FHA Interest Rate Costs

Filed under FHA Interest Rate by on January 6, 2011 at 2:37 pm {no comments}

have been increasingly lately.  While  rates are slightly higher, they haven’t been increasing as quickly as conventional loans have been.

The FHA interest rate has settled in near 4.75% lately after tempting the 5% levels.  It has been so volatile lately that many individual days have seen rate swings of that full 0.25%.

Lenders used to have daily sheets.  Not anymore.  What does it mean in terms of payments when a 0.25% swing is a regular occurence? 

On any given day, on a $300,000 loan, that’s a $45/month difference and almost $3,700 in the first five years.  Feel free to update the calculator with details particular to your situation.

Assumptions

These are the values used in this loan comparison. To update any values, go here

Comparison Term (Years): 5
Property Value: $300,000.00
FICO: 720
Input

FHA Now FHA up .25%
Loan Type FHA FHA
Loan Term (Years): 30 30
Loan Amount: $289,500.00 $289,500.00
Interest Rate: 4.750% 5.00%
UFMIP: 1.00% 1.00%
MI Factor: 0.900% 0.900%
Closing Costs ($): $0.00 $0.00
Closing Costs (%): 0.00% 0.00%

Monthly Analysis

Based on the information provided, this table shows the monthly payments for principal, interest, and mortgage insurance
(if applicable).

Loan & Payment Summary FHA Now FHA up .25%
P&I Payment $1,525.27 $1,569.64
Mortgage Insurance $219.30 $219.30
Monthly Payment $1,744.57 $1,788.94
Monthly Savings $44.37 $0.00
Total Loan Amount: $292,395.00 $292,395.00

Full Mortgage Analysis

Over the comparison term of 5 years, this table reviews the true cost of the loan over time in a way that monthly payments cannot. We remove the principal portions of payments to isolate the cost of interest, mortgage insurance, and any closing costs to calculate the total cost over time.

Real Cost Analysis FHA Now FHA up .25%
Total Payments $103,516.24 $106,238.38
Principal Payments $24,858.73 $23,892.38
Interest & MI Payments $78,657.00 $82,345.00
Remaining Balance $267,536.27 $268,502.62
Total Cost $81,552.00 $85,240.00
Total Savings $3,688.00 $0.00
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FHA Interest Rates & Fed Meeting

Filed under FOMC by on April 28, 2010 at 7:46 am {no comments}

The Federal Reserve adjourns from a scheduled, 2-day meeting today.  It’s one of 8 scheduled Fed meetings for 2010.

Upon adjournment, Fed Chairman Ben Bernanke & Co. will release a formal statement to the market. In it, the Fed is expected to announce “no change” in the .

The Fed Funds Rate is currently in a target range of 0.000-0.250 percent.

The Fed Funds Rate is an inter-bank lending rate. It’s also the basis for Prime Rate, a consumer interest rate on which credit card payments are based, among other consumer loans.  is equal to the Fed Funds Rate + 3 percent.  Credit card rates, therefore, will likely stay flat today, too.

Mortgage rates, however, should change.  Possibly by a lot.  The 30-year fixed mortgage does not correlate with the Fed Funds Rate (as shown in the chart at right).

The reason will change today is because, in its statement, the Federal Reserve will highlight vrious parts of the economy, identifying strengths, weaknesses and probable threats to growth.

These observations influence investors with a stake in bond markets and future returns and, with Wall Street on edge right now — unsure of whether recent economic growth is a longer-term trend or a short-lived blip –  mortgage rates could shoot higher or they could drop, depending on how traders interpret the Fed.

It’s a difficult time to be shopping mortgages in Illinois.

Further complicating matters is Greece’s recent debt downgrade to junk status. A small contagion fear is budding worldwide and, as a result, the flight-to-quality has picked up steam. Mortgage rates are down because of it but could reverse higher at any moment.

Therefore, if you’re actively shopping for a mortgage today, it may be prudent to lock your rate ahead of the Fed’s announcement and any major market reversal. Mortgage rates may fall today, but there’s very little room for them to fall.  This is, however, a lot of room for them to rise.

The Fed adjourns at 2:15 PM ET.  Call your loan officer to lock your rate.

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FHA Interest Rates Rally Back

Filed under FHA Interest Rate by on February 5, 2010 at 12:48 pm {no comments}

Just a quick mid-day update: Since opening significantly lower after the jobs report, mortgage bonds have rallied. The loan rates have recovered all of the losses from opening bell and are now up 18 basis points.

We are now overbought according to every technical signal so the market could move quickly if it reverses.

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FHA Loan Rate Recovers

Filed under FHA Loan Rate by on February 5, 2010 at 10:01 am {no comments}

What a wild day already.  At the opening today, the government’s Non-Farm Payrolls report came out.

Expectations were for job creation of about 15k.  We lost 20k jobs on the month.  On this negative , the interest rate should have normally improved, but nothing is normal these days.

The market plunged at open and it looked like were headed higher.  Now, 2.5 hours after all of the opening-bell fireworks, we’re back to exactly flat on the day.

There is absolutely no good reason for the FHA to still be at 5%, but it is.  If you’re looking at a purchase or refinance anytime soon, there is almost no room for rates to go lower and plenty of room for rates to go up.

Use our quick form and we’ll get quotes from the four best FHA lenders sent to you immediately.

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FHA Interest Rates Drop Today

Filed under FHA Interest Rate by on February 4, 2010 at 7:24 pm {no comments}

Our predictions aren’t looking so good this week.  We really thought that yesterday’s ADP report and tomorrow’s Non-Farm Payrolls account would be the market movers.  They weren’t.  Global fear turned out to be the main story, so far, this week.

Investors have pulled out of the stock market with the Dow now below 10,000 and at a 3-month low.

The rate is back to 5% after ticking up yesterday, but many lenders did not re-price rates late in the day.  Below 5% is a possibility when the market opens tomorrow.

However, the Non-Farm Payrolls report hits first thing.  We’ll have an update tomorrow, but this report has the potential to help this rally challenge all-time lows or it could push rates back up significantly with a strong reading.

How’s that for a prediction?  The market is so uncertain that we’ll try and report on it, not predict it.

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Pending Home Sales Recover

Filed under Pending Home Sales by on February 3, 2010 at 7:47 am {no comments}

recovered by 1% in December after November’s big drop.

A Pending Home Sale is a home under contract, but not yet closed. It’s compiled using over 60 large brokerages and over 100 regional data listing services and is considered to be one of the best indicators of home sales activity.

As such, it’s pretty accurate in projecting forward-looking housing reports.  Notably, with the data showing a moderate tick up on Pending Home Sales in December, it’s reasonable that we should see a tick up in in January.

With the ending soon, interest rates likely to go up, and now housing looking like it is going to resume its upward trend, the time to buy might be now.

For home buyers in Chicago , this is all a bit of good news. Home prices are based on the supply-and-demand balance that exists between buyers and sellers.  When buyers outnumber sellers, like they did through most of 2009, home supplies dip and, in fact, the national home inventory nearly halved during the 12 months ending November 2009.

With fewer homes for sale, multiple-offer situations were almost commonplace and home values rose as result.

Activity has since slowed, however, and fewer buyers are in today’s market. The supply-and-demand equation has shifted back some. In December, home supplies rose for the first time in 7 months and January will likely show the same.

The net result: Home buyers have more homes from which to choose and that can create negotiation leverage for better prices and better concessions.

With still low and a looming deadline on the homebuyer’s , market activity should be strong between now and April.   Take your time and bid right. And when you’re ready, be ready. The best deals likely won’t last.

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FHA Interest Rate Predictions: January 25, 2010 Edition

Filed under FHA Interest Rate by on January 25, 2010 at 7:46 am {no comments}

The FOMC meets this week -- mortgage rates will be volatileConforming and improved last week on the combination of soft economic data and new talk from the White House about tightening up banking regulations.

The S&P dropped 4% in its worst week since October.  As money left stocks, it went into bonds, and pushed rates lower.

Since a very ugly December, mortgage bonds have made up half of the losses and it is helping with home affordability and has opened the window on another surge of refinancing activity.

This week is loaded with news and could push rates back up in a blink.

Today, the December report came in and it was very weak.  This is because of a combination of factors including:

  1. The initial expiration date of November 30, 2009
  2. Sharply rising mortgage rates throughout the month of December
  3. A general slowdown from the holidays and from the weather

Home sales are down 16%, but there are a lot of reasons.

Later this week, we’ll see the Case-Shiller Index – a measure of home prices nationwide — and the New Home Sales report. The Index has registered mild home price improvement over the past 8 months and its latest report is expected to show the same.  New Home Sales should be similarly strong.

But, the biggest news of the week is the first Federal Open Market Committee meeting of 2010.

The Fed meets Tuesday and Wednesday this week and Wall Street will be watching closely.  The Fed is not expected to change the from its current target range of 0.000-0.250 percent, so, instead, markets will watching for the Fed’s post-meeting press release.

As always, what the Fed says is almost more important than what they do. If the Fed says the economy is growing and everything is going as expected, mortgage rates should rise.  On the flip side, if the Fed says there are still significant risks, rates could drop a little lower.

Rates will be volatile all week, but once the Fed’s press release hits the wires, it’s anyone’s guess what will happen.

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Changes to FHA Home Loan Approval Rules

Filed under FHA Mortgages by on January 21, 2010 at 8:47 am {no comments}

New FHA guidelinesSecuring an mortgage is about to get more expensive.

The FHA announced Wednesday that it is making a few policy changes to reduce their overall risk.

It will mean tougher approvals and higher costs to secure a mortgage approval for those who wait.

As listed in the official announcement, there are 3 major guideline updates for the FHA:

  1. Upfront mortgage insurance premiums are increasing to 2.25% from 1.75%
  2. Minimum 10% down payments for those with less than a 580 FICO
  3. Seller concessions are being limited to 3%, down from today’s allowable 6%

The FHA has also appealed to Congress to raise an FHA borrowers’ monthly mortgage insurance premiums.   The reason the comparisons keep favoring FHA is that the premiums are so low.

It’s clear that the Federal Housing Administration needs to clean up their portfolio and yet balance their mission of creating affordable mortgage loans.

They are also going to start improving the quality of their lenders.  They are introducing a “termination clause” to attack the problem where it starts.  Should certain lenders represent a disproportionate number of the bad loans, they will lose their right to originate FHA loans.

As a result, home buyers can expect tougher FHA underwriting in 2010.  This won’t be as much due to the guideline changes, but more due to the “termination clause.”  For lenders to prevent being the “bad lender,” they will add overlays to insure that they do not have a disproportionately bad portfolio.  Examples of this already exist:  The FHA will allow 580 FICO scores, but nearly all lenders require at least 620 FICO.

The new guidelines don’t go into effect until spring, but acting now will save the up-front mortgage insurance premium monies plus lock in today’s monthly mortgage insurance payments before those too get more expensive.

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There’s 100 Days Left To Claim The Homebuyer Tax Credit

Filed under Homebuyer Tax Credit by on January 20, 2010 at 7:46 am {no comments}

100 days remain for the Home Buyer Tax Credit ExpirationVersion 3.0 of the expires in 100 days.

The end of the first time home buyer $8,000 tax credit has been pushed forward to spring, requiring homebuyers to be under contract for a home no later than April 30, 2010, and to be closed no later than June 30, 2010.

In addition, “move-up” buyers were also added to the program’s eligibility list.  This means that you don’t have to be a first-time home buyer to be eligible for the tax credit.  If you’ve lived in your home for 5 of the last 8 years, you meet the requirements.  Tax credits of up to $6,500 on the “move-up” or “long-term residents” program.

The basic eligibility requirements are still the same:

  • You can’t purchase the home from a parent, spouse, or child
  • You can’t purchase the home from an entity in which they’re a majority owner
  • You can’t acquire the home by gift or inheritance
  • All parties to the purchase must meet eligibility requirements

There are still some notable changes.

First, the subject property’s sales price may not exceed $800,000. Over $800k?  Fully ineligible.  The good:  household income thresholds have been raised to $125,000 for single-filers and $225,500 for joint-filers.

    And lastly, don’t forget that the program is a true tax credit — not a deduction.  This means that a tax filer who’s eligible for the full $8,00 credit and whose “normal” tax liability totals $5,000 would receive a $3,000 refund from the U.S. Treasury at tax time.

    The complete list of qualifying criteria is posted on the IRS website.  Review it with a tax professional to determine your eligibility.  Then mark your calendar for April 30, 2010.

    There’s just 100 days to go.

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    2010 FHA Mortgage Rate Predictions

    Filed under FHA Interest Rate by on January 15, 2010 at 11:03 am {no comments}

    hit all-time lows on December 1st and shot right back up during the month of December.   We came into 2010 with just trading higher one day, lower the next.

    We’re starting to get some direction this week.  The 30 Year Fixed rate has moved back to 5% and is now developing a fairly clear trend towards lower rates…for now.

    The reason for the move this week has been that the simply wasn’t that great.  The Retail Sales showed we aren’t buying very much and the low inflation data today indicates we’re not growing very fast right now.

    2010

    I don’t believe that the data we’ve seen is enough to forecast rates going lower for the entire year.  Things simply weren’t as great as they appeared in December and they’re not as bad as they appeared in the past 48 hours.

    To get the best rate in 2010, you need to lock in your rate before the average person starts to think the economy is recovering.  There was great news in housing for nearly all of last year, the jobs market isn’t better–but it’s not worse, and the stock market has come back a lot since the lows.

    Still, people aren’t confident.  The “trick” to getting a great or buying at the lowest price is simply doing it before CNN broadcasts that housing has recovered.   Consumer Confidence is low and the Retails Sales reports confirm it.

    When confidence levels soar, so do home prices and mortgage rates.

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