At the beginning of the year, the Government gave an Economic Stimulus Plan which you received $600 refund in check ($600 for individual, couple $300, remember this one?) and part of the plan raised some metropolitan area conforming loan to $729,500 temporary. Now this temporary conforming loan is coming to an end. Yes, December, 31, this number will be evaporated.
As due to the sub-prime debacle, the lending industries enforced ever restricted borrowing guidelines: a. raising FICO score from 620 basic before to 680-720 minimum current standard, b. all loan applications are full document applications, sub-prime is history, and c, It required more down payment – these are just some of the stipulations.
1. Interim conforming loan, $729,750 is expiring as of December 31, 2008. In order for you to stretch your borrowing ability, you have about 10 days to send in your application and hopefully still do a 30 days close before the year ends. (Hope you already have your dream home selected, that is.)
The benefit of this is pretty obvious. Starting January 1, 2009, the conforming loan amount is $625,500. (in Bay Area) If your idea dream home is $650,000 (Santa Clara County Single Family Home average as of June, 2008), you can borrow more this year.
The lenders are now looking for 20%-30% down payment, sometimes even more to first consider your application. Your down payment can be looked at as equity of the property. 100% financing is not impossible, however, the trend is banks want more security when they lend money. And your reserve, typically, the lenders are expecting you will still have 6 months reserve in the bank after you put down all the down payment. In case there’s unexpected financial change in your household (lost jobs, medical, emergencies etc)
So, are you ready for this kind of change?
3. There’s 3.5% requirement for all FHA loan application starting next year. Right now the down payment is base on the purchase price. But the policy will enforce next year that all FHA loans will require 3.5% of down payment.
Before you do your income this year, especially you purchased property this year, make sure you look up IRS regulation regarding rule changes, or consult a Certified Accountant Professional.
Time is really running out.
