Homebuyer Financing Methods

I received an interesting newsletter from a real estate agent partner the other day.  It was Campbell/Inside Mortgage Finance's Housing Trends Update and it contained a graph depicting how buyer's paid for their homes (nationally) over the past 12 months; cash, FHA, or Conventional Conforming loans (Fannie/Freddie).

Cash Buyers: 
Feb 2010 -- 27.5%
Feb 2011 -- 33.7%

FHA Loans:
Feb 2010 -- 33.3%
Feb 2011 -- 27.8%

Fannie/Freddie Loans:
Feb 2010 -- 14.2%
Feb 2011 -- 13.6%

The article makes a couple points.  One, there are more investors in the market paying cash for distressed properties.  And two, mortgage financing is becoming increasingly difficult.

In my last blog post I discussed how FHA was increasing fees in an effort to promote a more balanced mortgage market.  However, Fannie and Freddie also continue to raise fees and tighten lending restrictions hindering any market share increases in Conventional/Conforming lending and doing little to improve the real estate market.

If you are a real estate agent and would like more information about the article you can go to www.campbellsurveys.com.

FHA is increasing the monthly mortgage insurance charges...again

Back in October I posted a positive blog about FHA's increasing charges and the hope that they would lead the mortgage industry back towards a more balanced market.  Well apparently the increases were not enough.

Effective with FHA case numbers issued on and after April 4th, 2011, FHA is increasing the rate of monthly mortgage insurance. 

For a typical 30 year borrower that is putting the minimum allowable down payment, the current factor used to calculate the fee is going from 0.9% per year to 1.15% per year. 

Let's look at the monthly payments that would have resulted during 3 time periods:  before 10/4/10, present time, and on or after 4/4/11 (assuming equal interest rates of 4.75% and 5.547% APR, 30yr fixed mortgage, 3.5% down payment, $150k purchase price, excluding property taxes and home owner's insurance).

Before 10/4/2010:  Principal & Interest =   $772.07
                              Pmi =                          $  66.34     
                              Total =                        $838.41

Present:                  Principal & Interest = $762.63
                              Pmi =                         $108.56
                              Total =                       $871.19

April 4, 2011 & After:
                              Principal & Interest = $762.63
                              Pmi =                        $138.72
                              Total =                      $901.35

Stay tuned, I'm sure more changes are coming.