Financing is such a hot topic right now. With financing option diminishing, consumers don't know what options are available for purchasing a home, even with good credit. Using FHA financing has become very popular in this market, and for those who want a quick reminder, following is some information to help you decide if this financing might be a consideration for your next purchase.
With all the restrictions on Conventional loans over 80%, FHA has become a major player in our marketplace, both for purchases and refinances. This is partly due to the flexibility, allowing people with credit-challenges to be financed (even a 580 credit score), but mostly due to the low down payment requirement (3%), which can be entirely gift funds.
I wanted to point out some of the significant changes in the works for FHA loans, both purchase and refinances.
Here's a summary:
1) The UFMIP (Up-Front-Mortgage-Insurance-Premium) has been increased from 1.5% to 1.75%. What is this? It's a percentage of the loan amount that is financed in the loan. Helps keep the monthly Mortgage Insurance cost lower than it would have been otherwise, and subsidizes the entire program. Everyone pays this in their loan, regardless of loan-to-value, or credit. In the future, we may go to a tiered system, but that was put on hold for now.
2) The minimum downpayment for FHA loans will eventually increase to 3.5% from the existing 3%. This was technically passed already, but held off until January 1, 2009, due to the sagging economy.
3) Cash-out refinances will be limited to 85% LTV. Currently, you can pull cash-out of your home up to 95% LTV.
Comments from one loan investor source: "FHA has traditionally been max 85% cashout. In late 2005 they decided to allow 95% cashout. They have had a 3 year run and not a very good experience as far as performance on these loans. That, coupled with the current housing market, etc, is causing serious debate among the powers-that-be to drop back to the 85% cash out limit. Again, it's not a done deal but if I needed the 95% cashout I'd get it done by the end of the year to be on the safe side, as this will likely be changed in the very near future."
Bottom line ... if you need to pull cash out of your home over 85% LTV, then it needs to be done now! With Conventional cash-outs capped at 80% LTV, and few other options, this is your only way to pull up to 95% cash out of your home.
For a referral to a reputable lender, please contact me. Knowing the right people to work with is key in this market.
For a referral to a reputable lender, please contact me. Knowing the right people to work with is key in this market.
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