In the first part, FHA Mortgage Insurance Premium & Monthly Mortgage Insurance and how it works, I talked about how the upfront mortgage insurance and the monthly mortgage insurance worked. After visiting several web sites describing FHA, the mortgage insurance, and who can get these types of loans, I decided to write more about how you need to be careful. I can't tell you have many sites were so wrong and or not updated. I saw a few that even said that the one-time mortgage insurance is 2.25%. This is not correct, it's 1.5% of the base loan amount.

What really irks me are those that blatantly lie about certain things about FHA and how it operates. The only things that are not written in stone is how an underwriter can view credit and that they can allow for higher qualifying ratios. Almost everything else can't be changed. Let me share two stories with you.

Borrower 1 : 

We purchased a home in dec 06 our credit wasn’t great but we had friends in new jersey with chase bank and we got our loan with a high interest rate and an arm deal.

We for the past almost three months have been working with a lender in ocean county nj again through friends. we went on monday to close but an error was made and they wanted 3.000 to close we didn’t have that so they were going to up the amount and we close tuesday well that ddnt happen because another processor got a hold of it and she says I cant be on title or deed, being its fha and that’s their rules.

now my lender is trying to fight this, they are now told if they find info stating that I can stay on title even though the loan is only in my husbands name they will let us close. its all so weird.

also we were told we didn’t have to pay pmi and we got that in writing because of our loan to value. we are refinancing for 160'000 and our home is appraised for 225.000.

at the last closing they wanted to charge us 2,500. one time refundable pmi but they also had a monthly in as well. which they claim is off but if all goes well we can close but have to pay the refundable 2,500.

truly I doubt we will close it’s a crazy. these people should be showing a fha statement about a spouce not being able to be on deed or title

I hope this wasn’t to confusing please let me no facts at least about me and the title,deed thing

thank you

judy

Answer to consumer #1's problems : 

• FHA and even conventional has a 1 year seasoning requirement. If you refinance less than a year, you have to use the purchase price and not the new appraised value. A Guideline.
• Working with a lender for 3 months now?  Ouch.  People, it shouldn't take more than 30 days.
• An error at closing, wanting $3,000 more?  Sorry, but this is a terrible error. Run away.
  
• Not being on title or the deed?  Each state is different and I don't know how they did the application, so I will pass on this one.
• As I stated in Part 1, no matter what LTV that you are using, you will have the one-time mortgage insurance premium.... at least for 5 years. This is FHA 101. This is so basic, it's sad.

Borrower #2 :

The borrower is speaking to an owner of a company that took their mortgage application. He used 2.25% as their upfront mortgage insurance. Again, this is mentioned in Part 1 that it's 1.5%. She did her homework online and even question him. He says that he has done this all the time. Sorry, wrong. FHA changed this to 1.5% about 6 years ago.

The 2nd issue when she showed me his good faith estimate. I was $4,500 more than him and my fees were $500 less. Whoops, he forgot to add the down payment. I mentioned this to the consumer and she then brought it to his attention. He said that he misplaced it. What?  And what irks me is that she is still talking to this lender as we speak. 

Summary :   People make mistakes. We are all human. I am not perfect and I have made my mistakes in the past. But when you make one as described above, why do some people back pedal and make stuff up?  Just stand up and say, I made a mistake. Borrower #1  But a $3,000 mistake?  Lying about the mortgage insurance?  Borrower #2  The wrong upfront MIP and to say that he uses this all the time?  And then to not add the down payment into the total costs?  

What would you do?  Do you believe in giving people a chance?  What about a 2nd chance or a 3rd chance?  Would you give someone 3 months to close a deal, as long as you didn't do anything to delay it? Again, what would you do? How would you act?  Especially if you are finding things out yourself and everyone else is saying the opposite. Why would you even give these people your business. Do you think being an owner of the company, that they will make it all better and make these mistakes disappear?  No, it doesn't work this way. 

 UPDATE :  FHA MIP has been changed. Please read this : FHA Mortgage Insurance - New risk based pricing guidelines - Effective 07/14/08

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For more information on FHA cash out refinancing, please go to this link. The FHA Expert

For more information on how you can obtain your dream home, please click here : Mortgage Financing Options