The dreaded FHA changes to the annual MIP rate is here! Effective April 18th, the new FHA annual MIP rate is 1.15%, which brings a $20 per month increase vs the old premium. I think FHA and the consumer would have been better served by increasing the upfront premium and leaving the annual (which actually felt monthly) premium the same or even lowering it.
What are the advantages of a VA home loan?
There are several key advantages to VA home loans that people tend to overlook because there is a little extra paperwork involved. The first thing I want to make clear is that VA mortgages are NOT hard to obtain, and if you are a veteran you owe it to yourself to find out if a VA loan might be the right option for your family. Below I have listed out a few of the key benefits of a VA home loan… Read more »
FHA has decided to increase the Annual Mortgage Insurance Premium 25 basis points starting April 18th, 2011. The annual MIP is collected in the borrower’s monthly payment. Right now the annual fee is 90 basis points, which would be $900 on every $100,000 borrowed or $75 per month. A borrower’s monthly payment would increase $20.83 per month under the new rule.
This is NOT retroactive so if you already have a FHA loan your payment will NOT change.
The cut-off for current home buyers is to have your case number assigned by FHA before April 18th. Here is a chart taken straight from the letter FHA sent out…
OK let’s talk about shopping rates! This is every customers headache and every loan officer’s nightmare… WHY you ask? Because of the misinformation in the marketplace and the deceptive practices of “some”.
Home buyers typically dread shopping rates because it feels similar to shopping for a new car. Once engaged, the evil sales guy is going to be relentless and pushy in trying to get you to sign with him, right? It really doesn’t have to be that way. Many customers get frustrated because they don’t get straight answers fast enough and get tired of swimming through the sea of sales jargon.
Loan officers detest “rate shoppers” because they feel that no matter how highly they are recommended and how good their service, some consumers are never satisfied until some smuck lies to them and offers something that is too good to be true. The new good faith estimate has cut down on the dishonest games played in the industry but they are still out there.
I believe that shopping for a great mortgage rate doesn’t have to be a negative experience for buyer or lender! The key is understanding a few simple truths.
The most important thing to understand is that almost all lenders get the money from the same places and for the same prices. Even the biggest banks like Bank of America and Wells Fargo seldom hold loans and service them forever. Most mortgages are sold and that open market determines the starting point for rates. Now each lender might have a slightly different margin and therefore rates can be a little different from lender to lender, but…
NO lender is going to beat any other lender by very much!!
This is VERY important to understand because if three lenders quote you 4.75% and one lender quotes you 4.00% – guess who is lying! Something is wrong, and you need to stay away from any lender quoting rates, fees or processing times that are vastly superior to everyone else. I know you want that 2% 30 year fixed with no costs and the ability to close in a week, but trust me, you are better off buying a lottery ticket!
When it comes time to shop rates, ask your Realtor for a referral to a good loan officer that they have had success with in the past. Then start the process with that loan officer, and feel free to call one or two other local lenders for a rate comparison. Be honest with the ones you call and let them know you are simply looking to compare a rate quote you already have. If you get anything .25% better then ask the lender you are working with about it and push for them to match or at least get within .125%. That way you know you are getting solid service and a competitive rate.
I am often asked the question, “What is your rate today?” Sometimes the question is asked differently but the intent is the same… people want to know what the LOWEST rate available is typically on the 30 year fixed mortgage. I think it is vitally important that people understand the TRUTH about mortgage rates before shopping around. Here is a quick list of some facts about mortgage rates that I will spend the next few posts breaking down…
- All mortgage lenders are going to offer similar rates and fees. (vast differences indicate misunderstanding or deception)
- The Fed does NOT determine the 30 year fixed mortgage rate.
- The specifics of your mortgage application can have a HUGE impact on your rate.
- Your rate and the amount of closing costs you pay are connected.
In the next post I will break down my first point. This is one of the most important because people are often motivated to save money and can be tricked by gimmicks that sound great upfront but have unforseen consequences!