Key dates on the Obama tax credit for first time home buyers and move up buyers in Minnesota

Can you believe we are only a week away from St Patricks Day 2010?  Me neither!  Here are some important dates and if you are “on the fence’ you should give me a call at 651.210.9593 so you get in before the deadlines. 

FHA closing costs are changing from a maximum of 6% right now to a maxium of 3% on case numbers assigned on and after April 5, 2010.  A case number is an FHA “identifier” of you and the property.  Typically 3% is sufficient to cover most closing costs but on smaller loans I see some 6% seller paid files.

Second, FHA Upfront MIP is going from 1.75% to 2.25% on case numbers assigned on or after April 5th.  ON a 100,000 loan that is 500 dollars.  On 300,000 it’s a whopping 1500.  If you are in the market you need to be proactive and get in before this goes up.

Lastly, for the First Time Home Buyer and the Move Up Home Buyer, you need to have your offer accepted by April 30, 2010 and close before June 30, 2010. 

Now a lot of people are asking me “will Obama extend the tax credit” and the answer is I don’t know.

Increase in Upfront Premiums for FHA Mortgage Insurance for Minnesota Home Loans

This is a letter copy and pasted from HUD.

w.hud.gov espanol.hud.gov

Can I buy a home in Minnesota after having a short sale?

Short sales occur when a property is sold for less than the borrower owes on the property. FHA will permit borrowers to purchase another home after a short sale, provided all of the following requirements are met:

Minnesota Contractor Helps Clients Remodel Home With No Out Of Pocket Costs

Tony Greczyna of Pineview Builders in Roseville got a call one day from a Minneapolis couple about remodeling their kitchen along with some updated mechanicals and hardwood flooring. 

After he talked to them on the phone he agreed to meet with them and inspect the property to put together a bid for the work.  When he asked how they’d be paying for the project they informed him that Jay Dacey, with Metropolitan Financial Mortgage Co. had them pre-approved for the project.

Rather surprised, Tony called Mr Dacey that same day to get more information on how they’d get the financing because the homeowner’s informed him they had only recently purchased the property and assumed there would not be a large equity position.

Mr Dacey explained to Tony that in 1978, under the National Housing Act, HUD made available a very unique home improvement loan program that is not well known but is starting to become more popular as many homeowners are either buying properties in need of work or already in a home that needs some type of renovation.

Surprisingly, qualifying for the loan is no more stringent than an FHA mortgage.  Homeowners need only a 640 credit score and reasonable debt to income ratios to credit qualify and they do not need 20% equity or anything like that either. 

In fact, the bank will give the homeowner credit for the work to be completed when determining the loan size so future appreciation is credited before construction starts.

What’s best for contractor’s Dacey noted is the funding is gauranteed for them because the money is held in escrow by the mortgage company. 

As 2010 is just around the corner more and more contractors are expected to be utilizing this as a tool for both new remodeling projects and to also get back in touch with past bids that never moved forward as a result of the home owners’ ability to finance them.  

Homeowner’s and contractors alike are encouage to give Jay Dacey a call at 651.210.9593 and see if they qualify for this program and are encouraged to do so immediately as the low fixed rates currently available are expected to rise in the first half of 2010.

Four things every MN home buyer need to know about the Obama $8,000 dollar tax credit

As you know the  homebuyer tax credit has been extended with some minor changes that will benefit first-time homebuyers and homeowners who want to sell their current home and buy a new one.

The credit is reasonably straightforward, but there are some tips for those who want to take advantage of it.
1. Deadline: April 30, 2010 – The most important tip is to be aware of the deadline. Buyers who want to use the tax credit must have their new home under contract (i.e., in escrow) by April 30, 2010, and must close the transaction within 60 days after that date.
That deadline is much sooner than it may seem: Many buyers take months to locate a house, and closing a transaction typically takes 45 to 60 days.
2. Credit up to $8,000 or $6,500 – Buyers also need to understand that the tax credit is equal to 10 percent of the sale price of the home, which could be less than the maximum of up to $8,000 for first-time buyers and up to $6,500 for repeat homeowners.
For example, if a first-time buyer purchased a small condominium that cost just $70,000, the tax credit would be $7,000. And by the way, if the home costs more than $800,000, the credit now drops to zero.
3. Get good advice – Homebuyers who want to take advantage of the tax credit should consult the right people for help
A tax preparer, who can help them ensure they meet all the requirements to use the credit.
A mortgage lender, who can help them choose a loan program that will fit their needs.
A Realtor, who can help them locate a home they can afford and want to purchase.
4. Beware of tax fraud – Homebuyers should educate themselves about the tax credit and learn the lingo.
Buyers and sellers should be wary of any advice that sounds suspicious or overly complicated. For instance, buyers who are told to conceal any information from their lender should “get away” from whoever offered that advice.
One final tip: The IRS has found such a high incidence of fraud and creative tax accounting associated with the homebuyer tax credit that taxpayers who take the credit will now be required to attach a copy of the settlement statement to their federal tax return as proof of purchase. Buyers should keep their paperwork handy.

What are the new changes to FHA and when do they go in effect?

Hey everyone, as usual, there’s talk of change in the mortgage industry (both in Minnesota and nationwide).  So the latest talk has to do with FHA and enforcing stricter guidelines.   Before I share them with you, it’s important you know that FHA defaults are rising very fast and I feel it will be the next “bubble” or “waive” of foreclosures…those 2007/2008 FHA files that were done without much thought having gone into the underwriting.

Ok, so here are the big ones….

Down payment:  talk of raising it from 3.5% to 5%.  Since most clients are getting gifts from their grandparents or parents, I don’t know if this will be that big of a deal.  It will obviously help the banks improve their equity position but not by much.  If you are able to save up 7k for a 200k purchase, will it be that much harder to save up 10k?  Savers can save.  Gift givers can gift.

Seller paid closing costs:  FHA allows for up to 6% which seems like a lot but isn’t really all that much more on small loans.  Conventional allows for 3% but no one is doing any conventional purchases now anyways so it’s not a huge deal.  Also, because the yield spread premiums banks pay brokers (or if you are an actual bank your service release premiums) are typically higher on FHA, on most loans 3% in seller paids plus some of the YSP towards the banks fees would offset this change to make it almost a non-issue.

Another area of issue is the Up Front Mortgage Insurance premium.  Right now it’s 1.75% of the loan for most loans and it’s rolled into the loan amount the majority of the time.  If it get’s rolled in, big deal.  If it’s a little higher, big deal.  Not out of pocket, not felt by the clients. 

Talk is also focused on raising the monthly MI payments.  This would be the most impactful in my opinion because now we are talking about dollars coming out of the pockets of consumers every month.  This also makes homes less affordable.  Kind of counter-productive, right? 

Last but not least…the magic FICO score requirment.  Currently at 500 but most lender imposing minimums of 620 or 640.  In my opinion, and I “saved the best for last”, raising credit score minimums to 700 for borrowers would be the safest bet for getting better performing loans. 

Now, there is only 1 minor problem with this…if you rip out the borrowers between 620-699 who can now get financing, you take away a decent sized portion of the market, lowering demand for housing and theoretically, lowering prices.  Now, this may be a short term pain for a long term gain. 

The reason why you ask?  The folks who have lower scores default/foreclose more often.  Those foreclosures are essentially bringing the homes values down of the neighbors who’ve paid on time.   So statistically, those people would be more likely to foreclose later on down the road and keep a drag on pricing by keeping foreclosures a larger portion of the market than is usual.

Since I  dont’ have a couple billion in TARP money and no high powered lobby firm I won’t be able to re-write these laws or have too much an impact…but it’s something to think about.  Raising credit standards alone should help prevent the majority of defaults more so than raising down payments and raising the costs by having higher MI payments.

Have questions, let me know….phone is 651.210.9593 or email away to jay@jaydacey.com

What percentage of FHA loans are currently delinquent?

A new survey put out recently indicated that 8.9% of FHA insured loans are currently 90 days or more behind.  This has worried some as FHA is required to keep 2% reserves per their agreement with the government.  They are currently around 3% in reserves but delinquincies are rising so be prepared for the potential for higher up front mortgage insurance premiums (currently at 1.75% for most FHA mortgage loans) and at .55% for the monthly mortgage insurance premium.  Now is a great time streamline into a lower rate adjustable rate mortgage because the rates are so good and if ARM’s make you uncomfortable, fixed rates are still well under 6%.

Streamline Refinancing of your FHA Home Loan Mortgage

One of the advantages of FHA financing is your ability to streamline refinance them without needing an appraisal.  Here are some quick FAQ’s on FHA streamlines.

Q:  How long do I need to be in the loan before I can streamline?

A:  There is NO time limit on how soon you can streamline.  If it has only been a month or two  you will need to either bring cash to closing OR have a new appraisal done with a higher appraised value to bump up the loan size.

Q:  Can I use a new appraised value or do I need to go off of purchase price?

A:  You can use the new appraised value immediately after closing.  If you get a great deal on a property this will help.  Although appraisal standards are MUCH tighter right now so if there is a big difference between your purchase price and appraised value a good explanation is required.

Q:  Do I need a full credit report to streamline my FHA mortgage ?

A:  No.  A “mortgage only” credit report is all that is required although we can use a full report.  The higher your score the better.  Many banks require a minimum 620 score.

Q:  Does my payment have to go down a certain amount?

A:  There is no minimum amount for your payment to go down.  Some people think it needs to be 50 dollars but that is not the case.

Q:  Do we need to provide income and asset information?

A:  No.  As long as your mortgage payments were made on time and your score is above 620 that is all you need to do.

Q:  Can I lower the term on my streamline and go from a 30 year to a 15 year?

A:  That depends.  If your payment increases by 20% or less then yes.  If it’s more you will likely need to verify income to show you are able to handle the payments.

Q:  I hear Adjustable Rates are really low right now, should I take one out?

A:  That, like many things in life, depends.  One of the benefits of an ARM is in addition to the lower monthly payments your principal balance actually gets paid off faster than with a 30 year fixed rate home loan so you build equity faster.  Because you can streamline FHA loans you can switch from an ARM back to a fixed if that is more comfortable.

If you have any other questions on FHA streamlines, Home Equity Lines of Credit or even a regular conventional fannie mae or freddie mac loan, just let me know and I will be happy to post the q/a on here.  If you’d like to appy for a streamline just give me a call at 651.210.9593.  Thanks much.  Jay Dacey.

When does the 8,000 tax credit expire and will Obama extend it for Minnesota home buyers?

The current tax credit is set to expire on November 30th which is JUST around the corner.  Purchase orders and contracts are taking about 45 days to close right now with the outsourcing of appraisal orders and increased disclosure requirements which slow down transactions.  So if you are trying to get in on this you should have a signed purchase agreement by mid October.

Now, there is a lot of talk about whether or not Obama will extend the tax credit and the answer is “maybe”.  I don’t have a direct pipeline to the President but I do know this.  Last year’s 7500 tax credit was extended because it wasn’t enough and so it was increased to 8000 and removed the “pay it back over time” string.

So here is my prediction…the credit WILL be extended.  The dollar amount may be reduced but the participation may be extended to include MORE than just first time buyers.  Perhaps “move up” buyers and even investors.  THere are a lot more foreclosures coming up this winter so there will be some artificial demand built in through legislation to prop that up.

Have questions, ask!  JayDacey at Gmail dot com and 651.210.9593 if you prefer the phone.  Talk soon.

How does a FHA 203k Refinance work on my home in Minnesota?

The FHA 203k Refinance is a product that allows home owner’s to finance about $30,000 in home improvements.  (The loan size limit of the repair portion is 35,000  but we need to pad this number with a 10% contingency fee as well as permits, inspections, bank fees and other misc items).

The loan proceeds can be used for most interior improvements that are NOT structural in nature.  In other words, new flooring, appliances and paint are OK but additions are foundation/wall alterations are NOT ok.

Interestingly, home buyers can also utilize this product as a purchase money loan.  The primary funds used to purchase the property will be paid out at closing to the seller and the remaining will be put into escrow to be utilized for the improvements.

In ALL cases, there are 2 draws.  The first draw is the lesser of 50% of job costs or 100% of materials.  The final draw will be for the balance.  This is a safe way for local builders to fund improvements and not tie up their lines of credit and also not have any risk of no-pay because the money is set aside in escrow.

This FHA 203k product will be gaining more and more traction as home buyers and new home owner’s purchasing foreclosures and short sales in Minnesota need money to fix up the properties.

If you are interested in either refinancing your home or purchasing a home utilizinge the FHA 203k Product call me right now at 651.210.9593.