Now is a Great Time to Buy

Those Who Wait Will Pay Thousands More This Spring…

Waiting a few extra days or weeks to purchase a home this spring could cost buyers thousands of extra dollars as the office of Housing and Urban Development (HUD) implements several changes for loans guaranteed by the Federal Housing Authority (FHA).

Coming just weeks before the April 30 deadline for the Home Buyer Tax Credit and just days after the March 31 expiration of the Federal Reserve Board’s mortgage backed securities purchase program (which has kept home loan rates artificially low for over a year), these FHA changes make it even more important to act now to save big.

Here are a few reasons why:

On April 5th, the cost of required up-front mortgage insurance for loans guaranteed by the FHA will increase from 1.75% to 2.25%. For a borrower purchasing a $200,000 home with a $7,000 down payment, the up-front mortgage insurance will increase by $965. Up-front mortgage insurance is typically financed in the final loan amount so the impact to a monthly payment will be minimal but overall, the increase is still borne by the borrower both upfront and monthly.

Later this spring, the amount of money that a seller can return to the buyer from their sale proceeds will be reduced from 6% to 3%. The reduction in these “seller concessions” can increase the amount of cash a buyer will be required to pay at closing by $6,000 for a home purchase of $200,000.

To discuss your financing options further, please contact Brad Wiese at Comstock Mortgage at 916.977.1248.

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Market News in Real Estate

Harder to get an Uncle Sam mortgage (CNN Money)
Rising defaults on loans insured by the Federal Housing Administration (FHA) have led the agency to impose future policy changes to its home loan program.   The FHA provides mortgage insurance on loans made by FHA-approved lenders. Borrowers must meet certain requirements established by the FHA to qualify for the insurance, but lenders bear less risk because the FHA will pay the lender if a homeowner defaults on his or her loan.

Keep this in mind. . .

• The FHA is federally mandated to maintain reserve funds at 2 percent or greater. As of November, the agency reported that its fund had declined to .53 percent. The funding is used to cover losses on mortgages insured by the FHA that go into default.

• Loans insured by the FHA generally are less expensive to borrowers because of the lower down payment requirements. However, these loans also have fees, such as up-front mortgage insurance. To help the agency raise its cash reserves, the FHA is increasing the up-front mortgage insurance premium from its current 1.75 percent to 2.25 percent. HUD released a Mortgagee Letter today making the premium increase effective in the spring.

• The agency also is raising the minimum credit score requirements. Currently, borrowers with FICO scores as low as 500 have been approved for FHA-insured loans. Under the policy changes, new borrowers will be required to have a minimum FICO score of 580 to qualify for the FHA’s 3.5 percent down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10 percent. FHA expects this to take effect in early summer once it passes the normal regulatory process.

• The new policy also will reduce the amount of money sellers can provide to home buyers at closing to 3 percent, down from its current 6 percent, of the home’s price. The change brings the agency in line with industry standards and removes the incentive to inflate appraisals. The FHA expects this to take effect in early summer after it passes the normal regulatory process.

To read the full story, please click here:

You can’t file for your $8,000 home buyer tax credit (CNN Money)
Did you purchase a home after Nov. 6? Don’t expect your $8,000 home buyer tax credit any time soon.

To read the full story, please click here:

What home sellers don’t tell buyers (The Wall Street Journal)
As buyers ease back into the battered real-estate market, they’re often hitting a stumbling block: Fibbing by home sellers.

To read the full story, please click here:

Government mortgage plan aids 7 percent of borrowers (CNBC)
The Obama administration’s mortgage relief plan provided help to only 7 percent of borrowers who signed up last year, another black mark for the struggling program.

To read the full story, please click here:

Low rates for just a few (The New York Times)
Mortgage borrowers might be forgiven for sometimes feeling like victims of a bait-and-switch scheme

To read the full story, please click here:

Investors dominate home flipping, auctions (San Francisco Chronicle)
House flipping, a quick-buck scheme pursued by amateurs and professionals alike during the real estate boom,
now is dominated by investors willing to pay all cash, who troll auctions for foreclosures that banks are
gradually trying to siphon off their books.

To read the full story, please click here:

Rates on 30-year home loans fall to 4.99 pct (Sacramento Bee)
Rates for 30-year loans fell to a shade below 5 percent this week, but remained above last month’s record
lows.

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Home loan applications jump 9 percent as interest rates fall (Los Angeles Times)
Applications for home loans jumped 9 percent last week as interest rates declined for all types of mortgages,
falling back to 5 percent for 30-year fixed loans, the industry trade association reported Wednesday.

To read the full story, please click here:

What you should know about the market. . .

• Customized rooms with extremely bright or dark colored paint, wallpaper, or wall fixtures can make a house feel like a home for the current homeowner, but often can be a turn off for home buyers. When selling a home, many REALTORS® recommend repainting rooms with neutral colors to help prospective buyers see the potential for the house.

• For homeowners who planned to overhaul the kitchen or bathroom with a major remodel but never found the time, there are some small, inexpensive changes that can be done. Replacing the hardware on cabinets, upgrading light switches, and changing outlet covers are a few examples.

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Market News in Real Estate for the week of 1/4/10

MSNBC

Housing may be headed for double dip
A recent real estate report indicates that consumers may be taking their time house hunting this winter, which some economists believe could lead to a “double dip” in home prices. A recent report from the NATIONAL ASSOCIATION OF REALTORS® (NAR) showed that its pending home sales index declined 16 percent in November to a reading of 96, the first decline after nine consecutive months of gains.

Keep this in mind. . .

• NAR’s Pending Home Sales Index (PHSI) is a barometer of future sales. Typically, there is a one- to two-month lag between the signing of a sales contract and the close of escrow. Although government incentives, low interest rates, and affordable home prices have lured many buyers, especially first- timers, to the market, historically sales decline during the winter months and begin to rise in the spring.

• Because of the government’s efforts to stimulate the housing market, some economists believe that housing prices will decline once the incentives come to an end. However, the CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) closely watched “2010 California Housing Market Forecast,” projected that the median home price in California will rise 3.3 percent to $280,000 in 2010 compared with a projected median of $271,000 in 2009.

• According to C.A.R.’s Vice President and Chief Economist Leslie Appleton-Young, unlike the rest of the nation, home sales in California already bottomed out more than two years ago, and the median home price reached its trough in February 2009.

• Although home buyers should not focus solely on future home price appreciation, according to data collected by C.A.R. over the last 40 years, homeowners who purchase a median-priced house, live in their home for at least five years, and sell it at the current median price, have averaged an annual rate of return of more than 11 percent.

To read the full story, please click here:

Sacramento Bee

Schwarzenegger proposes new round of home buyer tax credits
Gov. Arnold Schwarzenegger yesterday proposed a new round of $10,000 state tax credits for buyers of new and existing homes in California.

To read the full story, please click here:

The Wall Street Journal

NY Fed: Most successful mortgage modifications reduce borrowers’ principal
Borrowers who receive loan modifications that reduce loan balances and not simply interest rates are far less likely to redefault on their loans, according to a new study from the Federal Reserve Bank of New York.

To read the full story, please click here:

MSN Money

Losing a home? A tax bite may be next
You might avoid debt-relief taxes if your lender forecloses on your house and cancels your mortgage. But you could still wind up owing a lot of money to the IRS.

To read the full story, please click here:

Los Angeles Times

Homeowners forced to buy flood insurance after FEMA redraws maps
Tens of thousands of homeowners in Southern California are being forced to buy costly flood insurance because new maps issued by a federal agency say they live in a high-risk flood area.

To read the full story, please click here:

San Fransisco Chronicle

Foreclosures weigh on home appraisals
Across the country, agents and homebuilders are complaining too many appraisals are coming in low, scuttling deals.

To read the full story, please click here:

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Market News for Real Estate for the week of 1/11/10

(MSN)

What’s ahead for home prices?

California remains ahead of the nation in market recovery with many first-time home buyers entering the market due to affordable homes prices, low mortgage rates, and first-time home buyer tax credits from the state and federal governments. However, credit still is tight and unemployment remains high, which could hinder a full market recovery until 2011.

Keep this in mind

• Home sales in California hit bottom more than two years, and the median home price of an existing, single-family home reached its trough in February, according to data collected by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). In November, the state’s median home price rose in year- to-year comparisons for the first time since August 2007.

• C.A.R.’s closely watched “2010 California Housing Market Forecast,” projects that the median home price in California will rise 3.3 percent to $280,000 in 2010 compared with a projected median of $271,000 in 2009.

• Some economists are forecasting another surge of foreclosures in 2010. However, C.A.R.’s economists expect that foreclosures will remain flat this year compared with 2009. In 2008, many lenders flooded the market with foreclosures, and as a result, the state’s median price declined by historic levels. By comparison, in 2009, lenders listed properties for sale at a more measured pace, which helped moderate another home price decline.

• Government efforts to maintain a low interest rate environment have stabilized the market. However, a mortgage analyst at a financial publishing company predicts that rates likely will rise to 5.5 percent by mid-2010 and close the year at 5.75 percent to 6 percent.

To read the full story, please click here:

(Chicago Tribune)

Rates on 30-year mortgages drop to 5.06 pct
Rates for 30-year home loans edged lower for the second straight week, a report said Thursday, but remained above last month’s record lows.

To read the full story, please click here:

(Los Angeles Times)

Signs of life in the home-building industry
A large-scale development in Irvine and profits posted by some builders bring hope for a turnaround, but the industry’s outlook remains fragile.
To read the full story, please click here:

(Daily Breeze)

State and national foreclosure filings continue to rise
Even as the economy and real estate market show signs of stabilizing, foreclosure filings continued to grow in California and nationwide last year.
To read the full story, please click here:

(Los Angeles Times)
Going to sell the house? Don’t wait for ’spring’ in February
The busiest season for home sales traditionally begins the day after the Super Bowl. But putting off getting the
word out about your property would probably be a mistake, some experts say.

To read this full story, please click here:

What you should know about the market…

• The government is expected to unveil a new program in the next couple of months that, if approved, may reimburse homeowners for up to half the cost of making their homes more efficient. Through the program, homeowners will receive the largest return from simple upgrades like caulking windows, adding insulation, and changing incandescent light bulbs to those that are more energy-efficient.

• To determine which energy-efficiency upgrades are best for their house, homeowners should obtain a home energy audit.  Homeowners are advised to hire a contractor licensed by the Building Performance Institute or the Residential Energy Services Network. These contractors have been trained to first test a home to determine the amount of energy it is losing, and then make suggestions on renovations.

Thinking about selling or buying, give us a call to discuss your next move, click here to send an email or give us a call at 916.759.1699.

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