The FHA is dropping their monthly mortgage premium insurance to their lowest levels in nearly a decade, effective January 27, 2017.

The decision will save the average home buyer $500, making home buying a more easily affordable option over renting.

The current mortgage insurance premium (MIP) is 0.85%, but the FHA’s move will lower premiums by one-quarter of a percent to 0.60%. This decision is meant to make FHA loans a more popular option for home buyers.

Sizable drop in mortgage insurance premiums

Insurance premiums on FHA loans were rising after the financial crisis of 2007, and home buyers opted for conventional loans over FHA to save money.

As the economy began to stabilize, the FHA stopped increasing the rising MIP rates and waited for economic conditions to recover.

Now that the economy is healthy, the FHA has lowered monthly MIP rates to just above their lowest levels of the past decade.

According to an accompanying statement made by the FHA, there have been four straight years of economic growth, so “it’s time for FHA to pass along some modest savings to working families.”

By reducing MIP payments, the FHA is trying to attract more home buyers to use FHA loans. FHA loans already have low requirements for qualifying credit scores and down payments.

For the past five years, FHA loans were made more expensive by relatively high MIP payments. Now that they’ve been reduced, FHA can more easily compete with conventional loans.

According to the US Department of Housing and Urban Development, the reduced MIP rates will save homeowners an average of $500 annually. However, savings will depend on the size of the loan.

For example, on a loan of $250,000, homeowners would save $625 annually due to lower MIP rates. This saving is large enough that many home buyers could now become eligible for an FHA loan.

Savings increase the higher the loan amount. On FHA loans worth more than $625,000, homeowners will save at least $2,812 a year, or over $230 each month.

To qualify for an FHA loan, home buyers must meet debt-to-income (DTI) limits and make a downpayment of at least 3.5%. By reducing monthly MIP payments, it will be easier to qualify based on DTI while saving money that can go toward a downpayment.

Lower FHA MIP on all loans

Depending on the size and downpayment of an FHA loan, the monthly MIP rate could change. It can also change depending on whether your loan term is greater than 15 years.

While the most common option is a 30-year FHA loan with the minimum downpayment of 3.5%, others may find that a different downpayment with a larger loan size may fit their needs best.

The amount that home buyers can save on FHA loans of less than 15 years also changed. Changes to loans with 15 years or fewer are as follows:

• Loan amount less than $625,000 and down payment less than 10%: 0.50%
• Loan amount less than $625,000 and down payment greater than 10%: 0.25%
• Loan amount greater than $625,000 and down payment less than 10%: 0.50%
• Loan amount greater than $625,000 and down payment greater than 10%: 0.25%

Chart of historical FHA MIP changes

Historically, FHA MIP costs have been rising. However, the monthly MIP rate has been declining for the past few years, and now they’re practically on par with their pre-recession levels.

Below is an up-to-date graph that shows FHA MIP changes for loans with terms greater than 15 years and downpayments below 5%:

High monthly MIP payments deterred home buyers from using FHA loans. Now that premiums are near their lowest levels, home buyers who might not qualify for other loan programs could now afford FHA loans.

When do FHA MIP changes go into effect?

MIP rates will reduce on loans closed on or after January 27, 2017. Home buyers that apply for an FHA loan today will likely see their loan closed after that date. That means that home buyers can already start to take advantage of MIP changes.

FHA loans are also known for having some of the lowest available mortgage rates. FHA rates consistently beat conventional loan rates, and now that monthly MIP is reduced, and FHA loans could be the best available option for a number of home buyers.

The post FHA Reduces 2017 Mortgage Insurance Premiums first appeared on My Mortgage Insider.

HTLTV is an acronym for “high total loan to value.” HTLTV is a comparison between your home’s value and the total amount of credit available on the home. For instance, a home worth $100,000 with an $80,000 first mortgage and a $10,000 unused line of credit would have an HTLTV of 90%.

HTLTV is also known as HCLTV, or high combined loan to value, and will play a role in determining your refinance eligibility.

Your mortgage HTLTV ratio may be higher than your loan-to-value (LTV) ratio and total loan-to-value (TLTV) ratio since it takes into account any borrowable funds you have access to.

So even if you haven’t borrowed all available funds in your line of credit, your HTLTV is going to equal the total amount you can borrow.

Understanding what HTLTV is and how it affects you are important steps to take before refinancing.

Why does my lender say I have an HTLTV?

An HTLTV takes into account all available funds in all of your mortgages. If you took out a second mortgage in the form of a line of credit (LOC), your HTLTV ratio could be different than your LTV or TLTV ratio.

When applying for a refinance, your lender is going to want to look at all the funds you have available to borrow. Your HTLTV will represent the total funds available to you even if you haven’t borrowed that amount.

Having an HTLTV is not a bad thing. It means you have flexibility to pull more of your home’s equity at will for home improvement projects or even to go on vacation.

However, having a high HTLTV can affect your refinance. But in some cases it can be fairly easy to reduce.

Also, depending on your situation, your HTLTV may not affect your refinance eligibility at all.

What is the difference between LTV, TLTV and HTLTV?

The LTV is the percentage of your appraised home value covered by your first mortgage. If you purchased a home with an appraised value of $100,000, your LTV depends on how much your mortgage is worth.

If you borrowed $80,000 and put $20,000 down, your LTV would be 80. If you opted for a Conventional 97 and put $3,000 down, your LTV would be 97.

Your TLTV, also know as combined loan-to-value or CLTV, adds your first mortgage and second mortgage LTVs together.

Using the same example as before, a second mortgage worth $15,000 with an LTV of 80 would raise your TLTV to 95. Even though your second mortgage may be small your lender will take both into account.

However, your second mortgage could be a line of credit, commonly knownas a HELOC. If this is the case, your HTLTV may be different than your TLTV. Your HELOC could be open-ended meaning that any funds you didn’t borrow originally are still available to you.

Your lender will assume that you will take those funds out eventually even if you have not or do not plan to.

If you only took out $10,000 of the available $15,000 from your second mortgage, your TLTV would be 90. However, your HTLTV would be 95 since it also takes into account any available funds.

How HTLTV affects a refinance

Your lender will assume that any available funds from an open-ended line of credit will be used even if you have no plans to draw out more funds.

So if you have money available in your HELOC, this can increase you HTLTV.

When applying for a refinance, your lender will notice that your HTLTV is higher than your LTV or TLTV. This can affect the rates that you can get, but also whether or not you are eligible for a refinance.

For instance, a lender may allow an HTLTV up to 95 percent. But, your line of credit would let you draw up to 100 percent of your home’s value in cash. Your HTLTV would make you ineligible for the new loan.

Making sure that you know your current HTLTV and taking steps to keep it low could help immensely when you apply to refinance.

What if my HTLTV is too high?

If your HTLTV is too high, you should look into lowering your ratio of available mortgage funds compared to house value.

Depending on your situation, you may have a number of different ways to lower it.

Reduce your line of credit

If you haven’t borrowed the maximum available amount from your HELOC, you can ask your lender to reduce maximum available limit.

You can have it reduced by an amount. — for example, if you have $10,000 available in your HELOC but will only want to borrow $5,000 in the future, you can opt to get your LOC lowered by $5,000. This will decrease your HTLTV proportionally.

Many lenders are willing to reduce your available credit without having to open a whole new line of credit.

Make your line of credit close-ended

By changing your line of credit from open-ended to close-ended, you will remove the possibility of borrowing available funds.

The lender will change your line of credit into a home equity loan, meaning your second mortgage will act more like a first mortgage. You can pay off the balance, but you can no longer pull money out and add to your balance. You will not have a “credit limit” available on your second mortgage, so your HTLTV will equal your TLTV

Make a payment on your LOC then reduce the maximum

If you have any additional funds, you should consider making a principal payment on your LOC. After your payment, you can reduce the maximum available limit on your LOC and consequently reduce your TLTV and HTLTV.

Current refinance rates

Mortgage rates have been falling throughout 2016 to ultra-low levels.

Low mortgage rates have been driving homeowner interest in refinancing. Today’s rates could be some of the lowest in the past year. Check your home buying eligibility. Start here (Sep 16th, 2024)

The post Refinancing? Understand Your HTLTV And HCLTV first appeared on My Mortgage Insider.

Buying a house on top of all of that seems almost unachievable. But there are loans available and lots of assistance to make the dream of home ownership in reach for single fathers.

“There are programs out there to get more people in homes who don’t have a lot of savings. Homeownership is the ultimate goal of many of these loans and programs,” says Mark Gundersen, senior loan officer at Shelter Mortgage Company in Saint Charles, Ill. “It can be tough to support a family on one income.”

But, as Gunderson explains, if a single parent has decent credit, they could qualify for a mortgage.

Single dads have harder time qualifying after housing downturn

In 2013, the National Association of Realtors Profile of Home Buyers and Sellers survey showed that the overall market share of single buyers declined from 32 percent in 2010 to 25 percent in both 2012 and 2013.

“Single home buyers have been suppressed for the past three years by restrictive mortgage lending standards, which favor dual-income households who are more likely to have higher credit scores,” says Lawrence Yun, NAR chief economist, in an NAR press release about the survey.

The statistics do show that single dads have a harder battle to get a loan. But, there is hope. A good place to start is to talk with a local housing authority.  They can tell you what specific homeownership programs, grants and loans are available for your situation in your city or state.

Gundersen says that Illinois rolled out a new program in April called Welcome Home Illinois that is perfect for single fathers. More than $19 million of home loans have been given out so far in the program.

Those who qualify can get $7,500 in down payment assistance plus a below-market interest rate. It is run through the Illinois Housing Development Authority.  Participants must have a 640 credit score, be a first-time homebuyer and be able to put down 1 percent of the purchase price or $1,000, whichever is greater.

“There are income and purchase price limitations depending on which county you are going to buy the house in,” he says. “But no one is getting near the purchase price limitations – which is $378,461 in Cook County (Chicago area).”

The maximum gross income of $90,960 for a household of one or two people is also tough to go over if it is a one-income family, he adds. The $7,500 is a forgivable loan, meaning that if you move or refinance in less than 5 years from your closing, you have to pay that money back on a prorated basis.

There are similar homeownership programs in existence in many states, counties and municipalities to help stimulate the housing industry again.

Single father down payment assistance programs

Some of examples of assistance programs include:

• Baltimore City’s First Time Homebuyer Program is a $5,000 five-year forgivable loan to first-time homebuyers to assist with down payment and settlement expenses.
• Maine Housing’s First Home Program provides low fixed rate mortgages with little or no down payment. All First Home mortgages also come with payment protection for unemployment.
• Pinellas County, Fla., First-time Homebuyer program helps with down payment and closing costs assistance with a $10,000 at 0 percent interest loan that is deferred until you sell, refinance or payoff the home.

Best mortgages for single dads

No matter where you live, there are several mortgages to look into for single dads.

Here are some options to investigate for your situation with your lender, according to Gundersen:

FHA

Your loan will have a low interest rate, and you only need 3.5 percent down. That down payment can come from a gift. “That’s the lowest down payment out there except for the VA loan,” Gundersen says. Also, your credit score doesn’t have to be so great either. Depending on the lender, a minimum of 600 is being accepted in most areas and through most lending institutions. Some do take 580.

One of the down sides of an FHA loan is the mortgage insurance premium. It’s almost double what people pay with traditional loans called private mortgage insurance when the down payment is less than 20 percent of the loan.

“You will pay that mortgage insurance till the end of the loan even if you paid off 50 percent of the principal. It’s always going to be there until you refinance or sell the house,” Gundersen says.

Veterans Administration (VA) Loan

If the single dad is eligible to get a VA loan through his own military service or through another relationship, it could be the best loan out there for him.

“You are getting an unbelievable deal with this loan. It is a well-deserved loan though,” Gundersen says. “You have no mortgage insurance.”

This loan is available to military veterans and their families with no down payment, and the government backs 100 percent of the financing. There is no mortgage insurance to worry about either.

USDA Loan

United States Department of Agriculture offers a variety of loans to help low- to moderate-income people buy homes in rural areas. But “rural” can be a misnomer because many of the programs are offered in areas surrounding metropolitan cities. Many of these USDA loans have very low interest rates and no down payment. You get 100 percent financing, and the mortgage insurance premium is lower than that of FHA. USDA loans do have maximum levels of income, but most single dads will be well below income limits.

Conventional Loan

Gundersen says that you may need 5 percent down payment of your own money for a conventional loan. But conventional mortgage products like HomeReady^TM  only require 3%, and even allow you to use renter or boarder income to help you get approved.

You will need a pretty good credit score and credit history, but some lenders are lowering their credit score minimum to get more buyers these days. If you don’t pay 20 percent down, you will pay private mortgage insurance up to when you reach that 20 percent in the principal. You can choose from 10, 15, 20, 30 and even longer fixed years of paying the loan’s principal and interest off.

Check your home buying eligibility

There are tons of programs that help single dads get approved to become a homeowner instead of a renter.

Get a free eligibility check and get on your way to giving the gift of homeownership to yourself and your kids.

The post The Single Dad’s Guide To Becoming A Homeowner first appeared on My Mortgage Insider.

Most home shoppers choose fixed-rate mortgages without much thought about adjustable-rate mortgages.

But you may be surprised to learn both types of mortgages have advantages.

Depending on your situation, an adjustable-rate mortgage (ARM) could lower costs.

Let’s look closely at each type of loan to see which one works best for you.

Check today’s mortgage rates. Start here

Fixed-rate mortgages

Fixed-rate mortgages are the most popular mortgage loan. Over 90% of home buyers will pick a fixed–rate loan over an ARM loan.

The Federal Housing Administration (FHA) created fixed-rate mortgages to make homes easier to buy. Now, all of the major home loan programs offer fixed rates.

With a fixed rate, your mortgage principal and interest payments won’t increase during the life of the loan. This predictability means you can budget your money more easily for years to come.

Most borrowers today like the combination of a low rate plus stability that a fixed mortgage provides. And with rates still near historic lows, mortgage shoppers can’t go wrong by locking in a fixed rate.

So why do variable rate loans still exist? Because some homebuyers can create more room in their budget by choosing an ARM whose introductory rate can be even lower than a 30-year fixed rate.

Adjustable-rate mortgages

Adjustable-rate mortgages work differently than fixed-rate mortgages in a number of ways.

An ARM has a fixed introductory rate for a pre-set number of years. After this introductory period ends, the loan’s rate begins to adjust along with changes in overall mortgage rates. This is still a 30 year mortgage but one where you’ll pay a fixed rate for the first 5 years (or 7 or 10 years, depending your loan’s structure). For the remaining period of the loan (23, 25 or 20 years) you’ll pay a rate that can adjust as often as once per year.

As your rate changes, so will your monthly mortgage payment.

Introductory rates on ARMs, on average, are lower than fixed rates, so an ARM’s initial mortgage rate tends to be easier on budgets. An ARM’s introductory period could last five or seven years, for example, which would mean lower monthly payments during this period.

Then, if you sold or refinanced your home before the intro ARM rate expired, you’d be finished with the loan before its first rate increase.

How does an ARM work? Reading the numbers

When you’re considering an adjustable-rate mortgage, be sure to learn all of the loan’s details so you’re not surprised by a rate change.

Most importantly, you’ll want to know how long the initial interest rate will last before the rate adjustments begin.

An ARM will tell you this detail in its series of numbers. In a 5/1 ARM, for example, the first number tells you the length of the loan’s introductory period. In this case, you’d have a fixed interest rate for five years before the rate increases or decreases.

The second number shows how often the loan’s rate can change. In a 5/1 ARM, your rate could change each year after the five-year introductory period expires.

Rate caps limit how much your ARM can change  

An ARM has another important series of numbers that set limits on how much your loan rate can change. This series of numbers shows your rate caps.

For example, if you have an ARM with a 2/2/5 cap, your rate cannot change by more than:

• 2% after the fixed-rate period ends
• 2% for each adjustment period
• 5% over the life of the loan

So, with a 2/2/5 cap on a 5/1 ARM with an introductory interest rate of 3%, your loan’s rate:

• Would remain at 3% for the five-year introductory period
• Could reach as high as 5% after the intro rate expires
• Could increase by up to 2% at each subsequent yearly adjustment
• Could never surpass 8% during the life of the loan

These lifetime caps on ARMs protect borrowers from out-of-control rate increases, but even a 5% rate increase would mean much higher monthly payments.

You’d want to refinance out of your ARM before its intro rate expires, especially during a high-rate environment.  

Fixed rate or adjustable rate: Which loan is right for you?

If you’re like most homebuyers, you’ll want the predictability of a fixed interest rate.

After all, with a fixed rate on a 30-year mortgage, the payment on your principal and interest won’t change for three decades. (Your property taxes and homeowners insurance will likely change your monthly payment some.)

So how will you know if an ARM could save you money? Answering these questions can help:

How large a mortgage payment can you afford?

An ARM’s lower introductory rate could help you afford a more expensive home, or it could make more room in your monthly budget for several years or more.

But you’ll need to be ready to refinance or sell the home before the ARM’s introductory period ends, especially if interest rates are higher at that time.

How long do you plan on staying in the home?

When you’ll stay in your new home for only a few years, an ARM can help you save money during that period. After all, you’d be selling the home and paying off your loan before interest rates change.

If you change your plans and decide to stay in the home, you could still refinance before the ARM’s rate adjustments start to increase your payment. 

What are interest rates like?

During the COVID-19 pandemic, lenders have been offering historically low interest rates, offering homebuyers an opportunity to lock in uncommon savings with a fixed rate.

When market conditions change and mortgage rates increase, ARMs will likely be more attractive. 

How frequently does the ARM adjust?

An ARM’s initial interest rate will stay the same for a period of time — usually three, five, or seven years. After that, most ARMs adjust their rate every year to reflect market conditions.

Make sure your ARM’s introductory period lasts long enough to create the savings you’re aiming for. Remember that refinancing your mortgage loan requires closing costs, so you’ll have to pay to exit your ARM.

Could you afford your monthly payments if interest rates significantly increase?

Nobody can predict the future of mortgage rates. Who would have guessed in the summer of 2019 that rates would be so low going into 2022?

If there’s no way you could afford your mortgage payment with a higher interest rate that falls within your ARM’s rate caps, be careful. If your plans to sell or refinance before the introductory rate expires fell through, your personal finances could suffer.

Ready to talk to a mortgage specialist? Start here

Fixed rate and ARM pros and cons

Both types of mortgage loans have their pros and cons.

Fixed-rate mortgages

Adjustable-rate mortgages

ARM vocabulary: Knowing the terms

Adjustable-rate loans intimidate some homebuyers because of their terminology. If you’re considering an ARM, you should know these terms:

• Adjustment frequency: The amount of time between rate adjustments once the introductory period expires. The adjustment frequency for most ARMs is one year
• Adjustment indexes: An ARM’s rate won’t change randomly. Instead, it will be tied to an index rate. Many ARMs are tied to the SOFR (Secured Overnight Financing Rate)
• Margin: The gap between your loan’s index rate and your loan’s actual rate. A margin of 2% means your rate will be 2 percentage points higher than your loan’s index rate
• Caps: Limits on how much your rate can change during one adjustment period or over the entire term of the loan
• Ceiling: The highest possible rate you could be paying during the life of the loan
• Annual cap: The most your interest rate can increase during an annual adjustment period
• Lifetime cap: A limit on how much your rate could increase during the entire life of the loan

Always be sure to ask your loan officer when you’re not quite sure how your loan will work.

Other ways to lower your mortgage rate besides getting an ARM

Some loan shoppers consider an adjustable-rate mortgage only because of its lower interest rate. Here are some ways to score a lower rate on a fixed-rate loan:

• Shop around: Each lender will see your application a little differently. Getting Loan Estimates from at least three lenders increases your chance of finding a lower fixed rate
• Improve your credit score: With any kind of mortgage loan, a better credit score can lower your rate. Credit reporting errors could be pulling down your score. Missing payments will pull down your score, too
• Increase your down payment: Exceeding your loan’s minimum down payment could put your lender at ease and lead to a lower mortgage rate
• Pay off some debt first: Lenders prefer a lower debt-to-income ratio, or DTI, so you could trim your rate by paying off a student loan or getting your credit cards under control
• Choose a shorter loan term: Average rates on 15-year fixed loans are lower than average rates on 30-year fixed-rate loans. But a 15-year term requires higher monthly payments than a 30-year term

Combining several of these strategies could help lower your fixed rate so you could afford your loan without accepting the uncertainty of an ARM.

Check your home buying eligibility. Start here

Fixed- vs adjustable-rate mortgage FAQs

What’s the difference between a fixed-rate and adjustable-rate mortgage?

A fixed-rate loan’s interest rate won’t change, and its loan payments will remain the same throughout the life of the loan. An adjustable-rate mortgage begins with a fixed rate but then the rate changes periodically based on market conditions. As a result, payment amounts on an ARM will change periodically.

What are two disadvantages to an adjustable-rate mortgage?

Adjustable-rate mortgages are not as predictable as fixed-rate loans since their monthly payments will eventually change. Also, ARMs are more complicated than fixed-rate loans.

Why would a home buyer choose an adjustable-rate mortgage?

On average, ARMs offer lower mortgage interest rates during the introductory period which can last for several years. This lower rate gives homebuyers a chance to save money, especially if they sell or refinance the home before the ARM’s fixed period expires.

Is it better to go with a fixed or variable mortgage?

For most borrowers, especially first-time homebuyers, the simplicity of a fixed-rate mortgage works best. But in some cases, borrowers can enjoy lower payments with an ARM and then refinance or sell the home before the loan’s rate adjustments begin.

Why is an adjustment rate mortgage a bad idea?

Buying a home with an ARM would be a bad idea if:

1. You didn’t refinance or sell the home before the loan’s fixed period expired, and
2. Mortgage interest rates were a lot higher when the fixed period ended

This combination could increase your monthly payment significantly. It could make your home unaffordable.

How are ARMs and fixed-rate mortgages similar?

Both ARMs and fixed-rate mortgages begin with a fixed rate and level monthly payments. But a fixed loan’s initial interest rate lasts throughout the term of the loan while an ARM’s rate will begin to change, usually in three, five, or seven years.

Current mortgage rates

Mortgage interest rates rise and fall daily, but they continue to trend near historic lows. This has made home buying and refinancing incredibly affordable.

If you’re looking for a short-term loan, an ARM’s lower introductory rate could help you save even more.

Before applying for a home loan, be sure to check current rates for fixed- and adjustable-rate mortgages.

Check today’s mortgage rates. Start here

The post What Is The Difference Between Adjustable-Rate And Fixed-Rate Mortgages? first appeared on My Mortgage Insider.

Additionally, Fannie Mae’s High LTV Refinance Option (HLRO) currently has no expiration date. Similar to HARP and FMERR, it’s a great loan option for underwater homeowners who don’t have enough equity earned in their home to qualify for a refinance.

Mortgage rates near all-time lows

Homeowners who have waited patiently to see if rates will go lower finally have their chance.

Despite the Fed’s attempts to increase the cost of lending, rates for mortgages sank and are now hitting all-time lows. Homeowners who are considering a refinance might do well to start right away before mortgage rates follow the Fed rates upward.

But what about those who owe more than their home is worth and can’t refinance? Prior to the introduction of the Home Affordable Refinance Program (HARP), there wasn’t much they could do. Now, even “underwater” homes can refinance to get access to today’s low rates.

Of all the refinance programs out there, HARP is one of the easiest and simplest that you could have access to.

The middle-class stimulus package

Some think that HARP is too good to be true, but this isn’t the case. HARP is a government program that is designed to help the middle class by reducing their monthly payments.

HARP is real, and banks don’t like it for two main reasons:

1. Mortgage rates are near historically low levels
2. Homeowners can save a ton on their mortgage

Big savings means that banks aren’t making as much off your mortgage. By lowering your rate, you can lower the interest payments that go straight to banks. Those savings will start to add up, especially since current mortgage rates are extremely low.

If you haven’t heard of HARP, it isn’t too late – the program will be available until December 31, 2016. This means that HARP will be going away soon. Don’t miss out one of the simplest refinance programs available!

How do I check my eligibility?

Banks don’t want you to know about HARP, so it can be hard to find out if you’re eligible. Fortunately, we’ve created a useful tool that can help you check your eligibility – completely free.

Start by selecting your state and filling out a quick form. After that, you’ll get access to the mortgage rates you can get on a HARP refinance!

Sources: FHFA Refinance Report

The post Mortgage Refinance Banks Don’t Want You Knowing About first appeared on My Mortgage Insider.

Over 74.2 percent of FHA loans closed in the month of December, up from about 74 percent in the month of November.

FHA loans are known as being one the easiest programs to qualify for. Applicants only need a credit score of 580, and downpayments can be as low as 3.5%.

Also, FHA loans have some of the lowest mortgage rates available. Rates on FHA loans are consistently lower than similar conventional loans. This makes FHA one of the best loan programs available.

Now, FHA loans are also the most likely of any major loan to get approved.

Home buyers should take advantage of the low required credit score, low downpayment and low rates associated with FHA loans.

Click to check you FHA loan eligibility.

It’s Becoming Easier To Get FHA Approved

The percentage of FHA loans that closed were reported by mortgage software company Ellie Mae. Each month, they release a report of all loans that went through their software and compile an Origination Report.

The Ellie Mae Origination Report shows the percentage of loans that closed in a 90 day period. The higher the percentage, the more likely loans were to close in a normal amount of time. According to Ellie Mae, 78.8% of FHA loans closed in a 90 day period.

Purchase loans closed at a particularly high pace. Ellie Mae reported that 78.8 percent of purchase loans closed, up more than six percent from December 2018. For contrast, in May of 2015, only 63.1% of FHA purchase loans closed.

The Federal Housing Association (FHA) has recently been loosening their requirements for loans. This has made it easier for lenders to close FHA loans for borrowers, and it has made it easier for borrowers to get mortgages.

This has greatly affected FHA purchase loans which were six percent more likely to close than they were in December 2018.

Click to check current mortgage rates.

FHA Refinances Close At High Clip

Refinances backed by the FHA have been closing at a much higher pace than they were over the past year.

In December, 61.9% of FHA refinances closed. This is a huge increase from December 2018 when only 55.6% of refinances closed.

In May of 2015, FHA refinances were more likely not to close with only 48.9% of applications closing.

Refinancing has been a popular option of the past few months. Mortgage rates have been dropping to record-low levels, and they are not showing signs of rising any time soon. Low rates not only makes home buying more affordable, but they make existing mortgages less expensive.

Overall, refinances were more likely to close in December than they have been in the past 18 months.

Ellie Mae reported that 75.5% of all refinance applications closed in December, up from 71.4% in December 2018. This number represents all refinance applications including FHA, conventional and VA loans.

Low mortgage rates have been fueling refinances for the past few months, and refinances has steadily been getting more likely to close. There is a chance that refinances will close at an even higher clip in the month of June.

This month has already seen record low mortgage rates. According to Freddie Mac, mortgage rates are down to an average of 3.54% for a 30-year fixed rate mortgage. This is their lowest level in 37 months.

However, refinancers might opt to get a 15-year fixed rate mortgage which offers even lower rates.

Either way, those looking to refinance could find some big savings.

Click to see current refinance rates.

Current Rates Fuel Mortgages

Not only are mortgages closing at an incredibly high percentage, but they also have the lowest rates in the past 3 years. Low mortgage rates makes home buying more easily affordable, and more home buyers are being approved than before.

Summer is typically the busiest season for home buying. Those looking to purchase a new house might want to lock in at current rates while most mortgage applications are still getting approved.

Click to see current rates.

The post FHA Loans Getting Approved At High Clip first appeared on My Mortgage Insider.

A recent analysis of different housing markets around the nation showed what the median price of homes was in that city, as well as how much a downpayment would be, the cost of calculated monthly payments and the income you would need to keep the home.

Here are 12 of the largest markets and what you would need to be able to afford a home in the area. Can you afford to buy a home in any of these cities?

With some of these markets being barely affordable for most people, it’s fair to wonder where you can find affordable housing.

Many home buyers, especially first time home buyers, have been using special mortgage programs to afford a house. For example, the USDA home loan allows buyers to purchase a home in designated rural areas without requiring any downpayment. These rural areas often include the suburbs of many of the cities mentioned in this study.

Other home buying programs are available as well, such as low-income mortgages.

Click to see if you’re eligible for special mortgage programs.

Methodology:

• We calculated each downpayment rate starting with a median home price, data found on Zillow.
• We used Mortgage Reports mortgage payment calculators with the following inputs:
  • Median home price
  • 4.25% interest rate
  • 30-year loan
  • 20% downpayment (no PMI)
  • Property tax, county data from Census Bureau’s American Community Survey (ACS).
• To calculate the salary needed in each metro we used:
  • We used a 36% front-end debt ratio based on the median home price data and property tax.
  • We calculated based on 20% downpayment (excluding PMI).
• We included a homeowners insurance rate of 0.25%

Text Data:

12. Philadelphia, Pa.

Median home price: $140,200

Median real estate taxes: $1,694   

Downpayment:

20%: $28,040

10%: $14,020

5%: $7,010A

3.5%: $4,907

With 20% down, a homeowner could expect to pay about $722  per month including principal, interest, home insurance and property tax. A minimum qualifying income, using the 36% front-end ratio, is $24,071.

11. Phoenix, Ariz.

Median home price: $220,200

Median real estate taxes: $1,539

Downpayment:

20%: $44,040

10%: $22,020

5%: $11,010

3.5%: $7,707

With 20% down, a homeowner could expect to pay about $1,041 per month including principal, interest, home insurance and property tax. A minimum qualifying income, using the 36% front-end ratio, is $34,691.

10. Chicago, Ill.

Median home price: $221,600

Median real estate taxes: $4,995

Downpayment:

20%: $44,320

10%: $22,160

5%: $11,080

3.5%: $7,756

With 20% down, a homeowner could expect to pay about $1,335 per month including principal, interest, home insurance and property tax. A minimum qualifying income, using the 36% front-end ratio, is $44,484.

9. Minneapolis, Minn.

Median home price: $238,400

Median real estate taxes: $3,328  

Downpayment:

20%: $47,680

10%: $23,840

5%: $11,920

3.5%: $8,344

With 20% down, a homeowner could expect to pay about $1,265 per month including principal, interest, home insurance and property tax. A minimum qualifying income, using the 36% front-end ratio, is $42,174.

8. Miami, Fla.

Median home price: $308,000

Median real estate taxes: $2,600

Downpayment:

20%: $61,600

10%: $30,800

5%: $15,400

3.5%: $10,780

With 20% down, a homeowner could expect to pay about $1,493 per month including principal, interest, home insurance and property tax. A minimum qualifying income, using the 36% front-end ratio, is $49,766.

7. Austin, Texas

Median home price: $334,400

Median real estate taxes: $5,696

Downpayment:

20%: $66,880

10%:$33,440

5%: $16,720

3.5%: $11,704

With 20% down, a homeowner could expect to pay about $1,860 per month including principal, interest, home insurance and property tax. A minimum qualifying income, using the 36% front-end ratio, is $62,012.

6. Denver, Colo.

Median home price: $388,400

Median real estate taxes: $1,717

Downpayment:

20%: $77,680

10%: $38,840

5%: $19,420

3.5%: $13,594

With 20% down, a homeowner could expect to pay about $1,753 per month including principal, interest, home insurance and property tax. A minimum qualifying income, using the 36% front-end ratio, is $58,419.

5. Washington, DC

Median home price: $533,800

Median real estate taxes: $3,492

Downpayment:

20%: $106,760

10%: $53,380

5%: $26,690

3.5%: $18,683

With 20% down, a homeowner could expect to pay about $2,503 per month including principal, interest, home insurance and property tax. A minimum qualifying income, using the 36% front-end ratio, is $83,433.

4. Boston, Mass.

Median home price: $561,300

Median real estate taxes: $3,489

Downpayment:  

20%: $112,260

10%: $56,130

5%: $28,065

3.5%: $19,646

With 20% down, a homeowner could expect to pay about $2,617 per month including principal, interest, home insurance and property tax. A minimum qualifying income, using the 36% front-end ratio, is $87,223.

3. New York, N.Y.

Median home price: $586,400

Median real estate taxes: $9,006

Downpayment:

20%: $117,280

10%: $58,640

5%: $29,320

3.5%: $20,524

With 20% down, a homeowner could expect to pay about $3,181 per month including principal, interest, home insurance and property tax. A minimum qualifying income, using the 36% front-end ratio, is $106,015.

2. Seattle, Wash.

Median home price: $697,700

Median real estate taxes: $4,411

Downpayment:  

20%: $139,540

10%: $69,770

5%:$34,885

3.5%: $24,420

With 20% down, a homeowner could expect to pay about $3,259 per month including principal, interest, home insurance and property tax. A minimum qualifying income, using the 36% front-end ratio, is $108,625.

1. San Francisco, Calif.

Median home price: $1,249,000

Median real estate taxes: $7,615

Downpayment: rate

20%: $249,800

10%: $124,900

5%: $62,450

3.5%: $43,715

With 20% down, a homeowner could expect to pay about $5,810 per month including principal, interest, home insurance and property tax. A minimum qualifying income, using the 36% front-end ratio, is $193,675.

Click to see today’s rates.

The post How Much Can You Expect to Spend on a Mortgage in These 12 Metro Areas? first appeared on My Mortgage Insider.

It was caused by the shortage of available homes on the market, the same problem that has been plaguing the housing market for the past few years.

In June, existing home sales decreased by 1.8 percent, bringing the current pace to a seasonally adjusted annual rate of 5.52 million homes. This is the second lowest mark of 2017 after February’s low numbers.

The silver lining is that the current seasonally adjusted annual rate is higher than it was a year ago, and that could be a sign of a slow improvement.

For home buyers, the issue has been that there aren’t enough homes available to be purchased. Normally, existing homes make up the bulk of home sales. However, homeowners have not been eager to move.

This is despite the fact that many areas have homes selling for a record high average.

The housing shortage is nothing new, and many home buyers have still had success finding a home despite the odds seemingly against them. Homes are still being sold, and people are still buying them.

Low mortgage rates have been fueling the high demand for homes, and if home sales continue to gradually pick up, home buyers could end up finding a reasonably priced home with a low mortgage rate attached.

Check current mortgage rates.

About Existing Home Sales

Each month, the National Association of Realtors (NAR) tracks the number of homes sold. The existing home sales report is part of this, and it tracks all homes that are not newly built. This includes houses, townhouses, co-ops and condos.

June’s numbers aren’t entirely encouraging, but they do show signs of improvement. Compared to one year ago, June’s sales pace was 0.7% higher.

But homeowners aren’t putting their homes on the market fast enough to keep up with demand. The total housing inventory at the end of June was 1.96 million, down 0.5% from May.

Some home buyers are expecting new home sales to make up for the dip in existing home sales, but contractors are having trouble building new homes. There is currently a labor shortage for home construction.

As a result of the shortage, many contractors have cut back on the number of homes they’re building.

What’s more, the median prices of homes is also increasing. In June, the median price for all housing types was $263,000, continuing the trend of each month setting a new record.

But home buyers are still finding housing, and many areas still have very affordable housing.

Click to begin the pre-approval process.

First Time Home Buyers Still Buying

First time home buyers made up 33 percent of all existing home sales in June. At the current pace, they will make up roughly 35 percent of all existing home sales in 2017.

It’s encouraging to see that first time home buyers are still making an impact on the housing market. It shows that they are optimistic about the future of housing.

According to Fannie Mae, the future outlook for the housing market is still positive, despite a shortage of available homes.

Those looking to purchase a home shouldn’t be deterred by the national housing shortage. Just because there are not as many homes available as there have been doesn’t mean it’s impossible to find a home.

At some point,  the market will become less of a seller’s market. Home buyers could end up finding more available options going into the fall as the busy summer buying season comes to an end.

Click for current rates.

Current Mortgage Rates

Mortgage rates were rising through the beginning of 2017, but they have recently dropped to much lower levels.

Also, current rates are much lower than they have been historically. Rates are expected to rise throughout the year, so keeping track of rates could help when looking to buy a home.

Click to see current rates.

The post Existing Home Sales Dip, But Still Better Than One Year Ago first appeared on My Mortgage Insider.

However, their decision could end up forcing rates higher later this year.

The Federal Open Market Committee (FOMC) unanimously voted to maintain their current federal funds rate. Their rate is at a target level of 1%-1.25%, ever since they voted to increase it in June.

While the Fed decided not to raise rates, there could be a few reasons why mortgage rates are going to increase over the coming months.

First, the Fed is still planning on raising their rate at least one more time before the end of 2017. If and when they do this, it will increase the lowest levels that all forms of interest rates can go.

As a consequence, this could lead to consistently higher mortgage rates.

Second, the Fed has revealed more about their stimulus wind down, a plan for them to get rid of all the assets they collected to help revive the economy almost a decade ago.

The Fed could begin this plan as soon as September, and while it might not have a major impact on the economy, it could end up forcing rates higher for bonds.

There’s a chance that this could then go on to force mortgage rates higher.

Until that happens, mortgage rates could still hold low. Current rates are among the lowest of 2017, and while the Fed’s new could change rates, there’s a good chance that rates will stay fairly low until more news is released regarding the Fed.

See current mortgage rates here.

Why The Fed Maintained Rates

The FOMC is in charge of conducting monetary policy in the United States. They meet roughly every six weeks, and their most recent meeting was scheduled for July 25-26.

One tool the Fed uses to conduct monetary policy is the federal funds rate. This is their version of interest rates, and it tends to set interest rates nationwide.

The Fed decides to change their rate for a number of reasons. Recently, they have been raising their rate to try and spur a quicker growth in the economy. When the economy is growing, higher rates will help monitor the economy.

While increasing their rate is important, the Fed can’t do it at every meeting. The economy grows at a gradual rate, so they need to make sure that everything is healthy before they make more changes.

For home buyers, the federal funds rate represents what could happen to mortgage rates, but the two are not directly connected.

For example, rates have barely moved since the Fed rose their rates in June. Also, today’s rates are quite a bit lower than they were at the beginning of the year, and the Fed has risen their rate twice in that time period.

Mortgage rates may not be directly tied to the federal funds rate, but home buyers will still want to keep on eye on what the Fed does and says.

The Fed could easily decide to raise their rate in September, and that could cause mortgage rates to climb. Also, the anticipation of a rate hike can cause investors to influence rates.

As the busy summer buying season winds down, home buyers may want to consider checking what rates are available to them today.

Click to see current mortgage rates.

Mortgage Rates Could Increase Soon

The biggest news coming out of the Fed’s meeting was their decision to begin their balance sheet wind down “relatively soon.”

In contrast, the Fed had previously been saying “this year” in their post-meeting press release.

This change in language is small, but it could mean that the Fed is planning to begin selling their bonds in September.

If the Fed has trouble selling their bonds, they might increase the rates to make them more attractive to investors. The higher the rate on these bonds, the less interested investors will be in other options.

To combat that, lenders could raise mortgage rates to make mortgage backed securities, or packages of mortgages, seem more interesting to investors.

For home buyers, this translates to a potentially long-term increase in mortgage rates.

There’s no telling exactly how this plan is going to affect mortgage rates, but home buyers can still get historically low rates today. It would not be a bad idea to consider locking in on today’s rates.

Click to see today’s rates.

Today’s Rates

Rates change throughout the day, and they’ll continue to change each day until the next Fed meeting. Those looking to take advantage of relatively low rates may want to consider locking in on current rates.

Click to see what current mortgage rates are.

The post Fed Maintains Their Rate, But Higher Rates Could Be Coming first appeared on My Mortgage Insider.

As a result, June ended up having a low rate average.

Last month, the average rate for a closed loan was 4.27%, the lowest average for 2017. It’s the lowest a  monthly average has been since December of last year.

Low mortgage rates have been fueling the housing market and have kept homes more easily affordable for home buyers. However, rates have been fluctuating higher and lower over the past few weeks making current rates more difficult to track.

One surprise from June is that rates dropped compared to May despite the fact that the Fed decided to raise their rates at the beginning of June. Typically, the Fed opting to raise rates would lead to an increase in mortgage rates.

However, mortgage rates have not been very predictable in 2017. As a result, home buyers have had a difficult time trying to get the lowest available rates.

If June’s data is any sign of the future of the housing market, then home buyers will still have time to find a home before the market slows down. As mortgage rates rise, the housing market is going to start to cool off.

Since rates are low and home buyers are eager to find houses, many current homeowners are finding that now is a good time to sell. If this keeps up, it could end up leading to another rate hike from the Fed, and possibly even higher mortgage rates.

Click to see today’s mortgage rates.

Home Buyers Still Able To Get Mortgages

Every month, mortgage software company Ellie Mae tracks mortgage information from around the country. Roughly 75 percent of all mortgages go through their software, so their monthly origination report is seen as a trustworthy source for mortgage data.

Their report tracks mortgages that closed in a 90-day period, although many mortgages close much quicker than that. A closed mortgage is a mortgage that went through the mortgage application process and was approved.

In June, it took an average of 43 days for a mortgage to close. That’s a fast pace, considering that the fastest average for any month in 2016 was 44 days.

Combine the quick pace of mortgages closing with low mortgage rates and you have a market that’s very buyer friendly. However, the national housing shortage still gives power to the home sellers.

But this isn’t stopping home buyers. Lenders are eager to get people into homes, so they’re willing to make mortgages easier to get – and less expensive – for all types of home buyers.

Another sign of this is with FICO scores. In June, the average FICO score for a closed mortgage was 724, a fairly low amount historically.

It’s important for home buyers to keep in mind that the 724 credit score is an average, so many current homeowners with lower credit scores were approved for mortgages.

Also, over 70 percent of all mortgages that went through Ellie Mae’s system closed in a 90-day period, and over 75% of all purchase loans were closed in the same period.

While it can be hard for some home buyers to find a house, there are plenty of factors that are aiding home buyers.

Click to see current mortgage rates.

Rates Could Rise Soon

Ellie Mae’s Origination Report covers the data from the previous month, so mortgage rates have already changed from those that were reported. This is important to know, especially since the Fed is scheduled to meet soon.

At their meeting next week, the Fed could decide to raise rates. The current impression is that they will maintain the current rate, but even that decision can have an effect on housing.

If Ellie Mae’s historical data is any representation, then mortgage rates could be on their way down. In 2016, rates dropped by an average of 20 basis points (0.20%) from June to August. This is mostly because summer is the busiest season for home buyers.

As the summer buying season starts to slow in August, rates could drop to try and attract more home buyers. There are even signs that they have already started trending downward.

Check mortgage rates available to you.

Current Rates

Ellie Mae’s Origination Insight report gives valuable information to home buyers, but the data is a collection of mortgage rates from the previous month. Currently, mortgage rates are lower than those reported.

Home buyers and refinancers looking for the lowest possible rates will want to keep their eye on rate trends.

Click to see current mortgage rates.

The post Mortgage Rates Dropped To Lowest Average In 2017 first appeared on My Mortgage Insider.