FHA Loan Limits

by contributing writer, Eric Painter, Senior Mortgage Consultant, Infinity Funding Corporation

On March 5th 2008, FHA increased the FHA loan limit to $316,250 in Pima
County. The previous loan limit was $239,850. What does this mean
for home buyers? It means buyers can now buy and refinance properties
that have higher values and mortgage balances than they could before
with an FHA loan. The FHA loan is a lower cost loan for many
borrowers without perfect credit. In the past, if a borrower wanted
to buy a home for $300,000 and they had little or no down payment,
lenders were forced to look at conventional loans that many times
required higher credit scores and HIGH mortgage insurance premiums.
In March 2008, mortgage insurance companies started doing away with
mortgage insurance for loans with ZERO down. No more 100% financing
for conventional loans. Now FHA will allow a borrower with lower
credit scores to purchase that home even thought they do not have 700
credit scores and with mortgage insurance premiums of $118 monthly
compared to $213.77 for a conventional loan with 5% down. FHA still
allows for the seller to contribute to a Down Payment Assistance
Program. This means that for a purchase with an FHA loan, a borrower can
receive the down payment from the seller and the seller can pay the
buyer’s closing costs. The buyer can actually pay no down payment or
closing cost on a purchase up to $316,250 in Pima County and receive
effectively 100% financing with a 30-year fixed rate in the low 6’s
and mortgage insurance under $125 monthly. Bottom line: FHA financing
is the best financing for borrowers who don’t have much for a down
payment and/or closing costs. Another great aspect of FHA financing
is it allow for 97% rate and term financing and 95% cash out financing
for refinancing with the same rates as a purchase. Conventional
financing will cost you more to do a cash out loan in both rate and
mortgage insurance. FHA also has the FHA streamline refinance. The
“Streamline” allows an existing FHA borrower to lower their interest
rate without having to requalify. The lender does not verify anything
other than that the borrowers have made their mortgage payments on time in the
last 12 months, and sometimes even allow the borrower to have been 30 days past-due
in the last 12 months. There are little to no closing costs charged to
the borrower, and normally no appraisal is needed. FHA is part of HUD (Housing and Urban Development). They are a department of the
US government that promotes homeownership for Americans. All FHA
programs are designed to give the borrower the lowest cost of home
ownership. If mortgage rates drop below what the borrower is
currently paying, FHA and HUD believe that the borrower should be able
to refinance into a lower rate without having to go through the
paperwork and time they would with a conventional loan. The FHA
streamline caps off what many Americans have found to be the perfect
loan, even though they are not perfect conventional borrowers.

This entry was posted on Monday, March 10th, 2008 at 3:56 pm and is filed under Eric Painter, Financing. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.