New loan limits were released in March for FHA backed loans. Previously, Humboldt County's limit was $299,250, but now the limit has been raised to: $393,750. What does this mean for buyers? Now that the limits have been raised, FHA will now insure loans for a much higher amount than they would previously, making it easier for loan originators to sell them on the secondary market.
The hope is that this will shore up the credit crunch.
A buyer's biggest concern: Will I be able to make the payment? This was easier as lending restrictions loosened because Mortgage Insurance or PMI is only required on a loan that exceeds 80% of the Loan to Value or LTV. This PMI will ADD to your payment and thie amount could be a couple hundred dollars. With FHA, they will do a loan of up to 97% LTV, but you will have to pay the PMI, that previously was avoided by getting a first at 80% and a second at 20%. No loan would exceed 80% LTV, so therefore no mortgage insurance. With FHA, there is no way around it, so it will end up costing the buyer more per month.
The Value of FHA for the First Time Buyer: "Unlike conventional loans that adhere to strict underwriting guidelines, FHA-insured loans require very little cash investment to close a loan. There is more flexibility in calculating household income and payment ratios. The cost of the mortgage insurance is passed along to the homeowner and typically is included in the monthly payment. In most cases, the insurance cost to the homeowner will drop off after five years or when the remaining balance on the loan is 78 percent of the value of the property -whichever is longer." - Source HUD Website
For more information about FHA loans and who is qualified to do them in Humboldt County, call me and I will help you find a lender who does these loans.
Andy Parker
707-616-3456
