Shira Real Estate

January 21st, 2010

Securing an FHA mortgage in california is about to get more expensive.

In a statement issued Wednesday, the Federal Housing Authority outlined policy changes to its mortgage assistance program. The shift is meant to both reduce the government group’s portfolio risk while strengthening its overall financials.

For consumers, the changes mean higher costs.

As listed in the official announcement, there are 3 major guideline updates for the FHA:

1. Upfront mortgage insurance premiums are increasing to 2.25% from 1.75%
2. Minimum downpayments for applicants with sub-580 FICOs are rising to 10 percent
3. Seller concessions are being limited to 3%, down from today’s allowable 6%

Furthermore, the FHA has appealed to Congress to raise an FHA borrowers’ monthly mortgage insurance premiums.

To read the FHA’s statement, it’s clear what the group is trying to balance.  On one side, the FHA wants to provide affordable financing to families that need it. That’s its mission statement. On the other side, though, the FHA must manage the risk that comes with insuring lesser-quality loans.

To that end, the FHA is stepping up its enforcement of “bad lenders” in hopes of stopping problems where they start.

Also in its new policies, the FHA is introducing a “termination clause”. If banks or loan officers that produce more than their fair share of bad loans, they lose their right to originate FHA mortgages.

As a result, homebuyers in chicago should expect tougher FHA underwriting in 2010. Not because the FHA says so, necessarily, but because banks don’t want to do “bad loans”.  Lenders are incented to turn down at-risk applicants and, already, we’re seeing examples of this. Despite FHA allowing 580 FICOs and lower, many banks have made 620 their minimum.

Some have other guideline overlays, too.

The FHA’s new guidelines don’t go into effect until spring.  So, between now and then, the old guidelines will apply.  Therefore, if you know you’re going to need an FHA home loan in the next few months, consider moving up your time-frame.

If nothing else, you’ll save some money at closing.

http://themortgagebuzz.com/

Buyers looking for a good deal on a foreclosure now have a little help, thanks to Fannie Mae.

The housing giant recently introduced “First Look,” a nationwide initiative that restricts offers on all Fannie Mae-owned properties to potential owner-occupants — rather than investors — during the first 15 days on the market.

“We believe First Look will help us make progress toward stabilizing neighborhoods and building stronger communities in this difficult market,” says Terry Edwards, executive vice president for credit portfolio management at Fannie Mae.

In the current market, sellers have been attracted to investors because they fear that deals attached to a mortgage loan may fall through, says Amy Stanley, a Realtor with Coldwell Banker Residential Brokerage in Manassas, Va.

“Usually, investors are offering to pay cash, so it’s not hard to see why those offers are accepted,” she says.

As a result, many potential owner-occupants have become frustrated at their inability to purchase a home, Stanley says.

“In 2009, many first-time buyers I was working with just gave up on buying a home after dozens of offers had been rejected in favor of investor offers,” she says.

First Look aims to reverse that trend by limiting early offers to individual buyers or organizations using public or charitable funds for the purchase.

“First Look provides owner-occupants and public entities that are committed to the community an early opportunity to purchase one of Fannie Mae’s real estate owned pro

perties,” Edwards says.

Finding and financing a property

To find a Fannie Mae foreclosure, check out the company’s Web site, which lists all active Fannie Mae-owned properties, including townhomes, condominiums and single-family homes. Buyers can search by price and location.

Home shoppers also can sign up for free daily e-mail alerts by ZIP code that notify them when properties go on the market. E-mail alerts can be sent to the buyer’s real estate agent through the site.

While Fannie Mae properties are sold “as is,” the company’s homes are generally in better condition than other foreclosures, Stanley says. Fannie Mae makes repairs to increase the marketability of its properties, but still recommends shoppers have a home inspection before buying a property.

Other requirements for purchasing a Fannie Mae foreclosure include:

• Buyers need to work with a real estate agent to submit an offer to the listing agent identified on the HomePath site.
• No offers will be accepted if they are contingent on the sale of a buyer’s current home.
• Buyers are required to have a prequalification statement from a lender.

Fannie Mae’s foreclosure Web site includes information about financing. Many, but not all, properties are eligible for a Fannie Mae HomePath Mortgage or a HomePath Renovation Mortgage (which wraps repair costs into the loan). Eligible properties have the HomePath Mortgage logo next to the listing.

Buyers of Fannie Mae properties can use any financing, and often have already been preapproved by another lender,” Stanley says. “But the best way to finance a Fannie Mae REO is with HomePath financing.”

Foreclosure buyers should make sure they are completely preapproved for a loan and have submitted all the necessary paperwork before making an offer, Stanley says.

She urges shoppers to look into HomePath financing as part of the loan preapproval process so “they are in a position to make an immediate offer if they find a Fannie Mae foreclosure.”

Fannie Mae spokeswoman Amy Bonitatibus says that since Fannie Mae appraises each foreclosed property to determine the value, borrowers financing with HomePath Mortgage will not have to pay for an appraisal. They also will not have to pay for mortgage insurance. In addition, the down payment requirement is only 3 percent.

Help with closing costs

Bonitatibus says that Fannie Mae typically pays between 3 percent and 6 percent of a buyer’s closing costs, regardless of how the property is financed. Buyers may choose any title company.

The HomePath Renovation Mortgage allows buyers to borrow an additional 20 percent of the “as repaired” property value, up to $30,000. The “as repaired” value is the appraised value based on the completion of specified renovations, such as new appliances, cabinets or flooring.

Buyers interested in purchasing a Fannie Mae foreclosure should be sure their mortgage consultant knows about the HomePath program, says Tanya Marchiol, founder and president of TEAM Investments in Phoenix.

“Buyers with good credit and debt-to-income ratios, might prefer conventional financing or an FHA loan,” Marchiol says. “But it’s important that the lender has the knowledge of all these programs to see which one is a good fit.”

Buyers interested in obtaining funding from their state or local government or charities should apply directly to their local offices to see if they qualify for assistance.

By Michele Lerner • Bankrate.com