Seward Real Estate Blog

Time to take a new look at FHA Loans
July 29th, 2008 6:33 PM

Time to take a new look at FHA Loans

Federal Housing Authority (FHA) loans may actually become popular once again! Based upon the latest economic stimulus package signed into law, refinancing or buying a home with an FHA Loan may now make sense in California. This is particularly the case in Santa Barbara County, where the FHA loan value limit formula has raised significantly due to our higher Median Price levels.

The Federal Housing Authority, Fannie Mae, and Freddie Mac now have the limits on the size of mortgages they can finance or buy increased up to $729,750. Even higher limits are now available for Multi-Family Units.

With this new reform package, the Federal Housing Administration is now more relevant in today’s housing and mortgage lending industry since they are expanding the agency, loosening underwriting standards, and most importantly have raised the original restrictive loan limits here in California and especially Santa Barbara County.

FHA insured loans may also be an option for borrowers who may be unable to make payments on their current Adjustable Rate Mortgages when their ARM interest rates reset.

Even if your credit is less than perfect, an FHA loan might still make sense since you may qualify despite any previous financial problems. With the new guidelines, FICO scores do not apply, and there are relaxed rules for people who have had a bankruptcy discharge or Foreclosure after 2-years. The FHA rules are loosened, all at a time when the conventional /Jumbo Loan requirements have become far more stringent in the last several months.

The FHA Rates & Terms are far more competitive than the current Jumbo Loans, with rates typically a full 1 - 1.5 percent lower. The typical FHA Loan has little or no adjustment to the interest rate, and the Mortgage insurance is funded right into the loan which is far less than Private Mortgage Insurance (PMI) premiums. Borrowers can also finance up to 97% of the purchase price, and if combined with other types of loans, your down payment may actually be zero. The allowable debt-ratios are also higher than the strict debt-ratio limits required for today’s conventional loans.

A recent HUD announcement states that the increase in loan limits will enable more working families to become homeowners and will help the FHA mortgage insurance program keep pace with the robust housing market. The FHA estimates that it may be able to help over 200,000 borrowers who are facing possible foreclosure with the new higher loan limits coupled with the loosened underwriting standards.

It might be time to reconsider the more affordable FHA-backed mortgages, but don’t delay since this is only a temporary increase in the loan limits, and it is scheduled by law to end in 2009.

We have fully approved HUD / FHA Roster Appraisers that were tested under the original stringent FHA guidelines/standards. We understand all the FHA requirements, and can help streamline the FHA appraisal and loan underwriting approval process.

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Posted by William Seward on July 29th, 2008 6:33 PMPost a Comment

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