Is it Possible to Buy Real Estate with Less Than 20% Down?
Posted On: October 28th, 2011 by James Posted In: FHA Mortgage • Financial Health • Government Actions • Mortgage Insurance • Mortgage Programs • Mortgages
A realtor colleague of mine was recently relating his shock to me about how often he is talking to renters who aren’t considering buying real estate because they are under the impression that a purchase requires a 20% down payment. This idea couldn’t be further from the truth, and this message is sadly often relayed on TV from uninformed talking heads and people who are obviously not real estate professionals. I’m here to tell you the truth, dear blog reader! Isn’t that why you read blogs?!
The truth is that just about every borrower in the market could qualify to put less than 20% down if they chose to. The FHA loan is one of the easiest loans to qualify for and it isn’t just for first time home buyers, nor is there an income cap on this program… and it only requires a 3.5% down payment, but I digress… let me break this down for you in internet-friendly bullet point fashion. Continue Reading – Is it Possible to Buy Real Estate with Less Than 20% Down?
Low Rates and the Return of Private Mortgage Insurance (PMI)
Posted On: May 17th, 2011 by James Posted In: Financial Health • Mortgage Insurance • Mortgage Programs • Mortgage Rates • Mortgages • Portland Real Estate • Refinancing
Its happening again. Rates are tumbling and tumbling more. I read recently that avoiding closing costs in a declining rate environment is a wise approach and I completely agree. By avoiding closing costs two things happen:
1. The net benefit of the improved cash flow is immediately realized, and
2. You are in a position to refinance AGAIN as rates continue to slide. Because you haven’t paid any of your equity there is not much downside.
I’ve been making loans since 2003, and rates have pretty much always been really attractive with a few exceptions (sorry purchasers of the summer of 2006! I hope you’ve refinanced out of your 6.625% fixed). Continue Reading – Low Rates and the Return of Private Mortgage Insurance (PMI)
The Difference Between New & Old FHA Rules
Posted On: September 27th, 2010 by James Posted In: FHA Mortgage • Government Actions • Mortgage Insurance • Mortgage Programs • Refinancing
Just recently for Portland Home Loan, I prepared an analysis for 4 purchase scenarios on the same property. It is a purchase of $300,000 here in Portland, OR, and the 4 options are:
- 5% down conforming
- 10% down conforming, and
- 2 FHA options
One FHA option is the current FHA cost structure, which has been in place since April of 2009. The other option is the new FHA cost structure, which becomes unavoidable after October 4th of 2010. FHA mortgage insurance has always been paid in two places on the loan:
- The monthly premium (which is discounted based on a large upfront lump sum), and
- The Upfront Mortgage insurance Premium (which is 2.25% of the loan amount and automatically added to, and financed into the life of the FHA mortgage.
The major change starting Oct 4th 2010 is a shift of the mortgage insurance cost away from that “financed upfront premium” and more towards the monthly premium.
In short — FHA loans are about to become a little bit more expensive.
I have prepared an interactive FHA loan report that shows the breakdown more clearly.
The new Upfront FHA mortgage insurance premium will be reduced from 2.25% to 1% of the loan amount. However, the monthly mortgage insurance cost will almost double — being increased from 0.55% annually to 0.90% annually. In my example above, this shows up as a jump in payment of $69 per month on the same $300k mortgage.
Ultimately, FHA loans are still going to be amazingly popular, and continue to make a lot of sense for borrowers as we move forward. They still have the smallest available down payment requirement (at 3.5%) as well as the most flexibility around borrower credit history.
But I do think that this change will make a loan with 5% down and private mortgage insurance more attractive to borrowers with top credit scores. Additionally, the FHA streamline refinance will become much less attractive for many borrowers. I am scouring my client list and the wider community for last minute FHA streamline refinances! Last call for the good stuff!
The Return of PMI
Posted On: March 23rd, 2010 by James Posted In: FHA Mortgage • Mortgage Insurance • Mortgage Programs • Portland Real Estate
OK, so this is kind of exciting for all mortgage, real estate and general economic nerds. There are now not one but TWO private mortgage insurance (also known as PMI) companies who have taken Portland off their “declining markets” list!! The companies are PMI, and MGIC…. “James”, you ask… “why should I care about that?”. Well, I’m glad you asked. What it means is that buying real estate with less than 10% down just got a little more interesting.
Borrowers with top credit will now have options to buy with only a 5% down payment, and private mortgage insurance. This has not really been an option in the last 18 months, and these borrowers were all being pointed to FHA loans. And come April 5th, FHA loans are about to get more expensive as that FHA mortgage insurance is scheduled to INCREASE.
Continue Reading – The Return of PMI
New FHA Rules! (How Does This Affect Portland?)
Posted On: January 20th, 2010 by James Posted In: Government Actions • Mortgage Insurance • Mortgage Programs • Portland Real Estate
I’ve been hearing rumors about the FHA needing to increase its cash position and lower their risk profile for about a year now. I heard rumors that the down payment would increase from 3.5% to 5% down. All of these things make sense because the FHA is just being pushed beyond the brink of fiscal sanity right now. Now that the subprime mortgage universe has been sucked into a black hole, the only “low down payment” mortgage option, or “relaxed credit” mortgage option for borrowers has been the FHA mortgage.
Now, the FHA is not a bank, they are merely an insurance provider for banks. Other banks make the mortgage with knowledge that the FHA will cover a certain amount of possible loss incurred, thus alleviating a lot of the risk associated with making that loan to begin with. So, now that FHA loans make up over 30% of all mortgages being currently written, this pool of insurance is being massively stressed by all of the poor performance of mortgages of late.
Continue Reading – New FHA Rules! (How Does This Affect Portland?)
