Tag Archives: FHA

Significant FHA Loan Changes in April 2012

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Over the past few years FHA has increased their premiums to cope with mounting losses to their mortgage insurance fund; starting April 1st 2012 they’re at it again. If you go into contract on or after April 1st 2012 the upfront mortgage insurance premium will increase from the current 1% to 1.75%; on a $300,000 loan that’s additional $2250.

The monthly mortgage insurance will also increase 10 basis points.  On a $300,000 loan with a 30yr fixed FHA loan with a 3.5% down payment the monthly premium will jump from 115 basis points or $287.50/month to 125 basis points or $312.50/month; an increase of $25/month.

On loans over $625,500, for all case numbers assigned on or after June 1st 2012, the monthly premium will increase 25 basis points to 140; on a $700,000 loan that’s an increase of $145.84/month.

This change will encourage more potential homebuyers to look into traditional conventional financing with 5% down and lower overall costs.

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

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