95% Conventional Financing Now Available in CA

For some time now conventional financing in California has been limited to 90% financing. This has forced borrowers looking for conventional financing to either come in with a 10% down payment for a purchase or have at least a 10% equity position in the home they are looking to refinance, if they want to secure conventional financing. If they didn't have this 10%, securing financing meant alternative solutions, namely FHA and VA - both of which have large funding fees associated with a closed loan making these options less attractive. In addition a VA or FHA appraisal is typically stricter than conventional standards making these financing vehicles difficult to obtain when considering bank owned homes that need some fixing, or if their are any deficiencies associated with your current residence. Then there is the general problem of qualifying for FHA and VA... VA requiring a certificate of eligibility, and FHA requiring your income stays within a specific range. If you cannot meet these guidelines VA and FHA were not even options.

That is not the case any more. Conventional financing to 95% financing allows for 5% down or a 5% equity position to achieve financing. This is one loan (not a 1st 2nd mortgage combo) that requires mortgage insurance, but all loans over 80% loan to value require mortgage insurance (except VA loans), so this is not anything to get distressed over. After all once you can prove a 20% equity position you can have the mortgage insurance removed and retain the financing secured. Moreover MI insurance is tax deductible these days...

This new program offers significant opportunities for people that have the income but not the reserves necessary to buy a home. With home prices still low this is an important opportunity to review options... a denial 3 months ago does not mean you cannot qualify today.

Regardless this is a major development for conventional financing. It infers that markets are beginning to find their footing, and home prices are stabilizing in CA. This stabilization should it continue will help loosen guidelines, which this is an example of, which should allow more people looking for financing to be eligible.

Of course if this is something you are interested in. I would definitely recommend reviewing your options as soon as possible. The unreported side of this story in this article is interest rates. Rates are climbing.... more on this later today when the market has time to settle in. YOu should definitely look to secure financing now if you have the option... as rates climb it will be harder and harder to qualify.