It would be safe to say the Real Estate market would be in a more precarious position if it were not for FHA financing, as over 50% of all San Diego home loan transactions are now done through the FHA. Experts are predicting that FHA financing will be responsible for funding at least 75% of all first time homebuyer transactions for all home loans in San Diego in the next 12 months. Here are some of the recent FHA changes that came out recently that will affect all new buyers.
Recent announcements by FHA will help new buyers
FHA came out with a few announcements last week that will help the housing market in the near term. Spot approvals for condo projects were supposed to be ending on December 7th, but have been extended yet again until February 1st 2010. I actually would not be surprised if they extended this until the end of 2010. They also eased the guidelines for condo project eligibility until December 31st 2010 in regards to owner occupancy rates, pre sale requirements and FHA concentration requirements for each condo project…this essentially will make it easier for a buyer to qualify to buy a condo so this good news. FHA also took away the need for a 2nd appraisal on all jumbo loans over $417k, needing two appraisals done before was both more costly and time consuming for buyers and sellers.
Buyers not have enough funds to purchase? FHA to the rescue
The # 1 reason I hear that buyers cannot afford to buy is because they do not have the funds for the down payment and closing costs. FHA allows gift funds for all the down payment and closing costs, many times I have had to advise my clients that they are able to borrow funds from their family or a relative for closing, with the $8k tax credit being available currently, buyers can pay them back with this credit once they close. Or if they have some funds in their 401k or retirement account, they can borrow from this and then pay it right back with their $8k credit once they close. Another option that a lot of people are not aware of, is that mum or dad can lend if they wish, and not gift, some or all of the money for closing, and then put a 2nd lien against the home that exceeds 100% loan to value.
Buyers unable to qualify alone? FHA allows co-signers
Many times a new buyer is unable to meet the qualifying guidelines for a new purchase loan. FHA allows for the use of non occupant co borrowers (co-signers) to help buyers qualify. This is a very popular scenario with parents who want to help their child qualify for their first home. I have been able help many more of my first time buyers just by letting the buyer know they have an option to ask their parents for help, many times the buyer did not know this was an option. Many times there will be another family member who will be willing to help out and co sign, they just have reach out and ask.
Quick FHA facts
· A 15 year fixed FHA loan has no monthly mortgage insurance.
· 2-4 unit owner occupied properties are also eligible for 96.5% financing at the same interest rate as 1 unit homes.
• FHA financing allows for 96.5% financing up to $697k here in San Diego.
The 1st time buyer market is buzzing and FHA will represent 75% of new transactions!
With the $8k home buyer credit getting extended until June 30th, this has brought a flood of new buyers off the fence and back into the market looking for home loans in San Diego. Rates are also fantastic right now on FHA loans, with most borrowers qualifying around 4.875%-5%, and this also goes for people with above average credit scores of 660. But it is important for buyers to know that, once the Federal Reserve stops buying mortgage backed securities next year rates may go to 6%, becuase as we all know they are artificially manipulating the market right now to keep rates low to stimulate homebuying. I believe the next 6-12 months will represent a once in a lifetime opportunity for many buyers looking for home loans in SanDiego, especially when you consider current rates, temporary guideline changes and low prices, and the FHA is going to play a major role. If you are looking for more information please do not hesitate to contact me directly at 858-200-9602, or you can visit my website at www.michaeladeery.com for more information.
Sincerely
Your mortgage planner
Michael Deery