Get Your FHA Mortgage Application Started -- Fees Increase 1/2 Percent Starting Monday, April 5, 2010

Starting Monday, April 5, 2010, getting an FHA mortgage in Philadelphia and throughout the nation will be more expensive for borrowers. Combine that with the short period of time left for the tax credit program and its shaping up to be a busy week for buyers.

In new guidelines set forth earlier this year, the FHA announced plans to raise additional revenue and reduce the overall risk of its mortgage portfolio.

The changes include the following:

1. Increase Upfront Mortgage Insurance Premiums from 1.75% to 2.25% for everyone
2. A plan to reduce seller concessions from 6 percent to 3 percent
3. An increase in minimum downpayment for FICOs 580 or lower

For your own loan, to avoid being subject to higher loan costs, make sure to have your FHA Case Number assigned prior to Monday, April 5, 2010. That means you'll want to give a full mortgage application before the weekend so your lender can register your loan in time for the deadline.

But don't leave your application to the last minute.

Friday is Good Friday so most banks will be closed. Your true FHA deadline, therefore, is Thursday April 1.

Also worth noting is that the FHA isn't done with its changes.

In its policy statement, the group also announced its plans to petition Congress to raise monthly mortgage insurance premiums. The FHA's formal request, in summary:

1. Raise monthly premiums by roughly 0.30%, or $25 per $100,000 borrowed per month
2. Lower upfront mortgage insurance premiums by 1.25%, or $1,250 per $100,000 borrowed at closing

For now, the request is neither approved nor acknowledged by Congress. It's merely a request. And in the event that Congress does approves it, the FHA reserves the right to change its projections. Either way, it means higher costs for consumers.

The best plan, therefore, is to get your FHA mortgage into underwriting ahead of the switches because borrowing money will be harder, and more costly.

7 Weeks Remain To Find A Home, Claim Up To $8,000 In Tax Credits

In November, Congress extended and expanded the First-Time Home Buyer Tax Credit program to include a subset of "move-up" buyers -- homeowners that have owned and lived in their home for 5 of the last 8 years.

The credit ranges up to $8,000 per buyer. There's now just 7 weeks left to take advantage.

To be eligible, home buyers must be under contract for a new home no later than April 30, 2010, and must be closed no later than June 30, 2010.

In addition to meeting the deadline dates, there's a basic set of requirements to be tax credit-eligible:

• You can't purchase the home from a parent, spouse, or child
• You can't purchase the home from an entity in which the seller is a majority owner
• You can't acquire the home by gift or inheritance
• Each buyer in the purchase must meet eligibility requirements

There's other criteria, too.

For one, the sales price on the subject property cannot exceed $800,000. Homes sold for more than $800,000 are ineligible for the tax credit. Furthermore, households earning more than $125,000 as single-filers, or $225,500 for joint-filers, are ineligible.

You can read the complete eligibility requirements at the IRS website, or, you may just find it simpler to speak with your accountant about it. There are some nuances in qualifying for and claiming the tax credit on your returns and getting a professional's opinion is always wise.

And lastly, don't forget that government's tax credit program is a true tax credit. It's not a tax deduction. This means that a tax filer whose "normal" tax liability is $3,500 and who is eligible for $8,000 in credit will receive a $4,500 refund from the U.S. Treasury.

If you're currently in the House Hunt, mark your calendar for April 30, 2010. It's 7 weeks away and you can be sure that as the date gets closer, buyer traffic is going to increase. You may find sellers more willing to negotiate today than several weeks from now.

Separating FHA Fact From Fiction : Mortgage Insurance Premiums

The mortgage lending landscape changes a lot. Rates and guidelines are in constant flux, and it creates preparedness challenges for buyers in Mount Holly that aren't paying in cash.

The loan you get today won't always be the loan you get tomorrow.

Because of how frequently bank rules are changing, it can be hard for laypersons to distinguish between mortgage fact and fiction of "what's coming next".

Recently, we saw this with respect to FHA home loans.

January 20, 2010, the FHA issued a press release with new lending guidelines. Specifically, it announced 3 changes that will be effective starting April 5, 2010:

1. Upfront mortgage insurance premiums increase from 1.75% to 2.25%
2. Allowable seller concession reduced from 6% to 3%
3. FICO scores of 580 or lower are subject to a minimum 10% downpayment

But, also in its official statement, the FHA announced it would ask Congress for permission to raise monthly mortgage insurance premiums. This is where the rumors started.

Nestled on page 348 of the Budget of the United States Government, Fiscal Year 2011, in a section titled Special Topics, there is a 1-paragraph notation that details the FHA's petition.

1. Raise monthly premiums by roughly 0.30%, or $25 per $100,000 borrowed per month
2. Lower upfront mortgage insurance premiums by 1.25%, or $1,250 per $100,000 borrowed at closing

For now, the request is neither approved nor acknowledged by Congress. It's merely a request. And in the event that Congress does approves it, that doesn't mean that FHA has to stand by its initial projections.

Truth is, about the only thing we know about the future of FHA lending is that, come April 5, 2010, borrowing money is going to be tougher, and more expensive. These are the facts as we know them today.

Homebuyers should plan accordingly.

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Less Than 100 Days Left To Claim The Homebuyer Tax Credit

November 6, 2009, Congress voted to extend and expand the First-Time Home Buyer Tax Credit program. There's 100 days left to claim it.

The expiration date of the up-to-$8,000 tax credit has been pushed forward to spring, requiring homebuyers in Philadelphia and New Jersey to be under contract for a home no later than April 30, 2010, and to be closed no later than June 30, 2010.

In addition, "move-up" buyers were also added to the program's eligibility list meaning you don't have to be a first-time home buyer to be eligible for the tax credit. If you've lived in your home for 5 of the last 8 years, you meet the IRS requirements.

Move-up buyers are capped at a total tax credit of $6,500.

In our marketplace, that's a substantial amount of money. Areas with much higher priced homes see onyl a moderate impact from these tax credits, but in our market, which has always been a more balanced market economically, these amounts can mean a significant benefit to the homebuyer lucky enough to qualify and smart enough to take advantage of the program.

The tax credit's basic eligibility requirements remain the same:

• You can't purchase the home from a parent, spouse, or child
• You can't purchase the home from an entity in which they're a majority owner
• You can't acquire the home by gift or inheritance
• All parties to the purchase must meet eligibility requirements

The new law includes some notable updates, however.

First, the subject property's sales price may not exceed $800,000. Homes sold for more than $800,000 are ineligible. And, also, household income thresholds have been raised to $125,000 for single-filers and $225,500 for joint-filers.

And lastly, don't forget that the program is a true tax credit -- not a deduction. This means that a tax filer who's eligible for the full $8,00 credit and whose "normal" tax liability totals $5,000 would receive a $3,000 refund from the U.S. Treasury at tax time.

The complete list of qualifying criteria is posted on the IRS website. Review it with a tax professional to determine your eligibility. Then mark your calendar for April 30, 2010.

There's less than 100 days to go.

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Higher Loan Limits for Mortgages!

Image by Rev Dan Catt via Flickr

Image by Rev Dan Catt via Flickr

Everything old is new again.

Conforming mortgages are limited by loan size, based on "typical" housing costs around the country. The current conforming limit on a single-unit property is $417,000.

In 2008, as part of the Economic Stimulus Act of 2008, Congress authorized conforming loan limits increases in "high-cost" areas around the country. In Los Angeles County, for example, a mortgage could be as large as $729,750 and still be considered "conforming".

Those temporary increases rolled back effective January 1, 2009, to a maximum of $625,500.

However, as part of the American Recovery and Reinvestment Act of 2009 signed into law this week, conforming loan limits in high-cost areas have been returned to their elevated levels of 2008.

You can see the text on the bottom of page 111 of 407.

Changes to conforming loan limits impact everyone with a stake in real estate, even if their neighborhoods are not considered "high-cost". This is because conforming mortgages offer the widest selection of home loan products, and often at the lowest rates. The widespread availability of conforming mortgages helps to support home sales nationwide as well as providing ample refinancing options for people that need it.

Lenders have yet to pick up the change, but are expected to shortly. Once they do, more homeowners will be eligible for cheap home financing.

To lookup your neighborhood's conforming loan limits, visit the HUD Web site. Or, if you have specific questions related to your home or an upcoming purchase, contact me directly anytime.

The Stimulus Packages Helps More than 1st Time Homebuyers

Image by djbones via Flickr

With Congress reaching agreement on a $789 billion stimulus package for Americans and the President expected to sign it into law, the clock may be ticking for this year's home buyers and homeowners.

The package contains two benefits related to housing.

The first provision is fairly well-known. It gives first-time home buyers an $8,000 tax credit provided they purchase a home between January 1, 2009 and August 31, 2009.

This is a true tax credit.

To reduce misuse and abuse, however, the $8,000 credit is contingent on home buyers holding property for at least 3 years. If the home is sold in fewer than 3 years, the tax credit must be repaid to the government. It's also worth noting that the date range applies closings and not sales agreements.

Closings must occur within these 8 months to be eligible.

A second noteworthy feature in the package is that the stimulus package gives existing homeowners incentive to "green" their homes. With available tax credits for energy-efficient windows and doors, furnaces and insulation, homeowners can claim larger tax deductions based on home improvement, up to $1,500.

But, just because the government provides housing-related tax benefits doesn't mean you should just act on them blindly. Tax liability is a highly individual item and you may be ineligible for any number of reasons. Be sure to discuss your plans with a qualified accountant before committing to a plan.

Housing Sales Rise While Consumer Cinfidence Sags

Image by Smabs Sputzer via Flickr

Consumer Confidence fell this month for the first time in three months, reflecting Americans' concern for the economy, housing, and the financial system.

The reading isn't much of a surprise given our collective exposure to a near-constant stream of negative news. Before long, the reports become a self-fulfilling prophecy.

Despite falling confidence, however, the housing industry appears to be reviving. Sales of existing homes are on the rise and an increasing number of homes are under contract to sell. And, if these statistics seem out of place, consider the external forces that are accompanying this "down" economy:

• In some markets, home values have plummeted to early-2000 levels


• Government intervention has brought mortgage rates to near-5 percent


• Congress is pledging key support to housing and mortgage markets

These points can't be captured in confidence surveys which, by comparison, ignore facts and focus on Big Picture behavioral questions like "Do you think you'll be better off a year from now?" and "What's your attitude toward buying major household items?". It's useful information for economists, but not so much for home buyers.

Anecdotally, a lot of the country's housing markets have already started their recovery. Couple that with the natural momentum of Spring Buying and the stimulus package's proposed first-time home buyer tax credit and you can clearly see the disconnect.

Just because confidence is down doesn't mean that home prices will be, too.

Seeling Your Home Faster and for more money!

Super Bowl Weekend traditionally marks the start of the Spring Buying Season in real estate. Anecdotally, real estate agents will tell you that buyer activity tends to tick higher at this time of the year.

Meanwhile, with mortgage rates still trolling near all-time lows and Congress debating a first-time homebuyer tax credit, 2009 may bring out even more buyers than we've seen in the past.

Just having your home on the market may not be enough to attract an offer, though -- the home has to have appeal. That brings us to home staging -- the process by which a homeowner re-organizes and re-presents his home to appeal to as many potential buyers as possible.

Home staging is part-science, part-art, and part-psychology. Homebuyers tend to judge homes within the first 8 seconds of seeing them so making a quality first impression can mean the difference between getting multiple bids, and just getting a lot of foot traffic.

The 4-minute video gives some quick-and-easy tips, including:

• Create more light in the home
• Clean up the closets and thin them out
• Remove the clutter from every room in the house

Even though home inventories are falling, supplies are still higher than in previous years. Home sellers wanting to stand out in a crowd may want to consider staging their homes to help them sell more quickly.

Staged homes sell for as much as 17% more money and as much as 40% faster than non-staged ones.

How Unemployment May Make your House More Affordable

On the first Friday of every month, the Bureau of Labor Statistics releases its Non-Farm Payrolls report.

More commonly, it's called the "jobs report" and the October's data is trending with the rest of 2008.

After shedding another 240,000 jobs last month, the economy has now put 1.2 million Americans out of work this year and unemployment rates have climbed to 14-year highs.

As a strange twist, though, today's weak jobs data may lead to a positive turn for the economy and for housing in 2009.

In the wake of the jobs report, members of Congress are already calling for both tax cuts and direct stimulus to reverse the course of the economy. Both of these actions would put money back into U.S. citizens' household budgets, spurring consumer spending nationwide.

Because consumer spending accounts for 70 percent of the economy, this would be expected to push the economy forward at a time when it natural forces are slowing it down.

In addition, markets are betting that the Federal Reserve will cut the Fed Funds Rate below its current 1.000 percent level. This, too, would spur spending because the Fed Funds Rate is directly tied to consumer credit card rates and business credit lines.

Expectations for stimulus are one reason why mortgage rates have not risen today as high as they otherwise would have if this were a "normal" market.

Mortgage rates are slightly elevated as we head into the weekend, but don't be surprised if there's a late-afternoon push that brings them lower. For active home buyers, this could help home affordability as we cruise towards the holiday season.

(Image courtesy: USA Today)