Barbara Corcoran regarding Mortgage Brokers on NBC’s TODAY this weekend:
“I’m of the belief that the mortgage broker is the best route. Simply because people lack time and also bank loans have gotten so complicated that you need a specialist to explain every detail to you. Mortgage brokers earn their keep.”
In addition to the personal service mortgage brokers provide, we are also offered some of the best rates in the industry that we can pass along to you, our client. Having access to a number of different banks instead of just one means that we can better match your situation to the right terms, right product. After the loan closing, we are available to answer any questions that you may have. To finance property in the state of Maine, come to MDI Mortgage for our straigtforward advice and to see that, yes, “a mortgage broker is the best route.”
Changes for the FHA program are on their way for April 18th. This video lays out those changes, the impact, and alternatives for borrowers and homebuyers.
From the video: “In the past few years, FHA loans have seen a remarkable resurgence in popularity. When most of the low down payment and subprime loan options dissolved, many turned to FHA once again as the answer for homebuyers who might not have 5% or more to put down. This chart shows that in recent years, FHA accounts for close to 30% of the total purchase mortgage market.
Is all this added business good news for FHA? Yes and no. With such demand comes pressure, and it is FHA’s capital reserves which are being pressured currently. Last fall we witnessed an increase in FHA’s monthly mortgage insurance premium, and in the middle of next month, April 18th, FHA is implementing an additional increase of .25%.
What can we expect to see after April 18th? The monthly premium will be changing from a factor of .90% to 1.15%. On a purchase price of $200,000.00, this will result in a monthly insurance increase of $40.21 per month. Now, $40 may not be considered a great deal of money by some, but it is worthy of some attention if you are about to apply for financing using an FHA guarantee. If that is the case, it is highly recommended that you apply soon so that an FHA case number can be ordered for you prior to April 18th.
Here’s another way to look at it. If you were able to spend the extra $40.21 per month as a principal reduction instead of paying for insurance, you would save just under 3 years on the life of your loan, or approximately $15,000 in finance charges over the life of the loan.
It is interesting to note that the cost for PRIVATE mortgage insurance, unlike FHA, has been steadily decreasing recently. For a similar loan amount, the factor would be .67%, or $107 per month instead of $185 per month with an FHA loan. Also, FHA has an upfront premium of 1% and the private mortgage insurance does not, so that is an additional savings. With the private mortgage insurance, however, the typical down payment required is 5% instead of 3.5%, and it must be from the borrower’s own funds instead of from a documented gift like the FHA program allows.
With so many changes occurring in the mortgage world, seemingly at the speed of light, it is so beneficial to have a trusted advisor and partner looking out for your best interest. At MDI Mortgage, we are happy to review many different loan options with you, making sure that your financing solution is optimal for your entire financial picture and future direction.
From starting out as government entities, then changing to privately owned, government-sponsored agencies, and now to being held in conservatorship of the Federal Housing Finance Agency (a/k/a “the government” again), the mortgage giants Fannie Mae and Freddie Mac are about to be reinvented once more.
This Friday, the Obama administration will issue their “white paper” proposal with options for reducing or eliminating government involvement with the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).
While any changes may be over the course of a few years, there is no question that we are at the cusp of a new era in mortgage finance and homeownership. Any proposed changes have the potential to affect everyone who owns a house, wants to own a house, has friends, or relatives, or neighbors, or a boss, who own a house. What I’m trying to say is, this is BIG!
Yes, it’s true. Mortgage loans are about to become more expensive with the expanding risk-based pricing matrix from FannieMae and Freddie Mac. This video highlights the upcoming changes:
“First, what is risk-based pricing? A number of years ago, FannieMae and FreddieMac determined that certain loan characteristics carried more risk, and the borrower, or loan terms, that were in a higher risk category would pay higher costs. This was generally a fair way to allocate cost.
More recently, they added a quarter point “adverse market” fee. I like to call this a “the-government-sponsored-agencies-are-losing-to-much-money-and-are-simply-trying-to-cover-some-of-their-losses-fee”. This pricing hit affected everyone who was granted a conforming loan over the past 2 years. It may have been in closing costs, or in rate, but it was there, and it was across the board.
As of April 1st, 2011, the risk-based pricing matrix is expanding again, and what was once considered GOOD, might now be considered high-risk.
For example, a borrower could have an 800 credit score, and have 20% down payment, and this is suddenly risky? What once had no pricing adjustment now has a charge of .25% of the loan amount. A loan amount of $300,000 would have added closing costs of $750, or perhaps a rate that is .125% higher, adding to the overall finance charges over the life of the loan.
It is interesting that a 680 credit score was once considered excellent. Now, you can see that it would carry added closing costs of 1.75%, or $5250 on that $300,000.00 loan (or a rate that might be .25 – .375% higher.)
Most of the new pricing adjustments are for an extra .25% in costs, across the board.
So, what does this mean?
If a lender doesn’t sell the servicing to a mortgage, does that mean these fees don’t apply?
Unfortunately, most banks, whether small community banks or larger regional banks, underwrite to Fannie Mae and Freddie Mac standards, and they may sell these loans even though they keep the servicing. It something that happens behind the scenes, and the borrower may not even realize it. That will be a good topic to cover in another “Get Inside” video. Basically, unless the loan is specifically a portfolio loan, also known as an in-house mortgage (and the rates on these types of loans are typically higher anyway), these pricing adjustments will apply.
Are there any ways to avoid paying these risk-based premiums? Yes!
A 15 year mortgage, or shorter, term is exempt from these new price adjustments. Having a higher credit score, and a downpayment of 25% (or equity in the property if it is a refinance, of 25% or more) could be exempt from this new round of “what is a higher-risk loan”.
A FannieMae Refi plus, and the FreddieMac Relief refinances are not being assessed these extra fees. Not all the banks are offering these programs, but MDI Mortgage has access to these special, low cost loan programs and we have successfully negotiated some very favorable loan terms for our clients over the past few years.
There may be other options available for your unique situation, as well. When you contact MDI Mortgage for advice regarding your mortgage financing, we investigate the many different loan options and choices, and present all the information needed in an easy to understand format so that you can be sure that you are making the very best decision, for you.
For more details about this change, contact me — I’m happy to help.”
Sherri Dyer, Advisor & Mortgage Maven
writing for MDI Mortgage, a full service mortgage company located in Bar Harbor, Maine, Mount Desert island
~Sherri Dyer, Advisor & Mortgage Maven
Get Inside: Solving the Mortgage Mystery 