August 24th
FHA Down-payment To Be Increased
August 24, 2008
In an effort to prevent future foreclosure disasters like those happening across the nation in the present credit crisis, FHA is tightening up on who can buy a home. The problem over the last few years came about because Lenders became so ravenous for profits that they bent and twisted rules to facilitate loans for just about anyone. You could just about walk out of Beans Café and buy a home!
These lending practices, exacerbated by the activities of some fraudulent real estate and lending practitioners, have made the Government think very carefully about how to prevent similar scenarios in the future. Since the main problem was loans going to people who could not afford to buy a home, new regulations insure that only folks with decent credit and some real money to contribute will be eligible to purchase.
Under old FHA rules, the down-payment was 2.25% of the purchase price. If you didn’t have enough money for your closing costs, you could ask the seller to pay those closing costs, and reserves for taxes and insurance, if you brought at least 3% total of your own cash to the table.
Effective 1st January 2009, the down-payment is increased to 3.5% and closing costs cannot be rolled in. This means an FHA borrower, buying a $300,000 home, must have $10,500 of their own money as a minimum, plus some more to cover closing costs.
Such rules may seem tough, but will insure that homebuyers do not purchase prematurely. In addition, programs like ‘Nehemiah’ and ‘Ameridreams’, which enable people with no money at all to go ahead and purchase, will be prohibited by Law effective 1st October, 2008.
The new rules coming in across the board on lending practices are not bad. They are like restrictions that a parent brings to bear on the children after realizing that lax parenting has caused the kids to go astray. Let’s hope the next real estate boom, coming soon, will be balanced with some mortgage sanity. Federal regulators are trying to help.
Dear Dave: Our Real Estate Office has a family that recently closed on an older, East Anchorage home. The Seller had a home inspection on the property, and our Buyers had a separate home inspection by a different inspector. All disclosures were signed and understood.
Just after moving in and starting a remodel in a bedroom, they found mold all over. They have since removed every piece of sheetrock and insulation on the bottom floor and started on the top, only to find more mold and rotted wood/studs. There was no smell in the home, or even a hint of mold when the home inspections were performed, or even just walking through the house. The sad thing is that there seems to be no recourse for our Buyers. What is a homeowner to do in a situation like this?
Answer: Mold is a complex and evolving issue. The first thing I am wondering is whether they found ‘active’ mold or past, ‘inactive’ mold.
Almost all homes have mold spores hidden away somewhere, but they can only become active with the introduction of moisture. If this was old mold, there was nothing that could have been done to discover it.
If there had been moisture present, an infra-red camera (used by some inspectors) could have picked it up. If the mold was active, an Indoor Air Quality test (around $1,500 cost) could have revealed mold spores in the air.
Because mold is such an elusive element in homes, and complex in its nature, home inspectors have no industry standards to work with. It has been said that you could put a hundred people in a room, with one of the many varieties of mold spores present in the air, and only one person would have an allergic reaction.
I would recommend that homebuyers be on a relentless quest to determine moisture problems in a home as the first line of offence. Any past water problems disclosed will also be a red flag that may suggest a further probe behind sheetrock. However, if there had been a mold issue 10 or 20 years previous, and no moisture issues since, a visual home inspection today cannot tell you what secrets lie behind the sheetrock.
Dear Dave: I have been married for three months. My wife and I want to buy our first home, and we are expecting a baby. We have heard that some homes can have lead in the paint and that this will be harmful to children. How do we know if a house has lead-based paint in it?
Answer: Congratulations on your marriage and for your new family member expected. The Federal Government publishes an excellent booklet, available from your Realtor, on the subject of lead-based paint.
The only properties likely to have lead in the paint are those painted before 1978. From that year on, the use of lead-based paint was banned in the Untied States. If a home, built prior to 1978, has since been painted over, the risk of contamination is significantly reduced since the concern for infants is ingestion, such as chewing on the window sill or picking up paint flakes in the yard and eating them, or even paint dust in the air.
When you buy a new home you will doubtless have a home inspection. A licensed home inspector or engineer will be happy to explain about lead hazards and can, if necessary, recommend specific testing of the paint for the presence of lead. If you are really worried, just buy a home built after 1978.
