Last week, the Federal Housing Administration (FHA) announced it was reducing the loan limit for FHA-insured loans from $729,750 to $625,500 beginning Jan. 1, 2014. In California, it has resulted in reductions of an average of more than $100,000 statewide.
What this means to all home buyers, with the tightening of many of the requirements to get a home mortgage, it will be harder for all home buyers to qualify. Not only are they lowering loan limits, but increasing credit standards and doing away with any mortgage over 30 years. One other caveat, if you are selling a property and want to carry back a note, there are new dos and don’ts (see below).
- not have participated in the development of a residence on the property in the ordinary course of your business, AND
- the loan must be fully amortizing, AND
- you must verify that the buyer is in a position to repay it, AND
- the interest rate may not be adjusted within the first five years, AND
- any rate increases over the lifetime of the loan must be “reasonable” (whatever that means)
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