Loan Limits Rise for FHA and Conventional Loans

Loan limits rise in San Joaquin County and Sacramento county for the third year in row.  Over the past 8 years our housing prices have shifted drastically and many of our home prices saw 40-60% drops from their 2007 highs.  The economy has been improving and our housing market has rebounded faster than most thought was possible; which is why were seeing loan limit increases. This is welcomed news as many homes in San Joaquin and Sacramento counties have been priced above FHA loan limits for years.

When Loan limits rise potential buyers can purchase a home that may have been out of reach by offering a wider variety of favorable guidelines that FHA and conventional loans provide. Buyers purchasing above set loan limits can still use Jumbo financing, but that also comes with many the negatives borrowers are looking to avoid like larger down payments, higher interest rates, and strict UW guidelines.  Using traditional conforming financing is typically the cheapest and easiest financing to obtain which is why it’s so great when they widen the limits.

2017 FHA Loan Limits San Joaquin

2017 FHA Loan Limits - San Joaquin County (Stockton, Lodi, Manteca)
SingleDuplexTriplexFourplex
$362,250$463,750$560,550$696,650

2017 Fannie Mae Loan Limits San Joaquin

2017 Fannie Mae Loan Limits for San Joaquin County (Stockton, Lodi, Manteca)
SingleDuplexTriplexFourplex
$424,100$543,000$656,350$815,650

2017 FHA Loan Limits Sacramento

2017 FHA Loan Limits Sacramento (Elk Grove, Natomas, Galt, Folsom, Sacramento)
SingleDuplexTriplexFourplex
$488,750$625,700$756,300$939,900

2017 Fannie Mae Loan Limits Sacramento

2017 Fannie Mae Loan Limits Sacramento (Elk Grove, Natomas, Sacramento, Folsom,Galt)
SingleDuplexTriplexFourplex
$488,750$625,700$756,300$939,900

 

 

Prevent Problems Use The FHA Appraisal Checklist

Appraisal ChecklistDon’t let appraisal repair conditions ruin your transaction

It’s imperative that you protect yourself by insuring the property you’re purchasing or selling is ready to be inspected by an appraiser.  Allowing an appraiser to inspect a property with health and safety issues can easily derail a transaction and inflate the costs of repairs due to inaction.

“Per FHA Single Family Housing Policy Handbook, “HUD requires every property to be safe, sound, and secure to be eligible for FHA insurance”. The property must also comply with HUD’s Minimum Property Requirements (MPR) and Minimum Property Standards (MPS). FHA appraisers must report all readily observable property deficiencies, as well as any adverse conditions discovered performing the research involved in completion of the appraisal. In addition to identifying and disclosing these items, appraisers must provide photographic documentation of them in the appraisal report. “ -AAA Appraisal Management Company

A homes deficiencies and adverse conditions can lead an appraiser to request additional inspections that buyers and sellers don’t require.  Knowing common FHA repair conditions can help avoid the need for additional repairs and re-inspections.

The following repairs are suggested prior to scheduling an FHA appraisal inspection:

  • Repair (i.e. scrape, sand, fill, prime, paint) all defective paint surfaces.
  • Repair all leaks (i.e. plumbing, HVAC, roof, foundation, etc.).
  • Repair all foundation/structural settlement.
  • Repair/replace defective roofing.
  • Repair/replace all loose/missing handrails.
  • Repair/replace defective and exposed electrical wiring.
  • Properly install required safety items such as GFCI outlets, smoke detectors, carbon monoxide detectors, water heater pressure relief valves/extension pipe/straps, etc.
  • Repair/replace broken inoperable windows/doors and their locks.
  • Repair/replace broken/inoperable overhead garage door openers.
  • Repair/replace broken/uneven/loose stairs, walks, driveways, flooring, etc. (Trip hazards)

Why do I care if an Appraiser requires repairs or other inspections? Isn’t that a good thing?

By the time you have an appraisal done, you should already know the issues a home has and hopefully negotiated with the seller to repair items that will impact the financing of the home.  If an appraiser requires a repair they will charge for an additional inspection to ensure that said repair was completed.  Avoiding charges and issues should be your focus.

Why is chipping and peeling paint a big issue?

Homes built prior to 1978 with chipping and peeling paint shouldn’t be inspected until the paint is repaired. If the home was built prior to 1978 FHA requires and EPA certified painter to repair even the smallest repairs and that can cost nearly double the normal rate depending on the painter.  The seller can easily fix these things before the appraiser visits the property and avoid a potential nightmare.

Does an Appraiser really need to come out to the home to confirm a smoke alarm was installed?

YES! Make sure there are smoke alarms in all bedrooms and a Co2 detector installed on each floor. Otherwise this will incur a re-inspection fee ($50-$150)

 

USDA Drastically Reduces Guarantee Fees for 100% Financing

USDA Rural San JoaquinBeginning October 1st, 2016 USDA loans will drastically reduce their upfront and annual guarantee fees.  It will allow home buyers and homeowners in rural communities to reduce the costs associated with closing and holding a USDA 100% financed loan.

USDA guarantee fees are very similar to FHA’s MIP/ UFMIP(Mortgage Insurance Premium and Upfront MIP) or VA’s Funding fee.  Both FHA and USDA charge and upfront (financed) fee and an annual fee (paid monthly), while VA only charges an upfront funding fee.

 Upfront Guarantee FeeAnnual Guaranty Fee (Paid Monthly/12)
October 2016-20171.00%.35%
2015-2016 September2.75%.50%

Over the past several years delinquency rates and foreclosures have reduced to normal levels and USDA has reduced its risk which led to a reduction in the amount of insurance they need to collect.  This is a win for borrowers who plan to move into an USDA eligible community.

What areas can I buy a home and use a USDA home loan?

USDA will allow financing on homes in areas they have deemed rural.  Below is a list of some towns, cities and communities within 75 miles that will currently work:

Galt, Lathrop, Jackson, Sutter Creek, Wilton, Linden, Lockeford, Rancho Murieta, Plymouth, Thornton, Farmington, Escalon, Oakdale, San Andreas, Del Rio, Ripon, Patterson, Discovery bay, Newman, Waterloo, Valley Springs, Wallace, Walnut Grove, Rio Vista, Camino, Placerville, and many more in between

How much will the lower Guarantee fees save me?

On a $300,000 home, the new lower USDA upfront Guarantee fee of 1.0% will save you $5,250!  This will help keep your loan balance lower because the USDA upfront Guarantee fee is normally added to the loan balance.The new .35% annual fee (paid monthly) will reduce your monthly payment by approximately $37.50/month or $450/yea.

Why hasn’t my lender offered this program to me?

The truth is, Most lenders either don’t offer the program or don’t understand it.  It’s a Niche type of loan that isn’t available for use in big cities, so many large banks and lender don’t bother with it.  We live in an area that rightfully suits USDA financing due to the surrounding rural landscape ithat is far reaching and affordable.

Banks that don’t offer USDA or the other ‘niche’ loan programs that we offer, will often purposely withhold educating and informing their customers in hopes they don’t go elsewhere for their mortgage.

And don’t think USDA is the only low down payment option you have.

If you would like to find out of you can qualify for a USDA loan and interested in comparing that option with several other home buyer assistance programs that offer down payment and closing cost assistance, call me at 209-474-7111 or email jwomack@themortgagehouse.com

Co-signing a loan can prevent home ownership

If you have stable income and credit you’ve probably been approached by friends, family, and/or Girlfriends and Boyfriends to co-sign for a loan.  Lenders look for good credit and income to evaluate the potential risk of applicants and those that pose and elevated risk need others to help reduce that risk.  It’s important to know what can happen if you decide to co-sign before you sign on the dotted line.

Co-signing

A co-signer accepts joint responsibility for another individual’s debt.  Both parties are responsible for the making sure the debts are paid. Credit of both parties involved may be positively or adversely affected depending on the payment history.

Understanding the risk

Credit scores are based on risk and those who can’t qualify for a loan may have limited/no credit, bad credit, too much credit, or not enough income.  All of the reasons listed should raise red flags for any lender and potential co-signer.

Mortgages consider co-signed loans in the DTI (Debt to income Ratio)

Mortgages treat co-signed loans like any other loan, even when it’s someone else’s.  The only way to remove the liability from consideration is if you can prove someone else has been making the payments for 12 months.  This can prove difficult if the account is paid in cash or unverifiable.

Questions to ask yourself before co-signing:

  • Are you willing to assume the debt if the co-borrower wasn’t able/willing to pay?
  • Have you looked at the co-signer’s credit to evaluate their risk?
  • Are you willing to trust this person to make the payments?
  • Are you willing to jeopardize home ownership?
  • Are they making a rash decision they aren’t financially prepared for?

Things you can do to safely co-sign (If you must)

  • Explain expectations to co-signer
  • Require all payments be auto paid through bank – so that all payments are made on time and can be verified.
  • Make sure your number and email are attached to the account so you may be notified in case of account issues.
  • Require the co-signer to allow you to evaluate and inspect their credit history.
  • Avoid co-signing for anyone that’s not part of your immediate family. Avoid boyfriends, girlfriends, friends, etc.

Fannie Mae’s Foreclosure and Short Sale Waiting Periods Updated

Fannie Mae recently changed their policies regarding the purchase of a home after a major credit event like a foreclosure, short sale and bankruptcy. The changes are both positive and negative, but seem to focus on reducing the wait times for those that encountered an “extenuating circumstance” or in layman’s terms a one-time or temporary event that led to the negative credit event. These changes show Fannie Mae’s focus on helping those that were hit hard by the recession.

Derogatory EventWaiting Period RequirementsWaiting Period with Extenuating Circumstances
Bankruptcy Chapter 74 Years2 Years
Bankruptcy Chapter 132 Years from discharge date
4 Years from dismissal date
2 Years from discharge date
2 Years from dismissal date
Foreclosure Included in Bankruptcy4 Years2 Years
Short Sale or Deed in Lieu4 Years2 Years
Foreclosure7 Years3 Years

Requirements

After bankruptcy, foreclosure, or short sale a borrow must re-establish credit in order to meet minimum Fannie Mae guidelines. For specific down payment and documentation needed please contact me directly.

Questions

What’s considered an extenuating circumstance?

Extenuating Circumstances must be verifiable hardships that are considered out of the borrower’s control that significantly reduce income or expense. This can be anywhere from job loss to health issues.

I foreclosed when my property lost substantial value, is that an extenuating circumstance?

Unfortunately no, that falls under a strategic default and is exactly why Fannie Mae is drawing a line in the sand. If you fall into this category waiting 3 years and using FHA may be the best option for you.

Buying a Home After College

Buying A Home After College

You’re graduated from college or trade school, and ready to ditch your rental in favor of a property you can call your own. You’ve weighed your options and decided it’s time to invest in real estate ASAP. It’s likely you won’t have the cash needed to purchase the home out right and you’ll need to obtain a loan.  Cover your basis and review the steps below to graduate from rental status into home ownership.  Do you have what it takes to qualify?

Step 1 – Employment

Loan guidelines will accept two years of school transcripts in place of a two year work history as long as the education is in line with the job you’ve landed. Loans can close after you’ve received 30 days’ worth of pay-stubs.

Step 2 – Credit

Many college students have limited credit, but programs like FHA allow lower scores and alternative credit sources like cell phone, insurance, rent, and health club memberships. Learn about building credit in my understanding credit score article.

Step 3 – Funds

You just spent thousands on school and probably have limited savings; although you may be able to buy a home without much money at all. Down payment assistance programs like CALHFA, CHF Platinum, WISH, and County/City programs can bridge the gap for first time homebuyers without notable assets.