Ann Arbor Real Estate Talk

If you are a buying a home in Ann Arbor, give your lender a quick call to verify your Pre-Approval.

Why Should I Get Pre-Approved Again?

When a lender qualifies you for a home purchase, they look at your debts, income, credit scores and the interest rates to give you an amount of a new mortgage you will qualify to finance.

Rates have jumped .75% the last 6 weeks. Give your lender a quick call to verify you are still qualified for that amount.

Example of the Difference in Payments

Here is an example of how your payment can change based on the % of interest you will pay.This is based on a $200.00o  loan with 3.5% down. This example is an FHA loan. More and more homeowners are using FHA loans to finance in Ann Arbor especially first time home buyers.

Back in mid-November rates were approximately 4.17%.

Today they are between 5 and 5 1/4%

In November if you purchased your home at the 4.17% rate with 3.5% down, your monthly payment would have been $940.43, principal and interest.

Today if you purchased that same home at 5.00%, with 3.5% down,  your monthly payment would be $1036.06, principal and interest.

Now to many folks, this payment of almost $100.00 more will not make any difference but to some $95.63 a month could change the price of the home you can afford to purchase.

Predicting the Future

I don’t have a crystal ball to tell you what is going to happen to interest rates in the next few months, but .75% jump in 5 weeks is a strong indicator that interest rates will rise.

Homes for Sale in Ann Arbor

Ann Arbor Area Buyers, have you heard of the Energy Efficient Mortgages?

Energy Efficient Mortgages lack of popularity is not because it’s a bad type of loan, but because many loan officers and or lenders don’t know much about them. One could easily associate this type of mortgage with a FHA 203-k loan. But that would be a very bad assumption, because there isn’t much more to an energy efficient mortgage, known as an EEM loan, as opposed to the paperwork and understanding that goes into a 203-k loan.

Money being thrown out the window? Unless you are having a new home built that could be an energy efficient home, in many cases, the older home probably won’t be up to the current standards, which could cost you hundreds of dollars monthly.

Quick history about EEM’s -  HUD states that Congress started a pilot program in 1992 demonstrating the use of energy efficient mortgages, known as EEM’s. (Energy Efficient Mortgages) EEM’s recognize that reduced utility expenses will allow a homeowner to pay a higher mortgage payment to cover the cost of the energy improvements that were financed into the mortgage. A main reason behind the EEM’s program, it offers homeowners who couldn’t initially afford the cost of these energy saving improvements out of pocket, giving them the chance to finance them. These loans can be both done when purchasing a new home or when refinancing. FHA has adopted this into their financing options which allows a borrower to :

• save money monthly
• incorporate the improvement costs into the mortgage
• these improvements are installed after the loan closes
• this program allows you to use normal FHA guidelines with FHA mortgages

How does the Energy Efficient Mortgage program work?

The maximum amount of the portion of the EEM for energy improvements is the lesser of 5% of:

• the value of the property
• 115% of the median area price of a single family dwelling
• 150% of the conforming Freddie Mac limit.

.Eligibility Requirements

• Properties that are eligible are One to Four unit existing and new construction properties.
• Borrowers are approved through the normal FHA mortgage guidelines for obtaining a mortgage.
• The cost of the energy-efficient improvements that may be eligible for financing into the mortgage is the lesser of 5 percent of the property’s value, depending on 3 different equations. Please refer to these changes above.
• To be eligible for this mortgage, the energy efficient-improvements must be cost effective, meaning that the total cost of improvements is less than the total present value of the energy saved.
• The cost of the energy improvements and the energy savings must be determined by a home energy rating report which is done by a home energy rating system (HERS) or energy consultant. The HERS report usually costs from $250 to $350 and can be paid by the seller, the buyer, or sometimes included into the mortgage.
• The energy improvements are installed after the loan closes. The money is placed into an escrow account and is released once an inspection verifies the improvements are completed and that the savings will be achieved.
• Because of this program, the final loan amount can exceed the maximum mortgage limit by the amount of the energy-efficient improvements. Here is a list of the FHA max mortgage limits.

.EXAMPLE :

***I am not using a particular credit score and all closing costs are the same for either loan example.***

As you can see, it’s not a huge savings, but it does add up. Just in 1 year you saved $1,135.20. And the cost of the energy improvements that were added onto your mortgage now become a tax write-off.

**** My examples in the cost of improvements and your monthly bills, will vary depending on several different factors, such as age of air conditioner or heating, lighting fixtures, etc, etc. And also depending on what you pay per month. I only used these figures as examples.****

Reminder :There are special and certain tax credits both nationally and locally. For tax purposes, there is a $1,500 tax credit until the end of the year. Not sure if the government is going to extend this. There are also state credits and sometimes credits given by your utility companies. Just be careful though, because sometimes you have to use those they recommend when doing the energy inspection report.

Here is a link to a list of the past mortgagee letters for everything about Energy Efficient Mortgages.  FHA Energy Efficient Mortgages – Mortgagee Letters

Energy Efficient Mortgages – EEM loans – Part 1 of 2 – FHA loans going ‘Green’

Energy Efficient Mortgages – EEM loans – Part 2 of 2 – VA loans going ‘Green’

***Posted with permission from Jeff Belonger, a fantastic lender in N.J. Yes he does loans in Michigan.***

This came to my attention when Realtor Magazine posted this article on Pregnant woman being denied loans.

Then my friend Erica Ramus posted about it on Active Rain, but not at the mortgage application but near the end of the loan approval process.

Thankfully HUD announced they were going after the banks that were doing this in their weekly update:

HUD Secretary Shaun Donovan said, “Lenders have every right to ascertain the incomes of families to determine whether they are eligible for a mortgage loan but they have no right to use a pregnancy or a short-term disability as a cause to deny that family a mortgage they would otherwise qualify for. Having a child should be a time for a family to celebrate and must not be a cause for unfair lending practices.”

If this happens to you, please get up and walk away. We have good local Ann Arbor Area lenders who would not discriminate against pregnant or or “hope to be” pregnant woman.

You can also contact: Brian Sullivan, HUD
(202) 708-0685

Flickr photo credit

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A new program released by the Obama Administration is targeted toward the 5 hardest hit states for home loan assistance.

The Homeowner Assistance Program is geared toward unemployed people, those with high medical bills, or significant reduction in income.

The first of these home loan rescue programs to be implemented is in Michigan, by the Michigan State Housing Development Authority (MSHDA). Michigan’s Helping Hardest Hit Homeowners plan is structured to provide the following assistance:

• Help with mortgage payments for homeowners currently on unemployment,
• Catching homeowners up on missed mortgage payments due to unemployment or medical crisis, and
• Federal matching dollars to assist homeowners with principal reductions on homes they can no longer afford due to reduced income (underemployment).

The only glitch is the loan servicer does not have to participate. My guess some will, most won’t but if your situation is one of the above, call your loan servicer, then contact MSHDA to see if you will qualify for the assistance.  $54.5 Million has been allocated for Michigan.

The Home Loan Assistance Program goal is to help prevent homeowners from loosing their homes to foreclosure due to loss of income, job or high medical expenses.

Ann Arbor Area buyers…the home buyer tax credit has been extended until Sept 30th, 2010.

The Senate voted yesterday on a Bill very similar to the House bill to extend the deadline for closing on a home that was under contract on or before April 30th.

It will now go to the President to be signed.

A big sigh of relief was heard all over the United States as many home buyers were not able to get the homes  closed due to the “short sales”, lender’s with too many files, backlog of appraisals, and flood insurance running out. The National Association broke the stat’s down by states and Michigan has 6470 home buyers in that position.

***This is a closing date bill being extended not another stimulus bill.***

Some of our buyers woke up to good news this morning.

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Military Members Benefit from Tax Credit  Extension.

The $8,000 tax credit created a lot of buzz for real estate this year.  Millions of families received the credit and thousands waited anxiously to know if there would be an extension of the deadline.  

Unfortunately, there was no extension for the average citizen.  However, members of the military, Foreign Service and intelligence community returning home to Michigan in 2010 will be happy to know that the deadline was moved to April 30, 2011.  That ís one extra year to make those home ownership dreams come true.

Of course, service men and women more than deserve the additional time to find a home due to their special schedules and circumstances.  

Besides the mortgages general rules and perks of the credit, there are a couple of other exclusive benefits for qualified service members.

1.   Qualified service members who have to move from a tax credit home due to leaving for duty are exempt from having to pay back the tax credit also known as the ìrecaptureî rule.

2   Military members spouses are also eligible for the tax credit.  The spouse does not have to be serving overseas with their husband or wife to qualify for the credit.

3    April 30, 2011 is the deadline for signing a contract on a home.  The final sale does not have to be made until June 30, 2011.

4    This does not really come with the credit, but I should mention the ever-growing popularity of the VA loan.  Speak with a mortgage counselor today to find out further info about the VA mortgage program.

General rules and modifications on the credit include:

1  A serviceman or woman must have served abroad for 90 days between January 1, 2009 and April 30, 2010 to qualify for the credit.  A person who was not able to complete his or her duties during those dates due to medical reason may still be able to receive the credit.

2   Income requirements were modified. Now, a single-person buyer is allowed a salary up to $125,000.  For a married couple, the limit is $225,000.  Allowances might be made for some above the annual income.

3    The home purchased must be less than $800,000.

So once again, the real estate market will benefit from the numerous military members and their families achieving their goals of home ownership next year. A great and admirable group of consumers.

For more information on the extension, visit the IRS website.

****This is a guest blog by James Kelly who works for VA Mortgage Center.com, proudly serving American military families as the nation’s premier VA lender.***

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