FHA to Cut Seller Concessions by 50%
Paul Skeens, president of Colonial Mortgage Group in Waldorf, Md., said he is advising loan applicants to request a “good faith estimate” upfront that provides for the seller to pay 100 percent of closing costs and prepaid fees “so that in cases where the buyer doesn’t have much more than the down payment, that’s the only cash they’ll need to close” on an FHA loan before the policy change.
Skeens said he’d prefer that FHA adopt a “sliding scale” approach to concessions, with higher concessions allowed on lower priced homes, and the lowest concessions allowed on high-priced properties. Since closing and loan expenses generally represent a larger percentage of the total transaction on lower-priced houses, he believes the new 3 percent rule across the board “will have a much heavier impact on the people FHA traditionally has served,” who are buying modest priced houses and have limited cash resources.
New Fannie Mae Rules Affect Mortgage Qualification
New Fannie Mae Underwriting standards beginning June 1st
Rein in credit urges before closing
Beginning June 1st Fannie Mae will require a second credit check just before closing to see if you still qualify for the mortgage that was approved weeks earlier.
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The Last Breath of Interest-Only Loans?
THE LAST BREATH OF INTEREST-ONLY LOANS?
Interest Only Loans have served a good purpose in mortgage lending thru the years. Much has been written against the use of the interest only loan instrument and much of the criticism is justified. For the “enlightened” an interest only loan may have been used as a more temporary form of financing, often used by investors and flippers or consumers that knew that they would sell the home within the first 4-5 years. Since so little principle pay down occurs in the first few years in the popular 30 year fixed rate conventional loan, the lower interest rate of an interest only loan was attractive and the lack of principle pay off was not that different than a conventional loan for only 3-5 years.
Unfortunately, the pure interest only loan of former years morphed into a hybrid form of adjustable rate mortgage with a sting. The interest rate changes of the hybrid interest only loan backfired on uneducated borrowers. Because of the low initial interest rate the interest only loan was used by many buyers that couldn’t possibly afford the mortgage after a reset.
Now Fannie Mae and Freddie Mac has lowered the boom. In the last quarter of 2009, around 18 percent of the interest only borrowers were delinquent. The rest of Fannie’s portfolio had a delinquency rate of only 4 percent.
Beginning in September Freddie Mac will stop buying interest-only loans. Fannie will continue with tougher standards that include a 30 percent down payment and a credit score of at least 720. Additionally, the borrower must have 24 months of liquid-asset reserves following the closing.
In a good move, Fannie will also require that lenders take the responsibility of evaluating if the borrower can continue making payments if the rate increases in the first five years.
What does this all mean? A more sensible approach to underwriting and turning back the clock about 15 years to a more conservative approach to mortgage financing.
Hoffman Estates Home Sales Statistics
Real Estate Sales are Improving in Hoffman Estates
Palatine Real Estate Sales Statistics
Real Estate Sales Improve in Palatine, Il