Jeff Thomas » Loan Programs

First-time homebuyer tax credit extended

Jeff Thomas — Wed, 14 Jul 2010 15:48:40 +0000

The Homebuyer Assistance and Improvement Act of 2010 extends the closing date requirement for the first-time homebuyer tax credit from June 30, 2010, to September 30, 2010. This gives qualifying individuals who, prior to May 1, 2010, entered into a binding written contract to purchase a home, an additional three months to close on the purchase. Click on the title above and watch the video for additional information.

FHA seller concession rules

Jeff Thomas — Wed, 02 Jun 2010 12:56:02 +0000

The Federal Housing Administration (FHA home loans in Virginia) is eliminating one of the mainstays to its program sometime this summer. Gone will be the 6 percent seller concession and in will be the 3 percent seller concession. The reason for eliminating the concession according to FHA is the 6 percent seller concession exposes them to too much risk. This has been one of the key selling points with FHA for decades. But if sellers and buyers move fast there is a possibility they can still take advantage of the higher seller concession.

The buyers must still save or be gifted the money for the down payment to purchase the home. The current minimum down payment is 3.50% of the sales price. The current guidelines on seller concession allow sellers to pay for all of or part of buyers closing costs when purchasing a property. Items connected with the transaction such as — loan origination and discount points, state and county transfer stamps and fees, an appraisal, inspections, attorney and title closing costs.

When it comes to lower priced homes, closing and loan expenses typically represent a higher percentage of the total loan closing costs than on higher prices homes. In Fairfax, Virginia and Northern Virginia, closing costs typically run between 2.50% and 3.50% of the sales price of the home. So on a $300,000 home purchase, that could be an extra $7,500 to $10,500 of out of pocket expenses for a home buyer. Current with FHA financing rules, the contract can be structured so the seller agrees to pay all closing costs up to 6% ($18,000) at settlement. This amount could even include some small required repairs. Once the rule change takes effect, the max concessions will be a flat 3% of the sales price.

If you use Fannie Mae or Freddie Mac financing, seller concessions is generally limited to 3% for down payments below 20% of the sales price. Although concessions can be much higher when larger down payments are being used.

Bottom line is this: the helping hand of an FHA home loan is getting smaller and smaller. First the down payment was increased from 2.25% (3% in the new home) to a flat 3.50% down payment. Then a minimum credit score, now a decrease of seller concessions from 6% to 3% of the sales price.

The First Two Steps in Buying a Home

Jeff Thomas — Tue, 01 Jun 2010 16:55:54 +0000

Fairfax, VA – Statistics suggest that the Internet is the first destination and source of information for potential home buyers. In fact, nearly 80% of potential buyers reportedly begin their home buying process online. And why not? The Internet has a wealth of information and resources that can aid in the beginnings of the home buyer’s search and make them feel more comfortable and confident about the process. However, when a potential buyer is ready to move forward and really begin to focus on his or her home buying goals, there are two very important steps to consider first in order to initiate a successful home buying experience.

Know the Score – Whether you like it or not, your credit score will play a major role in your ability to qualify for a mortgage and purchase a home. Your credit score will also help determine your mortgage rate and how much home you can really afford. That’s why if you’re looking to purchase a home in the next 6 to 18 months, you don’t want to wait to find out what surprises, pleasant or otherwise, might await you on your credit report. By reviewing your credit early on in the process, you have time to make adjustments and improve your score. Remember, a lot has changed in the credit industry in the last two years alone. A recent federal crackdown on credit card companies have led many creditors to take actions such as lowering credit limits. This one act can significantly upset your debt ratios, which is a major component in calculating your credit score.

Get Preapproved – Once you know where your credit stands, the next step in your home buying process is to get yourself pre-approved – not just pre-qualified. Why? Well, by becoming pre-approved you’ll know exactly how much money you can borrow down to the dime. This knowledge will allow you to focus on only those houses you can actually afford, making your search for the perfect home much easier. By being pre-approved you also become a “cash buyer” which demonstrates to sellers that you’re serious about your search and will allow you to negotiate more effectively than potential buyers who are not pre-approved.

Home Buyer Tax Credit Extended for Military Personnel

Jeff Thomas — Tue, 01 Jun 2010 16:49:54 +0000

Fairfax, VA – The popular Home Buyer’s Tax Credit has expired for all Americans, except for three very deserving groups: the brave men and women of the uniformed services of the U.S military, members of the Foreign Service of the U.S., or employees of the intelligence community who are actively serving outside of the U.S. on “official extended duty.”

Official extended duty is defined as any period of extended duty outside of the United States for at least 90 days during the period beginning December 31, 2008 and ending before May 1, 2010.

That’s right. Thanks to the Worker, Home Ownership, and Business Assistance Act of 2009, which was signed into law by the President on November 6, 2009, qualified military service members have one extra year to take advantage of The Homebuyer’s Tax Credit of up to $8,000 for first-time buyers and up to $6,500 for certain repeat buyers. This means qualified military members must be under contract on a purchase by April 30, 2011 and close on the deal by June 30, 2011.

Qualified military buyers can also utilize this tax credit along with other available benefits from the Department of Veterans Affairs (VA), making this dollar-for-dollar tax credit extremely financially attractive with today’s lower home prices and lower interest rates. That’s because the VA allows qualified military borrowers to purchase certain homes in certain areas with no money down and no private mortgage insurance.

To be a qualified first-time home buyer and receive a tax credit of up to $8,000, the buyer and his or her spouse cannot have owned a home in the last three years. Unlike the Home Buyer Tax Credit for civilians, however, the maximum purchase price of a home is $800,000 under this program – anything over that and the tax credit is invalid. The credit phases out for individual taxpayers with modified adjusted gross income (MAGI) between $125,000 and $145,000 or between $225,000 and $245,000 for joint filers.

To be a qualified “repeat buyer” or non first-time buyer and receive a tax credit for up to $6,500, a buyer must have lived in his or her current residence for five out of the last eight years. The rest of the requirements are generally the same as the $8,000 tax credit.

You served your country, let us serve you. If you or someone you know is looking to purchase a new home and may qualify for this incredible opportunity, please don’t hesitate to give us a call right away.

USDA Zero Down Home Loan In Jeopardy!

Jeff Thomas — Wed, 17 Mar 2010 14:02:18 +0000

Fairfax, Virginia: Although USDA loans are not a big deal in the northern Virginia area, but they are HUGH deal in the outlying counties of Fauquier, Prince William and Loudoun. It was recently been announced that the USDA 100% (zero down) loan program will be out of money by the end of April 2010. Typically the USDA program has sufficient funds to cover the needs of potential borrowers. But as with many home financing programs, money is in short supply. As lending guidelines have tightened over the past two years, the ability of a borrower finding a zero down home loan out side of the Veteran Department VA loan has disappeared almost completely. This is has caused homebuyers that wouldn’t typically consider a USDA loan for financing to not only consider it, but actually apply for and be approved for the USDA zero down home loan. The program has no mortgage insurance, great rates and flexible credit guidelines. So over the last few years, USDA has stepped up to fill the void and provide affordable zero down loans for qualified first time homebuyers across the nation.

Although Fairfax, Virginia doesn’t have many areas that work for the USDA program, the increased demand across the country for USDA loans has led to a shortfall of funds. Last year the stimulus money was used to bridge the funding gap and business went along as usual. The stimulus money helped fill the void the past couple of years, but without additional it is projected that funds for the program will dry up sometime in late April. When this happens the USDA will stop issuing loan commitments until their normal refunding takes place sometime next fall. Most economist suspect any slow down in the housing market could have drastic affects on the economy pulling out of the recession. Many first-time homebuyers could miss the $8,000 tax credit. The best idea would be to fund the USDA program now so as to try and prevent the economy from slipping back in to a recession.

Below is a list of the members of the committees that can help steer passage of the appropriation request:
United States Senate Committee on Appropriations
Subcommittee on Agriculture
Rural Development
Food and Drug Administration

Democratic Members

Republican Members

Market Snap Shot for Fairfax, Virginia

Jeff Thomas — Tue, 02 Mar 2010 22:21:31 +0000

Market Snap Shot for Fairfax, Virginia Mortgage Interest Rates and Local Real Estate

By Sigma Research
By Tuesday, March 02, 2010

Treasuries and mortgages started weaker this morning with the stock index futures pointing to a nice open in equities at 9:30. No real data this morning, the only thing on the schedule is Feb auto and truck sales that will be out this afternoon. At 9:00 the DJIA +44, 10 yr note -10/32 3.65% +3 BP and mortgage prices for 30 yr fixed -5/32 (.15 bp). At 9:30 the DJIA opened +38, 10 yr note -7/32 at 3.64% and mortgages -3/32 (.09 bp).Four days and counting to the Feb employment report for Fairfax, Virginia Interest Rates. Always the key report each month, and each time there is some event or circumstance that makes it even more important—if that is possible. This report has a lot of weather related elements with the continual snow that crippled the mid-Atlantic and East coast; but the main event that traders are thinking about is the huge decline in consumer confidence in Feb and the big fall in new and existing home sales. How, if at all, will all that impact the employment picture? There is the theory that consumer confidence plunged by 20% because of more job losses. Long ago we gave up trying to anticipated non-farm jobs data, throwing darts blind folded is more accurate. Current estimates continue to be a small decline of 20K jobs in the month with the unemployment rate at 9.8% up 0.1% from Jan.Greece’s financial problems are well documented; next up according to what we are seeing is Great Britain. Investment mangers in England are bracing for a run on the British pound as its economic outlook remains dire. Britain’s debt amounts to 12% of output, about the same as Greece’s debt to output. Moody’s Investors Service and Standard & Poor’s said last week they may cut Greece’s credit rating; now fund managers in Britain are worried the same fate may befall England as its economy is struggling to get some traction. The take away from the continuing debt problems in Europe (Spain and Portugal) and now Britain is adding support to US treasuries as a safe place for parking money.

Markets and traders continue to expect US interest rates will increase this year as the US economy solidifies and consumers and the housing sector slowly improve. The Fed, with the exception of one or two Fed officials, is dead set on keeping the Federal Funds rate at near zero for that “extended period” which is markets are beginning to quantify as no rate increases until the Nov FOMC meeting. We noted yesterday we were hearing four more FOMC meetings before the Fed moves. A recent survey by Bloomberg of bankers was 46% chance the increase would be at the Nov FOMC meeting. What must be kept in mind is that the bond and mortgage markets will be out front of the Fed on any increases; given the preemptive move interest rates will begin to discount the increase by August. We expect mortgage rates to increase in Fairfax, Virginia by year end will be 50 basis points higher than at present levels; the 10 yr note to move to 4.15%.

Through the later half of Jan and the early part of Feb the 10 yr note tried 10 times to move below 3.60%/3.58% range; each time it failed. Yesterday the 10 yr hit 3.58% at mid-day but again failed to crack the wall. This morning at 9:00 the 10 yr was back to 3.65%; the FNMA 4.5 coupon is registering overbought readings on the relative strength oscillator. The bond market today will, as is the case recently, take its lead from how stock indexes trade. No data until this afternoon with auto and truck sales; but the remainder of the week has data everyday with of course the Feb employment on Friday. On Thursday Treasury will announce next week’s auctions of 3 yr, 10 yr and 30 yr borrowings

Those Who Wait Will Pay Thousands More This Spring

Jeff Thomas — Wed, 03 Feb 2010 14:41:47 +0000

Waiting a few extra days or weeks to purchase a home this spring could cost buyers thousands of extra dollars as the office of Housing and Urban Development (HUD) implements several changes for loans guaranteed by the Federal Housing Authority (FHA).

Coming just weeks before the April 30 deadline for the Home Buyer Tax Credit and just days after the March 31 expiration of the Federal Reserve Board’s mortgage backed securities purchase program (which has kept home loan rates artificially low for over a year), these FHA changes make it even more important to act now to save big.

Here are a few reasons why:

On April 5th, the cost of required up-front mortgage insurance for loans guaranteed by the FHA will increase from 1.75% to 2.25%. For a borrower purchasing a $200,000 home with a $7,000 down payment, the up-front mortgage insurance will increase by $965. Up-front mortgage insurance is typically financed in the final loan amount so the impact to a monthly payment will be minimal but overall, the increase is still borne by the borrower both upfront and monthly.

Later this spring, the amount of money that a seller can return to the buyer from their sale proceeds will be reduced from 6% to 3%. The reduction in these “seller concessions” can increase the amount of cash a buyer will be required to pay at closing by $6,000 for a home purchase of $200,000.

There is only one way to avoid being affected by all of these costly changes that lie ahead – submit all FHA mortgage applications by the last week of March.

90-Day Seasoning Waiver Expanded

Jeff Thomas — Mon, 18 Jan 2010 18:28:01 +0000

90-Day Seasoning Waiver Expanded

Fairfax, Virginia: This update from FHA Virginia Loans was released on Friday January 15th, 2010, as an excerpt from the CFR (Code of Federal Regulations) without a corresponding Mortgagee Letter and contains information about FHA’s policies regarding the waiver of the 90-day seasoning required for sellers.

Here are the 6 things you need to know about these changes:

1. Waiver takes effect February 1st, 2010 for a period of one year unless extended.
2. Investors are now exempt from the 90-day seasoning rule.
3. All transactions must me arms-length.
4. No identity of interest can exist between buyer and seller.
5. If sale price is 20% or more of the seller’s acquisition cost, the lender must:

a. provide supporting documentation and/or a second appraisal and
b. order an inspection of the property and provide it to the buyer.

6. The waiver is limited to forward mortgages only.

To read the text of this waiver and specific details: http://www.hud.gov/offices/hsg/sfh/waivpropflip2010.pdf

This is going to help a lot of home buyers get into a home. The seasoning rule was essentially locking people of bidding for certain homes. The next item that must be addresses is sellers and listing agents from eliminating all government loans (FHA, VA and UDSA loans) from submitting purchase bids.

The Investment Property Dilemma

Jeff Thomas — Tue, 08 Dec 2009 14:48:15 +0000

Here is just a few of the issues some of my clients have come across in the past few months.

Client 1:

Condo refinance in Vienna, Virginia

A recently married client wanted to refinance his condo to a lower rate and get out of the adjustable rate loan program they currently have. Both borrowers had excellent income, job stability and money in the bank. The condo was converted to a rental unit when he married. Equity in the property: 30% or more, plus my client was willing to pay down the mortgage five percent more if needed.

The investor concentration (number of units used as rentals) was over 55 percent. I could only find two banks that offered a potential program. One was at 6.50% the other was 5.50% with several points attached. Now this isn’t someone that was duped into getting an adjustable rate mortgage (ARM), he went in fully understanding how the program worked, but when love hits, it can make the best laid plans take a back seat. Not one of the big banks or big lenders had any program to help out well qualified borrowers. Fannie Mae and Freddie Mac have given investment condos the black plague treatment by not offering any type of financing for investment condo.

Investment property owners are not looking for hand outs, but it only makes sense to offer programs for well qualified home owners. Instead we have a homeowner that was willing to reduce a lenders expose (pay down the mortgage) and still could not get a decent loan.

Client 2:

Single family home refinance in Fairfax, Virginia

A client recently called to inquire about refinancing their investment property. They owed a about $350,000 and approximate value (HVCC rules prevent me from contacting an appraiser to get a preliminary value) of $430,000 leaving approximately 19% equity in the property. Fannie Mae and Freddie Mac have credit overlays for investment properties of 3% (roughly $12,900 in fees to Fannie Mae) this is before any other closing costs are added to the refinance. Mortgage insurance companies are not even offering insurance products for investment properties. Another rule, my client’s have a home equity line of credit on the home that was originated after the home was purchased causing the entire transaction to be considered a cash-out transaction. So now, no lenders will originate an investment mortgage on a single family home with less than 20% equity. Even if we subordinated the HELOC the equity would be less than 20% and lenders are not originating these types of loans either.

The mortgage crisis has caused lots of problems. It might seem like I am complaining, which I don’t think I am. But I am trying to bring to light issues with the system. I am not sure how to fix them. I spoke to someone at Freddie Mac recently and according to this person, both Fannie Mae and Freddie Max are concerned about being over exposed on a particular property. Well if the loan is already in their inventory and the homeowner is saving money (which makes it easier to make their monthly mortgage payment) isn’t that reducing their risk – not increasing it?

I feel that many people that are not in the trenches are making decisions that affect everyone. Tightening the lending guidelines is a good thing, but it needs to be done responsibly, not with a knee-jerk reaction that is making in nearly impossible to get a mortgage or check the value of ones home with a credible professional before spending $400 is not asking much. Yes, mortgages were too easy to get from 1999 to 2000. But everyone in the home buying and home financing process is at fault including the home buyer(s).

Many Changes to FHA Since 2000

Jeff Thomas — Thu, 05 Nov 2009 21:53:56 +0000

With over 1,000 changes to FHA programs since 2000, it is important to work with someone that understands how the “new” FHA loan works. In the last 5 years there have been significant changes made to FHA guidelines designed to make it much easier to originate these loans. but that has not actually been the case. Some changes make it more costly for the consumer. The Upfront MI charge has changed, the streamline progam has been altered and it could cost the consumer more money to refinance. Please call it you have any questions about FHA, VA or conventional loans.