Reform Act provides for an increase in monthly premium of up to 1.55 percent, among other details of the bill.

Despite the ability to charge 1.55 percent, FHA officials say an increase to 0.90 percent would be sufficient to self-insure its loans.

In everyday terms, assuming a $200,000 mortgage, the math to a homeowner looks as follows:

• Current Premium (0.55%) : $91.67 monthly mortgage insurance premium
• Expected Increase (0.90%) : $150.00 monthly mortgage insurance premium
• Maximum Increase (1.55%) : $258.33 monthly mortgage insurance premium

A increase in monthly mortgage insurance premiums will reduce home affordability for home buyers in Blue Ridge and Blairsville,  and will put a strain on household budgets.

The news isn’t all terrible, however.

Because higher monthly insurance premiums are expected to pad the FHA coffers sufficiently, the FHA has said it plans to reduce its upfront mortgage insurance premium paid at closing from 2.25 percent down to 1.000 percent.

On the same $200,000 mortgage, a move like that would reduces closing costs by $2,500.

The bill awaits companion legislation in Senate and final approval into law, but considering the House’s lopsided vote Thursday, it could happen rather quickly.  If you’re planning to buy or refinance a home using an FHA mortgage, you may find that waiting to take the next step could be a costly one, long-term.

The FHA insured close to a quarter of all mortgages made in the first three months of 2010.

The Federal Reserve says that financial markets “remain supportive of economic growth“. Residential mortgage guidelines, however, continue to tighten.

If you’ve applied for a home loan recently, you probably felt it; extra scrutiny on income, assets and credit scores, among other things.  The hard proof of the changes, however, can be found in the Federal Reserve’s quarterly survey of its member banks.

Every 3 months, the Federal Reserve asks senior bank loan officers around the country whether their respective banks’ “prime” residential mortgage guidelines tightened since the last survey.

For the period January-March 2010, 1 in 8 banks surveyed toughened their qualification standards.

Only 4% loosened them.

When we account for the Fed’s survey in conjunction with new underwriting standards from Fannie Mae and FHA, it’s clear that getting approved for a mortgage in 2010 is more difficult than at any time in recent memory.

Today’s homeowners and home buyers in Blairsville have taller hurdles to leap:

• Minimum FICO scores are higher
• Down payment/equity requirements are larger
• Debt-to-Income thresholds are smaller

In other words, mortgage rates may stay low throughout 2010, but that won’t matter to homeowners failing to meet the new, minimum eligibility standards as set forth by the lenders.

If you’re among the many people wondering if now is the right time to buy or refinance a home, remember that — along with a probable increase in mortgage rates — mortgage approvals are getting more scarce.

The best home price or mortgage rate in the world won’t matter if you’re ineligible for financing.

Mortgage rates and home affordability have improved lately, thanks to an unlikely ally — Mother Nature.

In the 7 days since Iceland’s Eyjafjallajökull erupted, ash clouds have grounded planes, disrupted businesses, and stranded exports in warehouses worldwide.

It’s a drag on commerce that’s spilled over onto Wall Street. As experts debate the potential for future seismic activity, traders are taking some of their investment risk off the table.

In trading circles, it’s called “safe haven buying”. When the market gets cloudy, investors often move their cash into relatively safe assets.  This includes government-backed securities — mortgage-bonds among them.

Demand for bonds rise, pushing up prices and driving down rates.

Conforming and FHA mortgage rates in the North Georgia Mountains touched a 3-week low earlier this week.

Volcanic eruptions and like natural disasters remind us: mortgage rates change for all sorts of reasons. Some we can predict, most we cannot. There’s literally thousands of influences on the U.S. mortgage market.

If you’ve been shopping for a home or floating a mortgage rate, luck’s been on your side.  However, as ash clouds dissipate and business resumes worldwide, investors will regain their collective appetite for risk and safe haven buying will reach its natural end.

When that happens, mortgage rates will rise.

Therefore, use the seismic uncertainty to your advantage.  Consider locking your mortgage rate sooner rather than later — while rates are still low.

Starting Monday, April 5, 2010, getting an FHA mortgage in Blue Ridge, Blairsville, Ellijay and all throughout the North Georgia Mountains will be more expensive for borrowers.

In new guidelines set forth earlier this year, the FHA announced plans to raise additional revenue and reduce the overall risk of its mortgage portfolio.

The changes include the following:

1. Increase Upfront Mortgage Insurance Premiums from 1.75% to 2.25% for everyone
2. A plan to reduce seller concessions from 6 percent to 3 percent
3. An increase in minimum downpayment for FICOs 580 or lower

For your own loan, to avoid being subject to higher loan costs, make sure to have your FHA Case Number assigned prior to Monday, April 5, 2010.  That means you’ll want to give a full mortgage application before the weekend so your lender can register your loan in time for the deadline.

But don’t leave your application to the last minute.

Friday is Good Friday so most banks will be closed. Your true FHA deadline, therefore, is Thursday April 1.

Also worth noting is that the FHA isn’t done with its changes.

In its policy statement, the group also announced its plans to petition Congress to raise monthly mortgage insurance premiums.  The FHA’s formal request, in summary:

1. Raise monthly premiums by roughly 0.30%, or $25 per $100,000 borrowed per month
2. Lower upfront mortgage insurance premiums by 1.25%, or $1,250 per $100,000 borrowed at closing

For now, the request is neither approved nor acknowledged by Congress. It’s merely a request. And in the event that Congress does approves it, the FHA reserves the right to change its projections.  Either way, it means higher costs for consumers.

The best plan, therefore, is to get your FHA mortgage into underwriting ahead of the switches because borrowing money will be harder, and more costly.

The mortgage lending landscape changes a lot.  Rates and guidelines are in constant flux, and it creates preparedness challenges for buyers in the North Georgia Mountains that aren’t paying in cash.

The loan you get today won’t always be the loan you get tomorrow.

Because of how frequently bank rules are changing, it can be hard for laypersons to distinguish between mortgage fact and fiction of “what’s coming next”.

Recently, we saw this with respect to FHA home loans.

January 20, 2010, the FHA issued a press release with new lending guidelines.  Specifically, it announced 3 changes that will be effective starting April 5, 2010:

1. Upfront mortgage insurance premiums increase from 1.75% to 2.25%

2. Allowable seller concession reduced from 6% to 3%

3. FICO scores of 580 or lower are subject to a minimum 10% downpayment

But, also in its official statement, the FHA announced it would ask Congress for permission to raise monthly mortgage insurance premiums.  This is where the rumors started.

Nestled on page 348 of the Budget of the United States Government, Fiscal Year 2011, in a section titled Special Topics, there is a 1-paragraph notation that details the FHA’s petition.

1. Raise monthly premiums by roughly 0.30%, or $25 per $100,000 borrowed per month

2. Lower upfront mortgage insurance premiums by 1.25%, or $1,250 per $100,000 borrowed at closing

For now, the request is neither approved nor acknowledged by Congress. It’s merely a request. And in the event that Congress does approves it, that doesn’t mean that FHA has to stand by its initial projections.

Truth is, about the only thing we know about the future of FHA lending is that, come April 5, 2010, borrowing money is going to be tougher, and more expensive. These are the facts as we know them today.

Home buyers should plan accordingly.

The economy’s improving but lending standards are not. Nationally, banks are making mortgage approvals harder to come by.

Underwriting guidelines are tightening.

The data comes from the Federal Reserve’s quarterly survey to its member banks.  The Fed asks senior bank loan officers around the country to report on “prime” residential mortgage guidelines over the most recent 3 months and whether they’ve tightened.

For the period October-December 2009:

• Roughly 1 in 4 banks said guidelines tightened
• Roughly 3 in 4 banks said guidelines were “basically unchanged”

Just 2 of 53 banks said its guidelines had loosened.

Combine the Fed’s survey with recent underwriting updates from the FHA and generally tougher standards for conventional loans and it’s clear that lenders are much more cautious about their loans than they were, say, in 2007.

Today’s Blairsville home buyers and would-be refinancers face a bevy of new borrowing hurdles including:

• Higher minimum FICO scores
• Larger downpayment requirements for purchases
• Larger equity positions for refinances
• Lower debt-to-income ratios

So, if you’re on the fence about whether now is a good time to buy a home, or make that refi, consider acting sooner rather than later.  It doesn’t necessarily matter that mortgage rates are low, or that there’s an up-to-$8,000 home purchase tax credit for households that qualify.  With each passing quarter, fewer and fewer applicants are eligible to take advantage.

Securing an FHA mortgage in Georgia is about to get more expensive.

In a statement issued Wednesday, the Federal Housing Authority outlined policy changes to its mortgage assistance program. The shift is meant to both reduce the government group’s portfolio risk while strengthening its overall financials.

For consumers, the changes mean higher costs.

As listed in the official announcement, there are 3 major guideline updates for the FHA:

1. Upfront mortgage insurance premiums are increasing to 2.25% from 1.75%

2. Minimum downpayments for applicants with sub-580 FICOs are rising to 10 percent

3. Seller concessions are being limited to 3%, down from today’s allowable 6%

Furthermore, the FHA has appealed to Congress to raise an FHA borrowers’ monthly mortgage insurance premiums.

To read the FHA’s statement, it’s clear what the group is trying to balance.  On one side, the FHA wants to provide affordable financing to families that need it. That’s its mission statement. On the other side, though, the FHA must manage the risk that comes with insuring lesser-quality loans.

To that end, the FHA is stepping up its enforcement of “bad lenders” in hopes of stopping problems where they start.

Also in its new policies, the FHA is introducing a “termination clause”. If banks or loan officers that produce more than their fair share of bad loans, they lose their right to originate FHA mortgages.

As a result, home buyers in Blairsville, GA.  should expect tougher FHA underwriting in 2010. Not because the FHA says so, necessarily, but because banks don’t want to do “bad loans”.  Lenders are incented to turn down at-risk applicants and, already, we’re seeing examples of this. Despite FHA allowing 580 FICOs and lower, many banks have made 620 their minimum.

Some have other guideline overlays, too.

The FHA’s new guidelines don’t go into effect until spring.  So, between now and then, the old guidelines will apply.  Therefore, if you know you’re going to need an FHA home loan in the next few months, consider moving up your time-frame.

If nothing else, you’ll save some money at closing.

Beginning November 17, 2009, the FHA will make it harder to qualify for its popular Streamline Refinance program.

Available exclusively to homeowners with existing FHA home loans, the streamline program is meant to help homeowners reduce mortgage payments as simply as possible.

As such, the program carries minimum eligibility requirements.

In fact, the FHA Streamline Refinance is more notable for what it doesn’t require from applicants.

• There’s no income verification
• There’s no asset verification
• There’s no employment verification
• There’s no appraisal required

The two biggest qualifiers, really, are that the homeowner meets a minimum credit score and that the new loan doesn’t exceed the original balance of the old loan.

The new program guidelines, however, are much stricter. 

Effective next month, among other requirements, applicants must show evidence of employment and income, plus proof of cash required at closing. 

Furthermore, homeowners can’t finance closing costs into the mortgage without a complete home appraisal.  In areas of declining value, this may render refinancing with the FHA impossible.

Therefore, if you’re a homeowner with an FHA mortgage, consider contacting your loan officer before the November 17 deadline to explore your Streamline Refinance options.  Mortgage rates are low and you never know for what you’ll qualify.

The worst thing you can do is to wait too long to find out.  Once the deadline passes, the old guidelines will be history.