How do I remove mortgage Insurance?

Removing mortgage insurance is something that can happen when the loan-to-value of your home mortgage reaches 80% or less. This happens as a result of two things, paying down principle and your house appreciating.

If you get to the point where you think your mortgage balance is less than 80% of the value of your home, you must call your mortgage company and ask them to remove your mortgage insurance. Mots companies will run an AVM or automated valuation model to determine the value of your home. AVMs are generally accurate but not always, so if the value comes in low and you get denied, you still have the option of ordering an appraisal.

With most if not all lenders you still have the right to hire an appraiser and get a professional assessment of value. If your appraiser comes back with the right value, you can submit that to your lender and ask them to remove the MI. They still reserve the right to review the appraisal. If after review your lender agrees with the appraised value, they will remove your mortgage insurance.

In my personal experience, my appraisal came in a few thousand low and as a result I spent $300 for nothing. With hindsight I would have told the appraiser what I needed for value and asked for a comp check. This is where they give you a good estimate of value based on recent sales of comparable homes in your area. If they come back with what you need, you order a full appraisal and send it to your lender. If the comp check comes up short, you don't order a full appraisal saving yourself a few hundred dollars.

Call your loan officer and ask them to do this for you as most mortgage loan officers will probably be using the same appraiser they used for your last appraisal and be able to get you a comp check at no charge.

Mortgage Insurance Calculator

Mortgage insurance has long been avoided with the 80/20 mortgage of late. These days it is getting harder and harder to find a lender that will offer a second mortgage up to 100% CLTV (combined loan to value) because in light of all the foreclosures, the companies holding the second mortgages are losing the most money.

One question that most loan officers struggle with when working with 100% financing is "What will my mortgage insurance payment be per month?" Worse yet, sometimes they forget to mention it as most of us loan officers have been writing 80/20 loans for the past five years.

To help loan officers and borrowers I have included a link in this blog for a mortgage insurance calculator. When loan officers and/or borrowers use this, everyone knows exactly what the MI will be.

To calculate your PMI ( private mortgage insurance ) payment follow this link, mortgage insurance calculator

Buying a foreclosure from Countrywide requires Countrywide loan approval

I'm not perfectly sure if it is true or not but I heard this week from a real estate agent that if anyone wants to make an offer on a foreclosure that is owned by Countrywide, they will need to be pre-approved by Countrywide for the mortgage.

What a great idea for Countrywide. This would allow them to maintain their gigantic servicing business by simply switching out non-performing borrowers with better qualified lower risk borrowers.

Fortunately Countrywide has a very good wholesale division which allows independent mortgage brokers like me to offer home buyers even lower rates than Countrywide itself.

If you are shopping for foreclosures in Minnesota and come across something you like that is owned by Countrywide, please give me a call, Ken Horst at 612-251-8237. I'll be able to get you approved quickly and at a very competitive rate.

Minnesota Mortgage Rates

Minnesota mortgage rates have continued to go down over the past few days and are now at;

5.5% for a 30 year fixed mortgage
4.875% for a 15 year fixed mortgage

On a $250,000 your payment would be $1,419.47 fixed for 30 years.

Call Ken Horst at Metropolitan Financial Mortgage Company at 612-251-8237 for more information or to get started.

List of FHA approved condo projects

OK, after a little more research and the help of a great Lakeville Real Estate Agent, I can now offer you this link as well. It is a link to the list of FHA approved condominium projects on the HUD site for all states. I highly recommend you check this list before you look at or make an offer on any condos if you are planning to use FHA financing. Remember you can always try a spot approval if your property is not on this list and/or be sure to check with the HOA Home owners Association to see if the approval is already in process. Good Luck!!

FHA Approved condominium projects

FHA Loans For Condos in Non-FHA Approved Projects

I'm in the middle of trying to get a loan done for a very qualified FHA candidate who is looking at condominiums. We have to go FHA as the borrower does not qualify for a conforming product. The home buyer has found a condo they are interested in but we have come to find out that the condo project is not already on the FHA approved project list.

Fortunately there is still a way to get these types of units done through the FHA. It's called "spot approval" and it is done on a unit by unit basis. The bottom line is the Home Owners Association must complete a Spot Approval questionnaire and if that comes back with all the right answers, you have a pretty good chance of getting the loan to go through. I have copied and pasted the guidelines and questions required for spot approval.

U. S. Department of Housing and Urban Development

Washington, D.C. 20410-8000

August 1, 1996

MORTGAGEE LETTER 96-41

TO:  ALL APPROVED MORTGAGEES

SUBJECT:  Single Family Loan Production - Condominium Units in

            Non-FHA Approved Projects; Mortgage Insurance

     On May 29, 1996, in 61 FR 26982, the Department issued a

final rule in the Federal Register, permitting the insurance of

mortgages on individual units in condominium projects that have

not been previously approved by the Department.  That final rule

established a "spot loan" procedure to provide home mortgage

insurance on individual units in condominium projects where there

is little likelihood that the project's homeowners association

would make the requisite changes to its legal documents (usually

to benefit one association member) to obtain FHA approval.  This

Mortgagee Letter provides further guidance on the use of these

spot loans.

     The Department's requirements for condominium projects are

set forth in 24 CFR 234.26 of the Code of Federal Regulations.

The spot loan provisions add a sub-section (i) to this section

and lists specific criteria that must be met.  The new spot loan

regulations also add a new section, 24 CFR 206.51, to the Home

Equity Conversion Mortgage (HECM) regulations.  The HECM program

incorporates by reference the project requirements set forth in

24 CFR 234.26(i).  Therefore, spot loans may be used under both

the Department's Section 234(c) and HECM programs.  Cooperatives

and planned unit developments (PUDS) are not eligible for spot

loans.

     The following requirements must be satisfied before a spot

loan is endorsed:

         The condominium project must be complete.  There should

     be no ongoing or anticipated addition of any units, common

     elements, and/or facilities.

         Control of the common areas of the project must have

been

     turned over to the unit owners association for at least one

     year.

                               -2-

         The owners association must provide evidence that the

     project has the appropriate hazard, liability and flood

     insurance.

         Individual units in the project must be owned in fee

     simple or be an eligible leasehold interest.  The project's

     legal documents must provide for undivided ownership of

     common areas by unit owners.  By virtue of this ownership,

     unit owners must have the right to use all facilities and

     unrestricted common elements.

         The project's documents should not place any legal

     restrictions on conveyance.  Any provisions that seek to

     limit the free transferability of title is generally

     unacceptable.  Such restrictions include rights of first

     refusal and restrictive covenants.  Certain governmental or

     nonprofit programs designed to assist in the purchase or

     rental of low-or moderate-income housing are exempted from

     the restrictions on conveyance provisions.  The Department's

     policy on the free assumability and transferability of

     property is set forth in 24 CFR 234.66.

         At least 90% of the units in the project must have been

     sold.

         At least 51% of the units in the project must be owner-

     occupied.

         No single entity may own more than 10% of the units in a

     project.  "Entity" includes an individual partnership,

     corporation, limited liability company, limited liability

     partnership, joint venture, investor group or other natural

     or legal person qualified to hold an interest in real

     property.  The 10% restriction does not apply when the

     ownership of less than three units would disqualify an

     otherwise eligible project.

         The Department recognized that the 10% cap on the number

of

     units that may secure FHA insured mortgages in a given

     project can place a small regime at a disadvantage, since

     only a few units will invoke the limit. Accordingly, a two-

     tiered system was established.  For condominium projects

     having more than 30 units, no more than 10% of the units may

     have FHA insured loans at any given time.  Condominium

     projects consisting of 30 units or less, can have up to 20%

     of the units encumbered by FHA insured mortgages under the

     spot loan rule.

                               -3-

     Mortgage lenders underwriting spot loans must perform

sufficient investigation and analysis to certify that the

condominium project satisfies the eligibility criteria.  Under

the regulations, mortgage lenders may employ a wide range

of approaches to ascertain compliance with the spot loan

requirements.  Project developers, appraisers, owners,

associations, management companies and real estate brokers are

among the sources of information lenders may use.  To the extent

that the Department has information that can be of assistance, it

will provide mortgagees with that information.  However, it

remains the lender's responsibility to ensure the accuracy of the

information it relies upon in making its certification.

     Attachment 1 is a suggested checklist lenders may wish to

use in their underwriting analyses.  It reflects some key

considerations in assessing the eligibility of a project for spot

loans.

     The standard Direct Endorsement Underwriter Certifications

applicable to condominiums under standard loan programs and the

HECM program are not sufficient for spot loan applications.  Some

modification is needed.  Accordingly, the following certification

is added to the list of Direct Endorsement (DE) certifications in

Appendix 3 of Handbook 4000.4, Rev. 1, Ch. 1 and to the list of

Underwriter Certification (HECM) in Appendix 3A of Mortgagee

Letter 95-54 :

     ( ) The property is in a project that has not received

     prior approval by HUD but the requirements of 26 CFR

     234.26(i) are met.

     This certification requirement will be in effect for all

mortgages executed on or after 30 days from the date of this

Mortgagee Letter.  A similar statement may be used until the

requirement for a certification becomes effective.

     Local HUD Offices and Regional Processing Centers will

conduct random reviews of mortgage loans insured under the spot

loan program.  Mortgage Lenders demonstrating a pattern of abuse

will be subject to those enforcement mechanisms and sanctions

governing FHA mortgage insurance activity.

     The spot loan program is designed to relieve a burden on

homebuyers in successfully-operating, non-approved condominium

projects where FHA involvement is limited; it must not be used to

circumvent the general requirement that a condominium project be

approved before a mortgage on any unit in that project can be

endorsed for insurance.  As previously noted, the approval

requirements for condominium projects are found in 24 CFR 234.26,

(a)-(h).  Additional requirements are set forth in Chapter 11,

HUD Handbook 4150.1 Rev 1, entitled "Valuation Analysis for Home

                               -4-

Mortgage Insurance" and reiterated in HUD Handbook 4265.1 ,

entitled "Home Mortgage Insurance - Condominium Units - Section

234(c)".

     Questions regarding spot loans and condominium project

approvals should be directed to the Single Family Division of the

local HUD Office.

Sincerely yours,

Nicolas P. Retsinas

Assistant Secretary for Housing-

Federal Housing Commissioner

Attachment

        SUGGESTED CHECK LIST FOR SPOT LOAN APPROVALS

_______ 1.  The legal documents of the homeowners association

do not contain a right of first refusal or restrictive covenant.

_______ 2.  The unit is part of a condominium regime that

provides for common and undivided ownership of common areas by

unit owners.

_______ 3.  The project, including the common elements, and those

of any Master Association, are complete, and the project is not

subject to additional phasing or annexation.

______  4.  (a)  There are no special assessments pending.

______      (b)  No legal action is pending against the

condominium association, or its officers or directors.

______  5.  The common areas have been under the control of the

homeowners association for at least one year.

______  6.  At least 90 percent of the total units in the project

have been sold.  Verified by _________________________.

______  7.  At least 51 percent of the total units in the project

are owner-occupied.  Verified by ______________________.

______  8.  There are no adverse environmental factors affecting

the project as a whole or individual units .

______  9.  No single entity owns more than 10 percent of the

total units in the project.  Verified by ______________________.

______ 10.  The units in the project are owned in fee simple or

the units are held under a leasehold acceptable to FHA.

Leasehold in file.

______ 11.  The owners association has adequate common area

insurance coverage.  General liability, replacement coverage,

etc. reflects the character, amenities and risks of the

particular development.  Flood and other insurances carried, when

applicable.

______ 12.  General maintenance level of common elements is

acceptable and there is no deferred maintenance, based on the

comments by the Appraiser and/or the pictures.

______ 13.  The owners association has a reserve plan and a

reserve fund, separate from the operating account, that is

adequate to prevent deferred maintenance.  The amount of the fund

is $_________ as of __________.

                               -2-

_______14.  (a)  For projects consisting of over 30 units, no

more than 10 percent of the total units are encumbered by FHA

insured mortgages.  Verified by ___________________.

_______     (b)  For projects consisting of 30 units or less, no

more than 20 percent of the total units are encumbered by FHA

insured mortgages.  Verified by _______________.

____________________________________     ________________________

       (Mortgagee)                           (Reviewer)

____________________________________     ________________________

       (Address)ss)                             (Title)

____________________________________     ________________________

                                             (Date)

__________________________________        _______________________

  (Condominium Project Name)                 (FHA case number)

__________________________________

  (Address)

__________________________________

_______________

How soon can I refinance if I just purchased my home?

This is another question that has been coming up more lately as people are buying homes and foreclosures at deeply discounted prices and want to know how fast they can tap into their equity and/or get rid of any mortgage insurance if the loan to value when they purchased was over 80%.

Recently I came across another Minnesota mortgage lender who offers a perfect solution to this problem. Historically most lenders would only allow a borrower to refinance a home they recently purchased by using the purchase price as the value for the new loan. After 12 months (the traditional seasoning requirements) the homeowner can get a new appraisal and tap into their equity and/or remove any PMI (private mortgage insurance). I can now offer Minnesota mortgage clients the ability to refinance their newly purchased homes right after the purchase using a new appraisal. There are a number of situations where this would make perfect sense.

One scenario is if you bought a deeply discounted home or foreclosure with little or no money down. These 100% mortgages are still readily available in the Minneapolis metro through Fannie Mae, Freddie Mac and FHA programs. For example you buy a foreclosed home with a purchase price of $124,000 with no money down so your loan to value is 100%. The home however appraises at $180,000. Your equity position based on the appraisal is 68% but because of how lenders use purchase price to determine loan to value, you end up with a slightly higher interest rate and having to pay mortgage insurance.

With our "no seasoning" requirements loan, you can now refinance that home within weeks of the purchase as either a rate and term, which means you finance the same amount as before with no cash out, or you could do a "cash out" refinance to tap into your instant equity. Either way, as long as you keep your new loan to value under 80%, you will benefit from a lower interest rate and no mortgage insurance.

Some things to keep in mind; you will have a closing costs again so you should go back to your original mortgage broker and ask them to do the new loan with no origination fee as they recently made a fair amount of money from your recent purchase.

The most important point for mortgage originators is to remember that many lenders will charge back your fees if your client refinances within a certain period of time, usually within 3-6 months. The bottom line is to work with your loan officer and plan for this scenario in the event that you are able to buy a home at an unbelievably low price and know you will want to refinance early to capitalize on your equity or lower your interest rate.

This option will be much more popular in the coming months as more homes go into foreclosure and banks are forced to lower prices even more because of the glut of homes on the market.

Can I refinance my home if it was recently for sale?

With the tough housing market we are currently facing, many home sellers have decided to take their home off the market in hopes that they can put it back on the market when things have turned around. One of the questions I have been getting more and more lately is, "can I refinance my home if it was listed for sale recently?"

There are a couple of different answers to this question as the answer depends on what you are trying to accomplish. If you just want to do a "rate and term" refinance, which allows you to roll in your closing costs but doesn't give you any cash out, the answer is yes. The best news is that now through one of our lenders, you can do this only one day after your home has been taken off the MLS (multiple listing service).

There are two main benefits to doing this, one, if you can get a lower interest rate, either fixed or adjustable if you still plan to sell your home within the next three years, you can lower your monthly payments. The second benefit is that with a refinance, depending on when you close, you won't have to make your mortgage payment for two months. While there are those who would say the benefits don't out weigh the costs (closing costs) depending upon the home owners situation, it may in fact make perfect sense.

Imagine if you have lowered the price on your home multiple times while it was on the market and have realized that in this market your home is currently worth 5-10% less than what you originally listed it for. If by waiting 1-3 years to put your home back on the market you are able to regain some if not all of that depreciation, your closing costs are more than covered in that short period of time and you got the benefit of lower payments during the waiting period. In addition, the two month skip in mortgage payment could be critical to home owners who need that extra money to get caught up, or to make improvements to their home to make it more saleable in the future.

The other situation that people are asking about is can they refinance their home after it's been on the market and take some cash out. The answer is yes but for most lenders, they will have to wait until their home has been off the market for at least 90 days. Again, while not all lenders offer this mortgage option, as a Minnesota mortgage broker we have at least one lender who is promoting it especially in light of the current housing market.