by Rob on February 8, 2010
As of February 1st, FHA has made some major changes to qualify FHA loan for a condo purchase. Prior to Feb 1st, to get FHA a loan a condo, the condo complex had to be on the FHA approved condo list, or if the condo was not on the FHA approved list you could apply for a FHA “spot” approval for a FHA loan on just that one unit. Now as of February 1st, if the condo is not already on the FHA approved list, you have to get the entire condo project approved. Also, every two years a condo will have to be RE-approved to stay on the FHA approved list.
There are basically two ways to get a condo on the FHA approved list and we can assist with both:
1. Have FHA itself approve the condo project
2. Work with a lender (such as us) to have the condo project approved for FHA loans
Getting the condo approved through FHA will take a minimum of 6 weeks and will require lot’s of documentation about the project. Working with a lender can speed up the process considerably.
For a condo project to be approved for FHA loans and get on the FHA condo approved list, the condo project has to meet a checklist of requirements. I won’t talk about the entire checklist here, but I will mention some of the major qualifications a condo will need to meet:
1. Owner Occupancy percentage requirements
51% or more of the units must have owners living in the unit as their primary residence. This is generally information the condo HOA keeps on record. Not meeting this occupancy requirement is the #1 reason condo’s fail to be FHA approved (and approved for conventional loans as well for that matter).
2. FHA loan concentration
Only 50% of the units in the project can have FHA loans on them. There some exceptions to get up to 100% FHA loan concentration.
3. Number of Units Owned by one owner
No one entity can owner more than 10% of the condo units in the project.
4. Percentage of Owners Late on HOA Dues
No more than 15% of the owners/units can be late on their HOA dues. This is also a big one that disqualifies many projects.
So those are the top four areas that have to meet FHA specifications for a condo to be FHA approved.
Here are some of the benefits of using FHA financing:
- FHA loan interest rates on the 30 year fixed loans are still ridiculously low!
- Maximum FHA loans in many parts of California go up to $729,750. So you can get FHA loan on a condo in places like San Francisco, Los Angeles, San Diego and Orange County with 3.5% down up to a $729,750 FHA max loan amount
- FHA loan credit score does not have to perfect, but it does help if your score is 620 or above
- FHA loan down payment is only 3.5% and that can be a gift from a relative
- FHA loan approval is a lot easier than conventional loan approval. You can have a lower credit score, higher back end debt-to-income ratio, and still get 30 years fixed rates as good as conventional loans!
Give me a call (858-922-7899) or email (homeloan8@gmail.com) if you have any questions at all about getting approved for a FHA Loan.
Warmest Regards,
Rob Chomentowski
Sr. Loan Officer (and FHA specialist)
858-922-7899
homeloan8@gmail.com
by Rob on January 26, 2010
FHA has announced few recent changes in the underwriting guidelines to qualify for a FHA loan and some changes with the FHA PMI (mortgage insurance).
1. Starting April 2010, FHA will require borrowers with credit scores less than 580 to put 10% down to qualify for a FHA loan.
This change will not have a major effect as there are not many FHA loans being approved with scores below 580 at this time anyway. As long as your credit score is above 580, you can still have the minimum FHA loan down payment of 3.5%. The best FHA loan interest rates and easiest/fastest loan process are for those FHA borrowers with credit scores of 620 or higher. If your credit score is below 620, give me a call as I will go over your credit with you and give you analysis as to how you can quickly raise your credit score.
2. Starting April 2010 the FHA loan up front mortgage insurance (UFMI) will increase from 1.75% to 2.25%.
This FHA mortgage insurance is paid to FHA to help insure FHA loans against default. This change affects all FHA borrowers who put down the minimum 3.5%. The FHA UFMI is rolled into the new loan balance so it is not paid out pocket (unless you elect to pay it out of pocket). So for example on a $300,000 loan, the old FHA up front mortgage insurance would have been $5,250, making your new loan balance at close $305,250. Starting April 2010, the FHA mortgage insurance on a $300,000 loan will be $6,750, making your loan balance at close $306,750. Talk to your CPA at close at this entire up front mortgage insurance may be tax deductible for you.
3. Starting April 2010, FHA will reduce the amount a seller can credit the buyer for closing costs in a FHA purchase loan to 3% from 6%.
Often when you purchase a property you can ask the seller to pay some or all of your closing costs. Starting April 2010 the maximum the seller will be able to credit you is 3%. The FHA is adding this rule to prevent sellers from inflating their prices so they can make large credits to buyers.
Some general highlights of FHA loans:
- FHA loans in California (certain counties) can go all the way up to $729,750
- FHA loan credit scores do not have to be perfect
- Conventional loan vs FHA…most conventional loans require 10% down and have much stricter credit score requirements and conventional loans require a 41% debt-to-income ratio with <20% down where FHA loans have a 56% debt-to-income ratio
- FHA loan interest rates are at historic lows STILL!
- You can still get a $8,000 tax credit from the IRS if you sign a contract to purchase by April 31st 2010
- FHA loan down payment is only 3.5% and ALL of that can be a gift from a relative
Give me a call (858-922-7899) or email (homeloan8@gmail.com) if you have any questions at all about getting approved for a FHA Loan.
Warmest Regards,
Rob Chomentowski
Sr. Loan Officer (and FHA specialist)
858-922-7899
by Rob on January 18, 2010
With current FHA loan guidelines, a borrower cannot qualify for a FHA loan unless that property has been owned by the seller for more than 90 days. So if an investor buys a property and fixes it up, they have to wait until the 91st day after they took ownership to go into contract with a FHA buyer. But now FHA has changed this rule and there is now no time limit a seller must have owned a property to qualify FHA loan.
This is a very good change for getting FHA loans in California and being able to get your purchase offer accepted. Many sellers were choosing to accept purchase offers with conventional loan vs FHA because of this rule. There are many investors in California that are purchasing properties at foreclosure trustee sales for cash and fixing them up to sell on the market. This represents a lot of the inventory available in the market right now. This rule change will help FHA borrowers be competitive against buyers making all cash offers and conventional loan offers.
This rule change takes affect February 1st 2010. FHA still will have some rules around flipping properties such as:
- All transactions with seller owing less than 90 days must be arms-length. No indentity of interest between buyer and seller or other parties participating in the transaction
- In cases where the sales price is 20% above the sellers original acquisition price and the seller purchased less than 90 days ago, the property must meet specific conditions
This rule change you help buyers out there be much more competitive to get an FHA home loan in California.
Some other great highlights of FHA loans in California below:
- Maximum FHA loan in many parts of California is $729,750
- FHA loan approval with up to 56% back end debt-to-income ratios (conventional loans with <20% down have a 41% max debt-to-income ratio)
- FHA loan interest rates fixed for 30 years STILL at historic lows
- FHA loan credit score does not have to be perfect
- FHA loan down payment is only 3.5% and that can be a gift from a relative (conventional minimum down is mostly 10% and you need a 720 credit score and 41% debt ratio)
Give me a call (858-922-7899) or email (homeloan8@gmail.com) if you have any questions at all about getting approved for a FHA Loan.
Warmest Regards,
Rob Chomentowski
Sr. Loan Officer (and FHA specialist)
858-922-7899
by Rob on January 14, 2010
Below are the maximum FHA loan amounts for the larger cities in California. These are the highest loan amounts you could go to in purchasing a home with a FHA loan in California. 1 unit refers to a condo or single-family home, 2 unit refers to a duplex, 3 unit a triplex and 4 unit a fourplex.
- FHA loan San Francisco: 1 unit $729,750, 2 units $934,200, 3 units $1,129,250, 4 units $1,403,400
- FHA loan San Jose, Oakland, Fremont, Hayward: 1 unit $729,750, 2 units $934,200, 3 units $1,129,250, 4 units $1,403,400
- FHA loan Los Angeles: 1 unit $729,750, 2 units $934,200, 3 units $1,129,250, 4 units $1,403,400
- FHA loan Sacramento: 1 unit $580,000, 2 units $742,500, 3 units $897,500, 4 units $1,115,400
- FHA loan Santa Ana, Irvine, (Orange County): 1 unit $729,750, 2 units $934,200, 3 units $1,129,250, 4 units $1,403,400
- FHA loan Riverside, San Bernardino, Ontario: 1 unit $500,000, 2 units $640,100, 3 units $773,700, 4 units $961,550
- FHA loan San Diego:1 unit $697,500, 2 units $892,950, 3 units $1,079,350, 4 units $1,341,350
- FHA loan Fresno: 1 unit $381,250, 2 units $488,050, 3 units $589,950, 4 units $733,150
- FHA loan Santa Barbara: 1 unit $729,750, 2 units $934,200, 3 units $1,129,250, 4 units $1,403,400
- FHA loan Santa Cruz, Watsonville: 1 unit $729,750, 2 units $934,200, 3 units $1,129,250, 4 units $1,403,400
- FHA loan Redding: 1 unit $423,750, 2 units $542,450, 3 units $655,700, 4 units $814,900
- FHA loan Vallejo, Fairfield: 1 unit $557,500, 2 units $713,700, 3 units $862,700, 4 units $1,072,150
- FHA loan Santa Rosa: 1 unit $662,500, 2 units $848,100, 3 units $1,025,200, 4 units $1,274,050
So those are the maximum FHA loan for various cities in California. If you don’t live in one of these area and would like to know the FHA max loan for your area, just give me a call or email. Remember if you buy a 2, 3 or 4 unit property and occupy one of the units as your primary residence, you can use the rental income from the other units you don’t occupy as income to qualify.
And here are some highlights to remember about FHA loans:
- To get a FHA loan credit score does not have to be perfect
- FHA loan interest rates are at historic lows
- You can use gift funds for FHA loan down payment
- Maximum FHA loan is $729,750, so you can get a FHA loan in expensive parts of California like Los Angeles, San Jose, San Francisco and San Diego
- Debt-to-income ratios on FHA loans are allowed up to 55% where conventional loans require 41% with less than 20% down
Give me a call (858-922-7899) or email (homeloan8@gmail.com) if you have any questions at all about getting approved for a FHA Loan.
Warmest Regards,
Rob Chomentowski
Sr. Loan Officer (and FHA specialist)
858-922-7899
homeloan8@gmail.com
by Rob on January 4, 2010
Many economists and prognosticators in the business world are predicting that FHA loan interest rates, as well as conventional loan (and all mortgage interest rates) could rise in 2010. Prognosticators have been wrong so many times at predicting the direction of interest rates so you have to take what they say with a grain of salt.
Most of the people in the business world predicting a rise of rates in 2010 are basing their argument that the Federal Reserve is going to stop purchasing Mortgage Backed Securities in March 2010. The Fed has been buying billions in MBS over the last year in an effort to stimulate the U.S. economy. The general thinking is the Fed has been artificially holding down 30 year fixed interest rates to artificially low levels around 5% and below 5% the past year. If the private market has to step in and buy MBS after March 2010, many believe rates will have to rise in order to attract these investors. How high they will need to rise is anyone’s guess. Possibly to 5.5% or 6%, but no one really knows for sure. And it’s not a given they will rise at all. Depending on the direction of the economy, who knows the Fed could extend their buying program. Much depends on the direction of the economy. One thing is pretty much for sure though, if we get a lot of good news about the economy in 2010, the FHA loan interest rate on the 30 year fixed will rise. Because not only will the Fed stop it’s purchasing program, speculation will start rising that the Fed will raise interest rates to keep inflation in check. When the Fed raises the Federal Funds Rate, it generally causes 30 year fixed mortgage rates to rise.
Here are some payments on a $300,000 FHA loan with different interest rates:
4.75% rate $300,000 loan=$1,564/mo
5.25% rate $300,000 loan=$1,656/mo
5.5% rate $300,000 loan=$1,703/mo
6% rate $300,000 loan=$1,798/mo
And here are some highlights to remember about FHA loans:
- To get a FHA loan credit score does not have to be perfect
- FHA loan interest rates are at historic lows
- You can use gift funds for FHA loan down payment
- Maximum FHA loan is $729,750, so you can get a FHA loan in expensive parts of California like Los Angeles, San Jose, San Francisco and San Diego
- Debt-to-income ratios on FHA loans are allowed up to 55% where conventional loans require 41% with less than 20% down
Give me a call (858-922-7899) or email (homeloan8@gmail.com) if you have any questions at all about getting approved for a FHA Loan.
Warmest Regards,
Rob Chomentowski
Sr. Loan Officer (and FHA specialist)
858-922-7899
