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Posts tagged ‘San Diego home loans’

23
Apr

San Diego Home Loans

San Diego home loansHomebuyers spend twice as much time researching a new car purchase as they do investigating a home loan and they are soliciting fewer mortgage quotes than they did two years ago, according to a recent Zillow survey.

Borrowers who obtained a home loan in the past five years typically spent five hours researching their home financing options, which is unchanged from two years ago when Zillow first conducted this survey. Nearly one-third of borrowers say they spent less than two hours. However, consumers spent an average of 10 hours researching a new car purchase. Those who obtained a mortgage loan in the past five years solicited an average of three quotes, compared with four quotes reported in 2008. Read more »

16
Dec

FHA Home Loans – The Next Bailout?

FHA home mortgagesIn San Diego, one major mortgage lender's new FHA loan originations went from approximately 2% to approximately 60% of new loans! The low  down payment (apprx. 3%) and relative availability of FHA home loans are helping to drive hoards of borrowers to the FHA. Many new homeowners with the most risk and fewest dollars are going to the FHA for loans.

In 2007, they handled 3% of new loans. This year it's 26%. However, these additional higher-risk loans are stressing the FHA insurance system. So, now the FHA's own somewhat lax standards are coming back to create a huge hit to their loan insurance fund. It has dropped the FHA insurance fund 39% since last year, raising concerns for the FHA requiring its own bailout.

Related prior posts:

San Diego Housing Market … Hitting the Lottery (or not)

New Relief Program For Homeowners at Risk of Foreclosure

Hope For San Diego Homeowners

Real Estate – An Innovative Way of Not Filing Bankruptcy

 

San Diego real estate agents

28
Aug

Jumbo Financing and the Impact on The San Diego Real Estate Market

San Diego California real estateJumbo Financing is any financing that goes ABOVE what the "agencies" will buy or insure. This basically includes any loan larger than the FNMA and FHA loan limits. There are currently very few players in this market. These players include GMAC, Chase, BofA, Wells, Citi, and a few others with less commonly known names. The issue is that these players can no longer "securitize" and sell these mortgage loans, so the loans use up their cash. In spite of being able to charge higher rates and diligent scrutinizing of the underwriting, the investors are also trying to conserve their cash positions; liquidity is king for banks right now. These investors have (nearly) all made guideline changes just in the last few week,s indicating that their appetite for the loans is slowing. We have seen investors raise minimum FICO score requirements. Chase will not finance anyone who owns more than 4 properties. GMAC has completely eliminated programs, only to reinstate some of them the next day. Citi has priced some products so high they are effectively out of the market  And so on it goes. These investors now require higher down payments and are especially cautious with their lending guidelines in "declining markets" like California.
To understand the effect this will have on our market, let's look at underwriting policies. For buyers buying a property that is WITHIN the "agency" guidelines, there are very specific underwriting criteria that are used. FNMA uses an automated underwriting system (called DU for Desktop Underwriter) that is actually still fairly liberal in allowances for income and debt ratios and other specifics. FHA will also accept a DU approval for their files. A buyer buying a property within these limits can make a 3% down payment with FHA financing or a 5-10% down payment and get conventional financing. However, when we go ABOVE the "agency" limits, the rules change. Investors generally want larger down payments and higher FICO scores. Rates for borrowers borrowing over the "agency" limits are close to the 8% range for 30 year fixed rate loans while "agency" loans can be obtained for rates well under 7%.
Why is this an issue for San Diego? Here's why. The loan limits (for 1 unit) in San Diego were about $365,000 for FHA and $417,000 for conventional loans. When the economic stimulus bill passed, the limits were raised. The MAXIMUM amount was just over $729,000. A formula was used allowing 125% of the median price for an area (calculated in 2006) which yielded a maximum amount of $697,500 for San Diego. This EXPIRES at the end of the year.
 
Many people have seen the new housing bill and seen the number $625,000 thrown around and (in my opinion) wrongfully assuming that the new loan limit will be $625,000. However, the language of the bill indicates that the $625,000 is a new MAXIMUM and that a NEW CALCULATION will be done. The new calculation will be 115% of the 2008 median. Uh oh! The current median is about $368 for San Diego County (as of July, and we don't yet know exactly which # and which month they will use). If we assume that the $368k median holds, the new "agency" loan limit for San Diego will go DOWN to about $423,000. This means that anyone wanting to borrow OVER the $423,000 loan limit will be tied to the jumbo underwriting guidelines and pricing. Those loans do not rely on the automated systems like DU for approval and generally have tighter qualifying guidelines than the agency loans.

Certain programs have already gone away or are going away. Right now, it is VERY difficult to finance people who are self employed, who are buying certain condos, who are investors owning more than a certain # of units, etc…
The net result is that anyone trying to sell a home priced from say $500,000 to $800,000 better get it sold and closed before the end of the year. With the expensive (think 8% fixed) and limited financing options (think VERY limited) available over the conforming limits and with that limit dropping (think the low $400k range as of January 1), qualified buyers in this price range will be very few indeed!