FYI
The economic stimulus plan worked out last week in Washington, should provide nearly a year of cheaper loans for Californians buying or refinancing higher-cost homes.
Leaders of the House of Representatives and the White House agreed that the size of loans that can be purchased by government-sponsored mortgage buyers Fannie Mae and Freddie Mac should be increased sharply for a year from the current cutoff of $417,000.
The plan also would more than double the size of loans insurable by the Federal Housing Administration, from $362,790 to $729,750.**
The precise increase on the "conforming" ceiling was still being debated late Thursday. House Republicans said they had agreed to temporarily raise loan limits for Fannie Mae and Freddie Mac to $625,500 while Democrats said the deal would boost limits to $729,750.
Either way, the increased limit on loans eligible to be bought by Fannie Mae and Freddie Mac would be temporary, expiring Dec. 31, 2008. It was not clear if the higher FHA limit would be temporary or permanent.
The FHA increase would allow thousands of Californians to buy or refinance their homes with much lower, more secure, fixed rate mortgages. By utilizing FHA, the buyer will not have to adhere to the stringent underwriting guidelines that have made Conforming and Jumbo loan programs difficult to qualify for. Higher loan to values, lower minimum credit scores, and flexible underwriting will make buying, selling, and financing a home in California much easier. Here are just some of the features of an FHA loan:
97% LTV on Purchases
Down Payment Assistance of up to 6%
95% LTV on cash out refinancing
No minimum credit scores
Liberal credit guidelines
No prepayment penalties
SFR, Condo's, Town Homes, and Manufactured
Seller contributions of up to 6%
Non-occupying cosigners
Higher income to debt ratios
Loans are assumable
Let's not forget the "5% DECLINING MARKET" hit that has affected
nearly every Conventional loan program above 75%. FHA still allows
97% LTV's on purchase transactions and up to 105% when using
some Down Payment Assistance Programs.
And FHA does not have a "credit risk adjustment" based upon credit
score such as the one recently implemented on Conventional loan's.**
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