Archive for the 'Mortgages & Finance' Category
CHFA Mortgage Rate Falls to 5.5%
September 12th, 2008 categories: Mortgages & Finance
I used to report weekly on the CHFA rate but the rate doesn’t change often enough or by much.
This week, though, the rate dropped to 5.5% and it hasn’t been this low in a while.
If you want to buy a house in Connecticut and qualify, 5.5% is a pretty darn good rate. And the rate gets a lot better if you buy within the Manchester Pilot Homeownership Program where the rate is 5.25% and slightly higher for teachers, military and police, or 5.35%.
CHFA Income Limits - $81,000 for 1-2 person households, $93,150 for 3+ in most of Hartford county
CHFA Sales Price Limits - $301,500 for most of Hartford county
For related posts:
Closing Costs Vs. Prepaid Items
New Housing Bill’s Impact of Home Buyers
Five Things Every Home Buyer Should Know About Mortgages and Mortgage Lenders
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The New Housing Bill’s Impact on Home Buyers
August 1st, 2008 categories: Home Buyers, Mortgages & Finance
I just finished reading the massive housing bill passed by the Senate and some analysis of the bill. Called the Housing and Economic Recovery Act of 2008, the legislation contains a lot more than the plan to “rescue hundreds of thousands of homeowners facing foreclosure,” some of it impacting future homebuyers.
Hello, First Time Homebuyer Tax “Credit”
Don’t get too excited, the tax credit is more like an interest free loan. According to CCH, a company that analyzes tax code and legislation for tax service providers,
“The housing act gives first-time homebuyers nationwide a temporary refundable tax credit equal to 10 percent of the purchase price of a home, up to $7,500 ($3,750 for married individuals filing separately) The credit begins to phase out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 in the case of a joint return).The credit is effective for homes purchased on or after April 9, 2008, and before July 1, 2009. Unlike other credits, however, the first-time homebuyer credit must be repaid in equal installments over 15 years, essentially making it an interest-free loan from the government for most qualifying homeowners.”
Additional Property Tax Deduction
Taxpayers who don’t itemize their income taxes will be able to take a property tax deduction of up to $500 for individuals or $1,000 for families. Taxpayers who itemize get to deduct more of their property taxes.
Goodbye, Seller-funded Downpayment Assistance and Gift Programs
According to the National Assocication of Realtors, the bill
“…codifies existing FHA proposal to prohibit the use of downpayment assistance programs funded by those who have a financial interest in the sale; does not prohibit other assistance programs provided by nonprofits funded by other sources, churches, employers, or family members.”
In 2007, 35% of all FHA-backed mortgages used some type of downpayment assistance which is a huge increase over previous years and a sign that people just couldn’t save enough money for a downpayment on their own.
Programs such as Nehemiah and AmeriDream would be disallowed but governmental entities, like CHFA who offer Downpayment Assistance Program (DAP) loans to borrowers, would still be permitted.
FHA has long argued that the default rate is much higher with borrowers who get downpayment assistance. FHA Commissioner Brian Montgomery earlier this year stated that, ”data clearly demonstrates that FHA loans made to borrowers relying on seller-funded downpayment assistance go to foreclosure at three times the rate of loans made to borrowers who make their own downpayments.”
Big Changes to FHA
FHA minimum downpayment increased from 3% -3.5%.
Possible increase in FHA fees - HUD Secretary Steve Preston has indicated that FHA may have to increase its fee of 1.5% since Congress refused to allow FHA to implement risk-based pricing. In order to handle subprime borrowers and their associated risks, FHA was set to implement risk-based pricing which would have charged people with better credit less (1.25%) and those with worse credit more. Now, everyone suffers.
Loan limits were also increased to up to 115 percent of local area median home price, with a $625,500 cap.
Who’s Getting Rescued?
From Oct. 1, 2008 through September 2011, homeowners facing foreclosure MAY be able to refinance their loan to an FHA-backed, 30-year, fixed rate loan. The following conditions must be met for people to qualify:
The program is available only to individuals living in their only homes. The mortgage must have originated before Jan. 1, 2008, and the borrowers’ debt-to-income ratio must be above 31 percent as of March 1, 2008. The debt-to-income ratio is figured by dividing the borrowers’ monthly mortgage payments (including principal, interest, taxes and insurance) by their monthly income.
Borrowers must agree to “share” future equity with the government. Specifically, if the home is sold within a year the government gets all the profit. The government’s share of the profit declines over five years, ending at 50 percent—in other words, if the home is sold after five years, the homeowner and the government split the profit 50-50.
Borrowers must demonstrate their ability to repay the new loan.
The mortgage owner (generally a bank or other financial services corporation) has to agree to write down (reduce) the principal on the existing loan. The new principal amount will be 90 percent of the home’s current value.
Borrowers do not need to be in default, but he or she must be able to prove that he or she will not be able to keep paying the existing mortgage and they must attest that he or she is not deliberately defaulting just to obtain lower payments.
All other loans against the home must be retired, including home equity loans or lines of credit.
Borrowers may not take out another home equity loan for at least five years unless the purpose is to pay for needed home maintenance or repairs.
The total debt on the home can not be any more than 95% of the home’s appraised value.
If Connecticut is any indication, the plan will probably only save a small percentage of the people facing foreclosure. In December of 2007, CT through CHFA rolled out its CT Families program to refinance at-risk mortgages. Since inception, 66 homeowners refinanced out of an estimated 18,000 subprime loans written in our state.
Many people are arguing that the biggest beneficary of this part of the bill will be Bank of America who recently aquired Countrywide, the largest issuer of loans for homes in foreclosure.
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If You Ain’t Been Pre-approved, You Ain’t Shoopoo
May 6th, 2008 categories: Home Buyers, Mortgages & Finance
Somewhere at a truck stop in Pennsylvania, you might find a t-shirt that reads:
“If You Ain’t Been Possum Hissed, You Ain’t Shoopoo.”
I wish I could show you a picture of this shirt but all I found was this photo of a possum.
My memory of this very weird shirt, which I wore for Halloween one year when I went dressed as a “Shotgun Wedding” (I was Paw, dragging my Kin to the altar), reminds me of agents who don’t require their clients be pre-approved before showing them homes or presenting offers.
For three years, I worked only as an exclusive buyer’s agent. Only within the last year have I been on the other side, examining offers and am shocked that all agents don’t get their clients pre-approved BEFORE putting in an offer. Even more surprising, I get grief back from agents who try to tell me that a pre-qualification is good enough. Ehhh! Wrong answer.
I’m not going to explain this to agents - if they don’t know, I can’t help them. Read the rest of this entry »
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Five Things Every Home Buyer Should Know About Mortgages and Mortgage Lenders
April 30th, 2008 categories: Mortgages & Finance
1. Mortgage Lenders/Brokers Don’t Owe Any Fiduciary Responsibilities to Borrowers
A fiduciary is one who acts legally on behalf and in the best interests of another. Realtors are required ethically and legally to act as fiduciaries for their clients. Examples of Realtor fiduciary responsibilities are: Disclosure; Reasonable Care; Loyalty and Obedience, just to name a few of them. Unlike Realtors, mortgage lenders and brokers are under no obligation, legally or professionally to look out for your best interests. If a lender does not do CHFA loans, he/she is under no obligation to tell you about CHFA, as an example.
2. Don’t Count on Rate Quotes to Be Accurate
If you’re calling around or surfing the net for the best rates, there are three hazards. First, rates can change throughout the day so unless you are looking at the same time, comparing rates will be inaccurate. Secondly, lenders may purposely give you a low rate quote knowing that you’re not going to lock in right that minute. Surprise, when you are ready to lock in, the rate has gone up. Thirdly, you are not locked in until you lock in - so your rate will probably change. Read the rest of this entry »
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Just How Did We Get Into This Mortgage Mess?
April 23rd, 2008 categories: Mortgages & Finance
My office hosted a luncheon today with Bill McCue of McCue Mortgage. Mr. McCue, in the mortgage business for longer than I’ve been alive, had a lot to say about the mortgage mess we find ourselves in.
In case you’ve been in a hole for the last year, the mortgage mess is as follows: No or low down payment loans almost non-existent, no subprime loans, no stated income loans and increasingly stringent credit and income guidelines coupled with increases in rates of foreclosures/defaults/short sales and housing prices on the decline nationwide. A big pot of yuck.
If you’ve scratched your head in wonderment then I have some answers, thanks in part to Mr. McCue. Caveat for you economists out there - this is a simple man’s explanation. I am only a Realtor, after all:)
A long time ago, if you wanted to buy a home, you went to your local bank. You opened up an account (or already had one) and a local loan officer qualified you for a mortgage. Unless you were borrowing money through FHA or VA, which guaranteed loans in the event you defaulted, banks wanted to ensure you did not default and you had to meet pretty stringent guidelines. Read the rest of this entry »
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