FHA Loan Limits May be Going Down. So What?

You may have been hearing lately that FHA loan limits in certain counties will be decreasing starting October 1. Currently in Stanislaus County the largest FHA loan a borrower can get on a residential 1-4 unit property is $423,750. Given our decline in values that amount of money can get you a pretty darn nice house. If the limits are allowed to go down, however Stanislaus County's limit will decrease to $276,000 which is nearly a $150,000 decrease.

You may be wondering how this is relevant. It is in fact entirely relevant to everyone, so keep reading. 

Not only does FHA lend money to first time buyers, they make the loans accessible to people who do not have a ten to twenty percent down payment or do not otherwise qualify for conventional financing.

You are not one of those buyers? OK, fine. But what if you are selling a house though at the higher end of the limit? Obviously you want your house available to as many buyers as possible. The conclusion is simple: 

Lower FHA limits = fewer buyers who can purchase your home

Or, let's say you are on the cusp of the limit. Your house on paper is worth $295,000. You might have to reduce your price to fit into the guidelines to entice buyers, which is certainly not going to do any favors for values in your neighborhood or your wallet.

It is essential as we emerge from this massive real estate mess we have gotten ourselves in we do not stifle the growth we so desperately need. There are still a lot of foreclosures- even though many have not hit the open market yet. Government moratoriums on foreclosures are only putting a finger in the crack in the dam, so to speak. The homes are out there- and they cannot stay hidden in the shadows forever. Limiting the purchasing power of buyers is not the key to reestablishing a stable real estate market and economy.

I urge you to click HERE and fill out a short form that will send a message to our elected representatives to vote to extend our current, higher FHA loan limits. It only takes a minute and it could save you thousands.

I Am Trying To Buy Your House, So Why Are You Making Me Jump Through Hoops?

For many buyers getting a pre-approval for a loan is a stressful, daunting process. You are essentially handing your life (on paper) over to a complete stranger who is going to comb through it with grave attention to detail and scrutinize it in every way possible. It makes you uncomfortable, undoubtedly. You are finally done- letter in hand and a smile on your face. Now you've found your dream house- but wait! Your agent breaks the news to you: "This house is owned by (insert name of "big bank" here) and they require you to submit a SECOND pre-approval from ONE OF THEIR LOAN AGENTS  before they will review your offer". Suddenly the anxiety rises up in your throat again- you think to yourself "Again? I have to go through this AGAIN? How could this be?"

The fact is that this practice has become commonplace in the Modesto area with the volume of foreclosures we have been seeing. So, that begs the question, why do they do that? 

The answer is a simple one: Money. They have already lost boatloads of money on the house you are trying to buy. They are trying to recoup some of that loss by hopefully converting you to a borrower in addition to selling you the house. They can recoup the loss through the long-term servicing of your loan. (i.e. you pay them interest for the next 30 years).

One very important thing to remember though- if they accept your offer after you jumped through their hoops, they CANNOT make you use a specific lender. You have the right to choose. 

Is it annoying? Yes. Is it a pain in the rear? Certainly. Is it of any benefit to you? Sort of. It is a good way to get a second opinion so you are confident you are getting the best pricing and terms available. Also, it could mean getting into your dream house!

For more information on the loan approval process or a referral to a loan agent, please contact me via telephone at 209.614.3303.