Rates WILL Rise a Good Reason to Buy Now?

This article is related so can be considered as a follow up to the last article “If You Don’t Buy a House Now, You’re Stupid or Broke. The answer to that question is… Well that it really depends on you and your debt to income ratios and ability to repay and previous repayment history of debt.

Lenders are subject to extreme scrutiny at the moment. Above average defaults can have drastic consequences and no lender is immune. This has led to over the top caution and excessive documentation and underwriting requirements.

It is what it is, so we’ll have to deal with it and only deal with mortgage reps on top of their game and don’t make promises they can’t keep!

FYI Rates continue to be at or near historic lows.

Given the eternal optimism that is inside all of us we believe the low rates are here to stay (or go lower yet) but think again.  The writing is on the wall for higher rates next year!  With the Fed buying approx 80% of all mortgage loans now, they will stop doing this by March, and there are few other buyers at current price and interest rates.

As the Federal Housing Administration (FHA) considers  raising the minimum credit score requirement for new borrowers to reduce risks to the single-family insurance fund, Fannie Mae (FNM: 1.04 +13.04%) has increased the minimum borrower credit score from 580 to 620.

Brian Faith, a Fannie Mae spokesperson confirmed the minimum hike, adding that the adjustment reflects a careful analysis of borrowers’ ability to repay their mortgage obligations over the life of the loan.

Faith said “Our experience with recently delivered loans with credit scores below 620 is that they reached a level of serious delinquency at a rate approximately nine times higher than other acquisitions during the same period.”

Fannie also reduced the allowable debt-to-income (DTI) ratio to 45% when executing loss mitigation efforts under the Home Affordable Modification Program (HAMP). Under HAMP, the US Treasury Department provides allocated capped incentives to servicers for the modification of loans on the verge of foreclosure.

Faith said that “high DTI ratio loans also have higher levels of serious delinquency. “In other words if you have a lot of debt and keep stacking it on with new cars, credit card bills and other investments and leveraged to the hilt, maybe you shouldn’t be buying a home until you pay down some of that debt first.

It’s not enough to help borrowers buy a home – we must also ensure that they can stay in the home over the long term. Repeat business through ill-gotten gains is rare, immoral and unethical, at least in my book.

Contact us today for a free consultation to see if home ownership may be in your future.

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Tax Credit Boosts October Home Sales 10.1%

A last minute rush of home purchases by first time home buyers wanting to take advantage of the expiring federal housing tax credit was the cause of home sales far exceeded expectations last month, surging to the highest level in 2 1/2 years.

The National Association of Realtors said Monday that home resales rose 10.1 percent to a seasonally adjusted annual rate of 6.1 million in October, from a downwardly revised pace of 5.54 million in September.

The tax credit of up to $8,000 for first-time owners was originally set to run out on Nov. 30, but Congress renewed it earlier this month and broadened its reach. Now even existing home owners who have owned their current homes for at least five years can now claim a tax credit of up to $6,500 for a home purchase. To qualify, buyers must sign a purchase agreement by April 30.

The Realtors report on October home sales reflect offers made before buyers knew the tax credit would be extended. "There was a lot of rush and hurry to complete sales" before the deadline.

Home sales are likely to drop over the winter as buyers hibernate for a few months without the looming tax credit deadline making this winter possibly the best time to begin shopping for a home. 

With a large inventory of homes for sale and limited time for sellers to sell with the threat of foreclosure hanging over their heads, there just may be some spectacular deals to be had and many options to choose from with little competition from other buyers.

The new deadline means that we're going to see some good activity coming out of the spring.

Sales, which were nearly 24 percent above last year's level, had been expected to rise to an annual pace of 5.65 million, according to economists surveyed by Thomson Reuters.

The median sales price was $173,100, down 7.1 percent from a year earlier and off 1.6 percent from September.

In addition to lower prices, mortgage rates have been hovering around 5 percent since the spring, largely because of government intervention. That has helped restore housing affordability in large swaths of the country.

The inventory of unsold homes on the market fell about 4 percent to 3.6 million. That's a 7 month supply at the current sales pace, and close to a healthy stock of about six months.

Over the summer, the housing market started to rebound from the worst downturn in decades, aided by aggressive federal intervention to lower mortgage rates and bring more buyers into the market.

But experts forecast that prices will fall again. Most say they will hit  a new low next spring, perhaps falling another 5 to 10 percent, as more foreclosures get pushed onto the market.

But the government support can't last forever. For example, the Federal Reserve is likely to curtail its effort to push down mortgage rates next year. If rates then rise too high, it would make home purchases less affordable and dampen housing demand.

"When we do kick those crutches out from under the housing market, will it be able to stand on its own?" said Mark Fleming, chief economist with real estate information company First American CoreLogic. "It's really hard to tell."

A record-high 14 percent of homeowners with a mortgage were either behind on payments or in foreclosure at the end of September, the Mortgage Bankers Association said last week. The worst damage is still concentrated in the states hardest hit from the start: Florida, Nevada, California and Arizona. Together, they accounted for 43 percent of new foreclosures.

So what does this mean for New Jersey home buyers? It’s hard to say but not being at the top of the foreclosure list of states could possibly mean we’ve hit bottom or already very close, couple that with very low mortgage rates and buyers will need to decide if now just may be the optimal time to make a purchase or wait to see if prices drop a little more and risk higher interest rates in the spring.

The great news is New Jersey has several local state, county and federal finance assistance programs available that could add up to $20,000 in home purchase discounts in the form of government grants. (depending on your location, price, income etc. and of course the knowledge of these programs available by your realtor and mortgage representative.)

Whenever your ready, Marivic GMAC Real Estate will be here to keep you informed and let you decide, remember we’re here to help.

www.MarivicRealty.com
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Toll Free: 1-866-745-GMAC(4622)
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This article is based on excerpts of a 11/23/09 story by ALAN ZIBEL
AP Real Estate Writer. Additional story contributions from Victor Kaminski Broker of Record of Marivic GMAC Real Estate.

HUD FHA Condominium Complex Approvals

I’ve been coming across this issue more and more lately so decided to write this article to address the issue of condo complexes being approved so that would be buyers can use an FHA loan to fund the purchase.

 
Since condominiums are becoming more popular across the country, I think this information will be helpful to you if you are new to FHA or if you are in need of a refresher on condominium requirements.

There are two types of condominium approvals for FHA:

• Full project review and approval by HUD
• Spot loan review and approval by the lender

To check see if a condo complex is HUD approved for FHA loans the first step would be to determine the name of the condominium project and conduct a search at HUD’s website to see if the project is currently approved. You’ll need to go to https://entp.hud.gov/idapp/html/condlook.cfm where you can search by condo name, condo id, alias name, city, state or zip code.

If the search concludes that the project is not currently approved, your mortgage rep would want to do one of two things:

1. Determine if the property is eligible for spot loan review and approval or
2. Determine if it’s best to gather project documentation and submit to the HUD Homeownership Center that oversees the jurisdiction of the property for full project review and approval.

For Spot Loan Approval
To proceed with spot loan approval, you would want to refer to Mortgagee Letter 1996-41 which explains spot loan approval requirements. You will find a spot loan questionnaire/checklist attached to ML 96-41. You will need to have an officer of the condominium project’s homeowners association or a representative from the company that oversees and manages the association complete the spot loan questionnaire as early in the process as possible. With the completed spot loan questionnaire, you will need to obtain a copy of the association’s most recent annual budget and you will need to obtain a copy of the certificate of insurance for the subject unit of the project. The association must have appropriate insurance coverage for the common areas and exteriors of the buildings within the project.

Most lenders also require a copy of the condominium declarations and bylaws to be submitted with the questionnaire, annual budget and certificate of insurance for the subject unit. You will want to check the specific lender procedures for spot loan approval because some lenders actually employ their own department for project reviews and approval. Most underwriters are able to determine project acceptability at the same time they underwrite the rest of your credit package but there are a few that differ in their processes. Make sure you’re clear up front on the exact process with the lender of choice.

One thing worth mentioning that you will not find within the Mortgagee Letter or the questionnaire: To be eligible for spot loan approval, the project must consist of no less than four units. This eliminates two unit duplexes and three unit triplexes which have been zoned as condominiums from being eligible for spot approval.

For full project review and approval
For cases where a particular originator has the potential to land a number of deals within the subject project, HUD advises pursuing full project approval. You will find full condominium project requirements at CFR-234.26(i) and also in HUD handbook 4150.1 Chapter 11. Each HUD Homeownership Center has their own specific project review process so you will want to be clear on what to include in your project submission, where to send the documents and to whose attention you need to address the documents.

For more information about purchasing or selling a home call
Marivic GMAC Real Estate
www.MarivicRealty.com
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