1. If you are thinking about buying a home soon you better be putting offers in very fast. On October 1, 2008 there will be new guidelines coming in to play that are administered by the Housing and Economic Recovery Act of 2008. This new housing bill is going to put a major squeeze on people looking to buy a home after that date so you better get a move on.
2. Under the new guidelines set forth by the FHA the minimum amount down payment will go up to 3.5%. It is currently at 3%. Not so much of a big deal but it does account for more money that you will have to come up with. On a $100k mortgage that is another $500 plus your closing costs.
3. FHA loan limits will decrease which will mean fewer people will be able to get approved on a jumbo loan. The current maximum loan limit is set at $729,750. This went into affect March 6, 2008. The FHA did this so they could help out people with bad loans that were in high cost areas. Hopefully you heard about this and have tried to refinance your mortgage over the past 5 months if you fall into that category. Now the FHA is taking a percentage of what the highest and lowest price sales of homes are for a particular area and using that number to determine what the max limits will be. This goes for people looking to buy a home or refinance with a FHA loan.
4. You can still receive a tax credit up to $7500 for a first time home buyer. This is to help you with things like closing costs when purchasing the home. It is not free money though. If you take the credit you will have to pay it back over the next 15 years or when you plan on selling the home. It is a no interest loan so it makes sense to use it, jsut remember its not free.
5. My favorite one is the Down Payment Assistance programs will be eliminated. You might be asking yourself what is Down Payment Assistance? Could it be another term for getting money from your parents or the company you work for? Nope. How it works is that if you want to buy a home you have to negotiate with the sellers for them to lower the price on the home first. If agreed, you would call up a mortgage company, get approved on the FHA loan, then send your application to another company that gives you the money for the sale of the home. Weird huh? This means another company is giving you the down payment, and at closing they are getting paid back the money from the proceeds of the sale. You wonder where they make any money because at the same time they are technically giving you money and receiving it back. More than likely they are getting a percentage of the revenue or a referral fee from the mortgage company the loan originated with. If I did not know how this worked I would think it would be some kind of scam. Seems like the FHA wants to put the kibosh on it too.
6. With the Down Payment Assistance programs being terminated it means that people looking to buy homes will actually have to (if you can believe this) save up money for a down payment and their closing costs. They can still negotiate with the sellers for “sellers concessions” if they want to which is okay. I do not get why people negotiate seller concessions to begin with. Its not like they are giving you money. The home buyer is just rolling the costs into the loan with the lowering of the price of the house which means you have financed your closing costs.
7. With this going into effect in a couple months the people that need the Down Payment Assistance Programs better be hoping they can get a house. The remaining Down Payment Assistance companies out there require you to have a 620 credit score or higher. No ifs, ands, or buts about it. You will probably see a lot of these companies going out of business or having to try another way to lend money.
8. This is actually good news for the people sitting around wondering if now is the time to buy a house. This gives more reason to wait until 2010 to buy a home. When the mortgage companies stopped doing 80/20 loans, second mortgages, and home equity loans it forced a lot of companies to do one normal conventional loan like a 30 year fixed rate mortgage. Things are going to start getting back to where they were before the housing boom because of this.
9. With no more 100% financing around it means that you will have to have money to get approved on a loan. With no down payment assistance this removes all of the buyers out there that are going to use it. Right now some of the big mortgage companies like Quicken Loans, Chase, Countrywide, and Bank Of America are using these programs to close loans. The FHA loan is a large portion of these companies business and once the guidelines are tightened you will probably see more people lose their jobs because there is not enough revenue coming in. They will still be able to refinance homes but the FHA is not allowing help anymore. I say good for them.
10. This is the last straw for mortgage companies and want to be home owners to get some sort of 100% financing when buying a home. When all of the options are removed there is going to be a time period of less people buying houses. Most people in this economy can afford a monthly payment but do not have the money for any kind of a down payment. With no people buying homes it is going to lower home prices even more. Its simple supply and demand. This will probably cause mortgage rates to go up a little more because now the banks need more revenue to make up for the lower amounts of homes being bought. All in all this really is a step in the right direction for the American population because now we are being held accountable for our financial actions. If you must buy a home and need the FHA loan to do it, you better be putting offers in and hope they close by October 1, 2008 or you will have to have 3.5% down payment coming out of your pocket.
How do you apply for the tax credit ($7,500)?
My realtor called the IRS and they have no brochures yet because it is so new.
@ Jennifer
You will want to contact the city/county you are buying in. They will have the info you are looking for. In regards to the IRS, you will probably see something in your income tax returns that says something like “did you buy a home in 2008.” I would be certain to ask the county first because the credit will only be given after you buy.
Your actually happy that the DPA program has gone away. Your delighted that now people will have to save up at least 3 percent on a downpayment for a new home. You work in print and news or real estate I assume.
Its always interesting to me when I see someone who seems to think they are doing reasonably well with their own life then will criticize others even when they have never ever experienced the same hardship or difficulty. Yes Brad “the Bratt” there are folks in this world who arent deadbeats who may need a leg up to get into a nice or even very nice home. “Bratty” Brad, it isnt cool to even slightly hint, joke or make some snardy comment regarding their right to do so when you have no clue as to why their sitiation calls for these gifts or factual statistics to report why your snardy comments make sense.
Oh but then I forgot, you are not really a reporter, youre probably some “Bratty” wet behind the ears kid with a blog and a mommy who loaned you the money for the house you have comfortably written this blog from. OR worse, your some snarky and bratty kid who is currently renting.
Based on the overwhelming success of this idiotic approach since your comment, it will be interesting to hear your opinion now. I am going to guess that things dont look so rosey now if your really true about your own situation and the current market. Bush and the congress have killed the housing market with this and most of their other bonehead deicisions about how to deal with it.
“Bratty” Brad, if you havent figured it out, I simply dont like people like you. You may ask “why is this person coming down so hard on me”? To put it simply “Bratty” Brad, most people of the people who think like you dont know crapola about real life experience yet you try to pass judgement with subtle jokes about their expereince or race. If there is a God in heaving, here is what I hope has happened to you Brad. You are now experiencing at least one of the situations the reflect the expereinces the people you have so sarcastically written about.
Plain and simple, Go to hell Brad.
@ Grim Reaper
Thanks for commenting on this one year old article so passionately.
I am excited as all hell about the DPA going away. It should never of been there in the first place. I use to work in real estate. In fact I was a very good mortgage banker for over 2 years. I wrote this article after I was let go when the real estate bubble started busting.
Nowhere in the article did I say I was doing well. In fact I was laid off at the time.
I have no problem with people getting help from somebody to buy something as long as its not from taxpayers money. What is funny is you commented today about this when a article describing how messed up the FHA and the tax credit is was written today http://moneyfeatures.blogs.money.cnn.com/2009/09/21/housing-tax-credit-cure-or-curse/. You obviously love the government running your life. Here is another one from a couple days ago http://money.cnn.com/2009/09/18/news/economy/FHA_housing_trouble/index.htm?postversion=2009091815 showing how messed up the FHA is.
If you read the second article hopefully you will understand that programs like the FHA and downpayment assistance keep real estate prices HIGH. Most mortgage companies are requiring 10% – 20% down payment now. By making people do this it takes a lot of so called buyers out. Simple supply and demand economics will tell us that if you take away the demand the supply will go up and prices will go down. This is good. It makes housing more affordable. With the FHA only requiring 3.5% down it brings more buyers in and unfortunately the money that is being lent is taxpayer money, i.e YOUR MONEY. You must like the government spending your tax dollars and making housing expensive. Here is another great article written TODAY talking about how unaffordable housing STILL is even after 2 years of declining home prices http://www.usatoday.com/money/economy/housing/2009-09-21-housing-affordability-census_N.htm.
I rent and it has been the best real estate decision to make in the past two years. Do you want to see the 11 For Sale signs on my street? Here in Michigan, real estate prices have been dropping more than 10% almost every quarter. So with not buying and renting I have built more equity in my future purchase by waiting then going out and buying. Looking at data of home sales http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_History_082562.xls it is clear to see that home prices at least in my state have dropped by almost 50% in a year and a half. Your state is probably close to that too. By looking at this data I see no point of buying a home for another year at least.
I agree with you that Bush and Congress have killed the housing market. The reason why the housing industry collapsed is because interest rates were set so low by the Federal Reserve. I suggest you read two books written by Congressman Ron Paul to educate yourself on why government involvement in anything is bad.
Ron Paul Revolution
End The Fed
You don’t like me because your an idiot. Something probably happened to you and you are pointing the finger at me because I tell it how it is. Nowhere in this article did I talk about race or God. You did.
You remind me of a client I had when I was writing mortgages. I approved him on a mortgage for $175k. He came back to me a couple months later and said he found his dream home but it was worth $425k. I told him I could not approve him on it unless he PUT A DOWN PAYMENT OF HIS OWN OF $250k. Of course he did not have it. As a matter of fact this is when we could still do 100% financing and he had to get seller concessions. He got mad at mad as it became MY FAULT he did not save up more or he did not earn more money at his job. Then he brought God into the conversation like you did. He said to me that “God is telling me to give him $425k as I should be able to forsee into his future.” I have never met God so I told him to walk God into my office and I would give him $425k. He stumbled on the phone and said “come on Brad, you know what I mean.” Obviously I don’t.
There is a book coming out that I intend to buy. I am excited to read it based on the title alone as it describes how I feel writing this back to you.
Glenn Beck – Arguing With Idiots
Wow Brad, i think you got him there! This guy sounds like he voted for B.O for sure! In my opinion and being in the real estate business myself….it sounds like the GRIM REAPER wannabe has an issue with saving up 3.5% for the home he wants, but can’t buy. Actually it probably already sold and he’s pissed. Question for you GRIM REAPER….who’s cooler in your opinion….a homeowner that now is upside down in his mortgage and in debt up to his “dry, experienced” ears OR a renter that saves over $500 a month by NOT owning a home? Brad and I will await silently under our mothers’ skirt for you to answer.