Archive for June, 2013

Avoiding FHA Loans is Saving Borrowers Thousands of Dollars but Few Know their Options

For the last few decades most borrowers, lenders, and real estate professionals have regarded the FHA Loan as the least expensive loan option for purchasing a home. The low 3.5% down payment and low mortgage insurance rates made buying a home more affordable for borrowers.

Now there has been a sea change in the mortgage world and FHA is fast becoming one of the more expensive options. The FHA loan is still the best you can do if you have less than stellar credit. And now with so many options to repair and enhance your credit score it makes sense to do this before applying for a mortgage so that you can get the best options.

If you don’t know how  get the credit score you need, read my last blog post Bad Credit to Great Credit in Three Easy Steps and Why you need it Now?

What happened to our Beloved FHA?  Congress, that’s what happened!

Currently under the current FHA guidelines a borrower purchasing a 30 year mortgage will pay 1.75% in an upfront PMI payment and 1.75% per year in PMI payments for the life of the loan. It used to be that once you had 22% equity in the property your mortgage insurance would go away but in 2013 Congress made PMI insurance permanent. You pay until the loan is paid off. Most borrowers get a FHA loan thinking they are going to pay  PMI insurance for only five years but the truth will cost those borrowers tens of thousands more in PMI insurance over the life of the loan. See the example below:

Example: $250,000 purchase – FHA loan

3.5% down payment –$ 8750.00

Upfront PMI – $ 4221.88

Loan amount –$ 245,461.88 assuming sellers pays all of closing cost

Monthly PMI – $265.92

Monthly payment excluding taxes and insurance at 4% – $1437.79

Mortgage insurance paid over the life of the loan $126,655.20, many borrowers took FHA loans thinking they would only pay for 5 years ($21,109.20) but congress changed the rules.

FHA is only good if there is no other affordable option; and luckily there is a better way to go.

Now there is a conventional loan product with the mortgage insurance paid upfront and included in the interest rate offered. This product eliminates so much of the cost of purchasing because there is no upfront PMI or monthly PMI. A conventional loan with Lender Paid Mortgage insurance or LPMI  is the way to go. Most borrowers know of this option because it is rarely offered.

Example: $250,000.00

3% down payment –$7,500.00

Up front PMI – 0.00

Monthly PMI -0.00

Loan amount – $242,500.00 assuming seller pays all the closing cost

Monthly Mortgage payment excluding taxes and insurance assuming 4.25% – $1192.95

As you can see the savings between the FHA and the LPMI are $330.74 per month or $119,066.40 over the life of the loan. This is why educated borrowers are making a move away from the FHA program and looking to LPMI as a better way to finance property. Not only is the capital needed up front less but the lifetime cost is less. In addition, the higher interest rate gives a larger tax deduction at the same time.

Current FHA loan holders can use this program in get out of current FHA loans and PMI insurance provided they meet the guidelines. People are saving tens of thousands walking away from FHA.

Give me a call at 410-908-5987 if I can be of service to you and your family.

Wishing you Wealth Wellness and Wisdom

Manager of Wealth


, , , , ,

Leave a comment

Bad Credit to Great Credit in Three Easy Steps and Why you need it Now!


For many in America 2008 to 2013 represents a time of financial challenge. Abrupt changes in lifestyle, employment, and financial health were thrust upon many because of the crash of the United States economy. For some these challenges meant paying bills late, foreclosures or short sales of homes, and Bad Credit.

This Credit Isn’t going to Fix Itself

Now that the worst may be over for you and you have achieved some financial balance its time to repair your credit. Most think that only time will repair their credit but that myth is far from true. If fact only about 2% of American’s ever make any attempt at fixing a problem that can cause many other challenges in your financial life. The time to fix your credit is now and no matter what your issue it is possible to achieve a 700 plus credit score in 6 to 12 months instead of the 7 years your may have been told you had to wait.

It’s not what you know, but what you think you know that Ain’t So

Your credit score is determined by a number of factors and in my 12 years in lending I have seen people do more damage to their credit by doing the things they believe make their credit stronger because they really have no idea. Credit is a mix of good payment history, low balances of certain types of debt, the mix of the types of account you have and the age of the accounts you have, and the removal of past negative items. All of these factors can be controlled and manipulated to achieve a strong credit score. It is a myth that you need to suffer for years after a bad period for your credit to repair itself.

I have personally witnessed credit scores go from 520 to 720 over a period of 180 days by clients working with a licensed and bonded credit professional and following their instructions to the letter. Repairing your credit should not be expensive nor should it be painful. A great credit repair program should follow three easy steps, and be able to show you past proof of performance.

Step 1 – Removal of all or most negative past items on your credit report. There are a number of legal and ethical ways to challenge the items on your credit report. If there is a legal way to remove an item your credit professional should be able to find it.

Step 2 Add positive credit to your report. There are certain types of credit you will need to add to your report. Revolving and installment trade lines. Your credit professional should have the relationships to get you new credit with solid and reputable lenders.

Step 3 – Perfect management and maintenance of your new and existing credit to keep the ratios at a level where it positively effects your report. Too many people think never having missed a payment means they have good credit. I have seen many borrowers with perfect payment histories that have scores on the low 600s.

Focus on a Great Score because the Computer Does

If you don’t have credit scores over 720 you need to get there now. Low scores can get you denied credit, charged higher than market interest rates, denied employment, and it may even cause your existing creditors to raise the interest rates they are currently charging you. Don’t make the mistake of working with a company that only focuses on removing negative items, that alone will not give your 700 credit. Lending decisions and credit pricing is done mainly by the score so give yourself the best chance by having a great score.

If you want a licensed, bonded and professional company to get you to 720 and beyond we have resources that we can refer nationwide. Just call me at 410-908-5987.

Wishing you Wealth Wellness and Wisdom,

Manager of Wealth


, , , ,

1 Comment