For those in California home loans with the FHA are coming under new guidelines beginning January 1, 2010. People in California need to be aware of the changes so that they can make the best decision for their own finances. Congress recently passed a bill that will extend the current FHA loan limits for 2010. Presently California FHA loan limits are capped at $625,500 in specified high cost regions.
What are the changes and what do they mean? Current California home loans with the FHA are relatively easy to get. They require no appraisal at this time. There is no maximum loan to value ratio and there is no asset verification. Income verification is not required and lower credit scores can qualify. And right now, because of the lack of these traditional restrictions, there are quick turn-rounds available on these loans. This has made California FHA loan refinances extremely popular with many people looking to lock in a lower rate. But time has become of the essence. This is going to change at the beginning of 2010.
On January 1, 2010, California mortgage loans with the FHA will become more difficult to get. If the home owner wants to roll his closing costs into the mortgage, an appraisal is going to be required, and it is now recommended in all cases. Without an appraisal, the new loan amount cannot exceed the principal due plus the new up-front mortgage insurance premium. The maximum loan to value ratio is going to be no more than 97.75%. If a homeowner wants to lower their rate by purchasing discount points, those cannot be rolled into the mortgage. Assets and income are going to have to be verified before approval. The homeowner also must be employed at the time of application. And there will be tighter credit restrictions as well. With these added restrictions, quick turn-rounds will be a thing of the past. All of these changes will likely not lower the FHA refinance’s popularity. But it will make it available to fewer people.
Given these changes, FHA borrowers with California mortgage rates that are adjustable need to make decisions on FHA refinancing. If the tighter restrictions will make their hopes of refinancing fade, they might want to get the process done prior to the end of 2009. That means getting their loan documentation submitted and approved quickly. However, if they can live with the tighter restrictions, it might pay to wait until the beginning of 2010. It depends on the individual homeowner and their situation. Speaking with a California mortgage professional will help you make the refinance decision that is best for you.