The lending world used to consist of strict guidelines.  It was all black and white, no gray area on qualifying.  The past few years lenders have lived in the gray area and we’ve all been spoiled to the “new way” of qualifying.  You don’t have a job, don’t worry about it . . . you didn’t pay your last mortgage, ah, that’s ok . . . you don’t have any money now while paying only $500 rent and you would like to buy a $300,000 house, sure, we can make that happen. 

Those were the days, right?!!!  In the past 12 months EVERYTHING has changed and it continues to change on a daily basis.  Our beloved, lenient “all qualifying” FHA loans are now undergoing major changes as well.  Effective tomorrow (3/9/10), the maximum debt to income ratios for FHA financing through Premier Lending is 50%.  There are no exceptions or compensating factors taken into consideration.  In the past it was not uncommon for a buyer to be approved for FHA financing with debt to income ratios as high at 62%.

So, what is a debt-to-income ratio?  Well, if you’re in the market to buy a house anytime soon, you need to know!

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FHA loans are the most popular financing option for homebuyers for many reasons.  The low down payment of 3.5%, minimum credit score of 620, and flexible debt-to-income ratios makes FHA the financing of choice for over 70% of my clients. 

There are many proposed changes for FHA and while they haven’t all been set into motion yet, we have certainty of one change which will negatively affect potential home buyers.   Currently FHA charges a 1.75% funding fee for using their loan product.  This funding fee is rolled into the total loan amount.  As of April 5, 2010, FHA will increase their funding fee to 2.25% (that’s an increase of .5%). 

Now, let’s put that into numbers for you.  On a loan of $200,000 this increased funding fee will now cost a borrower $4500, rolled into their mortgage to be financed for the life of the loan.

So, what’s a person to do?  If you have found the home of your dreams, write a purchase contract and get with your mortgage lender before April 5, 2010!  The lender must have an FHA case number assigned to the file prior to the deadline to secure the current 1.75% funding fee.

As always, I’m here to care for your family and save you some CA$H . . . it’s a pleasure serving you!