Loans by Irene – Granite Financial

A 5% down payment conventional loan is available again!  There are some heavy restrictions, so please read the following stipulations:

• Conforming loan ONLY (Maximum loan amount: $417,000)
• Purchase only (no refinances)
• Single-family home or detached PUDs only (no condos or attached PUDs)
• Must be your primary residence
• 760 minimum FICO (the middle FICO of all borrowers)
• 41% maximum Debt-to-Income ratio

Please note this is for California real estate.  If you do not fit into these guidelines, then FHA is most likely the way to go, which is more flexible with credit and qualifying requirements, although more expensive than a conventional loan.

I do not know how long this will last, but 5% down has not been available for a year.

Down payment requirements on conventional loans are dependent on several factors: Loan Amount, Property Type, FICO score and qualifying ratio.   The FICO score and qualifying ratio come into play primarily when you have less than 20% down and because we have to layer Mortgage Insurance company rules with normal lender rules.  20% down will get you the better interest rate, and it will also eliminate the need for Private Mortgage Insurance.

SFR: Single Family Residence (standing on its own; not a part of a development)

PUD: Planned Unit Development (generally known as a townhouse). It is rare to find a detached PUD, but do speak to your real estate agent about this.

DOWN PAYMENT REQUIREMENTS IN CALIFORNIA:

Up to $417k Loan Amount (Conforming Loan):

SFR/Detached PUD: 10% down minimum

Attached PUD/Condo: 15% down minimum

$417k – $729,750 Loan Amount (High-Balance Loan):

SFR/Detached PUD: 10% down payment

Attached PUD/Condo: 15% down payment

Above $729,750 (Jumbo Loan):

Please call me for this scenario.  The down payment requirement in the Jumbo Loan range tends to fluctuate; in addition, few lenders are participating in this loan level, so it depends on investor involvement and their portfolio at the time.

Federal Housing Administration (FHA)-insured loans are a great way for people to get started in the housing market. It provides an alternative to conventional loans because it allows for little down (3.5%) and the minimum credit score requirements are more flexible. You can read about FHA versus Conventional financing here.

The Federal Housing Administration has recently announced that there will be upcoming restrictions, so the window of opportunity is tightening. An exact date for implementing these changes has not been set, but they are alluding to late spring/early summer.

I will keep you updated, but some of the highlighted changes include:

• The Upfront Mortgage Insurance Premium will increase from 1.75% to 2.25% (on a $400k loan, this translates to a $2000.00 increase)

• A lower credit score will require more down than a higher credit score

• Allowable seller concessions (which help pay for closing costs, the Upfront Mortgage Insurance Premium and any points to buy down the interest rate) will decrease from 6% down to 3%

All of these mean less opportunity and higher costs for you, so if you’re on the fence about buying, you should consider these changes in your analysis. And as always, please let me know if I can run numbers or help you with a pro/con assessment.

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Beginning December 11th, it will officially be harder to qualify for a home loan.

In the past and up until 12/11/09, lenders allow(ed) your qualifying ratio to go up to 55%, at least with compensating factors of good credit and 20% equity or down payment in a home.

Your qualifying ratio is the calculation of your total housing payment obligation (mortgage, property taxes and insurance/HOA dues) plus your monthly payment obligations on any debt (credit card, student loans, car loans…) divided by your monthly gross income.  With good credit and equity, lenders have accepted ratios up to 55%.

The rule is changing and the qualifying ratio can be no greater than 45%. This will affect how much you can qualify for, so the change is significant.

If you’re thinking about refinancing and your ratio is tight, you may want to get your rate locked by the 11th; otherwise, the opportunity may be missed.

If you’re currently preapproved to buy a home but not have found a home yet, this can change your purchase price and loan amount level, so discuss this with your mortgage professional or let me know if I can help.

The $8000 federal tax credit has been extended and expanded! The credit, which was supposed to expire 12/1/09, has now been extended to 4/30/10. In addition, there will be a 60-day extension if you go into binding and official contract prior to April 30th.

In addition to extending the $8000 1st time homebuyer tax credit, it has been expanded in many ways:

1. Qualifying income limitations increased. Single filers can now qualify if their Modified Adjusted Gross Income (MAGI) is up to $125,000 (up from $75k). Joint filers qualification increased from $150k to $225k.
2. NEW: Existing homeowners that have lived in their current residence for at least 5 of the previous 8 years and are buying a new home now qualify for a $6,500 credit, assuming MAGI above.

Another highlight is that taxpayers can claim the credit on their 2009 tax returns for purchases made in 2010.
The other details remain the same, in regards to the definition of a first time homebuyer (must not have had ownership in the previous 3 years) and how long you must own the home in order to avoid paying back the credit (the home must remain your primary residence for 3 years after the purchase).

Right now, this is a rumor, but when I hear rumors like this, I’m pretty sure it will happen:

Effective 10.2.09, you will be required to put 15% down on a condo for a conventional loan.  FHA loans still allow for the minimum of 3.5% down, but there are stringent development requirements on condominium projects, which makes it very difficult to get a loan through if it is not already FHA-approved.  (Also, the seller may flat-out reject your offer if you only qualify for an FHA loan on a condo, since FHA condo requirements are so strict).

As a side note, if you’re seeking information online or from an online bank, make sure that they’re aware of the rules pertaining to the state you are buying in.  California is a declining market and thus does not allow for 10% down come October 2^nd.

Here are the changes that we’re expecting in the industry in regards to the latest down payment guidelines for conventional loans (FHA remains 3.5% minimum):

Up to $417k Loan Amount:

SFR/PUD: 10% down minimum

Condo: 15% down minimum (effective 10/2/09)

$417k – $729,750 Loan Amount:

SFR/PUD: 15% down payment

Condo: 15% down payment

$729,750+:

SFR/PUD: Call me; there are too many variables for FICO and exact loan amount

Condo: If this is your loan amount range, I hope you’re not in the market for a condo!