We all know about the $6,500 or $8,000 federal tax credit for people who buy a home, and are in contract by April 30th. But there are more reasons not to wait. FHA buyers will not be able to get all the same benefits as new regulations are passed.
One biggie: the seller will only be able to contribute 3%, not 6% towards closing costs. Another: not everyone will get the low 3.5% down payment.
New Rules for FHA Borrowers
The Federal Housing Administration (FHA) recently outlined future changes to the FHA home loan program. The changes first were proposed last month by Secretary of Housing and Urban Development (HUD) Shaun Donovan.
Rising defaults on FHA loans have led to the FHA’s cash reserves falling below federally mandated levels. FHA officials hope that policy changes will ensure borrowers have a stronger equity position and are less likely to default.
Policy changes include:
–Raising the up-front mortgage insurance premium: The premium will rise to 2.25 percent from its current 1.75 percent. HUD is expected to release a Mortgagee Letter on Jan. 21 making the premium increase effective in the spring.
–Raising the minimum credit score requirements: 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 after it goes through the normal regulatory process.
–Reduce allowable seller concessions: The agency is lowering the maximum permissible level to 3 percent from its current 6 percent limit. FHA expects this to take effect in early summer after it goes through the normal regulatory process.
More info
http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-016
FHA intends to lower the amount a seller can contribute to the buyer’s closing cost during the sale of their home. The current 6% seller concession, will be capped off at 3%.
Other changes include higher mortgage insurance and stricter credit score requirements.
The Federal Housing Administration (FHA) today outlined future changes to the FHA home loan program. The changes first were proposed last month by Secretary of Housing and Urban Development (HUD) Shaun Donovan.
Rising defaults on FHA loans have led to the FHA’s cash reserves falling below federally mandated levels. FHA officials hope that policy changes will ensure borrowers have a stronger equity position and are less likely to default.
Policy changes include:
- Raising the up-front mortgage insurance premium: The premium will rise to 2.25 percent from its current 1.75 percent. HUD is expected to release a Mortgagee Letter on Jan. 21 making the premium increase effective in the spring.
- Raising the minimum credit score requirements: 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 after it goes through the normal regulatory process.
- Reduce allowable seller concessions: The agency is lowering the maximum permissible level to 3 percent from its current 6 percent limit. FHA expects this to take effect in early summer after it goes through the normal regulatory process.
More info
I have long heard that the super low mortgage interest rates we have today will not last. This week, I found an article that explains why. And when.
April 1 will be the first day that the Federal Reserve will end its debt purchase program and allow the struggling U.S. mortgage market to operate unassisted. As a result, the Fed believes mortgage rates will rise about three-quarters of a percent to about 6 percent, Boston Fed President Eric Rosengren said Saturday.
Fear of a worldwide perception that the U.S. government is simply printing money to use to purchase mortgage-related securities is a big reason the Fed has pulled back, analysts say. If that fear caused a sell-off of U.S. government bonds, it would push borrowing costs substantially higher and derail the economic recovery.
We are still in uncharted waters,” Fed Vice Chairman Donald Kohn said in an unrelated speech Saturday. “We will need to be flexible and adjust as we gain experience.”
Source: Reuters News, (01/08/2010)
There are homeowners in Chico who need to sell their homes, but want to wait until the timing is right.
All indications are that we won’t see the high values of 2005 for quite awhile. So, for those of us that can hang on for several years, it may work to our advantage. Jobs and wages need to catch up before housing values can edge higher again.
For the rest of us, should we wait until spring? Spring sounds nice, the flowers are blooming and the grass is greener. The weather is warmer, so more people will be out looking, right?
Personally, I think the right time to sell is now. I keep hearing that the ultra-low mortgage interest rates cannot last through the recovery. The rates will have to begin to increase slowly.
But the largest factor in my decision is the federal tax credit. The $8,000 first time home buyer credit has been extended, but you must be in a binding contract before April 30, 2010. Same goes for the $6,500 tax credit for other owner occupied buyers.
I think that the credit will cause a surge in buyers in February, March and especially April. Then, we may see a dip in May if the credit goes away, which is what we think will happen.
I want the extra $6,500 to $8,000 to sweeten my deal. Sound as if I am talking like I have a house to sell? I do. And it will be coming on the market soon. Anyone looking for a four bedroom, two bath in peak condition on a quarter acre for $285,000??
The first quarter of 2010 is a dynamite time to purchase a home! Low interest rates and once-in-a-lifetime tax credits are sweetening the pot. And you don’t have to be a first time home buyer for tax credits anymore.
The Worker, Homeownership, and Business Assistance Act of 2009 (H.R. 3548) was signed by President Obama on November 6th, 2009.
This bill extended the $8,000 first time home buyer tax credit, which would have expired on December 1, 2009.
Home buyers now have until June 30, 2010 to close escrow on a qualifying home purchase. But, (and this is important) a binding contract must be entered into on or before April 30, 2010.
First time home buyers may receive up to $8,000 (or 10% of the home’s purchase price).
If you are not a first time home buyer, there is now a $6,500 credit available if you purchase a home as your residence.
There is a limit of $800,000 on the price of the home, and you must be over 18 in order to qualify. Income limits also apply. Eligibility phases out at $225,000 to $245,000 for married filing jointly.
It is best to check with your CPA or tax preparer to make sure that you can get the credit.
Then call me, and let’s find your dream home! There are still a few foreclosures and sales with great deals.
