Articles Tagged With: Amortization

June 13, 2017

What Is Mortgage Insurance And How Does It Work?

“What is mortgage insurance?” is a common question for those new to the home loan process. Do you understand how it works? It helps to define the two things referred to by industry professionals as mortgage insurance. There is mortgage insurance which the borrower pays for as a requirement of the FHA loan, then there is the “mortgage insurance” referred to in FHA loan rules which is something else entirely. Note: What we are discussing here is not hazard insurance, which may be a requirement on some, but not all FHA loans. FHA Mortgage Insurance For The Lender The FHA single family home loan handbook, HUD 4000.1, refers to “mortgage insurance” when discussing the FHA’s role in insuring the loan to reduce the risk for the participating lender. On page | more...

FHA Loans And Natural Disasters: What You Should Know

February 10, 2017

FHA UFMIP Refunds: A Reader Question

By Joe Wallace

Is the FHA Up Front Mortgage Insurance Premium or UFMIP refundable? A reader got in touch with us in the comments section this week to ask us a question in that area: “Is there any return of the UFMIP when refinancing out of an FHA loan to conventional? If so, what is the proration amount or percentage of fees refunded? over 6 months, 12 months, 18 months, 24 months?” This insurance premium on FHA mortgages is refundable under a specific set of refinance loan circumstances, but not for all loans. FHA loan rules in HUD 4000.1 address the issue directly; on page 156 we learn the following: “The UFMIP is not refundable, except in connection with the refinancing to a new FHA-insured Mortgage.” HUD 4000.1 states that Up Front Mortgage | more...

December 28, 2016

Buying HUD Homes With FHA Loans

By Joe Wallace

On the FHA/HUD official site, there is a section covering the purchase of HUD homes, including tips on which FHA home loan might be best for these transactions. According to the Department of Housing and Urban Development official site, “A HUD home is a 1-to-4 unit residential property acquired by HUD as a result of a foreclosure action on an FHA-insured mortgage. HUD becomes the property owner and offers it for sale to recover the loss on the foreclosure claim”. These homes are offered for sale via HUD. Who is qualified to buy one of these properties? According to HUD.gov, “Anyone who has the required cash or can qualify for a loan (subject to certain restrictions) may buy a HUD Home. HUD Homes are initially offered to owner-occupant purchasers (people | more...

September 22, 2016

FHA UFMIP: A Reader Question

By Joe Wallace

A reader asks, “I want to purchase at home for 141,000 and I am paying the 3.5 down payment which totals it 136,065. How much will I pay in Up Front mortgage and annually MIP. If I pay the UFMIP in closing will it still be added into to total amount loan?” Let’s begin with a few basics. UFMIP stands for Up Front Mortgage Insurance Premium, which is required as one of the closing costs of an FHA mortgage loan. According to HUD 4000.1, “Most FHA mortgage insurance programs require the payment of UFMIP, which may be financed into the Mortgage. The UFMIP is not considered when calculating the area-based Nationwide Mortgage Limits and LTV limits.” That last sentence means that your loan limit is unaffected by the amount of | more...

February 26, 2016

FHA Loan Mortgage Insurance Premium Rules

By Joe Wallace

When you purchase a home using an FHA mortgage, you’ll be required to pay an Up Front Mortgage Insurance Premium (UFMIP) and monthly mortgage insurance premium (MIP). The rules governing this mortgage insurance are found in HUD 4000.1 and it’s important to know them before you start budgeting and planning for your new mortgage. FHA loan rules covering this insurance begin by defining terms. “FHA collects a one-time Upfront Mortgage Insurance Premium (UFMIP) and an annual insurance premium, also referred to as the periodic or monthly MIP, which is collected in monthly installments.” One thing important for borrowers to know is that the FHA does not consider these payments to be part of the mortgage guaranty limit–this is a fee assessed after those limits are calculated, even though the Up | more...

January 7, 2016

FHA Loan Rules For Up Front Mortgage Insurance Premiums (UFMIP)

By Joe Wallace

When you buy a home with an FHA mortgage, there’s a requirement to pay an Up Front Mortgage Insurance Premium or UFMIP. This is not to be confused with Private Mortgage Insurance (PMI), and according to the FHA loan rules published in HUD 4000.1 most FHA loans require UFMIP. “Most FHA mortgage insurance programs require the payment of UFMIP, which may be financed into the Mortgage. The UFMIP is not considered when calculating the area-based Nationwide Mortgage Limits and LTV limits.” There are exceptions as found in HUD 4000.1: –Streamline Refinance and Simple Refinance Mortgages used to refinance a previous FHA-endorsed Mortgage on or before May 31, 2009 –Hawaiian Home Lands (Section 247) –Indian Lands (Section 248) How is the UFMIP calculated? “The UFMIP charged for all amortization terms is | more...

December 24, 2015

FHA Loans And The Up Front Mortgage Insurance Premium (UFMIP)

By Joe Wallace

FHA loan rules published in HUD 4000.1 include instructions to the lender on how FHA single family mortgages are to include the Up Front Mortgage Insurance Premium, also known as UFMIP. This is an expense borrowers should plan and budget for in the pre-application phase of preparing for an FHA mortgage loan. Borrowers can choose to finance the UFMIP or pay the cost at closing time. The UFMIP is not to be confused with the monthly mortgage insurance premium, also known as MIP, or private mortgage insurance commonly called PMI. According to HUD 4000.1: “FHA collects a one-time Upfront Mortgage Insurance Premium (UFMIP) and an annual insurance premium, also referred to as the periodic or monthly MIP, which is collected in monthly installments.” Of UFMIP, the rulebook says that “most | more...

July 30, 2015

FHA Loan Settlement Dates, Per Diem Interest At Closing

By Joe Wallace

The rules for FHA home loans regarding closing dates and related details are found in HUD 415.2 (at the time of this writing) in Chapter Six under the heading, General Loan Closing Requirements. There are a few items in this section that should be noted in case FHA borrowers have questions–including the basic definition of a closing date as described in the rulebook: “The date of closing/settlement is generally considered the date on which the note and mortgage are signed by the borrower. This is also the date defined as the settlement date on the HUD-1 Settlement Statement. However, the 60-day endorsement submission clock begins on the date that the lender relinquishes control of the loan proceeds (disburses the mortgage funds), for both purchase money mortgages and refinance transactions.” FHA | more...

January 15, 2015

FHA Loan MIP Rules: A Reader Question

By Joe Wallace

A reader asks, “When calculating the annual PMI, are the bps assessed against the original loan amount or the current pay-off amount of the loan?” Assuming the reader is asking about annual FHA Mortgage Insurance Premiums, and not monthly Private Mortgage Insurance, it’s important to know the following: When the FHA and HUD announced a reduced annual Mortgage Insurance Premium, it created a table showing how the new Mortgage Insurance Premium (MIP) is calculated. FHA MIP is calculated, according to the FHA/HUD official site, by “amortization term, base loan amount and Loan to Value (LTV) ratio.” Here is the table published by the FHA showing the new FHA MIP rates: As you can see, there is a listing for the previous FHA MIP payment and the new FHA MIP payment. | more...

September 23, 2013

FHA Loan Reader Questions: Credit Scores, Loan Limits and Mortgage Insurance

By Joe Wallace

A reader asks, “The insurance for fha does it include in your morgtage or you have to pay that together with the downpayment? Do you know before you pick the house the amount you qualify for? How hard is it after one year of bankruptcy? I was laid off and did not work for close to two years due to the economy. how hard is it to get a lender with a score of 580???? Can closing cost be included in mortgage? This is a lot of questions, but the first and most important question is the matter of FICO scores. The reader asks how difficult it is to get a lender when the borrower has a 580 credit score. We can’t speak for all lenders, but in general a | more...