Nevada Real Estate >> Las Vegas Real Estate Specialist: New Jersey: Bordentown

 

I have heard many different explanations when it comes to FHA origination fees. In my opinion, there seems to be confusion and inconsistencies when it comes to FHA origination fees. Let's first define FHA origination fee or just origination fee.  In the HUD buying handbook, it is explained to be a fee charged for the processing of the loan application. The origination fee is a percentage of the loan amount, if charged. It's not a standard 1 percent. It could be any fraction of a percentage.  This fee can vary amongst lenders, especially depending on the interest rate. And even though it's defined as a fee for processing, it's used for profit or to cover a lender's profit margin, depending on your interest rate.

Another reason for more confusion is because of the new Good Faith Estimates that went into affect January 1st, 2011. You now have a word called Origination Charge. This is not the origination fee, but the total of all lender charges to include the origination fee.

 

 

As you can see in the picture above, this is part of the new good faith estimate which shows the total as Origination charge. But it doesn't break down any of the other charges. So you don't know if it includes any part of an origination fee, processing fee, etc.

 

 

What you see above is part of a form called the 'itemized fee worksheet'. Not all loan officers or lenders give this to the borrower. As you can see, this gives you a complete break down regarding the origination fee and all other lender charges, aka lender fees. If you add up the origination fee and the commitment fee, it matches what is on the line for the origination charge. If you never see this break down, the only other time will be at closing, when it's broke down on the HUD-1 settlement sheet.

Why can I see this to be critical at times?

In some cases, you might not know exactly what you are paying for until you get to settlement, aka escrow, which is another term used. Some lenders will just roll their lender charges into your origination fee. Why does this matter? You can't write off the lender charges, but you can write off a percentage of your origination fee. Check with your accountant.

 

What are some other key important facts regarding origination fees?

 

FHA Rumor : All FHA loans have origination fees.  False.  It all comes down to your rate, loan amount, and credit score.  

FHA Rumor : FHA gets part of the origination fee on all FHA loans. False. I actually had a borrower that was told this once by another loan officer.

 

 

So, what does HUD/FHA collect on all FHA loans? Just the Upfront Mortgage Insurance Premium (MIP) and the monthly mortgage insurance MMI.  The lender gets all other lender related closing costs. I hate saying this, but if a loan officer tells you that part of the origination fee goes to FHA, don't walk, run very quickly and far away. This is not my opinion, but a real cold hard fact.

 

 

Summary :

Don't let your lender/loan officer confuse you with definitions of certain fees. It's amazing on how some loan officers will define such fees, especially when explaining what an origination fee is. And as a borrower, if you aren't sure, just ask. And no matter what the answer, google the topic. Just double check. As I mentioned, I actually had a borrower that I closed a loan for who was first told by a loan officer that part of the origination fee went to HUD. It didn't sound right, so they searched this online.

 

 

I had written a blog post a few weeks ago, Conventional Pricing Adjustments coming in April, in which I talked about how FHA had raised it's monthly mortgage insurance premiums back in October and how Fannie Mae will be adding onto their pricing adjustments in April of 2011. A realtor had stated this - "We saw the writing on the wall a while ago that this was bound to happen.  If any time for a buyer to get off the fence and purchase would be now."

I have been reading these kinds of statements for the last 12 to 18 months. When we saw the home buyers tax credit, when values were dropping, and when interest rates dropped. But wait, are these the reasons why one should buy a home now? Or when we see changes in loan programs for the worst, one should blurt out, "now is the time to buy, before it gets worse." Sorry, but there is a lot missing to such statements. To me, there is a lot of false sense of education, because one should not buy just because of these reasons. Keys to home ownership should be thought out and not just because someone says it's the right time to buy now.

It's almost like the advertising that tells you to buy a car, tv, or furniture with no money down and interest free for the first 18 months. I wonder how many of those that buy very quickly when seeing such an add, plan out their future payments. Or does one just say, "awe, when that time comes, I'll deal with it then."  Raise your hands... I am sure some of you have said this one time or another.

 

 

Seriously though, this is not to throw anyone under the bus or to mock them for such thoughts. But when buying a home, it will usually be one of the biggest investments in your life time. There should be careful planning.  What things should be thought about when buying a home?

• How much of a payment can I afford? - One really needs to evaluate this; going over their budget to include their finances, their short and long terms goals, and making sure that they will have some cash assets after buying their new home.

 

 

The end result is that one should not be tickled pink from such incentives, especially if they weren't truly prepared to buy now.  Or to read comments from people telling you that you should by now. Making you feel like an idiot if you don't take advantage of such deals and or incentives now. I still get some home buyers that call me up last minute when their credit is very less than perfect and or that they have no money to their name. It should take some careful planning. Many say talk to a realtor first, but sorry, I will disagree. Speaking to a loan officer that actually understands finances, deals with money every day, and works with different mortgage programs should be your first stop.  The loan officer will usually be the one that understands credit and credit repair, and be able to help you with this and other questions. My main point though.... Be careful when buying your new home and have a plan, not a buying itch because it sounds good.

 

 

- In my opinion, it's always a great time to buy a new home, when having a plan and when you have been properly educated on the home buying process, even if you have bought before.

 

 

 

The MORTGAGE PRO Week in Review is back. This weekly review has been away the last 18 months due to the lack of volunteers, in helping to get mortgage related information out to the public and to help keep realtors up to date on the ever changing topics of mortgages. This review will appear every Sunday eevning, once a week. There will be a post in a few days about this group and how you can volunteer.

 

Onto Mortgages and Real Estate.  Below is some very good mortgage posts that tell you what you need to apply for a mortgage, specific programs, and what you need to know about mortgages in general.  Please take the time to read these posts, it could be worth your wild and could save you thousands of dollars as a borrower.

 

 

 

10 Reasons to Buy a Home TODAY, NOT NEXT MONTH, NOT NEXT YEAR BUT RIGHT NOW!  by : Tom Burris

In my opinion, this post is not a scare tactic, just the basic facts to as why buying now could very well be better than buying later. Let's not forget, that is if you are in the position to buy now.

 

 

Houshold Budgets For Home Buyers #1  by : Paul Silver

Before you buy a home, you should have some sort of budget. Realtor, Paul Silver, writes a very good 3 part series on this.

 

 

 

 

 

Be Prepared for Mortgage Application .. Start Gathering These Documents NOW  by : Gene Mundt 

This shouldn't be a hard topic to figure out. Just be like the Boy Scouts, "Be Prepared". It never hurts to be prepared with all of your mortgage documents before speaking to a loan officer.  Gene does a good job of breaking it down for you.

 

 

Save Big by Choosing the Best Rate Lock  by : RJ Baxter

R.J. brings up a good point that many loan officers don't talk about, especially when the consumer is shopping around. Loan officers fail to talk about how to lock in your rate or what the differences are in the lock periods, yet they offer these so-called great interest rates.  Just very simple information to understand.

 

 

The 4 Things you Need to Get Approved for a Mortgage!!!!  by : Larry Bettag

What a better follow up to Gene's post, is Larry explaining on what 4 items gets your loan approved from a lenders perspective.

 

 

 

The Truth about Loan Modifications - Are you sure you want to look behind the curtain?  by : Drew Sygit

This is an excellent post that goes into details that many didn't know about. I personally know that Drew did some research on this, bringing you the real facts and not what is perceived out there.

 

 

Fannie Mae Home Path Financing  by : John Neil

This is a good program for some. John explains what you get with this type of program. The biggest selling point is that you don't have monthly mortgage insurance. This program is used for those properties owned by Fannie Mae. But please read below what Gary Miljour has to share, comparing this program with FHA loans. You do need to understand your options carefully and not just because this loan has no mortgage insurance. And showing these 2 was not a knock on either John or Gary. Each borrower and each loan program is different.

 

 

FHA vs. Fannie Mae Home Path Revisted  by : Gary Miljour

Gary gives you a quick simple breakdown between FHA loans and the Fannie Mae Home Path loan. In his opinion, FHA loans are still the clear winner.

 

 

 

FHA Loans with a simplified explanation of FHA credit standards  by : Jeff Belonger

FHA has some new changes pertaining to credit scores and down payment. And did you know that FHA is changing the monthly mortgage insurance that goes into effect on October 4th, 2010? Changes in FHA mortgages for the monthly mortgage insurance & UFMIP

 

 

Sir, I think your calculator is broken!  by Nevin Williams

A very simple and easy to understand post. Just be careful when using online mortgage calculators. There are a few factors that you as a consumer aren't aware of.

 

 

 

 

203K: Why is it so difficult to find a contractor to do this 203k? Answers within...  by : Brent Kludge

You first learn what a 203-k loan is and there is a group below that has some posts about this loan program. Brent goes into more specifics about the 203-k contractor, what to do and not to do.

 

 

Dressing Up Your Blog.... Nirvana Recipe  by : John Zolsky

My bonus post - Non mortgage related, but realtor John Zolsky shares some very interesting tips about how to write within your blog posts, such things as fonts and colors.

 

 

 

 

 

The next  3 members for the Mortgage Pro Week in Review : 

1.       Larry Bettag         09/20/2010    through    09/26/2010

2.       Gene Mundt          09/27/2010    through    10/03/2010

3.       Gerry Suarez       10/04/2010    through    10/10/2010

 

 

 

If you are writing mortgage posts or mortgage related posts, you should try placing them in the groups below. Not only is this good for the consumer or Realtor, but it helps those that are searching for top mortgage posts for the weekly review.

All About Mortgages/Mortgage Networking   Here is a group that many loan officers post their mortgage related blogs in.  A good place to learn more about the type of programs, new industry news, and sometimes some inside tips. Don't hesitate to join.

The FHA Mortgage Group - Here is a group that specifically talks about FHA, FHA updates, and what FHA can do for your buyers and sellers.

Mortgages - Another group with anything and everything about mortgages. A diversified group.

FHA 203-k and 203-k streamline group - Special type of mortgage that allows you to roll in the costs of repairing you home, new or old.

USDA Rural Development Loan Group - All mortgage information pertaining to USDA loans, Rural Development Loans.

VA Loan Group -  All mortgage information pertaining to VA loans.

Realtors Needing the services of the Lending Powers- A place where realtors can updates on mortgages in general.

Realtors® -For Real Estate Professionals to discuss marketing strategies, overcoming obstacles, successful sales techniques.  And a place to add mortgage related topics helping the consumer and realtor. 

 

 

We really could use some new volunteers for the Mortgage Pro Week in Review. Even if you are a realtor, a title person, or someone else that is related to the mortgage/real estate industry..... please read below.

 

MORTGAGE PRO Week in Review    A repository for the Mortgage Week in Review.  Please don't hesitate in joining this group. And any volunteers for the mortgage week in review, please e-mail Jeff Belonger at   jbelonger@ihmci.com

 

 

There will be no recreations of any type regarding the titles or content of this group or Review without the permission and expressed written consent of the Group's founder.

Mortgage Pro Week In Review - Copyright 2010^©

 

 

 

FHA Loan rumors now become a reality – So what happened?

 

Wow... I just talked about some rumors that have been floating around for months about FHA loans. Let me make something clear. They are rumors to me until they are officially stated through HUD/FHA. And on that note, they are also rumors when you read blogs that actually state that they happened already, when it was still in discussion. Here is what I said yesterday.

FHA Loans Rumor Alerts - 3% seller concessions & FICO scores - Part 1 of 2

In our ever changing world of mortgages in the last several years, FHA made a few changes that were announced today, but there is no concern to panic, at least in my opinion. You can read it directly on HUD's web site.

FHA Announces Policy Changes to Address Risk and Strengthen Finances

 

 

 

 

*** The FHA Loan changes as of January 20, 2010 ***

 

So what are some of the major changes or possible changes in the near future and what impact could they have on the average homebuyer? (4 changes below)

 

• FHA Upfront Mortgage Insurance Premium - Known as UFMIP - This is what gets added to your loan amount after your down payment is subtracted from your purchase price or your base loan amount of what you are refinancing. The old amount was 1.75% for purchases and refinances and 1.50% for all FHA streamline refinances. It will now be raised to 2.25%. HUD is also requesting that Congress increase the annual premium, which is your monthly mortgage insurance. Currently it is .55% and .50%, depending on your LTV position. This change will not take place until the spring. (more on this below)

Example of the UPMIP change - Sure, it will hurt some, but that extra 1/2% on the total does not change the payment as much as you think it does. On a $300,000 loan, you are talking about an additional $1,500. This equates to an additional $8 per month.- Not much to disqualify someone, depending on how high their debt-to-income ratio was initially pushed.

 

• FHA credit score and downpayment changes - As mentioned yesterday, FHA mortgages never had a FICO score (credit score) number. It still doesn't and here is where the rumors went wrong.  FHA has raised their credit score requirement for 3.5% downpayments to 580. Previously, you needed to have a credit score of 500 or higher. I will talk about this difference in change tomorrow in Part 2. This change will not take place until early summer.
  

• Reduction in allowable seller concession from 6% to 3% seller help -  Just basic mathematics... the buyer won't be able to get more than 3% from the seller to pay for their closing costs and pre-paids. This change will not take place until early summer.

 

• More awareness of FHA lenders perfromances - Basically giving the public more information and more access to this information. This can be found in # 4 under the new policy changes. New FHA policy changes

 

 

 

 

So why the changes and what do they do to you, the borrower?

 

As many of you know, HUD has been suffering major losses within their mortgage insurance pool. HUD just insures these loans. This is the money that is collected from the UPMIP and the annual monthly mortgage insurance (MMI). Here is some food for thought. HUD states this. "This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing."

 

FHA gets the Upfront Mortgage Insurance Premium (UPMIP) from the lender very quickly after the loan closes. This is upfront cash. But they want to shift some of this weight to the monthly mortgage insurance, claiming that it will reduce the total monies to the borrower. It is hard to argue this until we know what number they want to increase the monthly fee to. Once I know what the new percentage is, I will write a blog in regards to this shift to the MMI that in my opinion is smoke and mirrors. I will explain more in that blog.

 

Why change the credit scores to include a higher downpayment if you have a score below 580?  This basically allows FHA to balance its risk, yet still give anyone the chance to obtain a FHA mortgage. But keep in mind, they would need 10% down. I will be talking about this in part 2, giving you a better understanding of how hard these types of loans will be to obtain and why.

 

Lastly, lowering the seller concession from 6% to 3%. This has been a long standing discussion that appraisal values were raised to cover the additional expenses to the borrower, allowing the seller to pay for them. This effort also tries to keep those agreement of sale contracts from changing to a higher purchase price, just to cover such costs as mentioned above.

 

 

Keep in mind, there will be a new FHA mortgagee letter that will be out officially tomorrow, giving more detail.....and that this is not 100% official until the mortgagee letter is published. And as mentioned, the next step for HUD is to get congress to act on increasing the annual monthly mortgage insurance, which is known as MMI.

 

 

 

Important Reminder – be very careful of what articles you read about FHA loans. Several articles came out late yesterday, before HUD posted their own information. I have already read one article that was missing 1 of the 4 changes. And one article was giving bad opinion and advice, in my opinion, based on their lack of knowledge and experience in the mortgage industry. Keep in mind, they are just journalists trying to get some sort of news to the public as soon as. The new mortgagee letter will be out tomorrow. – 1/21/10

 

 

FHA Loans Rumor Alerts - 3% seller concessions & FICO scores - Part 1 of 2

FHA Loans Rumor Alerts - You don't need 10% or 20% down & more about credit scores - Part 2 of 2 (not truly all about part 2, but I do go into discussions about the credit scores - because of the recent FHA changes, I didn't get into great details about 10% or 20% down)

 

 

 

                    

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For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

 

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc