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FHA Experts Blog

Paramount FHA Experts answer your mortgage questions

February 15th, 2008 1:49 PM

We have been getting lots of questions regarding the changes in the mortgage industry. Take a look below to see if we can help you answer yours.

1) What advice do you have for consumers looking to purchase a home or refinance their mortgage?

Know your current situation. It is helpful for consumers to be aware of their credit histories - and take care of any outstanding derogatory items.It is also good for people to examine on a monthly basis what he or she is comfortable putting towards housing expense without sacrificing other important necessities or lifestyle choices. Being aware of this will allow you to go to the next step successfully.

Work with professionals and build a team (realtors, builders, mortgage bankers) This is an important exercise because professionals will work with your requirements and correlate that information to a proper sales price, loan amount and monthly payment. You may be surprised that you qualify for MORE on paper than what you though about previously. Insist on meeting face to face with these individuals - and treat is as a job interview - they are working for you. Get to know the staff at Paramount Mortgage >

2) How will the Fed’s actions affect interest rates?

Any rate tied to prime rate, such as credit cards or home equity lines of credit will see an immediate change. However, the mortgage rates are not directly correlated with the fed’s changes. Mortgage rates are tied to the bond market, most notably the 10 year treasury. View today's Rate Lock Advisory >

3) Is this a good time to refinance?

Yes, but there are some considerations. First of all, how long do you plan on remaining in your current home? There are fees incurred by refinancing, so if you only plan on being in your home a short time, you may not recoup the fees. To ensure you can make that decision properly, request information in writing - All costs and fees incurred in the buying, selling and refinance process should be clearly stated in writing. Ask questions if you don’t understand. As for mortgages, insist on a formal LOCK IN letter to outline the deal - BEFORE YOU GET TO THE CLOSING and have an unpleasant surprise. Know what you are paying for - review the fees listed on the written material. If it does not have a direct benefit to you or provide a truly necessary service - Question it! Learn more about refinancing options >

4) What if I am currently delinquent on my mortgage payment?

The most important thing you must do is contact the company where you make your payment and let them know what is happening. Most companies are willing to work out payment arrangements and that could help you save your home. In addition, if you are 62 or older and own your own home, a reverse mortgage is a great way to prevent foreclosure or rectify delinquencies. Learn more about reverse mortgages >

5.) Are there any upcoming changes that will help consumers?

Yes, there is pending legislation to modernize FHA which may of great assistance to anyone looking to buy a home or refinance. Also Fannie Mae is also considering raising their loan limits as well. Since these are “insured” programs, they are viable providers of mortgage credit. Visit the FHA website for details >

Do you have more questions? Please call Paramount Mortgage at (314) 372-4300 - we are here to help you.

Posted by Customer Service on February 15th, 2008 1:49 PMPost a Comment (0)

Overview of Proposed FHA Reforms and Reform Legislation

February 15th, 2008 1:55 PM

Reform Legislation

The Expanding American Homeownership Act, H.R. 1852, known as FHA Reform or FHA Modernization, was approved by the U.S. House Financial Services Committee on May 3, 2007. The bill now awaits a vote by the full House of Representatives and by the Senate. It will enable the FHA to reach more prospective borrowers and allow millions more low- and moderate-income families to achieve the American dream of homeownership.

Some of the highlights of the legislation include:

FHA mortgage limits:

Increase the limit for lower cost areas from 48% to 65% of the government sponsored enterprises (GSE) conforming loan limit, permitting the FHA to insure more newly constructed homes.
Increase the limit for higher cost areas from 87% to 100% of the conforming limit with individual local limits set at the median price of a home in each area.
Because of its current mortgage limits, FHA is not a viable option for borrowers in high cost housing markets.

Down payment:

Eliminates the FHA's 3% minimum cash investment requirement and down payment calculation.
Provides FHA borrowers a range of options to control the amount of their down payment and mortgage payment based on their immediate and long-term goals.

Loan term:

Increases the maximum loan term from 30 years to 40 years. The longer loan term will decrease monthly payments yet build homeowner equity through a fully amortized loan.

Mortgage insurance premium:

Eliminates the 2.25% upfront and .55% annual premium caps allowing the FHA to raise or lower the premium to match the borrower's risk. The FHA borrower gets a market interest rate loan; the risk is mitigated through the premium. 'High cost loans' offset risk in the interest rate, sometimes 3% to 8% above market. For example, a 3% FHA upfront premium for a $100,000 mortgage is $19 per month. A 3% interest rate increase (6.5% to 9.5%) for the same mortgage is $156 per month. The difference of $137 would allow the use of $21,700 more towards the purchase of a house. The annual FHA premium charge is eliminated after 5 years and 22% property equity.

Condominiums:

Revises the definition of "mortgage" to insure condominiums as a single family unit rather than a multifamily project. The change would align the FHA to the industry and streamline processing, potentially reducing condominium costs.

Reverse mortgages:

Eliminates the FHA cap on the number of loans that can be insured.
Sets a national loan limit at the GSE conforming rate so that all seniors have equal access to their equity regardless of where they live.
Permit seniors to purchase a home and get a HECM in one transaction, so that seniors can easily move to more suitable housing. Currently borrowers must complete their home purchase transaction and HECM separately, incurring additional costs.

Current internal reforms include

Simplified appraisal: The FHA has eliminated paperwork and has made its appraisal more similar to conventional appraisals. (ML 2005-34)

Streamlined FHA appraiser approval: The FHA has streamlined its appraiser examination and appraiser roster renewal procedures (ML 2006-26)

Closing costs: The FHA has simplified closing costs and accepts customary conventional fees and reasonable costs deemed necessary to close a mortgage. (ML 2006-04 and 07)

Repair requirements: The FHA has eliminated many repair requirements and forms. (ML 2005-48)

Streamlined rehabilitation mortgage: The FHA has created a streamlined version of its 203(k) Rehabilitation Mortgage that drastically reduces the amount of paperwork and shortens processing times for lenders. (ML 2005-19 and 50)

New construction: The FHA has greatly reduced documentation requirements for lenders. (ML 2006-33)

Lender insurance: By allowing high performing lenders to electronically endorse FHA mortgages, the FHA has made the processing of FHA loans easier and more cost-efficient. (ML 2005-36)

FHA resource center: The FHA has created a technical support center for industry partners. By using this approach lenders obtain clear and consistent technical guidance nationwide. (ML 2006-08)

Reverse mortgages (HECM): In order to streamline and improve processing, the FHA has made significant changes to the reverse mortgage program. Some of these changes include:

Elimination of some documentation (ML 2006-23)
Improved counseling (ML 2006-25)
Extension of principal limit rate lock (ML 2006-22)
Clarification on how to handle judgments and liens (ML 2006-20)
Line of credit payment option for Texas (ML 2006-06)
Expansion of the national HECM counseling network (ML 2005-44)

Source: FHA - portal.hud.gov

Posted by Customer Service on February 15th, 2008 1:55 PMPost a Comment (0)