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How Do I Cancel My FHA Mortgage Insurance?

How Do I Cancel My FHA Mortgage Insurance?

Canceling FHA mortgage insurance seems the be the first thing Orange County FHA borrowers want to know about after they have bought their home. FHA mortgages offer very attractive interest rates and with less demanding qualification requirements to allow first time home buyers and borrowers with less than perfect credit the opportunity to get into the real estate market. FHA allows Orange County home buyers to get a mortgage with a down payment as low as 3.5% as well as allowing borrowers to refinance without appraisal. The only real caveat to FHA mortgages is that the Mortgage insurance premiums are typically higher than other mortgage programs. Since FHA is essentially an insurance policy to lenders due to the higher risk potential borrowers, the higher insurance premiums are an essential aspect to the program. Types of Mortgage Insurance Premiums FHA has two different types of Mortgage insurance premiums, or MIPs, that are required as a part of an FHA mortgage. The first of these MIPs is the Up Front Mortgage Insurance Premium which is paid at closing. This premium is 1.75% of the loan amount and is financed into the loan amount. The second of these MIPs is the annual mortgage insurance premium. This is paid monthly as a part of your monthly loan payments. Rates for annual MIPs on a 30 year fixed rate term have ranged between .55% and 1.35% since 2008. Currently the annual mortgage insurance rate for 30 year fixed FHA loans is .85% for down payments less than 5%, and .8% for down payments more than 5%. Canceling MIPs With Conventional loan programs it is possible...
Higher FHA Loan Limit for Orange County in 2017

Higher FHA Loan Limit for Orange County in 2017

In December of 2016, FHA released an official statement announcing the increase of the 2017 FHA loan limits. This is the FHA loan limit increase in Orange County, CA since 2006.  What is an “FHA loan limit”? The Federal Housing Administration (FHA) sets a limit, effective each new year, of what a buyer can borrow within each state county. They calculate this limit based on the average price a home is selling for in that area. That means that in places like Orange County the limit will be significantly higher than in a county with lower housing prices like Riverside County. This does not mean that you cannot purchase a home at a higher sales price, just that you as the buyer, will be responsible for coming in with the difference between the loan limit and the purchase price. What does this mean for Orange County Buyers? This is an encouraging change for many prospective Orange County home buyers that have the income, satisfactory credit, appropriate debt-to-income ratios but may not have the savings for a conventional loan program. The FHA loan limit for Orange County is now at $636,150. That is up $10,650 from last years limit of $625,500. As housing prices increase in this popular area it is a welcome opportunity. Let’s take a look at the median house prices in a couple of in demand cities to see how this new limit will be impactful:                                                     (Taken from Zillow 1/12/17) Costa Mesa: $725,200                                                                                  Huntington Beach: $754,500 Santa Ana: $682,600                                                                                    Anaheim: $553,900 Cypress: $624,400                                                                                         Irvine: $776,600 Laguna Niguel: $790,500                                                                             Placentia: $661,300 Garden Grove: $545,200                                                                               Tustin: $670,400 Now look at the highest purchase price for the new loan limit, with the traditional 3.5% down: Purchase Price: $659,222         (<–Anything higher...
FHA to Lower the Cost of Mortgage Insurance

FHA to Lower the Cost of Mortgage Insurance

The U.S. Federal Housing Administration (FHA) announced that it is cutting annual premiums for Mortgage Insurance from 0.85% to 0.60% What is an FHA mortgage? FHA, which is a part of the Department of Housing and Urban Development, exists to fulfill the mission of providing homeownership opportunities to creditworthy buyers that may be overlooked by conventional lenders. FHA is a great option for Orange County first-time buyers, borrowers with lower to moderate income, or borrowers with less than perfect credit scores. With FHA loans, Orange County home buyers pay mortgage insurance to protect FHA’s funding in exchange for down payments as low as 3.5 percent. The lower premiums will come after FHA’s Mutual Mortgage Insurance Fund has recovered from the hit it took in the aftermath of the housing bust. “After four straight years of growth and with sufficient reserves on hand to meet future claims, it’s time for FHA to pass along some modest savings to working families,” Housing and Urban Development Secretary Julián Castro said in a statement What does this mean for Orange County Home Buyers? The planned cuts will lower the FHA annual premiums (monthly) from 0.85% to 0.60% of the loan balance, allowing FHA to get back on track in helping borrowers to realize their dream of owning a home. There are two types of mortgage insurance to consider. The first is the Upfront Mortgage Insurance Premium (UFMIP), which is a one time fee built into your loan amount (LA). The second, is the Mutual Mortgage Insurance (MMI) that is a monthly fee paid on top of your monthly mortgage payment. Let’s compare the current MMI to the new MMI available at the end of Jan 2017, assuming an Orange County...
Why PMI is Not a Bad Thing for Orange County Home Buyers

Why PMI is Not a Bad Thing for Orange County Home Buyers

A common request amongst Orange County home buyers is to get a loan with no mortgage insurance. But unless they have a down payment of 20%, or qualify for a specialized program like a VA loan, then understanding what PMI is and why it is beneficial to home buyers with less than 20% down is important. What is PMI? If you are entering into a Conventional loan and are going to be paying a down payment of less than 20 percent, the lender will require you pay Private Mortgage Insurance, or “PMI”. Having borrowers pay mortgage insurance protects lenders in the case that the borrower forecloses. Private Mortgage Insurance will usually vary between .2% and 1.5% and depend on your credit score and down payment size. Obviously, the better the credit score the lower the PMI factor. Also, the bigger the down payment percentage, the lower the PMI factor. It makes sense that a borrower with 15% equity and a FICO score of 740 will pay less for PMI than a borrower with 5% equity and a 620 FICO score. For example, if an Orange County first time home buyer is putting 5% down on a purchase price of $500,000, they will have  loan amount of $475,000 (after their $25,000 down payment). If the PMI factor is .62%, then the monthly PMI would be $245, which will be part of the monthly mortgage payment. ($475,000 x .0062 / 12 = $245). Paying for PMI There are several potential ways that you can pay for PMI on your loan. The most common way to pay for PMI is through a...
Fannie Mae’s Home Ready Mortgage for Orange County Home Buyers

Fannie Mae’s Home Ready Mortgage for Orange County Home Buyers

HomeReady is the newest home loan program offering from Fannie Mae and can save Orange County home buyers money. It’s designed to provide financing to creditworthy lower income borrowers in minority and low-income neighborhoods. It provides several benefits to borrowers like a reduced down payment, lower Loan Level Pricing Adjustments (LLPA’s), and reduced monthly Private Mortgage Insurance (PMI) premiums. Loans made through HomeReady can also be potentially refinanced up to 97% of the loan value. Eligibility for the HomeReady Loan Program There are some basic eligibility requirements for the HomeReady program,  but for those that are eligible  HomeReady offers quite a bit of  flexibility in getting your loan application approved. HomeReady does not allow the borrower to own another home at the time of the new loan, but not require the borrower to be a first time buyer. That’s right, this program not not restricted to only first time buyers. An online Home Buyer Education course is required to be completed prior to closing.   One of the coolest things about the HomeReady program is that it allows unconventional ways to establish a credit history. So for an Orange County home buyer with limited to no credit, providing alternative credit ( for example submitting proof of making a utility bill on time for 12 months) can be used in place of not having credit on the credit report. HomeReady also allows for the pooling of income from family members to help qualify the loan. Income limits still need to be met. Down Payment Requirement for HomeReady Home Loan Program The down payment requirement with HomeReady is lower compared to...
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