Today, I had three inquiries regarding mortgages for very small amounts from prospective buyers. At the beginning of the conversation I realized hat these would be "high cost loans." The definition of a high cost loan applies to FHA, VA, USDA or conventional loans. I continued to define a high cost loan and learned that these buyers had no knowledge that this could be a stumbling block to them making a home purchase.
"A high cost home loan refers to a home loan in which the terms of the loan meet or exceed one or more of the thresholds as defined by the GA Fair Lending Act." So what are the thresholds,
1) The annual percentage rate (APR) of the loan that is equal or exceed that set our in Section 152 of the Home Ownership and Equity Protection Act of 1994.
2) The total points and fees payable in connection with the loan, excluding up to 2 bona fide discount points, (i)exceeds 5% of the total loan amount if the total loan amount is $20,000 or more, (ii) the lesser of 8 percent of the total loan amount or $1000 if the total loan amount is less than $20,000.
For these reasons, many lenders no longer offer loans under $75,000. When selling homes at the lower end of the price range, keeping this in mind will prevent a deal from falling apart at the last minute.
For more information, please check out the GA Department of Banking and Finance website.
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