In an FHA mortgage, there are two types of MIP which the borrower pays.

1) The Up Front Mortgage Insurance Premium (UFMIP) and the amount depends on whether 1) the mortgage is a new one, or a re-finance; and 2) whether the mortgage is 30 years or 15 years.  For a new mortgage at 30 years, the UFMIP is 1.75 percent of the loan amount.

Let’s say you purchase a home with a new FHA mortgage on a 30-year note, and the Loan Amount is $250,000:

$250,000           Loan Amount

x .0175               Percentage Rate converted to a decimal

= $4,375             Total UFMIP

This $4,375 can be included in your mortgage, so you will not have to come out-of-pocket with this amount of money.

2) The monthly MIP is an extra amount added to your regular monthly mortgage payment, and it is .55 percent of the loan amount.

Using the same $250,000 Loan Amount as above, this monthly MIP would be calculated accordingly:

$250,000            Loan Amount

x .0055

=  $1,375

=  $114.58            ($1,375 divided by 12 months)

The monthly MIP is cancelled after 5 years OR the Loan-to-Value ration reaches 78%, whichever is LONGER.  This means if you take an FHA loan with a minimum down payment of 3.5%, you have a Loan-to-Value ratio of 96.5%-to-3.5%.  That LTV would have to be reduced to 78%-to-22% before the MIP would be cancelled.  If for whatever reason you were able to reach this LTV before 5 years had passed, then you’d have to wait until a full 5 years on the mortgage had expired before you could drop the MIP.

Scott T. Hunt

Owner/Broker

Centre Court Real Estate Group

We get a number of questions from readers wanting to know about Mortgage Insurance Premium (MIP), and how it will effect their monthly mortgage payment.  MIP is exactly what its name implies – it provides insurance to a lender in case a borrower defaults on their mortgage.  Calculating MIP is fairly straightforward and necessary because it is part of your total payment.

In a Conventional loan, if the Loan-to-Value (LTV) ratio is more than 80%, then the borrower is charged mortgage insurance, which becomes part of their monthly mortgage payment.  That means if the sales price of a home is $250,000, the borrower must come up with at least 20% (or $50,000 = 20% of $250,000) for a down payment to get to the 80-20% LTV, and avoid PMI.  Any amount less than 20% and the borrower gets MIP added to their payment.  MIP rates on Conventional loans may vary, but most are between .05 - .075 percent of the loan amount, then divided by 12 months.  For example:

250,000     Loan Amount

x   .0075     MIP Rate

=  $1,875     Annual MIP

=  $156.25   Monthly ($1,875 divided by 12 months)

You have to account for the MIP payment every month, along with the Principal & Interest, Taxes & Insurance to accurately calculate a total monthly mortgage payment.

In Part 2, we’ll look at MIP if you use an FHA loan.

Scott T. Hunt

Owner/Broker

Centre Court Real Estate Group   

Scientists call it the “Ah Ha” moment - that point in time when the light bulb comes on in one’s head, and they finally understand and accept what they initially did not, or refused to see.  And so it is with local homeowners trying to sell their property.

The local real estate market has bottomed, and has turned back to the upside, and sales are increasing.  Why?  Historically low interest rates, tax credit incentives and home prices we’ll never see again in our lifetimes as a result of foreclosures and short sales - just to name a few.  But I also believe another reason is that homeowners have finally come face-to-face with reality, and are pricing their properties according to “Market Value” and not “Emotional Value.”

After almost a decade and a half in the real estate business, I have seldom encountered a Seller that was not absolutely convinced their home was worth much more than it actually was.  Even after staring at a mountain of statistical facts presented to them about what similar properties are actually selling for, emotion usually overtakes logic, and they want to list their home at a much higher price.  And then they wonder why their home is not generating any offers.

But now – because of blogs such as this one and others, along with a plethora of media reports about the housing market – Sellers are finally accepting what real estate agents have been desperately trying to get them to understand for the past several years - price your home with your head and not your heart, and it has a better chance of selling.

If your home has been on the market for an extended period of time, you may not want to blame your real estate agent.  Just accept the fact that your home is probably priced way outside the realm of reality.  Listen to what your agent is telling you; get a second opinion from another agent; pay for an appraisal from a local real estate appraiser before you list your home – but whatever you do, just arm yourself with the facts.  Come to grips with, and accept “what is” and not “what should be.”  Only then will your property have a better chance of selling.

Scott T. Hunt

Owner/Broker

Centre Court Real Estate Group

We are sometimes asked about local programs that provide for down payment assistance towards the purchase of a home.  This is of particular importance to potential homebuyers who have good credit, stable employment, etc, but don’t have enough cash saved to use as a down payment.  And considering that FHA requires a minimum of a 3.5% (of the sales price) down payment, and anywhere from 5-10% for conventional loans, it’s understandable that people would seek whatever assistance there is available to help defray this sizeable cash outlay.

The good news is that there are two different down payment assistance programs available, locally.  The discouraging news is that the vast majority of Buyers that we have encountered do not qualify because their income was too high.

The down payment assistance program that a Buyer chooses will depend on where the property is located.  If it is within the city limits of Tallahassee, then the Tallahassee Lenders Consortium (TLC) would be their resource.  For properties outside the city limits, but still within Leon County, Buyers would choose the Leon County Down Payment Program (LCDPP).  Both programs are very similar in their rules, requirements and limitations, with some notable differences.

But again, regardless of which program is selected, we find the major obstacle to someone using either one is income limits.  Both programs are guided by the Housing and Urban Development (HUD) income limitations chart which varies depending on geographical area.  In the Tallahassee area, the limit for a household of 2 is $40,700.  For a family of 4, the limit is $50,900.  That’s not very much if the Buyers have any appreciable debt at all.  However, for those that fit within the income parameters; have good credit stable jobs, and low debt structure, these down payment assistance programs could be the catalyst that converts today’s renters into tomorrow’s homeowners.

If you want more specific information about these programs, here the links:

http://tallahasseelenders.org/tlc/index.shtml

http://www.leoncountyfl.gov/HHS/homebuyer.asp

Contact us with any questions you may have, and we’ll be happy to answer them for you.

Scott T. Hunt

Owner/Broker

Centre Court Real Estate Group

Last year the U.S. Congress passed the “Helping Families Save Their Homes Act of 2009.”  Part of that legislation provided protection for tenants (renters) of properties that were facing foreclosure.  Prior to this new law tenants may have been evicted by the bank taking the property back in those foreclosure proceedings.

If you’re renting a residence where your present landlord is losing their property to foreclosure, you have rights, and you need to know what they are.  This new law applies to all 50 states.

Here is a brief recap of the new law and the protections it provides to renters:

• All tenants must receive a 90-day notice before being evicted as the result of a foreclosure.
• With some exceptions, the law requires that in the event of foreclosure, existing leases for renters are honored to the end of the lease term.
• The stated exceptions are for tenants without a lease; tenants with a lease terminable at will under state law, or where the owner acquiring the property back in foreclosure plans to occupy that specific property.  But even in these cases, the tenants must receive a minimum of 90 days notice to vacate the property.
• The law does not affect the requirements of any state or local law that provides longer time periods or other additional protections for tenants.

The FDIC has been charged with enforcing this law and ensuring compliance.  Make sure you know what your rights are, and seek help should the need arise.  Here is a link to the actual law:

http://www.fdic.gov/news/news/financial/2009/fil09056a.pdf

Scott T. Hunt

Owner/Broker

Centre Court Real Estate Group

We are pleased to announce that our first video - geared specifically towards buyers of real estate - is now posted on YouTube.  Also, if the key words “Real Estate Tallahassee” are entered into YouTube’s search box, Centre Court Real Estate Group is the 8th video listed as of February 25, 2010.  You can view this video on YouTube at http://www.youtube.com/watch?v=aQRmCm9UhyI

We hope to have our second video - aimed specifically towards sellers of real estate - published on our web page and YouTube no later than the second week of March, 2010.

As always, we welcome your comments and suggestions; and thanks so much for your business and continued support.

Scott T. Hunt
Owner/Broker
Centre Court Real Estate Group

The widely anticipated changes in how credit card companies can do business went into effect yesterday.  Numerous studies have concluded that credit card debt and delinquency are one of the most serious problems affecting the personal finances of millions of consumers – most importantly, their credit score.  And credit scores are one of the primary determinants in whether a consumer can obtain mortgage financing - and at what interest rate. 

Among a mountain of new regulations, the legislation provides that credit card companies will not be able to hike the interest rates on existing balances as long as customers pay their bills on time, and they’ll need to notify customers at least 45 days in advance of interest rate increases and most fee changes.  Those two changes alone will save consumers an estimated $10 billion annually, nonprofit research firm Pew estimated in a recent report.

Yahoo Business has published a comprehensive list of these new changes in an easy-to-read format.  The web link is below:

http://finance.yahoo.com/banking-budgeting/article/108854/the-new-credit-card-rules-what-to-expect?mod=bb-creditcards

Scott T. Hunt

Owner/Broker

Centre Court Real Estate Group

Mortgage rates are close to a record low but probably won’t stay there much longer.  Experts say it’s time to get a loan now, or you’ll end up with a higher rate later.  According to Bankrate.com mortgage professionals believe rates are poised to jump sharply within a few weeks - and possibly a full percentage point higher within a year from now.

Homebuyers tend to be more influenced by home prices than by mortgage rates.  But as we have pointed out in this blog many times in the past, even a slight increase in interest rates can offset substantial price decreases. 

Mortgage rates are expected to rise because the Federal Reserve plans to stop buying mortgage-backed securities by the end of March.   For the past year, the Fed has been buying more than 80% of newly issued mortgage bonds.  When the central bank stops buying them, private investors will have to step in.  By most indications, investors are more risk-averse than the Fed when it comes to mortgages.  To compensate for the perceived risk of new mortgages, investors might demand substantially higher interest rates.

The Mortgage Broker Association foresees mortgage rates to rise by 1/2% from the end of March to the end of June - and that’s a conservative outlook.  Many other mortgage lenders are telling their customers they expect rates to increase half a percentage point or more within days or weeks of the end of March.

If you are in the market to refinance or make a purchase of a home, now is the time to act.

http://www.bankrate.com

Scott T. Hunt

Owner/Broker

Centre Court Real Estate Group

The number of borrowers falling behind on their mortgage payments dropped sharply at the end of last year, a sign the foreclosure crisis may be beginning to ebb.

According to an Associated Press report, the percentage of borrowers who missed just one payment on their home loans fell to 3.6% in the October to December quarter, down from 3.8% in the third quarter.  The decline, while small, was even more surprising because delinquencies usually rise at that time of year due to higher heating bills and holiday spending.

The new trend in late payments is significant because it means the number of people going into foreclosure will probably continue to decline this year.  And that is important for all homeowners in areas where cheaply priced foreclosures are bringing down neighboring values.

Still, the news is not all good.  More than 15% of U.S. homeowners with a mortgage have missed at least one payment or are in foreclosure, a record for the 10th straight quarter.  But banks are helping by prolonging the foreclosure process (traditionally between four and six months) as they evaluate borrowers for help under the under the mortgage relief effort.  It lowers borrowers payments to as low as 2% for five years, and extends loan terms to as long as 40 years.

In a housing market that’s begging for something positive, this bit of good news is just what the doctor ordered.

http://www.usatoday.com/money/economy/housing/2010-02-19-foreclosure_N.htm

Scott T. Hunt

Owner/Broker

Centre Court Real Estate Group

The Federal Reserve raised the discount rate it charges banks for emergency loans by a quarter-point late yesterday - the first increase in nearly four years - and it is further evidence that the financial crisis is finally history.  The rate increase is not expected to affect consumers obtaining loans for mortgages and other purchases.

In a macro-perspective, this move by the Fed provides a psychologically-positive boost to the overall economy.

With banks leery of lending to each other during the financial crisis, the Fed stepped in to become a loan resource.  But with the financial crisis ending as the economy improves, the Fed wants banks to “rely on private funding markets for short-term credit” and to use the Fed “only as a backup source.”

For those potential homebuyers watching interest rates, this move by the Fed will have no impact.  However, it is another step in the Fed’s highly-visible plan to begin removing itself from the markets.  Injections of Fed liquidity are slowing dramatically and will soon end.

Too, as the economy continues to improve, the Fed’s focus will shift from stabilizing the financial markets to inflation.  When that happens, swift and sure increases in interest rates (those which affect consumer and mortgage loans) will surely occur.

If you are in the market to purchase a home, get your historically low interest rate locked in now.  We think there is sufficient evidence – as we witnessed yesterday - to conclude that higher mortgage interest rates are on their way.

Scott T. Hunt

Owner/Broker

Centre Court Real Estate Group