So by now you all have heard that the Trump administration has stopped the planned decrease in the FHA MIP by .25%. While it would have been nice to have had a decrease in the cost of an FHA loan, it certainly isn’t the end of the world as some would have you think.

Articles and conversations on various social media platforms would have you think somebody eliminated FHA all together! Seriously, the number of loan officers throwing themselves into a fit is quite shocking. In fact, it’s pretty disturbing behavior for a financial professional.

This was a REDUCTION, not a new fee. FHA MIP premiums weren’t raised, they were left alone and not reduced until the new administration could look at the data and make sure this proposed fee reduction was something that could be done comfortably and without potential issues for the fund that insures these loans.

The crying over how people are no longer going to be able to afford to buy a home is absolutely ridiculous! On a $200,000 loan, you are talking less than $42 a month! If $42 a month is what keeps someone from buying a house, then maybe they should rethink their situation. Clearly rent on an apartment or equivalent home would be going UP more than that each year! And again, this fee isn’t going up, it’s staying the same!

Now as a business coach, my job is to help my clients deal with certain challenges. So, while none of them have had any issues with this situation, how about we talk about how to deal with this for those who may have an issue?

  • You could always buy a house that is about $8,000 less expensive?
  • You could spend a few thousand dollars in points to buy the rate down on the loan by .25%
  • You could use money from your 401K to make a larger down payment.
  • You could negotiate a seller’s concession toward closing costs to pay down the rate.
  • You could look for assistance with the down payment or closing costs to make up the difference.
  • You could work a part-time job for a couple of months and use that money to buy down the rate.
  • You could look to other loan programs that may have lower fees or allow you to finance more money.
  • You could wait and see if they lower the fee in the months to come, and hope interest rates don’t move higher.
  • You could pray that interest rates go down.

All of these ideas and likely many more are all ways to deal with the fact that the FHA MIP was not reduced. However, the facts are, most people don’t use FHA loans to buy a home, and those that do are largely not now precluded from buying a home, or are even close to their maximum payment tolerance. For those that were; maybe they really need to rethink what they were going to do?

In any circumstance, it is your job as a financial expert to explain the situation, not inflame it! This really isn’t that big a deal, so don’t act like it is. Just explain the options and do the math! For those needing to use FHA to buy their homes, they are still getting a great deal. Don’t add to the drama by fueling the fire. Nobody is a victim here. Just be professional and share all the options!

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“Grow Up”

The election is over and for some reason, a small part of our country has made a choice to whine and complain how things didn’t go their way. SERIOUSLY? Never before in the history of the Republic did universities have to take a time out, cancel classes and exams because their students needed emotional support animals! As I have said for years, giving children participation trophies would lead to an entire generation that was weak and undisciplined. Well, here you have it. We have people crying because they lost an election and showing their displeasure by blocking traffic, assaulting people, and causing millions of dollars in property damage. Yes, I know the pain of losing. I also know that you get up and go back to work. You congratulate the other side for their efforts and work harder to do better. Unfortunately, that isn’t happening for a small minority of people; the people who have a really distorted view of the world. The election is over and a new administration will take over in January. We ALL have a need for the new group to succeed, because we ALL live in this country and want it to do well. Anyone that ever wished for any new administration to do poorly; only wishes harm to themselves.

The mortgage point to all of this is that I have to caution all the idiots who are screaming about the collapse of the mortgage and real estate industry! Are you all insane? What, interest rates go about 4% and that’s it? Are you kidding me? The country has had artificially low rates for years and all that has happened is a sluggish economy where people can’t find growth. Higher rates are being triggered by OPTIMISUM in the stock market that the economy is going to get BETTER!!!

A thriving economy can certainly cause our artificially low rates to NORMALIZE! In fact, higher rates are actually a GOOD thing. Higher rates provide better returns for those bond investors, likely those on fixed incomes. In fact, for many years traditional savings accounts hung around the 5% mark. Higher returns on cash isn’t all bad!

Yes, higher rates cause higher payments. But have you taken the time to get past the emotional trigger of higher rates and just done the math? Yes the payments are now a little higher, but will that slightly higher payment really prevent people from buying a house? Come on, get real with it. If payments going up $20 to $100 a month really stop someone from buying a home, how are they going to deal with RENTS GOING UP EVERY YEAR?

Anyone that is that tight on payment shouldn’t be borrowing that much money in the first place. A vast majority of borrowers don’t borrow anywhere near the amount of money they would be approved for. And besides, you think home prices and rates are going BACK DOWN? Guess again!

My career began in a 15% rate market. For many years I wrote loans that were double digit terms and there was no shortage of business. Rates broke below 10% and kept going down. People were happy as they got deals at 8, 7, and 6%! We also know an entire refinance industry was born. Now I get that for some people, refinances are a significant part of their business. I also understand that I have been telling people to be certain they had a business model with no less than 70% purchase business because at some point, refinances were going to go away.

So for all the experts out there, who are forecasting the end of our industry, just grow up! Yes, higher rates are not as pleasant as lower rates are, I get it; but it doesn’t mean people aren’t going to buy homes. In fact, given all the complaints about limited inventory and too many buyers chasing too few homes, maybe higher rates help settle the markets and help us find a more “normal” environment?

Interest rates were going to go higher at some point. Isn’t it better that they go up because the markets are expecting a stronger economy with great growth, than because we have a stagnant economy with runaway inflation? So everybody take a deep breath. Yes, rates are higher. Yes things will cost a little more. But as professionals we have to get clear about the real costs and provide solutions to the challenges at hand.

So do the real math. Brush up on you adjustable loan products. Remain calm and understand that sometime you win and sometimes you lose. If you won, congratulations and I hope you are happy and your team does well. If you lost, congratulate the other side and hope they do well. If you are part of the half of the country that didn’t bother to vote, shut up! You didn’t participate; you have nothing to add to the situation! The sun always rises in the morning. Be happy about that and make the best of it.

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