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MAJOR mortgage insurance changes coming up March 9th

Real Estate Agent with ERA Landmark Real Estate

I'm sure you've heard the good news about the new tax credit:

The new legislation bumps up the maximum credit amount from $7,500 to $8,000 for homes purchased on or after January 1, 2009. The new law also extends the credit through the end of November 2009. The credit ONLY has to be repaid if the house is sold within three years of purchase.


BUT, there are some major changes coming up starting March 9th that are going to HURT some clients.  Any conventional loan that needs mortgage insurance (anything above 80% LTV--buyers with less than 20% down)


  • Minimum 680 credit score for all loans
  • No more: 
    • Second Homes
    • Cash-Out Refinance (Note:  FHA still allows cash out, but requires 2 appraisals)
  • Maximum 41% DTI (debt-to-income) Ratio for all loan--currently allows up to 55%
  • Minimum of 2 months reserves required on all transactions--this is liquid assets left in the bank after they pay their down payment and closing costs
  • Rate/Term Refinance:
    • Loan proceeds may not be used to pay off subordinate financing--if the have a current second mortgage they want to pay off, the transaction will be considered "cash out", and will thereby be limited to 80% of the value of the property
    • Existing secondary financing may be resubordinated provided it meets all guidelines, including maximum LTV/CLTV
  • Condominiums:
    • Maximum 95% LTV/CLTV in non-restricted markets

The good news is that this does not apply to FHA, VA or RD, so those options may still be available to those of you affected by the above changes.

The bottom line is, if you have buyers who are "pre-approved", make sure they get the approval updated to make sure they still qualify.  For example, a mortgage broker has a client whose price range will drop by $75,000 when these guidelines go into effect.  If that's not a reason to jump off the fence and buy, I don't know what is.  Mortgage insurance certificates have to be ordered by this date--transactions don't have to close by then--but they do have to have a property address and have their loan in the process.

Sue Frye
Era Landmark Real Estate
Phone: 406-556-5056
Email: suefrye@suefrye.com
Website: http://www.suefrye.com

Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

One way or another, it is almost impossible for even the most qualified and responsible buyers to get financing. 


Feb 26, 2009 04:31 AM
Sue Frye
ERA Landmark Real Estate - Bozeman, MT

I know.. Unbelievable...

Feb 26, 2009 04:45 AM