How the NAR Settlement Is Changing Kentucky Homebuyers Options for Mortgage Loan Approval

 On March 15th, 2024, the National Association of Realtors (NAR) agreed to pay $418 million in damages to settle some of their real estate commission lawsuits. The settlement prohibits NAR from requiring a seller's agent to engage in cooperative compensation with a buyer's agent.

The key details are:

• Date: March 15th, 2024
• Payment: NAR agreed to pay $418 million in damages
• Settlement terms: NAR prohibited from requiring seller's agent to cooperate with buyer's agent on commissions

This settlement is significant because the new terms will likely have ripple effects that both consumers and industry stakeholders will experience:

Consumers:

• Potentially lower real estate commission fees as a result of increased competition between agents
• More flexibility and control for sellers in how they compensate buyer's agents
• Possibility of buyers having to pay their agent's fees directly rather than them being bundled into the home price

Industry Stakeholders:

• Real estate brokerages and agents may need to adjust their business models and commission structures
• Reduced influence of NAR in setting industry standards and practices around commissions
• Potential for new business models and pricing approaches to emerge in the real estate market

Overall, this settlement represents a shift in the power dynamics of the real estate industry that could lead to more competition and consumer-friendly changes in the way real estate transactions are conducted. Let me know if you have any other questions!

Real Estate Commissions and Loan Types in Kentucky

The National Association of Realtors (NAR) recently reached a settlement that impacted real estate commissions for different mortgage loan types in Kentucky and across the United States. Here's a breakdown of how commissions can vary:

Conventional Loans

• For conventional mortgage loans, the typical real estate commission is 3-6% of the home's sale price.

• This commission is usually split evenly between the buyer's agent and the seller's agent.

• Buyer may pay their Agent's reasonable commissions or have the seller or agent constructio to the commission of the buyer agents' commission.  Typical fees paid by the seller are not subject to the IPC limits.  (interested party contribution)

FHA Loans

• For FHA (Federal Housing Administration) loans, the real estate commission is typically slightly lower, around 3-6% of the sale price.

• This lower commission is due to the additional requirements and paperwork involved with FHA loans.

• FHA Loans-FHA allows buyer to pay commissions of their agents, or negotiate the seller's or agent contribution to commission to the buyer's agent. – If the State and Local law or custom permits this, and if the commissions and fees are reasonable in amount, the existing policy would not treat it as an IPC. (interested party contribution)

VA Loans

• For VA (Veterans Affairs) loans, the real estate commission is usually the lowest, around 3-6% of the sale price.

• VA loans have strict guidelines, and the lower commission helps offset some of the additional costs associated with these loans.

• VA Loans-Buyer may pay their agent's commission or negotiate the seller or  agents contribution to commission to the buyer's agent.  (interested party contribution) IPC is not mentioned. A temporary variance is permitted for the Veteran buyer to pay Buyer Broker Fees.

USDA Loans

• USDA (United States Department of Agriculture) loans, which are designed for low-income homebuyers in rural areas, also typically have a real estate commission of 3-6%.

• The lower commission helps make these loans more affordable for the homebuyers.

• USDA loans-Buyer may pay their agents commission or negotiate the seller's or agent's contribute to the commission of the buyer's agent. Real Estate Commission Fees are excluded from the 6% cap for IPC concessions

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Interested Party Contributions: On April 15, Fannie Mae and Freddie Mac announced that they will not count buyer’s agent commissions as part of their allowable interested party contributions (IPCs). This is not an update to their selling guides, but a clarification on how seller-paid real estate agent fees are treated. Fannie/Freddie guidelines allow sellers to contribute 2-9% of the property value toward the borrower’s closing costs. In their announcement, Fannie and Freddie stated that “fees or costs customarily paid by the property seller according to local convention are not subject to these financing concessions limits.”

• 
  

•  The new terms outlined in this settlement will have ripple effects that both consumers and industry stakeholders will likely experience.

• The consumer impact:

  Consumers may feel more pressured to finance the broker’s commission into their loan. This could negatively impact underserved, low-to moderate-income, and first-time borrowers who may not have the necessary means to fund a buyer’s commission out of pocket.

• Higher mortgage costs:

  Financing the buyer-broker commission into the loan poses challenges to the Section 32 points & fees test, which could lead to an increase in higher-cost mortgages and non-qualified mortgage (QM) loans.

• 
  

On March 15th, 2024, the National Association of Realtors (NAR) agreed to pay $418 million in damages to settle some of their real estate commission lawsuits. The settlement prohibits NAR from requiring a seller's agent to engage in cooperative compensation with a buyer's agent.

The key details are:

• Date: March 15th, 2024
• Payment: NAR agreed to pay $418 million in damages
• Settlement terms: NAR prohibited from requiring seller's agent to cooperate with buyer's agent on commissions

This settlement is significant because the new terms will likely have ripple effects that both consumers and industry stakeholders will experience:

Consumers:

• Potentially lower real estate commission fees as a result of increased competition between agents
• More flexibility and control for sellers in how they compensate buyer's agents
• Possibility of buyers having to pay their agent's fees directly rather than them being bundled into the home price

Industry Stakeholders:

• Real estate brokerages and agents may need to adjust their business models and commission structures
• Reduced influence of NAR in setting industry standards and practices around commissions
• Potential for new business models and pricing approaches to emerge in the real estate market

Overall, this settlement represents a shift in the power dynamics of the real estate industry that could lead to more competition and consumer-friendly changes in the way real estate transactions are conducted. Let me know if you have any other questions!

• 
  

Reach out to me anytime on my cell --  Always happy to help!

Joel Lobb  Mortgage Loan Officer NMLS 57916

EVO Mortgage
 911 Barret Ave, Louisville, KY 40204
Company NMLS ID # 173846

Text/call: 502-905-3708

email: kentuckyloan@gmail.com

http://www.mylouisvillekentuckymortgage.com/

--

NMLS 57916  | Company NMLS #173846

The view and opinions stated on this website belong solely to the authors, and are intended for informational purposes only. The posted information does not guarantee approval, nor does it comprise full underwriting guidelines. This does not represent being part of a government agency. The views expressed on this post are mine and do not necessarily reflect the view of my employer. Not all products or services mentioned on this site may fit all people.
NMLS ID# 57916, (www.nmlsconsumeraccess.org).

Assumption of A Kentucky Mortgage Loan

An assumable mortgage is a type of home loan that allows a new buyer to take over the seller's existing mortgage instead of obtaining a new loan. Here are the key points about assumable mortgages:

1. Transfer of responsibility: The buyer assumes the remaining balance, interest rate, repayment term, and other conditions of the seller's mortgage.
2. Potential benefits:
   • Buyers may get a lower interest rate than current market rates
   • Lower closing costs compared to a new mortgage
   • Simplified process in some cases
3. Restrictions:
   • Not all mortgages are assumable
   • Lender approval is usually required
   • The buyer typically needs to qualify financially
4. Common types:
   • FHA loans
   • VA loans
   • Some adjustable-rate mortgages (ARMs)
5. Considerations:
   • The buyer may need to make up the difference if the purchase price exceeds the remaining mortgage balance
   • There may be fees associated with assuming the mortgage

Advantages and disadvantages of assuming someone's mortgage loan.

Advantages:

1. Lower interest rates: If current market rates are higher than the rate on the existing mortgage, the buyer can benefit from a lower rate.
2. Lower closing costs: Assuming a mortgage often involves fewer fees than getting a new loan, potentially saving thousands in closing costs.
3. Easier qualification: Sometimes, the qualification process for an assumable mortgage is less stringent than for a new loan.
4. Avoiding appraisal: In some cases, a new appraisal may not be required, which can save time and money.
5. Preserving favorable terms: If the original mortgage has beneficial terms, such as a low fixed rate or no prepayment penalty, these can be preserved.

Disadvantages:

1. Limited availability: Not all mortgages are assumable. Conventional loans are rarely assumable, while FHA and VA loans are more likely to be.
2. Lender approval required: Most assumable mortgages still require the buyer to be approved by the lender, which can be a hurdle.
3. Possible down payment gap: If the home's purchase price is higher than the remaining mortgage balance, the buyer needs to cover the difference, potentially requiring a large down payment or second mortgage.
4. Seller's liability: In some cases, the original borrower may remain partially liable for the loan unless formally released by the lender.
5. Outdated loan terms: If interest rates have fallen significantly since the original mortgage was issued, assuming the loan might not be advantageous.
6. Potential due-on-sale clause: Some mortgages have a due-on-sale clause that requires full repayment upon transfer, which can complicate or prevent assumption.
7. Assumption fees: While often lower than new loan costs, there may still be fees associated with assuming a mortgage.
8. Less flexibility: The buyer is locked into the existing loan's terms, which may not be ideal for their financial situation.

What is an Example of an Assumable Mortgage?

An example of an assumable mortgage would typically involve a government-backed loan, as these are the most common types of assumable mortgages. Let's walk through a specific scenario:

Example: FHA Loan Assumption

1. Original Mortgage:
   • Loan type: FHA (Federal Housing Administration) loan
   • Original loan amount: $300,000
   • Interest rate: 3.5% fixed
   • Term: 30 years
   • Time elapsed: 5 years
2. Current Situation:
   • Remaining balance: $270,000
   • Remaining term: 25 years
   • Current market interest rates: 5.5%
3. Assumption Process:
   • Home seller lists their property for $350,000
   • Buyer agrees to purchase and assume the existing FHA loan
   • Buyer applies with the current lender to assume the mortgage
   • Lender reviews buyer's credit and financial situation
4. Outcome:
   • Buyer is approved to assume the mortgage
   • Buyer takes over the remaining $270,000 loan at 3.5% interest
   • Buyer pays the $80,000 difference ($350,000 - $270,000) as a down payment or obtains a second mortgage
5. Benefits for the Buyer:
   • Obtains a 3.5% interest rate instead of the current 5.5% market rate
   • Saves on closing costs compared to a new mortgage
   • Inherits the remaining 25-year term of the original mortgage

This example illustrates how a buyer can benefit from assuming an existing mortgage, particularly in a rising interest rate environment. The process preserves the favorable terms of the original loan while allowing the property to change hands.

In regards to the assumption of the mortgage on a borrowers current loan on a house.

This sounds good on paper but in reality it never works. I have never done in my 20 years of doing mortgages and if they decide to go that route, they must get approved with the current servicer of the loan in which can be a very cumbersome process and usually does not work. 


Below I listed the reasons why assuming someone's mortgage does not work. In the end, most servicers will not make an assumption of the current mortgage because they don't want to be on the hook for such a low rate. Most lenders are trying to get rid of the low fixed rates on their books that were made during the Pandemic.

Only Certain Loans Are Eligible

Only USDA, FHA, and VA loans are eligible for mortgage assumption. Additionally, sellers may have to jump through a few hoops to release themselves of liability from the loan. This situation makes assumable mortgage loans less appealing to sellers if they have traditional offers on the table.

A Large Down Payment Is Required

The biggest obstacle to assuming a mortgage loan is the large down payment. You can obtain a second mortgage if you do not have the cash to cover the seller’s equity, but this situation can complicate things a bit. Depending on how much equity the seller has, it may be easier and more advantageous for you to obtain a traditional mortgage.

Stringent Approval Process

Assuming a mortgage isn’t a walk in the park. Buyers must provide extensive documentation and undergo a lengthy approval process, often taking up to 90-120 days. This can be cumbersome and time-consuming, potentially delaying the home buying process. Most services of current mortgage loans will not do an assumption due to the low rate.

Seller’s Liability

In a simple assumption, the seller remains liable for the outstanding mortgage debt. If the buyer defaults on payments, both parties’ credit scores are affected. This shared risk can strain the relationship between buyer and seller and lead to financial repercussions for both.



Assumptions are permitted, however they are rarely used as 7 CFR 3555.256(b)(2) requires the transferor to remain personally liable for the debt after the acquisition and assumption (among other requirements) Names cannot be removed from the loan without a refinance of the loan.

Questions about assuming someone's mortgage. Contact me below.

Thanks

Joel Lobb Mortgage Loan Officer NMLS 57916
EVO Mortgage
911 Barret Ave, Louisville, KY 40204
Company NMLS ID # 173846

Text/call: 502-905-3708

email: kentuckyloan@gmail.com


http://www.mylouisvillekentuckymortgage.com/








NMLS 57916 | Company NMLS #173846

The view and opinions stated on this website belong solely to the authors, and are intended for informational purposes only. The posted information does not guarantee approval, nor does it comprise full underwriting guidelines. This does not represent being part of a government agency. The views expressed on this post are mine and do not necessarily reflect the view of my employer. Not all products or services mentioned on this site may fit all people.
NMLS ID# 57916, (www.nmlsconsumeraccess.org).

How to Get Approved for a Kentucky Mortgage While in A Chapter 13 Bankruptcy:

Can you get a mortgage loan while in a Chapter 13 Bankruptcy?

Here is a brief summary:

You must have 12 payments paid into the Chapter 13 before you can apply for a mortgage loan.

The payments must be made on time for last 12 months or after 12 months if you have been in longer, so no late payments to the Chapter 13 while in it.

You have to ask permission from the courts to seek a mortgage loan. They usually grant this. I have never not seen them grant it.

You have to qualify with the new house payment along with Chapter 13 payments and other debts listed on credit report. Debt to income ratios usually center around 31 and 43% respectively, meaning the new house payment should not be more than 31% of your gross monthly income and your total house payment and debts listed on credit report along with Chapter 13 payment should not be more than 43% of your total gross monthly income.

Credit scores: Most FHA lenders I work with will want a 620-middle score. You have three fico scores from Experian, Equifax, and Transunion, and they throw out the high and low score and take middle score. For example, if you had a 598, 679, and 590 scores respectively for all three bureaus listed above, your qualifying score would be 598.

There are some FHA investors that I am set up with that will go down to 580, but I have seen in my past experiences 620 will get you a better deal and far greater chance of closing on your loan with FHA.

Down payment: For FHA loans, you will need to have at least 3.5% down payment saved up. It is extremely hard to find a no money down loan program to get you approved for a mortgage while you are in a Chapter 13 plan.

FHA, VA and USDA are really the only two options that I know of that offer financing for a borrower with a current Chapter 13 Bankruptcy plan, so keep that in mind.

Conventional loan program offered by Fannie Mae will not allow a mortgage loan for someone in a Chapter 13 Bankruptcy plan.

On USDA loans, it is possible to get 100% Financing after you have paid into the plan for 12 months with a good pay history. The credit scores needed for a USDA loan approval really need to be above 640 in my past experience in getting them approved. 

A lot of USDA lenders will say they will do down to 620, but it is very difficult getting them approved. Best to get your scores up to increase your changes in qualifying for a USDA loan. There is not much that difference in getting your scores up to that range if you are at a 620 score now.

With USDA loans, they have income and property eligibility requirements that FHA does not have, so below is a rough run down of FHA vs USDA loan for you:


Typically, USDA-eligible properties are located in rural areas. It is a mistake, however, to think that you have to live far out in the country to qualify for a USDA loan. USDA-eligible properties are often located near urban areas.

A property’s eligibility is determined by its location with respect to USDA’s map of eligible locations. The USDA program also places limits on your household income based on median earnings in an area. If you exceed that limit, you can’t obtain a USDA loan.

The FHA, by contrast, does not place limits on household earnings. The FHA, however, does establish a maximum limit on the amount of money that can be borrowed through the program.

So, if you were in a hurry to buy, after you have been in your Chapter 13 plan for 12 months, I can look at getting you approved to buy a home if you wish:

So, if you were in a hurry to buy, after you have been in your Chapter 13 plan for 12 months, I can look at getting you approved to buy a home if you wish:




If you have questions about qualifying as first time home buyer in Kentucky, please call, text, email or fill out free prequalification below for your next mortgage loan pre-approval.


Joel Lobb
Senior Loan Officer

(NMLS#57916)


Text or call phone: (502) 905-3708

email me at kentuckyloan@gmail.com

http://www.mylouisvillekentuckymortgage.com/

Louisville Kentucky Mortgage Lender for FHA, VA, KHC, USDA and Rural Housing Kentucky Mortgages: How to Get Approved for a Kentucky Mortgage While ...

Louisville Kentucky Mortgage Lender for FHA, VA, KHC, USDA and Rural Housing Kentucky Mortgages: How to Get Approved for a Kentucky Mortgage While ...: Can you get a mortgage loan while in a Chapter 13 Bankruptcy? Here is a brief summary: You must have 12 payments paid into the Chapter 13 b...

Kentucky First Time Home Buyer Loan Options

Big News for Kentucky Homebuyers: USDA Rural Housing Loans Just Got More Accessible With Higher Debt to Income Ratios

Debt to Income Changes for Kentucky USDA Loans

The Kentucky USDA Rural Housing Loan program has recently updated its guidelines for it's housing ratios for debt to income purposes , making it easier for more Kentuckians to qualify. Let's dive into the details of these changes and what they mean for you.

The Headline: Higher PITI Ratio Now Allowed

The biggest change is the increase in the maximum PITI (Principal, Interest, Taxes, and Insurance) ratio. This ratio, also known as the front-end ratio, has been bumped up to 34%. But what does this actually mean for you?

• More Buying Power: With a higher PITI ratio, you may be able to qualify for a larger loan amount. This could mean the difference between settling for a fixer-upper and landing your dream home.
• Easier Qualification: If you were previously on the edge of qualifying, this increase might just push you over the line into homeownership.

Understanding the Changes

Let's break down the key updates:

1. Maximum PITI Ratio Increase:
   • Old limit: 29%
   • New limit: 34%
   • Impact: You can now allocate up to 34% of your gross monthly income towards your mortgage payment, property taxes, and insurance.
2. Clarification on Business Debts:
   • The USDA has provided additional guidance on how business debts reported on your personal credit report are treated.
   • This could be particularly beneficial for small business owners and self-employed individuals.
3. Ratio Waivers for Purchases:
   • Important note: Waivers are not permitted to increase the PITI ratio above 34% for purchase transactions.
   • This ensures responsible lending practices while still providing flexibility.
4. New Compensating Factors:
   • The USDA has added more compensating factors that can support the approval of a ratio waiver.
   • This means more opportunities for approval if you have strengths in other areas of your financial profile.

What This Means for Kentucky Homebuyers

These changes are a game-changer for many potential homeowners in rural Kentucky. Here's why:

• More Flexibility: The higher PITI ratio gives you more wiggle room in your budget when shopping for a home.
• Clearer Guidelines: With better clarification on business debts and compensating factors, you'll have a clearer picture of where you stand.
• Responsible Lending: The cap on ratio waivers for purchases ensures that the program remains sustainable and responsible.

How the New 34% PITI Ratio Benefits USDA Loan Applicants: A Practical Example

To understand the real-world impact of the increased PITI (Principal, Interest, Taxes, and Insurance) ratio for USDA loans, let's walk through a hypothetical example. We'll compare how a potential buyer would fare under the old 29% ratio versus the new 34% ratio.

Meet Our Hypothetical Buyer: The Johnson Family

• Annual Gross Income: $60,000
• Monthly Gross Income: $5,000
• Credit Score: 680
• Existing Monthly Debts: $500 (car loan and credit card payments)

Scenario 1: Old 29% PITI Ratio

Under the old rules, here's how the Johnsons' maximum mortgage payment would be calculated:

1. Maximum PITI payment:
   • 29% of $5,000 = $1,450 per month
2. Maximum loan amount (assuming a 3.5% interest rate, 30-year term, and estimated taxes and insurance of $250/month):
   • Maximum P&I payment: $1,450 - $250 = $1,200
   • This translates to a maximum loan amount of approximately $268,000

Scenario 2: New 34% PITI Ratio

Now, let's see how the Johnsons fare under the new 34% PITI ratio:

1. Maximum PITI payment:
   • 34% of $5,000 = $1,700 per month
2. Maximum loan amount (same assumptions as above):
   • Maximum P&I payment: $1,700 - $250 = $1,450
   • This translates to a maximum loan amount of approximately $324,000

The Benefit: Increased Buying Power

The difference is significant:

• Increase in maximum PITI payment: $250 per month
• Increase in maximum loan amount: $56,000

This means the Johnson family can now qualify for a home that's about $56,000 more expensive than they could under the old rules. In many rural areas of Kentucky, this could be the difference between a modest starter home and a more spacious family home, or a home with desirable features like an extra bedroom, a larger lot, or modern amenities.

Additional Considerations

1. Debt-to-Income Ratio: Remember, USDA loans also consider the overall debt-to-income ratio. In this case:
   • Old rule: ($1,450 + $500) / $5,000 = 39% DTI
   • New rule: ($1,700 + $500) / $5,000 = 44% DTI Both are within USDA's typical maximum of 41-46% DTI.
2. Affordability: While the Johnsons can qualify for a larger loan, they should carefully consider if the higher payment fits comfortably within their budget.
3. Home Price Variations: In some rural areas of Kentucky, a $56,000 increase in buying power could significantly expand housing options.

Conclusion

The increase in the PITI ratio from 29% to 34% provides substantial benefits to USDA loan applicants like the Johnson family. It increases their buying power and expands their options in the rural housing market. However, it's crucial for buyers to consider their overall financial picture and ensure they're comfortable with the monthly payments before maxing out their borrowing capacity.

Next Steps: Is a USDA Rural Housing Loan Right for You?

If you've been on the fence about applying for a USDA Rural Housing Loan, now might be the perfect time to take action. Here's what you can do:

1. Check if your desired area qualifies as "rural" under USDA guidelines.
2. Review your current debt-to-income ratio and see how it fits with the new 34% PITI limit.
3. Gather documentation on your income, including any business debts if you're self-employed.
4. Speak with a USDA-approved lender to get a more detailed assessment of your eligibility.

Remember, while these changes make it easier to qualify, it's still important to borrow responsibly and ensure that your mortgage payments are comfortably within your budget.

Conclusion

The Kentucky USDA Rural Housing Loan program's new guidelines offer a fantastic opportunity for many Kentucky residents to achieve their dream of homeownership. With higher ratios allowed and clearer guidelines, the path to your rural Kentucky home just got a little smoother. Don't wait – start exploring your options today!

Joel Lobb  Mortgage Loan Officer

American Mortgage Solutions, Inc.
10602 Timberwood Circle
Louisville, KY 40223
Company NMLS ID #1364

Text/call: 502-905-3708

email: kentuckyloan@gmail.com

http://www.mylouisvillekentuckymortgage.com/

NMLS 57916  | Company NMLS #1364/MB73346135166/MBR1574

The view and opinions stated on this website belong solely to the authors, and are intended for informational purposes only. The posted information does not guarantee approval, nor does it comprise full underwriting guidelines. This does not represent being part of a government agency. The views expressed on this post are mine and do not necessarily reflect the view of my employer. Not all products or services mentioned on this site may fit all people.
NMLS ID# 57916, (www.nmlsconsumeraccess.org).

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​Kentucky FHA vs ​Kentucky Conventional Mortgage Insurance: A Comprehensive Comparison

Kentucky Mortgage Insurance requirements for Kentucky homebuyers for FHA and Fannie Mae Conventional loans.

When it comes to ​Kentucky home loans, understanding the differences between ​Kentucky FHA and conventional mortgage insurance is crucial for potential homebuyers. This article will break down the key distinctions in terms of credit score requirements, down payments, upfront premiums, monthly premiums, duration, and cancellation policies.

​Kentucky Mortgage Credit Score Requirements

​Kentucky FHA Mortgage Insurance

• Minimum credit score: 580 for a 3.5% down payment
• Scores between 500-579 may qualify with a 10% down payment

​Kentucky Conventional Mortgage Insurance

• Typically requires a minimum credit score of 620
• Higher scores often result in better rates and terms

​Kentucky Mortgage Down Payment​ Requirements

FHA Mortgage Insurance

• Minimum down payment of 3.5% with a credit score of 580 or higher
• 10% down payment required for credit scores between 500-579

Conventional Mortgage Insurance

• Typically requires a minimum of 3% down payment
• Lower down payments often result in higher insurance premiums

Upfront Premiums​ for Kentucky Mortgage Loans

FHA Mortgage Insurance

• Upfront Mortgage Insurance Premium (UFMIP) of 1.75% of the loan amount
• Can be financed into the loan

Conventional Mortgage Insurance

• No upfront premium required

Monthly Premiums​ for Kentucky Mortgage Loans

FHA Mortgage Insurance

• Annual MIP (divided into monthly payments) ranges from 0.45% to 1.05% of the loan amount, depending on the loan term and loan-to-value ratio

Conventional Mortgage Insurance

• Monthly premiums vary based on credit score, down payment, and loan-to-value ratio
• Generally range from 0.17% to 1.86% of the loan amount annually

Duration​ for Kentucky Mortgage Insurance

FHA Mortgage Insurance

• For loans with an LTV greater than 90% at origination, MIP lasts for the life of the loan
• For loans with an LTV of 90% or less, MIP lasts for 11 years

Conventional Mortgage Insurance

• Typically required until the loan-to-value ratio reaches 78% through normal amortization

Cancellation Policies

FHA Mortgage Insurance

• Cannot be canceled for loans originated after June 3, 2013, if the initial down payment was less than 10%
• For down payments of 10% or more, MIP can be canceled after 11 years

Conventional Mortgage Insurance

• Can be canceled when the loan-to-value ratio reaches 80%, either through home value appreciation or additional payments
• Automatically terminates when the loan balance reaches 78% of the original value

Conclusion

While FHA mortgage insurance offers more lenient credit requirements and lower down payment options, it often comes with higher costs and longer durations. Conventional mortgage insurance, though potentially more challenging to qualify for, offers more flexibility in terms of cancellation and can be less expensive in the long run for borrowers with good credit. Prospective homebuyers should carefully consider their financial situation and long-term goals when choosing between FHA and conventional loans.

Joel Lobb  Mortgage Loan Officer

American Mortgage Solutions, Inc.
10602 Timberwood Circle
Louisville, KY 40223
Company NMLS ID #1364

Text/call: 502-905-3708

email: kentuckyloan@gmail.com

http://www.mylouisvillekentuckymortgage.com/

NMLS 57916  | Company NMLS #1364/MB73346135166/MBR1574

The view and opinions stated on this website belong solely to the authors, and are intended for informational purposes only. The posted information does not guarantee approval, nor does it comprise full underwriting guidelines. This does not represent being part of a government agency. The views expressed on this post are mine and do not necessarily reflect the view of my employer. Not all products or services mentioned on this site may fit all people.
NMLS ID# 57916, (www.nmlsconsumeraccess.org).

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