2009 Economic Real Estate Forecasts by Gary Watts

For the Buyer:
1. Buyers putting down less than 20% must have a FICO score of at least 720.
2. All assets and income must be verified and could be re-verified at closing.
3. Fixed rate mortgages account for 69% of funded loans.
4. New conforming residential loan amount for Orange County is $625,500. (loan limits may vary by county)
5. Only 2.9% of buyers are taking an adjustable rate mortgage vs 85% in 2005.
6. Short-sales are selling for 97% of list price, while foreclosures sell for 101% of list price.
FHA is the New Big Player
1. Up-front insurance premium (MIP) is now 1.75%.
2. Down payment is 3.5% and the FICO score must be at least 580.
3. Down payment assistance programs have been abolished.
4. 45% front end and 55% back end debt ratios and 2 year employment history.
5. Must be greater disclosure to buyer on monthly payment changes.
6. Borrower must have a valid Social Security Number and be a legal resident of the U.S.
7. Owner-occupied properties only, but gift is still available for down payment.
A. Kiddy condos for kids in college.
8. FHA appraisers must be certified, which will cause a decrease in the number of appraisers.
9. New FHA loan limits for Orange County, are: (loan limits may vary by county)
One Unit Two Units Three Units Four Units $625,000 $800,775 $967,950 $1,202,100

For Lenders:
1. Some lenders may no longer use in-house appraisers.
2. Financial institutions will be held liable for any misleading advertising.
3. Adjustable sub-prime loans cannot have a pre-payment penalty for 4 years.
4. Fixed sub-prime loans cannot have a pre-payment penalty for 2 years.
5. Truth in Lending statement must be printed in the native language of the borrower.

For The Investor:
1. No more than 4 investment properties can be financed.
2. If investor puts down less than 20%, it introduces: PMI; higher rates; added approval by
insurance companies.
3. Loan rates are usually .75% higher to 1% higher than owner-occupied financing.
4. Investor loans are more difficult to get, because 40% of foreclosures are investment properties.

Source: FHA, Mortgage Bankers Association, Federal Reserve
*The above excerpts are from Gary Watts economic forecast dated 1/28/2009