First Time Homebuyer Financing

The Housing and Economic Recovery Act of 2008 affects many aspects of the real estate industry, including FHA loans. Here are several points you should know about how the housing bill alters FHA loans:

1. New Maximum Loan Limits – The maximum loan amount will be the lower of 115 percent of the median home price in the area or 150 percent of the conforming loan limit, which amounts to $625,500. In Miami Dade County, the maximum loan amount for a single family dwelling has been increased to $423,750.
2. Downpayment – FHA borrowers are required to make a minimum of 3.5% downpayment.
3. Seller Financing Downpayment Assistance – Sellers may still contribute 6% towards closing costs, and downpayment assistance programs are still allowed as well.
4. Alternative Underwriting – In addition to your traditional credit report, the FHA will allow your score to be derived from alternative credit sources as well. These sources may include, but are not limited to, rent and utilities.
5. Upfront Mortgage Insurance Premiums:
   • 1.75% for purchase mortgages and full credit qualifying refinances
   • 1.5% for streamline refinances
   • 3.0% for FHASecure (delinquent mortgagors)
6. Monthly Mortgage Insurance Premiums:
   • 0.55% for 30YR mortgages if your LTV > 95%
   • 0.5% for 30YR mortgages if your LTV < 95%
   • 0.25% for 15YR mortgages if your LTV > 90%
7. Credit Scores – The FHA requires a minimum credit score of 500 to qualify for maximum LTV. The middle of the three scores is used, and if you only have 2 scores, then they use the lower of the two.
8. Revised Loan To Values (LTV) – The LTV is based on the lower of the purchase price or the appraised value, as follows:
   • 96.5% for all purchases
   • 98.28% for rate and term refinances
   • 95% for cash-out refinances
   • 98.52% for all streamline finances

FHA loans remain a very viable source of financing with high loan to values for first-time homebuyers. Although other sources of conventional mortgages are available as well, often the FHA product is a good option for those borrower’s that may have a few credit challenges and/or need a mortgage product with a low downpayment.

For additional information on FHA financing or other sources, or for a free consultation to discuss your needs, please contact us at info@miamiangelproperties.com or call 305.673.5300.

No Credit – Run For The Hills!

Today I spent some time reconnecting with a few friends in the retail mortgage business. My idea was to determine the reality of the current lending climate and just what the latest mortgage lending guidelines require. And more importantly, is anyone funding loans out there?

A number of comments really jumped out at me, including:

• Until this week, Fannie Mae was still accepting “stated” or “liar” loans, however, Freddie Mac is still allowing them.
• The Federal Housing Administration is filling much of the gap, and in some cases, providing financing up to 97% loan-to-value (“LTV”). For example, even if you have a really low credit score in the 500’s, but you are able to show consistent payment history in the past 12 months, then you may qualify for up to 97% financing.
• Foreign National financing has been drastically cut back to a maximum LTV of 60%, however, these loans still require minimal documentation. 
• A few banks are still accepting ”stated” assets, therefore no sourcing or seasoning of reserves or downpayment is required.
• Mortgage insurers, excluding PMI, are no longer providing mortgage insurance on condominiums in Miami-Dade County and/or the state of Florida, therefore, max loan-to-value ratios on a condo are capped at 80% of purchase price or appraised value.
• A borrower with an 800 credit score, 18% debt-to-income ratio, could not obtain mortgage insurance to cover his 85% LTV, rate and term refinance, on his condo in Miami Beach.

In order to verify the information provided to me by my resources, I actually looked at the current FHA guidelines posted by Senderra Fuding. You may be quite surprised to read that “The Minimum FICO score for an Approve/Accept is 500″, and “Property Seller Contributions can not exceed 6%”, just to quote a couple of the guidelines. For more detailed information on FHA guidelines, please downloand FHA at a glance.

I hear that Countrywide, Bank of America, ING, Senderra Funding, AmTrust and several other banks all funded loans in south Florida this week. And 97% financing from the FHA with poor credit, no wonder why they are calling it the “new subprime!”

As far as running for the hills, please!