Qualifying for FHA Loan Will Get Tougher

Posted on March 4, 2010 by IC N in Marketing
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Higher credit scores. FHA has not required a minimum score to date, but will require a minimum of 580 under the new guidelines. Those with scores at the lower end will need to make at least a 10% down payment.
· Fewer acceptable seller concessions. Presently sellers can help with closing costs up to 6% of the property value. The new maximum will be 3%.
· Higher insurance costs. The new insurance premium will be 2.25% of the value of the loan. Currently the premium tops out at 1.75%. For example, in a $150,000 home the premium that will need to be paid at closing is $3,375, up from $2,625 under current guidelines. The additional expense can be rolled into the cost of the loan.
Why Short Sales Are Becoming the Preferred Solution to Foreclosure
Short Sales are fast becoming the preferred method of resolving foreclosures for Lenders. According to a survey by Campbell/Inside Mortgage Finance Monthly Survey 15.9% of homes purchased in January were Short Sale transactions. The Campbell Survey is based on a poll of over 1500 Real Estate Agents nationwide. In November 2009 Short Sales accounted for 12.4% of home sales.
By contrast, bank owned real estate sold during January which was move-in ready was 13.8% of the transactions, and damaged bank owned property accounted for 13.8% of sales.
First time homebuyers appear to be the primary purchasers of Short Sale properties. First time buyers are more able to wait out the time required to close a Short Sale than those with existing property to sell.
The study shows that Short Sales on average sell for around 91% of the list price while REOs sell for 99% of list price. Since Short Sales require less time and expense than REOs they are gaining in popularity among Lenders and there is a little more room for negotiation in the price usually.
Negative Equity Continues to Grow
Despite some slowing in the housing price decline in most markets, the number of mortgages that are now larger than the home value continues to grow. First American CoreLogic estimates the number of U.S. households with underwater mortgages as of the end of 2009 was 11.3 million, or 24% of all households with mortgages. Americans owe a combined $801 billion more than the value of their property.
Another 2.3 million households have less than 5% equity in their homes. Considering that many predict that home values will decline further in many markets, many of these mortgages will slip into the negative category during the coming year.
Homes with negative equity are far more likely to fall into foreclosure than others as many conclude they have nothing to lose to walk away from the mortgage. The negative equity problem continues to be a major drag on the economy and a major reason why the economy continues to be fragile.
In a separate report from Zillow this past month, even the White House lost value in 2009 to the tune of 5.1%. The January 2009 Zestimate for the White House was $308 million, based on the size and physical attributes, the Washington, D.C. market and its historical value. The Zestimate for 2010 was $292.5 million, a $15.6 million drop.
Have a good one!
Bob Massey