Carol Donnelly Bank Of America | Keller Williams Realty Atlanta: Search Atlanta Homes For Sale

Atlanta -
Peachtree Road

3925 Peachtree Rd.,
Ste. 200
Atlanta, GA 30319

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Phone:
404-419-3500

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Team Leader:
Brad Feiman

Posts Tagged ‘carol donnelly bank of america’

Keller Williams Realty Atlanta Mortgage Tip: What is Changing in the FHA World?

Sunday, August 29th, 2010

Keller Williams Realty Atlanta – Peachtree Road

What Is Changing in the FHA World?

Effective October 4, 2010, FHA will be making changes to their Mortgage Insurance Premiums. As you know, borrowers currently pay 1.75% of their loan amount upfront which is called Upfront MIP. Additionally they pay .50% to .55% of their loan amount annually (actually paid in 12 installments with their monthly payment).

The new MIP structure will require an Upfront MIP of only 1% of their loan amount. The downside is that their annual MIP will increase to .50% to .90% paid on a monthly basis.

Give Me An Example of How This Impacts The Wallet

Here is an example of how the changes will impact FHA borrowers:

Loan Amount: $250,000

Upfront MIP:   Currently                     $4,375
                        As of October 9, 2010 $2,500
                        Upfront cost is $1875 less BUT when the homebuyer sells or pays off the loan, part of this cost is refundable to the borrower

Monthly MIP: Currently                     $115 per month
                        As of October 9, 2010 $188 per month
                        Cost is $876 more per year
                        No portion of this monthly MIP is refundable to the borrower

What Is The Real Impact?

When an FHA homeowner sells their home, they are entitled to a refund of the unused portion of their Upfront MIP. The borrower is not entitled to any refund from the Monthly MIP they pay to FHA each month. So shifting the revenue stream paid to FHA from the Upfront MIP to the Monthly MIP is actually a win for FHA as less of the MIP paid by the borrower will be entitled to a refund.

The IRS allows homeowners to write-off the cost of mortgage insurance as long as their income is less than $110,000 per year. Shifting some of the MIP from Upfront to Monthly will actually give the homeowner a greater write-off on their tax return.

Higher monthly MIP will increase the borrower’s Debt-To-Income ratio and, in theory, make it slightly more difficult to qualify for the loan.

Net Effect: I believe the net effect to the borrower is negligible. Basically, these changes shift revenue within the government. FHA will enjoy higher revenues to offset their tremendous losses while the IRS will decrease their revenues as homeowners have greater mortgage insurance write-offs.

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You Think The Homebuyer Tax Credit Has Passed? Think Again!

Wednesday, July 28th, 2010

Keller Williams Realty Atlanta – Peachtree Road

You Think The Homebuyer Tax Credit Has Passed?

Think Again!

As was mentioned in the KW Atlanta Peachtree Road Office sales meeting this morning, let’s just think of the homebuyer credit from a different perspective. The average of the 30 year fixed rate mortgage from 7/1/2000 through 7/1/2010 is 6.75%. Today we are at 4.50%

How Much Does That Save a Buyer?

On a loan amount of $250,000, the principal & interest at the past 10 year average rate of 6.75% is $1622/month
The principal & interest at 4.50% is $1267/month. That is a savings of $355/month. Over the average stay of 5 years in a home, that creates an interest savings for the 5 year period of $21,287. This certainly makes the expired homebuyer tax credit pale in comparison.

How Can I calculate the Savings for a Specific Loan Amount?

Regardless of the loan amount, the difference in interest rate will save you interest payments of 8.51% of your loan amount over a 5 year period OR it will save you interest payments of 1.7% of your loan amount per year. As an example you can apply at any price point, a loan amount of $150,000 will save you $12,765 in interest payments over a 5 year period ($150,000 x 8.51%) or $2550 per year ($150,000 x 1.7%).

How Can FHA Loans Help Me 5 Years From Now?

Another talking point for potential buyers is regarding FHA loans. FHA loans are ASSUMABLE and that can be a real win situation for homebuyers today. A buyer who obtains an FHA loan today with a minimum down payment of 3.5%, who decides 5 years from now to sell may end up with a tremendous market advantage when they sell. Let’s assume a home purchased today at $175,000 increases in value 2% per year for the next 5 years. Value in 5 years is approximately $193,200 Assuming the borrower made the minimum down payment of 3.5% when they purchased and including the principal reduction they made over the 5 years, they probably have a payoff of approximately $153,400. The loan balance of $153,400 would be assumable at the initial rate of 4.5% to the new buyer which would require the new buyer to make a down payment of 20%. If current interest rates in 5 years are just average at 6.75%, that would make the home extremely attractive to have 4.5% financing available in a 6.75% market – especially if you are the listing agent!!