Showing posts with label FHA Mortgage insurance. Show all posts
Showing posts with label FHA Mortgage insurance. Show all posts

KENTUCKY FHA LOANS VS CONVENTIONAL FINANCING IN KENTUCKY

KENTUCKY FHA LOANS VS CONVENTIONAL FINANCING IN KENTUCKY



Conventional Mortgages.


Banks consider their interests first and protect them by not lending to people they considers poor risks. What constitutes a "poor risk" varies from lender to lender, but the general gist would be anyone whose credit score is 619 or less. Other attributes, such as income level, length of time in current dwelling, and previous loan history all factor into a private lender's decision. As always, the more anyone does notneed the money, the higher the degree of likelihood the bank will lend to that person.


Kentucky FHA Loans


Mortgages that come from the Federal Housing Administration are easier to get than private mortgages, but they will usually have a higher interest rate over the long haul than private mortgages. The FHA has its root during Franklin Roosevelt's administration during the Great Depression. Thousands upon thousands of Americans had either lost their homes in the debacle or were about to lose them. Shorn of their credit rating and nearly penniless, they had no hope of qualifying for loans even if the banks were in a position to lend, which many were not.

The FHA oversaw the lending of money to these desperate people and insured the debts, which contributed to the overall consumer confidence, the lack of which had contributed to the economic devastation of the Great Depression. In the modern era, the practice of the FHA is to oversee the lending money to people who have at least a 500 credit score. 

If the person's credit score is from 500-579, then the person must put 10 percent down. If the person's credit score is from 580-619, then the person must put down 5 percent. This is in contrast to standard mortgage loans where the person is allowed, in certain circumstances, to put down as little as 3 percent.


The Mortgage Insurance Difference on for FHA and Conventional Loans in Kentucky

There are three key differences:


Standard mortgages require you to have personal mortgage insurance, or PMI, if the homeowner has less than 20 percent equity in the home.

Standard mortgages require only PMI. FHA loans require borrowers to have two kinds of insurance: the up front mortgage insurance premium, or UFMIP, and the mortgage insurance premium, or MIP.

The cost of PMI is tied to a borrowers credit score whereas FHA insurance is not.


While FHA insurance remains the same cost regardless of a borrower's debt-to-income ratio, it is the more expensive of the two options. Still, the less expensive standard PMI is unavailable to borrowers whose credit is lower than 620. Also, PMI ismore expensive when a borrower's credit is between 620 and 680. A borrower is allowed to cancel PMI before the expiration of the term, too, whereas an FHA borrower is not allowed to do so.

In both standard and FHA loans, the insurance in question protects the lender more than the borrower. Basically, it's there to make sure the lender gets paid in the case of a default. Remember, even though the FHA is a government program, the money comes from private lenders. The FHA insurance makes it more palatable for those lenders to lend to people without good credit because it protects them from loss.


The Final Word


When borrowing money for a mortgage, the borrower should carefully weigh the pros and cons of each kind of mortgage before proceeding. Of course, with solid credit, good income, and a good payment history, it probably wouldn't be necessary to take out an FHA loan, but every case is different, and borrowers should consider all options before "signing on the dotted line."

Conventional vs. FHA vs. VA loans

CONVENTIONAL LOANSFHA LOANSVA LOANS
Minimum Credit Score620500 with 10% down; 580 with 3.5% downNo minimum score
Loan Limits$548,250 to $822,375 for conforming loans$356,362 to $822,375 for single-family homesNo loan limits
Down payment Minimum3%3.5%No down payment required
Extra FeesPMI required with down payment of less than 20%Upfront mortgage insurance of 1.75% and ongoing fee of 0.45% to 1.05%Upfront funding fee of 1.4% to 3.6%


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Joel Lobb
Mortgage Loan Officer
Individual NMLS ID #57916

American Mortgage Solutions, Inc.

Text/call:      502-905-3708
fax:            502-327-9119
email:
          kentuckyloan@gmail.com



What is Mortgage Insurance for a Kentucky Mortgage Loan Approval?


What is Mortgage Insurance?

If you can’t pay your mortgage, mortgage insurance protects your lender from financial loss. It doesn’t provide any coverage for your home; it only protects your mortgage lender. If you put less than 20% down on a home purchase, the lender considers your mortgage to have a higher risk. Therefore, mortgage insurance protects their investment if you stop making loan payments.


When Are You Required to Have Mortgage Insurance?

Different mortgage types and lenders have varying mortgage insurance requirements. While some may require mortgage insurance as a monthly payment, others may require an upfront fee or a combination of both.


Conventional Loan Mortgage Insurance Requirements

If you have a conventional loan through a private lender and put less than 20% down, a lender can require you to purchase private mortgage insurance (PMI). While some lenders require the borrower to pay for the mortgage insurance, other lenders offer lender-paid mortgage insurance. In other words, instead of directly paying for the mortgage insurance, the lender increases the interest rate to account for the additional risk of the loan.


There are several ways you can pay for your PMI if it’s a requirement:


Pay the entire amount in full

Make monthly payments

Or combine the two options

Most borrowers choose to make monthly payments.

You’ll continue paying for PMI until your mortgage balance reaches 80% or less of the home’s value and you have made timely payments. At this point, you should request the removal of PMI. Some lenders will automatically remove PMI when your loan balance reaches 78% of the original value of the home.


It’s important to point out that it’s your responsibility to keep track of the loan balance and payments. So when you reach a sufficient amount of equity, it’s up to you to request a cancellation of PMI. If you don’t, you could end up paying more premiums than you need to.


Some conventional lenders don’t require PMI, even if you put less than 20% down. So before applying for a mortgage, ask the lender about the PMI requirements.


FHA Mortgage Insurance Requirements

Suppose you choose a Federal Housing Administration (FHA) loan. In that case, you’re required to have mortgage insurance and pay it as an upfront mortgage insurance premium (UPMIP) and an annual mortgage insurance (MIP) regardless of your down payment amount.




Similarly, if you choose a U.S. Department of Agriculture (USDA) loan, you pay mortgage insurance in the form of a guaranteed fee and an annual upfront fee.


With an FHA loan, there are some circumstances where you can’t cancel your mortgage insurance when you reach 20% equity. MIP will remain in your loan indefinitely if you put less than 10% down. On the other hand, MIP can be removed after 11 years if your down payment is over 10%.


How to Get Mortgage Insurance

Your lender will select your mortgage insurance from a private company if you have a conventional loan. The payment is included in the monthly payment to your lender. Other lenders increase your interest rate to account for the mortgage insurance payment.


Unlike conventional loans, FHA loans require an upfront mortgage insurance payment as part of your closing costs. But like conventional loans, the other portion of your mortgage insurance is added to your monthly payment. Both payments are paid to the FHA.


Mortgage Insurance Cost

Depending on factors like your loan type, credit history and down payment, mortgage insurance costs can vary. But you can expect to pay between $30 and $70 per month for every $100,000 you borrowed, according to Freddie Mac.


With a USDA loan, you can expect your annual mortgage insurance rate to be 0.35% with a 1% upfront payment. FHA loan annual mortgage insurance rates currently vary between 0.8% and 1.05%, with a 1.75% upfront fee.


Suppose you buy a $300,000 home with a 3.5% down payment, for example. This means you must borrow $289,500. If you have a 30-year term with a 2.71% interest rate, you’ll pay an extra $114.54 (0.85%) in MIP with a UFMIP of $5,066.25.


How to Avoid Mortgage Insurance

If possible, you can avoid mortgage insurance since it covers your lender, not you. To avoid paying this additional expense, here are a few options.


Put down 20% or more. If you can put more than 20% down on a conventional loan, you probably avoid paying for PMI.

Take out a piggyback loan. With this type of loan, you can put 10% down and get another loan to cover the other 10% of the down payment.

Apply for a VA loan. If you qualify, you could buy a home with a VA loan, which doesn’t come with mortgage insurance requirements.

Compare lenders. Before you decide on a home, compare loan options and offers from various lenders; some may not require mortgage insurance. Review all costs involved to find the most suitable option for your needs.


If you do end up purchasing a home with mortgage insurance, make sure to keep track of the equity built in your home. This way, once your loan is less than 80% of the home’s value, you can either refinance or request a cancellation of your mortgage insurance if your lender allows.




I can answer your questions and usually get you pre-approved the same day.

Call or Text me at 502-905-3708 with your mortgage questions.
Email Kentuckyloan@gmail.com

 
 

Joel Lobb (NMLS#57916)
Senior  Loan Officer

American Mortgage Solutions, Inc.
10602 Timberwood Circle Suite 3
Louisville, KY 40223
Company ID #1364 | MB73346

Text/call 502-905-3708
kentuckyloan@gmail.com

 
 
The view and opinions stated on this website belong solely to the authors, and are intended for informational purposes only.  The posted information does not guarantee approval, nor does it comprise full underwriting guidelines.  This does not represent being part of a government agency. The views expressed on this post are mine and do not necessarily reflect the view of  my employer. Not all products or services mentioned on this site may fit all people.

, NMLS ID# 57916, (www.nmlsconsumeraccess.org). I lend in the following states: Kentucky

https://tulsaworld.com/business/investment/personal-finance/what-is-mortgage-insurance/article_e6cac741-97df-52a4-88b8-7737ca87f5c0.html

Can a person have more than one FHA loan?

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Can You Have Two FHA Loans at One Time?



FHA will not insure more than one Property as a Principal Residence for any Borrower, except as noted below. FHA will not insure a Mortgage if it is determined that the transaction was designed to use FHA mortgage insurance as a vehicle for obtaining Investment Properties, even if the Property to be insured will be the only one owned using FHA mortgage insurance.

Properties previously acquired as Investment Properties are not subject to these restrictions.

Listed below are the only circumstances in which a Borrower with an existing FHA-insured Mortgage for a Principal Residence may obtain an additional FHA-insured Mortgage on a new Principal Residence:

RELOCATION - A Borrower may be eligible to obtain another FHA-insured Mortgage without being required to sell an existing Property covered by an FHA-insured Mortgage if the Borrower is:
- relocating or has relocated for an employment-related reason; and
- establishing or has established a new Principal Residence in an area more than 100 miles from the Borrower’s current Principal Residence.

If the Borrower moves back to the original area, the Borrower is not required to live in the original house and may obtain a new FHA-insured Mortgage on a new Principal Residence provided the relocation meets the two requirements above.

INCREASE IN FAMILY SIZE - A Borrower may be eligible for another house with an FHA-insured Mortgage if the Borrower provides satisfactory evidence that:
- the Borrower has had an increase in legal dependents and the Property now fails to meet family needs; and
- the Loan-to-Value (LTV) ratio on the current Principal Residence is equal to or less than 75% or is paid down to that amount, based on the outstanding Mortgage balance and a current residential appraisal.
  
VACATING A JOINTLY-OWNED PROPERTY
- A Borrower may be eligible for another FHA-insured Mortgage if the Borrower is vacating (with no intent to return) the Principal Residence which will remain occupied by an existing co-Borrower.

NON-OCCUPYING CO-BORROWER - A non-occupying co-Borrower on an existing FHA-insured Mortgage may qualify for an FHA-insured Mortgage on a new Property to be their own Principal Residence.

For additional information see Handbook 4000.1 II.A.1.b.iii.(A) at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh


All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.
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Joel Lobb
Senior  Loan Officer
(NMLS#57916)


text or call my phone: (502) 905-3708
email me at kentuckyloan@gmail.com
The view and opinions stated on this website belong solely to the authors, and are intended for informational purposes only. The posted information does not guarantee approval, nor does it comprise full underwriting guidelines. This does not represent being part of a government agency. The views expressed on this post are mine and do not necessarily reflect the view of my employer. Not all products or services mentioned on this site may fit all people. NMLS ID# 57916, (www.nmlsconsumeraccess.org). Mortgage loans only offered in Kentucky.
All loans and lines are subject to credit approval, verification, and collateral evaluation and are originated by lender. Products and interest rates are subject to change without notice. Manufactured and mobile homes are not eligible as collateral.















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Popular Questions about getting a mortgage loan in Kentucky?

Popular Questions about getting a mortgage loan in Kentucky?



Are VA Loans the only type of mortgage loan that require a Termite Report?

Yes. VA loans require a clear termite report on both purchases and refinances. USDA, FHA, Fannie Mae loans do not require a termite report unless noted in the appraisal report.

kentucky va mortgage loan termite requirements





Can a buyer have two VA loans at once?

  Yes, a Veteran or active service member could have 2 VA loans at once. This is a pretty complex process but it can be done. I have done a few in my mortgage career.

Can I purchase a home without PMI and only put down less than 20%?  

Yes you can. There are two ways to do this on Conventional loans only. If you have a high credit score, say over 740, and your debt to income ratio is less than 45%, you can buy a home without having to pay mortgage insurance monthly. The offset of this, is it usually entails the lender increasing your interest rate by .25% to 3.375% to cover this risk. For example, if you got quoted a rate of 4% on a 30 year fixed with borrowing paying mi monthly, then you could increase the rate to 4.375%, and drop the mi. You have to weigh the pros and cons to set if it makes sense. The term is called lender paid mi.

On Government loans financed with FHA, USDA, and VA, you don't have this option.

Can I put down less than 20% on a second home purchase?


 Yes, 2nd home purchases can be as low as 10% down plus there are some very affordable PMI options for buyers with great credit scores. USDA, FHA, and VA are not usually used for 2nd home purchases because they are mainly used for primary residences.

Isn't there a time that the seller must own a property so that the buyer can use an FHA loan?  

Yes, it is called FHA Flipping Rules.  It is pretty flexible but it flat out must be longer than 3-6 months and may require a 2nd appraisal depending on the acquisition  costs and how much they are selling it for.


Joel Lobb
Senior  Loan Officer
(NMLS#57916)


text or call my phone: (502) 905-3708
email me at kentuckyloan@gmail.com
The view and opinions stated on this website belong solely to the authors, and are intended for informational purposes only. The posted information does not guarantee approval, nor does it comprise full underwriting guidelines. This does not represent being part of a government agency. The views expressed on this post are mine and do not necessarily reflect the view of my employer. Not all products or services mentioned on this site may fit all people. NMLS ID# 57916, (www.nmlsconsumeraccess.org). Mortgage loans only offered in Kentucky.
All loans and lines are subject to credit approval, verification, and collateral evaluation and are originated by lender. Products and interest rates are subject to change without notice. Manufactured and mobile homes are not eligible as collateral.


Kentucky FHA Mortgage Insurance Changes for 2017. Cheaper Mortgage Insurance!



Kentucky FHA MIP Rate Changes
Effective for Kentucky  FHA loans with a disbursement date on or after January 27, 2017, HUD is lowering the monthly MIP rates almost across the board. The only MIP remaining the same is that of Streamline & Simple Refinances with terms > 15 years who were eligible for lower MIP as part of the HARP program. Please refer to the below chart for a comparison of the current and upcoming MIP rates.

This is a 25% reduction so it is pretty big deal for lowering your mortgage payments if you go FHA.

For example on a $150,000 loan amount, this would reduce your payment by $31 a month if you had a FHA loan with with 3.5% down payment with a qualfying credit score. 

Remember, FHA does not base their premiums on credit scores, meaning everyone get's the same deal on mi even if you have a 600 credit score, or a 750 credit score.

So if you have a lower fico score, you may want to look at doing a FHA loan after January. 


Loan Term > 15 Years
Base Loan Amount*
LTV
Current MIP
New MIP
≤ $625,500
≤ 95.00%
80 bps
55 bps
≤ $625,500
> 95.00%
85 bps
60 bps
> $625,500
≤ 95.00%
100 bps
55 bps
> $625,500
> 95.00%
105 bps
60 bps
Loan Term ≤ 15 Years
Base Loan Amount*
LTV
Current MIP
New MIP
≤ $625,500
≤ 90.00%
45 bps
25 bps
≤ $625,500
> 90.00%
70 bps
50 bps
> $625,500
≤ 78.00%
45 bps
25 bps
> $625,500
78.01 - 90.00
70 bps
25 bps
> $625,500
> 90.00%
95 bps
50 bps
*NOTE: Base Loan Amount is as reported by FHA Mortgagee Letter. This amount may be subject to change to match the new FHA 1-Unit high balance limit of $636,150.
Streamline/Simple Refinances with previous mortgage endorsed prior to June 1, 2009
Term > 15 Years
Base Loan Amount
LTV
Current MIP
New MIP
All Loan Amounts
All LTVs
55 bps
55 bps
  
Term ≤ 15 Years
Base Loan Amount
LTV
Current MIP
New MIP
All Loan Amounts
All LTVs
55 bps
25 bps
Equal Housing Lender.  NMLS#:57916
Rates, terms, and program information are subject to change without notice. Subject to certain approvals, terms and conditions. This is not a commitment to lend.



The view and opinions stated on this website belong solely to the authors, and are intended for informational purposes only.  The posted information does not guarantee approval, nor does it comprise full underwriting guidelines.  This does not represent being part of a government agency. The views expressed on this post are mine and do not necessarily reflect the views of my employer. Not all products or services mentioned on this site may fit all people













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