EDITORS NOTE – August 30, 2009: Mortgage guidelines are constantly changing–please make sure to get updated guidelines from a local mortgage professional. This post was written under DU 7.0 and at this time, we are utilizing Fannie Mae/DU Version 7.1.
In King, Snohomish and Pierce County, FHA Jumbo will allow you to put 3% down as long as your loan amount is $567,500 or below. The buyer's required investment is 3% of the sales price (which can be gifted from a family member) and the seller can contribute up to 6%. Utilizing a FHA Jumbo, one could by $585,000 with as little as 3% down or up to around $595,000 with 5% down and still be within the FHA loan limits. The debt to income ratios are typically around 43%. Click here for more information on FHA Jumbo.
At 5% down with a sales price of $585,000, the FHA scenario would look like this:
Principal and interest @ 6.375% (APR 7.140%): $3,514.50 plus monthly mortgage insurance of $231.56 for a sub-total (not including taxes and home owners insurance) of: $3,746.06.
Amount needed to close estimated at $43,000. Buyer required investment = $17,550 (3% which can be gifted from a family member).
A conforming-jumbo will allow a 90% loan to value but good luck finding a second mortgage that will accommodate that–most second mortgages are limiting their total loan to value of 85%. Private mortgage insurance is an option up to 90% loan to value with a loan amount of $567,500. With a sales price of $600,000, 10% down would provide a loan amount of $540,000. At 10% down, the seller can contribute up to 6% as long as the buyer has invested a minimum of 5% of their own funds into the transaction.
Principal and interest @ 6.125% (APR 6.373%): $
4,555.10$3,281.10 plus monthly mortgage insurance in the amount of $316.85 for a sub-total (not including taxes and home owners insurance) of: $4,871.95$3,597.95.
Amount needed to close estimated at $73,000. Buyers required investment: $30,000 (5% which must be their own funds–gifts from family not included in the 5% down).
Fannie Mae just released DU 7.0 which promises to provide fewer loan approvals and more "expanded approvals". Before 7.0, 45% was the maximum debt to income ratio. This new version was released on May 31, 2008.
Note: Both scenarios are assuming mid-credit scores of 720 or better. A 719 will cause the rate to be 0.125% higher for the jumbo-conforming example or to cost 0.500% more in fee. For FHA, the rate would remain the same with a 719 score (and down to a 620 mid score).
I think you'll agree that we'll be seeing more FHA approved buyers than before…this is why Sellers and Real Estate Agents should learn more about FHA and be open to FHA buyers…it's not the FHA of yesteryear in fact, FHA is the future.