The FHA Loan to Value Requirements

Good Morning!

Mortgage backed securities are up on the day today and getting a good start for the week! I am carefully floating as of right now and if I see the market turn I am ready to pull the trigger and capitalize on this quarters best rates for your clients.

It may have been confusing regarding Mortgage Insurance Premiums (MIP), Monthly Mortgage Insurance (MMI), Private Mortgage Insurance (PMI) information updates I provided. Let me clarify:

Conventional financing only has PMI if you put down less than 20%.
The minimum down payment for a primary residence is 10% for conventional.
FHA minimum down today is 3%, as of January 1, 2009 it will be 3.5%.
FHA financing has a one-time MIP, now 1.75% of the loan amount, which can be financed into the loan, along with MMI payment paid monthly.
MIP and MMI are two separate insurance premiums.
MIP is paid to HUD directly at closing and the borrower pays the MMI monthly to HUD.

Sorry about the confusion. I hope this helps.

The FHA Loan to Value Requirements are staying at 3% until January 1, 2009. Attached is the mortgagee letter from HUD which gives example and can help you understand. Please call with any questions.

Oh by the way, I am Never too busy for any of your referrals!


Banks and investors are continuing to “write-down”

Good Morning and Happy MLK Day!

Look at my blog if you have any questions regarding the new declining market loan to value policy (http://www.SeanLaRue.com) or (http://www.MortgageDitty.com) especially if you are just now hearing about this. If I was unclear about the loan to value issue please be advised that not all loans are going to require 20% down. There are still programs available for loan down payments.

Banks and investors are continuing to “write-down” the values on their asset portfolios. This means they are adjusting the value they are placing on the portfolio not necessarily taking a loss on the company just re-adjusting their balance sheets. Slow starts in last weeks new construction report is helping mortgage backed bonds through the end of last week. Make it a great week!

California is considered to be a declining market

Look at today’s rate sheet! Rates are low, low, low!

There has been a rather substantial change this week to mortgage lending and our industry as a whole where Fannie and Freddie Mac are changing their credit policies and changing the low to value requirements for borrowers. These changes are based on the purchase price and not the appraised value. Loan to value is being slashed by 5% right off the top. What this means is that Fannie and Freddie Mac, the only people buying mortgage backed securities, are saying that the programs borrowers qualify must to be reduced by 5%. For example, if the loan to value was 80% the LTV must be reduced by 5% to 75%.

I am not telling you this to be negative, but it is a reality of the current market. The state of California is considered to be a declining market and applies on a case by case basis, but call YOUR lender to get more information. Below I have included a link regarding this information. Please call me with any questions and I’ll do my best to answer them.

I am NEVER too busy for any of your referrals! Have a wonderful weekend!

http://www.washingtonpost.com/wp-dyn/content/article/2008/01/12/AR2008011200269.html