[quote=earlyretirement]. . . Yes, it sounds ridiculous how strict the lenders are on these investment properties. The broker was joking that some deadbeat with a mediocre/decent FICO can get a VA or FHA loan and be fairly overleveraged.
He said one of his clients will have something like $40 left after his down payment and putting a very low downpayment yet those types can often get a mortgage easier than a solid buyer with a high FICO with great income buying investment properties.[/quote]
early, don’t be envious of these poor slugs that your mtg broker is mentioning who are taking out VA/FHA loans with “$40 left” to their name. The vast majority are likely first-time buyers of a principal residence. The up front-fees (PLUS monthly fees on FHA) on both of these programs are very, very high, likely rendering the buyer “underwater” upon COE. That is, unless they purchased well under market, which is not very likely in CA coastal counties, due to the bureaucracy of these programs being well-known to sellers.
. . . On June 11, 2012, the FHA deployed a two-tiered private mortgage insurance schedule. New FHA mortgages and refinances of an existing FHA mortgage which was endorsed by the FHA on, or after, June 1, 2009 are subject to an upfront mortgage insurance premium (UFMIP) of 1.75% and an annual mortgage insurance premium (MIP) of up to 1.50%. Upfront and annual mortgage insurance premiums for FHA loans which replace existing FHA which were endorsed by the FHA prior to June 1, 2009 via the FHA’s streamline refinance program pay just 0.01% and 0.55%, respectively.[9]
FHA-insured homeowners using a 15-year loan term and with more than 22% home equity are exempt from annual mortgage insurance payments.
. . . According to a VA circular posted at VA.gov, “For loans closed on or after October 1, 2011, the fee for subsequent use loans with less than 5 percent downpayment and subsequent use regular refinance loans will be 2.8 percent for both active duty Servicemembers, Veterans, and persons qualifying based solely on service in the Reserves or National Guard.”. . .
Due to their no or low-downpayment requirement (of less than 5%), their up-front “mortgage insurance premiums” on a $300K (with the minimum downpayment) loan are $8,400 (VA “funding fee”) and +/- $4,000 (FHA up-front MIP), making their total closing costs approx. $11K-$13K, depending upon the program and lender.
With great credit and 30% down, you could likely borrow $300K in purchase $$ from a conventional lender at zero cost or for under $4400 in closing costs AND possibly be eligible for a rebate at COE!
HLS, ctr70 or other mtg broker, feel free to correct me if you see something amiss here 🙂
