Ann Arbor Real Estate Talk

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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Ann Arbor Area buyers and sellers, do you think the Tax Credit should be extended for the closing date?

The Missy Caulk Team was incredibly busy the whole month of April with buyers who put homes under contract to get in on the $8000.00 First Time Home Buyer Credit and the $6500.00 credit for move up buyers.

Now it is time to get those homes closed by the June 30th deadline and people are panicking because of appraisal issues or they chose to work with lenders who haven’t been able to get the job done.  To say nothing of a few short sales (10) that have been under contract for 4 or more months.

NOTE: THIS IS NOT AN EXTENSION OF THE CREDIT, only an extension of the closing date to September 30th, 2010.

Today the Wall Street Journal wrote on post on how FRAUD could enter the picture IF agents back dated the contracts. This is a complete NO, NO.

Any Realtor who does this should lose their Real Estate License in a heartbeat.

Since the Amendment to the Bill has already passed the House and the Senate has wide support it will probably pass…but who knows.  I am in favor of the closing date being extended with a paper trail to show the home was really under contract and not backdated.

The National Association of Realtors is in support of the extension.

“NAR estimates the number of home buyers who have qualified for the tax credit and met the contract deadline of April 30, but who would not be able to close their transaction by the June 30 deadline, could go as high as 180,000. Realtors® have reported as many as one-third of qualified applicants have been notified by lenders that their mortgages will not close before June 30 due to the sheer volume of applications in the pipeline.”

What say you?

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If you live in the Ann Arbor Area, here are some new rules concerning buying a home if you have been subject to selling your home as a short sale.

Borrowers are not eligible for a new FHA mortgage if they pursued a short sale agreement on his or her principal residence simply to:

• take advantage of declining market conditions, and

• purchase, at a reduced price, a similar or superior property within a reasonable commuting distance.

Borrowers are considered eligible for a new FHA-insured mortgage if :

• they were current on their mortgage and other installment debts at the
time of the short sale of their previously owned property, and
• the proceeds from the short sale serve as payment in full.

Borrowers in default on their mortgage at the time of the short sale (or pre-
foreclosure sale) are not eligible for a new FHA-insured mortgage for three
years from the date of the pre-foreclosure sale.  Lenders may make exceptions
to this rule under certain circumstances.

If  you have lost your job, transferred for job opportunities, or have a medical condition DO NOT WAIT to call a Realtor before you are late on your payments. There are more opportunities available if you deal with the situation up front.

Call me for a confidential discussion.

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Today the U.S. Treasury released the terms of Two Programs. Remember (this it is important,) it is 2 programs.

1) Home Affordable Refinance Program

The Home Affordable Refinance program will be available to 4 to 5 million homeowners who have a solid payment history on an existing mortgage owned by Fannie Mae or Freddie Mac. Normally, these borrowers would be unable to refinance because their homes have lost value, pushing their current loan-to-value ratios above 80%.  Under the Home Affordable Refinance program, many of them will now be eligible to refinance their loan to take advantage of today’s lower mortgage rates or to refinance an adjustable-rate mortgage into a more stable mortgage, such as a 30-year fixed rate loan.

2) The Home Affordable Modification Program

The Home Affordable Modification program will help up to 3 to 4 million at-risk homeowners avoid foreclosure by reducing monthly mortgage payments.  Working with the banking and credit union regulators, the FHA, the VA, the USDA and the Federal Housing Finance Agency, the Treasury Department today announced program guidelines that are expected to become standard industry practice in pursuing affordable and sustainable mortgage modifications.  This program will work in tandem with an expanded and improved Hope for Homeowners program.

You can read all the provisions and the details on the Financial Stability Government web-site.

Eligibility and Verification Details
• Loans originated on or before January 1, 2009.
• First-lien loans on owner-occupied properties with unpaid principal balance up to $729,750.
Higher limits allowed for owner-occupied properties with 2-4 units.
• All borrowers must fully document income, including signed IRS 4506-T, two most recent pay
stubs, and most recent tax return, and must sign an affidavit of financial hardship.
• Property owner occupancy status will be verified through borrower credit report and other
documentation; no investor-owned, vacant, or condemned properties.
• Incentives to lenders and servicers to modify at risk borrowers who have not yet missed payments
when the servicer determines that the borrower is at imminent risk of default.
• Modifications can start from now until December 31, 2012; loans can be modified only once
under the program.

If you need help please call your current lender to see if they can help you.

If not give us a call. 734-821-0757

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My good friend, Jeff Belonger, recently wrote a post on Active Rain. Active Rain is a Real Estate blogging community of over 60,000 Realtors, Lenders, Home Stagers, Builders, Brokers, Feng Shui Specialists.

I have been following Jeff’s posts for over a year. He is most definately the FHA Expert.

Last night Jeff wrote a post on FHA Bill Passing in the U.S. Senate. I asked him if I could copy it here for the Ann Arbor community. The last several years many lenders moved away from doing FHA Loans. Most of them wrote what were 80/20 loans or 80/10/10 loans.  Rates were low so that is what their recommendation was for most buyers.

Here is Jeff’s post on the FHA reform working its way into law.

today — 12/14/07

Today the Senate passed the FHA Modernization bill aka the FHA reform bill. This bill is the  American Homeownership Act of 2006 (H.R. 5121) which has been through several approval stages since its inception. This bill now heads back to the House for “reconciliation” before heading to the White House where President Bush has his pen inked, ready for his signature.

In regards to everything that has happened this year; the subprime meltdown and just recently the fannie mae & freddie mac (by Rey Gallegos), this is a huge lift for the mortgage industry.

So what are these changes going to be in the near future? Tim Bradford explains it all hear. Proposed change to FHA MIP scheduled for change Jan 1, 2008.  But I will give you a quick breakdown from a source close to this issue. The new bill would :

• Increase the fha mortgage limits. There are still mixed reviews on what direction will be finalized when the bill is signed by the president. HUD has proposed that they use $417,000 across the board. And in high cost areas, keeping that number around $500,000 and in low cost areas around $290,000.  The old calculation was a little more complexed. FHA’s current loan limits for high-cost areas are derived from 87% of the government sponsored enterprise (GSE) and in lower-cost areas are 48% of the conforming loan limit. The other side of the new proposal would be that HUD uses 95 to 100% for the high-cost areas and 65% for the lower-cost areas. Which would be better?  Keeping the main number at $417,000. But either way would be a huge improvement over what we currently have.

• The original bill was looking at zero down payments. But what seems to be on the horizon is that they will be lowering the down payment of 3% to 1.5%.

• Allow FHA to offer another type of term, such as a 40-year mortgage. This would serve two different purposes. It would make it easier for someone to qualify for a little more of a house while keeping their payment the same if the house value was less. Or, it would just give them a cheaper payment if comparing the same price of a home.

• Also allow FHA to price borrowers accordingly to the credit risks that are described in Tim Bradford’s post mentioned above. Even though this is defined as risk base pricing, something that we have seen with the conventional market just recently, this will still be cheaper for everyone involved. How this will work? Those with least amount of money down and with the lowest credit scores will pay the highest premium. You might think that this is negative, but it really isn’t. Right now, the premium adjustment, which is called One-Time Mortgage Insurance Premium, is only 1.5% of the base loan amount. There is talk that they would raise it to 3% as a maximum. Again, this is not as bad as it seems because back in the mid ’90s it was 3%. It’s been lowered 3 times since then.

Some interesting facts in regards to previous loan amounts :

• FHA has been priced out of many area housing markets. In California, FHA insured only about 5,000 home mortgages in 2005, down 95 percent from 109,000 in 2000.

My Opinion :  Will there be a Negative Impact?   Yes. Those lenders and loan officer’s that don’t know the basics of FHA financing prior to the new bill being approved. And those lenders that are trying to get FHA approved now so they can jump into the game. Why will this be negative?  I can say that I know for a fact that there were many loan officers that didn’t take their client FHA because conventional delegated underwriting and subprime was easier. I even worked with some that even told me so. But the end result? This will be very positive for so many Americans.  Even those that have 660 credit scores, FHA will be better now.

I would have to estimate that over 80% of the FHA loans approved are approved manually. Which means that you just can’t fool an underwriting system. An underwriter has to physically review the income, assets, and most of all, the credit. It has to make sense and most of all, that underwriter’s license could be on the hook. Keep in mind, it costs the lender money to be FHA approved, hence why so many never signed up in the past. But now so many want to jump onto this fast moving vessel that will be sailing into the sunset. The ship that might just ridden some of this mess that was created in the last several years. Make sure that you speak with an FHA Expert and not someone claiming to be part of this elite crew.

Some key FHA tips :

• Shoppers that shop themselves right out of the market……

• FHA Shopping, rate shopping, fee shopping…. call it what you want, just be careful!!!

• Good Faith Estimate  –  What to look for when shopping……

• No Closing Cost Loans VS Closing Cost Loans

• FHA — Conventional — APR vs Rate –  Understanding the difference……

• FHA origination fee and what it means……

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