New Conforming Loan Limits Announced For 2009
Posted by Kevin Kueneke | Currently 1 Comment »
After months of speculation, we finally know what the new 2009 high balance conforming loan limits are for San Diego and other “high cost” areas. The Federal Housing Finance Agency (FHFA) said that the $697,500 number we enjoyed for part of 2008 is dropping to $546,250 in San Diego.
Some areas such as Los Angeles-Orange Counties, San Francisco, San Jose, and Santa Cruz are having their 2009 numbers set at the new maximum of $625,500.
According to FHFA’s press release, the 2009 loan limits were calculated using 115% of median house prices as determined by the Federal Housing Administration (FHA) whereas the 2008 loan limits were calculated using 125% of median house prices.
So what does this mean? It means that anyone currently in escrow in San Diego with plans to borrow more than $546,250 needs to do everything they can to get their loan closed before 12/31/2008 or face significantly higher interest rates. There is almost a 2% interest rate difference between loans less than $697,500 and loans greater than $697,500 (also known as true jumbo loans) because conforming loans are guaranteed by the government (FNMA and FHLMC). Guidelines are also more strict for true jumbo loans than for conforming and high balance conforming loans.
As expected, the Federal Housing Administration (FHA) announced that FHA Jumbo limits will match the high balance conforming limits. The Department of Veteran’s Affairs (VA) said that VA Jumbo loans with zero-down payments will be allowed up to the high balance conforming loan limits through the end of 2011. This is good news for FHA and VA buyers as they will still be allowed to take advantage of these programs for higher priced properties.
Any questions or comments? Please email me at Kevin@MyCWMtg.com
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FHA Loans - Income and Employment Requirements
Posted by Paul Gonzales | Currently 1 Comment »
This is the third in a series of six posts that deal with important aspects of FHA financing. The first post provided an overview of the program while the second post detailed FHA credit requirements. This post will discuss the income and employment requirements necessary to obtain an FHA home loan.
Income Documentation
For employees this is quite straightforward. Copies of the most recent paystubs covering at least one month and W2s for the previous two years are required. Complete Federal income tax returns for the previous two years may be required as well.
For self-employed people, signed copies of personal tax returns for the previous two years are required. If the business is a legal entity such as an “S” or “C” corporation, partnership or other legal entity then two years of business tax returns are also required. A signed year-to-date Profit and Loss statement (P&L) will be needed to complete the income documentation. FHA guidelines state that 25% or more ownership in a business is considered self-employment.
Types of Income for Employed People
The lender will review the paystubs together with the W2s and tax returns to establish a baseline amount of income as well as stability of the income. In general, if base income is increasing they will likely be able to use the current income amounts. On the other hand, income that is declining over the past two years will result in an averaging of the income. A significant decline in base income will require a written explanation.
- Overtime - to be counted it must have been relatively constant for the past two years as well as currently. There must be the prospect that it will continue and the employer will be required to state that it is likely to do so on a written Verification of Employment. If used it will be averaged over time and added to the base income
- Bonuses - the rules are similar to considering overtime.
- Commissions - will be averaged over the prior two years and must demonstrate reasonable stability; tax returns will be reviewed and unreimbursed business expenses will be deducted from the income
- Child support, alimony and spousal maintenance - such income can be included provided that it can be shown to continue for at least the next three years. It must be documented by a divorce decree, court order or separation agreement and actual receipt of the income documented by cancelled checks, bank statements or other positive means.
- Retirement income - Pension and Social Security income is acceptable and must be documented by award letters, IRS form 1099s and current “pay advices” (stubs). Again, there must be the prospect of continuing for at least the next three years
- Insurance and government income - workman’s compensation, long-term disability or other similar income must be documented and expected to continue for at least three years
Self-Employed Income
Income and expenses will be analyzed from the past two years tax returns and current P&L. The earnings will be averaged over this time period. Income that appears stable or increasing will be considered, whereas declining earnings may not be considered acceptable.
Minimum Length of Employment
Stable employment in the same general field of work or business for two or more years is considered minimum. Going from being an employee to self-employed, even in the same line of work, gets special scrutiny. A person who has been self-employed for at least one year AND has at least two previous years of employed experience in the same field may be considered. Formal training or education in the same line of work during the prior two years may be considered in lieu of employed experience.
The next post in this series will discuss the financial assets and down payment requirements for obtaining FHA financing.
you can contact Paul Gonzales at (800) 775-7334 or paulforloans@aol.com
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FHA Kiddie Condo…What Is That?
Posted by Kevin Kueneke | Leave A Comment »
Many of my referral partners have asked about the FHA “Kiddie Condo” program. I spoke about this several months ago, but now that FHA loans are more prevalent, I felt that it is a good time to revisit the details. Here are a couple questions I have been asked recently:
Question: My child is now attending college and I do not want to throw money away on their rent. Is there a way to buy a property for them to live in without having to pay an enormously high interest rate? Can I avoid a large down payment typically associated with investment properties? 
Answer: Absolutely. FHA allows a non-occupant family member (for example, mom and dad) to go on the loan and basically carry the load. Income and debt from all parties are used to qualify, but the occupying borrower is not required to have any income or assets of their own. As long as your college student does not have credit that would otherwise disqualify them for a loan, their income and assets (if any) are irrelevant. Hence the term “Kiddie Condo”. Better yet, rent the other rooms to your child’s friends to help with cash flow.
Question: My parents are looking to retire and relocate to a new home closer to my family. Unfortunately, their verifiable income is not enough to qualify for a loan, but they do have a small down payment. Since I had planned to help them with their new mortgage payment, can I help them purchase a new home?
Answer: Absolutely. The term “Kiddie Condo” does not just apply to parents helping their children. Adult children can help their parents!
By the way…in addition to condos, all 1-unit properties are eligible: attached and detached single family residences (SFR’s), and homes in a planned unit development (PUD’s).
Far better option than standard Conventional financing due to significantly lower down payment required (3% versus 25-30%) and still get owner-occupied interest rates! **The minimum down payment for FHA loans is going to 3.5% as of January 1, 2009. Still a dramatic difference.
Remember though: these are full documentation loans for all qualifying parties and property condition is important to FHA. At this time, FHA Jumbo loans do not allow a non-occupant co-borrower…so keep your loan amounts under $417,000.
Questions? Call me at (760)500-1919 or email me at Kevin@MyCWMtg.com
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FHA Update: Down Payment And Mortgage Insurance
Posted by Kevin Kueneke | Currently 1 Comment »
We finally have some clarification regarding the effective dates of the new Federal Housing Administration (FHA) down payment requirement as well as the new FHA Upfront and Monthly Mortgage Insurance Premiums.
As many of you will remember, FHA is increasing their minimum investment from the buyer from 3.0% to 3.5%. There were rumors that this was going to be effective October 1st, 2008. We now know that January 1, 2009, is the effective date for the down payment increase. 
FHA mortgage insurance, on the other hand, is changing effective October 1, 2008.
For purchase transactions, FHA has both a onetime upfront mortgage insurance premium (UFMIP) as well as monthly mortgage insurance (MIP), except for loan terms less than 15 years combined with a down payment of 10% or more.
The following is a breakdown of the new mortgage insurance for purchase money transactions with FHA case numbers assigned on or after October 1, 2008:
Loan Term > 15 Years
Loan to Value Upfront Premium Monthly Rate
<=95.00% 1.75 0.500
> 95.00% 1.75 0.550
Loan Term < 15 Years
Loan to Value Upfront Premium Monthly Rate
<=90.00% 1.75 None
> 90.00% 1.75 0.250
So how do these changes affect the typical home buyer? Most FHA loans fall into the category of less than 5% down payment and a loan term greater than 15 years. This makes sense since most first-time home buyers are looking for the least amount of down payment and the lowest monthly payment.
The old upfront premium was 1.5% of the base loan amount (base loan calculated using sales price minus down payment for this example, the actual calculation is slightly more complicated), and the old monthly insurance amount was 0.50% of the base loan amount divided by twelve months. Let’s look at a property with a sales price of $350,000:
Base Loan Amount: $339,500
Old Monthly Mortgage Insurance: $141.46
New Monthly Mortgage Insurance: $155.62
Difference of roughly $14.16 per month.
Old Upfront Mortgage Insurance Premium: $5,092.50 (of which $5,050 can be financed)
New Upfront Mortgage Insurance Premium: $5,941.25 (of which $5,900 can be financed)
If these amounts are financed, the difference in the payment at today’s 30 year fixed rate of 5.875% would be $5.03 per month. Add that to the slightly higher monthly mortgage insurance, and you are looking at just over $19 more per month with the new numbers.
An additional $19 per month is still relatively small considering FHA’s more lenient credit guidelines and down payment requirements. FHA is more strict though regarding the condition of the property versus typical conventional financing, helping to assure that the property is in a reasonable and safe condition.
With the new, higher FHA loan limits, FHA is taking more risk. As with any insurance whether it be auto, home, or mortgage, higher risk goes hand in hand with higher premiums. I think an extra $19 per month is worth paying to keep this program around.
Do you have a specific example you would like to discuss? Please feel free to call me at (760)500-1919 or email me: Kevin@MyCWMtg.com
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