Loan Limits Have Increased!

 “With California’s home prices climbing so significantly during the pandemic, C.A.R. (California Association of Realtors) commends the FHFA (Federal Housing Finance Agency) for recognizing the record-setting home price increases and raising maximum conforming loan limits in high-cost markets to $970,800,” said 2022 C.A.R. President Otto Catrina. “Conforming loans provide safe and affordable mortgages to California’s homebuyers across the state. If loan limits were not allowed to increase every year to keep up with home prices, first-time and moderate-income  homebuyers across the state would not have access to affordable mortgage capital, which reduces homeownership opportunities for those who need it the most.”

California Association of Realtors reminds us that "The conforming loan limit determines the maximum size of a mortgage that government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac can buy or “guarantee.” Non-conforming or “jumbo loans” typically have tighter underwriting standards and sometimes carry higher mortgage interest rates than conforming loans, increasing monthly payments and hampering the ability of families in California to purchase homes by making them less affordable."

The Long Beach average home price in November was $951,203.

 

Julia Huntsman, REALTOR, Broker | www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996

California Conforming Loan Limits Increased

Fannie Mae and Freddie Mac have increased the 2019 conforming loan limits, to match the increasing market which is higher than the national average.
Mortgage loan limits on loans acquired by Fannie Mae and Freddie Mac are increased  to $484,350 on one-unit properties and a cap of $726,525 in high-cost areas. The previous loan limits were $453,100 and $679,650, respectively.

Not all California counties will have the same upper loan limit, however, Los Angeles, Alameda, Orange, and other Bay Area counties such as San Francisco County will have the highest cap of $726,525 for one unit, and  up to $1,397,400 for 4 unit residential properties.  See California county loan limits.
 

Julia Huntsman, REALTOR, Broker | www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996

What the Government Shutdown Might Mean for Real Estate in Southern California

CLOSED

As of last weekend, HUD (U.S. Dept. of Housing and Urban Development) reversed its original position about loans and stated that applications for all government-backed mortgages will continue to be processed during a government shutdown, which for many California buyers means FHA loans.

But, though the loan may be processed, getting the FHA loan funded (meaning you're up to the last few days of your escrow period and ready to close) is another story.  To close an FHA loan, an IRS tax transcript (the 4506-T Form which is filed with the IRS to get your income tax information) and the Social Security Administration's verification for that buyer are needed.  The IRS is currently closed and Social Security is closed to new business.  The two closures will not affect anyone who received these items prior to the shutdown date, but to open a new loan and get it funded and closed will probably not happen during the shutdown. (NOTE: A particular FHA lender source may be willing to not require the 4506-T form itself, and be willing to close a loan without it, but not common.)  And, FHA may not have the ability to continue any loans beyond another two months in the future if the shutdown continues.  But we're not there yet.

But with FHA currently providing the majority (approximately 80%) of California buyers with their home purchase loans, there will be probably an impact to at least some parts of the California and Long Beach area real estate market, and certainly to many prospective California buyers.

Fannie Mae and Freddie Mac loans will not be affected because they are funded by fees from lenders, not by government appropriations.  Freddie Mac stated it will not require the 4506-T Form to be processed by the IRS, but that the information be provided as part of the loan.

VA loans are supposed to continue at this point, but there could be some delays with those loans.

While "economists" believe that there will be minimal impact overall, this shutdown could go on into the upcoming debt ceiling issue, and as certain legislators continue to balk, so probably the rate of home purchases.  "Research firm Capital Economics predicted that the effect of a shutdown would be minimal provided that it doesn’t presage a fight over the upcoming debt ceiling increase."  See more at DSNews .

Lower Loan Limits and a Higher 20% Minimum Down Payment?

Without an extension or permanent change enacted by Congress, loan limits will decrease from $729,750 to $625,500.  Couple that with new demands for a minimum 20% down payment for conventional loans and strict debt-to-income ratios, and there could be a very sad situation.

In many states these changes may not change too many people's lives.  But in California where the market has for years been higher than other areas of the country, those changes could be critical, decreasing ability of buyers and sellers to purchase and sell, and hurting the recovery of our market. There are 27 California members of Congress who have spoken out against these changes. Everyone should know how their homebuying or homeselling future could be impacted by these changes, and possibly be shut out of the market.

And to make matters more confusing, there have been alternate proposals, and different ideas of what defines a Qualified Residential Mortgage, meaning those mortgages that could be exempt from the new rules. While it may have started with good intentions, these new rules, if passed into law, could have unintended, unknown effects.



The Return of the 5% and 10% Down Payment on Conventional Loans

This is welcome news for borrowers (up to $417,000) whose only option was FHA if they didn't have 10% or 20% down payment funds. This is also welcome news for sellers of single family homes because buyers whose loan amount is $417,000 or less may now borrow with a 5% down payment. Yes, we know there are cash buyers out there with that amount of money, because the FHA buyers in the Southern California market have regularly been beaten down by the all cash buyers or 50% down buyers. But assuming the borrower is well qualified, pre-approved with a lender with a track record (and I mean fully pre-approved), and motivated, a seller may well want to seriously consider such a committed prospect who as a great desire to purchase his/her first home.

And, also in the good news department, is the return of the 10% down conventional loan for condos. This has been almost impossible to get in recent history from most lenders, and this is good news for sellers also, because it relieves the issue of an FHA borrower whose lender may well have to fully approve the entire association before closing escrow. Not only is this time consuming and requires a lot of work by both the lender and the homeowner association, the HOA may not, in the end, meet FHA standards criteria. In fact, sellers, did you know that if your association has 5% or more owners delinquent 30 days or more in their HOA dues payments, there is a problem with loan qualification.  This is true for both FHA and conventional loans.
But back to the good news. For associations which can overcome any such issues, the 10% down conventional loan opens up the door for many more borrowers and thus a faster sale for the seller.
So if you're thinking of selling, contact me for all your possibilities. Buyers who have been holding off should get rolling while interest rates are still in the 5% area (that's usually included paying one point of the loan amount).

Right now there are 349 single family homes listed in the MLS in Long Beach under $438,000 (for the 5% down buyer). In Lakewood, there are 96 single family homes under $438,000.  No, they don't have ocean views, but find them in east Long Beach, Wrigley, Ridgewood Heights, Alamitos Beach for Long Beach, and Lakewood Park and Lakewood Mutuals for City of Lakewood, plus other areas that might be worth your investigation especially if you are a first time buyer, or looking for a down sized smaller home.
Please find these different areas at http://www.juliahuntsman.com/ by clicking on links from the first page (scroll down first).

CalSTRS Loans Allow for 3% Down Payment

These are great loans for employees of the California public school districts or California community colleges--and, being a first-time buyer is not a requirement. This program is for any employee, and is not restricted to teachers only.

The 80/17/3 program means the buyer's down payment is 3%, and the 2nd trust deed is the 17%. The interest rates on the 1st and 2nds are the same, and right now they are at 5%. A borrower can take out 50% of what is in their account, and the FICO score requirement on the 3% down is 620.

Buyers, if you belong to STRS, these are great opportunities. Other than FHA and VA loans, there are virtually no other opportunities for low down payment programs. And while currently an FHA loan may be allowed as high as $729,750, the maximum CalSTRS loans go as high as $650,000 which is still very competitive for many Southland and Long Beach areas, and certainly for much of the condominium market.

For a conforming sales price of $521,250, 1st loan amount of $417,000 and 2nd of $88,612, borrower's 3% down payment, the principal and interest at the current 5% interest rate would be $2238.55 (excluding property taxes and insurance, no payment on the second for 5 years).

One year ago the rates were 6% and that same loan amount scenario required a P&I payment of $2538, or $300 more.

For loan amounts over $417,000 up to %650,000, interest rates are currently at 6%

Rates are current as of today, April 1.

To find a lender doing STRS loans in the Long Beach area, please contact me.

562-896-2609

www.juliahuntsman.com

Lowest Interest Rates in 50+ Years

The e-mails from the lenders are pouring in to my inbox this morning. As of this morning, the 30 year fixed Fannie Mae Rate (conventional loans) is now 4.375%, and the FHA 30 year fixed is 4.750%!!! Even Jumbo 30 year fixed rates to $3 million are now 5.375%!!! And, if you're willing to pay a point (not a bad thing if you plan on living in your home for several years), your rate can be even lower, saving you thousands over the life of your loan, and maybe hundreds off your payment now.

Get on board with the new buying opportunity! Please contact me immediately if you would like to be prequalified for a higher purchase price.

2009 FNMA and Freddie Mac Loan Limits Just Announced

Fannie Mae and FHA loans limits were "temporarily" increased to $729,750 in our market area as a part of an overall Economic Stimulus Plan. Well, those loan limits are due to sunset on December 31, 2008.

The Federal Housing Finance Agency just announced today that, for the Los Angeles-Long Beach-Santa Ana metropolitan region, the new 2009 conforming loan limits are $625,500 for one unit (house, condo, etc.), $800,775 for 2 units, $967,950 for 3 units, $1,202,925 for 4 units. The conforming loan limit in other areas will remain at $417,000. Link to high cost area loan limits.

Consult your lender for more details.

Key Provisions in New Housing Bill

Trying to follow this new law? Like the thread under this little reader, it will take time to unwind and fully realize the impact on buyers, lenders and current homeowners.

The Republicans most in favor of this new law were those whose districts are most impacted by high foreclosures and vacancy rates. Most of the Democrats were happy. It's been a controversial bill, and there are still doubts and disagreements by many as to its complete effectiveness. (Here's a housing example from right here in the Long Beach area: Yesterday, in a comparable market analysis for a specific downtown property, on one street in 90802 there were 20 condos listed under $300,00, 15 of which were listed as vacant. )

Signed this morning without the usual Congressional member representation at the meeting (the President was not originally in favor of it), the Federal Housing and Economic Recovery Act of 2008 includes:

New permanent higher cap on loans that can be purchased by Fannie Mae or Freddie Mac--$625,500 (that up from the previous limit, down from the 2008 temporary loan limit). The new loan limits for Fannie Mae and Freddie Mac are the greater of either $417,000 or 115 percent of an area’s median home price, up to $625,500. The new FHA loan limit will be the greater of $271,050 or 115 percent of an area’s median home price, up to $625,500. Both new loan limits will be effective at the expiration of the economic stimulus limits on December 31, 2008.

• New independent agency will regulate the two entities which now own more than half of the nation's $12 trillion of residential mortgage debt.


• Truth-in-lending requirements that explain a borrower's refinanced mortgage, new purchase mortgage, or home equity line of credit purchase.


• The FHA may now insure the full value of a home on a reserve mortgage, up to $625,000.


• Homeowner access to HUD home finance counseling services.


• Program to help refinance current eligible homeowners into 30-year, fixed rate mortgages--lenders may have to accept a lower loan amount.


• Community Development Block Grant funds to help rehabilitate foreclosed homes in areas of high foreclosures.


• Tax benefit of $7500 or 10% of home's purchase price, whichever is less, for first time homebuyer with $75,000 in adjusted gross income or $150,000 for couples filing jointly. The refund serves as an interest-free loan and the homeowner is required to repay it in equal installments over 15 years.


• Starting October 1, forbid the FHA from insuring mortgages where a seller contributes to the buyer's down payment (seller-assisted programs such as the HART and Nehemiah programs). Down-payment assistance from family, employers and other nonprofits is still allowed.

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FNMA: California No Longer a "Declining Market"

Since last December, California was named a "declining market" by FNMA ("FannieMae"), but in the spirit of its original mission under its 1938 creation under Franklin D. Roosevelt to "help those who house America", last Friday, May 16th, it removed that designation.

So what does this mean for you? "The new national down payment policy will supersede the policy the company adopted in December 2007 that required higher down payments in markets where home prices are declining...", which means that once again 3% and 5% down payment conventional loan programs will be allowed in California (and other areas). For the last several months, no matter how good your credit was, a buyer couldn't get a loan unles he/she had 10% down funds of the purchase price. So if you were making an offer on a $500,000 home, you had to have $50,000 down payment funds, and many of the first-time buyer programs that might otherwise have been able to assist you are just not available right now. The new policy goes into effect June 1, so hopefully we will be seeing those loan options returning to the local market sometime after that.

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