| Orlando real estate – The reforms enacted as part of the Housing and Economic Recovery Act of 2008 are less than a year old, but already their effects are being felt on the Orlando housing market. For example, changes made to the Federal Housing Administration mortgage program have contributed to a 425 percent increase in the number of local home sales financed by FHA loans between January 2008 and December 2008.The House and Economic Recovery Act of 2008 (HERA) made a number of significant changes to the FHA — and VA — mortgage program that makes it more usable for borrowers,” explains Les Simmonds, L.G. Simmons Real Estate Corp., president of the Orlando Regional REALTOR® Association. “In fact, as the agency aggressively markets it program and additional transactions are funneled through the closing pipeline, FHA loans are predicted to account for more than 30 percent of single-family home loans in 2009.”
The FHA program has a public purpose obligation to provide mortgage insurance to American families who choose FHA to meet their homeownership needs. But due to too-high loan limits, inflexible downpayment requirements, and an outdated fee structure the program has been suffering a dwindled marketshare. And, in recent years borrowers with less than perfect credit or those who needed a low downpayment instead turned to the risky non-traditional mortgages that are credited in part for the nation’s enormous foreclosure problem.
But now, the legislation has improved the FHA program by permanently increasing its loan limits to 115 percent of local area median home price. The new FHA floor is $271,050 and the ultimate cap in high-cost markets such as San Francisco is $625,500. In Orlando, where the median home price in December 2008 was $166,000, FHA offers loans up to $274,800 and requires a 3.5 percent downpayment. This loan limit is enough to purchase one of the more than 16,000 homes in Orange and Seminole counties currently listed at $274,800 or less.
The new law did increase the minimum cash investment for FHA loans to 3.5 percent from 3 percent. However, mortgage insurance premiums may now be financed into the transaction, and seller concessions of up to 6 percent are also permitted.
The legislation also makes it easier to purchase a condominium with an FHA loan. FHA has removed many of the burdensome requirements these loans have carried in the past, such as site reviews, and now allows FHA approved lenders to approve and process condo loans without further review.
In addition, the legislation increased the loan limit for FHA manufactured housing loans (for those homes built in a factory with a chassis) from $48,600 to $69,678. While this still sounds very low, keep in mind the national median price for a manufactured home in 2007 was $65,100. This is a home-only loan, as the land is often leased.
Finally, HERA increased the amount of money that can be included for improvements to FHA Energy Efficient Mortgages. These loans used to be limited to a total of $8,000 in energy efficient improvement, but now up to 5 percent the cost of the home will be permitted. |
