There was a time when, to buy a home, you had to have 20% down. Then came along mortgage insurance.
Mortgage insurance allows mortgage lenders to recover their losses if there is a foreclosure. So it allows them to give you a home loan with less than 20% down.
.......................UNTIL NOW...................
Everyone knows that the rules have been changing fast. Since the 'subprime mortgage crises' those changes have been when the largest mortgage investors, Freddie Mac and Fannie Mae, tighten up their guidelines.
On April 14th, that changed. That's when the major mortgage insurance carriers tightened up how they work. And they've decided two major things:
- They will not insure mortgages for non-owner occupied homes. This means that if you want to buy a second home, a vacation home, a rental or an investment property, you have to put 20% down before you can get financing.
- They will not insure cash-out refinances. That means that if you refinance your first trust deed (your home loan), you can only borrow 80% of the appraised value of your home.
FHA loans, which are government-insured by HUD (Department of Housing and Urban Development) will still cover refinances with cash out up to 95%, but I expect they'll change the rules eventually based on the number of foreclosures.
Now is a great time to buy. The bad news is that most people will have to have down payment. The good news is that home prices have become much more affordable in Hemet, Riverside County, and any area hit hard by foreclosures. 20% of $150,000 is a lot less than 20% of $350,000...so start using that savings account!
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Joey Aszterbaum is the Hemet Home Loan Guy and a member of the Active Rain social network of real estate professionals. To buy or refinance your home in Hemet, Riverside County, or California visit www.HemetHomeLoans.com or call 951.571.5751
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It gets more interesting every day.