Archive for November, 2007

Different types of FHA Loans

Thursday, November 15th, 2007

FHA Home Loans have many options that anyone can consider. The purpose of writing on this particular topic is to share with you what is available. I was not aware of all the different types of loans that FHA had to offer. Sure you will know about some of the ones that I talk about it, but there might be others that fit your situation better. So before you run right out and say you want a specific type of loan, read this thoroughly. Do additional research if necessary and choose what works best for you.

I heard you guys say, you are always saying research, research – couldn’t I have done enough research by now. Not necessarily and research aids in making informed decisions versus impulse decisions which lead to error, owning the American nightmare versus dream and even imposed tension in a marriage because someone did not research thoroughly before signing on the dotted line. I can’t tell you how many times I have heard that and have even witnessed something happening once or twice in my own marriage because all the information was not received up front. Don’t leave it up to the mortgage banker, broker or realtor to give you all the information. Do your own homework and research. At the end of the day, you are responsible for the mortgage payments and all that is involved with home ownership.

Let’s get to the different types of loans which I am going to talk about over two or three days. If it takes two days to cover it, then that is what it will take; otherwise it will be three. First we have the FHA 203(b) Loan – from what I read it is the most commonly used, offers a low down payment, flexible qualifying guidelines, limited lender’s fees and a maximum loan amount.

I believe one of the biggest benefits of any loan is having a loan with a low down payment. If you have a low down payment that alleviates more of a pressure of attempting to manage a higher down payment when you know you don’t have the money. When I was reading about this loan, it said this loan enables the homebuyer to finance both the purchase and rehabilitation of a home through a single mortgage. This meaning it is divided with a portion being used to pay off the seller’s existing mortgage and the remaining is placed in an escrow account and released as rehabilitation is completed.

Correct me if I am wrong, if it has to be rehabilitated isn’t it a pre-existing foundation? I would believe if it wasn’t pre-existing that this type of loan would then not be available for this particular buyer and the buyer would have to begin his or her search all over again. Definitely send me some comments on this, help my understanding of the 203(b). I am always looking for information that I believe has not been shared on a larger scale to share with my readers.

We have discussed the 203(b) – send me your comments and thoughts about this type of loan. Even if you have had this type of loan, what do you think the benefits are or what is the downside?

Dr. Taffy Wagner

When Can I Stop Paying My Monthly FHA Mortgage Insurance Premium?

Thursday, November 1st, 2007

If you are someone that has had a FHA Loan for a period of time, you might not have realized that you don’t have to always pay mortgage insurance premium. I remember when my husband and I first bought our house this was something we talked about. Then as time went on, we forgot about it.

I did some research and thought I would answer this question here this time. What I am about to share is food for thought. You will want to get rid of your premium mortgage insurance because it is not tax deductible, like mortgage interest. I’m always happy to receive that statement at the end of the year from our mortgage company in preparation for our taxes.

When you first purchase a home, you are looking for all the deductions you can get. True you get a lot that first year you purchase the home more than the following years, because you have points as well as mortgage interest and some other items. Let’s get back to premium mortgage insurance and when can you stop paying it.

I must share that this very question was addressed in a lot of different places. One of them being moving.com. What I liked was that the lender could not force you to keep the PMI once the loan-to-value has gone below 80%, however, the lender will not advise you when you are eligible to discontinue the coverage and stop making the mortgage insurance premium (MIP) payment. I have to say, if the lenders did contact the buyers even months or years down the road regarding discontinuing their mortgage insurance premium, what do you think the buyers would think of their loan company?

I know that I personally would be recommending that loan officer to everyone that I knew would be purchasing a house. However, it is left up to you to keep a track of what is happening with your loan. To find out where you are with your loan, take a look at your most recent mortgage statement, even if you are paying electronically. The files are usually up to date. Divide the remaining principal by the original purchase price of your home. If that number is below 80%, call the lender and find out their specific procedure for removing premium mortgage insurance.

Before you do anything, remember, remember, it is the responsibility of the buyer (you) to track the debt to value ratio and make the arrangements to stop premium mortgage insurance.

I continued researching to see if there was any more information I could share with you that would help you answer this question. When I was reading the fha.gov website it actually gave more information based on the different loan amounts. Here is what I mean, it stated it you have a mortgage that is 15 years or less and the loan to value ratio of 90% and greater, the mortgage insurance premium will be terminated when the loan to value reaches 78%, irrespective of the length of time the borrower has paid the mortgage insurance premium. I want to caution you if you have a 15 year or less term, to check with your lender as to their procedures. Because I am always hesitant when terminology like “will” gets thrown around. Sometimes they don’t follow through.

Look at your statement and see where you stand with mortgage insurance payment. You might find that you can stop at this time. Follow your lenders procedure for discontinuing.