FHA loans get more expensive, AGAIN

It’s been recently announced that FHA loans are going to get 0.25% more expensive.

Starting April 19th, FHA loans will carry monthly Mortgage Insurance Premiums over 1.00%.  This is an additional increase of roughly 0.25% over the increase we already experienced at the beginning of the year.

Recently there has been a lot of speculation in the media that the Government may be winding down their involvement in the mortgage markets.  Talks about structural changes to Freddie Mac and Fannie Mae, rumors about the end of FHA lending and talks about the mortgage markets being completely privatized are all interesting talking points.

However, if we think this through rationally, we have to remember two things.  1)  Ask yourself, when is the last time a Government Agency actually shrank in size or was shut down completely?  2) With the housing industry still in a state of flux, there is currently no private entity or group of entities that can replace the giant amount of mortgage guarantees that the Government currently covers.

What is more likely is that Government backed financing, through entities like the FHA and VA, will continue to get more expensive.  This, in turn, should encourage private investors to come back to the mortgage market as they can earn a better rate of return while still being competitive with rates offered by Government backed mortgages (like those offered through the FHA).

I believe this April 18th increase in cost to FHA loans is just the first of many cost increases coming over the next few years.

End of month rush-

Since starting in this business eleven years ago there is a reoccurring phenomenon that continues to bother me… the end of month rush.

Even though properties are going into escrow year-round on various days of the month, there always seems to be an end-of-month rush as lenders and Realtors try to close-out their deals.

I’m sure the biggest cause of this phenomenon is that most rental leases are from the first of the month to the last day of the month.  It makes sense that if you’re a renter closing on a home, you wouldn’t want to pay rent and a mortgage payment for any over-lapping amount of time.

However, it is important to know that there is normally 30-60 days of lag time between closing escrow and the due date of the first payment mortgage payment.  Add into this equation the fact that a mortgage payment can be made up to 14 days after the due-date without a penalty, and that means there are generally more than 60 days from the close of escrow until a payment is considered late.

Unfortunately, even with this knowledge, lender, Realtors, and escrow-officers continue to line-up deals to close at the end of the month.

This creates a back-log of files going through the underwriting process, to docs and back to the lender for funding.

In this challenging market, if you want the best chance of closing your transaction on-time, schedule the close of escrow between the 10th and 20th of the month.  I guarantee this small change to the escrow time-line will help create a less stressful transaction for buyers, sellers and real-estate professionals.

As always, if you have any questions, contact me at TrustYourLender@gmail.com

Funding conditions-

Every wonder why a home-loan closes later than expected even after the buyer has signed their loan docs?

The answer is simple… funding conditions.

Funding conditions are generally check-the-box items the lender must clear up before they will release the loan proceeds to an escrow or title company.

Funding conditions can be items that the client hadn’t yet provided to the lender but are not required for loan approval.  They can be items still outstanding from the title and escrow company, such as an updated HUD-1 or title supplement.  Or they can be items still outstanding from the the agents involved in the transaction, like a signed FHA addendum.

Often in the rush to “get loan docs”, lenders will move several conditions of the loan to Prior To Funding (PTF).  At that point it is important for all parties in the transaction (agents, buyer, seller, loan officer, funder, escrow officer) to identify what these funding conditions are and work together to turn in required conditions so that the loan can close.