Refinancing Your FHA Mortgage- Part 1

One of the main home financing options available right now is a FHA loan.  In fact, in 2009 34.5% of all loans were FHA loans, in 2010 27.7% were FHA loans, and 33% in 2011 so far.  With so many FHA loans administered by the Government the last few years FHA mortgage holders need to be aware of the advantages they may have when contemplating a refinance.

One option a FHA loan holder has is to refinance their current FHA loan into another FHA loan.   This kind of loan is called a Streamline Refinance.  This is a government program that is available to all FHA mortgage holders (some qualification standards still apply-call to see if you are eligible) because they wanted to allow FHA borrower’s the ability to drop their interest rate if rates improved, quickly and with little to no cost.

One of the advantages of this streamlined loan already mentioned above is the cost to complete them.  The Streamline Loan guidelines state that your new loan amount can only increase by so much.  To help meet and satisfy this guideline, credits are given back to you at closing to help pay for any mortgage related costs.  These credits keep your loan size low and close to your current mortgage balance.  This obviously turns into a fantastic deal for all potential Streamline Refinance customers.  A FHA mortgage holder can even potentially lower their loan size after the appropriate credits are given at close.  Again, this program helps  save FHA loan holder’s the precious equity they have in their home by utilizing this fantastic mortgage option and still drop their rate and save money.  The proverbial win/win situation.

Stayed tuned for part 2 of “Refinancing Your FHA Mortgage”.   You can learn about reduced paperwork requirements and also learn how FHA Streamline Refinance’s do not always require an appraisal.  See you soon.

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America’s Most Stressful Jobs 2011

Most stressful jobs in 2011

Most Stressful Jobs

If you think you have it bad when it comes to stress at work, you may be right! CareerCast.com has released their list for the most stressful jobs in 2011.  This is one top ten list that you do not want to be on.  Of course, one of the jobs on the list is being a Real Estate Agent.

10. Real Estate Agent

Average annual salary: $53,100
Hours per day: 9.5

Although the housing market is showing signs of recovery, real estate agents are still experiencing high stress.  Most real estate agents work long off beat hours and spend much of their time traveling to show properties to clients. Their incomes are based on commission, so each sale is very important. Adding to their stress is the difficulty in approving homebuyers for mortgages.  Being in real estate you must be prepared for last minute changes and to expect a rollercoaster ride on every deal.

9. Emergency Medical Technician

Average annual salary: $33,020
Hours per day: Varies

EMTS are responsible for saving lives.  This alone is enough to be considered a stressful job however they also must asses injuries, administer emergency care, and transport the sick or injured to hospitals at high speeds.  When every second that passes could be the difference between life and death the job is very stressful.

8. Stockbroker

Average annual salary: $85,580
Hours per day: 8

Stockbrokers are forced to make instant decisions that can make or break the financial lives of their clients.  Having high pressures to perform well and grow the financial portfolios for their clients, stockbrokers are stressed at all times.  With the economy in shambles over the past few years, stockbrokers inherently have had a stressful job.

7. Architects

Average annual salary: $78,800
Hours per day: 8+

Architects rank 7th on the list for the most stressful jobs in 2011.  The reasoning behind this conclusion is not due to overly intensive workloads; it is quite the opposite.  Due to the slow economy there is a lack in businesses expanding and constructing new buildings.  Large residential homes are also at a standstill making each bid more cut throat that Architects must be more accurate than ever and at lower costs to stay in business.

6.  Advertising Account Executive

Average annual salary: $97,670
Hours per day: 9.5

Technology is the reason in which being an advertising account executive is a top ten most stressful job for 2011.  AEs must continually keep up with the industry trends and consumer tastes.  Dealing with new marketing methods with online advertising as a key sales piece AEs are fighting for every sale.

5. Newscaster

Average annual salary: $43,270*
Hours per day: 8

Newscasters are on call 24 hours a day 7 days a week to respond to any disaster or war that breaks out.  They are expected to be prepared to go on-air with no preparation at the drop of a hat.  Reporting to the scene of deadly weather and dangerous wars make being a newscaster very stressful.

4. Photojournalist
Average annual salary: $43,270*
Hours per day: Varies

Similar to newscaster, photojournalists are expected to be ready for work at all times of the day and export dangerous areas of high crime, war and weather.  Photojournalists have been captured and held hostage in wars and even murdered just for showing up to work to do their jobs.  Unless they are reporting on cute animals at the zoo, you can bet that photojournalists have a stressful job.

3. Senior Corporate Executive
Average annual salary: $167,280
Hours per day: 11

Corporate executives are typically highly paid jobs but for good reasons.  Making the top three on the 2011 list of most stressful jobs, Senior Corporate executives are have very stressful jobs.

Their every day decisions put them in charge of the lives of all of their employee, shareholders and the public.  Their decisions must involve understanding industry trends, competition technology, laws and regulations.  With this being said they are responsible for not only their own destiny but that of many others.

2. Public Relations Executive

Average annual salary: $101,850
Hours per day: 9

Public Relations Executives have it tough to add a spin of positive press to every bad event or decision that comes from their clients.  Try being Charlie Sheen’s PR executive when he goes on a rampage about being a warlock.  Perhaps he was sleepy… PR executives are pressured to connect constantly with the social media and manage small details of their client’s campaigns at once.

1. Commercial Airline Pilot

Average annual salary: $117,060
Hours per day: 9

The most stressful job of 2011 is a commercial airline pilot, according to the article presented by CareerCast.com.  When each day at work requires your full attention to the smallest details stress levels are always elevated.  Airline pilots must be prepared to adapt and adjust for unexpected events that put the lives and their passenger’s lives in jeopardy.

Recently damages planes such as the Southwest 737 and air controllers falling asleep on the job are out the normal stresses that commercial airline pilots must overcome. Pilots have to stay extremely attentive to all gauges and mechanical indicators to properly fly their planes all while working long days with little rest. This is the perfect storm for the most stressful job in 2011.

2011 Postage Rate Increase

stamp prices

higher stamp prices

There is yet another cost of doing business for Realtors and Mortgage professionals taking place on April 17th, 2011.  The United State Postal Service (USPS) will be increasing stamp prices for most of its mail classes including First Class, Media Mail, and Parcel Postage.  Do not mistake these increases for the already implemented rate increases that took place on January 2, 2011 for Priority Mail and Express Mail.  These services will not experience additional rate increases on April 17th.

Related: USPS Stamp Price Rise and No Saturday Mail Delivery in 2013.

Many Realtors and Mortgage professionals make use of postcard to keep in touch with their clients.  These stamps will increase to $0.29 up from $0.28 per stamp.  First class mail will remain $0.44 per ounce however each additional ounce will be $0.20, up from $0.17.

The chart below from Stamps.com summarizes many of the April 17th Postage Rate Increases.

U.S. Postal Service Mail ClassNew Postage Rates
(effective 1/2/11 for Priority and Express, effective 4/17/11 for all other classes)
Previous Postage Rates
First-Class Mail letter (1 oz.)$0.44$0.44
First-Class Mail letter – each additional ounce$0.20$0.17
Postcard$0.29$0.28
First-Class Mail flat (1 oz.)$0.88$0.88
First-Class Mail parcel (1 oz.)$1.71$1.22
Certified Mail (in addition to postage)$2.85$2.80
Signature Confirmation (in addition to postage)$2.45$2.35
First-Class Mail International to Canada (1 oz.)$0.80$0.75
First-Class Mail International to Mexico (1 oz.)$0.80$0.79
First-Class Mail International to all other countries (1 oz.)$0.98$0.98
Priority Mail (1 lb.)$5.10 (and up)$4.90 (and up)
Express Mail (0.5 lb.)$13.25 (and up)$13.65 (and up)

One of the most noticeable increases is the priority mail envelope which many Realtors and Loan officers use to send purchase agreements and mortgage applications.  The Priority Mail 1 lb envelope will increase to $5.10 up from $4.90.

The increase in costs of stamps adds to extra costs from skyrocketing gas prices, licensing requirements and harder to qualify borrowers.  Many Realtors and Mortgage professionals will be further affected by these changes.

FHA Mortgage Insurance Premium Increases

FHA Mortgage Insurance Increases April 18th

For all FHA mortgage loans with case numbers assigned on or after April 18th 2011, the mortgage insurance premium will be increased making it more expensive for homebuyers.  This change will not affect those who already have a FHA case number assigned or FHA loans that are already funded.

To help you better understand FHA mortgages, there are two types of mortgage insurance; Upfront Mortgage Insurance and Annual Mortgage Insurance.  Upfront Mortgage insurance premiums (UFMIP) will be unchanged at 1% of the loan amount.  Annual mortgage insurance premiums (MIP) will be raised .25% effective April 18th 2011.

Annual mortgage insurance premiums are based off a percentage of your loan amount and are paid monthly.  The percentage also changes based on your loan to value (amount you are borrowing divided by your homes value) and loan term.  The chart below displays the different premiums for each scenario.

  • 15-year loan term, loan-to-value > 90% : 0.50% per year
  • 15-year loan term, loan-to-value <= 90% : 0.25% per year
  • 30-year loan term, loan-to-value > 95% : 1.15% per year
  • 30-year loan term, loan-to-value <= 95% : 1.10% per year

For example, on a $100,000 loan with a 30 year term over 95% LTV, your Mortgage Insurance Premium would be 1.10% x $100,000 = $1,100.  This would then be divided by 12 to get the monthly amount which is added to your payment. $1,100 / 12 = $91.67 per month.

The reasoning for this increase in fees to the Federal Housing Administration is due to the increase in volume of FHA loans over the past 5 years.  As subprime loans were done away with, many homeowners would not qualify for conventional mortgages due to credit issues or loan to value issues.  FHA mortgages are more flexible for these situations.

To learn how to get rid of your mortgage insurance refer to our previous post at Understanding Mortgage Insurance or speak with a mortgage professional.

Why there IS a Double dip in housing

housing-double-dipSales of new homes dropped 17 percent in February following another big drop in January.   This combined with a reported low level of mortgage purchase applications clearly spells out a Double Dip in the housing market.  The question is not if there will be a double dip, the question is when will it end.

With the current signs I would not predict a snappy recovery in the housing market.  The supply of homes is maintaining high levels due to a fast flow of foreclosures. With unemployment staying high, homeowners are unable to find work and end up behind on their mortgage payments.  There needs to be job growth before the foreclosures will slow down.

Gas prices are up a ton!  No matter how much you travel, if you own a vehicle you dread each trip to the gas pump.  The gas prices and rising prices on good and other household costs are affecting home owners on their budgets.  Less people can afford to save up for a down payment on their dream homes.

A report released yesterday, from Robert Shiller’s MacroMarkets, explains that nearly half of the 111 housing experts and economists questioned agree that housing will experience a double dip this year.  None of those surveyed expect home prices to raise up to the levels they were before the crash within the next five years!

On the bright side, those who can qualify for a home loan and are financially fit to purchase a home can pick up a gem of a house at some of the lowest costs in history.  Mortgage rates remain low and housing prices are low due to the high supply on the market.  Homebuyers shouldn’t feel too much pressure to settle on a house less than their dream home.

No Housing Rebound Expected until 2012

Housing Recovery in 2012During more traditional times sellers may welcome the Spring as a time when they start receiving more activity on their home.  It seems that once the snow starts melting home buyer’s start to heat up their desire to buy their dream home and sellers are the beneficiary.  Last year, homeowners had the benefit of this Spring time home buying season along with huge tax credits provided by the government for first time home buyers.  This greatly impacted the housing market in the Spring but stalled the market later in the year when no credits were available.

This year there are no credits to help stir the housing market and homes have lost even more value then they had last year.  Home owner’s who have already dropped their sales price down may have to continue to price drop.  Home owner’s also have to compete with a gluttony of foreclosure listings sold at a discount.  Because of this home analysts have delayed the housing recovery they called for this year until next spring.

This information is starting to sound familiar and repetitive.  There are just too many vacant homes and excess inventory on the market that need to be dealt with first before the real housing recovery can begin.  It makes one wonder if anyone actually knows for sure when the market is going to pick up or if this is the new normal market.

Jobs Reports Reflect Lowest Unemployment Rate in 2 Years

Jobs Reports RasingThree months in a row we have seen the unemployment rate drop for us non-farm payrolls.  According to this morning’s jobs report we are now under 9% unemployment rates at 8.9%.  Employers added 192,000 jobs in the last month alone with manufacturing, business, education and healthcare.  This is the lowest unemployment rate since April of 2009.  The jump is the biggest monthly raise in job numbers since May 2010.

Analysts agree that the economy is on its way to recovery and the unemployment rate will not rise again to 10% in the foreseeable future.  The growth will be credited to  manufacturing and middle income opportunities for the auto industry and related industries as we see the economy slowly recover to a point it was a few years ago.

In terms of mortgage rates, this positive growth will most likely attract more money to the stock market with the Dow Jones Industrial Average futures up 1.59% at 12,258.20 this morning at 8:45 AM. The 10 year treasury note is also ticking up at 3.57.  Experts report that there should not be a large change in mortgage rates because the market expected these numbers and made corrections in prior days.

Mortgage rates should start slightly higher than yesterday.  If you are in the market for a mortgage to refinance your home or purchase a new home I would recommend locking your interest rate.  These positive jobs numbers show opportunity for future recovery of the stock markets which will reflect negatively on mortgage rates.

Obama Increasing Down Payment Required for a Mortgage

obama-mortgage-downpaymentsThousands of people agree that the down payment for buying a home should be increased.  Today, if you are in the market to purchase a home you may not even need a down payment if you are able to qualify for a USDA Rural Housing Mortgage or VA Loan.  Most other qualified borrowers have the option to put down only 3.5% with a FHA mortgage.  The Obama Administration, like the thousands that voted on the Wall Street Journal’s Poll, agrees that the borrower need to have some skin in the game.
If all goes as planned, the Obama Administration will work with Fannie Mae and Freddie Mac to gradually raise the down payment minimum to 10% on conventional loans.  This restructuring of mortgages in the United States will help hedge against losses from foreclosures and delinquencies.
The ultimate goal for the administration is to privatize the mortgage market as it was intended to be prior to the governments intervention in Fannie Mae and Freddie Mac.  As it stands today nearly every mortgage in the United States is insured through the Federal Government.  VA loans (offered only to US military veterans) as well as FHA mortgages are insured by Ginnie Mae, a government entity.  Fannie Mae and Freddie Mac are the two private companies that buy and sell mortgages as mortgage backed securities to investors. When the economy took a downturn the government was forced to step in and bail out these two entities to stop a financial collapse of of our economy.
There are obvious implications in requiring larger down payments to buy a home.  The cost of home ownership is near the lowest in history yet foreclosed homes still sit vacant and banks are unable to resell their repossessed properties. Cities such as Detroit have thousands of homes vacant which bring in no tax revenue further adding to the implications.  Without tax revenue the cities are unable to operate and provide social services. Conversely if the foreclosure rate continues then the government will have no exit strategy in the bail out of Fannie Mae and Freddie Mac which is costing the US government billions of dollars.
Of the thousands that have voted on WSJ.com, the majority of people believe the down payments required to buy a home should be between 16% and 20%. There is no easy answer to these issues however according to this poll, the Obama Administration is moving in the right direction by raising the down payment requirements.

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The Cost of Not Refinancing

Should I Refinance my Home?When it comes to your mortgage the first thing people ask is “what is your interest rate?”  Many people have the old rule of them embedded in their thought processes that it does not make sense to refinance unless you are lowering your interest rate at least 1%.  This may be true in some cases however using this as a strict rule may cost you thousands. If you have the opportunity to lower your interest rate and you chose to pass it up, you may be making a financially painful mistake.

Of course we will take a look at how much you will save on your mortgage by refinancing to a lower interest rate.  Everyone wants to save money however another way to analyze your mortgage decision is to examine the cost to not refinance. If you do not take advantage of a lower rate that is made available to you then the amount you would have been saving is what you are paying extra.  For example, a homeowner with a $200,000 mortgage at 6.25% will pay $1231.43 per month in principle and interest.  If they are able to lower their rate to 5.375% and keep their mortgage at the same amount, their payment will be $1119.94 for a monthly savings of $111.49. Over one year they will have saved $1337.88 and conversely if you do not refinance then you are costing yourself this much each year.

 Obviously the monthly savings are nice but for those number crunchers out there, let’s also take a look at the big picture.  The savings over the life of your loan is also important.  Assume you have had your current mortgage for a full year or 12 payments.  On a 30 year mortgage you would have 348 payments remaining.  The biggest reason I hear from my clients on why they do not want to refinance is because it will restart their mortgage term over which will cost them money.  This is absolutely true however with this example 348 payments at the higher current interest rate will be a total of $428,537.64 paid over the remaining life of the loan ($1231.43 x 348 months) whereas 360 payments at the lower interest rate is a total of $403,178.40 (1119.94 x 360 months). This means that even though you have 12 additional payments, you end up paying $25359.24 extra by not refinancing!

 The other reason for not refinancing is because people say they do not want to take longer to pay off their home.  That is also an excellent point, however most mortgages these days do not have prepayment penalties so you can pay extra each month and cut down your mortgage term.  For this example if you were to refinance to the lower interest rate and continue paying the same payment therefore putting the savings towards the principle each month, you would pay your home off in 289.4 months or just over 24 years compared to the 29 you have remaining.  By paying your mortgage off 5 years early you will save $73885.80 in interest! By not refinancing you are choosing to pay $73885.80 extra which makes no financial sense.

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Mortgage’s Around the World

around-the-worldI thought it may be interesting to share some information on how other countires handle their mortgage markets.  Interestingly enough, most countries require much larger down payments to buy a home.  Here are a couple of countries I found some information on.  In Japan a buyer needs 10% down, in India a buyer needs to put 15% down, in most Asian countries including China that amount grows to 30% down payment, and lastly in Vietnam a buyer needs to put a whopping 40-50% down payment.

Here in the U.S. we still do not even have a down payment requirement in some circumstances.  If you are a veteran you can apply for a VA loan which requires no down payment.  You also can qualify for no down loan if you decide to live in less densely populated area through a USDA loan providing you meet the income restrictions those loans have in place.  If you do not qualify for no down payment you can still get into a house with as little as 3.5% down payment through an FHA loan or 5% with a conventional loan.  When you start comparing our down payment requirements in the U.S. with other countries you can really see the benefit of living in the “Good Ole USA”.

After looking more in depth into mortgage markets around the world, I also found that most countries have different kinds of mortgage terms then we do in the States.  It seems as if it is more common for homeowners to opt for adjustable rate mortgage (ARM) loans instead of fixed loans in other countries.  For example, in Canada and Britian prospective home-buyer’s cannot even get a fixed rate mortgage and instead have to settle for an ARM loan.  If an individual does get a fixed rate loan they typically have to set up a meeting every 2,3, or 5, years with their bank to resign and extend their loan.  The bank has much less risk with these shorter length terms because it is possible they would not renegotiate your loan especially in the unfortunate circumstance of an unexpected job loss etc.  We do have loan terms like these in the U.S. and they are called “Balloon’s”.  They are definitely not very popular.  For good reason…

Lastly, rates in other countries also vary greatly.  In Japan it is possible to get a short term adjustable rate mortgage at an unbelievably rate of .11%.  On the other hand, you can also expect an interest rate of 9.5% in Vietnam.  If you remember, Vietnam also had the 40-50% down payment requirement…OUCH.  Here are some other rates from around the world- Canada 3.5-6.75%, Germany 3.5-4.5%, and finally Australia 7.1-7.9%.  Our interest rates here compare favorably or are better then what you can find around the world.