Fha Rate And Term Refinance Worksheet: Fill & Download for Free

I advise anyone reading the answers here to do so critically. There is a fair amount of misinformation.Let’s get some terms defined. First is the down payment. FHA specifies a statutory investment (their term) of 3.5% of the purchase price. The money can come from the borrower’s funds, a recognized down payment assistance program, or a gift from a relative. Someone buying a home for $300,000 will have a down payment of $10,500 (3.5%).Closing costs are those expenses over and above the down payment. They include—but are not limited to—title and escrow fees, legal fees for states using closing attorneys, appraisal, notary, recording and lender fees for underwriting and processing. I’ll provide a list of examples later in this answer.There are two categories of closing costs: non-recurring closing costs and prorations and prepaids. The first category is the one-time expenses. The second is advance payments, such as the premium for the first year of the buyer’s homeowner’s insurance.One of the closing costs for an FHA loan is the up-front mortgage insurance premium. It is 1.75% of the base loan amount, typically added to the borrower’s loan, so they don’t have to pay it out of pocket.The other closing costs will be paid at closing.It is not possible to state that the closing costs will be a certain percentage of the purchase price. Different areas of the country may have their own fees for title, escrow, recording, and notary fees. The prorations and prepaid items for taxes, insurance and mortgage interest will vary according to the month and day of closing.FHA loans will always carry an impound account for taxes, insurance and mortgage insurance. The borrower will make one payment to the lender each month to cover the principal and interest payments and 1/12 of taxes, insurance, and the renewal of the mortgage insurance premium. The borrower will pre-fund the impound account so that there will be enough money to pay the property taxes and insurance renewal at the appropriate times.The borrower will deposit an amount to the impound account to have a two-month cushion when the account reaches its minimum balance during the year. In California, with property taxes being paid in November and February, the initial deposit can be as little as one month’s taxes or as much as nine months. The lender will typically collect two months’ homeowner’s insurance premiums.ExampleYou buy a $250,000 home with a 3.5% down payment and an FHA loan. Your loan will look like this:The initial MI premium is a cost, but it is not an out-of-pocket cost because it is added to the base loan in almost every case.The closing costs will look something like this:The total cash required to close will look like this:This can be a daunting figure to someone struggling to find the cash to become a homeowner. There are three ways to handle closing costs:Pay them out of pocketAsk the seller to pay some or all of themSelect a higher interest rate to get a lender rebate to offset some or all of themThe only requirement FHA has is that the borrower’s minimum investment be 3.5% of the purchase price.As long as we’re on the subject of FHA loans, we should show what the payment looks like and talk about mortgage insurance. The monthly payment will look something like this:Mortgage insurance (MI) is a way for the lender to limit its risk when the borrower’s loan is for more than 80% of the home’s value. MI benefits the borrower because, without it, the lender will not make the loan. It would be too risky.Some people mistakenly refer to FHA insurance as “PMI.” This term is not correct. PMI (private mortgage insurance) applies only to conventional loans, not FHA.The distinction is essential because FHA insurance remains in place for the life of the loan for most programs. The only way to get rid of it is to refinance into a conventional loan when there is enough equity. Conventional loans with PMI will eliminate insurance automatically once the loan balance reaches 78% of the original price. The borrower can request removal earlier by providing an appraisal showing that the loan balance is 80% of the home’s current value or less.I have provided these examples based on typical costs in California. Other areas will have their own, which will almost certainly be different. So how can you figure out reliably what the costs will be for your area?Ask a local mortgage professional to give you a closing cost worksheet. This document will provide a list of all the estimated costs and fees. It is an informal document, but if you provide more information (name, SSN, property address, income, interest rate and loan amount), the lender must send you a Loan Estimate, which contains the same information is a legal document. For most people, the worksheet is more than adequate for the early stages.FHA has been a popular program for first-time buyers since its creation in 1934. Being a first-time buyer is not a requirement for FHA, however—and it may not be the best choice for a cash-strapped buyer. There are conventional loans available for as little as 3% down—and, unlike FHA mortgage insurance, conventional PMI is temporary. Rates for FHA loans may be lower than conventional, depending on your credit score. If your score is 760 or higher, a comparison might look like this:The monthly payments are quite similar, but the PMI on the conventional loan is temporary. The required down payment of 3% is also lower. You should ask your lender to show you both scenarios so you can make an informed decision. Don’t allow yourself to be shoved into an FHA loan if it’s not the best choice for you.I hope this is helpful. Good luck!

As I write this (April 2, 2020), we are in the middle of a major crisis because of the COVID-19 pandemic. Last week’s unemployment claims (6.65 million for the week of March 28, more than 3 million the week before), together with general disruption of the global economy, have disrupted the entire U.S. economy—including the mortgage sector.Most people are sheltering in place, which means that walking into your local bank or credit union is not practical—or safe. They are closed or operating with very short staff.This does not mean you cannot get a mortgage today. Independent mortgage brokers and lenders are still operating, although in a far different mode from before the pandemic upended our lives. Many lenders have long since made a transition to doing business remotely, using email, teleconferencing, and telephone.Mortgage rates today are experiencing extremely high volatility. A rate someone promised last week might not be available today. The reason for this volatility is partly due to the well-meaning intervention of the Federal Reserve in the mortgage industry. That intervention has had several unintended consequences.I wrote about this in considerable detail recently for anyone who might be interested, but the short explanation is that lenders have temporarily increased the pricing on their loans to cover the many losses they have already suffered.There will come a time—hopefully within a month or less—when the market will return to some normalcy.Anyone who expects to need a mortgage within the near future should begin the process early—even though the rate they hope to get is not available today. Having a complete application in place with a lender gives the hopeful borrower the ability to act quickly when rates do return to normal.I’ll offer one final bit of advice before answering the question. Don’t be too focused on the rate. Almost all lenders sell the home loans they fund to an investor at a small profit. This is the fundamental business model of the residential mortgage industry. The spread between the most expensive lender and the least is not as broad as you might think. Choose a mortgage lender as much on the relationship with the loan officer as on the rate you can get. A lender who advertises a jaw-dropping low rate that they can’t deliver will waste your time.With all that as preface, here is how to best shop for a loan—and you don’t have to submit applications with several lenders to find out what rate they can give you.Before starting to call lenders, you’ll need to have several pieces of information:Your credit scoreThe approximate loan amount you’re seekingThe estimated price of the propertyYour down paymentThe type of property you plan to buy or refinanceThe type of loan you’re looking for (conventional, FHA, VA, etc.)The type of refinance: rate-and-term, cash-out or “streamline”Each of these items is a factor in the cost of a mortgage.The conversation you’d have with a lender would go something like this:“I plan to refinance my single-family home. It’s worth about $400,000, and I am looking for a loan of about $300,000. I will not take cash out. I have a credit score over 740. What rate could you offer me today for a 30-year fixed-rate conventional loan with no discount points? What are your fees for underwriting and processing?”Any loan officer will be able to give you that day’s rate based on that information.When you are comparing lenders, do so over as short a time as possible. A rate quote from a week ago is useless.A few years ago, a prospective borrower could ask a lender for a Good Faith Estimate. This document is obsolete, having been replaced by the Loan Estimate. There is no reason for you to ask for one at this stage, however. Preparing a Loan Estimate is somewhat involved on the lender’s side, and most are not willing to issue one without having a full application. The Loan Estimate does not guarantee a rate, and with today’s extreme volatility, having one is not particularly useful. Instead, you can ask for a closing cost worksheet. You will get the same information, but not in the form of a legal compliance document like the Loan Estimate. Most lenders should be quite willing to send you the worksheet.The size of the institution that issues your loan should not be one of the factors you consider—although my own biased opinion is that a small, independent mortgage lender will give you the best overall experience and results.All lenders sell their loans on the secondary mortgage market—that is the function that Fannie Mae and Freddie Mac (among others) serve. They all adhere to the same guidelines because they are set forth by those investors. The difference between a commercial bank like Wells Fargo, Bank of America or Chase and an independent mortgage company like my employer* is that a large commercial bank has many business channels—checking and savings, business loans, consumer loans—in addition to mortgages. A company whose entire business is providing residential mortgages for homeowners can concentrate on that one activity. An independent lender, whether banker or broker, depends on delivering a high level of service and competitive rates because they have no other business activity to generate their revenue.Finally, when you are contemplating a refinance, have a target rate in mind. Even though that rate may not be available today, it could appear next week. Having a full application in place will give you the ability to lock the rate you want when it appears. Don’t get too greedy; holding out for a rate .125% lower could mean missing your opportunity altogether. We have seen that happen too many times: a borrower has a chance to lock a favorable rate but wants to save another $20 per month. Rates move up, and they lose the benefit they could have had.I hope this is helpful.*I manage a branch of Pinnacle Home Loans, an independent mortgage banker based in Novato, California

It’s important for consumers to have at least a rudimentary understanding about how the mortgage industry operates. This knowledge will make identifying the best loan far easier.The first thing to know is that you are not borrowing money from “the bank” or “the lender.” The money the lender gives you is not theirs. It comes from a specialized line of credit called a warehouse line. This is not something for you to be concerned about.After the lender reviews your documentation and approves your loan, they wire money into the escrow to complete your purchase. You will sign an inch-thick stack of paperwork, almost all of which is connected with the loan.Among these documents will be a promissory note outlining the amount and terms of the loan, and a deed of trust, which is the lender’s security for the loan they are giving you. The deed of trust is a legal document that gives the lender to force the sale of the property if the borrower stops making payments. Even though the lender has the ability to foreclose in the event of the borrower’s default, it’s important to know that they have no ownership whatsoever in the property. You own it 100% regardless of your down payment.The lender immediately sells the loan to an investor for cash. They make a small profit on the sale—in other words, they sell it for more than the amount of the loan they made. From this margin, they’ll pay off the warehouse line, pay the costs of originating and funding the loan, and ultimately end up with a small profit.The investors who buy most residential loans are Fannie Mae, Freddie Mac and Ginnie Mae. The latter buys FHA and VA loans. Fannie and Freddie buy what are generally referred to as “conventional” loans.It’s important to understand this process because the investors’ guidelines are the same for every lender who sells their loans to them. Among these guidelines are loan-level pricing adjustments. These are additions to the cost of the loan determined by the borrower’s credit score, loan to value ratio, loan purpose and type of property (single family home, condominium or multi-unit property).Every loan will carry an adjustment for the borrower’s credit score and loan to value ratio. If a buyer with a 740 score can get a rate of 3.875% today (February 2020) for an 80% loan, a borrower with a 700 score can expect a rate of 4.25% for the same loan. A borrower with a 620 score (the minimum acceptable score for a conventional loan) would get a rate of about 5.125%.All lenders sell their loans to the investors with the same pricing on a given day. A small, independent mortgage bank like my employer will sell their loans to Fannie or Freddie with the same adjustments as any of the too-big-to-fail institutions like Wells Fargo or Chase.Before any lender can give you an accurate price quote, they have to have certain critical information:Your credit scoreThe size of your loanThe price of the propertyThe type of property (single family, condo, multi-unit)The type of loan—purchase, refinance to lower the rate, refinance to get cash proceeds, owner-occupied or investment propertyAlso be aware that the pricing for mortgages changes every day based on the activity in the market. Comparing a quote from a lender a week ago with one today is useless, as the pricing will almost certainly be different.Lenders are required to issue a legal document called a Loan Estimate (LE) within three days of collecting certain information from a borrower. The LE replaces the now-obsolete Good Faith Estimate and Truth In Lending documents.When shopping for a loan, you could theoretically ask each lender you speak to for a Loan Estimate, but you may not be comfortable turning over all your personal information to so many people. Most lenders I am familiar with are reluctant to go to the time and expense of issuing a Loan Estimate without taking a full application with all supporting documentation and getting a credit report.You can get the information you need without giving all your personal information and documentation by asking for a closing cost worksheet. This is an informal document that will give you can use to decide which lender you want to work with.You should know what your credit score is, the type of property you want to buy, and how much cash you have available for your down payment and closing costs. You would say something like this to the lender:“I want to buy a single-family home for about $400,000. I plan to put 10% down and have a credit score above 740. What is your rate today for a 30-year fixed rate loan with no discount points?”This is enough information for any loan officer to be able to determine a rate. In the interests of cooperation, you should be prepared to give them your name, phone number and email address. When someone calls me with a question like this, I consider that they’re asking in good faith if they’re willing to give me at least those items of information. I will always ask the caller if they’d like to proceed with an application, and send them the list of documents I need to move forward.When you ask multiple lenders about rates, try to make your inquiries over a short period, ideally on the same day. It is entirely reasonable to ask for a closing cost worksheet so you can have something in writing—but keep in mind that this is an informal document, and that rates change a bit every day. You won’t see a very wide variance in rates between lenders, but you should be mindful of the fact that getting a mortgage is a process, not a commodity. Getting a mortgage is not like taking a can of sliced peaches from the grocery shelf; selecting the right mortgage professional for you is important. You will enter into a sort of partnership during the time you’re getting preapproved, making offers on homes, and moving your loan through to funding and closing. Your loan officer should be a trusted advisor with whom you feel comfortable.Finally, you can get an idea of the prevailing rates quickly by going to the Consumer Finance Protection Bureau’s page, “Explore interest rates.” You should not rely too heavily on the chart presented, because the rates shown may involve discount points. If a lender offers a rate of, say, 3.875% but with the borrower paying 0.5% of the loan in discount points, the borrower would get a rate of 4% with no points. The CFPB’s site can be useful to get a rough idea of the prevailing rates, however.I hope this is helpful.