Moving? Here are our tips for choosing the right community

Let’s face it, moving is stressful. To reduce stress when you’re moving from another state, another part of Georgia or another city or town around metromailbox Atlanta, start by narrowing down the ideal community for you and your family.

For starters, consider your commute. There’s no denying the traffic issues Atlantans face, especially if they live outside the perimeter and commute downtown. If you’re moving because of a job, you may want to consider the time you’ll spend getting to and from work first and foremost. Now that we’ve cleared that up, let’s see how you can narrow down your choices so that when you’re ready to look at homes with your Realtor, you can pinpoint specific neighborhoods.

Here are some things to consider when moving to Atlanta:

  • Do you have children or are you planning to have children anytime soon?
    Research the school systems. Even if you’re single, living in an area with a much sought-after school system raises your property value.  Great Schools.org is one resource – http://www.greatschools.org/
  • What type of home do you want? Are you interested in a single-family home or an apartment, townhouse or co-op?  Do you want acreage or no maintenance? Match your home to your lifestyle. Are you looking for home with historic charm, or new development? Do you like the protection of an HOA, or want more freedom?
  • What does your ideal community have close by?  If you’re an outdoorsman, own a boat or love to mountain bike, you’ll want to be closer to lakes, forests and parks. If you love to eat out and shop, maybe you’ll want to be closer to stores and restaurants, maybe even have those amenities within walking distance of your front door…
  • What are the redlines?  Allergy sufferers or asthmatics may want to avoid industrial areas. Noise haters may want to steer clear of high traffic roads, highways, even college campuses… decide what’s a deal breaker for you.
  • Other considerations: be sure to review an area’s crime rate, police coverage, fire protection and location of medical facilities. If you are older, or have older parents living with you, a hospital nearby may be a must-have on your list.

Once you’ve narrowed down the areas based on the research and criteria above, there’s no better way to get a true picture of the neighborhood than to visit it (and you may want to visit during the weekend, and weekdays at different times of the day if possible).

  • What’s your first impression? Are the streets wide and well lit? Are they clean and well maintained? Are the homes and businesses kept up or run down? Do people look happy, friendly and energetic?
  • Picture yourself here. Do you see your family having dinner at the local café? Are the kids excited that the school has a big playground? Do you see yourself working out at the gym?
  • Talk to people! What better way to get a first-hand impression. Visit the local market and strike up a conversation with another shopper. Talk you your waitress, stop at a house that is for sale and greet the next-door neighbors…
  • Watch out for redlines and warning signs…. Are there several houses for sale on each block? Are homes and businesses vacant? Look for things that may cause your home value to decrease over time.

Once you’ve found the perfect community, you should apply some of the same principles to finding your ideal home.

  • How much can you afford to spend on a home? Use The Mortgage Guys handy mortgage calculator to see how much you can afford.  Apply Now for pre-approval to boost your bargaining power on the new home.
  • Compare your loan options. Read our Mortgage Basics blog post to find out what mortgage is right for you. http://www.mortgageguysatlanta.com/2011/12/19/mortgage-basics/
  • Find a licensed Realtor in your ideal community to help you find the perfect house!

Mortgage Guys Top Tips for a Smooth Move

Now that you’ve sold, or bought, and of course we hope you’ve worked with The Mortgage Guys on your mortgage, it’s time to think about organizing your move. Whether you’re going around the block or around the world, taking just the clothes on your back or a tractor trailer full of possessions, you’ve got to be organized in order to make the transition a smooth one. The Mortgage Guys have gathered our Ten Top Tips for a smooth and stress-free move:

1-      Plan Ahead – doesn’t matter if you’re move date is in a week or six weeks – planning can take the edge off for you and your family. Create a moving notebook and devote a page to each week (or each day) from now until the move and decide what you’ll accomplish, listing the tasks on each page of the book.

2-      Room Sweep – go room to room in your current place and decide what you’re taking and what you’re selling, donating, or throwing away. These decisions will help you decide whether you’ll need a rental truck or a moving company.  If you’re planning a yard sale, set aside items to sell as you go through the house.

3-      List Resources – make a list of the phone numbers, websites and addresses of the companies you’ll need to help you move (moving companies, rental companies, shipping companies, storage companies, cleaning companies). List out the phone numbers of utilities, schools and other services in your old and new locations.

4-      Gather the Goods – head to the store to gather up what you’ll need for packing (boxes, plastic bags, bubble wrap or other wrapping material, a thick marker pen, color coding stickers, packing tape). You can be creative with packing materials and save money too. Use household items like sheets, towels, grocery bags, and newspaper to pad boxes.

5-      Friendly Folders – create folders or files for all your moving-related expenses and receipts, family records (such as children’s medical and school records), and account information with national companies (cell phones, satellite TV, insurance company, bank etc).

6-      Spread the Word – start a “change-of-address notification” list. Include everyone you do business with, from service people to health care providers as well as your neighbors and friends. Don’t forget to file a “change of address” form with the U.S. Postal Service.

7-      Prepare the Family – if you’re moving more than 10-15 miles from your current home, take children on a farewell visit to some of the places that hold happy memories or hold a going-away party for them and their friends, and for the adults, maybe hold a pot-luck dinner or barbeque.  Make arrangements with a friend or neighbor to watch kids and pets on moving day. This will ease their stress and yours as the truck is loaded.

8-      Go Treasure Hunting – If you’ve hidden any valuables around the house, be sure to dig them up (check the attic and crawl spaces too). Also remember to pick up any dry cleaning, shoe or jewelry repairs, and return library books, movie rentals, etc. Be prepared to carry valuables such as jewelry, collectibles, and medicines with you instead of packing them to go with the movers.

9-      Touch Up – check each room of the home for things you need to repair and or clean. Fix major nail holes, replace burned out light bulbs, clean carpet and floors, and wash down spills in refrigerator. Or, if time is tight, hire a cleaning company to come in and do a quick clean after the movers leave to make sure that everything is clean and ready for the new owners.

10-   Final Sweep – after the truck is loaded with all of your furniture and boxes, do a last check of:

-  Water shut off?

-  Furnace shut off?

-  Light switches turned off?

-  All utilities set for disconnection?

-  All windows and doors are closed and locked?

-  All spare house keys and garage door openers left for the new owners?

-  Mailbox empty of your mail?

-  Have you left anything at all inside, or out?

 

 

 

 

 

 

 

 

 

 

 

 

Moving is less of a chore when you get organized and check off tasks as you complete them. Once you arrive at your new home, your planning will make the relocation easier, but be sure to start into a routine as soon as you can – this is especially important for kids. We also found this a great Infographic to help you remember to de-stress and move smooth!


George Beylouny is a licensed loan originator and the Branch Manager for Silverton Mortgage Vinings.  He can be reached at 678-428-6514, George@mgatl.com or  www.mortgageguysatlanta.com

 

 

Why to Buy… the emotions and economies of renting vs. buying a home

Today’s reduced home prices, low mortgage rates, and solid home inventory have made buying a house attractive, and many Atlantans are asking themselves if it’s the time to give up renting to buy their own home. Making the move from renting to home ownership is an emotional decision, and also very much a financial one.

While setting down roots is often considered a natural step, job responsibilities, family ties, and personal satisfaction can weigh heavy on the decision to give up the flexibility of renting under a 1 year lease, to the 15 or 30 year commitment of a mortgage. Personality and time commitments play a big part in the decision of what type of home to buy as renters are accustom simply making a phone call to fix maintenance problems, and to having all outdoor maintenance, landscaping and yard work done for them. Home ownership comes with a certain degree of upkeep which varies based on whether you buy a condo, townhouse, single family or ranch-style property.

If you’re not a handyman (or handywoman), consider the costs of modernizing and redecorating as you’ll need to hire out, so you may want to just look at move-in ready homes. Consider your out of pocket costs will be to get into the new home (keeping in mind what you’d “love to have”), then talk to the mortgage professionals here about what you can truly afford month to month. You also want to be sure that the home you buy is one you’ll be happy in for years to come. Don’t make the mistake of convincing yourself that home buying a short-term commitment.

Emotions matter…i f you’ve just gone through a big life change such as marriage, a newborn, divorce, job change, or a death in the family, taking on the responsibility of owning a home might not be the best decision today.

When considering a move from a rental unit to a home, you need to find a neighborhood and a house that suits your lifestyle, commute time, and budget. You may want to live in Woodstock, but don’t want to spend the commute time to get to your south Atlanta job because you have young children in daycare. Regardless of where you decide to live, be sure to have your Realtor share the sales price trends of homes in the neighborhoods you’re considering, after all, a home is an investment.

Buying a home is in fact one of the biggest investments you will make – ever.  So…armed with good credit, a stable job, and cash in the bank, making that investment may very well be a wise financial decision.

The Pros

For Renting:

  • Flexibility (relocating is easier)
  • Can invest money elsewhere (stock market)
  • No upkeep fees (drippy faucets, broken appliances, etc.)

For Buying:

  • Tax-breaks (mortgage interest and property tax deductions)
  • Potential for building equity (traditionally 4-5% annually)
  • Emotional satisfaction/pride
  • Security, stability, comfort

 

The Cons

For Renting:

  • No equity
  • Annual rent increases

For Buying:

  • Property taxes
  • Upkeep
  • Mortgage costs
  • Loss of flexibility should you want to move

If you are on the fence about whether to buy or rent, use what’s called the rent ratio, an over-simplified starting point. Take the purchase price of a house and divide it by the yearly cost of renting. The New York Times has a great calculator to help you in your decision making process: http://www.nytimes.com/interactive/business/buy-rent-calculator.html.

You may also want to read our Tips for First Time Home Buyers blog post – http://www.mortgageguysatlanta.com/2012/07/26/tips-for-first-time-home-buyers/

All in all the decision to assume a mortgage and buy a home is a very personal one. But armed with accurate information, it’s a decision you can feel good about. Contact Atlanta’s Mortgage Guys before you tear up that rental agreement, and we’ll help you review your options so you can make the best choice for you.


George Beylouny is a licensed loan originator and the Branch Manager for Silverton Mortgage Vinings.  He can be reached at 678-428-6514, George@mgatl.com or  www.mortgageguysatlanta.com

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.

_________________________________

Related Articles – Home Buying Process:

Ten Credit Do's and Don'ts To Bear In Mind Prior To Getting Your Mortgage Loan

How can a fully approved loan get denied for funding after the borrower has signed loan docs?

Simple, the underwriter pulls an updated credit report to verify that there hasn’t been any new activity since original approval was issued, and the new findings kill the loan.

This generally won’t happen in a 30 day time-frame, but borrowers should anticipate a new credit report being pulled if the time from an original credit report to funding is more than 60 days.

Purchase transactions involving short sales or foreclosures tend to drag on for several months, so this approval / denial scenario is common.

It’s An Ugly Cycle:

  1. First-Time Home Buyer receives an approval
  2. Thinks everything is OK
  3. Makes a credit impacting decision (new car, furniture, run up credit card balance)
  4. Funder pulls new credit report and denies the loan

In the hopes of stemming the senseless slaughter of perfectly acceptable approvals, we’ve developed a “Ten credit do’s and don’ts” list to help ensure a smoother loan process.

These tips don’t encompass everything a borrower can do prior to and after the Pre-Approval process, however they’re a good representation of the things most likely to help and hurt an approval.

Ten Credit Do’s and Don’ts:

DO continue making your mortgage or rent payments

Remember, you’re trying to buy or refinance your home – one of the first things a lender looks for is responsible payment patterns on your current housing situation.

Even if you plan on closing in the middle of the month, or if you’ve already given notice, continue paying that rent until you’ve signed your final loan documents.

It’s always better to be safe than sorry.

DO stay current on all accounts

Much like the first item, the same goes for your other types of accounts (student loans, credit cards, etc).

Nothing can derail a loan approval faster than a late payment coming in the middle of the loan process.

DON’T make a major purchase (car, boat, big-screen TV, etc…)

This one gets borrowers in trouble more than any other item.

A simple tip: wait until the loan is closed before buying that new car, boat, or TV.

DON’T buy any furniture

This is similar to the previous, but deserves it’s own category as it gets many borrowers in trouble (especially First-Time Home Buyers).

Remember, you’ll have plenty of time to decorate your new home (or spend on your line of credit) AFTER the loan closes.

DON’T open a new credit card

Opening a new credit card dings your credit by adding an additional inquiry to your score, and it may change the mix of credit types within your report (i.e. credit cards, student loans, etc).

Both of these can have a negative impact on your score, and could result in a denial if things are already tight.

DON’T close any credit card accounts

The reverse of the previous item is also true. Closing accounts can have a negative impact on your score (for one – it decreases your capacity which accounts for 30% of your score).

DON’T open a new cell phone account

Cell phone companies pull your credit when you open a new account. If you’re on the border credit-wise, that inquiry could drop your score enough to impact your rate or cause a denial.

DON’T consolidate your debt onto 1 or 2 cards

We’ve already established that additional credit inquiries will hurt your score, but consolidating your credit will also diminish your capacity (the amount of credit you have available), resulting in another hit to your credit.

DON’T pay off collections

Sometimes a lender will require you to pay of a collection prior to closing your loan; other times they will not.

The best rule of thumb is to only pay off collections if absolutely necessary to ensure a loan approval. Otherwise, needlessly paying off collections could have a negative impact on your score.

Consult your loan professional prior to paying off any accounts.

DON’T take out a new loan

This goes for car loans, student loans, additional credit cards, lines of credit, and any other type of loan.

Taking out a new loan can have a negative impact on your credit, but also looks bad to underwriters and investors alike.

…..

Follow these Do’s and Don’ts for a smoother mortgage approval and funding process.

Just remember the simple tip: wait until AFTER the loan closes for any major purchases, loans, consolidations, and new accounts.

_________________________________

Related Credit / Identity Articles:

How Much Can I Afford?

How much mortgage money can I qualify to borrow?

This is typically the number one question mortgage professionals are asked by new clients.

Of critical importance when considering mortgage financing: There is sometimes a difference between what a client ***can*** borrow and what they ***should*** borrow.

In other words, what makes for a comfortable long-term mortgage payment?

The Quick Answer:

If we’re simply considering the financial math, lenders will calculate your Debt-to-Income Ratio and generally allow for 28-31% of your gross income to be used for the new house payment with up to 43% of your gross income to be used for all consumer related debts combined.

Sample Mortgage Scenario:

Let’s use a gross monthly income of $3000 and a qualifying factor of 30% Debt-to-Income Ratio:

$3000 multiplied by .3 (30%) = $900 max monthly mortgage payment

This means that your mortgage payment (Principal, Interest, Taxes, Hazard Insurance) cannot exceed $900 a month.

“Ballparking” a Qualifying Loan Amount:

Simple step:  We use a safe average of $7 per month in payment for every $1000 in purchase price so…

Step 1)  $900 a month divided by $7 = $128.50

Step 2) $128.50 multiplied by 1000 = $128,500 loan amount.

Remember, these are average ratios and guidelines set by most lenders for common mortgage programs.

Keep in mind, while most consumer debts are listed on a credit report, there are some additional monthly liabilities that may contribute to the overall qualifying percentages as well.

Regardless of how your personal income and credit scenarios factor in, it is important to consider your overall budget when trying to determine how much of a mortgage you should qualify for.

Other items to consider in your monthly budget:

1. Confirm all debts are taken into account
2. Any private notes or family loans
3. Short-term expenses – medical, auto repairs, travel, emergencies
4. Plan on additional expenses for the home such as water, electric, maintenance, etc…
5. Keep a cushion for savings and financial planning

_________________________________

Related Articles – Mortgage Approval Process:

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

_________________________________

Related Articles – Closing Process / Costs

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.

_________________________________

Related Articles – Home Buying Process:

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.

_________________________________

Related Articles – Mortgage Approval Process:

First-Time Home Buyer Credit Checklist

Getting a new mortgage for a First-Time Home Buyer can be a little overwhelming with all of the important details, guidelines and potential speed bumps.

Since there are so many rules and steps to follow, here is a simple list of Do’s and Don’ts to keep in mind throughout the mortgage approval process:

DO:

  • Continue working at your current job
  • Stay current on all your accounts
  • Keep making your house or rent payments
  • Keep your insurance payments current
  • Continue to maintain your credit as usual
  • Call us if you have any questions

DON’T

  • Make any major purchases (Car, Boat, Jet Ski, Home Theater…)
  • Apply for new credit
  • Open new credit cards
  • Transfer any balances from one credit or bank acct to another
  • Pay off any charge-off accts or collections
  • Take out furniture loans
  • Close any credit cards
  • Max out your credit cards
  • Consolidate credit debt

Basically, while you are in the process of getting a new mortgage, keep your financial status as stable as possible until the loan is funded and recorded.

Any number of minor changes could easily raise a red flag or cause a negative impact on a credit score that may result in a denied loan.

Most importantly, check with your loan officer on even the simplest questions to make sure your loan approval is successful.

_________________________________

Related Articles – Home Buying Process: