Call Your Lender - Reduce Your Rate

What To Do If You Were Counting On The Mortgage Premium Cut

By Jaymi Naciri

January 26, 2017

About that FHA mortgage interest premium (MIP) reduction we wrote about earlier this month…well, never mind. The cut that would have "lowered premiums to 0.60 percent, saving FHA-insured borrowers with a closing date on or after Jan. 27, 2017 an average $500 this year," said RIS Media, is dead.

The official word from the Trump administration is "suspended indefinitely," but few believe the cut will be revived, even while "more analysis and research" is done "to assess future adjustments while also considering potential market conditions in an ever-changing global economy that could impact our efforts."

Since the announcement was made prior to the effective date of the cut, no loans included the new MIP rate. But that doesn't mean potential homebuyers weren't counting on lower payments to give them some breathing room with their monthly mortgage payments or help them qualify in the first place.

"According to our estimates, roughly 750,000 to 850,000 homebuyers will face higher costs and 30,000 to 40,000 new homebuyers will be left on the sidelines in 2017 without the cut," National Association of REALTORS® President William E. Brown said in a statement. "We're disappointed in the decision but will continue making the case to reinstate the cut in the months ahead."

So what can you do to help disappointed buyers and salvage a sale?

Try for an interest rate adjustment

Rates hit a high of 4.32 percent on December 28 but have since dipped down to 4.18 percent this week. On a $300,000 loan, that can save a borrower close to $300 in a year. If your buyer is currently locked in to a higher rate, a call to the lender to request an adjustment is a good start.

Cut some fees

Are there any miscellaneous fees included in the closing costs - things like "excessive processing and documentation fees," as Investopedia calls them, that can be classified as garbage or junk fees? If you have a good relationship with the lender on your buyer's loan, they should be willing to negotiate things like: the application fee; underwriting fee; mortgage rate lock fee; loan processing fee; and broker rebate (and, if not, maybe it's time to work with a new lender).

Introduce down payment assistance programs

"There are many programs for home buyers in down-payment distress," said Bankrate. "Borrowers in a wide range of incomes, locales and professional groups may have access to aid from Fannie Mae and Freddie Mac, the government-sponsored offices that buy mortgages and package them as investments. Various nonprofit and community groups also lend a hand to buyers struggling to put money down on a home. And don't forget about assistance from state agencies."

The National Homebuyers Fund (NHF) offers multi-state down payment assistance programs in the form of a non-repayable grant, which can include a down payment and/or closing cost assistance grant, up to 5% of the loan amount." Down Payment Resource can help borrowers determine eligibility for assistance programs and find available funds.

Gifts?

Does your client have a birthday coming up? How about an anniversary, or any other reason for people to be thinking of gifts - gifts that can be reimagined as cash? Down payment gifts are allowed for many loans, including low-down payment loans such as the FHA mortgage, "the Conventional 97 mortgage and the HomeReady™ mortgage from Fannie Mae, both of which require just 3% down," said The Mortgage Reports.

Upping that down payment will lower the principle, and therefore the monthly payments. Just be sure your clients understand the gifting rules.

Stress savings

Do your buyers have some time to get more cash together while they're looking for a home, or can they delay their purchase for a few months while they pump up their savings? A few smart strategies can help them put away money without even feeling much pain. Nerdwallet and The Simple Dollar have some suggestions.

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