The Federal Housing Administration or FHA has announced some changes which are geared at strengthening the capital reserves as well as manage risk. These changes will affect borrowers abilities to secure a loan, they are changes that should be reviewed prior to making a loan application. The following is a list of changes:
1. The mortgage insurance premium (MIP) will be increased to 2.25% of the loan amount. In addition, the FHA will seek approval to increase to the maximum annual MIP that the FHA can charge. However, if the maximum is charged then the premium or at lease a portion of the premium will be spread out through the term of the loan versus being paid upfront; this will enable the borrower to feel less upfront impact of the premium while still building the proper capital reserves. The initial MIP increase should go into affect this coming Spring.
2. The credit and down payment requirements for borrowers will also be updated. In order to qualify for a 3.5% down payment they must have a 580 or greater FICO score. Those borrowers with a lower than 580 Fico score will be required to place 10% down payment. This change is being made in an effort to balance the risk factor involved with these loans.
3. Seller concession or contributions will be reduced to an allowable 3% this is down from 6%. This change was made in order to eliminate the tendency to over inflate appraised values.
Most of the professionals in the business would probably agree that although 2009 did show some signs of recovery in the housing market they certainly look forward to new year with new hopes. Well, there is some good news on the horizon along with some positive indicators.
I recently read a message written by NAR Chief Economist Lawrence Yun (Personally I have always found his analysis very reliable and I would even say that he tends to be conservative with his predicted numbers):
The end of 2009 did show higher sales compared to the rest of the year; however, Mr. Yun and other economist will say that most of this movement was due to folks running out to beat the tax credit expiration. Now with the new deadline not threatening until mid 2010; Mr. Yun is predicting heavier activity for spring and early summer due to the tax credit expiration.
So, we have seen lowered near bottomed prices and we are still seeing historically low-interest rates and in addition we are (as buyers) enjoying high levels of inventory and motivated sellers and not to mention a great government incentive program. It really is the best time to BUY. So what is holding this housing market back??? According to Mr. Yun the answer lies in the job market.
Unemployment is still looming at a very high rate of 10% and although there are sectors which are having job gains the reality is that the unemployment rate is still expected to climb a bit more.
Mr. Yun’s opinion and stats show that the private sector is still very hesitant to move forward with hiring new employees. Instead, company’s are placing additional pressure on their current employees to increase production and they are resorting to the temp job market. With that said the temp job market has seen increases; hopefully signaling new permanent jobs in the future.
With all this taken into account we should certainly see a boost in the housing market provided that the job market picks up. We have a formula for success and a recovery!
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As of the first of the year HUD issued new rules regarding Good Faith Estimates (also know as GFE’s). These newly adopted rules called for stricter guidelines for the preparation of GFE’s by lenders, mortgage bankers and mortgage brokers. Obviously the look of the GFE and layout has changed; however, the real change in the rules is how accurate the preparer must be in estimating closing costs and loan origination fees. In the past there were not many guidelines regarding the accuracy of these items. Although, I feel that there are many great mortgage brokers and lenders working in our market; I must also admit that I had many instances where the final HUD at he closing table had significant differences from the original GFE, and trust me, it was never in the favor of the buyer. Although, there is no way to prove it; it would appear that preparers of GFE would under estimate closing costs, prepaid items and origination fees in order to get the buyer / borrower to commit to them, only to later at the closing table, at the 11th hour change-up the numbers. “Well, now what here we are a the closing table, with a ton of deposit money in escrow at risk if we don’t close.” Naturally, this would anger any buyer and anger any agent or broker representing the buyer.
I for one am glad that the new rules are in place. The rules basically state that there is only a small margin of acceptable variance from the GFE to the final HUD for the previously mentioned fees. Also, if these fees do vary by more than the acceptable margin then the lender must absorb the difference. I feel that this will help in more honest and responsible lending.
Lenders are naturally concerned about this rule as they see it as potential losses. Therefore, many lenders have responded by creating “initial fees worksheet”. This worksheet will give an estimate of fees and prepaid items, etc. However, this particular worksheet will be provided prior to application, that is prior to the borrower having their credit pulled, or even providing the property address. The main thing for a buyer / borrower to remember is that this is not a GFE and should not be taken as such. The “initial fees worksheet” offers no guarantees whatsoever.
South Florida Brokers & Associates, Inc.
According to a recent article in the Miami Herald 2009 was a pretty good year for condo sales in the Downtown Miami area. The article expresses that buyers snatched up good deals at a rate of 7 condos per day. In my opinion this is extremely impressive in light of the downturn in the real estate market in recent years. The article goes on to describe a possible reason for the buying frenzy, that is developer slashing of prices by roughly 33% from an average of 300 per square foot to 200 per square foot. We ourselves can say that we have seen many sales closing in our office in this 200 per square foot for condos off the ocean (areas such as Downtown, Brickell and even Aventura).
However, I don’t believe this means we are out of the woods yet. I also read another report where realty track is depicting the foreclosure filing shooting up by 21%. This may keep the inventory at high levels, meaning good news for buyers who will be able to shop in a market that will still have great deals due to high inventory, but hopefully in a recovering real estate market.
Take a look at the great priced unit available in Downtown Miami and Brickell areas.
South Florida Brokers & Associates, Inc.