Mortgage Insurance Madness!

monopoly board pictureThere 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:

  1. 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.
  2. 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

 
This post has been included in California Information Riverside County, CA Information Hemet, CA Information
Post is included in group: Mortgages
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7 Comments on Mortgage Insurance Madness!

It gets more interesting every day.

04/27/2008 05:55 AM by Donna Marie Godfrey (Kenneth R. Styer Real Estate)

Thus the shift to FHA and RD ETC. Now 80% of my closings are government and It hasnt really affected me much on sales volume.

04/27/2008 07:00 AM by Chip Jefferson (Carrion Builders)

Donna: It's barely an exageration to say "Every Day". This is one instance where I knew about the change AFTER it actually took place. Luckily I didn't have any loans in the pipeline. Thank you for visiting!

Chip: FHA disappeared in Southern California when prices went up so fast. Now they're back in force. Thanks for visiting, and good to hear about your healthy volume, too!

04/27/2008 09:33 AM by Hemet Home Loan Guy, Joey Aszterbaum (Patrion Mortgage)

Joey,  Good information.  It looks like the conventional market is reverting back to a time when you need a downpayment to get a loan.  Looks like government loans are in favor again.

04/27/2008 03:48 PM by Jimmy McCall~Clarksville's Mortgage Consultant (Legacy Mortgage Services, Inc. ~ Clarksville, Tennessee)

Jimmy: That's the trend in the Hemet real estate market, for sure. How about yours?

04/27/2008 07:05 PM by Hemet Home Loan Guy, Joey Aszterbaum (Patrion Mortgage)

Excellent post Joey!  The flurry of changes has been enormous and you are right that it is barely an exageration that they are happening daily.  A large part of our job is keeping Agents & the Public aware of these changes as they come to pass.  And I also agree that the FHA will change their rules sooner rather than later.

04/28/2008 01:36 PM by Jason Sardi, Pennsylvania Mortgage Broker (First Choice Equity Group Inc.)

Jason: My company has added the ability to 'hold on to your hat' as part of my job description. I hope you're holding your hat well!

04/28/2008 05:13 PM by Hemet Home Loan Guy, Joey Aszterbaum (Patrion Mortgage)

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Loan Officer: Hemet Home Loan Guy, Joey Aszterbaum (Patrion Mortgage)
Hemet Home Loan Guy, Joey Aszterbaum
Hemet, CA
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Hemet Mortgage and Real Estate Blog: buy or refinance, credit, things to do in Hemet, Realtor sales training and misc stuff from the Hemet Home Loan Guy a member of the Active Rain social network since 11/06.

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