Currently FHA is in the process of tightening even further their borrower qualifications. Soon borrowers will need at least a 640 fico score to qualify for the 3.5% down payment program. Otherwise they will be required to put 5-10% down.
Heads up for guidelines scheduled to go into effect Spring 2010 and Early Summer 2010.
#1 Seller paid closing costs are being lowered from the current level of 6% to 3%. This will negatively affect borrowers, especially those with very little money saved and who need the seller to cover the majority of the closing costs. 3% on a small loan amount may not cover all the costs.
#2 The upfront mortgage insurance premium is going from the current 1.75% to 2.25% of the loan amount.
Bottom line, is now is the time to buy. I doubt we will see so many variables in favor of purchasing again in our lifetime. Think about it. Rates are at historic lows, prices are down, the IRS is offering an $8,000 first time home buyer credit and you can get into a home with as little as 3.5% down.
A few months from now when the interest rates go up the average buyer will see a decrease in their buying power of aproximately $20,000 for every 1% the rates rise.
Interest rates dropped at the end of November after creeping up over the summer. As of the beginning of December, 30-year fixed-rate mortgages with interest rates below 5 percent were readily available.
Mortgage interest rates change as often as two to three times in one day. Securing the lowest rate possible is every borrower's goal. However, it's impossible to time the finance market, just as it's impossible to predict exactly when the housing market will peak or slide.
In this low-interest-rate environment, many buyers are locking in a rate, either when they submit their loan application and purchase contract, or some time before closing. A lock-in is a commitment from the lender to hold an interest rate for a period of time. Points (the lenders original fees) can also be locked.
The length of the rate lock varies from seven days to 60 days and possibly longer. However, it's more expensive for a longer lock -- about 1/8 percent to 1/4 percent in rate or points for each additional 15 days.
Today, it's wise to lock in your rate for 45 days if you lock when you submit your package. With delays due to appraisal issues and lenders asking for additional documentation, it can take this long to close the loan.
There are advantages and disadvantages to locking in a rate. If rates fall after you lock, the lender probably won't give you the lower rate. If rates rise after you lock, the lender should honor the locked rate as long as you close on time.
Some lenders offer a "float down." This would come into play if interest rates were to drop between the lock data and the date your loan documents are drawn. The lender probably won't let your locked rate float down to market rate, but to something in between. A float down is a one-time-only option.
HOUSE HUNTING TIP: Because rate locks have an expiration date, it's essential to provide as much financial documentation needed to qualify you for the mortgage as soon as possible. This will speed up the approval process.
Lenders require much more personal financial information than they did several years ago. Ask your loan agent or mortgage broker at the time you submit your loan application what personal financial data the lender will require -- like pay stubs and information supporting your cash downpayment and cash reserves (in bank accounts, IRAs and 401Ks). If you're self-employed, you'll need to provide tax returns for the last two years.
After your loan package is submitted to underwriting for approval, there could be other conditions that must be met. If you drag your feet producing additional documentation, this could delay approval and jeopardize your rate lock.
Extensions of rate locks are sometimes granted, but don't count on it. If the delay is due to a slowdown in the lender's processing, the lender might agree to an extension, especially if interest rates haven't changed much. But, if the delay is due to your failure to provide the materials necessary to qualify you for the loan, don't expect a sympathetic ear.
Try to get the lender's rate-lock commitment in writing. Some lenders will do so, but many give only verbal agreements, which are hard to enforce.
Lenders often give processing priority to purchase loans over refinances. If you're refinancing and rates are low but threatening to rise, lock in for 45-60 days.
Now is a great time to refinance not only because interest rates are low, but because there will be fewer home sales during the winter months and less competition to worry about in terms of getting the loan closed on time.
THE CLOSING: Get a copy of the Federal Reserve Board's "A Consumer's Guide to Mortgage Lock-Ins" online.
Dian Hymer, a real estate broker with more than 30 years' experience, is a nationally syndicated real estate columnist and author of "House Hunting: The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide."
***
What's your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story.
Copyright 2010 Inman News Features
DEAR BENNY: My wife and I are considering a move to Arizona. As we have lived in our current townhome for six years, I am sure we would be eligible for the homebuyer credit of $6,500. What I cannot find is any reference about if and when we must sell our current home. Can we buy a replacement home by the cutoff date of April 30, 2010, then sell our current residence later in the year? Or if we make the new house our principal residence, are we required to sell our current residence at all? --John
DEAR JOHN: According to the Internal Revenue Service, you do not have to sell your current house -- which must have been owned and used as a principal or primary residence for at least five consecutive years of the eight-year period ending on the date of purchase of a new home as a primary residence -- in order to take advantage of the new $6,500 tax credit for repeat homebuyers so long as the new house becomes your primary house.
There are, however, some additional limitations. While you do not have to purchase a home that is more expensive than your current home to qualify for the credit, if your new home costs more than $800,000, you are not eligible for that credit.
There are also income limitations. For single taxpayers, you cannot make more than $125,000 annually; for married folks, you cannot earn more than $225,000 if you file a joint tax return. There is a phase-out until your income reaches $145,000 for a single taxpayer or $245,000 for joint tax filers. This means that the credit is reduced proportionately until you reach the ceiling cap.
You cannot purchase the new home from family members, which includes parents, grandparents or children.
And finally, the purchase must take place by April 30, 2010. However, if you have entered into a binding contract before that date, you must settle (go to escrow) by June 30, 2010, or you will lose this credit.
This is my opinion; I suggest you consult your own tax advisors for specific advice.
DEAR BENNY: My wife and I own a rental house that is now paid off. We are thinking of gifting it to our three daughters and their spouses. It is appraised by the county for around $100,000 and would probably fetch that on the market. We could gift it in one year at that value, but am wondering just how to do so. If they could turn around and sell it, would they avoid the recapture of taxes on the depreciation? Also, would we need a professional appraisal or could we get several valuations from Realtors and take the average to come up with the amount? --Joe
DEAR JOE: You and your wife can each gift (completely tax-free) up to $13,000 this year to each of your daughters and their husbands. That comes to $78,000 ($13,000 multiplied by 6). The remaining $22,000 may have a taxable impact on you later, and you should consult with a tax attorney before you proceed with that gift.
Keep in mind that if the property is worth $100,000, and if you sell it through a real estate agent, you will have to pay a commission in the range of 5-6 percent. Accordingly, I think that you should be able to deduct this commission (which you will not have to pay) in determining the actual amount of your gift.
While a professional appraiser would be helpful, I believe that the Internal Revenue Service -- should they ever decide to look into this transaction -- would accept written valuation statements from two or three real estate agents or brokers.
When you give a gift, your basis for tax purposes becomes the basis for the giftee (the persons receiving that gift). Thus, their basis will be your depreciated basis. There will be no accumulated depreciation brought forward and there will be no recapture of depreciation.
Your daughters and their spouses should also consult with a tax attorney to determine what capital gains they may have to pay if and when they sell it.
I don't oppose your idea, but everyone should go into the transaction with their eyes open and knowing all of the facts, especially the tax ramifications.
DEAR BENNY: My daughter was in the final process of closing on a house, which was a short sale. The loan was approved and the amount offered was accepted by both the seller and the loan company. The contract was signed by both parties. However, just as we are ready to finish the process, the bank who holds the mortgage is now demanding $20,000 more.
I read your article that answered a question about short sales. From what I understand, the bank has the right to negotiate the price. However, shouldn't that have been done in the beginning of the process? My daughter's offer and earnest deposit was accepted, the house was inspected and appraised, and everything was in check until this bombshell. Do my daughter and the seller have any legal rights? Can the bank change its mind like that so far into the process? --Roseann
DEAR ROSEANN: Banks are banks and unless challenged by a government agency or a court order, they typically do what they want to do. Did your contract have a contingency for bank approval? If not, you have a binding contract, and you can sue the sellers either for specific performance (i.e., ask the court to force the sale) or for damages. In some jurisdictions, you can actually sue for both.
But litigation is time-consuming, expensive and always uncertain. More importantly, the sellers probably do not have any money, and they can't just convey the property to you until they know that their current mortgage will be paid off.
But if you have something in writing from the lender that approved the sale, you should contact a lawyer who can put serious pressure on the lender. Once the lender has agreed to the sale, I do not believe it has the legal right to back away from the deal.
You can also file a formal complaint with all appropriate state and federal agencies that have jurisdiction over the lender. If, for example, it is a national bank, your complaint should go to the Office of the Comptroller. You should also file a complaint with your state's consumer protection agency, or if there is no such agency, with the state attorney general's office.
DEAR BENNY: What is your opinion of FSBOs? --Ed
DEAR ED: I am sure that my response will generate a lot of e-mails from real estate agents and brokers, but this is still a country where I can speak freely.
FSBO means "for sale by owner." The real estate industry created this concept as a way to disparage such sales. Brokers will tell you that they are professionals, and only they can assist you through the complex maze of selling.
To some extent, this is true -- especially in today's economy. Lenders have tightened their standards, the secondary mortgage market (including VA and FHA) have imposed strict guidelines, and appraisals are coming in very conservative and low.
But this does not mean that homeowners should not try to sell their home on their own. Over the years, I have counseled hundreds of clients on how to market their house, averaging around 60 percent success.
The first thing you have to ask yourself is, "Do I have the time and the patience to try it on my own?" If you have any hesitation, then you should consider using a real estate broker.
On the other hand, if you have confidence, then go for it. I suggest you consult a lawyer in your area who practices real estate law. The attorney's fee -- if you are successful -- will be considerably less than the 3, 4, 5 or even 6 percent commission you will have to pay the broker.
Your attorney can guide you through the process. How do you determine the fair market value of your house? Should you hold open houses or show the house by invitation only? If you find a potential buyer, what's the next step?
This column cannot provide a comprehensive course on selling your house. But the bottom line is: It is possible.
More importantly, if a broker shows up with a potential buyer, you can negotiate the commission, and at the very least, save half of what you would pay if you had listed your house with a broker from the beginning of the process.
Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to benny@inman.com.
WASHINGTON (AP) -- Buying a home is about to get cheaper for a whole new crop of homebuyers -- $6,500 cheaper.
First-time homebuyers have been getting tax credits of up to $8,000 since January as part of the economic stimulus package enacted earlier this year. But with the program scheduled to expire at the end of November, the Senate voted Wednesday to extend and expand the tax credit to include many buyers who already own homes. The House is scheduled to vote on the bill Thursday.
Buyers who have owned their current homes at least five years would be eligible for tax credits of up to $6,500. First-time homebuyers -- or anyone who hasn't owned a home in the last three years -- would still get up to $8,000. To qualify, buyers in both groups have to sign a purchase agreement by April 30, 2010, and close by June 30.
"This is probably the last extension," said Sen. Johnny Isakson, R-Ga., a former real estate executive who championed the credits.
The homebuyers tax credit is one of two tax breaks totaling more than $21 billion that the Senate included in a bill extending unemployment benefits for those without a job for more than a year. The other would let companies now losing money recoup taxes they paid on profits earned in the previous five years.
"We are still in a world of economic hurt, and Congress must continue to act boldly and creatively," said Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee. "With the right mix of tax breaks and investments we will get through this recession and get folks working again."
The real estate industry has been pushing to extend and expand the housing tax credit. About 1.4 million first-time homebuyers have qualified for the credit through August. The National Association of Realtors estimates that 350,000 of them would not have purchased their homes without the credit.
Extending and expanding the tax credit for homebuyers is projected to cost the government about $10.8 billion in lost taxes. While the measure passed the Senate by a 98-0 vote, Sen. Kit Bond, R-Mo., questioned its efficiency in stimulating home sales.
"For the vast majority of cases, the homebuyer tax credit amounted to a free gift since it did not affect their decision to purchase a home," Bond said. "And for the small minority of buyers whose decision was directly caused by the credit, this raises the question of whether we are subsidizing buyers who may not have been able to afford buying a home in the first place."
The credit is available for the purchase of principal homes costing $800,000 or less, meaning vacation homes are ineligible. The credit would be phased out for individuals with annual incomes above $125,000 and for joint filers with incomes above $225,000.
The credit would be extended an additional year, until June 30, 2011, for members of the military serving outside the United States for at least 90 days.
Expanding the tax credit for money-losing companies is projected to cost $10.4 billion.
The business tax break would allow money-losing companies to use current losses to offset taxable profits earned in the previous five years, giving them refunds of taxes paid in those years. Under current law, businesses with annual gross receipts of more than $15 million can claim losses back only two years.
The tax break would help industries suffering losses in 2008 or 2009, including retailers, homebuilders and newspapers. Congress included a scaled-back version of the tax break -- for companies with revenues of $15 million or less -- in the economic recovery package enacted in February. The new tax break would be available to companies of any size, providing a quick source of cash.
The U.S Chamber of Commerce has been a big backer of the tax break for money-losing companies.
"It frees up capital that they can use to maintain jobs and potentially even hire new people as the economy returns," said Caroline Harris, senior tax counsel for the U.S. Chamber of Commerce.
The tax breaks would be paid for largely by delaying a tax break for multinational companies that pay foreign taxes. It was passed in 2004 and originally was to have taken effect this year, but would now be delayed until 2018.
The bill is H.R. 3548.
Congress: http://thomas.loc.gov
Citywide Home Loans is now an approved lender for the Home Run 2 Grant mortgage assistance program.
What is the Home Run 2 Grant?
The Home Run 2 Grant is a mortgage assistance program that grants $4000 to home buyers who wish to: (A) have a new home constructed, (B) have a partially-constructed home completed, or (C) purchase a newly-constructed home. It must be the primary residence of the home buyer. Homes that have been previously occupied do not qualify.
What is the difference between the first Home Run program and Home Run 2?
The first Home Run program, which ended in June 2009, provided a $6000 grant to eligible home buyers. Home Run 2 provides a $4000 grant. The first program required that homes be ready for occupany upon closing. Home Run 2 buyers have two additional options. They can purchase a home that is contracted for construction or partially finished for competion.
Who is eligible to recieve a $4000 Home Run 2 Grant?
Home buyers (any person taking title) must meet the following income restrictions.
* Single person, maximum income $75,000
* Married couple, maximum income $150,000
*If more than one unmarried person is taking title to the Eligible Home, each such single person is subject to the $75,000 income limit
*Income calculations will be determined by the Adjusted Gross Income as verified by the Approved Lender using the 2008 IRS Federal Income Tax transcript obtained directly from IRS or from authorized third party vendor.
Home buyers must occupy the purchased home as a primary, permanent residence.
If home buyers need a mortgage loan to purchase the home, the loan must be a fixed interest rate, amortizing mortgage loan with a term of 30 years or less.
The Home Run 2 Grant Program is effective only for home purchases closed after a Home Run 2 Grant Commitment has been issued for that specific transaction. The grant funds may not be issued for homes purchased prior to obtaining the Home Run 2 Grant Commitment and may not be used by Home buyers who recieved the $6000 grant under the previous Home Run Grant program.
For more information on the Home Run 2 Grant program go to:
http://b2b.utahhousingcorp.org/HOMERUN2_INFO.html
Where does the money go?
If you're like most U.S. consumers, more than half of it goes to housing and transportation costs.
According to the government's most recent Consumer Expenditure Survey, spending patterns are little changed from years prior.
More money is spent on entertainment and less money is spent on dining out. Beyond that, the figures are somewhat static.
Meanwhile, using on the survey's industry-by-industry breakdown, we can see how monthly housing payments and daily commuting costs impact a household's budget.
For the budget-conscious, going out less often and bargain-shopping can help pad the bottom line, but not as much as living in a less expensive home or moving closer to work.
Even a refinance into lower rates can make a difference.
Contact Us | Home | Loan Application | My Blog
Copyright © 2010 Major Mortgage USAPortions Copyright © 2010 a la mode, inc.Another XSite by a la mode, inc. | Admin Login| Terms of Use| Site Map
