In our current market with declining property values, many clients are sorely disappointed when they apply for a lower interest rate on a mortgage, only to find their home value has declined a bit, requiring them to obtain Private Mortgage Insurance.
Additionally, pricing adjustments coming into play based on Loan to Values and Credit Scores are hurting clients as well. It is frustrating for clients and loan officers alike when one sees low rates advertised that few people can qualify to receive. I recently was able to obtain commitments for clients with credit scores below a 580 with rates below 6% for their financing needs.
This has killed a few deals for myself and I am sure many others. However, that being said, FHA financing is still a great way for a consumer to reduce their mortgage rate and obtain favorable financing. Much of the Fannie Mae rates being thrown around are "sizzle" rather than "Steak"
One primary reason is that the new Fannie Mae pricing adjustments for borrowers with credit scores below 680 is prohibitive: a borrower with a 659 credit score now has a 3.00 pt adjustment in fee when borrower against 76% of the value of their home, without taking any cash-out on a traditional Fannie Mae loan. Add another 1.5 pts if they want to pay off a credit card with the proceeds. That is not very nice! Fannie Mae also imposes a 1 pt fee for a 2 unit property, regardless of credit rating.
On an FHA loan, regardless of a loans Loan to Value, you will incur the 1.75% MIP, and typically the monthly MI .55. However, you do not incur these credit adjustments that Fannie Mae imposes unless your credit score is below 620.
FHA Loan Limits for your area can be found at: https://entp.hud.gov/idapp/html/hicostlook.cfm
Cash out for debt consolidation or any other purpose on an single family FHA loan can be obtained up to 95% of a home's value, although 2 appraisals are now required for cash-out LTV's over 85%. There is no pricing adjustment for a cash-out FHA Loan.
All in all, if you are considering refinancing in Connecticut, consider an FHA loan as well. Make sure your loan officer is experienced in handling FHA loans as well.
Michael Byrne
908 531 6170 Cell
800-999-2489 x7972 office
908 531 6170 Cell
800-999-2489 x7972 Office
Michael Byrne
Mortgage Specialist
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