In the news -- June 25, 2010

Mortgage Rates. Average rates on 30-year fixed-rate mortgages have reached their lowest levels in more than 50 years this week. On Thursday, rates dropped as low as 4.69%, down from 4.75% on Wednesday and an average 4.85% last week.

Freddie Mac also said on Thursday that rates this week had fallen to an average of 4.69%, which is the lowest level recorded since it began its survey in 1971. Brokers were quoting rates as low as 4.25% on 30-year loans on Thursday for well-qualified borrowers.

Some analysts say that youd have to go back to at least the 1950s to find comparable ratesand those may not be great comparisons because of how different the mortgage market was back then.

Ongoing concerns about the health of the U.S. economy, in general, and European debt uncertainties have put pressure on interest rates.

Financial Reform Bill. In the wee dawn hours of Friday, lawmakers put the finishing touches on the toughest financial reforms since the Great Depression. These changes included consumer protection measures that should make lending agreements easier to understand and protect small borrowers from fine-print penalties and fees.

The bill offers a number of new protections, some of which have already been voluntarily implemented. Lenders, for instance, will have to really check borrowers income and assets.

Other rules include a ban on prepayment penalties for people with adjustable rate and other more complex types of mortgages. Mortgage brokers and bank employees will no longer be able to earn bonuses based on the type of loan they sell. That will presumably eliminate any incentive to push high-interest loans on borrowers (who might otherwise qualify for a better deal) to inflate bank profits.

There will be a cap limiting mortgage origination fees to 3 percent of the loan. Exceptions to this new rule will be buyer paid points to buy-down the mortgage interest rate or required up-front mortgage insurance premiums.

Changes to credit score rules are also included in this new legislation. While you still cant get a free credit score each year with your three free credit reports, you will soon be able to see the score if it has hurt you in some way.

Lets say a mortgage lender, credit card issuer, insurance company or landlord quotes you a more expensive interest rate or premium price because of credit score issues. If this happens, the company or individual would have to provide, for free, the score (probably a FICO score) that led to your troubles.

And, theres nothing to stop you from asking for the score, even if you like the rate or result of your application for credit. You may be able to get it for free even if the lender, insurer or landlord is not legally required to give it to you.

If you have questions about any of this or other related issues, dont hesitate to call or email me at any time.

What in the world is HAFA?

Are you contemplating a short sale and want to know about the NEW RULES?

Check out this cool YouTube video for the answers...

The Truth About Short Sales

What is a short sale?

According to the National Association of Realtors, A short sale is a transaction in which the lender agrees to accept less than the mortgage amount owed by the current homeowner. In some cases the difference is forgiven by the lender; in others the homeowner must make arrangements with the lender to settle the remainder of the debt. This remainder is known as a deficiency. In all cases the borrower must prove a financial hardship.

What qualifies as a financial hardship?

The list of financial hardships includes: mortgage increase, loss of employment or income, medical expenses, divorce/separation, job relocation, repairs the homeowner cant afford, death of a family member, too much debt; among others.

What are the advantages of a short sale?

The primary alternative to a short sale is foreclosure, sometimes followed by bankruptcy. Foreclosure creates a huge impact on your credit score and its consequences can easily last 7 years or longer. Often, the impact of a short sale is minimal.

Are short sales complicated?

Complicated no, detailed yes. You will have to compile financial information and complete some bank paperwork. After that your agent will handle the negotiations with the lender and the sale of the property. You should be prepared however short sales do not usually close quickly. The Home Affordable Foreclosure Alternatives (HAFA) initiative includes guidelines to minimize the total time necessary to complete a short sale but are not proven yet.

Can I continue to live in my home until the short sale is completed?

Usually you can live there until closing and are required to maintain the property as if you were making your mortgage payments. You may also continue to receive collection notices.

What about the deficiency amount?

Depending on HAFA guidelines and your states laws, the lender may or may not pursue the borrower for any deficiency amount. Consult your tax advisor regarding any tax ramifications of your sale.

What about the $1,500 relocation refund Ive heard about?

One facet of the HAFA guidelines allows for qualified homeowners to receive $1,500 from the short sale proceeds to help with relocation expenses.

Can any Realtor handle the short sale process on my property?

Yes and no. While any licensed agent can work your short sale, lenders prefer to work with agents who have completed short sale training and are experienced in the process. The process requires patience, constant follow-up and excellent negotiating skills. I completed my Certified Distressed Property Expert (CDPE) designation in Summer 2009 and have worked both sides of short sales.

Who pays the Realtors sales commission?

In both short sale and foreclosure transactions, the brokerage fees are paid by the lender.

How do I get the process started?

Give me a call or email me. Well set up a time to talk about your particular situation and start organizing the required paperwork. I promise to make the process as painless as possible.

Rick Richardson has been a full-time Realtor since 1994 and has worked all facets of single family and multi-family transactions.

Homebuyer Tax Credit Extended&Expanded

President Obama signed legislation on Friday, November 6, 2010 that extends and expands the U.S. tax credit for homebuyers. Earlier this week, both the Senate and the House overwhelmingly passed the Dodd-Lieberman-Isakson Amendment to extend and expand the first-time homebuyer tax credit that was set to expire November 30. This was an amendment to a bill extending unemployment benefits. Click on this November 6 Associated Press news article link for the latest details. These actions come after Congress voted last week to extend higher loan limits on federally backed mortgages. Read more.

According to the Senate Committee on Banking, Housing & Urban Affairs Web site, the homebuyer tax credit expansion measure includes these provisions:

• Extends the $8,000 first time homebuyer tax credit and creates a new $6,500 tax credit for existing homeowners buying a new home from December 1, 2009 to April 30, 2010. A first time buyer is one who has not owned a home for at least 3 years.
• Homebuyers with contracts as of April 30 qualify for the credit so long as they close the transaction within 60 days (June 30, 2010).
• Available to homebuyers with incomes of up to $125,000 for a taxpayer filing a single return or $225,000 for a joint return.
• Not available for homes costing over $800,000.
• Homebuyers who already own a home are only eligible if the home they are leaving has been used as a principal residence for five consecutive years in the last eight.
• Provides authority to the IRS to provide greater oversight while processing the return and requires that the taxpayer claiming the credit be 18 years or older.
• Members of the military, military intelligence and foreign service who are on qualified extended official duty are not subject to the recapture fee and individuals who have been deployed overseas for 90 days or more in 2008 or 2009 can claim the credit through April 30, 2011.

This link takes you to a comparison chart that shows both the old program and the new one:

http://www.realtor.org/fedistrk.nsf/files/government_affairs_tax_credit_ext_chart_110409.pdf/$FILE/government_affairs_tax_credit_ext_chart_110409.pdf

Clock Is Ticking For First Time Buyers

Timing is everything for many first-time buyers today. For those who purchase a home this year, the tax credit is for 10 percent of the purchase price, up to $8,000. Those who have owned a home in the past three years aren't eligible. Buyers also have to meet eligibility requirements regarding income; the current credit begins to phase out for singles who make more than $75,000 and couples who make more than $150,000. Unless it is extended, this credit will expire on Nov. 30.

As that date approaches, were seeing an increase in buyers wanting to get closed prior to the tax credit closing deadline. Were also seeing an increase in sellers wanting to get their homes on the market and closed by this deadline.

Many real estate agents and mortgage lenders are recommending that first-time buyers close on their purchase no later than the week before Thanksgiving to ensure that no holiday-related office closings or abbreviated schedules interfere with the process. This means completing a purchase on or before Nov. 20.

In fact, to make sure you can take advantage of the credit, most lenders are recommending that you are under contract no later than the first or second week of October.

The National Association of Realtors reports that it's taking about two months to complete a home sale in the current market, as lenders scrutinize borrower paperwork and issues with appraisals. While the timing is different from lender to lender, the absolute minimum time to close a sale almost always exceeds 30 days.

But rushing to meet the deadline can be a double-edged sword. The purchase of a home let alone your first one isn't a decision that should be taken lightly. For anyone, the decision to buy a house has to be a right one. While the $8,000 can be great to have, don't let that push you into a decision. But if there is something that works and you want to take advantage of the credit, you can't afford to delay the decision.

For buyers who don't make the deadline, there is a chance the credit will be extended. There are at least 20 bills drafted regarding the credit; one-third of them have been introduced recently, said Lucien Salvant, managing director of public affairs for the National Association of Realtors (NAR).

Some proposals would not only extend the first-time buyer credit into next year, but would also expand it to include all home buyers, remove income restrictions and raise the maximum amount of the credit, up to $15,000.

The current programs success should provide good reason to extend it. NAR estimates that about 1.8 million to 2 million first-time buyers will take advantage of the tax credit this year, and says that roughly 350,000 sales wouldn't have taken place without the credit.

If you're a first-time buyer, however, waiting is a gamble. Right now theres a tax credit after that, well, well have to wait and see.

If you or someone you know is looking and wanting to take advantage of this credit, give me a call today so we can see if we can get you qualified and closed before time runs out.

All the best,

Rick

Market Stabilization Favors Sellers

Is the Buyers Market over?

With the housing market showing real signs of stabilization, home buyers are seeing their leverage over sellers diminish, according to a new report from real estate information service Zillow. The report found that, nationally, buyers paid an average of 3.3 percent -- or about $7,000 -- less than final listing prices in July, which is a substantially smaller bargain than the 4.6 percent--or $10,260--discounts they landed in January. "The strong summer selling season in 2009 has led to a decreasing difference between the last listing price and final sale price," Stan Humphries, Zillow's chief economist, said in a news release issued Wednesday.

There are several reasons for this trend:

• Housing market stabilization: After a historic string of ugly data, news out of the housing market has turned increasingly optimistic in recent months. July's new-home sales report showed raw inventory at its lowest level since 1993, according to Mike Larson of Weiss Research. At the same time, existing home sales increased for the fourth month in a row, while the pending home sales index hit its highest mark since June 2007. Meanwhile, the most recent Case-Shiller home price report showed that the pace of price deflation is moderating. "The overall trend toward stabilization is undeniable at this point," Larson said in a recent report.
• Less leverage: The stabilization is a result of several factors, including lower home prices, attractive mortgage rates, and the $8,000 first-time home buyer tax credit. And although still elevated, tighter inventory levels work to erode at least a portion of the negotiating leverage that buyers once enjoyed, Larson said in an interview. "The buyer may have a little less leverage," Larson said.
• Tax credit expiration: Patrick Newport, an economist at IHS Global Insight, cautions that the shrinking spread between listing and selling prices could widen in the future. He notes that at least some of the recent demand for housing is being stoked by the government's tax incentive, which expires December 1. "One reason the margin is narrowing and that buyers are losing power is because there are more people out their trying to take advantage of the credit and demand is up," he says.
• More realistic listings: Larson also believes the data indicates that home sellers--who have found it painful to reduce their listing prices from pre-crash levels in the past--may finally be getting more realistic. "The more this thing drags on, the more people are willing to throw in the towel and list for [a lower price]," he says. "Or the more they are willing to listen to their real estate agent.

Portions of this article originally appeared in US News&World Report and Yahoo! News.

We've all been bombarded with newspaper, radio, television and internet reports about the almost $800 billion stimulus package. And while we all hope that it will kick-start our economy, we're even more curious how this legislation will affect us personally.

One facet of the bill deals with home purchases and specifically with first-time home buyers. Below are the benefits available to those buyers.

• First-time buyers are defined as those who haven’t owned a primary residence in the past 3 years.
• Buyers can receive a credit of 10% of the purchase price or $8,000 maximum.
• As long as the buyer holds the property for at least 3 years, there is no repayment.  The credit applies to purchases which close between January 1, 2009 and December 1, 2009.

I've found that many "would-be" owners don't take the step towards home ownership because they are afraid they won't qualify...and let's face it, no one likes to hear "no." But if your dream is to have your own home, it costs you nothing to find out whether you can buy now or if you need a game plan to help you realize your dreams down the road.

In almost 15 years of selling homes in this market I’ve never seen all of the conditions come together so well for first time buyers --

• Many bank-owned properties are selling at below market prices.
• Interest rates are at a 3-year low.
• FHA financing offers 3.5% down payments, which can be gifted by parents.
• More lenient credit score criteria for FHA loans.
• New house payment is often less than the current rent payment.

If you’re ready to start the process, I am too! Call or email me today and ask me how you can receive new listings that meet your personal search criteria (size, age, location, school district, etc.). And you’ll know about it before the majority of Realtors know it’s for sale. It’s FREE and takes only a few minutes to set up!