IE Business Daily Business news for the Inland Empire.
The Federal Housing Administration which provides mortgage insurance on qualifying loans and only requires a 3.5 percent down payment, lowered its loan limits at the outset of the year from $500,000 to $355,350 in Riverside and San Bernardino counties. Meanwhile, the Riverside County median home sale price rose 15.4 percent to $286,250 from $248,000 in April; and San Bernardino County saw a more significant gain with median prices jumping from $195,000 to $240,000. Some loans exceeding these limitations would fall into the category of a Jumbo Loan. Many people ask what is a Jumbo Loan and how can it help get around these existing FHA limitations.
Homebuyers, as a result, will likely have to put more money down or search for a home that doesn’t exceed the lowered limit. Additionally, as home prices rise, more homebuyers will be required to obtain a jumbo loan, a loan that exceeds the conventional loan limit of $417,000.
The FHA decrease in loan limits and the rise in home prices have created a more challenging environment for prospective homebuyers. Without the resources for a higher down payment, their search for a home is limited in today’s market, and the qualification requirements in obtaining a jumbo loan are more stringent than those of a conventional loan.
To qualify for jumbo mortgages borrowers have to show a debt-to-income ratio below 43 percent; a FICO score of at least 700 is required; have a 20 percent down payment; and provide proof that they have six to 18 months of mortgage payments, including taxes and insurance, in cash reserves.
According to Wholesale Capital Corp. President Ed Hoffman, a direct mortgage lender who also offers jumbo loans, the demand for these loans on steroids is increasing and in turn lenders are easing their guidelines.
“Now we’re seeing more 90 percent firsts and hopefully see some 95 percent firsts,” Hoffman said about borrowers obtaining two loans in order to purchase their high-priced homes.
The one-size-fits-all approach in determining a median house price in the Inland Empire and using that estimate to establish a lowered FHA loan limit is ineffective because just in San Bernardino County there is a vast difference in home prices from Victorville to Upland, and in Riverside County, Temecula to Corona.
“The economy is improving and people are making more money, but tax rates are higher and the average American doesn’t have the money to save, much less place a 20 percent down payment,” Hoffman explained. “Many don’t have the savings but they can actually afford the home.”
Hoffman recently spoke with a HUD official charged with investigating FHA loan limits who informed him the lowered limit was derived by studying the region’s median home prices in 2008 and going over that figure by 115 percent. The reasoning, the official explained, was to avoid another spike in housing prices. Hoffman disagrees and maintains that the industry should be working to put people in homes, which will in turn improve the Inland Empire’s economy as a whole. For more information about Jumbo Loans CA please visit the site directly.
