Last week Congress approved raising the loan limits on FHA loans to $729,750. How will that effect Palos Verdes homes owners? At first glance, one would guess that there is not too much Palos Verdes real estate selling in the lower ranges. Currently, 25% or 51 single family Palos Verdes houses are for sale for less than $1,000,000. However, 46 out of the 47 Palos Verdes condos/townhomes currently for sale are under $1,000,000.
FHA mortgages require lower FICO scores than a conventional loan – 620 for FHA and 660 for conventional. FHA mortgages require less down payment – a minimum of 3.5% versus 20% for a conventional loan. This is attractive for some buyers and therefore helpful for some sellers of Palos Verdes real estate. The downside for buyers is that FHA requires PMI (private mortgage insurance) which is an additional payment on top of the mortgage payment – 1.15% of the loan amount.
Kenneth R. Harney wrote a recent article in the LA Times with some wise advice, “Bottom line for house shoppers: Take a hard, close look at FHA with a local loan officer, in light of the rule changes. Pencil out the costs, down-payment requirements and more generous standards on credit.” Click here to read his article.
Fun wintery photo courtesy of Arvin Design