We knew it was coming…and it is almost here. The reduction of FHA loan limits in Maricopa County is happening on October 1st. SOUNDS CRAZY to me to do this…but it’s true.
The now amount will be $271,050… translating to to a sales price of $280,880 with a 3.5% down payment.
Most people think that a conventional loan has down payment requirements that are out of their reach. According to one of my trusted lender partners, Kelly Zitlow, there are options.
Kelly recently put out the following information regarding a 3% down conventional loan option:
- 3% down payment option up to a loan limit of $417,000!
- Credit does not have to be pulled on a disclaiming spouse. FHA loans require the lender to pull the disclaiming spouses credit and count obligations in the buyer’s debt to income ratio.
- Conventional loans allow for PMI to be dropped or reduced after being in the loan for 2 years and once the loan to value is 78% or lower. Conventional loans use an appraisal to determine current market value. FHA loans require the buyer to pay mortgage insurance for a minimum of 5 years and after that point the MIP would only drop off if the principal balance reaches 78% of the original sales price NOT the current market value This means that unless the buyer has focused on paying extra toward their principal balance they will likely pay mortgage insurance for roughly 10 years.
- Allows for down payment and closing costs to be gifted by a family member, however, if the down payment is less than 20%, a minimum of 3% must be from the buyer’s own funds (mortgage insurance requirement).
- Conventional loans offer a variety of ways mortgage insurance can be paid.
- Interest rates are driven by credit score and loan to value on conventional loans. This isn’t the case with FHA loans.
Keep in mind, Mortgage Insurance companies have their own set of guidelines (i.e. fico score requirements, debt to income ratio guidelines & loan to value limitations, property flipping guidelines etc). That said, it’s very important that lenders are well versed in both the loan program and mortgage insurance guidelines early in the pre-qualification stage..
A few of the most important Mortgage Insurance Guidelines today:
- 3% down with a 680+ fico, primary residence ~ condos are allowed (must meet Fannie Mae’s condo requirements)
- Low, competitive rates for loans with LTV’s at 95% and fico scores > 720
- Minimum fico score of 620 for LTV’s = 95% (keep in mind mortgage insurance is more expensive with lower credit scores)
- 10% down with a 620+ fico, second home ~ condos are allowed (must meet Fannie Mae’s condo requirements)
- Single premium and split premium options available for LTV’s = 95%
- Investment property are currently ineligible
Kelly has been a lender in the Valley for many years and has helped 100’s of homeowners with their financing. You can learn more about her and her team here. Give her a call if you have any mortgage questions.
As always… if you are looking for a GREAT agent to help with your real estate needs please e-mail me at Adele@GreaterPhoenixHomes.com or give me a call (or text) at 602-504-3898 or 888-897-7821 x 114. Plus, I have a GREAT search tool on my web site that gives you the ability to search the entire MLS…just like agents do. Very COOL! Go to Metro Phoenix Homes For Sale and check it out! YOU can create and save as many searches as you would like…and it is THE SAME SEARCH I DO AS AN AGENT! You will LOVE it!
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