In obtaining a FHA loan might be a tad more challenging now, more than ever. Now with a slightly larger downpayment and the possibility of downpayment assistance programs being delayed or not coming back, the average consumer will just need to be a little more patient. Hence the reason why they will need the services of a mortgage professional more than ever, and just not an order taker.
So, what has changed and will take place next year? FHA Mortgagee Letter 2008-23 - The fact that you will need 3.5% of your own money as a downpayment. 100% of this can still be from a gift, which can still come from several different sources. But none of that 3.5% will be applied to your closing costs as if did in the past.
The effective date for all FHA mortgages on the new downpayment will be January 1, 2009. Now, this is for purchases only. We will still be using the old method for all refinances in regards to FHA loans. The one difference being that you could not exceed the appraised value when for all loans when adding the UFMIP.(upfront mortgage insurance premium)
Some extra changes or non-changes :
- Sellers assistance is still permitted up to 6% seller concessions. This 6% is calculated off of the sales price.
- As mentioned, closing costs may not be used to help meet the minimum 3.5% downpayment requirement.
- On all FHA loans, no matter if it's a purchase or refinance, the total first mortgage with UFMIP can't exceed the appraised value.
- In regards to the combined loan-to-value (CLTV). If government subordinate liens are involved, the combination of the 1st mortgage and any other lien can exceed 100%. This has always been the same, previous to this new mortgagee letter.
- The effective date for the 3.5% change is for all FHA loans with FHA case numbers that are assigned on or after January 1, 2009.
FYI Section - For any of you reading this that have been talking to another loan officer and it takes more than a day to get an answer about anything? I would start to seek a true mortgage professional. Especially one that understands most guidelines when it comes to FHA mortgages. I am seeing more and more bad advice or misleading information being passed out by loan officers. This could cost you money down the road, no matter how you look at it.
For your FHA mortgage needs, please don't hesitate to contact me.
FHA Loan changes for 2008 - 2009
Part 1 - Down Payment Assistance Programs
Part 2 - Upfront Mortgage Insurance Premiums
Part 3 - Down payment and Maximum Mortgage Requirements
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For more information on FHA loans, please go to this link. The FHA Expert
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For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!!
Copyright © 2008 by Jeff Belonger
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For more information on FHA loans, please go to this link. The FHA Expert
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Copyright © 2011 by Jeff Belonger of Infinity Home Mortgage Company, Inc
Thanks for the update. These rules are fairly simple to me, but to the average buyerm they may seem a little complicated. I guess that's why they need a good mortgage person.
Nice concise piece Jeff. I am thinking that your recent visit had some influence on the lawmakers. As for the FHA down payment requirements, 3.5% is a good number. As one of my colleagues used to say, borrowers should have some "skin" in their investment. In this market, the more skin you have when the house is declining, the better off you are. Thus the real reason an investor wants a down payment. It helps protect the investment.
As always, thanks
Bo
Jeff- Great info. Could you clarify what you mean by the "effective" date of 1/1/2009? Is this for any loan that closes on or after 1/1/2009, regardless of when it was originated? Thanks!
Jeff, thanks for the information. It is so important to be informed right now, because buyers have many questions.
Jeff:
This is an important update for us and for buyers. I suspect we will see many other changes that will make getting a loan more difficult. Not a bad thing for some buyers, but frustrating for others.
Jeff
LARRY B. ........ it did get simpler, that's for sure. And for the average borrower, they just need a good loan officer to walk them through all of this. thanks
BO........ thanks for the kind words. And in regards to my most recent trip to DC, I would hope so. In regards to your comment about skin in the deal? I semi disagree.... if they qualify under the basic guidelines without pushing the envelope, then it shouldn't matter as much. Do you know that there are 100's of thousands of foreclosures with people that put 10% to 20% down? It goes back to our economy... more people are willing to save their house, but if they could just make their mortgage payment. I still honestly think that was the route of the problem... and still will be. The rest of the info in my opinion is just hogwash... just politicians trying to sound smart and educated.
MATT...... thanks for the compliment and thanks for pointing out the effective date issue. I did go back and add to this. It basically says that all FHA loans that are assigned a case number on or after 1/1/09, are required to have the n32 3.5% downpayment. thanks
SHARON....... it's not even the buyers with many questions, but the loan officers that don't have much of an idea. So many don't know the basic credit requirements and how to determine income ratios correctly.
Excellent..you're an inspiration to us all true mortgage professionals!
Jeff- Thanks for clarifying and helping me better understand the changes. This information is sooo important, I just spoke with a friend of mine last night who simply assumed no one could get a mortgage right now. I've got to think many others who would qualify, assume the same thing and have retreated to the sidelines.
The amazing thing is that none of it can be used towards closing costs. The changes keep coming, but FHA is still the best thing out there.
I guess we will be selling fewer homes now but less foreclosures in the future.
Good info Jeff.
It is more & more important for borrowers and their realtors to work with knowlegable loan officers.
Jeff,
Great, brief and full of the right facts- we can always count on you to get the word out. Really well done piece on all 3 posts. Kudos for putting in the time and effort.
I too have been seeing a lot more misinformation going on lately. Whether it because there are too many changes coming too fast or too many lenders trying to get into FHA, it's more important than ever to get a knowledgeable pro!
Gerry Suarez, Jr.
Your FHA Loan Pro!
Jeff, As always, thanks for the much needed updates on the FHA guidelines! So many changes to keep up with and your posts really help us all! I would love to reblog all 3 in this series if you wouldn't mind?
Thanks very much for the updates; excellent post:)
Jeff,
Thanks for the post. No doubt there will be a barrage of new rules for the practitioners to adhere to. Your efforts to keep us informed are appreciated.
You are an excellent resource. Thanks so much for the info.