Randy Johnson of Newport Beach, author of “How to Save Thousands of Dollars on Your Home Mortgage” and a mortgage broker since 1983, answers questions…
Lisa in Aliso Viejo asks:
Q. I have heard that loans are easy to acquire with a sizeable down payment and a good FICO score. Can you please define sizeable and good? For a conforming loan (less than $417,000), would 10% down and a FICO score of 720 be a candidate for the best rate?
A. Lisa, with 10% down and a 720 FICO score you will be just fine. For other readers, even though Fannie Mae’s automated underwriting might approve you for a 95% loan, the private mortgage insurance companies still consider California to be a declining market area. Therefore, they are only approving loans to 90%. Good luck.
(Editor’s Note: FICO is the credit rating developed by Fair Isaac Corp. and is commonly used to evaluate applicants for a home loan.)
David in Huntington Beach asks:
Q. I read what I found to be quite a confusing article about Federal Housing Administration (FHA) and Fannie Mae/Freddie Mac financing. The article states that there will be loan amount changes next year that will drop the maximum amount from about $729,000 to about $625,000. Unless I have lost my mind, $729,000 is the current maximum loan available in certain areas, including Orange County, for FHA. As you know, FHA, and Freddie/Fannie are different animals. Any clarification you can provide on this would be greatly appreciated.
A. As part of the stimulus package earlier this year, Congress authorized Fannie Mae and Freddie Mac to increase temporarily the maximum loan size that they would buy to 175% of the normal conforming limit of $417,000. That resulted in a higher loan limit of $729,750. This package feature will expire on Dec. 31, to be replaced by a new limit that is 150% of $417,000, or $625,500. For details, CLICK HERE.
This is the absolute maximum but it applies to only about 5% of U.S. counties because it is related to the property values in each county. For example, Los Angeles and Orange County limits will be $625,500 but in Sacramento, the conforming jumbo loan limit is being reduced from $580,000 to $474,950. See the list of limits for each county HERE.
FHA is following suit with the limit of $625,500, and I imagine the details will be similar. Read the government’s release on the FHA limit HERE.
That’s it. Read prior questions and answers by clicking on the headlines below…
- When insurers kill your mortgage application
- Mortgage insurance companies not giving breaks
- How price reductions work when Uncle Sam owns a foreclosure
- How long should we wait to refinance?
- Can you be too old to get a mortgage?
- Why aren’t foreclosures cheaper?
- When you can’t afford your mortgage
- How much to put down and other mortgage answers
If you want Johnson to answer a question, email it to Mathew Padilla at mapadilla(at)ocregister.com. Include your name or nickname and the city you live in — that information will be published with your question. Johnson will answer up to three questions each week, so keep checking back for a response. If many questions are submitted, it could take a while to get a response, or he may never get to it.
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FHA is the way to go with 10% down on a $417,000 loan amount. Over that loan amount FHA is still the way to go. Its much easier to qualify for a FHA Jumbo loan than a FNMA/Freddie Jumbo loan, better rates as well.
Oh ya, one more thing. Your fico score doesnt matter if you dont make enough money to afford the payment. I’d put fico score about 5th on the list of qualifying factors. In 3 years, FICO scores will be obsolete to Mortgage Lending. Why? Because they will have so much data on what loans perform and what loans dont, and the high FICO scores will prove to be just as bad or worse in regards to pay back.
Do not buy a house with any debt. Period. No ifs, ands or buts. Trust me.
No Credit card debt
No auto loan debt
No student loan debt
NO DEBT!
If you have to, eat mac and cheese until you pay off all your debt. Then only purchase a home where 25% of your take home goes to the mortgage. Save enough of a down payment to where that works for you.
I can not tell you how much that feels when you have no debt and only 25% of your take home goes to your mortgage. We really have to get rid of the “it is okay to be in debt society”
Bite the bullet for a couple years and you will live like a king from the rest of your life.
Scott, aka dave ramsey…….
Great, hope you feel better.
I agree with Mortgagemaker on the Fico scores.
People have got to understand that it is only part of the qualifying and does not give you a right to the best deal.
How many people with high scores over bought and are now walking away from their properties because they lost their second job (HELOC)
I am seeing borrowers that were using the HELOC for a second job just because they could with a high FICO.
Quit blaming Mortgage Brokers for your own excess.
Mortgage Brokers did not approve the loans or Write the checks for the loans, The banks did and look who is getting bailed out.
Who actully got their property back, when ACORN was bribed to approach banks which garnered ACORN’s members creditline normally denied them?
Could it be bankers?
Who could have afforded to secretly pay Modesto gangs to ripoff roofs in alternating neighborhoods? Could it be bankers?
Who could have easily paid its own employees to play Hedge Monte-Carlo, while paying law enforcement to ignore every law to punish them? Could it be bankers?
Who could get Alan Greenspan to change his ideological stance as easy as a child wipes his nose? Could it be bankers?
Would could get government to go gaw gaw over absolutely nothing?
Could it be bankers?