Tuesday, November 22, 2011

New Higher FHA Loan Limits Signed Into Law Friday

President Obama signed into law Friday H.R. 2112, a bill that among other things has raised the mortgage limit on Federal Housing Administration (FHA) loans. On October 1st of this year, the lending limits for high cost areas was slashed, with the national maximum being reduced from $729,750 to $625,000 and San Diego County's maximum also declining from $697,500 to $546,250. This bill will extend the pre-October 1st high cost area limits from now through December 2013. This increased limit only applies to loans backed by the FHA, as Fannie Mae and Freddie Mac loans were not included in this bill.

This raising of mortgage limits was done for those in high cost areas who simply cannot get a home for the same prices as those in other areas of the country. FHA was created to help low and middle income families acquire loans with very little down payment, encouraging home buying for those who can afford their monthly mortgage payment but otherwise might struggle to come up with the down payment. San Diego is a prime example of a high cost area. The national limit for FHA basic standard mortgages is now 271,050.00. A quick Zillow search of single family homes yielded 21,279 homes on the market in San Diego County. Of those only 9,844 were priced lower than the national limit, the majority being condos or apartments. San Diego is an expensive market to live in, therefore what is considered middle class housing here is higher than in places such as the Midwest. This bill will remove the penalty of living in an expensive region of the country and provide opportunities to purchase great homes for the middle class. If one couples the FHA loans low down payments with the historically low interest rates, this bill will enable more middle class families to afford homes in the county.

This bill will be beneficial to San Diegans, as there will be far more homes eligible for FHA loans and refinancing. Another Zillow search for homes between the prices of $546,250 (previous limit) and $697,500(new limit) shows 1521 homes. This means that 1521 homes in San Diego are now eligible under the FHA programs that were previously ineligible. The FHA wants to encourage home buying, as it stimulates economic growth. With so many more eligible homes home buying should increase, helping both our local and national economies after what has been a rough few years. Purchasing a home now while prices, down payments, and interest rates are low is an excellent investment in the future, and the FHA can make this possible for you.

Monday, November 14, 2011

More Personal Information in the Credit Report

Consumers applying for a mortgage will be sharing more of their personal information with lenders next year.

FICO scores have been based on a person's credit history. But now, tools are being developed to help the lending industry dig deeper.

Fair Isaac Corp., and CoreLogic recently announced a joint project that will result in a separate score that will be available to mortgage lenders and will include payday loans, evictions and child support payments. In the future, the status of utility, rent and cellphone payments may also be included.

Experian, Equifax and TransUnion have recently begun providing estimates of consumer income as an option to the credit report. Experian has also begun including data on on-time rental payments in its reports as of this year.

All this new information could have positive or negative impact for consumers: It may open the door to homeownership to some consumers who otherwise lack sufficient credit histories, and it may help more affluent homeowners who show little use of credit.

On the negative side, the extra information could make a borderline borrower look even worse on paper.

The FICO-CoreLogic partnership will not result in a credit score that will eliminate a borrower for a mortgage backed by FNMA, FHLMC or FHA. This is because the report required for such a loan does not rely on the additional CoreLogic data. It could affect mortgage fees or interest rates charged by lenders who use a risk-based pricing model.This model rewards the most creditworthy borrowers with low rates and tack extra fees onto loans for those with lower credit scores.

It will be interesting to see if the new information will actually expand the number of people who can get a mortgage.