FHA Changes, Jumbo Loans and Credit Crunches: A Lending Update

by Natalie Terchek

David Krichmar, Weststar Mortgage

David Krichmar, Weststar Mortgage

DAVID KRICHMAR
Mortgage Banker
Weststar Mortgage

 

What are the best products for homebuyers right now?

FHA is still very popular because it has easier guidelines than a conventional loan, so FHA has made some changes that make it less attractive than it has been in the past, such as the mortgage insurance changes. There’s a good chance mortgage insurance doesn’t go away at all, depending on what type of loan you’re doing.

When you’re speaking about condos, there are actually very few that are FHA approved anymore, especially in the Houston area, because a lot of the approvals have expired and a lot of the Homeowner Associations (HOAs) aren’t taking it upon themselves to reapprove them. I’ve seen a little bit of an increase with the HOAs becoming more interested in that because they know it greatly affects the value in the ability of their tenants or neighbors to refinance or sell their condos. So you’re seeing much more involvement from the HOA but it is a very slim to few amount of condo projects that are actually FHA approved in the immediate Houston area.

As long as the government doesn’t make the guidelines any stricter, we should be okay. The truth of the whole thing is that without FHA loans, a great part of the homebuying community can’t buy homes. If anything was every to happen to the FHA loans, we’d be in a really bad spot.

Construction loans and first and second mortgage combinations are very popular, because that helps borrowers avoids mortgage insurance. Because of FHA’s changes that have made it not as attractive, I’ve seen an increase in conventional loans where somebody is putting 3 percent down, 5 percent down payments under 20 percent. Doing a conventional loan vs. in the past, they may have done a FHA loan with the least amount of down payment.

I’d say homebuyers are qualifying for these as well. Most people going into it want to know if they can get approved, so credit score wise and stuff like that, which usually leads to maybe a FHA loan since the credit guidelines are easier. And then from there, they want to know how much of a home can they purchase and qualify for. But yes, it still falls under those same types of programs [listed above].

What are some of the biggest trends you are seeing?

Because of how healthy Houston’s market is, you’re seeing a lot of people right now offering more than the listing price, substantially higher than the listing price, so maybe $5,000, $10,000 or $15,000 more than what the home is listed for because it’s so competitive here in Houston right now that it’s extremely a seller’s market versus a buyers market. A lot of people are also wanting to buy before they think rates are going to continue to increase like they have been. And those are probably the two biggest market indicators that I’ve seen.

Are you seeing many buyers who have lost homes to short sales/foreclosures coming back to the market for loans? What is the process when they have a foreclosure on their credit report?

Ironically, I am. A lot of people know that it’s three years from when they had a foreclosure to qualify for a FHA loan, and a lot of people were informed of that when they went through it. So when it comes after or very close to the three-year mark, they are back in the market for buying a home and they’re much more educated now because they know what caused them to get into those proms, whether it be an ARM rate, a subprime mortgage, maybe not escrowing your taxes and insurance. They are a much more educated client and buyer than they were the first time.

The minimum time period to wait is three years from when it was finalized to get a FHA loan and other programs are longer than that.

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