New Monthly Mortgage Insurance Premium Schedule

The MIP schedule for FHA loans with terms greater than 15 years (e.g. 30 year fixed FHA) is as follows :

• For loans with LTV greater than 95 percent: 1.250% percent annually ($200,000 loan amount would have an a monthly mortgage insurance payment of $208).
• For loans with LTV less than, or equal to, 95 percent : 1.200% percent annually.

New Up-Front Mortgage Insurance Premium

• The Up-Front Mortgage Insurance Premium was increased from 1 percent to 1.75 percent of the base loan amount. This increase applies regardless of the amortization term or LTV ratio. FHA will continue to permit financing of this charge into the mortgage and will continue to calculate actual premium charges against the base loan amount before adding any financed UFMIP. This change is effective for case numbers assigned on or after April 9, 2012. (Example-$200,000 loan will have $3,500 added to the loan amount)

FHA Streamline Refinance MIP Rates for ‘Older’ Loans (Refi Program)

Not everyone will pay the FHA’s new mortgage insurance rates. For FHA-backed homeowners whose mortgages are older; whose loans were endorsed prior to June 1, 2009, FHA mortgage insurance is getting cheaper, not more expensive. Some current FHA-backed homeowners can now use the FHA Streamline Refinance program without fear of “more mortgage insurance”.

New Up-front Mortgage Insurance Premium Schedule For ‘Older’ Loans (Refi Program)

Beginning June 11, 2012, all new FHA mortgages replacing a mortgage from prior to June 1, 2009, will pay an upfront mortgage insurance premium of 0.01%, or $10 per $100,000 borrowed.

This is a major reduction off the “full price” UFMIP paid by everyone else.

New Monthly Mortgage Insurance Premium Schedule For ‘Older’ Loans (Refi Program)

Also beginning June 11, 2012, if you’re replacing an FHA mortgage endorsed prior to June 1, 2009, and your new FHA mortgage has a term greater than 15 years (e.g.; 20-year fixed FHA, 30-year fixed FHA), your new loan’s MIP schedule is as follows :

• For loans with LTV greater than 95 percent : 0.55% percent annually
• For loans with LTV less than, or equal to, 95 percent : 0.55%% percent annually

Many potential property owners in Burlington are not aware of the benefits of using the FHA (Federal Housing Administration) mortgage program for their loan.

Federally Insured Mortgages offer lower down payments than conventional mortgages. FHA mortgages also offer flexibility in qualifiying requirements and seller assistance.

Benefits of FHA Financing:

• Available on 1-4 unit and FHA approved condominiums.
• Down payment requirements as little as 3.5%.
• Down payment does not have to be borrower’s own funds. The full 3.5% down payment requirement can be 100% gift funds from family member, borrower’s employer and even a close friend.
• Any closing costs including origination fee, discount points, Up Front Mortgage Insurance, Buydown costs and prepaid items can be paid by the seller up to 6% of the purchase price.
• Private Secondary financing is permitted by charitable organization, government agencies and family members.
• Less restrictive credit guidelines allowing credit scores as low as 640.
• No reserve requirements on 1 and 2 family properties. Three months reserves are required on 3 and 4 family properties from borrower’s own funds.
• When purchasing a 2-4 unit property, 85% of rental income can be added to the qualify.
• Non-owner occupants are allowed on single family homes and condominium purchases (ie. Parents cosigning).

As you can probably tell, FHA loans are ideal for those borrowers who may have limited down payment resources, and/or an acceptable, but less than perfect credit score, or limited credit history.

FHA loans do require some specific appraisal and inspection requirements which you can review in this document: FHA Info That You Should Know

If you are wondering if an FHA loan is right for you, or if you are a real estate professional who may need more details on the FHA programs for your Burlington Vermont area real estate clients, please give us a call at 802-658-5599 x3111.

Some people believe that home-ownership is riskier than renting. However, the numbers clearly show that owning a home is still a very solid path to build wealth. Conversely, everyone agrees that renting will not help you achieve prosperity.

Even though home prices have been dropping in many parts of the country, the long-term data can be used as evidence that even with conservative appreciation your bottom line costs are significantly less than when renting.

Factoring in the tax benefit that home-owners receive is another bonus that improves the bottom line cost of owning your home.

Also keep in the mind that the costs of owning a home have been steadily declining while rents have been steadily increasing!

Your Home = Your Savings Account

Additional irrefutable evidence is that home owners pay down the principal more and more with each payment. This loan reduction is essential a forced savings account because the value of your payments accumulates in the equity of your home.

If you’re the type of person who is renting because you’re not sure now is a good time to invest in home-ownership, give us a call at 800-499-6371 and we’ll run the numbers for your individual situation. You’ll probably be thrilled to discover how dramatically your financial future can improve.

Many people are not sure what “housing affordability” means, or how it affects their mortgage, housing payments or home values.

Let’s start with some of the latest stats on Housing Affordability:

• The monthly mortgage payment for a median-priced single-family home is now $700, compared to $1,140 in 2006 — a decline of nearly 40 percent!
• Mortgage payments now account for only 13 percent of monthly median family income, the lowest percentage on record (since 1971).
• Price declines and low mortgage rates have resulted in a ratio of monthly mortgage payments to median family income that is the lowest on record.

If you are a potential seller, one consequence of this record affordability is that you may be able to sell your home to a home buyer who would not have ordinarily been able to afford your home a few years ago. While the overall housing market is still struggling, the increase in housing affordability is seen as a bright spot for people now looking to sell or buy a new home.

If you need a mortgage in this climate, do not be deterred by various media reporting that you need a 20% down payment to qualify.

You don’t always need 20% down to qualify for a mortgage:

Many people do not realize that funding sources exist from the FHA, RD, VA and VHFA that still allow for low, or even no, down-payments. In addition, if you have good to excellent credit, you can also get ‘conventional’ mortgages with as little as 5% down by utilizing Private Mortgage Insurance (PMI).

If you would like to take advantage of the record housing affordability, and would like to know what your payments would look like, give me a call today at 802-658-5599 or check in with me online at www.vtmortgageadvisor.com .

Mark Chaffee

Vermont Mortgage Advisor

802-658-5599

What is a gift?

You want to help your child with the purchase of their new home but you are worried you will have to pay a ‘gift tax.’ What exactly is this tax and how does it work. Well, to start, the IRS defines a gift as “any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money’s worth) is not received in return.” In other words, if you give someone something of value and don’t receive an equal value in return, you’ve given them a gift.

How are gifts taxed?

Gifts that you or your child receives are not considered income, and don’t get reported on your tax return. That being said, you can’t simply dodge taxes by calling your income a gift. If, for example, you receive a “gift” in return for services rendered, it’s not a gift.

So what’s all this talk about gift taxes? The gift tax actually applies to the donor, not the recipient. The whole point of this tax is to prevent individuals from transfer their estate to others before their death, thereby avoiding the estate tax.

Exclusions from the gift tax

There is an annual gift tax exclusion that currently stands at $13k/recipient. In other words, you’re allowed to give away up to $13k  per recipient per year, to as many recipients as you wish, without any tax implications. This limit is effectively doubled for married couples, who can jointly give gifts up to $26k/year total to a single recipient.

As importantly, there is also a second, $1M lifetime limit of gifts in excess of the $13k annual limit before the gift tax is triggered. If you exceed this limit, then you’ll either have to pay the gift taxes that year, or use up a portion of this lifetime limit that would otherwise be used to offset the estate tax upon your death.

Gift tax returns and the gift tax rate

If you exceed the annual exclusion of $13k/recipient, you’ll have to file a gift tax return. But remember, you still won’t have to pay the gift tax until you reach the $1M lifetime limit. What happens once you exceed your $1M lifetime limit? How much will you owe?  At that point, the gift tax rate is, essentially, the estate tax rate and the amount owed will depend upon the estate tax rates in force at that time.

Many people are not quite sure how their credit scores affect their mortgage rate. In the simplest terms, the better your credit score, the better chance you have of qualifying for the mortgage loan that is ideal for you. This could mean better interest rates, more loan options, and a quicker closing.

Your credit score is also referred to as your “FICO score”. FICO is an abbreviation for the “Fair Issac Company, the developer of the original scoring model. The credit score that FICO gives you in a number between 300-850, with a higher number being a better score. The score is based on many factors, such as past late payments, debt utilization, and the age of your active accounts. However, how the final score is exactly calculated has not been released, as it is a trade secret closed protected by Fair Issac Co.

It is very important that you know and understand your credit score before you start evaluating mortgage loan options.

Two Ways to Get Your Credit Scores:

1. Go to www.myfico.com and sign up to obtain your credit score directly from FICO. Be careful that even though you can obtain your score for free you must then cancel your free trial within 10 days to avoid being charged for 3 months of service.

2. Use www.creditkarma.com. CreditKarma is a truly free way to obtain, and monitor, your credit score over time. CreditKarma is supported by advertising partners that advertise credit cards, loan programs, and more so that you can use the website free of charge. Credit Karma also offers you advice on how to improve your credit score by analyzing the different factors that make up you total score (length of credit history, hard credit INQUIRES, late payments, etc.)

You can also get your credit report free, once per year, but with no scores, from the government sponsored website www.AnnualCreditReport.com.

It is important to note that while your credit score is a key component, it is not the only factor that a lender considers when approving a mortgage. Be sure to contact us, before you shop for a new home in the Burlington area so you already know how to improve your chances of qualifying for the loan that is ideal for you.

Mark Chaffee

Vermont Mortgage Advisor

802-658-5599

It used to be fairly safe to tell buyers that the maximum contribution that a seller could make toward the buyer’s closing costs was 3%. Unfortunately, this is no longer the case. Here’s where we currently stand:

• FHA is 6% regardless of down payment.
• Conventional is 3% if the down payment is less than 10%, 6% if the down payment is 10% or more but less than 25% and finally, 9% if the down payment is 25% or more
• For jumbo loans, if the down payment is less than 20%, the maximum contribution is 3% and if the down payment is 20% or more, the max is 6%.
• For VA loans, the seller can pay all non-recurring costs and up to 4% for anything else.
• If you are purchasing investment property, the maximum amount that can be paid is simply 2%.

Many folks are not aware of the last bullet and, often, contracts are written up with excess contributions that need to be corrected prior to loan submission. Keep in mind that these contributions can only be for acceptable closing costs and pre-paid expenses. More on that later.

Are you thinking about becoming a landlord?   The number one question for prospective landlords is how to finance such a purchase. Typically, non-owner occupied one through four unit properties are considered ‘conventional’ loans by most Lenders, while five plus units are considered ‘commercial’.  Conventional one to four unit properties are often much easier to finance. However, due to the recent financial and credit ‘crunch’, one and two unit investment properties now require a minimum 20% down payment by most lenders.  Three- four unit properties typically require a 25% down payment. The Lender will determine the risk involved in acquiring rental property by looking at the buyer’s personal finances and the projected rental income.  However, if you don’t have landlord experience, many lenders will require you to qualify without using rental income. Finally, lenders will want to make sure that the borrower has sufficient reserves to handle contingencies, such as repairs, maintenance, and taxes and insurance.

If you are saving for a new home, you may feel that it will take you
forever to come up with the cash necessary for the down payment and closing costs. Before you delay your purchase any longer, make sure you check into the latest low down and no down mortgage products. You may find that your dream is much closer to a reality than you imagined. If you have acceptable credit and a steady job, you may not need a lot of cash to purchase a home. Some loan programs still allow you to put as little as 0 down if you are a veteran or are buying in an area designated as ‘rural’ by the USDA. For example, in Vermont, the Vermont Housing Finance Agency (VHFA) still offers a 100% financing program when combined with Rural Development’s mortgage insurance. If you are a veteran you can also obtain 100% financing through the VA’s loan program. If you don’t meet the above criteria you can purchase with as little as 3.5% down using Federal Housing Administration (FHA) financing and all of this money can even be a gift from family. By doing a pre-purchase credit check you can verify if you qualify for any of these programs or if you need to work on resolving any credit problems before you begin your search for a home. Buyers who thought they were years away from the purchase of a home are often pleasantly surprised to find that they don’t have to wait to begin their search.

Did you know that nearly 40% of all borrowers have a credit score that is too low to obtain traditional mortgage financing? The good news is that Mortgage Financial now has a system in place that allows borrowers to obtain a step by step outline on how to maximize their scores. This tool can be useful to bring a buyer into the range that is acceptable for financing or, as importantly, improve their score to where they can save on their rate and or costs (i.e. A 660 Fico score vs. 740 score can be .50% higher in rate or 5k in additional points). Although this system can be used to improve scores in as little as 1 week, ideally we would like to have 30-60 days.

If you would like to improve your scores before you buy or refinance, simply contact me for a free consulation. I will make sure you will receive the info you need to effectively maximize your scores.