For first time home buyers, this is an opportunity you do not want to miss!  The Housing & Economic Recovery Act is newly enacted legislation that allows up to a $7500 tax credit for first time buyers or those that have not owned a home in the past three years, on home purchases made from April 9, 2008 through July 1, 2009.   To qualify for the full credit amount, single taxpayer incomes cannot exceed $75,000 and for married couples filing jointly, income levels cannot surpass $150,000.   Ownership of a vacation home or rental property not used as a primary residence does not disqualify a buyer. The credit is refundable, meaning the home buyer can claim an amount greater than their tax liability.  The government will send the home buyer a check for the amount that exceeds what they owe in taxes (even if they owe nothing). The amount of the tax credit is based on the purchase price of the home with $7500 being the maximum. The tax credit is 10% of the purchase price of the home up to $75,000.  The tax credit is treated as an interest free loan that must be repaid over 15 years, however repayments do not need to begin for two years after the credit is claimed. This is significant when compared to a loan at 7% interest payable over 15 yrs, the homeowner would save $4200 in interest payments, if it is a 30 year mortgage at 7% the savings would increase to $8100 in interest payments.  The home buyer not only saves on the interest, but it also provides a reduction in taxes in the year it is claimed. To participate, no formal application or pre-approval process is required.  This program is being handled through the IRS and not a financial institution. You simply claim the tax credit as a line item on your federal income tax return.   In an effort to boost the housing market and stimulate the nation’s economy, other provisions were put into place under this Act to provide additional tax relief for the homeowner.  For more information please contact any of our loan officers at NextHome Mortgage Corp., 1-888-566-4100.

Effective June 1, 2008 Fannie Mae has revised down payment requirements for conventional, conforming loans that they will purchase or guarantee. The ratio of home loan to value can be a maximum of 97% for loans written through the automated underwriting system known as Desktop Underwriter. The lower ratio of 95% of loan to value is available for conventional conforming loans written outside of the automated Desktop Underwriting system. This new national policy makes low down payment loans available nationally in areas where home   prices were declining. This means that buyers of owner occupied single-family homes will have a consistent national approach when applying for a conventional conforming mortgage.

Housing sales peaked in 2005 and have been experiencing a pricing decline since. The good news is since the correction, prices are beginning to stabilize and Fannie Mae is seeing lower risk of further significant declines. This new down payment policy that supersedes the former “declining market” provisions means home buyers may not need higher down payments. The new policy also helps assure stability, liquidity and affordability for the housing market which should help those seeking mortgage loans.

Fannie Mae also has streamlined refinancing for borrowers whose mortgage balance exceeds the value of their homes; improved pricing for jumbo-conforming mortgages and undertaken a neighborhood stabilization initiative for targeted areas with high home foreclosures. These policies should help further strengthen the housing market’s long-term prospects.

The turmoil in the mortgage loan industry has resulted in many changes including tightening credit standards for borrowers, revision of home loan underwriting standards and the elimination of many home loan tandem products. The mortgage markets are adjusting and consumer choices are also changing.

One example is 100% financing on home loans. In the past, many home loan programs achieved 100% financing by taking two mortgage loans on a home. The first loan would be for 75% to 80% of the purchase price and the second loan, also referred to as a “piggyback” loan was for the remaining 20% to 25% to achieve 100% financing. These types of home loan mortgage programs are no longer available. However, there are still mortgage loan programs to effectively finance the total purchase price of a home. 

FHA Loans are available through the Federal Housing Administration. With the Down Payment Assistance program, the seller of a home can contribute up to 3% of the purchase price and the remaining 97% if financed through the FHA at a competitive interest rate. 

My Community Mortgage is another possibility. The seller again can contribute 3% thru the use of a Down Payment Assistance program of the purchase price and a My Community Mortgage makes up the 97% balance. The loan interest rates for the My Community Mortgages are also very competitive with other mortgage loan products. 

NextHome Mortgage offers both FHA Loans and My Community Mortgages which can be designed with down payment assistance provided by the seller to effectively finance the home purchase.  Visit our home loan page to get more details.

The mortgage industry and banks in particular are reeling as a result of their inability to sell home loans they originated to investors. The concern centers on current economic conditions and declining property values in many markets. Consequently, the Federal National Mortgage Association (FNMA) has instituted specific guidelines to reduce credit and collateral risk to lenders.  

The term “Declining Market” is determined by appraisers and utilizes various data sources including national and local information. If a home is determined to be in a declining market, the maximum home loan amount that can be borrowed is reduced by 5% of the revised appraised value of the home. This simply means that a buyer must increase their mortgage down payment by 5%. The declining market rules are rather subjective, which means that declining markets can be defined within a city or suburb, or even a neighborhood.  

Both home sellers and home buyers should be aware of the ramifications of the declining market adjustment before an offer is made and accepted. An experienced mortgage lender familiar with the declining market underwriting process is essential for a home buyer before an offer is made. 

If your ability to purchase a home with a conventional loan is adversely affected by these changing conditions, NextHome Mortgage has a variety of home loans that can reduce the amount of money required as a down payment. Start your search by visiting our Mortgage Home Loan page.

Selling a home has been relatively easy in prior years. The challenge typically was finding a new home to buy. Many sellers refused to sell their existing home until they found a replacement.

Buying first worked well for many sellers in years past as the risk of owning two homes for a long period of time was relatively low.

Now there is substantial evidence suggesting that the real estate market is slowing with supply now exceeding demand. If so, is it still a good idea to buy before selling?

First, consider the alternatives. If you buy first, you will know where you’re moving, what it will cost and when you can move. Families with small children often find it easier to market their old home after they have moved out. Their home can then be prepared for sale and kept that way with little, if any, effort.

The downside to this approach is that it’s expensive. You must come up with cash for a down payment and closing costs before your home is sold. Many homeowners do not have the extra cash in savings to accomplish this. Some homeowners may tap into their home equity before selling by using an equity line of credit.

House Hunting Tip: In a changing market, it’s wise to factor in a longer marketing period for the home you’ll be selling. You could get lucky and sell quickly. However, in a soft market, it usually takes longer for homes to sell. It’s far better to err on the conservative side than to be caught short of cash making mortgage payments on two homes.

The biggest risk you face in buying before selling is that your home doesn’t sell in the desired time frame and the market worsens. In this case, you could be forced to reduce your list price in an attempt to speed up the selling process.

An option may be to rent your old home until the market improves. But, keep in mind that to take advantage of the federal capital gains tax exemption on the sale of a primary residence (a $250,000 exemption for single sellers and $500,000 for married sellers who file jointly), you need to have occupied the property for two of the last five years.

Homeowners who can’t qualify to buy before selling, or who don’t want the anxiety of owning two homes, have other options. The most appealing is to buy the new home contingent on the sale of your home. Unfortunately, sellers of the most desirable homes usually don’t look favorably on contingent sale offers. A local real estate agent will be able to tell you if contingent sale offers are a viable option in your area.

If not, consider selling your home with an option to rent it back from the new owners for a time after closing. This will give you extra time to find a home to buy if you haven’t found one by the time your sale closes.

Typically the seller’s rent covers the buyer’s costs of ownership during the rent back period. This may be more than you paid to own your home, particularly if your home has appreciated substantially and the buyer is taking out a large mortgage.

The Closing: Renting your home back from the buyer after closing is done for convenience sake. If you want to pay cheaper rent, you can always move to a temporary rental until you find your dream home.