A good sign for the real estate market is that some lenders have reintroduced the 95% conventional loan product. There are also some other “more risky” loan products making a comeback. I think we can look at these new financing options as a positive sign for our market place. Investors and mortgage insurance companies are now willing to offer these loan programs that have been unavailable for the past two years. In this weeks mortgage market insider newsletter, I want to cover some of the loan programs that have been recently revised and updated and are now available for buyers in California. 

1. The 95% conventional loan is back
A few lenders have started offering this loan product again in the past few weeks. This is good news for the markets as the Mortgage Insurance companies obviously believe that these loans are now worth insuring again, until recently most MI companies would only go to 85% financing. This loan is available for first time buyers up to $417k on single family residences only. Good credit scores over 740, low debt ratios and reserves are required.
 
This truly is a great low down payment alternative to FHA loans, especially since FHA just increased their upfront MIP (mortgage insurance premium) to 2.25%..conforming loans do not have this charge.  

 
2. Jumbo loans up to 90% and $729k are now available
Several banks are now offering 90% financing on Fannie Mae jumbo purchase loans up to $729k in CA on single family homes only, the San Diego’s county loan limit is $697k. This is excellent news as the mortgage insurance companies are now willing to offer MI on jumbo loans with a lower down payment, until recently most MI companies would only go to 80% financing. This loan is also available for first time buyers, you need a 720 credit score and debt ratios are required to be under 45%.

3. Super Jumbo loans are making a comeback
This has been a demographic of the market that has been hit really bad in the past few years, as many investors and banks would not offer loans over the Fannie Mae jumbo loan limits of $729k here in California. There are now a few investors that will go to $2 million dollars on jumbo loans up to 80% financing. Up until recently most super jumbo lenders would only go to 65% or 70%. These loans are full documentation only, require good credit scores, Strong debt ratios and plenty of reserves
 
David Adamo the CEO of Luxury Mortgage Corp, whose company is always one of the biggest players in the super jumbo loans arena, recently announced “I am very optimistic that we’ll be restoring the liquidity in that end of the market very soon, as investor groups have been asking our company to come up with new super jumbo products having loan balances over $1 million for the first time in two years”.
 
4. Stated loans are available
Stated loans have practically disappeared over the past two years. But now there are two investors offering stated loans to new buyers. W2 stated borrowers can get financing to 80% up to $417k on a single family home or a condo. Once again good credit scores over 720, low debt ratios and assets are required.  
 
Stated self employed is another segment of our industry that has taken a beating recently, as no one has been willing to lend to this group. There are many Americans that are self employed with excellent credit and tons of reserves that cannot qualify full documentation, but deserve the opportunity to get a good loan. These loans absolutely make sense if they are underwritten properly. I have an investor that can now offer Stated self employed buyers between 50-70% financing up to $1 million with a 720 credit scores and Strong reserves. Interest rates are also very good. 
  
5. Private money loans for REO’s
Private money loans are a great financing option in this market especially for investors looking to flip properties. I have one very good source that I work with that offers up to 65% of rehab value and only requires 10% down of the purchase price, in most cases affords 90% financing and will do escrow hold backs like the 203K program. There are no payments and no prepay penalties due while the property is being fixed up, so maximum profits can be taken for the investor. Terms are also very competitive.  

 
Fannie Shortens Wait for Some Distressed Borrowers to Get New Loans
Fannie Mae just announced last week that it is reducing the wait time for some borrowers between when they complete a short sale or deed-in-lieu of foreclosure transaction and when they can obtain a new mortgage. Previously, a borrower was required to wait four years before getting a new mortgage, or two years if their home sold in a short sale. Under the new guidelines, a borrower that previously completed a deed-in-lieu of foreclosure transaction can get a new mortgage in two years, provided the borrower has a 20% down payment. This new policy is effective for manually underwritten mortgage loans with application dates beginning July 1, 2010.
 
Showing signs of recovery
I think it is great news for our markets that investors are beginning to offer these alternative financing options again for our buyers. Many of these loan programs above were not available a few months ago, so this is definitely a boost for everyone. The mortgage insurance companies are obviously deciphering that in most areas serious depreciation is becoming stable, hence why they are now allowing loans to get financing up to 95% for example. Now we can just hope that some of the other underwriting guidelines start to ease up for some of our buyers…I can hear some people groan:).  Click here to find out the top 5 reasons why loans are being denied by underwriters.  

 
I believe that for a full market recovery it is imperative that investors continue to make more of these financing options available, so more buyers can continue to enter the markets. But, as each month passes too, we also must be thankful for the signs of recovery we see. As these new programs become available, it is important to let your clients and friends know these new financing options are available to them. As one door opens there is always someone who is waiting for that opportunity.
 
If you have any questions about how to qualify for any of these loan programs, or you have a buyer that might fit one of the scenarios above, please do not to hesitate to contact me directly at 858-200-9602. I look forward to chatting soon.

This entry was posted on Thursday, May 13th, 2010 at 7:09 pm and is filed under The 95% Conventional Loan is Back for New Home Buyers!. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Leave a Reply