Yesterday I received an interesting call from Jennifer Miller of CBS 4 in Denver. She was putting together a story for the 10 o'clock news and wanted to come to my office to interview me. The station was interested in the "Making Home Affordable" initiative that originated in February but became available yesterday.
The plan is aimed at individuals who are and also those who are NOT late on their mortgage payments. Mortgage servicers who choose to participate will be able to reduce your interest rate to a floor of 2% and also extend the term of your loan for 40 yrs to bring the payment down to a 3rd of your gross monthly income.
The second facet to the plan is it will also allow homeowners who owe more than their home is worth to refinance and obtain a market rate.
CBS 4 did a very good story on this program and if you would like to know more of the details I would suggest you visit their site as well.
Click here to read the story
Click here to watch the news cast
Michael Shotnik
Summit Home Mortgage
303-800-4595
Up until a few days ago the conversations about revising the first time homebuyer tax credit were mere speculation. The revised guidelines have now become reality and are a big improvement.
$8,000 Home Buyer Tax Credit at a Glance
Information obtained from the NAHB
I've spent about a year trying to find a good budgeting system. I've tried Microsoft Money, mint.com and even hand written budgets. None of them seemed to work. They either confused me, had to many features that made them over whelming or it was a self created system that I was unable to stick to.
I just found a system that I'm in LOVE with. It's very basic, it's free and it is very customizable. The system is an excel template I found online. Below is a link to the downloadable template:
http://www.free-financial-advice.net/create-budget.html
In order to take full advantage of the template you need to know how to use Excel a little, but it's fairly easy to learn if you've never used it before.
No one really knows if mortgage rates will fall even further but at this point no one can complain about our current position. We have hit a point that matches the lowest mark since Freddie Mac started tracking the data nearly 28 years ago.
As the economy continues to struggle mortgage rates will continue to maintain these low points or even go lower. In my opinion once the economy shows signs of recovery mortgage rates will climb quickly to more reasonable levels. The low rates should really spark the first time homebuyer market and hopefully lead the way to recovery.
By the end of 2009 Denver should be in a very good position. Since the New Year we have already seen a surge in refinance and purchase business that is a great signal for the local real estate market. At this point it's hard for homeowners to sell their home and purchase another but for first time homebuyers this is the perfect conditions to buy in.
Michael Shotnik-
On December 4th details of a Treasury intervention to bring mortgage rates down to 4.5% was leaked. This news was not supposed to be released as the plans are still under discussion. I have not commented on this topic because I wanted to see if more concrete news was going to be released but at this point nothing new has come out and I feel it’s my job to give my opinion on the topic.
First, at this point the plan is just speculation, so I’m remaining central on the issue.
From what we’re hearing the plan will only be eligible for first time homebuyers (people who have not owned a home within the past 3 years). The 4.5% will not be available for refinancing or buying an investment property. In my opinion the plan should included refinance loans. For the people whose budgets are tight the drop in rate to 4.5% would allow for more spending thus help the economy.
Going into the New Year and new leadership I think the 4.5% would be great for the Denver housing market. As a relatively strong market the 4.5% would incent more fence sitters to buy homes. The more buyers we have in the market the less supply Denver has which will level home prices out if not drive them up.
I plan on updating readers on this topic as often as news is released. If you are interested in refinancing or buying a home in the near future this news directly affects you. To be added to my email list send me an email: mshotnik@summit-mortgage.com
Direct Mortgage Banker
E mshotnik@summit-mortgage.com
P 303-800-4595
Referenced from the HUD website: http://www.hud.gov/offices/hsg/sfh/nsc/nschome.cfm
Termination of the FHA monthly mortgage insurance premium (MIP) is based on several factors including: the loan term, loan-to-value (LTV) at loan origination and regulations in place when the loan is closed. Generally, loans closed prior to January 1, 2001 will not be eligible for termination of MIP, which is collected as part of your monthly mortgage payment.
For loans closed on or after January 1, 2001, FHA's MIP will be automatically terminated under the following conditions:
1. For mortgages with terms more than 15 years, the MIP will be terminated when the Loan to Value (LTV) ratio reaches 78%, provided the
borrower has paid the MIP for at least five years. If the LTV reaches 78% and the borrower has not paid MIP for at least five years then the borrower must continue to pay MIP until the five year requirement is met.
2. For mortgages with terms 15 years and less and with LTV ratios of 90% and greater, the MIP will be terminated when the LTV ratio reaches 78%, irrespective of the length of time the borrower has paid the MIP.
3. Mortgages with terms 15 years and less and with LTV ratios of 89.99% and less will not be charged MIP.
Note: The MIP cancellation provision excludes those loans not insured by the Mutual Mortgage Insurance (MMI) fund. The MMI does not cover
mortgage on condominiums or Section 203(k) rehabilitation loans.
Although the MIP will be terminated as described, the FHA insurance will remain in force for the loan's full term. This MIP termination provision only applies to loans where the borrower also paid an Up-front MIP at closing.
FHA will determine when a borrower has reached the 78% LTV ratio based on the lesser of the sales price or appraised value at loan origination. For example, if the lesser of the sales price or the appraised value at origination was $100,000, when the loan amount reaches $78,000, HUD will no longer collect MIP on the loan.
FHA's regulations do not permit a borrower to submit a new appraisal to reach the threshold for termination of MIP. Termination of MIP will normally be based on the scheduled amortization of the loan. However, borrowers may reach the 78% threshold in advance of the scheduled amortization because of prepayments of loan principal. A borrower whose loan reaches the 78% LTV threshold sooner than projected because of prepayment may have the MIP terminated (but not sooner than five years from loan closing for loans with terms greater than 15 years) if the borrower has not been more than 30 days delinquent in paying the mortgage payments during the previous 12 months. The borrower must submit a termination request to the lender and the lender must provide the borrower's request and supporting documentation with respect to the mortgage payments during the last 12 months to FHA for such termination.
If you have questions regarding the termination of MIP, go to the following HUD website: http://www.hud.gov/offices/hsg/sfh/nsc/nschome.cfm or contact 1-800-CALL FHA.
WASHINGTON - U.S. Department of Housing and Urban Development Secretary Steve Preston today announced the new Federal Housing Administration (FHA) mortgage loan limits for single-family homes as prescribed by the Housing and Economic Recovery Act of 2008.
Beginning January 1, 2009, FHA will insure single-family home mortgages up to $271,050 in low cost areas and up to a maximum of $625,500 in high cost areas. The February 2008 Stimulus Package temporarily raised the FHA maximum to $729,750 through December 31, 2008. The new $625,500 maximum, however, represents a significant increase over the $362,790 limit that was in effect prior to the Stimulus Package.
"In today's environment where access to credit is being restricted, we need to make mortgage loans readily available to households throughout the country, and especially in high-cost areas," said Preston. "These new loan limits will ensure FHA can to continue help struggling homeowners refinance into safe, affordable government-insured loans, and allow many first-time buyers take advantage of today's buyers market"
For several years, FHA's loan levels were below the cost of the average home in communities across the nation. As a result, families who needed FHA mortgage insurance to qualify to buy a home were effectively locked out of the process. In some cases, borrowers turned to exotic subprime loans.
FHA mortgage insurance makes home financing more available to low-income and first time homebuyers. This is because the mortgage is backed by the full faith and credit of the government, freeing lenders from assuming the risk of default.
Higher FHA loan limits do not cost the government any money because the FHA Insurance Fund is fully supported by premiums paid by borrowers who receive FHA-insured mortgage loans.
The Housing and Economic Recovery Act pegs the national conforming mortgage loan limit to a house price index chosen by the new Federal Housing Finance Agency (FHFA). For 2009, the national conforming limit will remain at the current level of $417,000.
The Act says that the new FHA loan limits will be set at 115 percent of the median house price in a given area, as determined by HUD, but can not be lower than 65 percent of the conforming loan limit (the national floor). Also, the FHA mortgage limit cannot exceed 150 percent of the national conforming loan limit (the national ceiling).
Release is from the HUD website: http://www.hud.gov/news/release.cfm?content=pr08-174.cfm
If you are one of the many Americans that routinely watches the local news than you mostly likely think no one is able to buy or sell real estate in the current market. The media is in the business of entertaining whether it be true or false and in the case of the local Denver Real Estate market is way off. The term that is regularly used like “credit freeze” and all the publicity given to failing banks greatly discourages first time and seasoned buyers from buying a home. Any investor will tell you to buy low and sell high, now is the low point and for some reason the media is scaring people away from real estate. Homebuyers will realize the most benefit by buying in this real estate lull and selling at the next high. The process is cyclical and proven to re-stabilize and produce massive gains every time.
To set the record straight we have outlined steps to homeownership in this market:
1. Find
2. Qualify
3. Budget
Find. The first step is to find a price range and quality of home you are interested in. Denver and the Metro area vary greatly depending on the aspects of a neighborhood that are important to you. A local real estate agent can easily provide you with detailed information about a particular home or area of Denver.
Qualify. After you have decided you would like to buy a home a very important step is to speak with a mortgage professional. As a mortgage banker I can help you determine what purchase price you qualify for and also what type of loan product is the best fit for your individual situation. Many home buyers avoid this step until they are very involved in the home buying process. I always recommend starting early because by the time you find the perfect home you won’t want to talk to me about interest rates and amortization terms you’ll want to spend time at Crate and Barrell picking out your furnishings.
Budget. Whether you need to save for a downpayment or prepare for move in costs budgeting is another important aspect. As a home buyer you will have additional costs as well as financial benefits that will need to be incorporated into your monthly and annual budget. I suggest planning financially before and after the home purchase.
Finding, Qualifying and Budgeting for your new home is an exciting process. If you focus on the 3 elements laid out above you will discover just how beneficial owning your own home can be.
In an effort to educate our clients we hold monthly workshops to focus on Finding, Qualifying and Budgeting for home ownership.
EMAIL ME TO INQUIRE ABOUT THE NEXT HOMEOWNERSHIP WORKSHOP – mshotnik@summit-mortgage.com
Final bit of advice:
The absolute truth about real estate regardless of the market conditions is the sooner you get in the sooner you’ll realize your financial potential.
Mortgage Banker
There is a lot of confusion about escrow accounts. I think this confusion comes from the fact that there are a lot of moving parts. Essentially an escrow account is an account attached to your mortgage that on a monthly basis collects taxes and insurance that you pay within your mortgage payment. For some types of loans an escrow account is an option to you where as some types of loans require you to "escrow" your taxes and insurance.
Taxes are due 2 times per year and home owners insurance is generally due 1 time per year. It is easier for most people to pay a fraction of these 2 obligations on a monthly basis opposed to lump sum payments. The funds you pay go into an account that collects the funds and disburses/pays your taxes and home owners insurance when they are due.
In my opinion they are a huge convenience. I would much rather make smaller payments throughout the year opposed to large payments.
Valuable information from an article I found in Yahoo Real Estate:
http://realestate.yahoo.com/info/guides/how-does-escrow-work
When you put money in escrow it is held by a neutral third party (called an escrow agent) who works for both the lender and the borrower. The agent's role is to carry out the instructions agreed upon by both parties. The money is released when all the terms of the agreement are met. Escrow can be involved in anything from multimillion-dollar building projects to purchases made on online auction sites.
When your mortgage closes, your lender will usually require you to open an escrow account to cover property taxes and homeowner's insurance. You'll make an initial deposit, followed by payments to the account every month. (Usually these are added to your regular mortgage payment.) The escrow agent will then release these funds as your taxes and insurance premiums come due.
The idea is to protect the lender by ensuring that you pay your taxes and insurance on time. If you default on your property tax, for example, your municipality can put a lien on the house, which would make it difficult to sell. Or if your house burns down and you've neglected to pay the insurance, the lender would be left with no collateral.
Escrow can benefit borrowers by helping them spread insurance and tax expenses evenly over 12 payments. For example, assume your yearly property taxes are two payments of $1,000 each, and your insurance is $400 annually. If you paid these directly, it would mean three large payments a year; your escrow costs, however, would be a manageable $200 a month.
Your escrow account will have a built-in cushion -- if you miss a payment, the lender must still be able to pay your accounts on time. However, federal law prohibits lenders from requiring more than two months. expenses in escrow. And because your tax and insurance costs will change slightly from year to year, the lender will review and adjust your escrow payments annually.
In most states, the money you place in an escrow account earns no interest for you. For that reason, many borrowers prefer to pay their taxes and insurance directly. Lenders may agree to this if your down payment is more than 20 percent, although some will raise your interest rate slightly to compensate. Once you agree to putting funds into an escrow account, however, it is difficult to cancel it, so make sure you fully understand the arrangement before your mortgage closes.
mshotnik@summit-mortgage.com
Treasury Secretary Henry Paulson spoke with reporters Monday regarding the implications of the bailout. He said the the bailout should not be viewed as an expenditure but an investment. Paulson also said "Our purpose is to increase confidence in our banks and increase the confidence of our banks, so that they will deploy, not hoard, their capital". The injections of funds are intended to relive the banks of bad debt that is killing their lending ability.
For you and I the increase in liquidity should bring more homebuyers into the market, allow for more refinances and bring some life back to the housing industry. As a large sector of the economy we all gain when real estate does well.
I'm glad to hear the Treasury Secretary is adamant about banks lending money. Depending on how quickly the Fed is able to inject funds I think we will see a relatively quick turnaround in the lending industry.
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