Mortgage Market ChangesOriginally Posted on October 21, 2008 - Because of the credit crisis, there have been many changes in the mortgage market of late. People that were qualified previously are being denied loans, and many that are still qualified are finding that they are having to pay more for the same loan that they would have gotten for less earlier. Beyond the changes that the individual lenders are instating, below are some general guidelines that all of them are having to go by:
FHA (Effective October 1st, 2008)
1) Up front mortgage insurance premium is being increased from 1.5% to 1.75% (can be financed into the priciple of the loan)
2) Monthly mortgage insurance for a 30 year loan will be .55% for a loan-to-value greater than 95% and .50% on a loan-to-value less than 95%. For a 15 year loan the monthly mortgage insurance will be .25% for a loan-to-value of 95% or higher and there will be NO MONTHLY MORTGAGE INSURANCE PREMIUM on a 15 year loan with a loan-to-value of less than 95%
FHA (Effective January 1st, 2008)
1) Down Payment requirement will be increased from 3% to 3.5%, and closing costs may not be used to come up with any of the 3.5% requirement. Currently you can have 2.25% come from down payment and .75% come from closing costs. This doesn't mean that it will be costing you more to purchase a home, it just means that you will need to put more money towards the equity of the home in order to purchase it.
2) If you are thinking about purchasing a home using an FHA loan and you are converting your current home to a 2nd home or rental, your income must be able to cover both houses. If you have at least 25% equity in the home that you are going to be converting, you can use up to 75% of the income from the rental to offset that mortgage payment. Your closing costs on your new home will also be elevated because an appraisal of your current home will be manditory.
Fannie Mae Guidelines (conventional loans)
The following are ineligable for mortgage insurance:
1) If you are an investor, you can only have up to 4 properties financed at one time (this is down from 10 previously). This rule does not apply to people that are purchasing or refinancing a principle residence.
2) Minimum credit score of 620 for single family homes, and 680 for two-unit properties. 3+ unit properties are ineligable for mortgage insurance.
3) If you are purchasing a second home or converting an existing home to a rental, you must have established reserves of 6 months payments (Principle, Interest, Taxes, and Insurance), and you must have at least 30% equity in your current home. You may qualify using up to 75% of the rental income from your home that you are converting. Your closing costs will be elevated because an appraisal of both the home you are purchasing and your current home is a requirement.
These guideline changes are courtesy of Irene Fitzgerald of First Mortgage: (405) 310-5334
Please feel free to give me a call if you are interested in purchasing a home in the Norman or Oklahoma City area. You can also search for-sale homes directly from my website at http://www.oklahomeseller.com, or give me a call and I can set up a personalized listing website for you that will automatically update as new listings are added that match your search.Rob Schaerer
Dillard Group Real Estate