Recap for the month of:

It's the end of the month ALREADY! Oh my!!

Here are the highlights of the posts done this month with easy access to find the info for reference in the future.

1st Time Homebuyer Credit

FHA Changes to Down Payment

Down Payment Assistance

Short Sale as Bad as Foreclosure

FHA Mortgage Insurance Premiums

ALSO - here is an important link when you want to be reminded of what the maximum loan amount is for an FHA loan is for a specific county: FHA MAX LOAN.

Next week I'll give you a preview of the upcoming FHA Mortgage Insurance Premiums... and more!

Short Sale Same as Foreclosure!!!

Short Sales today seem to be all the buzz! While the pros and cons of a short sale can be bantered back and forth, there is one negative that isn't fully understood: many think that a short sale is saving their credit.

IT'S NOT!

When you a buyer does a short sale to assist them in the sell of their home, it will show up on their credit, even if the investor agrees to accept the balance as paid in full. When the seller of that home attempts to purchase their next home and completes the loan application form, there is a question "Have you ever had title or deed transferred in lieu of foreclosure". The correct answer would be "Yes". NOW is when there is the issue ...lenders DO view a short sale (or any mortgage 120 days or more past due, for that matter) the same as a foreclosure. Start the clock ticking, cause now we have to wait three or four years (depending on the loan program) to get them approved for the new loan.


Few sellers are actually told this!


However, it would seem that SOME sellers did understand this upfront. So, they acquired a new home before letting the existing home go into default or positioning themselves for a possible short sale. They "leased" out the current home so they weren't hit with two payments and could qualify for the loan on the new home. And when the "lease" would fall through, the seller would then quit making the monthly payment on the initial home not caring about the impact on their credit.

So now guess what? The guidelines have changed on accepting a lease agreement to offset the current mortgage payment.... and it's not pretty! We no longer can accept just a signed lease agreement, but we now also have to document the deposit AND the property must have 30% equity in the existing home!!! (This new rule does not apply to government loans.)
So I ask you, how many today have 30% equity in a home they are thinking about renting? But the better question is who with 30% equity would let it go into foreclosure?

Yikes!

Cast Your Vote on DPA!

The elimination of Downpayment Assistance Programs with the signing of the Housing and Economic Recovery Act has created quite a stir in the industry. HR6694 is the bill that was introduced to the House trying to bring back DPA, the very next day after President Bush eliminated all seller assisted down payment assistance programs with the signing of HERA.

Do YOU have an opinion? Interested in what others think about it? Cast YOUR vote here:

WashingtonWatch

(If nothing else, you'll enjoy the comments others have made about the issue!)

1st Time Homebuyer Tax Credit

Another interesting point worth discussing as a result of the signing of HERA is the tax credit offered to first time homebuyers (defined as not having owned a home in the past 3 years).

There is a lot of conversation going back and forth as to whether this is a good thing, or not a good thing. You be the judge. And to help you with that, check out this link from Realty Resource that gives charts and samples of the credit based on income and the repayment schedule:

Homebuyer Tax Credit

The dates to be eligible to apply for this credit are purchases from April 9, 2008 through July 1, 2009. This means YOU may have already qualified!

Housing and Economic Recovery Act of 2008

It's no wonder there has been so little "official" release of the entire bill - it was 789 pages long!

So, I'm going to try and break this down into bite-sized tidbits as it affects our business daily.

The first BIG issue to prepare for is the increase of the minimum FHA down payment. As of October 1, 2008 the required down payment will go to 3.5%. (Previously the minimum investment was 3 per cent; 2.25% could be down payment and .75% in closing costs.)

This ties in directly with another big change regarding down payments: DOWN PAYMENT ASSISTANCE PROGRAMS. As of October 1, 2008 any seller assisted DPA program is no longer acceptable. The specific dates as it relates to DPA programs:

• Loan must be final approved (including the FHA case number assignment) by September 30th.
• The loan must CLOSE by October 31st.

(For more information on the actions taken since October 2007 with DPA, check out: http://activerain.com/blogsview/255218/Down-Payment-Assistant-Programs.)

This is not to be confused with most bond programs. In Colorado we are particulary fond of the CHFA's MRB First Step w/a CHFA 2nd program (http://www.chfainfo.com/). Even though the FHA down payment will be increased from a total of 3% to 3.5% of sales price, this CHFA program will stay at 3% (off total loan amount) at this time. HOWEVER, keep in mind that CHFA requires a minimum of $1,000 of the borrowers' own funds be invested in the property, it may not be a big change anyway (depending on whether the seller has agreed to pay all other closing costs and prepaids).

Stay tuned for more to come on HERA and the effect on our business day to day...