So on the lending front many things have changed. The FHA loan program which is driving the majority of sales in todays market has adjusted multiple times and recently there has been another adjustment, which might just make it more attractive for purchasers to take a chance on a foreclosed property in disrepair.
For years the FHA required purchasers must put 3% of the sales price into the deal. Yet limited their responsibility to that, meaning any additional fees the seller was required to pick up the slack on behalf of the purchaser. In the hot market these loans were not very beneficial to the seller as they could avoid the burdon of extra costs at closing by taking a conventional loan with no purchaser assistance. Once the market started to turn FHA gained strength. The 100% financing programs all but washed up and the market grew weary of how to get buyers into properties with little money and keep the property sales going strong. The FHA program was attractive again because purchasers could afford to buy homes with little money down and the seller, in many cases was glad to pick up the additional costs out of fear their house might be worth much less if they waited a month.
As we have seen the lending restrictions on conventional grow increasingly difficult, banks are requiring more money as a downpayment in some instances. FHA has been the best value in town for the under 417K price point. A few months back however, FHA noticed they were getting stretched thin. They have increased the downpayment to 3.5% and to help slow down high risk investing, they said you can only purchase a property with FHA funds if it has been owned for more than 90 days by the current purchaser. This not only had an effect on the flipped properties that investors bought but it unwittingly hurt the banks. Many of who became the new owners of property that people were foreclosing on, requiring them to hold the bag for 90 days also.
They have since come to see these practices while good in theory are not only hurting the purchasers by limiting what inventory they can purchase but hurting the banks who are already strapped for cash.
As of February 1, 2010 FHA is loosening its guidelines again to allow purchasers to buy properties that have been owned for less than 90 days.
For more information on the changes HUD is attempting to make to loosen their protectionist regulations visit: http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf
For information on properties that might fit your needs in the VA and DC markets contact your DC Real Estate Examiner at 703-447-3085 or visit http://www.brianblackburn.com
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