Ignore Teaser Rates, Learn about FHASecure
When you are in the market for a home loan it is exciting to see an offer for a $200,000 mortgage for only $700 per month! The problem is that these rates don’t last for long. Many people have been lured into taking out a mortgage to purchase a home because of teaser rates like these. With these types of offers the mortgage company or broker will offer you a great rate to begin, but the catch is that the rate increases after a specified period of time. Like adjustable rate mortgages, the interest rate starts out low, and then skyrockets to the point where the homeowner could be paying close to double their original mortgage payment amount every month. This has caused many foreclosures.
In order to help homeowners who are stuck into these types of bait and switch mortgage contracts, the FHA has a new loan program called FHASecure. This program offers current homeowners the chance to refinance their high interest loans into lower more affordable mortgages. The FHA has always worked towards lowering foreclosure rates to help Americans keep their homes in times of crisis and now they are offering these secure loans to offer Americans relief from predatory lending practices.
The following is a list of requirements the FHA has for people to qualify for a FHASecure mortgage refinance loan:
• You must make enough money to qualify for the refinance and make the mortgage payment based on FHA income standards.
• You must have a history of steady employment.
• You are currently delinquent on your mortgage payments.
• You must currently have an adjustable rate mortgage where the initial low interest rate has expired and is currently increasing or could increase in the future.
• You must have a credit history that shows that your payments were on time before the interest rate began to increase to unaffordable levels.
When considering your application for an FHASecure mortgage refinance, you must also qualify for the loan based on the FHA lender requirements with the exception of late mortgage payments after the interest rate became adjustable.
For more information on FHASecure loans contact Mortgage Loan Place today.
Risk Based Premiums
With the announcement by HUD that the FHA will begin using a risk-based structure for mortgage insurance, many are wondering what will change. Currently, FHA borrowers are assigned the same mortgage insurance amounts regardless of the risk they pose to lenders. For a 30-year fixed-rate mortgage, borrowers must pay a premium of 1.5% of the total loan amount upfront, which can be financed into the loan, and .50% as part of their monthly payment. These rates are considerably higher than those associated with conventional loans.
The new system, which will begin on January 1, 2008, will determine the borrower’s premium based on his or her credit profile. This will allow for borrowers with better credit to pay a lower percentage. Borrowers with poor credit will have to pay a slightly higher amount. This system has been in place in the private loan market since the mid-‘90s. The main reason for this change is to attract borrowers with fair credit who would have chosen sub-prime loans over FHA because of the lower mortgage insurance. This change, along with other proposed changes to the FHA, are all part of the push to make FHA loans relevant in the 21st century.
What is FHASecure?
The news outlets have been abuzz since Friday’s announcement by the president about a new program called FHASecure. So just what is this product that is supposed to save Americans from the sub-prime fiasco?
FHASecure is a new refinance option that is being offered to borrowers who have a good credit history and were making on-time payments before their adjustable-rate mortgages reset. The program has stringent underwriting guidelines and borrowers will have to pay a mortgage insurance premium, which are both safeguards for the borrower, lender, and taxpayers. More obvious benefits to the program include the FHA’s trusted foreclosure prevention assistance and the absence of prepayment penalties.
According to a statement released by HUD, homeowners must meet the following five criteria to be eligible for FHASecure:
- A history of on-time mortgage payments before the borrower’s teaser rates expired and loans reset;
- Interest rates must have or will reset between June 2005 and December 2009;
- Three percent cash or equity in the home;
- A sustained history of employment; and
- Sufficient income to make the mortgage payment.
In addition to the introduction of FHASecure, it was also announced that risk-based premiums will be implemented beginning on January 1, 2008.
Search
