USDA Appraisal Requirement Change July 1, 2009

Beginning July 1, 2009 USDA is requiring the updated Freddie Mac/ Fannie Mae appraisal in their packages.  As with any change, there are some potential drawbacks.

USDA home loans are made in genearlly rural areas.  The new Freddie/Fannie appraisal is designed specifically to identify for the underwriter any recent changes (read DECLINING changes) identified in a particular subdivision or small locality… well, in a mostly rural area, you don’t always have consistantly priced homes, so if you are asking about a small local geographic area, it’s very possible that the property values will look as if they are declining.  That’s why it is important, now more than ever, to work with a HIGHLY skilled Appriaser who can competently and carefully give the FULL details regarding the area in the additional comments sections provided.

Here’s the news:
New Appraisal Requirements for Single Family Housing Guaranteed Loans
 
For new application packages submitted to the Agency on or after July 1, 2009, Rural Development will require the Fannie Mae/Freddie Mac form 1004MC “Market Conditions Addendum to the Appraisal Report” be included in the appraisal.  Beginning July 1, 2009, Lenders should order appraisals to include the Fannie Mae/Freddie Mac form 1004MC.  For loans already in process, the Agency will continue to accept appraisals without the Fannie Mae/Freddie Mac form 1004MC until July 31, 2009.  The form is not required if an application package has already been submitted to the Agency, or if an appraisal has already been conducted that did not include the form.  This applies to all guaranteed loan requests, including those manually underwritten or submitted through GUS.  An Administrative Notice on this topic is forthcoming.

If you are considering purchasing a home, and using the USDA home loan mortgage program, please contact us!  We specialize in these (and other) government loan programs!  Steve and Eleanor Thorne, Meridian Residential, 919-459-1313.  There are MANY areas in Wake County that qualify for USDA financing, and ALL of Johnston County Qualifies for USDA mortgage loans!  Click here to see maps of specific areas qualifying for USDA mortgages!

FHA To Allow Tax Credit To Work As Downpayment

FHA announced during a summit in Washington that they will shortly be allowing the Tax Credit for First Time Homebuyers to be used as downpayment!

 THIS IS HUGE!

There are few details available about how they will execute this, but here’s a link to the information I was able to find:

http://www.realtor.org/RMODaily.nsf/pages/News2009051202?OpenDocument

Follow FHA / HUD News on Twitter!

Earlier this week HUD started sending out Tweets with updates about FHA Programs!  Isn’t that COOL?

You can subscribe to the RSS Feed and get updates whenever anything is posted!

http://twitter.com/HUDFHA

TRIPPIN’! Wow!  When the Obama Administration said they were going to be transparent - I guess they meant it!

If you are thinking of buying a home, or refinancing a mortgage - you might want to follow this feed!

Credit Scores and First Time Homebuyers!

How Credit Scores are calculated is changing, and the minimum scores required for mortgage loans are going HIGHER!  For information about “WHY” Credit Scores requirements are changing in NC, click here.

It’s important to know that Transunion began making changes to the way they calculate credit scores, and if you don’t change your credit strategy - you might not be able to purchase! 

I think it’s important for First Time Homebuyers (especially) to know what credit scores they need so that they can take advantage of the $8000 Tax Credit, Low Rates and “Cheap Houses!”

If you are using VA Benefits, you need a 620 score, even though VA does not have a MINIMUM credit score!  I think that (JMHO) because VA doesn’t have a minimum - those VA rates have gotten higher in the last 2 months!  For details on Credit and Veteran’s Administration home loans click here!  Again, do not be surprised if the VA rates are not as “cheap” as the FHA and USDA rates!  This is a SHIFT!

USDA Home Loans are probably the most “forgiving” on credit requirements, but you still need to have at least two of your scores over 600.  Even with that, it’s VERY difficult to get a USDA Backed Mortgage Loan without at LEAST a Credit Score of 620!

If you are purchasing a home in NC and want to use a FHA mortgage loan program - you really do need 620 credit scores.  I know that there are people out there who are advertising that you can get a mortgage with a credit score lower than 620… but I’m telling you from my experience - those home loans are NOT CLOSING!

I already know it’s not going to be popular, because we NEED good, open, used, credit right now!  Just paying off “bad” credit will not raise your scores enough!

Here are some of the biggest things you can do:

• Do not pay off collections that are older than 24 months without speaking with a lender first.  It is possible that by paying off an old debt you will “revive” it and cause your score to go down.
• DO payoff anything that’s not medical related and over $100 on your credit report within the last 2 years.
• Make certain you have at LEAST 2 OPEN revolving accounts reporting to all three agencies showing on your credit report.
• Make certain you have at LEAST one OPEN installment debt reporting to all three agencies showing on your credit report.
• PAY YOUR BALANCES DOWN.  This is possibly the single biggest thing you can do!  I’ve seen this one thing increase a score 40 points!

If you have questions about purchasing a home in NC, or refinancing a mortgage - and have questions about how your credit score might need to change to qualify, please call Steve and Eleanor Thorne, Mortgage Loan Officers @ Meridian Residential in Cary, NC  919-459-1313

First Time Homebuyers Get $8000 in NC

With the new programs adopted by the Government, there’s a great “gift” for First Time Homebuyers! It’s a G-I-F-T from the Government, and unlike the $7500 credit given out last year, you do NOT have to pay it back, as long as you are actually going to live there for 3 years!  This makes getting a mortgage so much easier!

Here are some of the details!

• The $8000 tax credit or 10% of the home’s purchase price, whichever is less, is available only for first time home buyers (Definition of a “first time home buyer” is a buyer who has not owned a principal residence during the three-year period prior to the purchase)
• There is a $75,000 adjusted gross income limit for tax filers filing as single and $150,000 limit for joint return filers.
• The $8000 tax credit is available only for primary residence purchases.
• The tax credit does not require a repayment in most cases.
  • The tax credit does have a repayment provision if the homeowner does not occupy the property for a minimum of 3 years from the closing date.
• The home buyer must purchase a home between January 1, 2009 and December 1, 2009.  (Remember - this does NOT go through the end of the year!)

The $8000 tax credit is received when you file your tax return.

Frequently Asked Questions:

How do I claim the tax credit? Do I need to complete a form or application?
Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on Line 69 of their 1040 income tax return. No other applications or forms are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests.

I read that the tax credit is “refundable.” What does that mean?

The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.

For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).

I purchased a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns. How can I claim the new $8,000 tax credit instead?

Home buyers in this situation may file an amended 2008 tax return with a 1040X form. You should consult with a tax advisor to ensure you file this return properly.

For additional Frequently Asked Questions please visit the FAQ section of the Federal Housing Tax Website

Resources found on our website (http://www.AmeristarMadison.com):

IRS Form 5405
Federal Housing Tax Credit website
2009 Federal Housing Tax Credit Frequently Asked Questions page

Keep in mind that if you purchased a home between April 9, 2008 and December 31, 2008, you are still eligible for the $7500 tax credit. This tax credit does have a repayment provision to be paid back over 15 year’s interest free. You can read more about the $7500 tax credit for additional information.

If you have questions about purchasing a home in NC (or refinancing into a lower rate), we would love to help!  Please call Steve and Eleanor Thorne, Mortgage Lenders @ Meridian Residential in Cary, NC  919-459-1313

FAQ RE: Obama Loan Modification Program

The Obama Administration announced plans to allow for special considerations in cases for folks who are currently behind on their mortgages, and headed into foreclosure.  Those guidelines apply only to mortgages that are currently held by Fannie Mae or Freddie Mac - but could impact a significant number of people in NC.

Here’s a list of Frequently Asked Questions recently published:

The Obama Administration unveiled the final details of its “Making Home Affordable Program,” which is designed to help up to 9 million American families refinance or modify their loans to a payment that is affordable now and into the future.

One of the initiatives in this program is aimed at helping struggling homeowners “modify” their loans to avoid foreclosure. Here are some common Questions and Answers about the Modification Initiative in the program.

MODIFICATION INITIATIVE

Who is eligible?

To apply for a Home Affordable Modification, you must:

• Own and currently occupy a one- to four-unit home.
• Have an unpaid principal balance that is equal to or less than $729,750 (for one unit properties).
• Have a loan that was originated before January 1, 2009.
• Have a mortgage payment (including taxes, insurance, and home owners association dues) that is more than 31% of your gross (pre-tax) monthly income.
• And, have a mortgage payment that is no longer affordable, perhaps because of a significant change in income or expenses.

If you answered YES to all of these questions, you may be eligible for the Modification Initiative.

Am I eligible if I missed some mortgage payments?

Yes. If you missed two or more mortgage payments and answered “yes” to the Modification Initiative requirements above, you may be eligible for a loan modification.

Do I need to be behind on my mortgage payments to be eligible for a Home Affordable Modification?

No. Responsible borrowers who are struggling to remain current on their mortgage payments are eligible if they are at risk of imminent default. Examples of being “at risk” include facing a significant increase in your mortgage payment or a reduction in your income. Contact me to discuss your specific situation.

I have a second mortgage. Am I still eligible?

Yes, but only the first mortgage is eligible for a modification.

I have an FHA loan. Can it be modified under this program? Are all loans eligible?

Most conventional loans including prime, subprime, and adjustable loans; loans owned by Fannie Mae and Freddie Mac as well as private lenders; and loans in mortgage backed securities are eligible for a modification. Contact me to discuss your specific situation.

I have a mortgage on a duplex. I live in one unit and rent the other. Will I still be eligible?

Yes. Mortgages on two, three and four unit properties are eligible as long as you live in one unit as your primary residence.

What does the Modification Initiative do?

If you are eligible for this plan and are approved, you will be put on a trial modification for three months at a new interest rate and payment.

If you successfully make the payments and are current at the end of the three-month trial period, your servicer will execute a permanent modification agreement that will lower your interest rate to a fixed rate for five years.

What happens after five years?

Beginning in year six, the rate may increase no more than one percentage point per year until it reaches the “rate cap” in your modification agreement, which is basically the market interest rate on the date the modification is finalized.

That means your rate can never be higher than the market rate on the day your loan is modified. This is great news because rates are currently at historic lows… and you can lock in now.

How low can my interest rate go?

Treasury is providing incentives to your investor to write the interest down as low as 2%, if necessary to get to a payment that you can afford based on your income.

What happens if that is not enough to get to an affordable payment?

If a 2% interest rate is not enough to bring your payment down to 31% of your gross monthly income, your servicer can extend your payment term–for example, give you a 40-year loan rather than a 30-year.

If that is still not sufficient your servicer will defer repayment on a portion of the amount you owe until a later time. This is called a principal forbearance. A portion of the debt could also be forgiven. This is optional on the part of the investor. There is no requirement for principal forgiveness.

Are there any other benefits to this program?

Yes. For every month you make a payment on time, Treasury will pay an incentive that reduces the principal balance on your loan. Over five years the total principal reduction could add up to $5,000.

How much will a modification cost me?

There is no cost to borrowers for a Home Affordable Modification. You will not be asked for any money.

If there are costs associated with the modification–such as payment of back taxes–your servicer will add those costs on to the amount you owe. Your servicer will also forgive any late fees.

Is housing counseling required under this program?

Borrowers are strongly encouraged to contact a HUD-approved housing counselor to help them understand all of their financial options and to create a workable budget plan.

However, housing counseling is only required for borrowers whose total monthly debts are very high in relation to their incomes (55% of your gross monthly income).

If you would like to speak to a housing counselor, call 1-888-995-HOPE (4673).

How do I apply for the Modification Initiative?

If you meet the general eligibility criteria for the program, you should gather the following information:

• Recent pay stubs to help determine your gross (before tax) household income.
• Your most recent income tax return.
• Information about your assets.
• Information about any second mortgage on your house.
• Account balances and minimum monthly payments due on all of your credit cards.
• Account balances and monthly payments on all other debts, such as student loans and car loans.
• A letter describing the circumstances that caused your income to be reduced or expenses to be increased (for example: job loss, divorce, illness, etc.).

Once you have this information, call your mortgage servicer and ask to be considered for a Home Affordable Modification. The number is on your monthly mortgage bill or coupon book.

My loan is scheduled for foreclosure soon. What should I do?

If your mortgage has been scheduled for foreclosure or if you have missed one or more mortgage payments, you should contact your servicer immediately.

You may also want contact a HUD-approved housing counselor by calling 1-888-995-HOPE (4673).

We do not “normally” suggest that people work with a modification company - however, if you are considering this type of transaction, we can recommend some guys that have a good track record!

Call us.  Steve and Eleanor Thorne at  Meridian Residential  in Cary, NC  919-459-1313

FHA Cashout Refinance Changes

You have 2 weeks to make application if you want to take cash out of your home using a FHA refinance.

The technical explination of “cash out refinance” is when more than the balance of the mortgage and closing costs are included in the new loan amount. This could be in the form of cash to the borrower, or payment of secondary liens against the property, or the payment of any other borrower indebtness (like credit cards).

This is a significant change from the current 95% maximum loan to value for a cash out refinance. Borrowers have until March 31 to start their application if they would like to receive more than 85% loan to value.

If you have questions about this program, please call Steve and Eleanor Thorne with Meridian Residential in Cary, NC  at 919-459-1313.

2% Mortgage Rate on Refinance?

The Obama Administration outlined today their efforts to help borrowers who need to refinance - and for various reasons can not. 

If you’ve made your payments on time, here’s the current plan being floated… REMEMBER! This must be approved by Congress!

A Home Affordable Refinance Program to Provide Access to Low-Cost Refinancing for Responsible Homeowners Suffering From Falling Home Prices:

“Provide the Opportunity for Up to 4 to 5 Million Responsible Homeowners to Refinance: Mortgage rates are currently at historically low levels, providing homeowners with the opportunity to reduce their monthly payments by refinancing. But under current rules, most families who owe more than 80% of the value of their homes have a difficult time securing refinancing. (For example, if a borrower’s home was worth $200,000, he or she would have limited refinancing options if he or she owed more than $160,000.) Yet millions of responsible homeowners who put money down and made their mortgage payments on time have – through no fault of their own – seen the value of their homes drop low enough to make them unable to take advantage of these lower rates. As a result, the Obama Administration’s program will provide the opportunity for up to 4 to 5 million responsible homeowners who took out loans owned or guaranteed by Freddie Mac and Fannie Mae (the GSEs) to refinance through the two institutions over time. Reducing Monthly Payments: For many families, a low-cost refinancing could reduce mortgage payments by thousands of dollars per year. For example, consider a family that took a 30-year fixed rate mortgage of $207,000 with an interest rate of 6.50% on a house worth $260,000 at the time. Today, that family has $200,000 remaining on their mortgage, but the value of that home has fallen 15% to $221,000 – making them ineligible for today’s low interest rates that generally require the borrower to have 20% home equity. Under this refinancing plan, that family could refinance to a rate near 5.16% – reducing their annual payments by over $2,300. “Okay - here are some details!  The 5.16% rate mentioned above is the APR (they left that out).  There are also COSTS involved in refinancing which means that if your current rate is 6.5%, and the Obama Administration helps push mortgage rates to the mid to low 4% range - this might make sense.

The other BIG thing to notice is that they are talking about people who’s mortgage is currently owned by Fannie Mae and Freddie Mac.  There’s a REALLY good chance your mortgage is owned by Wells Fargo, or BB&T or JP Chase Morgan and they don’t have to fall under these guidelines!

But it still doesn’t get us to that 2% mortgage rate on a refinance!  THAT rate is only mentioned for folks who are about to lose their house… and that’s a TON more complicated!

For those details, click here.

If you want to find out more about qualifying to refinance in NC, please contact Steve and Eleanor Thorne, Meridian Residential, 919-459-1313.

What Improvements Can You Make with a FHA 203K Loan For?

FHA has a great program to help with renovating a new home!  It’s called the 203K program - and if you’ve been on Craigslist, you’ve definately seen, “this property is eligable for FHA 203k loan!”

It’s a great program for making up to $35,000 of improvements to the home.  Many time, foreclosed property has what Realtors refer to as “Deferred Maintenance.”  This means that people who could not afford to make their house payment - also could not afford to have the termite / wood rot repaired, or the stove fixed, or the carpet replaced… So this loan is PERFECT for those kinds of updates!

What items can you update - and which ones can you NOT do with this loan?  Here are some basic guidelines:

Eligible Improvements/Work

• Repair/Replacement of roofs, gutters and downspouts
• Repair/Replacement/upgrade of existing HVAC systems
• Repair/Replacement/upgrade of plumbing and electrical systems
• Repair/Replacement of flooring
• Minor Remodeling, such as kitchens, which does not involve structural repairs
• Painting, both exterior and interior
• Weatherization, including storm windows and doors, insulation, weather
• stripping, etc.
• Purchase and installation of appliances, including free-standing ranges,
• refrigerators, washers/dryers, dishwashers and microwave ovens
• Accessibility improvements for persons with disabilities
• Repair/Replace/add exterior decks, patios, porches
• Basement finishing and remodeling, which does not involve structural repairs
• Basement waterproofing, including mold removal
• Window and door replacements and exterior wall re-siding
• Septic system and/or well repair or replacement
• Connection to public water or sewage system

Ineligible Improvements/Work

• Major rehabilitation or major remodeling, such as the relocation of a wall
• New construction (including room additions)
• Repair of structural damage
• Repairs requiring detailed drawings, plans or architectural exhibits
• Landscaping or similar site amenity improvements, including fence
• Lead-based paint stabilization or abatement of lead-based paint hazards
• Any repair or improvement requiring a work schedule longer than three (3) months; or Rehabilitation activities that require more than two (2) draws/payments.
• Any work requiring a plan reviewer
• Result in work not starting within 30 days after loan closing; or cause the borrower to be displaced from the property for more than 30 days during the time the rehabilitation work is being conducted (FHA anticipates that, in a typical case, the borrower would be able to occupy the property after the mortgage closing.

REMEMBER!  If you are a First Time HomeBuyer, you might qualify for a $8000 tax credit (that you don’t have to pay back!)!  Click Here for more details!

Many loan officers do not offer this program, and are not familiar with the process.  Please call Steve and Eleanor Thorne, Meridian Residential in Cary, NC for details!  919-459-1313

First Time Homebuyer Tips!

If you are a First Time Homebuyer, the government recently initiated a program that could help you! 

They are G-I-V-I-N-G you a $8000 credit that you can use in 2008 or 2009!  For details on this credit, click here!

First Time Homebuyers have many loan program options.  If you, or your spouse, are a Veteran then you qualify for a 100% VA Home Loan! 

VA Mortgage Loan Basic Guidelines:

• No restriction about where the property is located
• No income restriction
• Maximum loan with no downpayment is $417,000
• Seller can pay closing costs
• Total Debt should not exceed 43% of Gross monthly income

USDA also offers Mortgage Home Loan Programs with no money down!

• Restricted to more rural areas - but all counties in NC have qualifying properties! Click here to see if your property is eligible!
• Income Restrictions based upon how many people live in your home, click here to see if you meet those requirements! These income restrictions vary by COUNTY.
• You can not currently own a property in the Geographic Area you are purchasing (unless it is in adequate), and if you have a previous home rented, you must show evidence that you are reasonably receiving income from that property (it’s a little complicated)
• The Seller can help with closing costs, and you can receive a gift - but you can not have liquid assets equal to more than 20% of the sales price.
• No swimming pools. (LOL!)

FHA Mortgage Home Loans are another great alternative for first time home buyers! 

• Maximum Loan Amount restrictions based upon the county the property is located.  To find out the limit for homes in the NC County you are interested in, please click here!
• No Maximum Income Requirements!
• Swimming Pools are Okay! 8-P
• Down Payment of 3.5% can be a gift!
• Allow non-occupying co-borrower!
• If you have a bankruptcy or foreclosure in your past you might still qualify! (you MUST have re-established your credit, and have at least 3 current tradelines with AT LEAST 12 months of clean credit)

Our advice is that if you are First Time Home Buyer thinking you would like to purchase this year to take advantage of the $8000 Tax Credit you need to check on your credit scores in the near future.  Meet with a loan officer, find out if you need to work on your credit NOW, because in general, credit score guidelines are getting tighter!

If you are considering a home purchase, please call Steve and Eleanor Thorne, Meridian Residential, 919-459-1313 for specific details regarding your situation!