From what we hear, the guidelines for FHA financing are about to change. It's not a minute too soon, some say. We hear this from Dave Stevens, now the head of FHA and a one time president of Long and Foster. After witnessing a burst bubble because of financing that was historically too easy for the market and which has created a massive headache in the real estate world, the FHA determined that they would raise the limits for financing to over $700,000, up from a cap in the mid $300,000s. This was done rather hurriedly, in the midst of all of the stimulus excitement in an effort to keep the real estate world from collapsing. With conventional financing before the change, it was possible to get 100% financing. Now with FHA, and for a little while longer, you can get 97% financing. If you thought that was a scanty difference, you would be right.
So what FHA and their guidelines will be dealing out, we hear, is the emergence of an old fashioned mode of selling real estate...make the buyer put some skin in the game. We are liable to see a requirement of 10% down payment, as a minimum.
For those agents who have been counting on 100% financing (if there are any left standing), this is a noisome wakeup call. For those buyers who want to buy but have no down payment, it may be a time of saving up funds in preparation for buying. If you need some guidance on how to do that, please call. I am always glad to help.
Now, VA financing is still able to be 100% financed...that's not likely to change.
In a way I agree with FHA, they should raise up the down payment %, however, I don't know how it will effect low income buyers who can only put down the 3% that's required. Don't you think this will discourage potential buyers from buying?
ReplyDeleteTo answer your question directly, if the down payment is raised to 10%, it will indeed make it more difficult for the 3% down scenario to work. It will require the buyers either to save the required amount or to get help from other investors.
ReplyDeleteAmazingly, the head of FHA is a former President of our own Long and Foster. He is looking at cases all over the country and concluding that the bubble could re-emerge, with FHA as the responsible governmental agency.