Financing - From Doug Erwin - WR Starkey

Looks like my prediction from Wednesday night was a bit off.  Rather than lasting three months, 100% financing may have about three weeks.  I received notice today that one of the last mortgage insurance companies to insure loans up to 100% "LTV" has announced that they will discontinue doing so after the 31st of this month.  What this means is that regardless of credit score, Conventional 100% financing is gone unless it's done in the form of an "80/20" or "75/25", meaning two liens.  To qualify for these, borrowers will need a 700+ credit score, and then some.  

In addition, rumor has it that the minimum FICO required by FHA/VA will soon go from 560 to 580, in fact, some lenders have already made this change.

So, what options are there for buyers that need to get into a home with a low down payment?  VA still allow 100% financing, and FHA still allows "DPA" in the form of gifts from such institutions as Nehemiah, Genesis, etc..., and as some of you might already know, FHA loan limits were recently raised to $271,050. 

Now, a word of warning.  I'm guessing there's going to be a massive rush towards the latter, meaning financing through FHA with "DPA", and though some of the highest paid people in the nation believe that DPA either falls from the sky, or is pulled from someone's &^%, you, as a Realtor, know better.  But, it's only a matter of time before the grand poo-bahs of high finance, who have decided that 103% financing is too risky, and that "80/20"s should only be granted to the most qualified of borrowers, crack open a calculator, and figure out FHA loans with down-payment assistance is really up to 109% financing, and that you only need a 581 FICO to get it!  Once they do, the party's over. 

So, if you've got such buyers, I'd encourage them to pick a home and close as quickly as possible.  And at least until all this has blown over, I'd be very careful when putting new people into your car who don't at least have a back-up plan regarding how to acquire 3% to put down, unless they qualify for a VA loan, as it's already been proven that "DPA" could be taken away without notice.  Keep in mind that since a loan officer can pre-approve someone in the time it takes you to make 12 appointments and get your car washed, they may not be as concerned about turning folks loose without such a plan.  For us, sending such buyers out into the market is worth a shot, as we only have an hour or two invested.  For you guys, the stakes are obviously a lot higher, so again, I'd give careful consideration to working with such buyers, and I sure wouldn't be missing an easter egg hunt to do it.

Doug