January 1930 - There are two great dangers to the continuance of prosperity. The first is the false idea that business is still governed by a cycle of boom and depression, and the second is that the leaders of business will think that the country is broke because some of their friends are. And also there is the danger that many executives who have been playing the market instead of working will not know how to get back to real work.
Samuel Crowther, The World's Work
The following news is old, a bit antique in the "live feed" internet world we live in. Yet, it's vital for the loan du jour these days in a very different lending atmosphere.
I've had two concerns with FHA Loans and those have been documented in writing. Here they are:
*Picking up so much funding slack (my guess is at record levels) because of conventional Pricing changes and the disappearance of the sub-prime market. Mistake folks, big mistake. I give you the "All Eggs..." analogy.
*Subprime folks who penetrated the FHA product early on. FHA is NOT subprime and certainly not a viable substitute.
And to the news...
* If it is a cash-out refinance over 85% of your home's worth, two appraisals need to be done. I've seen (in my area) appraisals being done for anywhere from $375.00 to $400.00. The positive spin on this is that your equity position probably won't be over-inflated. The reality is that you are going to have to pay for two appraisals. Make sure you have the cash-flow to do it.
* Property Condition Issues - Peeling paint is a No-No. GFCI outlets (those things that you plug stuff into) must be upgraded if they already aren't. They must have a reset button, which is usually red. (This applies to kitchens and bathrooms or anywhere there is running water)...
* The down payment has risen to 3.5% since the New Year.
* 620 may be the magic credit score. Don't count on civilian credit checks to see what you may qualify for. Of note, scores can be lower than 620... just make sure that right now... you know that credit scores mean a damn along the merry little way and may even mean more down the road. Ironically, I wrote this post in "draft mode" before this other post came to be.
* How about those DPA's:) Down Payment Assistance Programs have received more scrutiny than Mr. T attending a Richard Simmon's Summer Home Pajama Party. For me, it's another way for a seller to sell their house and the buyer to be able to buy it. Done legitamately, it is a worthwhile product & amenity to Mortgage Financing.
* 203K loans are one of the only Rehab Loans I know of at this point. You know, you find a property at a decent price that needs work but you don't have the cash to buy it and do the improvements yourself. These loans must be owner-occupied (as all FHA loans stipulate) and it's a great example on how you can turn a dive into a palace. Or, at least better your abode and respective neighborhood.
I've done a few more Conventional and even Hard Money Rehab Loans and most of the banks/lenders backed out of delivering the product. The FHA 203K Loans are alive and swinging.
December 2008 - People, especially Americans, started believing that they can live on other people's money. And more and more so. First other people's money in your own country. And then savings rate comes down, and you start living on other people's money outside. At first it was the Japanese. Now the Chinese and the Middle Easterners.
We-the Chinese, the Middle Easterners, the Japanese-we can see too. Okay, we'd love to support you guys-if it's sustainable. But if it's not, why should we be doing this? After we are gone, you cannot just go to the moon to get more money.
Gao Xizing, president of China Investment
If you've stuck around this long, here's a song...