East Bay Area Real Estate

Preparing for 2009: The new world of financing: I recently attended a discussion on Financing presented by an appraiser, a mortgage broker for primarily conventional financing and one for FHA financing.

The changes for appraisers has already begun but come January (unless it is postponed) they will be guided by legislation instilling the arms-length relationship between the lender, mortgage broker and the real estate agent. The pooling of request for appraisals will be overseen and information documented as to what is provided an appraiser; i.e. the full purchase contract as compared to never having this information in the past. For the moment, appraisers can use sales from the last 60 days (horrifying to me since there are so few comparable sales). If a property is difficult to appraise it can be subject to an in-house review.

Beginning January 1 the conforming loan limit will be $625,500. If you remember we had a period of time this year when that amount had been increased to $729,950. The good news is this $625,500 is cast in stone (it used to be $417,000). For 2 units, the limit is now $800,775. So loans in this range can be 30 year, fixed with very attractive rates. The good old days of having an “80-10-10″ loan may have disappeared entirely. With the change in the limit, a home selling for no more than $780,000 must have 20% down to stay within the guidelines of the confirming amount. Interest rates for these loans are around 5.25%. The restrictions are firm on debt-to-income ratios. Jumbo loans (over $625,500) will be adjustable rates, and will require at least 20% down and the rates will be just under 7%.

FHA (Federal Housing Administration) loans are limited to $625,500 with 2 programs, fixed rate or an adjustable l, 3 or 5-year term. One attractive element of an FHA loan is Gift funds that can equal 100% of the down payment or the buyers minimum is 3.5% down; no credit score requirement and no cash reserves required at close of escrow. In the past reports or inspections were required – no longer necessary for a flat roof or even a pest inspection (unless there are real signs of damage). The interest rates are usually higher than conventional loans.

A final note – the time taken to close an escrow very well could be 45 days rather than the customary 30 days or less. Many lenders and escrow/title companies have fewer employees so the approval process may lag.

We are looking for a robust spring in the real estate market. If rates continue at the present 5.1/4% and up, we should see plenty of interest.

Guest Blogger – Diane Verducci, Pacific Union – East Bay Area Realtor

Diane Verducci, CRS, SRES
Email: diane@dianeverducci.com
Direct Line: 510-982-4409