What loan options are available to me above the fha limits?
Tuesday, March 4th, 2008Mortgage solutions.. getting a loan in today’s tighter credit market
The idea, virtually an industry maxim not so very long ago, that there is a mortgage for every homebuyer’s circumstance or situation is now just a fond memory. The reality in the current environment is that some would-be borrowers will be out of luck and for those for whom mortgages are available, the standards are now much tougher. Understand, there is a still a mortgage solution for most circumstances and situations, but in many cases, fitting within the new boundaries being set by lenders will require more cash, higher incomes and better credit scores than in the recent past. To give you an idea about where we are in the aftermath of a host of changes in mortgage metrics, here are some blog posts of typical situations and what can be expected in today’s market.
Q. We need a bigger home for our growing family, so , we’re thinking about moving up. What we are considering will probably require a mortgage larger than FHA or a conforming loan larger than FHA can provide. What are our options?
It has been a tough time to be in the market for a Jumbo loan (above the conforming limit) since August 2007, when the mortgage market turmoil began. Because liquidity for these loans has evaporated, most are held by the lender who originates them, so these lenders are being picky and asking for sizable markups over conforming loans. Getting the best available deal has required shopping around. The spread between jumbo and conforming loans should eventually narrow, but when? The good news is that you may not need a jumbo loan now! Help has come as a result of the economic stimulus package just signed into law. The new law raised the conforming limit and the FHA maximums in high-cost metropolitan areas. Many lenders started accepting applications at the new FHA limits before the ink was even dry on the President’s signature.
Who gets the increase? Much of California, which has some of the highest cost housing in America should now benefit from limits that are expected to be raised to the new max of $729,750. Other projected increases are in the Washington, DC area—$600,487; NYC & Northern NJ—$595,125; Boston— $518,375; Seattle— $493,375; and Miami-West Palm Beach —$433,500. Lenders were poised to implement the new special conforming limits once Fannie Mae and Freddie Mac gives the okay. These increases are presently scheduled to expire on December 31.
If you are still in Jumbo territory even after the new increases, consider getting a maximum conforming loan and a 2nd mortgage for the difference. Let’s assume a sales price of $650,000 and a 10% downpayment. With a Jumbo rate of 7.75% for a fixed, 30-year loan, the PI on $520,000 (80% loan-tovalue) is $3,725.61 and a 10% LTV 2nd trust (@8.9%) for another $518.54, a total PI payment of $4,244.15. If you used a conforming 1st mortgage of $417,000 at 6.125% and used a 2nd mortgage for the remainder, the payments would be $2,534.10 and $1,327.87, a total of $3,861.97. This would save $382.18 per month or $4,500 per year.
Once liquidity returns to the secondary markets, rates should come down for both Jumbo and 2nd trusts, so that the spread between conforming and Jumbo loan may “only” one percent or less. The other option is to look at Jumbo ARMs with a fixed payment for 5, 7 or 10 years. The interest rates on these loans can be as much as 3/4 percentage points lower than the fixed 30-year products, but you might have to deal with a refinance later.
VA, DC, MD fha mortgage
© 2007, Real Estate Information Services, Capitol Assets, Choice Real Estate, Inc. & Choice Real Estate of VA, Inc., & Choice Finance®
Alex Echeandia, Choice Finance Corporation
I’m buying my first home, what are my options?
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I need cash, what are my options?
