Some major changes went into effect today for FHA loans on San Jose & rest of the Bay Area Condominiums.
I. Elimination of “Spot Loan” Approval Process
If a condo project was not approved by FHA, a “spot approval” was allowed just for financing one unit. This process has been eliminated as of today. Now the entire project has to be approved either directly by HUD (process called HRAP) or by a Direct Endorsed Lender (process called DELRAP). With all the liabilities involved around the process most of the direct endorsed lenders would prefer HUD to directly approve the project. This can cause major delays at 2 ends:
- Collecting all the required documents from Home Owner’s association (HOA)
- HUD’s review of those documents to approve/reject the project
Dont be surprised if FHA loans on un-approved condominium projects take 60 days or more to close at least till the time HUD comes up with faster turn times or a more efficient process.
II. FHA Concentration Requirements
- The FHA concentration (Percentage of units which has FHA loans in a project) requirement will be increased temporarily to 50 percent.
- Exceptions to 50 percent Concentration Level - The FHA concentration may be increased up to 100 percent if the project meets all of the basic condominium standards plus some of the additional items.
III. Owner-Occupancy Requirements
- At least 50 percent of the units in a project must be owner-occupied or sold to owners who intend to occupy the units. For proposed, under construction, or projects still in their initial marketing period, FHA will allow a minimum owner occupancy amount equal to 50 percent of the number of presold units.
- Vacant or tenant-occupied real estate owned (REOs), including properties that are bank owned, may be excluded from the calculation of the required owner-occupancy percentage (should be removed from both the numerator and denominator).
IV. Pre-Sale Requirements
- In the case of new construction, the pre-sale requirement will be reduced temporarily to 30 percent.
As of today, 45 condominium projects are approved in San Jose. If you are a buyer or a seller and would like to know if a certain project is approved or not, call me at 408.905.6261 or email me at Shashank@ArcusLending.com
Also read - FHA is changing guidelines for condominiums
FHA today increased it’s upfront mortgage insurance premium requirements for Bay Area FHA Home Loans. Upfront Mortgage Insurance is the money that FHA collects at the time of closing a mortgage to insure the loan against default. Currently, this premium is 1.75% for most purchase and refinance transactions. However, effective April 5, 2010, FHA will collect an upfront mortgage insurance premium of 2.25 percent for purchase money and refinance transactions, including FHA-to-FHA streamlined refinance transactions. Below is the breakdown of FHA upfront mortgage insurance for different loan programs:
Great news for First Time Home Buyers - FHA is eliminating the 90 day flipping rule for mortgages on San Francisco (SF) Bay Area homes. With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. Currently such homes are mostly bought by investors with large down payments or an all cash transaction. Due to lack of financing options Bay Area First Time Home Buyers were not able to make offers on such homes.
In the final state of the state address of his gubernatorial career, Gov. Arnold Schwarzenegger proposed a second round of $10,000 first time home buyer tax credit. The previous tax credit depleted eight months before the deadline after benefiting almost 10,700 California home buyers. The Franchise Tax Board stopped taking new applications at the start of July, 2009.
FHA’s Energy Efficient Mortgage program (EEM) helps San Francisco (SF) Bay Area homebuyers or homeowners save money on utility bills. This is done by enabling them to finance the cost of adding energy efficiency features to their house as part of their FHA insured loan.
In home purchase transactions in San Jose and rest of the Bay Area, there are many times when the buyer and the seller are simply unable to agree upon a specified closing date. The Real Estate Agent involved can negotiate a ‘rent back’ period that is agreeable to both parties. This means the transaction technically closes, the loan for mortgage financing is funded, and ownership of the property is transferred into the buyer’s name. However, the buyer does not take occupancy of the property until several days later. Instead, the buyer sets up a rental agreement in which the property is leased back to the seller for a temporary period that everyone has agreed upon.
President Obama signed the congressional resolution extending through 2010 the current conforming loan limits of $417,000 for most areas in the U.S. and $729,750 for high-cost areas, including San Jose. The counties of Santa Clara, Alameda, San Mateo, San Francisco & Contra Costa in the Bay Area will have the maximum loan amount at $729,750. Yesterday’s actions extends the higher conforming loan limits for Fannie, Freddie, and FHA loans through 2010.
The $8000 first time home buyer credit has been extended and expanded for San Jose and rest of the Bay Area buyers. President Obama has signed a bill that extends the tax credit for first-time homebuyers (FTHBs) into the first half of 2010. This program had been scheduled to expire on November 30, 2009.
Action #1 – Buying Mortgage Backed Securities (MBS)
