FHA

When must Home Start loans close by?

These must close on or before November 30th.  There are no guarantees that the tax credit will be extended on a federal level nor are there any guarantees that IHDA would continue the program if the federal tax credit is extended.

What is the minimum down payment?

The combined Loan-to-Value can be 100%.  The borrower must be able to document 1% of their own funds to qualify.

What loan(s) make up the Home Start program?

The first mortgage is an FHA 30 Year Fixed rate.  The second mortgage provides up to $6,000 as a second mortgage.

Are there income or purchase price limits with this program?

There are two links from IHDA that might help:

• Income Limits
• Purchase Price Limits

Are there any limitations on property types?

This applies to existing 1-unit, single family homes, HUD approved condominiums, and townhomes.  Ineligible property types include NO new construction and no condominiums that have pending litigation.

Where else can I learn more?

The IHDA website

How does the Home Start program compare to other options?

The mortgage rate is going to be higher than the normal Chicago mortgage loan FHA interest rate.  Right now, the spread is about .5%. That's a pretty big spread.  Here's how I'm looking at this:

• For someone with access to a 3.5% gift from a family member, that is a better option that Home Start:  You avoid the strings and hoops of the Home Start program and get a better mortgage interest rate.  Buying now at low rates and low home prices seems like a good play if it is affordable.
• For someone without access to a 3.5% gift or down payment, this is a significantly better option than doing nothing.  Let's presume that it would take you 6 months to save up the full down payment.  Mortgage rates would likely be .5% higher anyway and home prices are on the rise.

Home Start allows people to act now.  With countless stocks that have jumped 800-900% (mortgage insurers, Fannie Mae, Freddie Mac, etc.), we're seeing some investment in housing-related stocks.  I don't know when the housing market hit its low, but I know that the day that CNN reports that housing is recovered will be too late to buy a home at these current levels of affordability.

Chicago Mortgage Loan Option Comparison

I had an interesting comparison the other day and the numbers sort of surprised me. Notes:

• * The purchase price is ficticious, but these rates were real at the time that I was doing the math. Changes in mortgage rates would change the calculations in this post.  Check Current Chicago Mortgage Rates
• ** Payment Total disregards property taxes and insurance because they won't vary based on the loan program. This is for illustrating the mortgage performance solely
• *** At closing disregards all fixed closing costs, transfer stamps, etc. This is solely attempting to isolate the impact of the Up-Front Mortgage Insurance Premium on the FHA loan versus the Fannie Mae / Freddie Mac Loan Level Price Adjustment on the Conforming Option

Results from Conforming and FHA Mortgage Calculators

I'm assuming a $200,000 purchase

Payment Edge:  FHA

Okay, so we have a slightly better payment with the FHA Loan ,but let's look at the impact of that up-front mortgage insurance.  What we've done here is include any upfront interest payments, plus the mortgage insurance premium, plus the cumulative interest.  In other words, we've removed the cumulative principal to get a truer estimate of the total cost of the mortgage loan.  Results:

Total Costs Edge:  FHA by a nose. With rates unlikely to be this low in the next 0-60 month term, refinancing becomes less likely as a means to remove the PMI.

Which is the better loan option?

It depends.  For all the things that have changed in the past few years, we're finally back to normal.  Mortgage loans are typically the largest household debt and are not one size fits all.  If you're likely to be relocating, needing a larger home, or needing a smaller home in the next few years, then the Conforming loan may be a better fit.  If you're in this home for 3+ years, FHA has become cool for the 700+ FICO crowd again.

Contact us for a personalized review of your financing needs.

The federal goverment suspended the third-largest issuer of FHA loans - Taylor, Bean, & Whitaker (TBW).  They funded $17 billion in the first half of the year and estimates put 20,000-30,000 loan applications in limbo.

Here's a quick attempt on the FAQ's:

Q: Did you use Taylor, Bean & Whitaker?

No.  Zero loans with us are impacting by this news.

Q: Taylor, Bean & Whitaker is my lender.  What do I do now?

Nothing changes.  The mortgage contract survives the shutdown of TBW's future lending.  Continue making your payments to the address provided on the dates required until you hear differently in writing.

Q: My loan is in underwriting / cleared to close / scheduled to close.  Is everything fine?

No.  TBW has no capability to fund a loan and that loan application is no longer advancing.

Q: I closed and funded my home purchase last week, am I okay?

Yes.  Purchase loans that have funded are fine.  Pay attention to your mail as you may be receiving notification via USPS mail regarding any future changes of payment address.

Q: I closed on a refinance with TBW last week and it was scheduled to fund this week, am I okay?

No.  TBW is no longer funding mortgages.  Refinances have a three-day right of recission between closing and funding.  If you signed your paperwork at the title company on July 31, August 3, or August 4 your loan will not fund.  You'd need to start a new FHA mortgage application.

Q: Okay, I get it--any loan in process is terminated.  What do I do?

Start over.  Question #1 in today's market should be:  "Do you fund your own loans at closing or does the end-lender?"

This not only influences the approval and underwriting control, but in today's market (with 30,000 new FHA loans being resubmitted) it helps avoid a 60 day re-processing time.

Q: What's the fastest way to get approved for a new FHA loan?

Contact us. We underwrite and fund our own FHA loans.

The mortgage rates for FHA and conforming loans have moved closer recently.

When we look at someone with perfect credit, single-family home and a 10% down payment, these loans are currently offering essentially the same rates in the low 5's.  These are essentially differentiated by only the pro's and con's of the mortgage insurance products.

For 20% down, conforming loans reign supreme.  Seeking less than 5% down?  FHA is the only game in town right now.  What's interesting is how condominiums and less-than-perfect credit scores should be leaning.

With the Loan-Level Price Adjustments being as punitive as they are, FHA has become hip again.

Take that same scenario of perfect credit, single-family home, and 10% down and change it to 680 FICO, an existing condominium, and the same down payment.  Now the conforming loan has two .75% fees--the first is for the lower credit score and the second is for the condominium at less than a 25% down payment.  On a $300,000 loan, this is a 1.5% or a $4,500 difference.

If you're weighing the pro's and con's of either mortgage program, new markets require new comparisons.  Contact us for an FHA v. Conforming Loan Analysis.