Archives For loan amount

house logo with ascending arrowCheck out the new release below. Conforming loan limits will increase from $417,000 to $424,100 in 2017. This is the first increase in almost 10 years.

FHFA Announces Increase in Maximum Conforming Loan Limits for Fannie Mae and Freddie Mac in 2017

FOR IMMEDIATE RELEASE
11/23/2016
Washington, D.C.

The Federal Housing Finance Agency (FHFA) today announced that the maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac in 2017 will increase. In most of the country, the 2017 maximum loan limit for one-unit properties will be $424,100, an increase from $417,000. This will be the first increase in the baseline loan limit since 2006. In higher-cost areas, higher loan limits will be in effect.

The Housing and Economic Recovery Act of 2008 (HERA) established the baseline loan limit of $417,000 and requires this limit to be adjusted each year to reflect the changes in the national average home price. However, after a period of declining home prices, HERA also made clear that the baseline loan limit could not rise again until the average U.S. home price returned to its pre-decline level. Until this year, the average U.S. home price remained below the level achieved in the third quarter of 2007 and thus the baseline loan limit had not been increased.

Earlier today FHFA published its third quarter 2016 House Price Index (HPI), which makes clear that average home prices are now above their level in the third quarter of 2007. The expanded-data HPI value for the third quarter of 2016 was roughly 1.7 percent above the value for the third quarter of 2007, and thus the baseline loan limit will increase by that percentage.

High-cost areas
In areas where 115 percent of the local median home value exceeds the baseline loan limit, the maximum area loan limit will be higher. HERA sets the maximum loan limit as a function of the area median home value, while setting a “ceiling” on that limit of 150 percent of the baseline loan limit.
This year, median home values generally rose in high-cost areas. Because the baseline loan limit will be higher in 2017, the new ceiling limit will also be higher. The new ceiling loan limit, which applies in areas with the most expensive homes, will be $636,150 (150 percent of $424,100) for one-unit properties in the contiguous U.S.

Special statutory provisions establish different loan limit calculations for Alaska, Hawaii, Guam and the U.S. Virgin Islands. In these areas, the baseline loan limit will be $636,150 for one-unit properties, but actual loan limits may be higher in some specific locations.

County-level data
As a result of generally rising home values, the increase in baseline loan limit, and the rise in the ceiling loan limit, the maximum loan limit rose in all but 87 counties (or county equivalents) in the country.

A list of the 2017 maximum conforming loan limits for all counties and county-equivalent areas in the country can be found here. A map showing the maximum loan limits across the country can be found here. A description of the methodology used for determining the maximum loan limits can be found in an addendum to this news release and a short video shows the process used and why the loan limit is rising.

Questions concerning the maximum conforming loan limits can be addressed to LoanLimitQuestions@fhfa.gov.

Source:Federal Housing Finance Agency (FHFA)

fha loan limitsGreat news friends – homebuyers in the DFW metro (and surrounding areas) will see increased purchasing power thanks to FHA’s decision to increase loan limits beginning January 2015. Currently the max loan amount for DFW area is $287,500 which means buyers may buy a $297,900 home by putting the very minimum down. However, as of January 2015 the max loan amount increases to $310,500!  This means buyers can buy a $321,750 home with the minimum 3% down payment – an increase of $23,850 in purchasing power!! This is GREAT news!

To find out the max loan amount in your specific county follow this link FHA Max Loan Amount Search!

I’ve had several FHA questions lately so I thought I’d shoot over some tips and rules of thumb for you to use as a reference guide. With FHA’s max loan amount increasing and conventional loan credit guidelines still a little tight FHA is becoming more and more popular.

31/43 qualifying ratios – this means that your client’s total monthly payments (those that report to the credit bureaus) + their house payment (PITI) should not exceed 43% of their GROSS monthly income.  The first number (31) represents the percentage of their income that the house payment (PITI) alone should not exceed.  These guidelines can sometimes be exceeded with an automated-underwriting decision (computer generated approval): Example, the Holmes’s earn $5000 p/mo (total farce) before any taxes are withheld.  In this case the Holmes’s should keep their total house payment close to $1550 and their total monthly payments (credit cards, auto & boat loans, student loans, etc.) + the total house payment close to $2150.  Again, with automated underwriting lenders can typically get outside these ratios….but these are good rules of thumb.

$310,500 – this is the max loan amount in the DFW area.  Can the sales price be higher than this loan amount?

Yes, absolutely!  As long as your client has money to put towards a down payment so that the loan amount is not exceeding the max in your county, the sales price can exceed the max loan amount.

Assuming they are putting the very minimum down of 3.5% they’d be able to purchase a home with a sales price of $321,750 with an FHA Loan.

Example – purchase price = $321,750….3.5% down payment = $11,261…..loan amount = $310,488 ($22 under the max loan amount J)

PLUS, the seller is allowed to pay their closing costs!

Go HERE to search your specific county FHA Max Loan Amount Search!

giftWhat is the down payment requirement? – FHA requires a minimum 3.5% cash investment.  Can this be a gift?

Yes! The entire 3.5% can be a gift!

What are the non-allowables? – What dollar amount should you put in the contract for FHA non-allowables?  NONE, ZERO!  Those were the old days!  The only non-allowable is the tax service fee which is typically less than $80.  This can easily be absorbed by a lender.

Is there a minimum credit score? – Most lenders have gone to a 640 credit score requirement.  Although FHA does not have a published minimum credit score lenders have noticed a pattern of poor performance with credit scores lower than 580.  We will allow for as low as a 600 credit score on our in-house product.

clock moneyWhat are turn times?  How quickly can we close? – I would NOT write in a contract close date less than 30 days out.  FURTHERMORE, I would make sure there are plenty of days from the end of the option period to the closing date.  Most lenders will NOT order an appraisal until the option period is over and the buyers are still moving forward.  It does not do any good to have a 30 day close, with a 15 day option period.  You will probably need 15 business days from option period ending to the close date to be on the safe side.  Again, this is a general rule of thumb….for stress free home purchases, that is!

Can my client use a co-signer? – Yes, Absolutely!  Keep in mind that a co-signer/co-borrower will be treated just like the actual borrower and will need to provide all their income & asset documents.  The lender will configure a joint debt-to-income ratio based on a combination of ALL income and ALL debt.  Generally a co-signer needs to have great credit, good income, and minimal debt.

Can my client purchase without their spouse on the loan due to credit? – Yes, Absolutely!  However, FHA requires that lenders consider the non-purchasing spouse’s individual debt.  For example, if your client’s spouse has an auto loan and a few credit cards in his/her name alone, then these monthly payments will be factored into your client’s debt-ratio. Lenders MUST pull a credit history on non-purchasing spouses.

Is FHA only for first time homebuyers? – NO!  This is a common misconception.  You can use an FHA loan on your 2nd, 3rd, 4th, 5th, or 20th home.  Under most circumstances you can only have 1 (one) FHA loan at a time.

Can I refinance a conventional loan to an FHA loan? – Yes, Absolutely!  Since FHA is more forgiving (in my opinion) with its underwriting guidelines we have successfully moved families out of a high interest rate and/or adjustable rate (ARM) loan and into a low fixed rate FHA loan.