Recovery in Site?

The roller coaster of economic news continues. (I guess it would be too easy if everything pointed to one outcome.) Last week rates improved, as they did again yesterday morning after Asian stocks fell significantly. Oil, gold, and other commodities were down (although sugar is at a 28 year high, which doesn’t help people who make jam at home and kids who eat Captain Crunch).

How far can rates drop? I haven’t heard too many agents complain about rates in general, as mortgage rates remain near their lows but the government’s borrowing needs are at historical highs. This limits the amount that rates will be able to fall so as to attract buyers of our debt, and most analysts believe that soon the buyers of our debt will be demanding higher yields. Last week the Fed left overnight rates unchanged. So what? If anything, what the last year or two has taught us is that mortgage rates have little or no correlation with Fed Funds, so even though CNBC and the media make a big deal out of the Fed’s decision, mortgage rates are not impacted. Granted, any changes in rates can impact the Prime Rate (currently 3.25%), but that obviously is not the same as a 30-yr mortgage rate. So how do mortgage rates change? Mortgage rates are the result of supply and demand forces, just like any other security that is bought and sold in the open market. Securities that are backed by mortgages trade in the market, just like other fixed-income debt, and just like stocks which garner the headlines, with the prices in turn determining rates.

Get your approval today before the $8000 expires on November 30, 2009.

What does $787 B look like

Just signed and sealed…a $787 Billion Stimulus Plan made up of tax cuts and spending programs aims at reviving the US economy. Although the package was scaled down from nearly $1 Trillion, it still stands as the largest anti-recession effort since World War II. Home owners and potential homebuyers stand to gain from key provisions in this stimulus plan. Here is what we know as of today… The following discussions are intended for you to use directly with your client either in writing or verbally.

Tax Credit for Homebuyers First-time homebuyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit. Remember a tax credit is very different than a tax deduction – a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income. The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years.

Additional Housing-Related Provisions Tax Incentives to Spur Energy Savings and Green Jobs — This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation. Landmark Energy Savings — This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills. Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing—This provision provides a total of $6.3 Billion for increasing energy efficiency in federally supported housing programs.Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section 8) to increase energy efficiency, including new insulation, windows, and frames. Expanding Housing Assistance—This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.

More Help for Homeowners in the Future Another thing to keep an eye on in the coming weeks is President Obama’s plan to help struggling borrowers before they are faced with a default on their mortgage. According to reports, the Obama administration is discussing plans to help borrowers who are struggling to stay afloat, but who have not yet fallen behind on their payments. At this point, details are scarce; however, reports indicate that President Obama is looking to spend approximately $50 Billion to directly help homeowners before they face foreclosure and financial disaster. While this is good news for individual homeowners, it will likely be good for the housing industry as a whole. That’s because, assisting struggling borrowers before they default should help stop the wave of foreclosures, which are estimated to top two million this year. That, in turn, will help stabilize home prices. The Economic Stimulus Plan is huge, and impacts a number of industries. I’ve highlighted some of the major provisions that may impact you now and in the future. As always, if you have any questions or would like to discuss how this may specifically impact you, I’d be happy to sit down with you. Just call or email me to set up an appointment.

New Rules of Lending

By Les Christie, CNNMoney.com staff writer

February 4, 2009: 1:35 PM ET

NEW YORK (CNNMoney.com) — If you’re shopping for a mortgage these days, it’s a whole new world out there. “There have been a huge number of changes over the past few years in mortgage borrowing,” said Gibran Nicholas, founder of the CMPS Institute, which trains and certifies mortgage advisors. Of course, many of the subprime loans that helped fuel the housing boom – those that didn’t require borrowers to show any proof of income, or that let homeowners make minimum payments – are are simply no longer available. But even buyers looking for a traditional mortgage are now faced with different factors to consider. Here is what you need to know: Paying up-front points. Borrowers can pay points – one-time, up-front fees – in order to reduce their mortgage’s interest rate over the life of the loan. One point represents 1% of the mortgage value. But they often assume that they should never pay points, according to Alan Rosenbaum, founder of mortgage broker Guardhill Financial. That’s a mistake, in his opinion. When interest rates were high, paying points didn’t make sense because borrowers were very likely to refinance after rates dropped. They wouldn’t hold their original loans long enough to recoup their up-front costs. But now borrowers can get a lot more bang for their buck. The old rule of thumb was that paying one point at closing could lower their mortgage’s interest rate by a quarter percentage point or so. “Today the spread is worth a half point to a full point on the rate,” said Rosenbaum. It means paying $2,000 on a $200,000 mortgage at closing can shave as much as a whole percentage point off the loan’s interest rate, changing a 6% loan to 5%. That would save $126 a month, and pay for itself in 16 months. Even if the rate were only lowered to 5.5%, that would still save $64 a month, paying for itself in 32 months. Still, not everyone is convinced. Rosenbaum recently had a client who chose a 15-year fixed rate loan at 5.875% with zero up-front points on a $800,000 loan, instead of paying a point to get a 5.375% loan. Had the borrower chosen to pay that point, he would have recouped that cost in about three years, and then gone on to save more than $200 a month for the remaining 12 years of the loan. Of course, there are caveats. Buyers who are planning to refinance or sell within a few years shouldn’t pay points, since the strategy simply doesn’t pay in the short term. Making more than the minimum down payment. If you can afford to put 25%, 30% or more down, should you do it? Most lenders require a minimum down payment of 20%; anything less and borrowers will need to obtain private mortgage insurance. And if a buyer could afford to put more than 20% down, it was generally assumed that they should. The traditional thinking was, “If you have the capital to commit, why not?” said Keith Gumbinger of mortgage research firm HSH Associates. “It will give you a smaller balance to pay off. But now, in light of declining home markets, not everyone would agree with that.” High down payments can be wiped out in severely declining markets. Nicholas said he knows of a couple in Arizona who put a whopping $400,000 down on a million dollar house a couple of years ago. That gave them, they thought, a nice home equity cushion should they run into financial trouble. “But prices are down so much, the couple still fell underwater,” he said. “It would have been better to conserve that cash in case home prices continue to decline.” Locking in the mortgage rate. Many borrowers choose not to lock in when rates are falling, as they have been, since they assume that the deals will only get better. But that’s often a mistake. “We almost always recommend that if you have the numbers that make your deal work, then lock it in,” said Gumbinger. His reason: Interest rates tend to jump up much faster than they inch down, meaning that buyers are much more likely to get stuck with a higher mortgage rate than they are to get lower one because they waited. Besides, locking in at the currently very affordable rates can give borrowers peace of mind, which is no small matter when you’re trying to buy a house. “You’ll sleep better at night,” said Gumbinger.

FHA new down payment and loan limits

 2009 FHA Loan Limits

The 2009 FHA loan limits are calculated at 115% of the area median sales price.  For 1-unit, the FHA floor remains at $271,050 and the ceiling is now at 150% of the conventional floor, or $625,500.  Below is a table illustrating the 2009 FHA loan limit Floor and Ceiling:

 

2009 FHA Loan Limits
	1 – Unit	2 – Units	3 – Units	4 – Units
Minimum (Floor)	$271,050	$347,000	$419,000	$521,250
Maximum (Ceiling)	$625,500	$800,775	$967,950	$1,202,925
Alaska & Hawaii	$938,250	$1,202,150	$1,451,925	$1,804,375

 

 In order to determine the FHA Loan Limit for your area, please follow the link below, type in County where your property is located and click on the “down arrow” next to “Limit Year” and select “CY2009” before you click on “Send”.  This will bring up the FHA Mortgage Limit in your desired area for 2009.

 

https://entp.hud.gov/idapp/html/hicostlook.cfm

 

 FHA Down Payment Requirements

Effective with new case number assignments on or after January 1, 2009, the minimum down payment requirement on purchase transactions increases to 3.5% (from 3%) of the lesser of the appraised value or sales. This amount is in addition to any borrower closing costs.

 This change eliminates the previous loan-to-value limits that varied by property value and average closing costs for the state.

 For all refinance transactions, including streamline refinances, the maximum loan-to-value is 100% of the appraised value, including the financed upfront mortgage insurance premium.

 The new down payment requirements only apply to FHA 203(b), 234(c), and streamline refinance loan programs.

Tax Credit for 1st time Buyers

First-Time Home Buyer Tax Credit Fact Sheet

 Who is Eligible

• The $7,500 tax credit is available for first-time home buyers only.
• The law defines a first-time home buyer as a buyer who has not owned a home during the past three years.
• All U.S. citizens who file taxes are eligible to participate in the program.

Income Limits

• Home buyers who file as single or head-of-household taxpayers can claim the full $7,500 credit if their modified adjusted gross income (MAGI) is less than $75,000.
• For married couples filing a joint return, the income limit doubles to $150,000.
• Single or head-of-household taxpayers who earn between $75,000 and $95,000 are eligible to receive a partial first-time home buyer tax credit.
• Married couples who earn between $150,000 and $170,000 are eligible to receive a partial first-time home buyer tax credit.
• The credit is not available for single taxpayers whose MAGI is greater than $95,000 and married couples with an MAGI that exceeds $170,000.

 Effective Dates for the Tax Credit

• First-time home buyers would receive a $7,500 tax credit for the purchase of any home on or after April 9, 2008 and before July 1, 2009. To qualify, you must actually close on the sale of the home during this period.

 Tax Credit is Refundable

• A refundable credit means that if you pay less than $7,500 in federal income taxes, then the government will write you a check for the difference.
• For example, if you owe $5,000 in federal income taxes, you would pay nothing to the IRS and receive a $2,500 payment from the government.
• If you are due to receive a $1,000 tax refund from the government, your refund would grow to $8,500 ($1,000 plus $7,500 from the home buyer tax credit).
• Buyers can take the tax credit in their 2008 or 2009 tax return.
• If you purchased the home in 2008, the tax credit is taken on your 2008 tax return. If you buy in 2009, you have the option of taking the credit on your 2008 or 2009 tax returns.

 

 Types of Homes that Qualify for the Tax Credit

• All homes, whether single-family, townhomes or condominium apartments will qualify, provided that the home will be used as a principal residence and the buyer has not owned a home in the prior three years. This also includes newly-constructed homes.

 Payback Provisions

• The tax credit essentially serves as an interest-free loan to be repaid over 15 years.
• For example, a home buyer claiming a $7,500 credit would repay the credit at $500 per year. However, the buyer doesn’t have to start repaying the credit until two years after the tax year in which the credit is claimed.
• If the home owner sold the home, then the remaining credit would be due from the profit of the home sale.
• If there was insufficient profit, then the remaining credit payback would be forgiven.

 For more details on the tax credit, go to www.federalhousingtaxcredit.com

DON’T ZERO DOWN IS GONE OCT 1 ACT NOW www.BuyorRefi.Biz

More great news to help people buy homes

Guaranteed Rural Housing Loan Program – New Product!

I’m happy to announce a great new program for people looking to buy a home on the outskirts of town.  This product is designed to help low-income individuals or households purchase homes in rural areas.  Funds can be used to build, repair, renovate or even purchase and prepare sites.

Properties (or sites) must be located in a Rural Development (RD) eligible area.  Applicants for loans may have an income of up to 115% of the median income for the area.  Please visit the following website for income limits and eligible areas:

http://eligibility.sc.egov.usda.gov

Below are just some of the program highlights:

Ø      Up to 102% financing available based on appraised value

Ø      No monthly Mortgage Insurance payments – One-time guarantee fee of 2.00%

Ø      No reserves required

Ø      No downpayment required

Ø      First Time Homebuyers welcome – no additional requirements

Ø      No maximum seller contributions (if > 6%, comment from the appraiser is required)

Ø      Gifts allowed – donor must be disinterested third party

Ø      No minimum credit score

Ø      Previous housing history is not required

Ø      Non-traditional credit is allowed like cell phones or insurance

Ø      Ratios: 29/41

Tax credit for first time buyers

By Kenneth R. Harney, Washington Post Writers Group
August 3, 2008

WASHINGTON — Anyone who’s been sitting on the sidelines hesitant to jump into the housing market until conditions settle down should know these dates: April 9, 2008, through June 30, 2009.

They mark the eligibility period for the home purchase tax credit created by the housing bill enacted last week. If you have not owned a house during the last three years — or are considering buying a first home — and you close on a purchase before the end of next June, you may be eligible for a credit of as much as $7,500 against your federal taxes for 2008 or 2009 ($3,750 if you file taxes as a single person).

The new tax credit is expected to benefit hundreds of thousands of buyers. Here’s an overview of the specifics.

* The basic idea: To jump-start housing sales and clear out stocks of unsold real estate, Congress is offering tax credits to encourage new purchasers. Buy any house — new, old, in any location or condition for any price — within the designated time period and the IRS will cut as much as $7,500 off your tax bill this year or next.

For example, if you’re an eligible buyer of a home this year and you owe the IRS $4,000 on your total 2008 income tax bill, your $7,500 tax credit could wipe out everything you owe plus get you a $3,500 refund.

* Eligibility rules: If you own a home now, you’re not eligible. If you sold your home more than three years ago and now rent, you are eligible. The same is true if you’ve never owned a home. Close on a house before next June 30 and you can claim a credit of up to 10% of the purchase price to a maximum of $7,500.

If your adjusted gross income exceeds $150,000 ($75,000 for singles), the credit maximum begins to phase down. You cannot claim the credit if you financed the property using a state or local housing agency’s tax-exempt bond mortgage, or do not plan to use the house as your principal residence.

* Payback: Unlike some past tax credits, this one must be repaid over an extended period. Starting in the second tax year after purchase and continuing for up to 15 years, taxpayers are expected to make pro-rata repayments to the government on their federal filings. Over a 15-year payback period for the full $7,500 credit, the cost would be $500 a year.

If you sell the house before the end of the repayment period, and you have no gain on the sale, you won’t be expected to repay the remainder of the credit from the proceeds. If you have a net gain, the “recapture” cannot exceed the amount of your gain. In other words, the federal government is taking on all or much of the risk that the value of your new house won’t increase over time.

At its core, the new tax credit works very much like an interest-free loan. You pay the principal back in increments over time, but there’s no interest charge to you.

Rob Dietz, an economist for the National Assn. of Home Builders, says the credit not only will pull first-time buyers into the market but also will have a powerful “multiplier effect” as thousands of sellers of these credit-assisted houses go out and purchase replacement homes for themselves — extending the effect of the credit into the move-up segment.

How do you claim the credit? If you qualify, you simply request the credit on your tax return for either 2008 or 2009, which will be modified for that purpose.

Even if you purchase in 2009, you can take the credit against your 2008 taxes by filing an amended return. The home builders group is launching an educational website, at www.federalhousingtaxcredit.com, with additional information for consumers.

 

Thank you for that great info

Down Payment Assistance going away

Well this may be the bad part on the housing bill, but I’m sure there is a good reason for it.  Down payment assistance have helped many buyers that haven’t saved for down payment let the seller gift it.  So in essence their is a true zero down loan.  Also part of the bill that was passed yesterday says loan limits will be raised and FHA will need a 3.5% down payment not 3%.  If anybody is on the fence to buy do it now.

3 days till FHA credit based change

Many people have been interested to what these changes mean and how it works.  Let me tell you the difference.  RIGHT NOW if you found a house and use FHA financing, NO MATTER WHAT THE CREDIT SCORE, the upfront mortgage premium is 150 basis points and the monthly mortgage insurance is .5% of the loan amount.  Example I looked at today was a borrower buying a $161,000 house with a 633 credit score.  his upfront fee(financed into the loan) is $2,342 and $65 monthly.  With the changes Mon the 14th upfront will go to $2,732 and $71 monthly.  That’s an additional $750 over the 60 months.  Hopefully FHA and HUD will continue to bail out the tough housing industry with that extra money.  Other credit scores will be effected differently.  Se the chart below.

FHA Single Family Mortgage Insurance Upfront and Annual Mortgage Insurance Premiums  (Loan Terms > 15 years) Effective as of July 14, 2008
All premiums are specified in basis points (0.01%)
Decision Credit Score  (FICO)
LTV	850-680	679-640	639-600	599-560	559-500	499-300	NON-TRADITIONAL
≤ 90.00	125/50	125/50	125/50	150/50	175/50	175/50	150/50
90.01-95.00	125/50	125/50	150/50	175/50	200/50	n/a	175/50
> 95	125/55	150/55	175/55	200/55	225a/55	n/a	200/55
A first-time homebuyer, with HUD-approved counseling, will pay only 200 basis points for the upfront mortgage insurance premiums.

 

Dont forget your free credit report is waiting for you at www.buyorrefi.biz

More Buyers Buying using DPA

It’s awesome how many calls I’m getting lately saying give us an approval letter.  A recent stat I saw from the National Association of Realtors said 47% of homes being sold are to first time home buyers.  Go get em kids.  With the DPA ( down payment assistant) programs that let the seller gift the 3% down and with banks needing to raise capital homes are starting to move.  The average sales price is dropping like the Dow Jones when oil and jobs have a bit of bad news, to the low $200’s instead of a year ago around $260,000.  That just tells me America is becoming less greedy.  I hope folks just learn to budget now and not wait for another “BOOM”.

For anyone that doesn’t know how a DPA(down payment assistance) works let me briefly explain.  The seller is able to pay, through a gift program, the required 3% down from a FHA(Federal Housing Administration) loan.  This makes the buyer of the new home come up with the hardest part of home ownership, the down payment.  The program helps thousands of people every month realize their dreams of home ownership. 

Need more info just call or write anytime.