Archive for the ‘FHA’ Category
Friday, November 18th, 2011
It is official – Congress has voted to bring back the higher FHA loan limits. The measure, once signed by the President, will push the FHA conforming loan limit in the highest priced real estate markets (like California and New York) to $729,750 through 2013. The current limits cap at $625,500 in these markets; they were cut back as of October 1, because of Congress’ failure to extend them.
The limits had been temporarily raised for FHA and Fannie and Freddie during the financial crisis, when it became more difficult to obtain loans from banks.What does this mean for buyers? In the higher priced markets, it means buyers can get higher loans with lower downpayments, a move that prevents them from being locked out of certain neighborhoods due to lack of extra cash.
The new extension applies only to FHA loans, not Fannie and Freddie. FHA, which is a mortgage insurer (not a lender), provides mortgage insurance to buyers who do not have large enough downpayments to obtain prime loans. Borrowers with FHA loans can put as little as 3.5% down on the purchase of a home.
Sunday, August 21st, 2011
These days it is more difficult than ever before to qualify for a loan. Lenders have such a tight grip on their money that they practically require you to sign over your firstborn to release it. Many buyers find themselves in tricky situations – first time buyers who might not have enough cash or credit scores that are not practically off the top of the charts, and move-up buyers who may not have enough equity in their homes for downpayments. But there is an option that may make home buying possible: FHA loans.
FHA loans have been popular with first time buyers for some time, as they offer low rates, underwriting standards that are not as strict, and only require very minimum downpayments. Furthermore, these loans allow use of rent history for qualification purposes – a great help for those who have never owned. But more recently repeat buyers have been discovering these types of loans, allowing many to purchase when they do not have the cash reserves available for a traditional 20% downpayment.
There are requirements for FHA loans – the buyer must be purchasing the home as a primary residence, have reasonable credit scores, and be able to afford monthly payments, for starters – and these can vary depending on county or state, so it is imperative to consult with an FHA-approved mortgage lender. If you need referrals please let me know. If you are considering a home purchase you should definitely look into FHA loans.
Friday, July 8th, 2011
Obama Administration Extends Foreclosure Programs for the Unemployed. Those who are unemployed and have an FHA loan will soon be given up to a year of forbearance on their payments, giving them time to find a new job before losing their homes. This announcement arose from the fact that many Americans are unemployed for more than three months, making the current forbearance period (4 months) unfair in giving the homeowner a chance to get caught up and not lose their homes. Missed payments, plus interest, will be added on to the back end of the loan. The new program will start August 1 and last for 2 years.
Loan Limit Changes are on the Horizon. Starting October 1, unless Congress decides to be realistic and prevent the change, federal conforming loan limit maximums will change from $729,750 to $625,500. In preparation for this some lenders, like Bank of America, have already stopped accepting applications for loans over the new limit. Those seeking higher loan amounts through Fannie, Freddie or the FHA will need to apply for non-conforming loans, which have higher interest rates. Many politicians, organizations and other industry-related entities have been hard at work to prevent these changes, which they believe (and I agree) will be bad news for the already-injured housing market, pushing a recovery further into the future. Let’s hope these changes are prevented.
San Diego County Property Assessment Values Rise. For the first time since 2008 county property values have risen, and albeit a small amount (0.51%), it is still positive news for San Diego’s housing market. The only cities that did not see assessed value increases were Carlsbad, Chula Vista and Imperial Beach. The average a homeowner will have to pay due to the increase is about $260.
Bill Calls for Merger of Fannie Mae and Freddie Mac. The struggle to do away with Fannie and Freddie continues, and the latest news comes from a California Republican, who wants to merge the two into a government-held corporation. Freddie, Fannie (who own or guarantee 56% of all home loans in the U.S.) and their cousin Ginnie Mae back the majority of mortgage loans on the market – if they were not around there would likely not be any mortgages available now. Debaters have been arguing on whether to keep them under government control or sell them and get the government completely out of the mortgage market. This new option throws another log in the fire. I am sure the debate about what to do with Fannie and Freddie will continue.
Government Still Toying with Idea of Mortgage Servicer Oversight. Again, the government is announcing that it plans to start regulating mortgage servicers. Citing the risk of consumer harm with the current system (you think?), the Consumer Financial Protection Bureau plans to put the choke collar on these firms. The power to impose these restrictions on non-bank servicers, who are not subject to federal banking regulations, was provided by last year’s Dodd-Frank Act. Details are still in the works so it will be interesting to see what transpires. If you are a buyer and are planning on applying for a loan, I highly suggest you speak with your mortgage professional right away.
Big Banks Modifying More Loans (but not in the way we hope). Big banks have been modifying, or attempting to modify, more loans. But the interesting part is that they have been doing so of their own volition – contacting those borrowers who are not yet late with payments, but who pose a risk of future default. While this seems like a great idea in theory, many borrowers who have tried to get modifications complain that it doesn’t help those who reach out to the lender for help – modifications that should be granted are not, while those that shouldn’t (not yet in default or borrower hasn’t contacted lender yet) are granted. It’s frustrating for people who are honestly trying to work out a plan to stay in their homes. I think the lenders need to address those who have stepped up and asked for help before contacting those who have not…a “deal with what is in front of you NOW, and worry about the future in the future” concept. What do you think?
Tuesday, March 1st, 2011
Wells Fargo recently announced that those who desire to purchase a home but have credit scores as low as 500 will be able to qualify for FHA mortgages. This announcement came after a slew of articles about how the major banks are stifling home purchases by cranking up the minimum credit score requirement in order to qualify for loans. This policy took effect January 15.
The FHA has a minimum credit score requirement was not being followed by banks, who required a score of at least 600 in order for the buyer to qualify for the 3.5% down payment. Under Wells Fargo’s new plan there will be several tiers for those seeking FHA loan approval.
Borrowers with credit scores of 500-579 will be required to make a down payment of at least 10% of the purchase price–no funding gifts or other assistance is allowed. Those who fall in the 580-599 range will be required to put down 5% (with the same gift and assistance restrictions), and those who have credit scores of 600 or higher will make a 3.5% down payment.
This is a positive move for the housing industry, and will afford more buyers the opportunity to become home owners. Kudos to Wells Fargo; hopefully other lenders will soon follow suit.
Saturday, February 12th, 2011
In case you were wondering, or if you have been sitting on the sidelines waiting to purchase a home in San Diego county, here is some fantastic news: housing affordability in San Diego reached a record high last quarter. Combined with other factors, it is an ideal time for buyers right now in San Diego, especially first-time buyers.
According to data published in the San Diego Union Tribune, 62% of first time homebuyers can afford to purchase a home in the county, the highest percentage going back to 2000. Affordability has tripled since 2006, when it was at an all-time low. Other factors come into play making the timing ripe for buying.
Interest rates, while estimated to climb slightly this year, still are at an all-time low. Even if rates climb a point this year they will still be at historically low levels.
Inventory will likely rise heading into the Spring selling season, although we are still at low levels comparatively speaking. Homes that are already on the market will have more competition with inventory increases, making it a great time to negotiate with those sellers. I have seen a rise in inventory in the last month alone along the north county coast, and overall most sellers are listing their properties comparably.
Short sales and REOs (lender-owned inventory) make for great negotiation possibilities, as long as a buyer is willing to wait a while when considering a short sale. I also see lenders making a return to the market, which is a good sign for housing, but could be competition for buyers as more well-priced inventory makes it’s way to the market.
Loan Products give first-time buyers choices and can make a big difference in the down payment and affordability factor. FHA loans, for example, only require a small down payment, and is a fantastic product for those who qualify otherwise but do not have 20% of the purchase price laying around in a bank account. This reason alone is one of the strongest in the affordability equation for first-time buyers. As long as the buyer has a job and is not self-employed an FHA loan could be a good choice.
Rent increases. Rents have risen across the country and in San Diego county lately, and renting and buying are getting closer from a cost-perspective. This Fall rent increases ranged from 1% to just under 4.5% in the county, leading to more vacancies as well (many people are moving to the outskirts of the county in search of cheaper rents). For many first-time home buyers who do the math it can be enlightening– so if you are still not sure about a home purchase look at the numbers and see if it makes sense for you.
Realtors have been saying for some time that now is a great time to buy, mostly because of the theory that buying when in a down or slow market is a strong financial tactic. But the above points show that there are many factors in play that make this a great time to buy. If you need further information on the local North San Diego market please do not hesitate to contact me.
Sunday, December 5th, 2010
Could it be that lenders are discriminating against you if your FICO score is at the lower end of the required range for granting a loan? It could very well be. A series of federal lawsuits is about to be filed, claiming that lenders are purposefully denying loans to many applicants based on lower credit scores, even though those scores fall well above the 580 minimum score set by the FHA (for applicants who qualify and have a 3.5% down payment). Many lenders require applicant borrowers to have credit score minimums falling between 620 and 680 despite FHA requirements that they can be lower.
Unfortunately for the lenders these federal complaints fall under the Federal Fair Housing Act, which will focus the spotlight on these lenders and could get them into hot water. The complaints allege that the requirement to have higher credit scores discriminates disproportionately against certain minority groups, including African Americans and Latino borrowers.
The FHA’s role is to insure lenders against loan losses such as foreclosures or delinquencies. If lenders are discriminating based on FICO scores, even though they fall within the established limits set by the FHA, then it means the FHA becomes, in a way, a partner in crime with the lender in discrimination. The FHA insures loans that fall within the guidelines, but obviously cannot do so if the lenders are not following the guideline requirements.
The end result of lenders setting their own limits is that borrowers and those wishing to refinance will be denied the opportunity to do so. It also has an impact on homeowners who are seeking loan modifications–if they do not meet the lender-imposed higher FICO requirements they will be denied modifications, which leads to more foreclosures. Not only is this discriminatory, but it further stagnates the housing market and prevents recovery, which has a big effect on the economy.
Lenders claim that imposing stricter credit limit requirements upon borrowers insures that there will be fewer delinquencies in the future. Lenders also receive revenue for servicing FHA-insured mortgages, which could disappear if many loans go delinquent.
What do you think: should lenders be able to set their own credit requirements, based on what they believe to be the applicant’s capacity to maintain the loan? Or should they be made to abide by the FHA loan requirements using minimum credit scores?
Thursday, November 18th, 2010
The Department of Housing and Urban Development (HUD) recently announced that it has initiated a program that could help you pay for home energy improvements. This program will grant loans, called FHA PowerSaver Loans, to credit-worthy borrowers up to $25,000 to make energy efficient improvements of their choice.
PowerSaver loans will be backed by the FHA, and up to 90% of the loan amount will be insured by FHA mortgage insurance. Lenders will be chosen to participate in the program based on commitment and ability to provide energy saving loans. Interest rates will be low and borrowers must have at least some equity in their homes, but it is not yet clear exactly how much and whether it will be a case-by-case basis.
Examples of energy efficient improvements include duct sealing, new doors and windows, water heaters, HVAC systems, solar panels, insulation and georthermal systems. It is not clear whether energy efficient appliances–such as washers and dishwashers–are included but most states have programs that provide rebates for these appliances.
Thursday, September 30th, 2010
Congress has approved HR 3081, extending existing loan limits through September 30, 2011 for Fannie Mae, Freddie Mac and FHA loans. This means that loans will continue to be guaranteed and insurance programs will remain in place which back loans up to $729,750 in markets where the cost of living is highest. This applies to new loans as well as refinancing.
The benefit of the extension to buyers is great, as it will allow them access to affordable, long-term mortgages with fixed rates, for a longer period of time. The bill also gives the FHA more power to back multifamily loans–great news for development, renovation and mortgage refinancing, which will benefit the housing rental market.
The extension bypasses the previous 2008 extension, which would have expired at the end of 2010. The maximum for conforming loan limits in non-high cost areas remains at $417,000 for Fannie and Freddie and at $271,050 for FHA loans.
Friday, January 22nd, 2010
The FHA has announced it is to make changes that will provide easier access to home ownership for borrowers and strengthen its reserves, allowing it to better manage risks. The changes are expected to go into effect this spring and early summer. They include:
1. Increase the mortgage insurance premium (MIP). The goal is to bring back private lending, which will offer more choices to borrowers. At first the upfront MIP will be raised to 2.25%, with a request to raise it to maximum levels allowed by the legislature. Upon authorization the MIP premiums will then shift to the annual MIP. The benefit to the consumer will be an increase in capital reserves, as the annual MIP will be paid over the life of the loan in lieu of being paid at closing time.
2. Update the FICO score and down payment requirement for new borrowers. To qualify for the FHA’s 3.5% down payment program a new borrower would have to have a minimum FICO score of 580. A lower score would require a down payment of at least 10%. To put it simply, the riskier the borrower the higher the interest rate and down payment needed to secure a loan. This change would take effect in early summer.
3. Seller concessions would be reduced from 6% to 3%. Doing so will prevent inflated appraisal issues.
4. Increase enforcement of FHA lenders. There are several measures included to keep lenders in compliance.
There will also be a moratorium on the 90 day anti-flipping rule. This rule stated that investors had to wait 90 days after purchase of a property before they could place it for sale on the market. The problem with this rule is that it ended up affecting average home buyers too, who did not have the opportunity to purchase homes bought by investors until the waiting period expired. Investors need to sell these properties quickly. There are some further details involved, so if you would like that information please let me know and I will get it for you.
Michael Mekler of Benchmark Mortgage, who is an FHA lending specialist, says that there is a silver lining in all these changes: “The increase in PMI will offset losses already incurred by HUD, and not decrease the volume of FHA borrowers. The lifting of the 90-day rule gives FHA borrowers a better chance of being able to buy a rehabbed home.” Mekler believes that even with the increases in MIP, FHA loans will still be a popular choice amongst borrowers. For more detailed information on the new rules you can contact Michael at firstname.lastname@example.org or call toll-free to 1-888-218-0094.
Wednesday, December 2nd, 2009
If you are in the market to purchase property and are counting on getting an FHA-insured loan, you may want to act quickly.
First, a quick explanation: the FHA, or Federal Housing Administration, is not a lender, but instead insures loans that are written under its guidelines, thus protecting lenders against losses on those loans. If the borrower defaults on the loan the lender can seek recourse from the agency. A huge benefit of an FHA insured loan is the low down payment, which can be as low as 3%. The agency insures a large percentage of loans written by lenders in the U.S.
The FHA is about to enforce new underwriting guidelines and fee increases in order to combat falling reserves and rising losses that have affected the FHA. There are four categories of changes that are to be implemented:
1. Raising Annual Insurance Premiums for Borrowers. The bottom line is that borrowers will have to pay higher insurance premiums as part of their borrowing costs. An upfront insurance premium payment will be raised, as will the percentage of annual premiums depending on the amount of the down payment.
2. Buyer Credit Score “Floor.” The lower the down payment, the higher the credit score will need to be. Exact amounts are not yet determined. Currently most lenders require a minimum credit score of 620 for FHA borrowers, but this may change if the down payment is low.
3. Increase in Buyer Down Payments. Sellers will be restricted on the amount of money they can put toward the buyer’s closing costs. This number will drop from the currently allowed 6% to just 3% of the home price. Down payment increases are also being considered, which could price many FHA buyers out of the market.
4. Higher Accountability for FHA Lenders. FHA approved lenders will be held to much higher standards for loans they submit to the FHA. There are no details as of yet on this one.
The problem with the above changes is that if the economy continues to worsen it may not actually be beneficial to the FHA. The result could facilitate the necessity to utilize a tax payer bail out of the agency, something that I assume the majority of people will oppose. This won’t likely happen right away but could be a problem in the years ahead. Either way, THE FEDERAL GOVERNMENT NEEDS TO IMPLEMENT MORE DRASTIC MEASURES TO PREVENT THESE PROBLEMS.
This newest real estate fallout could make it much harder for people to obtain loans, especially those with small down payments–what is viewed as an acceptable down payment today may not be in the future.