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FHA Raises the Roof - New Loan Limits For Home Buyers
10 Jun 2008 You see, previously, FHA loans in the Knoxville and surrounding area were limited to $200,160 for the note amount. If you wanted to buy a $210,000 home, you had to pay the difference out of your own pocket. The new increase limit allows for a note amount of $271,050. That’s a remarkable leap. And that big jump means the FHA umbrella has widened. Again, great news. What’s so fabulous about FHA? First and foremost, a FHA loan only requires a 3% contribution out of pocket from the buyer. And, FHA allows the seller to pay up to 6% of closing costs and pre-paid costs (”pre-paid costs” are the money held in reserves to pay for your taxes, insurance and per diem interest). Look at it this way. If you wanted to buy a $250,000 home now, you would only need to have $7500 into the deal if you could negotiate with the seller to pay the remainder of the closing costs and pre-paid items. On this particular example, that would mean the seller could pay up to $15,000 in closing costs for you. In reality, the closing costs/pre-paids would be more around $5,000-6,000, but you get the picture. It’s a very affordable program. The other highlights of FHA? Flexibility from an underwriting stand point. Credit scores can be as low as 560 (with proper documentation) and medical collections accounts are ok. Judgments do have to have been satisfied. Also, there is no income limitation. You can make as much money as you want and still qualify for the program. And the monthly mortgage insurance that is required is at a reduced rate. An upfront mortgage insurance premium is collected, but it’s financed into the loan amount. The loans can only be for your primary residence, and you can get adjustable rate mortgages or buy downs (money collected upfront to make your payment less for the next year or so-usually seller paid) if you want, too. What else? No need to worry about a pre-payment penalty. They don’t apply to an FHA loan. I’ve personally seen a huge increase for my customers in FHA loans lately. Where they previously may have qualified for conventional financing, they now prefer the FHA program. It better suits their goals and they qualify more easily for the program if they have minor credit challenges. Oftentimes, they are denied a conventional loan but obtain FHA underwriting approval. The new FHA loan limit should help many people in months to come. Also, look for the conventional conforming limit take a higher jump (it’s currently at $417K). That move will also allow more flexibility for purchasing and refinancing homes. I’ll write about that later. But right now, the FHA has raised the roof, so take advantage of it! Kristin’s articles on Home Loans are very practical, consumer friendly information written in PLAIN ENGLISH. Consumer education is critical to what is most often a family’s largest and only investment - their home. Kristin Abouelata, Mortgage Specialist with Mortgage Investors Group |
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