Real Estate Financing for 2008

Changes, so many changes.

This past Saturday, I took a class entitled, “Contract Writing for Today’s Financing” from David Rider.  It was a fast-paced class with lots of info for today’s market. 

New Fees

Beginning March 8th, 2008, new “delivery” fees will be attached to conventional loans.  Fees are based on the buyer’s FICO score and can be significant.  In looking around for a good overview of the program, I found this timely mortgage fee overview.  Instructor David shared that the fees are already starting to show up in new loans.

Declining Market Values

Maricopa County has been declared a declining market area by at least one lender, which impacts loan-to-value ratios.  David shared that one lender is making a 5% reduction in the loan ratio across the board on all types of loans.  Example: 100% loan amount would be reduced to 95% and the buyer would have to have a 5% down payment. 

Second Mortgages

Second mortgages have virtually disappeared, and private mortgage insurance is back.  In the past, buyers often took out two loans to purchase a house.  One for 80% of the of value of the house and say a second of 15%, putting 5% down.  This allowed the buyer to eliminate the need for the insurance.  No more.

FHA Loans

FHA loans are back.  Changes took place well over a year ago that significantly reduced the amount of financial contribution that a seller was required to make in a FHA sale.  At the current time, only a $75 tax processing fee must be paid for by the seller.  FHA loans also allow a down payment gift and and do not require a FICO credit score.  The current maximum for a FHA loan in Maricopa County is $263,150.  If a property is in a townhouse or condo complex, it must be 70% owner occupied and certified.

FHA also has a rehab loan (FHA 203K) which allows for up to $35,000 in funds to the buyer for repairs.

Mortgage Forgiveness Debt Relief

Was signed by the President last week.  Much has already been written.   Home seller who are upside down (oweing more than their house if currently worth) will gain some relief.  The overall relief offered by the new law remains to be seen.