January 8, 2010

Tips for Financing Real Estate in 2010

In this climate of constant change, here is some key information relevant in today’s real estate market. Some things are new while others are worth reviewing again.

1) The $8000 FTHB tax credit requires the borrower to have a binding contract signed by April 30, 2010 and close by June 30, 2010.

2) The tax credit for repeat home buyers follows the same timeline above. It does not require the buyer to sell their existing home but does require the new purchase to be owner occupied. Learn more

3) For Conventional financing, you need a minimum qualifying FICO score of 720, a DTI of 45 percent and down payment of at least 20 percent to get the best interest rate. If you are looking for a lower down payment with private mortgage insurance, expect a 740 FICO and 41 percent DTI.

4) FHA has raised the minimum qualifying FICO score to 620 although most lenders will charge a higher rate for FICO’s below 640. The minimum FICO for FHA Jumbos is 660. FHA’s minimum down payment remains at 3.5 percent.

5) Fannie Mae's regular conforming limit remains at $417,000. The Temporary High Balance limit ranges from $417,001 to $729,750 depending on the county. For the Sacramento tri-county region, the high cost limit is $580,000.

5) VA continues to offer “zero” down payment financing.

6) Student loan balances that are considered “deferred” and therefore show no monthly payment on a borrower’s credit report, will require a 1.25 to 1.50 percent payment factor (varies by lender) to be added to the borrower’s DTI.

7) Before you consider co-signing for someone, understand the debt will appear on your credit report and needs to be included in your DTI when qualifying for a mortgage. It makes no difference that someone else makes the payment.

8) The wait period to qualify for a mortgage after discharge of Chapter 7 bankruptcy is 4 years for Conventional and 2 years for FHA.

9) A borrower paying off debts with a Chapter 13 bankruptcy may qualify for FHA financing after successfully completing 1 year of the payoff program and have the Court's approval.

10) Conventional financing requires a 2 year wait period after discharge of a Chapter 13 bankruptcy or 4 years after a dismissal.

11) In order to use FHA financing on a flipped property, the seller must be on title for at least 90 days. In cases where the property is an REO, the flip rule does not apply.

12) Fannie Mae does not have a 90 day flip rule however most lenders who fund Conventional loans do have this rule. To buy a flipped property within 90 days, find a mortgage broker who has lending sources with no flip rule.
Learn more

13) The waiting period to qualify for a mortgage after a short sale is 2 years for Conventional financing and 3 years for FHA. In the case of a foreclosure, the wait is 5 years for Conventional and 3 years for FHA. Learn more

14) When it come to down payments, FHA allows the entire 3.5 percent to be "gifted" by a family member or others as long as they are not associated with the transaction. Conventional financing allows 20 percent to be gifted when the loan balance is conforming.

The information provided is basic and not intended to represent complete guideline for the topics discussed. As we have all experienced, things will likely change as the year passes. For more information, feel free to contact me.