Just a Friendly Reminder of All the Changes Coming Up in 20 Days

September 10, 2008 by Leave a Comment

The passage of HR 3221 has made many changes effective October 1, 2008.   Here are just a few that will officially go into effect in 20 days:

FHA Mortgage Insurance is Increasing

Down Payment Assistance Programs will be gone

You have until the end of this year to take advantage of the higher conforming-jumbo and FHA-jumbo loan limits.   Effective January 1, 2009, they will be reduced (from the passage of HR 3221).

And if you have not owned a home over the past 36 months, you have until the first half of 2009 to take advantage of the first time home buyers tax credit (interest free loan).

Is HR 3221 effecting you for better or worse?  I’d love to hear how.

Filed Under: Legislation

FHA Mortgage Insurance Increasing October 1, 2008

August 27, 2008 by 3 Comments

This is another result of HR 3221, I mentioned in an earlier post that the ceiling was raised for how much could be charged for FHA upfront and monthly mortgage insurance…I recently learned the actual details.

Upfront mortgage insurance will increase from 1.5% to 1.75% for purchases and refinances (not FHA streamlined).  Streamlined refinances will be 1.5% and FHA Secure will be 3.0% (hopefully you refinance before you need FHA Secure).

Monthly mortgage insurance will be 0.55% for loans with less than 10% down (or over 90% loan to value) and 0.50% for loan to values equal or greater than 90%.

Currently we have risked based pricing in effect through the end of September 2008 which rewards down payments and better credit scores.

Based on a 90% loan to value and 680 mid score purchase with a loan amount of $400,000, here’s how now and October 1, 2008 compare (using rates I posted Monday for example sake only–this is NOT a rate quote):

FHA case numbers issued NOW through September 30, 2008:

Upfront MI = 1.25%. 400,000 x 1.25% = $5,000.  Adjusted loan amount (FHA upfront mortgage insurance may be financed) = $405,000 @ 6.5% for 30 years = principal and interest payment of $2559.88.

Montly mortgage insurance (referred to as annual MIP) is 0.50% = 400,000 x 0.50% = 2000.  2000 divided by 12 months = $166.67.

Total payment not including taxes and insurance = $2726.55

FHA case numbers issued October 1, 2008 and later (at least until the moritoriam is over on September 30, 2009):

Upfront MI = 1.75%. 400,000 x 1.75% = $7,000.  Adjusted loan amount = $407,000 @ 6.5% for 30 years = $2572.52.

Monthly mortgage insurance based on this example is the same 0.5% = $166.67 (monthly mortgage insurance is calculated off the base loan amount and not the adjusted loan amount).

Total payment not including taxes and insurance = $2739.19

$12.64 a month may not be enough to have you jump off the fence to buy a home or refinance if the above scenario resembles you.  I know that I would rather have the lower financed upfront mortgage insurance ($2000 lower based on this example).

I prefer the risk based pricing model.  It makes the most sense to me.  Reward more down payment and higher credit and compensate HUD for taking on loans with higher risk (lower down payments and lower credit scores).

FHA’s popularity continues to grow with convetional (Fannie/Freddie) guideines tightening and with the risk based pricing increasing.   Do make sure that your Mortgage Professioanal is qualified and approved to do FHA loans–not all originators are.

Filed Under: FHA, Legislation, Mortgage Insurance

Don’t Forget to Vote Tomorrow

August 18, 2008 by Leave a Comment

Vote

Just a friendly reminder that tomorrow you can should vote in Washington State’s Top 2 Primary.   

This election will determine which two candidates will advance to the November General Election. 

So vote…and vote often! 

For more information, click here.

Filed Under: Legislation

FHA Minimum Down Payment Increasing January 1, 2009

August 13, 2008 by 4 Comments

With the passage of HR 3221, the minimum required investment of a home buyer utilizing a FHA insured mortgage is increasing from roughly 3% to 3.5% effective January 1, 2009.  You may think this sounds like small change, but with larger loan amounts, this adds up.

For example, if a home buyer is utilizing a FHA Jumbo and they are buying a home priced at $500,000.   Their current minimum required down payment of 3% is $15,000.  Effective January 1, 2009, the minimum required down payment of 3.5% is $17,500; a difference of $2,500 for the amount required to invest into the transaction.   With a home priced at $300,000; the current required investment from the buyer would be $9,000.  As of January 1, 2009, the new amount required will be $10,500.

What does this mean to you?

If you are planning to buy a home utilizing a FHA insured mortgage, be aware of the changes to the minimum down payment requirements.   After December 31, 2008, you'll be required to come up with additional funds towards your down payment which may be a gift or loan from family members.

If you are wanting to take advantage of the lower down payment requirement, meet with a Mortgage Professional who is qualified to provide FHA loans (not all loan originators are, you can check HUD's site to verify).

If you would like me to provide la rate quote for a FHA mortgage on a home located anywhere in Washington, please click here.

Editors Note: this post wass been modified to correct the effective date.

Filed Under: FHA, Jumbo/Non-Conforming, Legislation, Residential Purchase

Conforming/FHA Jumbo Limit to Decrease January 1, 2009

August 12, 2008 by Leave a Comment

November 7, 2008 Update: FHFA has announced the new conforming jumbo loan limits for 2009 which are based on a lower median home price than used here (which was 2008’s limits).  Based on these figures, a single family unit will be $506,000 for King, Pierce and Snohomish Counties.  Read more here.

Recent legislation, HR 3221 included what the new conforming loan limits will be.  Our conforming-jumbo limits will be rolled back slightly to the following effective for all mortgage loans not closed December 31, 2008.   Here’s what the new limits will be effective January 1, 2009 (based on HUD’s current median home prices at the time of this post):

King, Pierce and Snohomish Counties:

Single Family:  $506,000 $522,100 ($567,500 until 12/31/2008)

Two Family:  $668,350 ($726,500 until 12/31/2008)

Three Family: $807,850 ($878,150 until 12/31/2008)

Four Family: $1,004,000 ($1,091,350 until 12/31/2008)

Kitsap County:

Single Family:  $437,000 ($475,000 until 12/31/2008)

Two Family:  $559,450 ($608,100 until 12/31/2008)

Three Family:  $676,250 ($735,050 until 12/31/2008)

Four Family:  $840,350 ($913,450 until 12/31/2008)

San Juan County:

Single Family:  $546,250 ($593,750 until 12/31/2008)

Two Family:  $699,250 ($760,100 until 12/31/2008)

Three Family:  $845,250 ($918,800 until 12/31/2008)

Four Family: $1,050,500 ($1,141,850 until 12/31/2008)

Clark and Skamania Counties:

Single Family: $417,000 ($418,750 until 12/31/2008)

Two Family:  $533,850 ($536,050 until 12/31/2008)

Three Family:  $645,300 ($648,000 until 12/31/2008)

Four Family:  $801,950 ($805,300 until 12/31/2008)

Jefferson County:

Single Family:  $417,000 ($437,500 until 12/31/2008)

Two Family:  $533,850 ($560,050 until 12/31/2008)

Three Family:  $645,300 ($677,000 until 12/31/2008)

Four Family:  $801,950 ($841,350 until 12/31/2008)

Watch for my follow up post on what this means to you.

Read my related articles on HR 3221:

First Time Home Buyers Tax Credit

Down Payment Assistance Programs Days are Numbered

Filed Under: FHA, Jumbo/Non-Conforming, Legislation, Mortgage, Refinance, Residential Purchase, Seattle

Down Payment Assistance Programs Days are Numbered

August 11, 2008 by 6 Comments

With the passing of HR 3221, Down Payment Assistance Programs will no longer be allowed with FHA mortgages as of October 1, 2008.    DPA’s such as Nehemiah, have been popular for helping home buyers come up with their down payment.  FHA allows Sellers to pay for closing costs and prepaids as long as the buyer has met their minimum required investment (which has also changed with the passing of HR 3221–another post will follow on this subject).   With DPAs, the seller contributes funds to the DPA (like Nehemiah) which is a "charity" (they collect a small fee from the seller which is used for charitable causes).   The DPA then contributes the funds towards the down payment for the buyer.

Section 2113 of HR 3221 states that down payments for FHA insured mortgages may not come from "the seller or any other person or entity that financially benefits from the transaction" or "any third party or entity that is reimbursed directly or indirectly".  This applies for new loan applications on or after October 1, 2008.

Family members can still contribute towards the down payment on FHA insured mortgages.  In fact, Section 2113 of HR 3221 allows family members to loan up to "100% of the appraised value of the property plus any initial service charges, appraisal, inspection and other fees in connection with the mortgage".   The borrower must qualify for both mortgage payments (the first mortgage-FHA insured at 96.5% of the appraised value and the second mortgage from the Bank of Mom and Dad for the remainder).   This may make family members more comfortable with helping out with down payments as it will not be treated as a gift and the loan is documented, terms would be clear and recorded as well as secured against the property as collateral.  (Hopefully the Bank of Mom and Dad never have to foreclose).

What does this mean to you?

If you’re considering buying a home with minimum down payment, your family can gift or finance the 3.5% required investment of the buyer for FHA insured financing.  However, if you’re family not in the position to do so or if you don’t want to ask the Bank of Mom and Dad, then you have limited time to take advantage of the Down Payment Assistance Programs.

If you’re hoping to use a down payment assistance program to purchase your next home, you have just over a month to do so.  Meet as soon as possible with a qualified Mortgage Professional who can help you become preapproved with an FHA insured mortgage (NOTE:  not all lenders are approved to do FHA loans).  You must be credit approved prior to October 1, 2008 (and the closer we approach that date, the busier FHA approved lenders will be trying to beat the deadline).

Of course, DPAs are going down kicking and screaming to stay alive.  At this point, the countdown to the demise of DPAs is clicking away.

Update: 9:30 am August 11, 2008.   I’ve just received notice from one of the banks that we work with are no longer allowing DPAs.   This serves as a good reminder that lenders may have their guidelines that overlay government requirements.

Related posts on HR 3221:

First Time Home Buyer Tax Credit

Filed Under: FHA, Legislation, Residential Purchase

First Time Home Buyer Tax Credit

August 6, 2008 by 41 Comments

Update February 17, 2009:  The American Recovery and Reinvestment Act has modified this tax credit posted here.  If you're a first time home buyer who purchased January 1, 2009 – December 31, 2009; click here.  If you purchased from April 9, 2008 – December 31, 2008; this post still applies to you. 

Please check with your CPA or tax advisor to see how this impacts you.

With the recent passage of HR 3221, people who have not owned a home for the lastUnclesam  3 years may qualify for an interest free loan from Uncle Sam of up to $7,500. Here's a quick skinny on how this works:

First time home buyers may receive a tax credit of up to 10% of the purchase price of the home (not to exceed $7500).   This is a "tax credit" meaning that you receive the credit (if you want it) after you file your income taxes.   For example, this means that when you file your taxes in 2009 and you owe $5,000 to Uncle Sam and you qualify to have a tax credit in the amount of $7,500; you would receive a refund of $2,500.   However, this is a refundable credit (aka interest free loan) that must be paid back each year to the IRS (when you file your taxes) over the next 15 years.

If you sell your home before the tax credit is repaid to Uncle Sam, then the full amount is due or if your property that you received the tax credit for is no longer your primary residence (i.e. you convert your home to a rental).

This credit does not apply if the first time home buyer is buying a home from a relative.

This tax credit is only available for purchases made between April 9, 2008 and July 1, 2009 for adjusted gross incomes of up to $75,000 ($150,000, if married, filed jointly) and phases out up to $95,000 ($170,000, if married, filed jointly).

Should you take advantage of this opportunity? 

Sure!  Who wouldn't want a $7,500 interest free loan?  Two things I would consider using this credit for if I were a first time home buyer:

  • investing into an interest bearing savings account to build my "emergency fund".
  • pay off a nasty high interest credit card (freeing up a monthly cash flow).
  • fund your IRA.

Just understand that this is essentially an interest free loan.  This is not "down payment assistance".  You will be paying this back over the next 15 years (or sooner if you sell, rent out the property or convert it a second home)…but you just can't beat "interest free".

For more information, click here.

Friendly reminder:  I am not a tax professional, I am a Mortgage Planner assisting families who need mortgages in beautiful Washington State.   Always consult with your CPA, financial or tax advisor.

Watch for more posts on the effects of HR 3221.

Filed Under: First Time Home Buyer, Legislation, Residential Purchase

Mortgage Porter Super Hero Trading Cards

July 31, 2008 by 1 Comment

Last week, in San Francisco at RE Bar Camp, the attendees were surprised with their very own super hero trading cards.  Somehow, my trading card didn’t make the order with the other "super bloggers" (which is easy to understand since this huge feat was pulled off in just a couple days before the event).   A huge thank you goes to Gia Freer, VP and Community Manager of RealSeekr (aka Principessa di Proprieta) for creating my super hero trading card!   

Rebarcamp_rhondaporter_frt_2

Rebarcamp_rhondaporter_bk_2_2

On a much more serious note, please check out my article on Rain City Guide about The Housing Rescue Bill which was signed off by President Bush yesterday.

Filed Under: Just for Fun, Legislation
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