If the changes in limits for loans through FHA do change instead of being extended it may make it hard on home buyers.
If Congress does not extend the expiration deadline, FHA loan limits will end starting on October 1, which will result in changes that can affect potential borrowers and the housing market. FHA loans provide borrowers competitive rates along with terms, and only require a 3.5% down payment.
Allowable debt ratios are higher than the normal debt ratio limits seen with conventional loans. Additionally, there are not any income limit qualifications, which allow more individuals to qualify for the loans.
In an effort to help the home buying market, Congress raised the loan limit until September 30. Lawmakers at this time have not come to an agreement when it comes to extending the loan limit. If this loan limit is dropped several California home buyers looking for larger mortgage will need to apply for jumbo or conventional loans. This may cause these individuals to have to put up larger down payments and pay higher interest rates.
Potential home buyers should keep an eye on the following if the loan limits are decreased.
• Lower loan limits – The conforming loan limit decides the maximum mortgage amount that FHA, Fannie Mae, and Freddie Mac can buy or guarantee.
• Decreases by county – Under the new FHA loan limits, some counties in California will see major drops in their loan limits. Santa Clara County will see a $104,250 drop.
• Jumbo loans – The current FHA loan limit is $729,750. After October 1, that limit may decrease to $625,500. All mortgage loans higher than this amount will be known as nonconforming jumbo loans, which normally have rates that are 0.875% to 1.5% higher than conforming rates and require higher down payments.
• More stringent requirements – FHA loan requirements may permit lower credit scores.
Good News! Mortgage rates are considerably low right now. What this means is if you are considering refinancing, now is the time. With rates this low, you can save a huge amount of money each month by reducing your monthly mortgage payment.
This will allow you to have extra money to put away in your child’s college fund or your own retirement fund, home repairs, home improvements, or for that brand new car. If you wait, you may miss the chance to save hundreds of dollars. The market changes at a blink of an eye and you do not want to miss the opportunity while mortgage rates are low. Let me help you get started today on that refinancing loan.
More good news! Congress has extended higher conforming loan limits that are backed by FHA, Fannie Mae, and Freddie Mac until September 30, 2011. The higher loan limits were established by the Housing and Recovery Act in 2008.
Before this time, the conforming loan limit was $417,000 in the high-cost areas. After the Housing and Recovery Act was signed, the conforming loan limit has been $729,750 in most high-cost areas.
This conforming loan limit is very helpful in high cost areas across the nation such as in New York and California where the average housing costs trends are quite a bit higher than other areas around the US. With housing prices down, many homebuyers in these high-cost areas have discovered they are eligible for refinancing with a high balance conforming loan. Do not wait if you wish to refinance as you only have until September 30 to close the contract.
You can contact me today and I will provide you with all the information about these new great developments and how they can save you money.
There is more and more evidence that our society is shifting from conventional mortgages to Government Insured mortgages, so for lenders there is a question whether they should become a FHA approved lender.
Look at the past activity. In July 2008, 29.1 percent of loan applications were for government issued loans. In just one year, the share of loans that are government issued has tripled. Since July 2007, we have seen an increase of 317 percent from conventional to FHA refinance applications, 260.8 percent conventional to FHA refinance endorsements, 133.9 percent applications for government-insured loans, and a 502 percent decrease in conventional loan applications.
Looking through more data it can be surmised that FHA is fast becoming the wave of the future for many wanting to purchase a new home. In January of 2007, FHA loans were only a mere 1% while Fannie Mae and Freddie Mac were at 60% for Lenders One. Scott Stern the CEO of Lenders One stated, “FHA is the fastest-growing product,” and went on to state that, â€œNow we are almost 48% conventional and 48% FHA.”
He believes that FHA is receiving more good publicity and the at the federal mortgage insurance program are helping with this new trend. The main reason the federal mortgage insurance program is aiding is that fees have not raised and they have not tightened their underwriting standards that we have recently seen with Fannie Mae, Freddie Mac and others.
In July 2008, Ginnie Mae reported 24.9 billion in fixed issuance whereas Freddie Mac was only at 20.3 billion. This is the first time in history that Ginnie Mae had been above Fannie Mae or Freddie Mac.
August is looking great as well for Ginnie Mae since they have issued 25.3 billion to date while Fannie Mae is at 24.0 billion and Freddie Mac is at 16.5 billion.
With this trend, more and more homeowners are searching for government issued loans for all kinds of reasons over conventional loans. Not only should lenders look into becoming FHA approved, but also more agents should be seeking these lenders to help homebuyers in search of their dream home.
Much like everything else tied to the stock market, we have analysts, and stock trading investors that love to jump the gun. When they jump the gun, everything comes tumbling down so to speak.
When investors feel the market is not doing what they think it should and bring them record profits, they pull away from certain stocks, or sell what they own. When investors do not have confidence in any market sector, they are not going to buy stocks in that sector whether it is the housing market, oil, or even electronics. We see this trend all the time in every sector across the board.
Of course, you heard it on the news that Fannie Mae and Freddie Mac were in trouble, once again, you are listening to the Media that loves to blow everything out of proportion to get a rise out of investors, consumers, and everyone that listens.
When this occurred, the Fedâ€™s had to do something just to ease the minds of the general public and of course those investors on Wall Street. What did they do? Well, all they really did was state that Fannie Mae and Freddy Mac cannot fail as they are both government sponsored enterprises and they will do what is necessary to stop the failure, which will never happen.
The Fedâ€™s devised an emergency plan just to put everyone at ease, which includes:
Congress was asked to pass legislation to extend lines of credit for a temporary time period over the 2.25 billion limits at the present time.
This will give the Treasury has the option to buy equity in Fannie Mae and Freddie Mac.
In addition, grant the Federal Reserve Bank of New York the authority to lend funds to Fannie Mae and Freddie Mac if needed.
After the initial statement from the Fedâ€™s we heard from both Fannie Mae and Freddie Mac.
Daniel H. Mudd, President, and CEO of Fannie Mae stated, â€œWe continue to hold more than adequate capital reserves and maintain access to liquidity from the capital markets,â€¦â€œGiven the market turmoil, having options to access provisional sources of liquidity if needed will help to strengthen overall confidence in the market.â€
Words of Richard F. Syron, Chairman and CEO of Freddie Mac were, â€œThe company (Freddie Mac) is adequately capitalized, has a large liquidity portfolio and access to the world’s debt markets. The company’s capital and liquidity resources will enable it to continue to serve its public mission as it has always done.â€