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GA Home Buyers May get an Extension on the Federal Tax Credit

Toby — Thu, 17 Jun 2010 02:00:53 +0000

Today the Senate passed a bill 60-37 to extend the tax credit for first time home buyers from June 30, 2010 to September 30, 2010. This is only for home buyers that went under contract on or before April 30, 2010. Many lenders and people in Congress feel this is necessary due to the amount of home buyers that may not close on time to receive their $8,000 tax credit. The national association of realtors is estimating as many as 180,000 homebuyers are at risk of not closing on time.

There are many reasons for the delays. One of the most common is waiting for a home to be completed. There was such a surge of buyers trying to get new homes and take advantage of the $8,000 tax credit that builders have their contractors working day and night to meet the June 30th deadline. As new construction goes, there have been a lot of construction delays. The second most common delay is short-sales. Short-sales can take months to get approved. Buyers put contracts in before April 30th hoping to hear back soon whether their offer was accepted, but they are hearing back too late. We have many Georgia home buyers that have just heard back this week and due to volume there is no way they will close by June 30th. Most Georgia lenders have been running 45-60 days to close loans and now there are only 10 business days left in the month.

The bill still has to pass the House, so we are all anxiously awaiting a decision. Congress said they had hoped to have this passed this week, but it may spill over into next week. There is a lot of support behind the bill but some in Congress are worried about the cost of the extension. It is estimated the extension will cost $140 million which is tough to stomach in this time of rising federal deficits.

Let us know what you think. Should Congress extend or let it expire?

Cost for GA Home Loans Going Up

Toby — Wed, 19 May 2010 01:41:25 +0000

On May 12, 2010 Georgia’s Governor Sonny Purdue signed a bill raising the Georgia per loan fee from $6.50 to $10.00. This fee will be collected by Georgia mortgage lenders and bankers and is remitted to Georgia’s Department of Banking and finance for each residential mortgage closed in Georgia. Although the $3.50 is not a big increase in fees to borrowers, it is another way that the mortgage consumer is hit with higher cost when obtaining a loan. Because of all of the new compliance laws and regulations, mortgage companies are having to hire compliance officers and more processors.
The loan process is taking longer than ever to process a loan, which means the number of loans a processor can process is declining causing companies to add staff to keep up. The downside of compliance and more regulation is increased cost to the consumer. Georgia Home Buyers can expect to see higher fees when they purchase or refinance a loan. Also, buyers that try to obtain a Georgia home loan can expect loans to take a little longer to process for most mortgage lenders. However, Academy Mortgage is still offering its 18 day close guarantee.

Although compliance and regulation are needed in the mortgage industry, hopefully we can find a happy median where cost doesn’t rise too high for the consumer.

Tax Credit is Extended for some Georgia Home Buyers

Toby — Mon, 03 May 2010 22:11:12 +0000

As most people in the real estate industry are aware, the first-time homebuyer and move-up tax credit expired on April 30th, 2010. What most people don’t know, it was extended for certain federal and military personnel. If you were in the military or are a federal employee that was serving outside the United States from December 31, 2008 and ending May 1, 2010, you may be eligible. The time overseas would have to have been at least 90 days. The extension was for 1 year, so the eligible buyer would have to go under contract by April 30, 2011 and close by June 30, 2011. The extension can also apply to the spouse of a qualifying military or federal person. Only one spouse is required to be overseas during the time period, to claim the tax credit.

If you are a realtor and live near a military base or work with a lot of military or federal personnel, this is good information to know. Most agents are unaware of this extension and this information will give you an advantage over the competition. Some agents are worried about what will happen after the tax credit goes away. This can be a whole new niche for you and you can start marketing it before your competition does.

USDA and Flood Insurance, Problems for GA Homeowners

Toby — Mon, 05 Apr 2010 15:17:12 +0000

The two most important issues facing Georgia home loans right now are USDA rural development and flood insurance. USDA loans have become wildly popular in the last two years due to the fact it is one of the only 100% loan programs left. In the middle of March USDA announced that they anticipate running out of funds by the end of April. This has happened in the past and funds were allocated quickly, but this time may be different. It does not appear that congress is going to reallocate funds this time. They will let funding run out and buyers that would like to get a USDA rural housing loan, may have to wait until October or November. This would be devastating to the rural housing market in Georgia.

Flood insurance is also a big issue right now. On March 28, 2010, congress let the National Flood Insurance Programs authority expire. This has not happened since 2002 and some speculate that the lapse was because Congress was focusing on getting the health care bill passed. When the NFIP’s authority expired, they now do not have the authority to issue new flood insurance policies or renew old ones. If this is not corrected soon, it could cause problems when trying to obtain a Georgia home loan. If the property you are trying to buy needs flood insurance and you cannot obtain it, you may not be able to close on your GA home loan.

What can we do? If you are a Realtor®, NAR has set up a call to action form that you can send to your congressmen. Follow this link to the form - NAR Call to Action

If you are concerned potential home buyer, write or call your congressmen. Let them know these issues are important to you.

USDA Rural Development is Running out of Money

Toby — Thu, 11 Mar 2010 19:26:03 +0000

On March 9, 2010 we received a letter from USDA Rural Development stating that they anticipate running out of funds by the end of April 2010. If your USDA loan is in processing or you are looking for a home and plan on using USDA, this can be frightening news. It is actually quite common for USDA for run out of funds. It seems like this happens once or twice a year. Since USDA is one of the few 100% financing loans still available, it has become quite popular in recent years. When they run out of funds, Congress has to appropriate more funds to them, which usually takes a week or two. This is not guaranteed to happen, but has in the past.

If they do run out of money, you should be prepared to react if necessary. Your choices would include waiting until funds are appropriated or maybe switching your loan to an FHA or VA loan. The negative to an FHA loan would be the fact that you will now have mortgage insurance and have to come up with the 3.5% down payment. Keep in mind, this is all happening as everyone is trying to take advantage of the $8,000 first-time homebuyer tax credit, that expires April 30th. You don’t have to close by April 30th, but you do have to be under contract. The end of April is likely to be a chaotic time for most lenders, so plan appropriately.

Financing Condo’s in Georgia is Getting Tougher

Toby — Thu, 11 Feb 2010 17:24:30 +0000

On February 1st a new FHA ruling took effect regarding condos. A Condominium has to be approved by FHA in order to allow for FHA Insurability. There is a list that lenders check to see if condo project is approved. If the project is not approved, lenders would try to get a “spot approval,” so that we could proceed with the loan. Spot approvals are now, no longer allowed. HUD decided they did not want to be in the business of approving condos anymore, so they put the burden back on the lender.

The process of approving condos can be very expensive and time consuming, so lenders are trying to figure out how to best handle this. If you are considering buying or selling a condo, this is something you will need to research upfront. This change is a major opportunity for condo complexes that are already approved. Agents need to advertise the fact that their condo is FHA approved. If you need help figuring out if a condo is approved, contact me and I will look it up for you.

Getting a condo FHA approved that is not on the list can take up to 6 weeks. Agents need to find out right away if a Georgia condo is approved before listing a condo or showing a condo. A lot of condos are not on the list. I would dare to say more Atlanta condos are not on the list than are. Call me today to find out.

Changes Coming to GA FHA Loans

Toby — Thu, 21 Jan 2010 22:55:30 +0000

On January 2oth, FHA announced they will be making some changes in the upcoming months. They are looking to strengthen FHA’s capital reserves, which have diminished over the past several years due to the high number of foreclosures. They plan to make changes in 4 different areas:

Mortgage Insurance Premium (MIP) will be increased from 1.75% to 2.25%. On a $100,000 loan this would mean a $500 increase in the upfront MIP premium. This will supposedly take place in the spring.
They will require 10% down if a borrower has a 580 score or less. We are not yet sure what kind of effect that this will have. Most lenders already require a 620 credit score, so this may not affect anything or it may cause lenders to loosen up their requirements on scores. Time will tell on this one. It is anticipated this will take place in early summer.
Reduce seller concessions from 6% to 3%. FHA feels that the current 6% level is creating incentives to inflate appraised value. This is also supposed to take place in early summer.
FHA wants to increase enforcement on FHA lenders. They plan to do this by publicly reporting lender performance, monitoring lender performance and compliance. They are also trying to get legislative approval to increase enforcement on FHA lenders. FHA wants to make lenders liable for loans they originate and underwrite.

One final thing FHA has been testing the water with is raising the 3.5% down-payment to 5%. This will definitely eliminate a lot of potential buyers. This is not official yet, but may be coming soon.

All of these changes will most likely make it more difficult for buyers to obtain a Georgia FHA loan in an already tight credit market. If you are thinking about getting a home, now is the time to do so. The credit markets continue to tighten and there does not appear to be relief in sight.

Foreclosure vs. Short Sale in Georgia

Toby — Mon, 21 Dec 2009 20:21:49 +0000

There are many different factors to consider when you are facing the unfortunate decision of choosing between a foreclosure and a short sale. You have to not only look at how your decision will affect you now, but how it will affect you in the future as well. As far as a conventional mortgage goes, if you foreclose you would have to wait five years to purchase again (3 years with extenuating circumstances). With a Short sale it can be as little as 2 years with extenuating circumstances. There has been debate for some time on how FHA views foreclosures, but on HUD’s most recent mortgagee letter, they basically clarify that they consider a foreclosure the same as a short sale. This means you would have to wait 3 years to get a new FHA mortgage after a short sale or foreclosure. They did state that if the mortgage was reported paid in full and there were no lates on the mortgage, you wouldn’t have to wait the three years. Normally the only way to qualify for a short sale is the fact that you are late on your mortgage and can prove a hardship, so waiting three years will most likely be the standard.
Your credit score is a big factor in making a decision as well. With a foreclosure, your credit score will typically drop 225-300 points. It would normally take 3 years for your score to get back to normal. With a short sale, only the late payments will show, which will typically drop your score 75-125 points. This would normally take 12 to 18 months for your score to recover. A foreclosure will remain on your credit report for 10 years, where a short sale won’t.
There are two other big items to consider when deciding between a foreclosure and a short sale. When you do a short sale, the lender may 1099 you for the amount forgiven. If you owe $200,000 and the short sale ends up at $150,000, you may have to pay taxes on the $50,000 that is forgiven. The same is possible on a foreclosure if the bank pursues a deficiency judgment. Something you should also consider is security clearance. If you are in or planning on going in the military, FBI, Secret Service, etc., you would need to know you can lose your security clearance by having a foreclosure and in some cases your position is terminated. A short sale typically does not have the same affect.
The rules on short sales and foreclosures are changing as the market changes. Check back for more updates.

Underwriting Changes that will affect your GA Mortgage

Toby — Tue, 01 Dec 2009 22:08:29 +0000

A quick background: When we obtain an approval for clients on a conventional, conforming loan we run their scenario through an automated underwriting system put in place by Fannie Mae. Since Fannie Mae buys many of the loans in the secondary market almost all lenders, banks, etc. use their underwriting guidelines as the standard by which they underwrite their files. The system that is used for these underwriting determinations is Fannie Mae’s DU program (DU = Desktop Underwriter) and it basically does a statistical analysis of each applicant to determine their risk for default. These days Fannie Mae is even more focused on reducing default risks for borrowers and they use changes to the DU system to do this.

On December 12th, 2009, Fannie Mae is changing their guidelines toward qualifying ratios. The qualifying ratio that most lenders are concerned with is called the back-end ratio.

The back-end ratio tells us what percentage of a person’s total gross income goes to pay monthly debt, including the new mortgage you are about to have. Currently it is not uncommon for a borrower to have a back ratio of 50-55% and that scenario is often approved by DU. On December 12th, the back-end ratio will go to 45%. So what? If you have a loan in process and you are already under contract, if your lender runs DU again on or after Dec. 12th and you have a higher than 45% back-end ratio, chances are your loan will be declined. Many lenders are not aware that this change is coming, so find out what your ratio is today and be prepared if your ratio is high. If you are a real estate agent and have buyers in process, find out if this change is going to affect your buyers. Georgia mortgages are constantly changing, so check back here often and I will keep you up to date on changes.

New Revised Home Buyer Tax Credit

Toby — Tue, 10 Nov 2009 20:24:06 +0000

Recently Congress extended and expanded the $8,000 tax credit for first time home buyers. The tax credit will be extended until April 30th, 2010. The purchaser has to go under contract by April 30th and close before July 1st, 2010. The income limits have also changed from $75,000 for a single filer, to $125,000. For married filers it has been extended to $225,000, up from $150,000. One other change that was not on the previous tax credit is the purchase price is limited to $800,000. A buyer must buy a home less than this amount in order to receive the credit.

What is really exciting about the new federal tax credit is the fact that it is being offered not just to first time home buyers, but also move up or repeat buyers. The amount that is being offered to this type of buyer is $6,500. The buyer has to of owned and resided in their home for at least 5 consecutive years out of the 8 years prior to the purchase date. So far over 1.5 million families have taken advantage of the
federal home buyer tax credit.

Here are a couple of other things to consider in relation to the Federal Home Buyers Tax Credit:

Purchases by dependents don’t count

Purchaser must attach a HUD-1 settlement statement to their tax return to help combat fraud

If you make over the income limits you still may get a portion of the tax credit

Non-Resident aliens can qualify for the tax credit if they have owned a home in the US, 5 of the last 8 years

The home must be a primary residence, but includes all types of homes such as single family, condos and townhomes

This latest federal home tax credit will most likely not be extended. Let us help you with your Atlanta GA home loan so you can take advantage of the new federal tax credit.