Brad Lynch

One of the ways that FHA have chosen to combat themselves against increasing the continued risk of foreclosure is by increasing the costs for Mortgage Insurance Premium in the upfront and monthly MIP side of costs. In an FHA loan, you pay up front Mortgage Insurance, and a monthly Mortgage Insurance. In the below chart, the larger percentage reflects the UpFront and the smaller is the monthly. You take the percentage and multiply that times the loan amount on the upfront and you get the cost up front...for example, on a $100,000 loan with 1.75% Upfront MI, your cost would be $1,750. On the monthly, you take the loan amount times the rate, and divide it by 12 and you get the monthly. So, $100,000 loan with .5% monthly means you have a $41.66 monthly MI payment to your total payment.


30/25/20 Year Fixed
All Credit Scores* Up-Front Mortgage
Insurance Premium Annual Premium
= 90% Loan to Value(10% or more down) 1.75% .50%
= 90.01% - 95% Loan to Value(9.99% - 5.00% down) 1.75% .50%
= > 95% Loan to Value (5.01% - 2.25% down) 1.75% .55%


15/10 Year Fixed
All Credit Scores* Up-Front Mortgage
Insurance Premium Annual Premium
= 90% Loan to Value(10% or more down) 1.75% NONE
= 90.01% -94.99% Loan to Value(9.99 - 5.01 down) 1.75% .25%
= > 95 Loan to Value (5.00 - 2.25 down) 1.75% .25%

I'm going to "shoot from the hip" here, so if you are riding a Shetland, you better duck! ha ha I tell my readers from my www.friscomortgageplanner.blogspot.com blog that I have two types of blogs. One is just an opinion of mine that may not match everyones situation but is usually relevant in mine, and then I offer facts from market research or respected media in my other type of submissions. This is the opinion version...it's more enjoyable to write and read anyway.

In the recent 4-6 months, I have been in numerous transactions where my clients/buyers were buying a home and appraisal circumstances arose. I use the word circumstances because I don't want to use a negative term when ultimately it's not negative and shouldn't be unexpected. When you are a lender or realtor working w/in a real estate market that is regarded as one of if not the worst foreclosure markets the nation has seen, you have to conform your expectations to what the norm is. Obviously EVERY home sold in the DFW and Collin County is not in a declining, soft, or foreclosure community and I'm not talking to all of you professionals who's target market isn't in a foreclosure situation. On the other hand, it might be pretty safe to say that there are more in those markets than in the non-declining, soft, or foreclosure riddled market. "The majority defines the norm." Think that through and it may change the face of your approach in consulting in these days. "The majority defines the norm". Mortgage and Real Estate Pro's, know the facts of your market and create proper expectations for your clients and educate yourself where many professionals aren't. This is where we bring value to ourselves and earn our referrals more than ever. If you are a practicing realtor or lender, and in describing your represented home or client's home you have to use description terms and phrases like, biggest, bigger than the others in the area, newest, most upgraded, least upgraded, smallest, and all the other terms that take a description farthest from anything that is TYPICAL, you are not likely to benefit from an appraisal in this market. On the other hand, if you are educated on this and have been through and accepted the fact that there is a better chance that the less than hopeful price shows up on the appraisal, you'll be prepared to educate your seller of their risk in not accepting the lesser value and the unfortunate possibility they run directly into the same problem if they choose to pull out of the contract in hopes to get another buyer who's lender accepts a higher elevated appraisal. Am I saying that the suggested house isn't worth what they think it is? NO!...and I mean NO. If there are people willing to pay $200,000 for a house, but due to appraisal pressures, the appraisers value comes back at $185,000, you can probably get $200,000 for it, IF IT'S A CASH BUYER, or you are willing to wait for some type of pressure relief on appraisals. I am merely saying that the guidelines, restrictions, and pressure that has been put on appraisers in this market have forced them to a more template driven form of appraising and using common sense and "brain power" is not an option. If you are in this type of transaction, your advice to your client might have two options and sound like this when the appraisal comes back less than the contracted agreed amount; "client, nobody knows when the market will turn or restrictions become less restrictive and if you don't lower your sale price to the appraised value (that many times is reviewed by a non-biased appraiser)so that the buyers lender will lend on this property, you are most likely going to run into this in the next 30 day escrow you join into, or think about holding out for the turn in the market in hopes of getting the value you think your house is worth, and the value we all know realistically it is worth." Since the majority/norm of buyers is coming to the table with financing, most sellers are going to eventually succumb to lowering their value or giving up on selling for the time being.
Please realize that there are many communities that are not seeing this at all, and I am not talking to you if that is the case in your market. If you haven't run into this, your community may be turning and churning just great. My reflection on an appraisal that I recieve today is that it is not reliable for my purposes until an underwriter has seen it, and if that underwriter has demanded an appraisal review, then after the appraisal review comes back. This means that just because a seller had an appraisal done before they put their house on the market, or 2 days before the buyer submitted their offer, that doesn't mean respected and accredited underwriters certified to underwrite for Fannie, Freddie, VA, or FHA loans will agree. There are new laws and guidelines in respect to the relationship between lender and appraiser so that the appraiser does not feel pressure in "stretching value", but appraisers will tell you that those guidelines haven't made their effect yet, and appraisers are still trying to meet referral expectations on value, therefore coming up with values that won't make it through underwriting.
One of my favorite motivational phrases is, "some have a strength, call it a talent or capacity, for change." Times have changed. Have you?

On December the 11th of 2007 when the Fed was on the edge of changing prime, I wrote the below blog at www.friscomortgageplanner.blogspot.com It's today that everyone in the mortgage and financial advising world are on the edge of their seats to see what the Federal Reserve decides on the recent rate adjustment. Some think .25% and others hope .5%. Just about any veteran Loan Consultant such as myself can expect clients and prospects to start asking the question, "will I get a better rate now that the Fed lowered the rate...". The answer to that is, "not congruent to the amount that prime changes necessarily, but over a couple days, it seems that the stimulus in the market that will reside from such a move will cause a "bettering" in the 30 year mortgage rate in the short term." If you have been waiting for a good turn in the market for rates before you start your home search, now is the time. Rates really settled to a lowest rate seen in a couple years in recent weeks, and then started upward again this week and last. My guess is that in the next couple weeks or months, rates will hold, then settle a little before they make an upward swing again. If you want to catch this window of time for best rate options, go to this link and start a Market Watch so you can start actively seeking a home.

The Mortgage Rate Trend Survey which is a survey done by Mortgage-X Mortgage Information Services, surveys and summarizes where mortgage professionals think mortgage rates are going in the short term. To conduct this survey, Mortgage-X asked more than 250 experts in the mortgage field each Monday about their expectations for the mortgage market.

If you are trying to decide whether you want to hold on a home bid, or have a contract on a home and are not sure if you would like to float or lock your rate, maybe this will help. (click on the "float" hyperlink to see a great definition from www.moving.com above.
Here are the findings for what experts forecast Home Loan Interest Rates for the next 30 days:
6.9% said rates would rise significantly
34.5% said rates will rise slightly
41.4% said rates would ultimately remain unchanged
17.2$ said rates will decline slightly
0% forecasted a better of rates in significant amounts
Here are the findings for what experts forecast Home Loan Interest Rates for the next 90 days:
6.9% said rates would rise significantly
44.8% said rates will rise slightly
27.6% said rates would ultimately remain unchanged
20.7$ said rates will decline slightly
0% forecasted a better of rates in significant amounts


Mortgage-X concluded and summarized that, "about 41% of the participating mortgage professionals believe mortgage rates will remain unchanged over the next 30 days and 45% believe mortgage rates will rise slightly over the next 90 days".

Enjoy your weekend and for what my opinion is worth, gambling in this mortgage market for best interest rates is not a great strategy unless market signs show obvious directions at some point...they haven't but one or two times in recent months. In my opinion, if you are gambling on a rate and are active in a purchase transaction with a 30 day escrow or less, you are probably gambling because you have that personality type (conservative vs aggressive/liberal)and need to "play the game" so you feel like you played a roll in the future of your mortgage strategy, or you may have not been educated or advised by the right Mortgage Consultant to make a different decision. I'm a conservative, so there is a chance that thousands who read this might jump up and down all over this theory. It's my theory, and I'm sticking to it. Rates have been so volatile in recent months, even experts' gambles are more like playing darts with their eyes closed in my opinion. Have a Great weekend, and "gamble lightly so you can afford to gamble another day".