The $168 billion economic stimulus plan signed Wednesday includes a temporary increase to conforming loan limits in some parts of the country.
Currently, many homeowners whose loans exceed $417,000 are paying higher interest rates because their loans are not securitized the way that smaller loans are.
The loan limit increase is intended to make housing more affordable in certain “high cost” areas around the United States.
However, the loan limit changes are not immediate. The stimulus package grants HUD 30 days to determine which metropolitan areas should be designated as “high cost” and it should take another few weeks for Fannie Mae and Freddie Mac to remodel their mortgage pricing engines.
All told, it could be mid-April before the new limits are in place.
Author’s Note: There is a lot of speculation about which areas will be designated as “high cost” and nobody knows for certain until HUD decides. Rather than misreport the facts, we’ll save our coverage until something is concrete. However — if you’re in a “high cost” area, you probably already know it.
When the new limits are official, though, expect that many homeowners will take advantage. That will lead to underwriting delays because mortgage refinance activity will surge.
Therefore, consider being proactive about your financing options if:
You suspect you live in a high-cost area
You have liens on your home exceeding $417,000
If you don’t live in a high cost area, you can’t take advantage of the new loan limits; and if your outstanding liens total less than $417,000, you won’t want to be helped.
Converting from a jumbo home loan will not be appropriate for everyone, but it will be right for some. Get personal advice and figure out what’s best for you.
And then hope the HUD fingers your neighborhood as high cost.
Good news for First Mangus Financial Corp. Employees!
There was an article today in the AZSTARNET newspaper about the the bankruptcy approval. Looks as though Judge James Marlar will have a decision as soon as this week.
According to the AZSTARNET “First Mangus representatives have said that the employees would be completely repaid, up to $10,000 per person, under the plan.”
Mortgage markets are conflicted about the U.S. economy and the confusion is impacting home buyers.
If you’ve recently tried to lock a mortgage rate, you’ve probably experienced it personally.
On one hand, reports of plunging sales suggest that the economy is slowing more quickly than expected.
This is recessionary and tends to be good for mortgage rates. So, some days, rates have been down.
On the other hand, some pundits (including a Federal Reserve official) are saying that recent Fed cuts may stoke inflation in the second half of 2008.
This is inflationary and tends to be bad for mortgage rates. So, some days, rates have been up.
Neither side is wrong — 2008 will likely show signs of both recession and inflation at some point. Markets are waking up to this fact.
And this is why mortgage rates have changed so much from day-to-day — investors can’t agree upon exactly when the Fed rate cuts will work their way through the economy. With each “target date” change, mortgage rates change.
This week, expect more of the same volatility with January’s Retail Sales data being released and five Fed speakers (including Fed Chairman Ben Bernanke) stumping.
The spoken word of the Fed Chief can be a very powerful influence on markets.
If you’ve recently gone under contract for a home, you may find peace of mind by concentrating on a mortgage payment as opposed to a mortgage rate; rates could change multiple times each day and timing a market-bottom can be futile.
Through an official announcement just received, MGIC and other MI companies have just reclassified all of Arizona, California, Florida, Nevada as well as many counties in several states as “restricted markets”.
As such, here are their new guidelines for issuing Mortgage Insurance beginning March 3rd.
Mortgage Insurance will still be available on the following loans:
• 95% Loan-to-Value with a credit score of 680 (90% LTV with 620) based upon full documentation for Primary & Second Homes only.
Mortgage Insurance will NO LONGER BE AVAILABLE on the following loans:
• Any loan greater than 95% Loan-to-Value (good-bye 100% financing)
• Reduced Documentation or A-Minus (”Expanded Approval”) loans
• Investment properties of any kind
• Cash-out refinances of any kind
• Any loan with the potential of negative amortization.
New rules will also apply to any loan with LPMI (lender paid mortgage insurance) or One-time (up front) mortgage insurance policies.
These changes go into effect on March 3rd so if you’re considering something like this…
GET THE DEAL UNDER CONTRACT AND SECURE FINANCING NOW!!!
Note that FHA and VA loan programs are not affected.
Many homeowners are entitled to two major tax deductions — one for annual interest paid on a home loan, and another for real estate tax bills paid to government.
Calculating your approximate tax credit is basic:
Add mortgage interest paid and real estate taxes paid together
So, for a homeowner that paid a combined $13,000 in mortgage interest and real estate taxes last year, and who is in the 28% marginal tax bracket, a tax credit of $3,640 may be due from the IRS.
This credit is one reason why some people sometimes refer to “after-tax mortgage rates”. An after-tax mortgage rate is the adjusted interest rate after the IRS doles out credits and is calculated as follows:
The same homeowner with a 6.000% mortgage rate, therefore, has an after-tax mortgage rate of 4.32%.
Because not every homeowner is eligible for mortgage interest and/or real estate tax deductions, and because not every homeowner should claim them, you should consult with your accountant to see how tax credits fit into your tax liability schedules.
Federal income taxes are highly personal and require the attention of an experienced professional.
All mortgage approvals are strictly based on what I call the Income-Equity-Credit Triangle.
The stronger the elements of the triangle, the more likely a person will qualify for a conforming (or “prime”) mortgage.
The triangle’s three corners are defined as follows:
• Income: The relative strength of income versus debts. Also referred to as debt ratio.
• Equity: The percentage of equity in a home. Also referred to as loan-to-value, or LTV.
• Credit: The middle of a person’s three credit scores, as reported by the three major credit bureaus.
When all three elements of the Income-Equity-Credit triangle conform to the guidelines, the “Mortgage Approved” target is fully visible. This means that the home loan application is very likely to be approved.
When any one element is weak, on the other hand, the triangle’s area shrinks and a home loan approval becomes much less likely or likely with different terms.
Weakness in one of the three areas usually requires exceptional strength in the two other categories to outweigh the drag on the mortgage approval. Read the rest of this entry »
The end of the Super Bowl kicks off the Real Estate Spring Buying Season.
As home sellers should prepare for the season’s upcoming homebuyers, they could do worse than to watch this four-minute home staging video from Barbara Corcoran.
Barbara offer simple steps that “won’t cost you a lot of money but could make a 10-20 percent difference in the selling price of your home”.
Then, to watch home staging in action, tune in to well-known Home Staging professional Barb Schwarz as she takes the 20/20 news crew into Bothell, WA for a before-and-after.
With so much housing supply relative to recent years, home staging could be the difference-maker to home sellers. And it’s usually less expensive than a price reduction.
If you could have access to the equity in your home, regardless of whether or not you EVER tapped it, why would you not want it?
I’ve had this discussion with literally thousands of homeowners over the past 10 years and will continue to shout it from the mountain top!
The objections I hear are always the same: “I want to pay OFF my mortgage so why would I want another mortgage?” and “what on earth would I do with it?”. There are obvious disadvantages to the abuse of debt but the concept that most people continue to miss is that debt is a part of our financial life and managed wisely is GOOD.
Let’s look at the ADVANTAGES of just being able to access your equity, but first some basic assumptions:
1. Home Equity, in and of itself, earns 0% rate of return. The proof: property appreciation is based on the physical value alone (regardless of any underlying liens).
2. Home Equity, in and of itself, is NOT safe. The proof: look at the declining property values in California, Florida and Nevada.
3. Home Equity, in and of itself, is NOT accessible: The proof: try to take out a new loan after you lose your job or have a financial crisis. Read the rest of this entry »
When buying a home, you pay for more than just physical property at the closing table. You also pay a series of charges. Commonly, homebuyers lump all of these charges under the heading of “closing costs”. That’s a miscategorization.
Many changes on a HUD-1 Settlement Statement are specifically not closing costs. They are more appropriately designated as “reserves” or monies “paid in advance”.
These “prepaid items” include:
Advance mortgage interest paid from the closing date to month-end
California, Florida, Nevada as well as many counties in several states as “restricted markets”.
If you could have access to the equity in your home, regardless of whether or not you EVER tapped it, why would you not want it?
