The World of Mortgage Blog - According to Kimberly and Cathy

What's Up With Mortgage Insurance/Changes Beginning 10/1/11?

We’ve been asked several times today: “What impact will the Fed’s action yesterday have on mortgage interest rates?”  Here’s their plan:

Sell short term treasuries and reinvest those funds in long term treasuries.  This is intended to push long term rates even lower (because of course 4% isn’t low enough!)

Reinvesting funds from maturing Mortgage Backed Securities (MBS) in new MBS.  Again, this is indented to keep mortgage rates at low levels.

** So, the impact on this effort should equate to continued low long-term mortgage rates.

 Loan Changes coming affective October 1, 2011

 VA- They have lowered their upfront Funding Fee from 2.15% of the loan amount to 1.4% of the loan amount for loans closing after 10/01/11. 

This is a great benefit to our Veterans and is nice to see.  This funding fee is added to the loan amount (financed) and this change doesn’t affect their payments a great deal but their loan balance will be less.

FHA – Loan limits change depending on County.  King, Pierce and Snohomish county will remain at $417,000.  The new “high balance” FHA will be $506,000.

Conventional – Loan limits change depending on County.  King, Pierce and Snohomish county will remain at $417,000.  The new “high balance” Conventional will be $506,000. 

Tip Of The Week!

Mortgage Insurance Companies rates vary pretty substantially based on the business that they are trying to carve out.  If your buyer is having a hard time qualifying for a particular home, work with your lender to make sure they are getting the most competitive rate possible on their PMI.  It might make the difference between a deal and no deal.

 

Here is an example we ran into this week:

 

Buyer has great credit, but a bit high debt-to-income ratio and only enough cash for the 10% down and required reserves. 

Solution:  We shopped two different PMI companies and found upfront PMI premiums ranging from 2.15% (of the loan amount) down to 1.44%.  Using the upfront PMI premium vs. a monthly premium got their DTI in line.  We were able to use the money from the seller contributions to cover the PMI and the deal is set to close on the 15^th.

There are still creative ways to work through the changes in the mortgage insurance industry.  Let us know if we can help.