The Mortgage Scoop

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The 2010 City Living program for first time home buyers in Minneapolis and St. Paul was rolled out today.  There are two options on this program, just like there used to be for anyone familiar with the program.  For either option the buyer can get a FHA or VA loan–no Conventional mortgages.

Option 1 is a 30 year fixed rate loan at 4.75%.

Option 2 is a 4.99% 30 year fixed rate loan that also provides down payment assistance of 2% for the home buyer.

The 2% assistance comes in the form of a second mortgage, but if you live in the home for 7 years, the loan is forgiven–it would no longer need to be paid back.  (You must be living in the home this entire time–can’t convert it to a rental home).

This program is only available for first time buyers (or those qualifying under the Veterans Exceptions).  A first time buyer for those of you who don’t know the rule, is someone who has not owned a home they have lived in during the previous 3 years.  If two or more people are buying together, all of them must be first time home buyers.

There is a minimum credit score of 620, there may be an option for people who have no credit score.

Programs like these always have income limits, so the people who need help the most can get.  The limits are the following:

in Non-Targeted Areas:

• 1 or 2 person households: $83,900
• 3 or more person household $92,290

in Targeted Areas:

• 1 or 2 person households: $92,290
• 3 or more person household $92,290

 The property can be a 1-4 unit, existing single family home, townhome or FHA approved condos.

The maximum sales price is $376,870.

This is a great program for first time home buyers who want to buy a home in the city limits of Minneapolis or St. Paul (not West St. Paul or South St. Paul).  A standard FHA loan requires 3.5% down payment, so this program can take care of more than half of that, which can really help first time home buyers in the Twin Cities of Minneapolis or St. Paul.

To apply for this loan you can visit my secure web site www.MNHomeLoan.com and click on the Apply Online tab.

February 5th, 2010 | Tags: city living, Down payment assistance, FHA, First Time Home Buyer, Mortgages, special loans, special mortgages, VA loans | Category: Buyer Info, First Time Home Buyer, Loan Programs, Mortgages | Comments (1)

This past week one of the three titans of mortgages, Freddie Mac, announced they agree with my assessment that mortgage rates will be going up in 2010.  Now I am only waiting for Fannie Mae and FHA to announce that they think I am right too.  (If you didn’t notice my name in any of these announcements, I am sure it was merely a slight oversight or typographical error).  Here’s a link to the Washington Post article about Freddie Mac’s announcement.

I have mentioned numerous times that I expect rates to be 0.5-1.0% higher by the middle of 2010.  There are two main reasons rates will be higher.

First, the Government will have pumped about $1.25 Trillion dollars into buying up mortgages when it’s current program expires in March of 2010.  They have already extended the program once (they did not increase the amount being purchased at that time) and have made it very clear they have no plans to extend it again.  (I am using the term “Government” in this case to refer to the efforts of both the Federal Reserve and the Treasury Department).

The amount of money pushed in by the Government has been credited with reducing rates about 0.5% currently.  Indeed, within days of originally announcing the program rates dropped this amount and have only drifted lower since.  So, when that money is no longer in the market, it is only logical to assume rates will return to their normal place–higher.

Second, financial markets will continue to return to a more normal state.  When that happens, investors will be looking to place their money where they feel it will get the best return instead of where they are least likely to lose money–which drove many of their decisions in the past fifteen months.

As the Government continues to sell Treasury debts to finance our deficit they will likely have to start paying out higher rates of return to attract the investors and their money.  Treasury debts are the primary competition for mortgage backed securities.  So, mortgages will also have to pay out higher rates to attract investors.  The only way they can do this is to charge higher interest rates to the new mortgage borrowers.

What does this mean if you are considering buying a home in the Twin Cities or refinancing a home you already own?  If you are looking to buy, you need to realize that every time rates increase by 0.5% your buying power goes down $10,000.  By that I mean that if you kept the same monthly payment but used the higher interest rate the loan would be for about $10,000 less.  So, if rates increase by a full 1%, then you would lose $20,000.

Losing $10-20k in buying power obviously makes a big difference in the types of homes you can consider buying and still stay in your price range.  You would be forced to either buy a smaller home (less bedrooms or bathrooms) or switch cities or neighborhoods you are considering purchasing a home in throughout the Twin Cities.

If you are refinancing, that 0.50% can easily be the difference between whether or not you should refi your loan.  Currently I am refinancing clients that have a FHA loan to 5.25% rate and being able to pay all of their closing costs for them.  This allows them to drop their monthly payment without needing to pay any extra money to close the new loan and they do not need to increase the size of their mortgage in order to finance closing costs in.

If you hope to do something with a mortgage in the next four months, you should get started today.  Shoot me an email and we’ll get you started.  You can reach me at agrebis@bellmortgage.com

December 28th, 2009 | Tags: Interest Rates, Mortgages, Refinancing in MN | Category: Buyer Info, Market Update | Comments (1)

On January 1, 2010 a new set of requirements kicks in for all mortgage lenders.  The biggest change will be to the Good Faith Estimate (GFE).  In the past this form could be used by a consumer to determine what their total monthly payment would be, how much money they would need at closing and what they were being charged for each individual item on the HUD-1 Settlement Statement.

The purpose of the new GFE has essentially been redefined.  It now is really going to become a tool for consumers to use to accurately compare and shop mortgage companies.  In the past, people would collect GFEs from several companies, compare them, and then chose a lender.  The flaw with this is that lenders were not bound by any of the numbers listed.  The could tell you one set of charges today and change them tomorrow if they wanted to, for no specific reason.

That has now changed.  Now, when a lender issues GFE they are essential required to make sure your charges at closing match what you were told up front.  There are certain events or “change or circumstance” that allows the numbers to be altered–but only in a way that directly follows whatever that change was.  So, essentially the days of consumers being jerked around by misleading or lying lenders should be coming to an end.

That is the good part.

The bad part–the new GFE will not tell you what your total monthly payment will be, because the property taxes and home owners insurance are not a part of it–at least not in the format of showing you a monthly payment.  Also, no where on the GFE does it tell you how much cash you will need at the closing.  It will tell you the closing costs, but not the money needed for prepaid expenses such as setting up your escrow account.  Also, there is no place for you to see if the seller is paying any of your closing costs and what that might do to lower your number needed.

I’ll go into more detail over the next several weeks on this topic as it becomes reality.  But, be warned, if you are getting a loan in the next couple of months there will likely be a fair amount of confusion.

Also, check out my new radio show: Sweet Home Minnesota this Sunday from 2-3 pm where we’ll get into this topic, what’s going on in the Twin Cities housing market and a preview of some upcoming tax benefits for home owners.

December 18th, 2009 | Category: Industry News | Leave a comment

This post first appeared on www.SweetHomeMN.com

After a lot of work getting ready, this Sunday we’ll get to launch Sweet Home MN on the air.

I’ll be on the show this week, along with Scott Wollmering and Kelly Guest both of whom I’ve done another show with for almost four years, so I know we’ll have a good time.  We will have two new partners in the both with us for this show: Brandon Hedges and Matt Barker whose “Homes of Minnesota” real estate team is one of the top RE/MAX teams in all of Minnesota.  I’m excited about the different expertise they will add to the show.

This first week we’ll get into some of the more “macro” issues with real estate–why real estate matters to everyone, especially the economy.  We’ll also touch on some of the changes in the mortgage world–where even more big changes are looming and will change how everything works in the mortgage business starting January 1, 2010.

Tax Credits are always confusing to people, so we’ll break down the existing ones.  But, we’ll also talk about the proposed Job Stimulus Package that Obama began previewing this week.  There will be billions of dollars pumped into helping home owners make their homes more energy efficient.  So, you will get to hear some tips about what you can do to prepare yourself to take advantage of these credits when they become available.

Check us out, Sunday from 2-3 pm on 107.1 FM.  Also, be sure to sign up for our newsletter, you can do it on the left hand side of this page.

December 9th, 2009 | Tags: real estate radio | Category: Uncategorized | Leave a comment

Nice article written by Kara McGuire at the StarTribune today.  She detailed several people’s agony in the ever increasing wait to receive their $8,000 check from the IRS for their first time home buyer tax credit.

According to the article, the IRS has to review each amended tax return by hand.  Since there are over one million of these potentially rolling in, you can see why it’s going to take a while.  In the past amended returned were to be reviewed within 8 to 12 weeks but the IRS has extended that to 12 to 16 weeks due to volume.

There were several stories of people who bought a home in May or June that are still waiting to get their money.  It’s a perfect example of what can go wrong with using tax money to stimulate the economy.  Based on what I read, I’m estimating that about $3 billion of the tax credit money that should have already been spent at stores like Home Depot is still sitting in the vast government abyss, just waiting to be released…oh well, at least there’s tens of billions of more dollars about to come our way soon (we’ll see how badly that gets messed up).

December 9th, 2009 | Category: First Time Home Buyer | Leave a comment

On Wednesday afternoon (the day I write this) HUD Secretary Shaun Donovan will be making a presentation to the House Financial Services Committee.  According to a story first reported by national real estate columnist Kenneth Harney a number of changes, including increased down payments, higher minimum credit scores and raising the cost of mortgage insurance could very well be asked for before the day is done.

Diana Olick reporting for CNBC.com saw an advanced copy of Donovan’s remarks that matches much of what Hanrey speculated in his article 10 days ago.  I’ll write more later once I have more exact details, but it looks like another important twist is about to show up…ugh.

December 2nd, 2009 | Tags: FHA | Category: Buyer Info, Industry News | Comments (1)

A number of you emailed asking where in the world I went to for the past month.  I wish I could answer something ridiculously fun like hanging out on the beach in Tahiti or Costa Rica.  But, it’s still something pretty cool.

I will be launching a new radio show starting in about two weeks.  So, I’ve been busy working on materials for the show.  I’ll post more details in a couple of days.

By the way, thanks to those of you who did ask

–Alec

December 1st, 2009 | Category: Uncategorized | Leave a comment

In case you live in a cave and didn’t hear, the Government extended the tax credit for first time buyers to the end of April 2010.  It also expanded the program to include up to $6,500 in tax credits for buyers looking to move up or down.  The biggest rule to follow if you are a repeat buyer, is you must have lived in your home for 5 consecutive years (out of the last 8).

The National Association of Home Builders has done a great job of breaking out these credit since it was first created.  So, rather than put it in my own words, let’s just look at what they wrote.  This information can be found at www.federalhousingtaxcredit.com.

$8,000 First-time Home Buyer Tax Credit at a Glance

·   The $8,000 tax credit is for first-time home buyers only. For the tax credit program, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.

·   The tax credit does not have to be repaid unless the home is sold or ceases to be used as the buyer’s principal residence within three years after the initial purchase.

·   The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.

·   The tax credit applies only to homes priced at $800,000 or less.

·   The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.

·   For homes purchased on or after January 1, 2009 and on or before November 6, 2009, the income limits are $75,000 for single taxpayers and $150,000 for married couples filing jointly.

·   For homes purchased after November 6, 2009 and on or before April 30, 2010, single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

The $6,500 Move-Up / Repeat Home Buyer Tax Credit at a Glance

·   To be eligible to claim the tax credit, buyers must have owned and lived in their previous home for five consecutive years out of the last eight years.

·   The tax credit does not have to be repaid unless the home is sold or ceases to be used as the buyer’s principal residence within three years after the initial purchase.

·   The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $6,500.

·   The tax credit applies only to homes priced at $800,000 or less.

·   The credit is available for homes purchased after November 6, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, the home purchase qualifies provided it is completed by June 30, 2010.

·   Single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

December 1st, 2009 | Tags: Add new tag, First Time Home Buyer, Obama Plan, Tax Credit | Category: Uncategorized | Leave a comment

The 2009-2010 version of the home buying tax credit has passed through Congress and the bill should be signed tomorrow by President Obama CNBC.com is reporting.

The details did not change much from the last posting I wrote.  Here are the basics:

• The tax credit will apply to purchase agreements accepted on or before April 30, 2010 and must be closed by June 30, 2010.
• First Time Home Buyers will be able to receive 10% of the home’s price or $8,000 (whichever is less)
• The income limit for first time buyers was raised to $125,000 and $225,000 for couples
• Existing Home Buyers who have lived in their current home for 5 consecutive years during the past 8 years will be able to receive 10% of the home’s price or $6,500 (whichever is less)
• If the buyer lives in their new home for 3 years they will not need to pay the credit back.
• Homes must cost less than $800,000

It was attached to a bill extending unemployment benefits.  It passed the Senate 98-0 and the House 403-12

November 5th, 2009 | Tags: First Time Home Buyer, Home Buying Tax Credit | Category: Buyer Info, First Time Home Buyer, Market Update | Leave a comment