President Obama signed into law a bill that will reinstate higher limits on Friday for FHA insured mortgages in high-cost areas. The maximum limits had dropped to $625,500 from $729,750 on October 1, 2011 due to the expiration of the Economic Stimulus Act of 2008. As of November 18th, 2011 the loan limits of the Economic Stimulus Act of 2008 have been reinstated back to $729,750. [callout_left]borrowers will be able to utilize FHA financing to purchase a home that is in a high cost area such as Los Angeles and Orange county.[/callout_left]In layman’s terms, borrowers will be able to utilize FHA financing to purchase a home that is in a high cost area such as Los Angeles and Orange county. Borrowers will be able to take advantage of a lower required down payment and lower interest rates (follow the link below to see an example) along with some of the flexible guidelines that come with FHA such as a higher debt-to-income ratio cap (more buying power).

To illustrate how different it would be if you were to purchase a home prior to November 18th, 2011 when FHA loan limits where $355,350 compared to the new loan limits of $729,750, I have prepared a detailed analysis for your viewing pleasure. First and foremost, I have to explain that when the loan limits were lower FHA financing could not be used due to guidelines, therefore; a Jumbo loan would be utilized and a higher down payment would be required. A jumbo loan requires a 25% down payment along with stricter guidelines and a higher interest rate of about 1% higher.

In summary, these new increased loan limits will allow a qualified buyer with good income who lacks the required funds for a 25% down payment to purchase a home that is above the prior loan limit of $355,350.

Click on the thumbnail below to be directed to the analysis.

This is a very common question. A question I get a lot from peers, past clients, and business partners on a weekly basis. I decided to put this blog together to inform people of the facts about the waiting periods required for buying after selling your home in a short sale. There are three major agencies that regulate the guidelines that banks follow when underwriting loans. These are Fannie Mae, Freddie Mac and FHA. Before I begin, It’s important to know that there aren’t any restrictions on buying a home, the following restrictions are for obtaining a new loan. If you purchase a home cash, the following guidelines/restrictions do not apply to you.

Fannie Mae/Freddie Mac

Borrowers willing and able to invest at least 20% down may purchase a home after 2 years of completing a short sale. Borrowers not able to invest a 20% down payment must wait a minimum of 4 years. Key points to know is that the transaction must be arms-length (any of the parties involved may not be related or have any type of relationship) and must meet all guidelines set forth by Fannie Mae and/or Freddie Mac including some of the basic guidelines listed below:

• Minimum FICO score of 620
• 50% max debt-to-income ratio (with compensating factors)
• No derogatory accounts listed on the credit report for the last 12 months

The rest of the guidelines will be determined by Fannie Mae or Freddie Mac’s automated underwriting system (AUS).

FHA

For FHA, it gets a little tricky because the actual guidelines state that there isn’t a restriction to re-purchasing given that the reason that you sold your house as a short sale was due to extenuating circumstances such as:

• Death
• Your employment relocated to a place too far for you to drive to
• Loss of job
• You have a balloon payment due and cannot afford the payment.

Also, If your current lender accepts a short sale without you being late on your mortgage payments, you can buy another home right away. Till this day, I haven’t seen a bank accept a short sale with out the borrower being late on their payments, but who knows… it could happen.