Loudoun Real Estate Blog

Jennifer Moist with First Horizon Home Loans has just updated us that the U.S. Dept of Housing and Urban Development has informed lenders of the new changes to FHA loans.  This is a huge opportunity to move some buyers into homes and/or provide some alternatives to Sellers who have had homes on the market for an extended period.  Also the rumor is that the jumbo loan limit is going to be raised to $729,750 as well and some speculate that HUD decided to go to the same limit.  We will know more about the jumbo limit within the next week.

HERE IS WHY FHA LOANS ARE GREAT:

• There is currently no minimum credit score requirement (although guideline is 580+)
• There is only a 3% downpayment requirement (which you can negotiate for the Seller to pay on the buyer’s behalf via a Seller Funded Downpayment Assistance program such as Nehemiah or AmeriDream–explanation of this attached)
• Seller concessions of up to 6% of the purchase price allowed (PLUS with First Horizon, we currently permit the Seller to contribute another 3-4% towards downpayment assistance for a total of 10% in allowable contributions)–most other lenders include the Seller Funded Downpayment Assistance contribution as part of the maximum 6% concession
• NO INCOME RESTRICTIONS FOR BUYERS
• NOT RESTRICTED TO FIRST TIME HOMEBUYERS, AND NO LIMIT TO HOW MANY PROPERTIES BORROWER CAN OWN SIMULTANEOUSLY
• Current 30 year fixed rate of 6%, or a 3 year ARM at only 5%!!!
• If the Seller isn’t willing to fund the downpayment, the Buyer can receive the entire downpayment as a gift from an immediately family member
• No reserves required

There are other changes coming due with the FHA program, including the prospect of reducing the downpayment required to only 1.5%!!!  This may be in conjunction with tiered pricing adjustments for credit scores/loan amounts, but the exact guidelines for such have not yet been released.  I’ll keep you posted of developments and news as the information becomes available.  It is expected the anticipated changes on Conventional loans will be released tomorrow as well, so I’ll be providing you the information on that too as soon as we get it!

Things to be cautious about concerning FHA:  condominium projects must be FHA approved, and there are not a lot in Loudoun county that are.  Also, there are two forms of mortgage insurance on FHA loans:  an upfront premium that is financed into the loan (so it only marginally affects the monthly payment) PLUS a monthly premium (which is roughly half of what it would be on a conventional loan, so it isn’t a big deal.  Plus the monthly premium can be eliminated once the balance of the mortgage reaches 78% of the initial loan amount (at this time, they won’t allow a new appraisal to eliminate the PMI).  The Borrower must keep the monthly PMI a minimum of 5 years.  However the Borrower can refinance the loan within 6 months of purchase if they qualify and have established enough equity at that point (i.e. they put an addition on the home or the market turns and home starts appreciating, or if they pay a lump sum down on the principal balance). FHA loans must be used for primary residence purchases.  Lastly, the new loan limits are only verified to be through December 31, 2008 at this time.  FHA may decide to extend them, but we won’t know that until a later date. 

Keep in mind these changes have just gone into affect, so many lenders will need to update their computer system and automated approval engines to incorporate the changes