The National Association of Realtors announced their latest enticement for the buying public.  One of the reasons the real estate market has been taking so long to recover is that people are afraid of loosing their jobs.  Anyone can understand that concern in these times.  So, to try to allay that fear, Realtors are offering their buyers an insurance policy that will essentially pay up to $1000 or $1500 per month for 6 months if the borrower looses their job.  This insurance has a premium somewhat like a Home Warranty policy.  For the higher amount of coverage, one pays $275 (one time at close of escrow), the lower one $200.

There are some restrictions of course but basically this looks like a good deal.  The coverage is only for one year and the buyer cannot renew it.  It does only cover 6 months but this bit of help could be just what buyers need to get them off the fence and into their own home — at a time when everything else is giving them the green light!  If you are interested, read more here and contact us!

Way to go NAR!!  NOW, LET’S GET THE WORD OUT!!

On October 1, 2010, the U. S. Congress voted to extend the heretofore temporary Fannie Mae and Freddie Mac conforming loan limits. The bill has been passed on to President Obama and he is expected to sign it extending the expiration date until October 1, 2011.

In the U.S. a conforming mortgage loan is one that conforms to Fannie Mae/Freddie Mac guidelines. Conforming loans offer the best possible interest rates and qualification requirements are not as strict as Jumbo loans. Conforming loans are favorable both in terms of available rates & qualification, because Fannie/Freddie guarantee they will buy all conforming loans from lending banks. This is paramount to all banks maintaining proper balance of liquidity vs. loans oustanding.

There used to be only 2 types of loans: conforming & jumbo. Now, since 2008, the mortgage market should be thought of as having 3 types of loans: conforming, high balance conforming (aka “confumbo”), and Jumbo. Most of the qualification criteria guidelines for the high balance conforming loans mirror those of true conforming, but carry a small rate premium of .25%, on most business days.

In order to help the housing market, the high balance, or “confumbo,” loan amount limits were put in place in 2008 to bring more homes within loan limits that conform to Fannie/Freddie guidelines. “Confumbo” limits are geographically specific based on median price range within a county, and have a nationwide cap of $729,750. In 2009 these limits were temporarily reduced to reflect updated/lower median price ranges, but were quickly, and temporarily, amended back up to previous limits as part of the stimulus package. These limits were returned higher temporarily and are exactly what Congress voted to extend again on October 1^st, 2010. This vote prevents the lowering of “confumbo” loan limits in each county, and rather than the nationwide cap dropping to $625,500, it will remain at $729,750. This will help the housing market.

Moreover, the true conforming loan limit is still set nationwide at $417,000. Loans above the “confumbo” limits are Jumbo.

How this might affect us as consumers can be illustrated here. Let’s consider a property owner who currently holds a $700,000, 30 year fixed mortgage at a rate of 7% (payment Principle and Interest = $4657 per month). It is now possible that he would be able to refinance his loan into a $700,000, 30 year fixed mortgage at a rate of 4.5% (payment $3547 per month), thus saving himself $1,110 per month. If these limits had not been extended, this homeowner would be subjected to higher interest rates & stricter qualification guidelines of the Jumbo loan market.

You can visit Ephraim here if you have more questions.

]]> http://www.tahoetruckeehomesales.com/congress-votes-to-extend-temporary-loan-limits-for-fannie-freddie/feed/ 0 http://www.tahoetruckeehomesales.com/first-time-homebuyers-hurry-up/ http://www.tahoetruckeehomesales.com/first-time-homebuyers-hurry-up/#comments Thu, 21 Jan 2010 21:37:56 +0000 Kappy Mann http://www.tahoetruckeehomesales.com/?p=1091 Read More »]]> As if the first time buyer needs more incentive to get off the dime, FHA has just announced that they are considering increasing the up front “mortgage insurance premium” fee that they assess a borrower when they take out one of their insured loans.

The FHA is talking about increasing the fee from the current level of 1.75 percent of the loan to 2.25 percent.  That would mean that based on a $300,000 mortgage, a borrower will now have to pony up  $6,750 instead of $5,250. This amount will still be able to be financed by adding it to the total loan.  These changes are expected to take effect sometime in the first half of this year (2010).

For the reader who is not aware, the FHA does not make loans, they insure loans against default, something that we have seen a lot of lately.   According to The Mortgage Banker’s Association, 18 percent of FHA borrowers are at least one payment behind or in foreclosure, compared with 14 percent of all loans.   FHA insured loans are traditionally granted to those borrowers who put a minimum of 3.5% downpayment of their own money.

So, Buyers, hurry up.  On top of this looming cloud, don’t forget the other reasons to purchase NOW.

1)  prices are lower than they have been in years,  here is a list of homes under $350,000 – there are condos too, call us for more info.
2)  The federal government has offered a tax credit of up to $8000 for the first time buyer. This credit is set to expire in April 2010;
3)  There are many down payment assistance plans in your neighborhood. If you live in Truckee check it out here at. If you live elsewhere, check with your city or county website or housing affordability department.  I’ll bet there is something similar there, everyone is trying to stimulate the economy.

Whatever you do, be sure to go talk to a mortgage broker and a Realtor about your chances of purchasing your new home this year.  We’re Realtors and We would love to help you!!

This downpayment assistance program is available to people who live and work in Truckee.  The assistance comes in the form of a “silent second” loan at 3%.  The payments and the principal are deferred until the borrower either sells the home, pays off the mortgage or the home becomes something other than his principal residence.

The surprising thing to me is that this program is available to those who want to purchase a mobile home in a mobile home park.  JoAnn told me that they have been successful with one borrower on a home in the Coachland Mobile Home Park.   If you are someone who thinks they can benefit from this opportunity — give us a call and we will supply the application and more information.

This program is designed to be used on some of the affordable stock within the town of Truckee’s inventory.  We are not talking about just deed restricted properties, rather, also those properties that are currently lowering in price to the point where they become affordable.

As you can imagine, there are some restrictions with regard to income, family size and to the price to be paid for the home.  The eligible home prices are from $265,000 to $445,000.  These home prices are available in the Truckee area (see link below).   Be sure to get in touch with us for more information or call David Griffith, Redevelopment and Housing Coordinator with the Town of Truckee.  He is the expert and really great to deal with.

HERE IT IS TRUCKEE!!  Now with the extension of the 1st time homebuyer tax credit this tool makes it impossible not to look at NOW as being a great time to get into the housing market.   Call us for a list of homes that qualify or just check it out here.

TAX CREDIT OVERVIEW

Who Gets What?

First-Time Homebuyers (FTHBs): First-time homebuyers (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10% of the purchase price of the home, with a maximum available credit of $8,000

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

Current Owners: The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Single taxpayers and married couples filing a joint return may qualify for the full tax credit amount.

What are the New Deadlines?

In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010.

What are the Income Caps?

The amount of income someone can earn and qualify for the full amount of the credit has been increased.

Single tax filers who earn up to $125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who earn $145,000 and above are ineligible

Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.

What is the Maximum Purchase Price?

Qualifying buyers may purchase a property with a maximum sale price of $800,000.

What is a Tax Credit?

A tax credit is a direct reduction in tax liability owed by an individual to the Internal Revenue Service (IRS). In the event no taxes are owed, the IRS will issue a check for the amount of the tax credit an individual is owed. Unlike the tax credit that existed in 2008, this credit does not require repayment unless the home, at any time in the first 36 months of ownership, is no longer an individual’s primary residence.

How Much are First-Time Homebuyers (FTHB) Eligible to Receive?

An eligible homebuyer may request from the IRS a tax credit of up to $8,000 or 10% of the purchase price for a home. If the amount of the home purchased is $75,000, the maximum amount the credit can be is $7,500. If the amount of the home purchased is $100,000, the amount of the credit may not exceed $8,000.

Who is Eligible fort FTHB Tax Credit?

Anyone who has not owned a primary residence in the previous 36 months, prior to closing and the transfer of title, is eligible.

This applies both to single taxpayers and married couples. In the case where there is a married couple, if either spouse has owned a primary residence in the last 36 months, neither would qualify. In the case where an individual has owned property that has not been a primary residence, such as a second home or investment property, that individual would be eligible.

As mentioned above, the tax credit has been expanded so that existing homeowners who have owned and occupied a primary residence for a period of five consecutive years during the last eight years are now eligible for a tax credit of up to $6,500.

How Much are Current Home Owners Eligible to Receive?

The tax credit program includes a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five consecutive years during the last eight years.

Can Homebuyers Claim the Tax Credit in Advance of Purchasing a Property?

No. The IRS has recently begun prosecuting people who have claimed credits where a purchase had not taken place.

Can a Taxpayer Claim a Credit if the Property is Purchased from a Seller with Seller Financing and the Seller Retains Title to the Property?

Yes. In situations where the buyer purchases the property, even though the seller retains legal title, the taxpayer may file for the credit. Some examples of this would include a land contract or a contract for deed.

According to the IRS, factors that would demonstrate the ownership of the property would include:

1. Right of possession,
2. Right to obtain legal title upon full payment of the purchase price,
3. Right to construct improvements,
4. Obligation to pay property taxes,
5. Risk of loss,
6. Responsibility to insure the property, and
7. Duty to maintain the property.

Are There Other Restrictions to Taking the FTHB Credit?

Yes. According to the IRS, if any of the following describe a homebuyer’s situation, a credit would not be due:

• They buy the home from a close relative. This includes a spouse, parent, grandparent, child or grandchild. (Please see the question below for details regarding purchases from “step-relatives.”)
• They do not use the home as your principal residence.
• They sell their home before the end of the year.
• They are a nonresident alien.
• They are, or were, eligible to claim the District of Columbia first-time homebuyer credit for any taxable year. (This does not apply for a home purchased in 2009.)
• Their home financing comes from tax-exempt mortgage revenue bonds. (This does not apply for a home purchased in 2009.)
• They owned a principal residence at any time during the three years prior to the date of purchase of your new home. For example, if you bought a home on July 1, 2008, you cannot take the credit for that home if you owned, or had an ownership interest in, another principal residence at any time from July 2, 2005, through July 1, 2008.

Can Homebuyers Purchase a Home from a Step-Relative and Still be Eligible for the Credit?

Yes. As long as the person they buy the home from is not a direct blood relative, the purchase would be allowed.

If a Parent (Who Will Not Live In The Property) Cosigns for a Mortgage, Will Their Child Still be Eligible for the Credit?

Yes, provided that the child meets the other requirements for the tax credit.

Ephraim Schwartz

Partner, Mortgage Consultant CMPS

O’Dette Mortgage Group

415-931-2129 (San Francisco Office) * 1842 Union St., San Francisco, CA 94123

530-582-3345 (Tahoe Office) * 11209 Brockway Rd. #304, Truckee, CA 96161

415-297-8514 (cell)

866-304-8323 (fax)

www.omglenders.com

1)  The borrower is pre-qualifed — loan agent takes verbal information from borrower and assesses, based on income and debt, what the borrower is qualified to borrow.  Loan officer gives the borrower a letter stating what he will pre-qualify him to borrow.

2)  Borrower makes an offer and gets into contract on a house using the aforementioned letter.

3)  The borrower must produce all of the documentation supporting what he has verbally told the loan officer.  The loan officer puts this together with a copy of the contract, the title report and the appraisal and submits it to the bank’s underwriting department.

4)  The underwriting department checks his “need” list against the documentation supplied and makes sure everything is acceptable.  Generally there are some things that still need to be supplied, (like evidence of insurance for the home or a current pay stub) so the underwriter will stamp the loan file “approved” subject to some conditions.

5)  The borrower and the loan officer work together to gather and/or fulfill these conditions.

6)  Loan documents are ordered and they are sent to the Escrow company.  The Escrow officer makes arrangements for the borrower to sign.

7)  The Borrower signs the loan documents and the Escrow company sends the documents back to the bank.

10)  The Bank looks at the loan documents one more time and then they call the “funder” (the department that sends the money).

11)  The funds from the bank arrive in the Escrow company’s account and the Escrow officer gives the okay to record the Deed at the County Seat.

Viola — everybody is done and the property changes hand.

So there it is, plain and simple, right?  Not so fast.  There are about a gazillion things that can happen in between all of these lines but this is BASICALLY the framework for how the loan process works from start to finish.

The latest of a rapidly growing list of new regulations on the lending industry is the requirement for the lenders to re-do their “truth in lending” disclosure whenever any thing happens that would change the annual percentage rate (APR) that their clients would be charged on a loan by 1/8th of a percent (either up or down).  The APR is determined not by just the mortgage rate but the combination of the rate and all of the fees that it will take to get this rate.

This may not sound too onerous at first blush but the more you think about it, the more complicated it gets.

Let’s just say that the borrower meets with the lender and they lock a loan of 6.5% with 1 point (a point is 1% or the loan amount).  The lender produces a “truth in lending” statement that discloses the annual percentage rate.  The borrower and the lender go through the transaction (either a re-fi or a home purchase) and when they get to the end the borrower decides that he would rather have a lower mortgage rate and pay for it with another point.  This will probably change the APR by more than an 1/8 of a percentage point and the lender will have to produce a new “truth in lending” statement which carries with it a 3 day right of rescission (the borrower can back out of the loan within 3 days).  Well let’s remember, at least in the case of a purchase, there is a seller on the other side of this transaction, waiting for the contractual closing date.  Add to that the time it takes a lending institution to re-draw documents after being told that their customer (the borrower) has decided to change his rate.  Well, you can begin to see the picture — right?

Now, I am not saying that this is a bad decision on the part of our regulatory agencies — it is just that either escrows are going to take a lot longer or borrowers are going to have to spend a lot more time doing their homework with regard to interest rates and loan scenarios before they make a decision.

As always, this is just our take on the situation.  Read more about it here.

35% by Payment History

30% by Balances Owed

15% by Length of Credit History

10% by New Credit

10% by Types of Credit in Use

And the overall calculated ranges;

720 – 850 Excellent, A-paper credit, the “good-guy” rates available

680 – 719 Good, not much of a compromise on rates

620 – 679 OK or Fair, clearly in range for FHA consideration

580 – 619 Low, bottom of the range for FHA consideration, “alternate credit” comes

                 heavily into play

500 – 579 Poor, truly nothing can be done without credit rehabilitation

If you are ready or think you are ready purchase a home, now is the time to talk with your lender. If you don’t already have someone you are working with, we have excellent people that can help you get your ducks in order. And in today’s market, more than ever, it is essential to know where you stand with regards to your Purchase Power.

 Many of us have been spoiled by recent interest rates and either weren’t old enough or don’t remember when double digit rates hung around for several years. See Mortgage Rate History Graph for an interesting view of how rates have changed over the years dating back to 1973. You will notice that 5% interest rates were no where to be found until 2003 and later. How long do you think this can last?

 That leads to the question; How do changes in interest rates affect your purchasing power?  Well let’s take a look; The summary below shows how just a ¼% rate difference can change your payment and overall loan amount.

 Loan Amount                                $300,000                 $300,000                   Difference

Interest Rate                                           5%                        5.25%                      0.25%       

Monthly Payment                          $1,610.46                 $1,656.61                    $46.15

Total Paid Over Life of Loan    $579,765.60             $596,379.60                   $16,614

Loan Amount                              $500,000                  $500,000                   Difference

Interest Rate                                       5.25%                     5.50 %                         0.25%

Monthly Payment                          $2,761.02                $2,838.95                        $77.93

Total Paid Over Life of Loan     $993,967.60        $1,022,022.00                 $28,054.80