I have been receiving a lot of questions about FHA Mortgage Insurance Premium, Here are Some Answers

FHA mortgage insurance is similar to the private mortgage insurance (PMI) required for conventional mortgages with down payments below 20%, but key differences exist:

Up-front Fees: 1% up-front fee due at closing.

Rate: For fixed rate loans, there is an annual premium of 1.1% to 1.15% of the loan amount per year, divided over 12 months. Variable term MIP rates are 0.25% to .50% per month for 15 year or shorter-term loans.

Removal: FHA MIP is mandatory for the first five years of loans with terms more than 15 years (even if your loan balance reaches 78% of the original home value or sales price. PMI premiums can often be removed if the loan balance is below 80% of current market value. Conventional loans automatically remove PMI when the loan balance falls below 78% of the loan amount.

Exceptions: If you have a loan term of 15 years or less and put down 10% or more of the sales price, the MIP will be cancelled after the loan balance falls to 78% (of the original sales price, or the original appraised value, whichever is less). 20% down on a 15-year loan cancels PMI altogether.
How the MIP Affects Your Loan Decision? Considering that PMI payments do not go towards the principle, or add to the value of the home, most borrowers would choose to avoid paying PMI altogether.

However, It's hard to avoid paying PMI without putting 20% down. IF you have good credit history, and the money to put 20% down, then a conventional mortgage is probably better for you as PMI would automatically be lifted. However, if the down payment is a family loan or a gift, you may not qualify for a conventional loan even with 20% down. In that case, an FHA loan with MIP may be your only option, if you cannot afford the higher payments of a conventional 15-year mortgage.

Call A and N Mortgage 773-305-5626 for any more questions!

The Importance of Customer Service and Referrals in the Mortgage Business

Sr. Mortgage Consultant Mike McNamara

FHA -- Fewer Home Approvals

The Federal Housing Administration suffered a 27% drop in market share from fiscal 2010 numbers. Department of Housing and Urban Development numbers show that while FHA refinance volume has increased by 9% since August, the 12% drag on purchase production has hurt the overall numbers in September vs. August. Coupled with this drop in monthly productivity has been a 30 basis point (or 0.3%) increase in delinquency in comparison to August numbers.  


A statistically significant number for the Chicago market specifically is the 13% drop in condominium closings, not surprising, as condominiums have been consistently falling out of favor due to the elimination of spot-approvals, and increased strictness of conditions that have been enforced since the housing bubble burst.
And while FHA loan turn-times remained at a steady 5.9 weeks average from application to closing, it is an overall improvement from the 6.8 week average turn times at this time last year.

What this data shows is that while FHA loans are a solid product, the market for them has been deteriorating, with the expectation that this deterioration will continue for the forseeable future.

A and N's Home Buyer Tips: Get the Best Refi Rates

• Improve Credit - If you're a homeowner with great credit and plenty of equity, odds are those lower rates are within your reach. But if your score is less than desirable, work at improving it by paying all of your bills on time, paying down your credit card debt, keeping your credit lines open and increasing your credit limits.        

• Loan-to-Value Factor - To calculate your loan-to-value ratio, divide the amount you want to borrow by the current value of your home. If your LTV ratio exceeds 80 percent, you may have trouble qualifying for a refi.

• Short Term = Savings - Paying your loan off in a shorter period of time is not only a surefire way to save money over the life of your loan, but it is also a way to obtain an attractive rate on your mortgage.

• Opt to Pay Points - Buy down your loan's interest by paying points. A point is equal to 1 percent of your loan amount. Those buyers who opt to pay more points when refinancing are often  able to acquire lower interest rates on their loan. This could mean significant savings over the life of the mortgage. 

Should Banks Maintain Foreclosed Homes?

See our own Neena Vlamis interviewed on Fox News speaking to this hot topic.

Should Banks Maintain Foreclosed Homes?: MyFoxCHICAGO.com