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Why Buy Now?
$8000 Stimulus Grant
Now extended to April 30, 2010 with new rules.
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$8000 married, $4000 married filing separate
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First time buyer
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Current homeowner- amount of Creidt $6500 ($3250 married filing separate)
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Current homeowner-definition for Eligibility: must have used the home sold or being sold as a principal residence consecutively for 5 of the last 8 years.
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Termination of Credit: Purchases after April 30, 2010
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Binding Contract rule: so long as a written binding contract to purchase is in effect on April 30, 10, the purchaser will have until July 1, 2010 to close.
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Income Limits: $125K single, $225K married. Additional $20K phase out
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Limitation on Cost of Purchased home: $800,000
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Purchase by a Dependent: ineligible
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Anti-fraud Rule: Purchaser must attach documentation of purchase to tax return.
$8000 Stimulus Grant
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$8000 Does Not have to be paid back!
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Why buy now? Can you qualify?
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Why pay someone else's mortgage when you can own your own home and get the tax benefits?
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Interest rates are at an all time LOW!
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Have you ever been offered $8000 by anyone to purchase a home before and not have to pay it back?
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You may qualify for a FHA loan with only 3/5% down
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or a Utah Housing loan with 100% financing!
Can you qualify?
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Are you a first time home buyer?
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Have you owned a home within the past 3 years? If not, you may qualify.
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Are you credit scores in the mid 600's.
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If single, do you make less than $75,000 (for full credit)
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If married, do you make less than $150,000 (for full creidt)
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If single, do you make less than $90,000 (for partial credit)
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If married, do you make less than $170,000 (for partial credit)
Learn How to Refinance and Save Your Home
ForeclosureRelief
Housing Stimulus Bill Explained
This week, the Senate passed a housing bill a little over a week ago (the House joined last Wednesday) that seeks to give the housing market a shot in the arm. With 1 in every 171 homes going into foreclosure, the cries for help are getting loud and loud and, with the next year’s deficit nearing half a trillion dollars, we might as well pile it on. What’s another few hundred billion?
So, what’s going on? Here are the bits that are likely to affect you.
The Main Bailout
The FHA will be allowed to insure up to $300 billion in 30-year fixed mortgages for those at risk and who are living in owner occupied homes. The net result of this is that some loans will be restructured from their current state to an FHA insured loan. It’s help but it’s not a get out of jail free card, you’ll see why in the second paragraph of the gotchas section.
Who is qualified? You qualify if you have a loan that was issued between January 2005 and June 2007, must be spending at least 31% of your gross monthly income on mortgage debt, the total debt cannot exceed 95% of the home’s appraised value, and prove that they will not be able to continue to pay their mortgage. They can be defaulting or current, that won’t matter, but they have to retire all other debt on the home.
What happens? If you think you qualify, go to an FHA-approved lender and they will take it from there.
Any gotchas, catches, or tricks? There are two types of gotchas. First, in order for this go through, the lender will have to write down the value of the existing loan to 90% of the home’s current value and take the hit. Lenders won’t do this unless they think they’ll lose more than that, so you will probably really have to be in trouble to qualify.
The second type of gotcha is the restrictions and extra payments the borrower will have to bear. You can’t get a home equity loan for at least five years, you’ll have to pay the 1.5% annual insurance premium to the FHA for the guarantee, you’ll have to pay a 3% exit fee on the principal to the FHA if you sell or refinance, and finally you’ll have to give up all profits to the FHA if you sell or refinance within a year. After a year, you’ll only be on the hook for 90% of the profits and drops by 10% each year until it gets to 50%, where it will be forever. That’s a long time.
The Supporting Cast Measures There are a few other additions to the bill that may be of interest.
Conforming Loans ceiling set to $625,500. A temporary measure increasing the maximum value of a “conforming loan,” or loans that would be guaranteed by Fannie Mae or Freddie Mac, was increased and pegged to home prices in a geographic region.
10% home-buyer “credit,” up to $7,500. It’s not really a credit, it’s a 15 year no-interest loan of up to 10% of a home’s purchase price, no greater than $7,500. I don’t know if this will induce many folks into buying, there’s no sense rushing to buy something if you think it’ll still go down in value. No one loses money by sitting on the sidelines in this market.
My Thoughts Overall, I think the way the “bail out” was structured was reasonable. Borrowers might be bailed out, only if the lenders accept the writing on the walls, but they don’t get to reap any rewards on the back end. I like the idea that the government gets at least 50% of a bailed out home’s appreciated value if it’s sold or refinanced. That’s a hit and the cost of doing business. Qualified borrowers get to keep their homes, lenders don’t lose as much, both sides seem to win.
It appears that the only losers are those excluded from the deal (taxpayers included). Lenders may be stubborn and refuse to take the hit, borrowers may find themselves close but not quite over the 31% gross income rule, and others may be left out because of the date of issue on their loan. You can’t save everyone.
New York Times
If you weren’t a fan of President Bush and believed he, and politicians in general, only pushed for tax breaks for the rich then you’ll want to pay close attention to a recently Fortune that sheds some light onto the little footnote on the 2008 tax stimulus package. Most people focus on the tax stimulus check they’ll be receiving in a month or two, I know I did because that’s what affects us and most Americans. Fortunately, we have people like Allan Sloan focusing on all parts, including the little piece about raising the “maximum size of a ‘conforming’ mortgage to $729,750 from the previous cap of $417,000.”
What the heck does that mean? A conforming loan is one that Fannie Mae and Freddie Mac can buy. Since they can buy them, the interest rates on the loans are generally lower because they’re less risky. If a bank knows it can sell it to Fannie Mae and Freddie Mac, they can charge less in interest. The spread these days, according to Fortune, is a significant 1.27%.
My friends that share a half-million dollar mortgage, and those who own homes that are worth more than $417,000 but less than $729,750, benefit the most from this. Borrowers have access to lower interest rates and thus are able to purchase “more house.” (Nothing changes for those above the $729,750 amount)
For example, for the monthly mortgage payment of $1,500 can get you a $250,188 loan at 6.00% or a $219,448 loan at 7.27% - that’s a difference in the purchase price of $30,740! And, it obviously gets bigger as your amounts get higher. This makes homes in that range more affordable and thus helps increase their value. That’s stimulus people!
Allan goes on to recognize that the boost will expire at the end of the year, since it was designed to help stimulate the economy, but he suspects it will remain. I just wanted to highlight this piece of the package since very few people discuss it and Allan does a great job. His ending quote is a gem as well - “The one thing I liked about the stimulus package was that the government had enough sense to not send money to people like me. But then it turns around and hands me a housing subsidy. I’ll gratefully accept the gift. But that’s no way to run a country.”
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New York Times
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