Archive for January, 2008


Thursday, January 31st, 2008

Reader Gerald asked, Does either of the packages address whether or not PMI will be required with deposits of less than a certain percentage, and what would that percentage be?

Actually, FHA loans do not use PMI, but rather mutual mortgage insurance (MMI). MMI is made up of an upfront mortgage insurance premium (MIP) and monthly mortgage insurance (MI).

The upfront MIP is required for all borrowers with less than a 20% down payment. On a 30-year fixed-rate loan the MIP is 1.5% of the total loan amount. Any unused portions of the MIP can be refunded within 84 months of loan term (7 years).

The monthly MI is .05% of the total loan amount per year. Borrowers who put down at least 10% on a 15-year loan are exempt from paying monthly MI. For the rest of borrowers paying monthly MI, it is cancelled after 78% of the principle has been paid off. For this cancellation to happen, borrowers must have made all MI payments on a 30-year loan for five consecutive years.


Friday, January 18th, 2008

I recently received the following question from reader Sandra:

The average home price where I live is $525,000. Will FHA ever raise the loan limits, so that areas that have a higher average price can utilize the program? Also what is the required down payment? I had recenly heard that it was to be reduced from 3% to 1.5%

As for now, FHA loan limits aren’t going to be changing. However, current legislation (HR 1852, which has passed in the House) includes an amendment proposing the loan limit be set at lower of either

  • 125% of the local median home price, or
  • 175% of the national GSE conforming limit

This bill may be combined with a Senate bill, but both seek to increase loan limits to make FHA loans a realistic option for more buyers. As for the down payment, it is still a toss up as to what the agreed-upon change will be. Although nearly all legislators seek to remove the 3% down payment, there is disagreement on whether it should be zero down or the 1.5%, which could be packaged into fees. In my opinion, the 3% isn’t terrible (look where a lot of the subprime borrowers who didn’t put up any cash ended up), but a lower down payment could certainly make homeownership possible for many more Americans. I’d predict that in the next 6 months or so the 1.5% will be the new minimum.

Thanks to Sandra for the question! If you have a question, please leave it as a comment or send an email to

Numbers Going Up and Through The Roof

Wednesday, January 16th, 2008

This is a bit of news that I believe the readers should know about as well. Even though the majority of the blogs written here provide information about FHA and also some current news, it is just as important that you are aware of some other aspects of the mortgage industry. Why? Because I believe that some of what I am about to share you could already know or this information is going to give you insight into what could have happened to you.

I was talking with my brother about my blogging and he said did you see this article about mortgage fraud. I asked him what he was talking about and he basically gave me the gist of it – there are so many mortgage fraud cases filed that the officials that prosecute the cases cannot keep up. So I took the time and did some research and found out that banks filed 47,717 cases this year which is up from 21,994 two years ago which was according to Federal Bureau of Investigation and Financial Crimes Enforcement Network of The Treasury Department. What does this say to you? This says to me that people were clearly being taken advantage of by people in the mortgage industry.

Understand this before you get all in an uproar, I am not saying everyone in the mortgage industry was bad. What it says is that you must be careful and do your due diligence before hiring a realtor, mortgage broker, banker or lender. As a matter of fact, in every area of your life, you should do your homework and background checks. Let me give you a prime example, I recently received a letter in the mail from a company that read about me on a press release. They contacted me basically throwing out some names that I would know. I finished reading the letter and put it aside. I had decided that after a couple of days, I would do some research on the internet to find out about them. After doing my research, I had found some very derogatory information that was recent from several different people. I was very proud of myself for not being too eager to jump right into something without having done my homework.

Look at these numbers as well because when I say numbers are going up, they are going up. I remember last month there was an article that said the number of foreclosures filed here had already topped last year’s filing in November. For any of you that have followed
Colorado’s foreclosure being in national news as #1 in the nation for foreclosure during the past year. So I am sure even where you are, the foreclosures have made record numbers.

If mortgage fraud is up, then it almost stands to reason why there are tons of foreclosures. Does make you say hmmmm. It did for me because that has to be a part of it. Once again even if you are facing foreclosure, thoroughly read all your paperwork.

Taffy Wagner