Investor Report: Condo Loan Rules

Investor Report: Condo Loan Rules

by Kenneth R. Harney

FHA has come out with its long-awaited rules on condominium loans, and they’re a mixed bag for investors, second home and other buyers and sellers.

HUD: Tax Credit Can Be Used on Closing Costs

FHA-approved lenders received the go-ahead to develop bridge-loan products that enable first-time buyers to use the benefits of the federal tax credit upfront, according to eagerly awaited guidance from the U.S. Department of Housing and Urban Development on so-called home buyer tax credit loans that was released today.

Under the guidance, FHA-approved lenders can

Homes May Be Undervalued Today

After dropping for two years, home prices appear to be bottoming out, and any further declines would be an overcorrection, NAR Chief Economist Lawrence Yun told thousands of practitioners at the REALTORS® Midyear Legislative Meetings in Washington, D.C., on Thursday.

Tread Carefully When Making a Low-Ball Offer

These days, it’s easier to make a low-ball offer than it used to be, but still it’s important to be smart. Here are some things that a real estate practitioner and would-be buyer should consider when contemplating such an offer:

● Use foreclosures as comps carefully. Look realistically at the prices foreclosures in the neighborhood brought. Foreclosures aren’t good comps if the homes were stripped of appliances, pipes, HVAC, etc.
● Examine details of short sales critically. How many liens were there against low-selling short sales? If there were no secondary liens, the lender had considerable flexibility.
● Establish realistic time frames. Even in the best of circumstances, foreclosure takes a long time. Will the seller play the waiting game? How long have houses whose owners have equity stayed on the market? Is the buyer in a hurry?

If your buyer makes a low-ball offer, the bank probably won’t be in any rush to take it. They’ll likely just keep soliciting offers without coming back with a counter. Ultimately, the property is likely to sell for a higher price and, chances are, you and your buyer won’t know it until the deal is done.

Top 10 Most Heavily Taxed States

It’s April, so people’s thoughts are turning to taxes, and where they live makes a big difference in how much they pay. Here are the 10 states with the highest taxes, including property, individual income, sales, alcoholic beverages, tobacco, motor vehicles, hunting and fishing, motor fuels, death and gift taxes, as well as insurance premiums. The per capita tax was derived by adding up all the taxes and dividing the total by the number of citizens.

1. Vermont, $3,861

2. Hawaii, $3,856

3. Connecticut, $3,596

4. Minnesota, $3,203

5. New Jersey, $3,024

6. New York, $3,019

7. Massachusetts, $2,953

8. Washington, $2,553

9. Wyoming, $2,357

10. Pennsylvania, $2,223

I’m glad that our state just squeezed in there.

Why You Shouldn’t Keep a Mortgage Just for the Tax Deduction

This is a post from CJ at WiseMoneyMatters.com. This post represents CJ’s viewpoints, which are not necessarily my viewpoints. (Although I, too, hope to pay off my mortgage early.)

The other day, I was telling my wife’s grandmother that we had sold our house. We are downsizing in order to eliminate our mortgage more quickly. It looks like we will have our mortgage completely paid off in three to five years, depending on when kids enter the scene. She gave me a speech about how our house is one of the only tax deductions we have, and how most accountants recommend you keep a mortgage payment for that reason.

I think this logic is misguided. Let me show you why.

50% of Foreclosures Concentrated in 1% of the Country

Nearly 12 percent of all American home owners with a mortgage–a record 5.4 million–were one month late or actually in foreclosure at the end of 2008, according to data from the Mortgage Bankers Association. Among home owners with subprime adjustable-rate mortgages, 48 percent are behind in their payments. The increase in foreclosures is being fueled by rising unemployment.

While numbers of foreclosures are declining in states that were initially hardest hit by the crisis, the situation is getting worse in Texas and New York City, places that appeared early on to be immune from the problem. Meanwhile, a report by RealtyTrac shows that most of the 1.5 million foreclosures in 2008 were focused in  35 counties. These locales represent about 1 percent of all the counties and are clustered in Michigan, Ohio, Southern California, Nevada, Arizona, South Florida and Washington, D.C. One quarter of last year’s foreclosures happened in just eight counties in Arizona, California, Florida and Nevada, places where the market boomed and prices skyrocketed. About 20 percent of U.S. households live in these key counties, but they account for more than 50 percent of the foreclosures last year. In more than 650 other counties nationwide – about 20 percent – foreclosures have actually dropped since 2006.

Commentary: House Prices Will Rise Greatly over the Next Few Years, Buy Now

Interesting commentary from RISmedia contributor, Mike Parker…

”Those who do not study history are condemned to repeat it.” So spoke Sir John Buchan, the First Baron of Tweedsmuir, back in the mists of time often referred to as “the good old days.”

Well, I may not be as old as the Baron, but I did live through President James Earl Carter, 21% prime interest rates, 20% inflation, Paul Volker and his attempt to strangle inflation by strangling the money supply, and that famous “WIN (Whip Inflation NOW!)” button the White House handed out. The period I am referring to was in the 1970s and early 1980s,

Fannie and Freddie Plan Big Fee Increases

Fannie Mae and Freddie Mac are both toughening their credit score and down-payment rules as of April 1.

In response, major lenders are already factoring in the higher fees, which reduces the effectiveness of the stimulus efforts.

Under the new guidelines, buyers with down payments of less than 25 percent will be charged a three-quarter point add-on penalty, no matter how high their credit score.

Buyers of duplexes, where one unit is owner-occupied and the other is rented, will be charged a 1 percent add-on.

Refinancers who take cash out will be charged as much as three points if they have a low to moderate equity stake.

Freddie spokesman Brad German says the loan categories and credit risk combinations targeted by these fees “default at four to eight times” the rate of other mortgages backed by Freddie. “We have to manage these risks appropriately,” he says.

5 Tips for Homebuyers Seeking a Mortgage

Here’s a warning for potential borrowers: Nervous lenders have tough new rules and are paperwork crazy.

Before you apply, here are a few things for you to consider:

Tax Information for Homeowners

If you are like me, you are probably doing your taxes now. Here is the IRS publication regarding what you can and cannot deduct for 2008. Enjoy!

First-time Homebuyer Tax Credit Extended and Repayment Waived

As part of the new stimulus package, i.e. American Recovery and Reinvestment Act of 2009, First-time homebuyers could get a tax credit of up to $8,000 if they buy homes in 2009. The credit refunds 10 percent of the purchase price, up to $8,000,  to couples with incomes of less than $150,000. Those making up to $170,000 can get reduced credits, while those making more are ineligible.  One nice feature: the credit is refundable.

Eight Tips to Getting a Loan

These days one of the biggest obstacles to closing a real estate transaction can be the buyer’s ability to get a mortgage.  BusinessWeek asked mortgage bankers and other real estate professionals for tips on how to get a loan approved.  They are helpful tips to give to your clients.  For example, borrowers can turn to the government or take steps to boost their credit scores.

For full article, click here.

Homestead Tax Reduction Deadline Approaching

Pennsylvania residents have until March 2, 2009 to file an application to share in this year’s tax reduction, made possible by revenue from Pennsylvania casinos. The amount of rebate varies according to the school district, but Pennsylvania’s healthy slots proceeds could mean bigger checks than last year for homeowners. Last year, the state estimated the average tax bill would be cut by 10 percent, or about $169. The one-page applications are available on the respective county board of assessment websites listed below:

• Chester County Department of Assessment
• Delaware County Board of Assessment
• Montgomery County Board of Assessment

Government Struggles to Keep Interest Rates Low

Mortgage rates are rising, despite the government’s efforts to hold them down.

The government can’t control all the factors that affect mortgage rates. Mortgage interest has climbed because more borrowers refinanced when rates fell and boosted the supply of mortgage bonds.

Experts also attribute rising rates to expanded borrowing by the government to pay for stimulus packages, worries about Fannie Mae and Freddie Mac, and concerns about whether the central bank will continue to purchase mortgage bonds after June.

The suggestion that the government solve the problem by creating an entity that offers 30-year mortgages at preset rates of 4 percent or 4.5 percent has drawn criticism.

“Not a lot of buyers are likely to want to buy a 3.5 percent mortgage-backed security, so the government may end up being a significant holder of these loans,” said Nicholas Strand, a mortgage strategist with Barclays Capital. “And that number could run up to trillions of dollars.”