FHA LOAN APPLICATIONS SURGE, As Sub-Prime, Piggy Back Loan Option Dries Up!
NEW CHICAGO METRO AREA FHA CEILING OF $410,000 FOR SINGLE-FAMILY HOMES, UP TO $788,000 FOR FOUR-UNIT MULTI-FAMILIES OPENS DOOR TO MORE POTENTIAL BORROWERS!
It''s interesting how quickly - and dramatically - consumer lending preferences have changed over the past year.
When housing was all the boom, here in Chicago and elsewhere, few borrowers looked to FHA insured loans to fund their new home. Loan limits were low - far lower than were needed, in many cases, to finance a home in Chicago and in most Chicago Suburbs. Loan requirements were more stringent, and often required the seller to make certain repairs before the sale closed.
Also, during headier times, sub-prime conventional loans, requiring little or no down payment, and piggy back mortgages, where the borrower took out a large loan for 80% of the home's market value, plus an immediate second mortgage for as much as another 15%, were prevalent. There was no need to consider the FHA option.
Times have changed, however!
Today, FHA loans are just about the only loan option for those with as little as 3% down payment, challenged credit, or those needing down payment assistance from family members or government agencies (Down Payment Assistance programs involving sellers making a contribution to a buyer's down payment - from firms including Ameridream, Nehemiah , and others - are scheduled for phase-out by October 1st of this year).
Here in Chicago, FHA Loan Ceilings have increased to a minimum of $410,000 (for single-family homes), making more borrowers candidates for the FHA option.
True, FHA has certain property condition requirements, and many condo associations still have by-laws, including a Right of First Refusal, which could curtail the ability of some FHA loans to close. But, often, the FHA route offers a more secure, competitive-rate option for many.
Indeed, FHA Loan Applications are booming! Last week, the Mortgage Bankers Association released data indicating nearly one-third of all new loans involve FHA or other government-insured financing. One year ago, these loans accounted for only 8% of all new loans originated.
Many financing out of resetting adjustable rate sub-prime loans are also going the FHA route. Since June, 2007, FHA-insured re-fi loans have jumped 260%!
For more information, read Mary Umberger's column in today's Chicago Tribune.
DEAN MOSS & DEAN'S TEAM CHICAGO
