Some Home Buyers Can't Afford to Wait for the Spring Market

An article by Matt Carter in today's Inman News titled, FHA hiking premiums this spring, details FHA changes and mentions two other events which could impact our Spring real estate market.

The Federal Housing Administration won't raise the 3.5 percent minimum down payment requirement for mortgages it guarantees as long as borrowers have FICO scores of 580 or better.

Beginning early this summer, however, borrowers with credit scores below 580 will be required to make down payments of at least 10 percent in order to participate in FHA's mortgage insurance program.

This spring, the Obama administration also plans to raise the upfront mortgage insurance premiums paid by all FHA borrowers to 2.25 percent, up from 1.75 percent now.

The increase -- some of which may later be shifted to annual premium payments -- will help build FHA capital reserves back to statutory minimums and bring back private lending, FHA Commissioner David Stevens said today.

Mr. Carter goes on to mention two other events that could have an impact on home sales

The Federal Reserve will wind down a $1.25 trillion program at the end of March that's helped keep mortgage rates low, and the recently expanded homebuyer tax credit expires for buyers not under contract by April 30 and closing by June 30 (see story).

Although the changes may affect a small percentage of individual buyers, Berkeley Hills Realty retains faith in our local market; a market which has remained stronger than the national averages. This belief will continue to be supported by the high number of cash buyers in the bay area (see story). In addition, Carter quotes NAR Chief Economist Lawrence Yun as stating that he does not expect the "modest tightening" announced today will stall the housing market recovery, given that interest rates remain near historic lows and that the homebuyer tax credit will remain in effect during the first half of the year.

"Any tightening will knock some would-be buyers out of the potential pool," Yun said. "But at the same time, any lax underwriting or FHA insolvency can have more significant future negative ramifications for the housing market."

Useful links:
U.S. Department of Housing and Urban Development Press Release: FHA Announces Policy Changes to Address Risk and Strengthen Finances
Berkeley Hills Realty website
Berkeley Hills Realty tools for home buyers
Berkeley Hills Realty agents

C.A.R. H.A.F. Mortgage Protection Program Extended

EXTENDED INTO 2010!
Due to the popularity of this program, the qualifying period has been extended to December 31, 2010 or when allocated funds have depleted, whichever occurs first.

On April 2, 2009 the Housing Affordability Fund launched a new program designed to provide peace of mind to first-time buyers who are hesitant to enter the housing market due to concerns about potential job loss, and subsequently being unable to meet their monthly mortgage obligations. Qualifying buyers can receive up to $1,500 a month for up to six months in the event of job loss, a qualified co-buyer can also receive a $750 benefit for up to six months to help pay the mortgage.

TO QUALIFY FOR THE MORTGAGE PROTECTION PROGRAM APPLICANTS MUST:
· Be a first-time home buyer – someone who has not owned property in the last three years
(includes co-buyer).
· Open escrow April 2, 2009, or later, and close on or before December 31, 2010
(purchase agreement cannot be dated before April 2, 2009)
· Use a California REALTOR® in the transaction (fee for referral does not qualify)
· Purchase the property in California
· Be a W-2 employee (cannot be self-employed)

YOUR REALTOR® CAN PRE-QUALIFY YOU FOR THE MORTGAGE PROTECTION PROGRAM!
Due to the demand for the program, CAR has created a pre-qualification process that will ensure you get a policy if you meet the program qualifications and closes escrow before December 31, 2010.
Just ask your agent for an application and have he/she submit it with a copy of the qualifying executed purchase agreement – your file will be approved pending the receipt of the HUD-1 Closing statement indicating the close of escrow for your buyer.

Click here to meet a qualified Berkeley Hills Realty Agent.

· Download the Revised MPP Application followed by a list of Frequently Asked Questions.
( This must be submitted by an active California REALTOR® )
· Click here to review cynoSure Financial, Inc.'s program Terms & Conditions and
sample welcome packet.

Home Buyer Tax Credit Extended

Following the Senate’s favorable vote yesterday, the U.S. House of Representatives just voted 403 to 12 to extend the home buyer tax credit, expanding the parameters to include existing homeowners and not just first-time buyers. We expect President Obama to sign the legislation in short order.

As it now stands, the federal tax credit will be extended through April 30, 2010, with a 60-day extension if a binding contract is in place prior to the deadline. First-time home buyers will continue to be eligible for a tax credit of up to $8,000, while existing homeowners will be eligible for a reduced credit of up to $6,500. To qualify for the $6,500 credit, existing homeowners must have lived in their current residences for at least five years. The bill also increases the qualifying income limits from $75,000 for single tax filers and $150,000 for joint filers to $125,000 and $225,000, respectively. The purchase price of the home is capped at $800,000 in both instances.

Under additional provisions included in the bill, taxpayers can claim the credit on purchases completed in 2010 on their 2009 income tax returns. The legislation maintains the provision that home buyers do not have to repay the credit provided the home remains their primary residence for 36 months after purchase, and waives this requirement for active duty military personnel who move due to a military order.

Nationwide, more than 1.4 million first-time home buyers were given the opportunity to become homeowners as a result of the Federal Tax Credit for First-time Home Buyers. We expect that number to increase dramatically in the months ahead with this new legislation in place.

James Liptak
2009 President
CALIFORNIA ASSOCIATION OF REALTORS®

Buy a House, but Don't Pay the Mortgage!

A new reverse mortgage option, HECM (Home Equity Conversion Mortgage, the FHA term for a reverse mortgage), has been unveiled that may help senior citizens age 62 or older buy a house or downsize from a current home in the Bay Area. Reverse mortgages have been around for quite some time. However, the concept of their use to purchase a home is new.

In the past a reverse mortgage was a way for seniors to access the equity they had built up in their primary residence. The concept is simple; a homeowner receives a check (in lump sum or multiple payments) from the bank against the existing equity in his/her home and the homeowner's obligation to repay the loan is deferred until the owner dies or the home is sold.

The new version of the HECM program allows buyers to use a reverse mortgage as a plan to permanently finance the qualified buyers new home. Through the program, the qualified homeowner may live "mortgage free" and only be responsible for property taxes, insurance and maintenance costs for as long as they live in the home. Beyond living mortgage free, additional financial benefits may be found by freeing a retired homeowner's equity:

The purchase program, in effect, doubles the purchasing power of eligible buyers, several brokers said. Under the program, a couple with a $1,800 monthly payment on a home in which they have $250,000 in equity could sell the house, use $150,000 of their equity to buy a $300,000 condo and never make another mortgage payment.

They would then have $100,000 in cash that could be used for any purpose, such as supplementing their retirement savings or pension income.

Here are few of the fine points:

• Buyers need to be at least 62 years old. The older the borrower, the greater the amount of the home price that can be financed.
• The property being purchased must be a principal residence and owner-occupied.
• Homes can appraise at up to $625,500.
• Buyers need to put up a substantial down payment (often 40% or more) to create the instant "equity". The size of the down payment varies depending on the age of the buyer and the interest rate of the loan.
• Reverse mortgage costs and fees can be substantially higher than for conventional loans.
• Buyers must pay 2 percent of the property's appraised value - up to the maximum value of $625,500 - as a premium for federal mortgage insurance.

Resource: New reverse mortgage opens options for seniors, by Robert Hollis, Special to the Chronicle.

First-time Buyers Benefit by Employing a California REALTOR®

From C.A.R: C.A.R. launches mortgage protection plan for first-time home buyers

The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) launched the C.A.R. Housing Affordability Fund Mortgage Protection Program (C.A.R.H.A.F. MPP), for first-time home buyers.

Through the Housing Affordability Fund Mortgage Protection Program, first-time home buyers who lose their jobs due to layoffs may be eligible to receive $1,500 per month, for six months, to help make their mortgage payments. A qualified co-buyer also can participate in the program, and receive a monthly benefit of $750 per month for up to six months. Program benefits also include coverage for accidental disability and a $10,000 death benefit.

C.A.R.’s Housing Affordability Fund is dedicating $1 million toward its Mortgage Protection Program, and estimates that as many as 3,000 families will benefit from the program this year.

To qualify for the Mortgage Protection Program, applicants must:

• Be a first-time home buyer – someone who has not owned a home in three or more years

• Open escrow April 2, 2009, or later, and close on or before Dec. 31, 2009

• Use a California REALTOR® in the transaction

• Purchase the property in California

• Be a W-2 employee (cannot be self-employed)

To apply for the program, home buyers must request an application for the H.A.F. Mortgage Protection Program from their REALTOR®.

Note to first-time home buyers: All Berkeley Hills agents are REALTORS®, and can help with the paperwork. We can also help provide details of other programs such as the $8,000 tax credit for first-time home buyers. Call 1 800 Hi Berkeley to start the process.