Is the FHA Lower Annual Insurance Premium for Everyone?

As we mentioned in a previous post, Lower Annual Insurance Premiums on FHA Loans Create Savings for Homebuyers, the Federal Housing Administration (FHA) lowered their annual insurance premiums from 1.35% to 0.85% of the loan amount in an annual basis (from $112.50  per month to $70.83 per month for a $100,000 mortgage), however this loan is not for everyone.

mortgage calculatorSome homebuyers have mortgage insurance premiums that can be canceled in the future and for those, refinancing with a lower annual insurance premium FHA loan may not be the best fit.  If you applied for an FHA loan prior to June 2013, this lower annual insurance premium could create a short term gain but a long term loss.  For these loans, the mortgage insurance premium is cancelable after 5 years, which means you may not want to refinance and get additional years of paying the mortgage insurance premium.  It could lower the monthly mortgage insurance premium bill, but you will be paying more as the term for the premium would be extended for the life of the loan.  Please make sure loan originators are reviewing the entire loan situation.  Some aggressive loan originators may promise lowering payments without looking at your specific situation, sacrificing short term gain for long term cost.

If you applied for an FHA loan in June 2013 or after, this lower annual insurance premium may be able to improve your financing situation.

If you are located in Ohio, Pennsylvania or Indiana, please call us for a free evaluation of your specific situation before you do anything.

ReCasa Financial Group
614-221-6770
www.recasafinancial.com

 

ReCasa Financial Group   614-221-6770
NMLS #9722 OH: MB.803923.000 IN: 08-0038 LB  PA: Licensed by the PA Department of Banking
130 E.  Chestnut Street, Suite 200 Columbus, OH 43215
Graham Montigny   NMLS # 195412   OH LO 002049.000     IN LO 195412     PA LO 35011
Michael Wolf  NMLS # 85452  OH LO 001440.001
Michael Troutman  NMLS # 319798  OH LO 037303.000

Homebuyers are Ready to Buy After Foreclosures and Short Sales

RealtyTrac’s article, 7.3 Million Boomerang Buyers Poised to Recover Homeownership in Next 8 Years, stated:

In 2015, the first wave of 7.3 million homeowners who lost their home to foreclosure or short sale during the foreclosure crisis are now past the seven-year window they conservatively need to repair their credit and qualify to buy a home.

As of August 2014, new changes were made to the mortgage waiting period for foreclosures and short sales for specific situations.

Conventional Loans

  • Foreclosures: 7 years from the foreclosure completion date (some applicants may qualify for a conventional loan only 3 years after with extenuating conditions including wage earner death, illness or job loss)
  • Short Sale/Deed in Lieu-Short Sale:
    • 7 year with less than 10% down of primary residence
    • 4 years with 10% down on the purchase of a primary residence
    • 4 years with 20% down on the purchase of a primary, secondary or investment property purchase
    • 2 years with extenuating circumstances, only with 20% down

FHA Loans

  • Foreclosures: 3 years from the foreclosure completion date and transferred back to the lender to the credit report date
  • Short Sale: 3 years from the title transfer date

Department of Veterans Affairs Loans

  • Foreclosure: 2 years from foreclosure completion date and date transferred back to the lender
  • Short Sale: 2 years from previous sale closed date and new owner transfer date

For additional information regarding specific waiting periods for conventional, FHA and/or Department of Veterans Affair loans, visit New Changes to Mortgage Waiting Period.

This is great news for the housing market and real estate investors.  More homebuyers should be ready to purchase over the next 8 years as they slowly come out of the foreclosure or short term window.  These “boomerang” homebuyers are characterized as being Generation X (35-44 year olds) and Baby Boomers.  As investors, it is important to keep the home buying audience in mind to make the property rehab decisions.

How are you preparing for these “boomeranghomebuyers?

Potential Boomerang Buyers by Year

Importance of Credit Scores in Real Estate Investing

As an organization that caters to rehab investors, and having funded thousands of real estate investment deals, ReCasa Financial Group can tell investors that the most important asset is their credit score. A credit score can have a lasting impact on your ability to grow your real estate business in addition to other aspects of your personal and business endeavors.  Not only can it change a loan from being approved to denied, but it can affect other aspects of successful real estate investing.

  • Credit scores can make the difference between being able to obtain a loan and getting denied. Even if your score only drops several points, it can result in higher interest rates.  As far as lenders are concerned, lower credit scores equate with higher chances of delinquency,which translates into a higher risk premium on your loans or flat denial of your application.
  • Insurance companies use credit scores to determine if they will even provide insurance to a client, the types of coverage that they will make available, and the cost.  Insurance companies have thousands of historical data points and statistical evidence that shows a correlation with “Bad or Lower” credit scores and the probability that an insurance claim will be filed.
  • Suppliers of building products and many utility companies use the credit score as the primary tool in evaluating whether they will extend credit and how much.   The alternative is to require cash payments or deposits for those products and services.

Building and growing a real estate business can be challenging and requires the management of many variables.   Managing the most important or valuable asset, the credit score, is something that you have control over.  Taking the necessary steps to preserve and increase the score will result in significant savings that can be reinvested in the business and provide access to premium loan and insurance products.

Credit Score Additional ways to a better credit score, include:

  • On time bill payments
  • Avoid needless credit inquiries
  • Keep utilizations low (below 50% of credit lines)

What other reasons can you add to the importance of your credit score in real estate investing?

Lower Annual Insurance Premiums on FHA Loans Create Savings for Homebuyers

President Barack Obama announced January 7, 2015 that the Federal Housing Administration (FHA) will lower annual insurance premiums from 1.35% to 0.85% to make homeownership more affordable for over 2 million Americans in the next 3 years.  Real estate professionals believe this will help many first-time homebuyers, a vast majority of FHA borrowers, as well as homebuyers looking to refinance.  Even with this decrease, FHA will remain on a positive financial path.  This program will only pertain to active FHA case numbers appointed on or after January 26, 2015.

CNBC’s article, FHA to lower cost of mortgage insurance, reported:

For the typical FHA applicant, the reduction in premiums means a savings of about $80 on their monthly payment, according to CoreLogic’s chief economist, Sam Khater.

A little more about FHA loans

  • FHA loans can be used for purchases and refinances. Can choose between fixed and adjustable-rate mortgages. There are also FHA 203(k) loans for renovations to help with home updates to lower utility bills.
  • Homebuyers can purchase and renovate a home with FHA with as little as a 3.5% down payment.
  • Homebuyers qualify for a FHA loan with as little as a 580 credit score (550 with 10% down).
  • The seller, home builder, or lender is allowed to pay some or all of the closing costs on your behalf through an FHA loan.

 

If you are interested in purchasing a home with a lower annual insurance premium, call ReCasa Financial Group’s Graham Montigny or Michael Wolf today at 614-221-6770. 

ReCasa Financial Group   614-221-6770
NMLS #9722 OH: MB.803923.000 IN: 08-0038 LB  PA: Licensed by the PA Department of Banking
130 E.  Chestnut Street, Suite 200 Columbus, OH 43215
Graham Montigny   NMLS # 195412   OH LO 002049.000     IN LO 195412     PA LO 35011
Michael Wolf  NMLS # 85452  OH LO 001440.001
Michael Troutman  NMLS # 319798  OH LO 037303.000

5 Renovations That Don’t Actually Add Value to a Home

Tim Smith writes for Modernize, a website dedicated to helping homeowners build their dream home. Before becoming a writer, Tim worked as a contractor. In his spare time, he enjoys water-sports, cooking, and spending time with his three kids. Below is a recent post written by Smith for real estate investors.

5 Renovations That Don’t Actually Add Value to a Home
By: Tim Smith

renovations for homeownersWhen planning home renovations, you are making a substantial investment into the enjoyment of your home. But do these renovations actually add value to the sticker price of your abode? Read on to get the scoop on five home renovations that, while they may be useful for you and your family, don’t typically add value to your home when you’re ready to sell.

1. Converted Bedrooms
You might have a four-bedroom house and only need three of those bedrooms. It’s a great idea to convert one to a wine cellar, library, or workout room, right? Not if you plan to sell your home. In most cases, an additional bedroom will give your home more value than an interest-specific space that may or may not appeal to potential buyers.

2. High-End Appliances
This is largely dependent on the neighborhood where you live, but it typically doesn’t make sense to add high-end kitchen appliances and other luxury items. The reason? These types of renovations may add value to your home, but if you have the most expensive house in your neighborhood you may price out potential buyers and be unable to recoup your investment.

3. Adding Carpet
These days, the majority of buyers prefer hardwood, engineered hardwood, or tiled floors. Adding new carpet is an investment that will not add substantial value to your home. If you truly need to replace the flooring in your home before putting it on the market, consider an option other than carpet. Not only is wall-to-wall carpet expensive compared to other options, families with young children may be concerned about its durability and exposure to potential allergens.

4. Internal Systems

While you should certainly plan to have heating, air conditioning, plumbing, and electrical systems up to date before you sell your home, doing so won’t add substantial value. The reason? Buyers expect these items to be in good working order before they decide to make a purchase.

5. Swimming Pools
While a pool may increase the enjoyment of your home for you and your family, it can actually be a liability for potential buyers. Families with very young children may be concerned about the safety issues around a pool, while others may not want the additional insurance expense that a pool brings.

In the end, the renovations you choose to make on your home should reflect the way that your family lives. However, if you plan to sell in the short-term, consider avoiding these expensive renovations.