FHA Home Loans

FHA Home Loans:

One of the most well known loan programs in the country is the FHA home loan program. The program started just after the great depression to enable more Americans to become homeowners. The National Housing Act of 1934 was the legislation that created the Federal Housing Authority (FHA).

After WW II the Federal Housing Authority was instrumental in assisting our veterans purchase homes as they returned from war.

Since 1934 the FHA home loan program has allowed over 40 million Americans to become homeowners and currently they have nearly eight million mortgages in their portfolio

FHA Home Loans For Purchase and Refinance Transactions:

A homebuyer or a current homeowner can obtain a FHA home loan. The program offers some unique features that make it standout amongst the other well known home loan programs. Mortgage rates for FHA home loans are generally lower than mortgage rates for Conforming loans however FHA home loans come with Mortgage Insurance (MI). 

What is Mortgage Insurance (MI)?

The first thing to understand when it comes to MI is that it's NOT your homeowners insurance. Homeowners insurance covers your home in case of fire or other disasters. 

It's also not your mortgage rate.

MI is an insurance policy that covers the lender for any losses in case you default on your mortgage. There is an up-front fee (that you pay at closing or it's rolled into the interest rate) and then you pay monthly with your mortgage payment.

FHA Loans To Buy A Home:

There are two great things about the FHA Home Loan program when you're buying a home:

  • Low down payment (3.5% of the purchase price)
  • Poor to Average credit is ok

If you have a 630 credit score and you want to buy a home for $200,000 then you only need $7,000 for a down payment to open the door to getting qualified under the FHA program.

You also need the obvious; employment and enough income to be able to afford the monthly payments.

FHA Streamline Refinance Program:

If you currently have a FHA home loan you are in luck. You have access to one of the best refinance programs in the country (provided you meet the basic qualifications). The main requirement is that your current loan is a FHA loan.

Benefits of the program:

  • No appraisal
  • No income documentation
  • Very fast closing

Who Should Consider the FHA Home Loan Program:

If you have a small down payment (or little equity) and/or less than perfect credit you may want to consider the FHA home loan program. If you have a big down payment and/or great credit the FHA home loan program may not be for you. 

When contacting a Loan Officer be sure to ask plenty of questions so that you are fully informed about your mortgage options.

The Relationship Between Mortgage Rates And The Price Of Oil

Higher Oil, Stable Inflation and Lower Mortgage Rates:

It's widely believed that if oil moves higher so does inflation which means mortgage rates move higher as well. And in a very broad general way that is somewhat true.

Are you thinking that whenever oil moves significantly higher so does inflation and mortgage rates?

From December 2018 to April 2019 the price of oil increased significantly however inflation was moderate and mortgage rates moved lower. 

Does this mean we don't need to worry about the price of oil pushing inflation and mortgage rates higher? Absolutely not.

How To Use Oil Price Properly When It Comes To Mortgage Rates:

When making a determination as to the direction mortgage rates will go never use one component in your decision making. Oil prices do not dictate mortgage rates. They can have an influence/impact on mortgage rates but they do not directly dictate the mortgage rates consumers obtain when they apply for a mortgage.

If you are looking to refinance your current mortgage or purchase a home and want to evaluate the direction of mortgage rates then I suggest looking at more than just oil, or just the employment report or just the Fed.

I suggest you look all of those things and more.

But at the end of the day you must understand this important fact; no one can accurately predict mortgage rates. What you can do is make an educated guess based on all the various components to mortgage rates to help guide you in making a determination on when you should lock in your mortgage rates/terms.

Mortgage Rates - April 16th, 2019

Mortgage Rates Are Moving Higher - For Now:

Who remembers the the mortgage rate euphoria in late March 2019? 
Mortgage rates were moving down and news outlets were claiming this was only the start; that even lower mortgage rates were on the way: The only problem is; even lower mortgage rates never happened.
Any Loan Officer with knowledge of how the industry works and 10+ years of experience would have told you this simple truth: Ignore those saying mortgage rates will keep going down and/or those saying low rates will continue for a long time.

I'm a Loan Officer with over 14 years of experience; I know what consumer mortgage rates are based on (It's not the 10y treasury yield) and my company offers some of the lowest California mortgage rates for both refinance and purchase transactions. 

During the last few weeks of March I was telling everyone and anyone who would listen - lock in your rate if it makes financial sense. The worst thing a homeowner or homebuyer can do is think rates will keep "tanking" (to use CNBC's description) after they made one of the biggest moves down in ten years.

It simply doesn't work like that in the mortgage industry. The easiest way to understand mortgage rates and when they are trending lower is this; two steps forward and 1.75 steps back. 

Mortgage rates rarely move down by more than a .125% and not snap back. So the next time you see home loan rates decrease by .125% or more and you've been waiting to lock in terms - move to lock in terms asap. That leads us to this; will there be a next time and if so when will that happen?

Mortgage Rates Moving Forward:

Predicting mortgage rates is super difficult at best. Why? There are so many moving parts that influence mortgage rates it's next to impossible to say what exactly mortgage rates will do in a specific time frame.

What we can do is make an educated guess and recognize what may prove that educated guess to be wrong.

Will we see home loan rates return to levels seen towards the end of March/the first few days of April 2019? I believe there is a good chance that will happen however we'll have to be patient. Here are the reasons why I believe we'll revisit those mortgage rate lows:

  • The Fed - When mortgage rates and general interest rates were moving up late summer/early Fall 2018 signs of an economic slowdown started to appear. When mortgage rates topped 5.00% for some mortgage companies loan application volume dropped dramatically. Based on the Fed's most recent statement I believe they are very aware that the economy can not handle interest rates at the level seen six months ago and they have already announced certain actions which are favorable to keeping home loan rates low.

  • The Economy - We are going on nearly ten years since our last recession. The economy is in last stages of this current expansion and signs of a slow down are starting to appear.

As we move towards the end of April it would not be surprising to see mortgage rates level out and establish a new range (similar to what happened late January). However there is no guarantee that will happen and as I suggest to all my clients: if current mortgage rates make financial sense then do no hesitate to lock in terms and close your loan.