This month brings many changes in mortgage financing!!
Two unit properties owner occupied properties will require 20% down- if the buyer doesn’t have that FHA is the way to go! Buyers can still buy an owner-occupied 2 unit property with 3.5% down.
Debt to income ratios have been tightened up also. Maximum total debt to income ratio is 50% on FHA regardless of automated underwriting findings.
Debt to income ratios on conventional financing without PMI are 45%. If you need Private mortgage insurance (have less than 20% down)- PMI companies are tightening the ratio to 41%! If you have less than 20% down- FHA is clearly the way to go!! Debt to ratios are higher & the mortgage insurance rate is lower & automatically issued by HUD- no getting approval from a Private Mortgage Insurance company!
If you’re purchasing an investment property, you need at least 20% down & if you own more than 4 properties, you’ll need at least 25% down, a solid credit score above 720 & lots of cash reserves!
The tax credit was extended & also opened up to “move up” buyers that have owned their current home for the last 5 years out of the last 8 years. Tax credit is $6500 max, max sale price is $800k & max income is $125k for single filers & $225k for married tax filers. A purchase contract must be signed by April 30, 2010 & the transaction must be closed by June 30, 2010. That should keep those of us in the real estate & mortage banking industry busy through the summer of 2010.
Rates are still very low (30 year FHA today is around 4.75%) which should also keep buyers out there looking!
All the signs are pointing to “buy now”- a person who doesn’t own a home & wants to would be foolish not to buy now- interest rates on mortgages are low, home prices are low, but will be rising again! Mortgage money is “cheap” now & your investment will grow- buy for the “long haul investment” not for a “flip”!
Bottom line- BUY NOW!!!
Give yourself the gift of a new home this holiday season!!!