Orange County FHA, VA & First Time Buyer Loan Information

VA recently released the 2012 100% financing VA loan limits for southern California. Orange County, whose 2011 loan limit was $700,000, will drop down to $621,000. Based on a revised formula for calculating the loan limit, all "high cost" areas of the country experienced a drop in loan limits. Still, $621,000 will purchase a nice home in Orange County, especially considering this is the $0 down limit.

Jumbo VA Loan in Orange County

Just because the zero down loan limit for VA financing in Orange County is $621,000 does not mean that a Veteran cannot get a bigger loan on a more expensive home. A Jumbo VA loan occurs when an eligible VA borrower purchases a home for more than the 100% VA loan limit within the county. The VA borrower is required to have a down payment equal to at least 25% of the difference between the loan limit and the purchase price. For example, a Veteran buying a home in Irvine for $721,000 would need only a $25,000 down payment. The VA loan, not counting the VA Funding Fee,  would be $696,000.  ($721,000 purchase price - $621,000 loan limit = $100,000 difference. x 25% = $25,000 down payment. ) Not all lenders will fund a Jumbo VA loan. Many stay within the VA 100% limits, and some lenders outside of California are not comfortable with loans above $417,000. Consulting with a California VA Lender is important for those who are wanting to take advantage of their VA eligibility.  With the VA limits remaining so high, upper income Veterans are rediscovering the VA loan program.

Advantages of the VA loan Program for Orange County Veterans

• No Down payment to $621,000 price
• Minimal down payment for prices above $621,000
• No Monthly Mortgage Insurance, as would be found on an FHA or Conventional loan with less than 20% down payment.
• Flexible Debt to Income ratio qualifying. While Conventional financing won't allow debt to income ratios above 45% (with less than 20% down), VA approvals are common with debt to income ratios above 50%.
• Flexible credit guidelines. Some California VA lenders will allow FICO scoring as low as 620.
• Low Fixed Rates, especially taking when compared to "high balance" loans over $417,000.
• Cashout refinances to 90%
• Rate and Term refinance to 100% to $621,000 in Orange and Los Angeles counties.

Find a Great VA Lender in Orange County, CA

Authored by Tim Storm, an Orange County, CA VA Mortgage Loan Officer MLO 223456– Please contact my office atAlpine Mortgage Planning for more information about an Orange County, CA Mortgage. 949-829-1846. www.OrangeCountyVALoans.com

Contact us for your Orange County VA Mortgage:

949-829-1846 | tstorm (at) ochomebuyerloans.com

FHA financing has been a savior for Orange County homebuyers since the collapse of the mortgage industry in 2007. Prior to 2007 it was easy to buy a home in Orange County with $0 or very little down payment. But then things changed and low down payment Conventional financing went away. Private Mortgage Insurance companies struggled and would not insure 95% loan to value loans in most of California. But FHA came to the rescue. Not only did FHA allow for only 3.5% down payment, but also increased their loan limits to accommodate high priced areas like Orange County, CA.

Private Mortgage Insurance Makes a Comeback

Recently PMI companies have been more aggressive with their underwriting. While Fannie Mae guidelines allow for a 3% down payment, until recently you couldn't find a PMI company willing to insure the loan. Now, companies like MGIC, Radian, and United Guaranty will insure these high loan to value deals. Also, the insurance rates are very favorable when compared to the now increased FHA Mortgage Insurance rates.

97% Condo Loans- and It's not FHA

Today, in November 2011, only 10% of condo projects in Orange County that were FHA approved in 2010 are still FHA approved. FHA has dramatically tightened their Condo project approval guidelines. This has made it very difficult for a first time buyer to purchase a condo. It has also made it very difficult to sell a condo. But now it is possible to get a Conventional loan on a condo with only a 3% down payment. It is even possible to pay the PMI one time up front.

First Time Home Buyers Need to Compare

It is important to check all your options when researching loan programs. FHA may be the best option for some people while a Conventional loan with PMI is best for someone else. It is important to find a local Orange County loan officer who can prepare custom loan scenarios along with a side by side analysis of the available options. And of course, getting Preapproved for a mortgage is required before making an offer on a home.

Authored by Tim Storm, an Orange County, CA Jumbo Mortgage Loan Officer MLO 223456– Please contact my office atAlpine Mortgage Planning for more information about an Orange County, CA Mortgage. 949-829-1846. www.OCHomeBuyerLoans.com

Contact us for your Orange County Mortgage:

949-829-1846 | tstorm (at) ochomebuyerloans.com

On January 15, 2010, HUD issued a news release which dramatically changes its 90 day anti flipping rule, which will help Orange County first time home buyers using FHA financing. The 90 day no flipping rule has prevented Orange County home buyers from purchasing a property that had been recently purchased by an investor for profit.

What was the Purpose of the No Flipping Rule?

 In 2003 HUD came up with the No Flip rule in order to prevent investors from artificially inflating prices, thus ripping off unsuspecting home buyers. But in the current market the rule has been seen as a road block to the housing recovery. With all of the new consumer protection rules that have gone into place in the past 12 months including HVCC, which takes the appraisal ordering out of the hands of the lender, it would be difficult for a property to be sold for more than it can appraise.

The No Flip rule did allow for homes to be sold in less than 90 days if they had been foreclosed on and then sold by the foreclosing bank. But if an investor bought the property in order to resell for profit, then a contract to purchase could not be signed until the 91st day after the seller acquired the property.

Why Has FHA Decided to Lift the Ban on Flips?

FHA has found that in todays market, properties are being purchased, fixed up, and resold in less than 90 days. The No Flip rule prevented sellers from accepting offers from FHA borrowers. Because of the restriction, FHA borrowers have been unable to purchase many affordable homes. The waiver of the No Flip rule will take effect on February 1, 2010 and remain in place for 12 months. There will still be certain rules in place to protect home buyers.

What Conditions Need to be Met?

There are conditions that need to be met in order for FHA financing to be possible on a recently flipped property.

• All transactions must be arms-length, with no identity of interest bewteen the buyer and seller or other parties participating in the sale. This means the lender will need to make sure the seller holds title to the property. The lender will need to make sure that an LLC or Corporation which holds title to the property was established and is operated lawfully. The lender will verify that there is no previous pattern of flipping activity over the previous 12 months by checking the chain of title. The lender will also need to verify the property was marketed openly, such as on MLS, or For Sale by Owner. A red flag would be if the wording "assignment of contract of sale" appears in the purchase contract.
• The new sales price cannot be more than 20% above the price the seller/investor paid for the property. If it is, then additional conditions will need to be met.
• The waiver is only for forward mortgages. This does not apply to the HECM, or Reverse Mortgage.

What if the Property is Sold for More than 20% of the Sellers Cost?

If a property is sold for more than 20% of the sellers cost, additional conditions need to be met. The lender will need additional documentation, and may require a second appraisal, which verifies the seller has completed legitimate renovation or repair on the property which will support the increase in value. In situations where there was no rehab work, the appraiser will need to explain the increase in property value since the previous title transfer. Also, the lender will need to order a Property Inspection and provide a copy of the report to the new home buyer prior to closing. The Property Inspection need to be ordered by the lender, and paid for by the lender, although the cost can be passed on to the buyer.

Who Will Benefit from This in Orange County?

Both real estate investors and home buyers will benefit. Homebuyers, especially Orange County first time home buyers who tend to use FHA financing because of the low down payment requirements, have had limited housing inventory to choose from over the past 12 months. This rule waiver will open up a segment of the market that was previously unavailable to them.

Of course, the first thing an Orange County First Time buyer needs to do is check into how much of a loan they will qualify for. They need to contact an Orange County FHA Lender who can walk them through the initial steps of getting Prequalified and/or PreApproved for an FHA loan. Knowing how much home they can afford based on their income, or payment comfort level, is important in order to prevent wasting time by looking at homes that are out their price range.

Authored by Tim Storm, an Orange County, CA Loan Officer - Please contact my office at Frost Mortgage Lending Group for more information about an Orange County, CA home loan.  877-786-4243 x 7.

www.OCFHALoans.com

Contact us for your Orange County FHA Mortgage:

Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com

*Licensed by Department of Corporations under the California Residential Mortgage Lending Act. PRMI Branch License 813F487.

In Orange County, CA the 2009 loan limits are $625,500 for an FHA mortgage. This is a big increase from the low limits FHA used to have in Orange County. Until March of 2008, when FHA implemented a temporary increase for the remainder of 2008, the maximum FHA loan was only $362,790.

A $625,500 loan will buy a nice home in Orange County. A home buyer can purchase a home for approximately $650,000 with only a 3.5% down payment. Realistically, even a buyer with a 10% down payment may need to take a serious look at FHA for their loan. It has become very difficult, especially on Conventional loans over $417,000, to get PMI (Mortgage Insurance) when there is only 10% for down payment. To make matters worse, if the borrowers FICO score is under 700 they may need 20% down on a Conventional loan.

This is not the case with an FHA loan. On FHA loans over $417,000, even a borrower with a 620 FICO score can buy a $650,000 home with 3.5% down.

FHA Works with more than 3.5% Down Payment

That should seem obvious. In situations where the buyers FICO score is below 700, or worse, below 680, the interest rate can really jump up on a Conventional loan at 90% and 85% loan to value. On an FHA loan, there is generally not a difference in interest rate for someone with a FICO of 720 or 620. Anyone having a tough time trying to do a Conventional loan with 10% down or even 15% down, should check out what an FHA loan can do for them.

Authored by Tim Storm, CMPS, Sr. Loan Officer with Frost Mortgage, a Direct Endorsed FHA Lender located in Irvine, CA. For information on FHA, or to be prequalified please call 877-786-4243 x 7.