Lots of changes in the industry take place this month…here’s a summary:
First let’s discuss FHA, since it is pretty much going to be the #1 way to finance deals in this market (you’ll see why a little further down).
FHA has increased their MIP factors just a little bit, from 1.5% up front to 1.75 and from .5 monthly to .5 or .55 depending on LTV.
The Seller Funded down payment assistance is gone as of today (Oct 1, 2008). Please note, there are some actions in Washington to bring it back, so stay tuned, and the county/state downpayment programs ARE still ok, as are gifts from a family member, church, boss, etc.
FHA will no longer allow a “non-occupant co-borrower” IF the primary borrower does not have a “traditional” credit file.
PLEASE READ THIS IMPORTANT WARNING: As FHA becomes a bigger and bigger player in the finance market, mortgage brokers who are not approved start getting creative at how they can close FHA loans even though they are not approved. BE SURE that whoever is doing the mortgage REALLY IS FHA approved! Here’s 2 reasons why this is important:
1. Some brokers will have their “spouse” be an “employee” of an FHA approved lender so they can put the loan through them. I recently worked as a buyers agent on one of these and our closing was delayed by about 2 weeks because nobody knew what was going on and the processor was out of another state and it was a REAL mess, AND, the buyer got a really high interest rate because so many people had their fingers in the pie.
2. There are some companies now that have found a loophole in the FHA rules and they CAN help a client get an FHA loan and get paid for it, but they cannot get paid to originate the loan, they can only get paid as a “consultant” AND they can only get paid out of the borrowers own funds, up to 2%, so this means there will be an EXTRA 2% FEE that your buyer will have to pay, above and beyond the normal fees and closing costs.
3. You CANNOT originate FHA loans if you are a Realtor, insurance agent, or title agent. If your company is letting you do both, be careful!
It’s OK to interview your mortgage company and make sure they are properly licensed an approved to originate FHA loans. This will make your closings go smoother, your customers happier, and your bank account fatter!
Also just announced today…2 of the big Mortgage Insurance companies are rolling out some changes: GE/Genworth: Eff. October 6th: All loan transactions in FL, CA, AZ, NV will require at least a 720 score and a maximum debt ration of 41% (regardless of what the computer approval says)
Radian: Eff. October 20th, Radian will only insure up to 95% in stable markets and 90% in declining markets (yes, Florida is one of them)
Please note! This does NOT mean that your borrower must have a 720 score and 10% down, this is NOT a FNMA change, each insurance company sets their own guidelines, but expect that we will begin to see more of these types of changes in the coming months! And of course, don’t forget, the new Florida Foreclosure law goes into play Oct. 1!!! Make sure you’re disclosing to your sellers AND tracking if they GO into foreclosure while you have it listed.
If you have any questions about these changes or any loan scenarios, please call Tim, Eric, or Myself right away at 407-831-2277!