FHA loans will be a little more expensive on Monday than they were on Friday

In case you didn't know, you can get a fixed-rate mortgage with less than 20% down. You can even get a conventional, 30-year loan up to about $636,000 for as little as 5% down.  Most of these loans are guaranteed by the Federal Housing Administration, or FHA, which we also refer to as Fannie Mae.  The catch is, and always has been, that you need mortgage insurance if you are putting down less than 20% -- and that can add a lot of money to your monthly payment.

The good news was that the mortgage insurance rate was reduced recently, which means a significant savings for home buyers.  But that was last week.  The bad news is that the new administration's Housing and Urban Development Department raised the insurance rate back up to where it was yesterday.😭This erases a savings of about $1500 annually for FHA buyers in L.A.  Read about it here from today's L.A. Times.

FHA changes to loans for condos

There's news on FHA loans for condos, and restrictions are even tighter than they were before. Yes, they will still guarantee purchase money loans, but with the following stipulations:
- The units have to be 51% owner occupied (that isn't new);
- No more than 15% of units can be more than 30 days' delinquent on dues;
- There needs to be "walls-in" insurance. This insures replacement of items like kitchen cabinets, bathroom fixtures, etc. Most condo insurance policies cover the walls to the studs, and that's it;
- there is a restriction on how many units may be FHA financed. This is sort of like "I don't want to join a club that would have people like me as members."
This is not all-inclusive, and I understand there's some case-by-case flexibility.

$8000 1st-time buyer tax credit can now be used for a downpayment

As we all know, The American Recovery and Reinvestment Act of 2009 offers homebuyers a tax credit of up to $8,000 for purchasing their first home. Now, according to this HUD press release, first-time buyers can now use their $8000 tax credit towards their down payment or closing costs. While I don't quite get the mechanics of how this will work, it's good news.

Here's a quote: "Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs, which can help achieve a lower interest rate." Here's what that means. Often, a buyer's interest rate is a little higher for a government-backed loan, like FHA. This will enable a buyer to "buy down" their interest rate and therefore have a lower monthly payment.

Why aren't more troubled homeowners seeking assistance?

HUD Secretary Says Programs Are Ineffective
Two government programs intended to help hundreds of thousands of borrowers avoid foreclosure are having negligible effects, a top Bush administration official acknowledged Wednesday. One program will be revamped immediately, and the other possibly in the near future.
“The response has not kept up with the need,” Steven C. Preston, Secretary of Housing and Urban Development, said to the National Press Club. “Many Americans who should be getting help are not getting help.”

The FHASecure program announced in August 2007 has helped only about 4,000 delinquent borrowers, Mr. Preston said. The other, Hope for Homeowners, has received just 111 applications from distressed homeowners since it was introduced on Oct. 1. He outlined changes intended to encourage more participation in the Hope for Homeowners program.

Under the new rules, lenders would be allowed to take a smaller loss. New loans can be made for 96.5 percent of the home’s current value, rather than the previous 90 percent. Even with the changes, borrowers would still have to pay back half of any appreciation to the government if they sell the house or refinance."

Bizarre. Thanks, Dana Dukelow, for this article. Why aren't more distressed homeowners seeking assistance?