FHA Jacks Up Loan Costs - Mortgage by Randy Newsletter - Mar 2012

Mortgage by Randy

monthly update to our clients, colleagues, family & friends

By: Randy Mitchelson, March 2012

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In Issue 48 We Touch On:

FHA Jacks Up Loan Costs
Credit For Rent Payments

Reverse Mortgage Tips

Is the economy catching a case of March Madness? Signs of life are sprouting since Spring as sprung. Don't miss the U.S. Jobs Update below so you know the facts. During this heated political season there is a lot of misinformation and opinion discussed on television and it helps to know the actual facts. In terms of mortgages, rates remain at historically low levels despite a slight bump up recently. Rates go up and down - that's not news to you - but there is no reason (yet) to suspect a sudden trend toward the upside. That said, if interest rates remain this low it's only bad news as it means our economy is still struggling. Remember, there's a flip side to every coin especially when discussing economics. What's good for some is bad for others.

The current newsletter and all prior newsletters are archived at the Mortgage by Randy blog. Bookmark it and share with your friends and family.  You can make your own comments and feedback as well.  Time for the news…

Mortgage Market: FHA Loans About To Get More Expensive For Consumers
If you haven't figured it out yet, FHA Loans are the new subprime. During the real estate boom no one bothered doing FHA loans since there were so many other Wall Street backed lender options. After the collapse the government pushed FHA forward as a means of helping first time homebuyers and borrowers with credit score challenges to qualify for a mortgage. As a result, FHA has also experienced a rash of defaults and in order to keep the organization solvent, FHA has announced fee increases.

Effective April 1, 2012, the upfront premium for FHA loans will increase from 1 percent to 1.75 percent. In addition, the annual mortgage insurance premium will increase by 0.10 percent for loans under $625,000. For example, if you borrow $200,000, your FHA fee that is charged upfront at closing will go up from $2,000 to $3,500.

FHA is not a lender.  Rather, it is an insurance program that lenders can participate in and make home loans. If one of those loans defaults, the lender gets some of their money back through the insurance program. FHA requirements include mortgage insurance for loans to protect lenders against losses that result from defaults on home mortgages. The annual mortgage insurance (which is built in to the monthly payment) will bump up approximately $5 per month based on FHA's own estimates. 

Personal Credit: Experian Now Includes Rent Payments In Credit History

Mortgage lenders report payment history to the credit bureaus which factors in to your credit score.  However, the millions of people who also make their monthly housing payment each month, but in the way of rent, do not get that history tracked as part of their credit score. That is changing now.
 

Experian, one of the three major credit bureaus, acquired a company called RentBureau in June 2010. RentBureau aggregates rent payment information from property management companies across the United States. According to the National Multi Housing Council, there are nearly 96 million individuals currently renting. These people deserve to have their payment history count toward their credit score just as much as a homeowner that pays their mortgage.

To learn more about this change and to learn how to get your property manager involved with reporting payment history to Experian, read our full article "Experian Now Includes Rental Payments In Credit History."

Have you been given credit score advice that you are not sure about or read an article that has conflicting credit score information from what you believe to be true?  I am here to help.  Submit your question and I will be happy to respond. For more free and easy to read credit score tips visit the DailyDollar and click on the Credit Score and Credit Monitoring sections.

Economy & Financial Insights: U.S. Jobs Update (Nothing Else Matters)
Jobs drive many other variables critical to our economy so it's important that you pay attention to the numbers so that you have an accurate feel for what is really happening. This allows you to break through the noise you hear on the nightly news and in political debates. Here are some indisputable facts courtesy of our U.S. Bureau of Labor Statistics combined with some analysis by economist John Mauldin:

"We lost 10 million jobs peak to trough in the last recession. We are still down 7 million jobs from the high-water mark. But it is actually worse than that, because we need 125,000 new jobs each month just to keep up with population growth. That is 1.5 million jobs per year. Even if we grow at 3 million jobs a year, it would still take over 4 years (2016) to get back to the level of unemployment (4.5%) that we saw in 2007."

Jobs directly affect how much money consumers spend (which impacts sales tax revenue at the state and local level), how much income tax revenue the government takes in and corporate profits just to name a few. 

Although the number of job openings continues to increase, the harsh reality is that there are 3 people chasing every job opening right now.  We need more jobs created. 99% of businesses in the U.S. are small businesses. There seems to be a lot of government money being allocated to education and retraining of workers.  But, are there enough programs being rolled out by the government to help small businesses expand and create jobs? 
 

Question of the Month: What Factors Should We Consider With A Reverse Mortgage?

There is a lot of information available about reverse mortgages - almost too much. We see television commercials offering free infromation kits, radio ads, seminars at local restaurants, and tons of internet advertising. 

Reverse mortgages are for homeowners aged 62 or older and who have either paid off or nearly paid off their home. The product is designed to be a cash flow solution whereby the homeowner can access the equity in their home by receiving a monthly payment, a lump sum line of credit or combination of both. There are some interesting points to consider when researching if a reverse mortgage is the right thing for you:

1) Funds retained will count as an asset for Medicaid eligibility.
2) When you get a reverse mortage you are no longer eligible to qualify for a home equity line of credit.
3) Income from a reverse mortgage is tax free.
4) Closing fees are shockingly expensive.
5) You must pay an annual mortgage insurance fee.

To get all the facts the best source for reliable reverse mortgage information is from the government directly. 

Giving Back: Annual Tax Time Reminders About Charitable Donations
Each year at this time we provide reminders about tax matters associated with charitable donations. For example, if you donated used clothing and household goods to a qualified charity in 2010, be sure to follow these simple steps to remain compliant with IRS regulations (and always consult with your personal tax professional before filing):

1) Document an itemized listing of each article of clothing or other item being donated to a specific charity.
2) Determine either the thrift store or garage sale value of each item and document that figure on your list.
3) When delivering the donations to the charity, ask for a receipt and ensure it is signed and dated by a representative of the charity.
4) Attach your itemized donation listing to the signed receipt and keep it with your tax records for at least seven years (no need to mail those docs in with your tax return).

Another tax deduction to consider is if you drove your personal vehicle to and from volunteer work with a qualified charity. If so, you can take the actual cost of gas and oil or just use a 14 cent per mile calculation. Don't forget to include additional travel expenses you paid like parking and tolls.

Need volunteers? Do you have a fundraising event upcoming?   Do you have a personal web site where you are raising donations for your cause?  Submit the information to randy@mortgagebyrandy.com by the 5th day of each month and we will do our best to include your information in the next issue.
 

2012 is flying by as we enter the second quarter and usher in Spring. Anyone have a winning March Madness bracket ? I am off to ad:tech in San Francisco at the end of the month. Shortly after we will be taking a few days at Disney for a long overdue visit with family. 
 

Randy
 

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Mortgage by Randy newsletter, Copyright 2008-2012 Randy Mitchelson.  All Rights Reserved.

Randy Mitchelson is a licensed mortgage professional. All material presented herein is believed to be reliable but we cannot attest to its accuracy. All material represents the opinions of Randy Mitchelson.  Recommendations may change and readers are urged to check with their financial advisors before making any decisions. Opinions expressed in these reports may change without prior notice. Mitchelson can be reached at 239-851-6738.

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You have permission to publish this article electronically or in print as long as the following is included:

Randy Mitchelson is a business professional, entrepreneur and author with almost 20 years experience in financial services.  Mitchelson has served in leadership roles for Fortune 500 firms Bank of America, KeyBank and CIBC.

As a licensed mortgage professional and member of National Association of Mortgage Brokers, Mitchelson educates both individuals and groups about credit scoring by conducting personalized credit report reviews, action plans and one on one consultations. He is author of the free monthly newsletter, Mortgage by Randy.

He is owner of Estero, Florida based National Web Leads, LLC, (NWL) an internet marketing and lead generation services company. NWL drives new customer acquisition through email, web display, social media, keyword search strategies, mobile devices and more.

NWL distributes customers' marketing campaigns via NWL's network of publishing partners. Clients include payday lenders, auto loan lenders, educational institutions, legal services, health and beauty product distributors and more. Lead generation companies utilize end-to-end lead generation software solutions provided by NWL's technology affiliate company Applied Cognetics.

NWL operates te DailyDollar™. U.S. News and World Report names NWL's DailyDollar to its list of 8 Savvy Personal Financial Podcasts.

Mitchelson earned his BS and MBA at Rensselaer Polytechnic Institute in Troy, NY.  He is a founding member of the Southwest Florida Regional Technology Partnership Inc. and Vice President for the Michelle’s Angels Foundation Inc.  He is married to Susan, a Pharmacy Supervisor in the Lee Memorial Health System in Fort Myers, Florida.