Monthly Archives: September 2011

Conforming Loan Limits Change on Oct. 1

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The maximum FHA, Fannie Mae, and Freddie Mac conforming loan limit will decline to $625,500 beginning Oct. 1, 2011, from the current $729,750 limit, though the majority of counties will fall far below the $625,500 maximum.  The conforming loan limit determines the maximum size of a mortgage that FHA, Fannie Mae, and Freddie Mac government-sponsored enterprises (GSEs) can buy or guarantee.   Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan and require a higher down payment, increasing the monthly payment and negatively impacting housing affordability for California home buyers.

Under the new GSE loan limits, Monterey County would see the greatest drop in the loan limit at $246,750, followed by San Diego ($151,250), Sonoma ($141,550), Solano ($140,500), and Napa ($137,500) counties.  Under the new FHA loan limits, Monterey County would see the greatest drop in the loan limit at $246,750, followed by Merced ($201,450), Riverside ($164,650), San Bernardino ($164,650), Solano ($157,300), and San Diego ($151,250) counties.

Regionally, Marin County would be impacted the most, with more than 12 percent of home sales rendered ineligible under the lower GSE loan limit, followed by Contra Costa (11.5%), San Mateo (10.7%), San Francisco (9.9%), Monterey (8.8%), San Diego (8.2%), Sonoma (7.9%), and Santa Clara (7.8%) counties.  Under the lower FHA loan limit, San Francisco County would be impacted the most, with more than 14 percent of home sales rendered ineligible, followed by Santa Cruz (13.9%), Orange County (13.3%), Marin (13.2%), San Mateo and Ventura (both at 12.7%), Santa Clara (12.2%), San Diego (11.9%), Alameda (11.8%), Riverside (11.5%), and Contra Costa (11%) counties.

What does this mean to you and why is it important?

As a result, your once “conforming mortgage” could soon become a jumbo loan, with mortgage rates on the latter pricing about half a percentage point or higher than the former.  So instead of enjoying an interest rate of 4.00% on your home loan, you may be stuck paying 4.50% or higher for the same mortgage next week.  Conforming mortgages are eligible for purchase by Fannie Mae and Freddie Mac, making them more marketable to investors and thus cheaper for consumers.

If possible, consider bringing more money to the table to keep your loan amount at or below the new loan limit.  You may also be able to break up your loan into a first and second mortgage, keeping the first below the new conforming limit.  This should make qualifying easier and will certainly result in a lower interest rate, which could save you a lot of money over the years.

Data Source for Statistics and Limits:  CAR

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Understanding Today’s Home Buyers

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Home buyers used to have it easy – all they had to consider when buying a home was price, condition and location. Getting loans was a snap, and reselling the home was never a worry.

But today’s recessionary market is throwing home buyers a curve. They’re not so certain home buying is a good investment, and neither are their bankers.

If you’re a home seller, you need to know what buyers are facing in today’s real estate market, so you can do the one thing that will help the right buyer buy your home.

Price it to sell.

  • Buyers begin their search for a home with prices. Buyers may search many neighborhoods or look at homes out of their price range to get an idea of the marketplace. But, when it comes to serious shopping, they know their price and use it to see which homes they can afford.
  • Buyers are prequalified by their lender. A serious buyer will not be satisfied with day dreaming for long. They’ll share their financial information, and get prequalified by a lender who will tell them exactly how much they can afford. Is your home in the right price range?
  • Buyers work with real estate professionals. Once they have a green light, buyers start shopping. They ask their real estate professionals to start gathering and presenting homes they might like. If your home is priced too high, your best, likeliest buyer will never see it. Is your home overpriced compared to the competition?
  • Buyers have incredible sources to compare homes. Videos, virtual tours, feature sheets and multiple photos are the eye candy. They quickly sort through what’s available to a short list of the most appealing homes in their price range. Did you de-clutter, clean, stage and update your home?
  • Buyers choose homes based on bang for the buck. As buyers walk through listings with their real estate agent, they’ll quickly make snap decisions based on size, condition, and location as compared to price.  Does your home offer the most bang for the buck?
  • Buyers use the same comparables you do. Just as you and your real estate agent have examined the market, buyers and their agents do the same. They know which homes are overpriced, and they’ll assume that an overpriced home comes from either an unmotivated or unrealistic seller.  They’ll make their offer to the seller whose home offers the most for the money and who appears most reasonable to an offer. Do you appear negotiable?
  • Buyers’ banks confirm prices with appraisals. Today’s appraisals are strict. New codes of conduct require banks to avoid pressuring appraisers to “hit the numbers.” Appraisers are required to go back as long as one year, to determine if your home is in a “declining market.” If so, the appraisal can come as much as 5% under your list price. If the appraisal is under the list price, the bank won’t lend. Are you prepared to lower your price to make the deal go through?
  • Buyers face unprecedented banking challenges. Banks no longer offer non-conforming loans with abandon. Many banks are balking at offering conforming loans, and those are government-guaranteed. They require stricter proof from buyers that they are able to repay their loans, often qualifying them at much lower levels. Are you willing to help your buyer by paying down points?
  • Buyers are scared. They have to have a good reason to buy a home, and news of declining prices hasn’t provided much incentive. Help them by  showing them all the ways your home has rewarded your ownership. Show them how much you pay in property taxes, how much you get as a homestead exemption, how much you’re able to write off your income taxes as a homeowner. Are you willing to share what buyers need to know?
  • Buyers don’t have to buy. They want to buy. They want the joys of homeownership, and it’s your job as a homeowner to provide them with the tipping point they need – the best home at the best price. Is your home priced to sell?

Current Sacramento Area Real Estate Statistics

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Here are your real estate statistics for the Sacramento area!

Information Source:  MetroList

Article by:  Sheri Negri, Realtor

www.loveforhomessac.com

Upcoming Changes to FHA Loans

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Unless Congress extends the expiration deadline, Federal Housing Administration (FHA) loan limits set in 2008 will drop significantly beginning October 1. Congress raised the loan limit amount in response to the housing crisis to help spur the home buying market.  FHA loans offer borrowers very competitive rates and terms, and they only require a 3.5% down payment. Allowable debt ratios are higher than the typical debt-ratio limits imposed for conventional loans, and there are no income limit qualifications, so more people can qualify for them.

If the loan limit drops on October 1, many California homebuyers will face higher down payments, higher mortgage rates and stricter loan qualification requirements. Borrowers seeking larger mortgages will have to apply for conventional loans or jumbo loans, which may be subject to higher interest rates and down payments. Here are four things you should know to help your clients now.

1. LOWER LOAN LIMITS

The conforming loan limit determines the maximum mortgage amount that FHA, Fannie Mae and Freddie Mac can buy or guarantee. If your client wants to stay under the current loan limits, then encourage them to purchase now and close by September 30th.

2.DROPS BY COUNTY

Under the new FHA loan limits, some counties will see significant drops in their loan limits. San Diego County will experience a $151,250 drop, Sonoma
County a $141,550 reduction, while Orange and Los Angeles Counties will drop by $104,250.

3.JUMBO LOANS

The current FHA loan limit is $729,750. After October 1, that limit may drop to $625,500. Mortgage loans higher than that amount will be considered
non-conforming jumbo loans, which typically have rates that are 0.875% to 1.5% higher than conforming rates, depending on the loan product, and require higher down payments.

4.MORE STRINGENT REQUIREMENTS

FHA loan requirements may allow for lower credit scores. So an applicant with a lower FICO score can still qualify for an FHA loan, even if they can’t for a conventional loan. Your clients may be able to obtain an FHA loan three years after defaulting or having a loan foreclosed.

Article by:  Sheri Negri, Realtor
www.loveforhomessac.com
Information Source:  CAR