Wednesday, February 27, 2013

My Home Didn’t Appraise For Its Purchase Price. What Are My Options?

My Home Didn’t Appraise For Its Purchase Price. What Are My Options?




Whether you're buying, selling or refinancing a home, the home appraisal is an important part of the process.

What Is A Home Appraisal?

By definition, appraising a home is the act of assigning monetary value to a property; determining its "fair market value".
For today's home buyers, a home appraisal helps to determine whether you're over-paying for a home relative to similar for-sale homes, or getting a "good price". For refinancing households -- save for those using a no-appraisal-needed streamlined refinance -- the appraisal helps to determine your mortgage eligibility.
Appraisals are performed by licensed home appraisers and there are several different methods by which an appraiser will assign value to a home. The Sales Comparison approach is the most common.
Via the Sales Comparison appraisal approach, a home appraiser will compare your home to similar homes in the immediate vicinity with similar physical attributes.
Examples of such traits includes number of bedrooms; number of bathrooms; age of home; quality of home finishes; and square footage. Location matters, too, such that similar homes in different school districts may have different appeal and may not be considered "comparable".
Appraisers will then look at recent sales data of such similar homes, and will assign your property's value based on available data, and with adjustments made for variances between homes. A home with a finished basement, for example, may be adjusted to a higher value; as might a home with recent renovations.
Homes sold in the most recent 90 days will receive the highest weight in the Sales Comparison approach. Homes sold over 6 months are often given no consideration whatsoever.

What Happens When A Home Appraises For Less Than Its Purchase Price?

Another home appraisal function is to help set your downpayment amount on a purchase.
Mortgage lenders use home appraisals as the "value" portion of the your mortgage's loan-to-value (LTV) calculation, where "value" is equal to the lower of your home's purchase price or its appraised value.
For example, if you purchase a $410,000 condo in Chicago, Illinois with an appraised value of $400,000, and you plan to make a 3.5 percent downpayment via the FHA, your required downpayment amount is fourteen thousand dollars.
Conversely, if your home appraises for more than the purchase price, the required downpayment amount is $14,350.
When your home appraises for less than its purchase price, there are three potential outcomes :
  1. Buyer and seller renegotiate a new, lower home sale price
  2. Buyer increases downpayment to meet new LTV and downpayment minimums
  3. Buyer chooses neither option, and cancels home purchase contract
The possibility of a "bad appraisal" is among the reasons why the majority of home purchase contracts are written with an appraisal contingency. In the event that the home fails to appraise for its purchase price, the contingency clause gives buyers an opportunity to re-evaluate.
Appraisal contingencies are also sometimes used to renegotiate or exit contracts after an appraiser identifies required repairs, such as chipped paint or cracked windows.

How Much Home Can You Afford?

For today's home buyers, a home's appraised value is unlikely to fall short of its sale price. This is because buyers and sellers are more savvy about the "going price of a home" in 2013, and because U.S. housing markets have exhibited steady growth since late-2011.
Home appraisers are likely to consider both factors when assigning a home's Fair Market Value.
If you plan to buy a home in 2013 or 2014, consider your household budget and your expected home downpayment. An appraisal can change your math, and so can rising home prices. See how much home you can afford -- it's free and there's no obligation whatsoever.

Contact The Mortgage Mark with any questions!

www.themortgagemark.com     mwilkins@capitalfmc.com  

Monday, February 11, 2013

FHA raises the annual MIP by 0.10 percentage points for all new borrowers; Jumbo downpayments rising, too


Data from Inside FHA Lending shows that mortgage bankers funded $233 billion in FHA-insured loans last year, marking a 22 percent increase from the year prior. Recently announced changes, however, may derail that success.
For all FHA borrowers, the Federal Housing Administration has set deadlines for a new mortgage insurance premium schedule; an increase in downpayment minimums; and, new underwriting standards for loans with low credit scores.
All FHA mortgages will be affected.
Click here to check your FHA eligibility.

FHA Mortgage Insurance Premium Changes

The FHA is an insurer of mortgage loans and, by law, it is required to maintain a 2% reserve in its Mutual Mortgage Insurance (MMI) fund. Currently, because of bad loans made last decade, the FHA's reserves are -1.44 percent.
In an effort to rebuild the MMI, therefore, the Federal Housing Administration has planned some changes -- chief among them, an increase in annual mortgage insurance premiums on most FHA-backed mortgages.

New MIP Begins April 1, 2013

Beginning April 1, 2013, most FHA-backed mortgages will be subject to an MIP increase of 10 basis points annually, or 0.10 percentage points. The increase applies to all loan terms, including 15-year fixed-rate FHA loans.
In addition, insurance premiums for jumbo FHA loans will change, too.
Loans with terms of 15 years or less, and balances between $625,500 and $729,750, will be subject to an increase of 10 basis points annually, or 0.10 percentage points. These loans are only available in designated "high cost" areas which include Orange County, California; Montgomery County, Maryland; and Eagle County, Colorado, among others.
Loans with terms of between fifteen and 30 years will be adjusted higher by 5 basis points annually, or 0.05 percentage points, to a the maximum 1.55% annual MIP rate as allowed by law.
The MIP increase will not affect FHA Streamline Refinances which replace FHA loans from before June 1, 2009.

New FHA MIP Cancelation Policy Begins June 3, 2013

The Federal Housing Administration also made a second MIP-related announcement -- the agency is reversing its policy which allows FHA-backed homeowners to cancel mortgage insurance premiums once the outstanding principal balance of an FHA loan reaches 78 percent of the original balance.
Going forward, the FHA will disallow the removal of MIP throughout the life of a loan, if the loan's starting loan balance is higher than 90% of its appraised value. This is true for purchases and refinances.
For loans in which the loan-to-value begins at 90 percent or less, mortgage insurance premiums must be paid for 11 years. This change goes into effect June 3, 2013.

Other Changes To FHA Loans

In addition, the FHA will now require lenders to manually underwrite loans in cases in which borrowers have credit scores lower than 620 and total debt-to-income ratios higher than 43 percent. In these instances, lender must also document any factors that support approving the loan.
Furthermore, the Federal Housing Administration will announce higher down payment requirements for jumbo FHA loans, increasing the minimum from 3.5 percent to 5 percent or more.
Click here to check your FHA eligibility.

How To Get A Mortgage Via The FHA

The good news is that FHA mortgages -- although more restrictive -- remain among the best "deals" for both low-downpayment buyers and current homeowners with FHA-backed loans.
To check your FHA eligibility, and how the agency's new rules may affect your finances, get started with a rate quote online. It's fast, free, and if you get started before the April 1, 2013 deadline, you'll be "grandfathered" in to the current, lower MIP rates.
Click here to get started with today's FHA mortgage rates.


Contact The Mortgage Mark with any Questions!!!

http://www.themortgagemark.com 

Mark@themortgagemark.com