Tax Credit Boost?

When the Obama Administration announced that first-time home buyers would receive an Eight Thousand Dollar ($8,000) Tax Credit to assist them in the home buying process, my first thought was a positive one because the idea of affordable housing and financing is one that I have been talking about and practicing in my capacity as a mortgage loan officer and before that as a realtor and realtor associate, by utilizing FHA mortgage programs for purchases and refinances.

In my opinion though, it is one thing to have the opportunity and quite another to take advantage of it. So I would urge those first-time home buyers who qualify for the program to waste no time to procrastination or any other unproductive time-consuming activity that would delay their taking advantage of this gift from the Administration.

An amount of Eight Thousand Dollars ($8,000) adequately represents the total down payment needed for the purchase of a home priced at Two Hundred Twenty Eight Thousand Five Hundred Dollars ($228,500) – if the purchase is financed with a FHA 203b or 203k mortgage – with a little left over to buy a floor rug.

Just this morning I had a conversation with one of my newest customers who had an opportunity to purchase a home for $228,000 exactly, and the amount discussed as his required down payment was $$7,900. So, to first time home buyers; A word of encouragement: Go find a home and buy it!

Workable Home Buyer/Seller Solutions

Home sellers and buyers can benefit simultaneously by utilizing a procedure available to FHA-insured 203k and 203b mortgagors. The procedure casually known as mortgage assumption or take-over mortgage was another method of transacting the business real estate transactions when I was selling homes in the 1980s, but I’ll come back to that later. First there need to be some home selling preparations discussed.

It is rather obvious that in order to sell a home (be a home seller) a person must first own one (be a homeowner) and as such, must transition from homeowner to home seller. Once the decision to sell is made, preparations must be undertaken to effect a successful transition. For the purpose of this page, success in selling a home is considered an eventful occasion of signing one’s deed over a purchaser while accepting from the closing attorney, a check for the net proceeds of the transaction.

To accomplish a successful sale, the transition from homeowner to home seller has to be undertaken. This entails making the stated preparations in a methodical, step-by-step manner. Generally there are three preparatory steps to consider. The first is self-preparation (mental detachment from the home), the second is preparing the home for traffic (showings to a number of prospective purchasers and realtors), and the third is preparing the product – now looked at as someone else’s potentially big-ticket purchase – to bring the best possible price (perform needed cosmetic, structural and energy conservation repairs), so that a home seller has the distinct edge needed to effect a successful sale in competitive markets.

Making the transition

The first two preparatory steps, though difficult at first, will be easier to achieve than the third because no substantial sums are required to be spent. The third step however, may require the outlay of funds, depending on the physical integrity of the dwelling. At this juncture it may be difficult for a home seller to determine exactly what needs to be done in order to properly prepare, so he/she may require a third-party opinion; Someone who is not affected one way or another by success or failure of the sale, but who can be relied upon to provide an honest evaluation of what needs to be done to the home.

A home inspector or appraiser may be best suited for this inquiry, but most likely there will be a fee charged for services rendered. While it is true that fees paid to appraisers and home inspectors are usually borne by home buyers and not home sellers, it is also true that by the time a home buyer starts paying out those fees, an agreement is usually in place between the parties, and in most cases, a contract of sale has already been signed.

Under such a circumstance, the agreed-upon price may not have favorable to the seller since the purchaser would’ve had the advantage of home shopping experience to rely on in negotiations and the seller usually would not.

Assumption

An alternative which could be of mutual interest would be for mortgage holders/servicers to allow “mortgage assumptions” similar to FHA 203k and 203b mortgages. In a mortgage assumption transaction, the purchaser assumes the responsibility of a seller’s existing mortgage and pays the purchase price balance from his/her own cash resources or raise funds needed to complete the purchase from other financing sources.

Mortgage assumptions would help to resolve many of the problems faced by home sellers and buyers when seeking to consummate real estate transactions. Of course, the holders/servicers of those existing mortgages would need to cooperate by waiving acceleration clauses written into most conventional mortgages. If the waivers are agreed to, those entities would be assured of retaining the mortgages as well as acquiring new customers at the same time.

Homeowners who refinanced their homes utilizing FHA-insured financing within the last two years or earlier can automatically take advantage of assumption mortgage permissions in the mortgage documents when selling, thereby simplifying the selling process, creating a better bargaining position for themselves, and eliminating market rate restrictions. It just seems to make practical sense; especially in sluggish-to-slow markets.

If the government can’t run business, how come businesses always run to the government for a bailout when it runs into trouble?
FHA-insured mortgages, government run for 75 years. Not too shabby, huh?


Housing Crises: When Every Penny Counts!

Financing solutions

Two mortgage articles I wrote early last year dealt with possible solutions to some of the problems that existed in the real estate and mortgage industry – see Government Program Could Ease Sub-Prime Mess 01/17/2009, and Mortgage Offers New Expected Yields 03/10/2008 – for more on those articles which, as with most of my articles and blog posts, dealt with the FHA-insured financing programs for residential one-to-four family homes and mixed-use properties (203(b), 203(k) and HECM reverse mortgages); but based on my objective which is to help home buyers and homeowners find affordable, practical methods of financing, it is necessary that I write something about the latest affordable housing program, Making Home Affordable, announced by the Administration early this year, even if it focuses more on Fannie Mae & Freddie Mac than FHA.

Initiative

In accordance with a July 1 Press Release, HUD Secretary Shaun Donovan announced the expanded eligibility for the Making Home Affordable program announced by the Administration on February 18, 2009. The Secretary’s announcement makes the program available to borrowers who are up to 125% underwater (higher mortgage balance than home value) in the Las Vegas area. That community tops the list of those “hardest hit” by the mortgage crises and thus served as an appropriate venue for announcing the 20% increase in eligibility over the original maximum of 105% announced in February.

The Federal Housing Finance Agency has provided authorization for borrowers with mortgages owned or guaranteed by Fannie Mae and Freddie Mac to refinance their loans according to terms of the newly modified Making Home Affordable refinance program which is expected to increase the number of homeowners who will be eligible to participate. This announcement is viewed by many as a positive step in addressing the mortgage financing needs of many hart-hit communities.

Improvement

The opinion of this author when the program was first introduced in February was that it didn’t go far enough to address people’s financing problems because there was already a mortgage program on the books that allows for 110% LTV financing, which included home repair costs of up to $5,000, and which I covered in several of my articles under the term FHA 203k, so I could not get very excited about a new program that allowed for less than 110%, even though it applied primarily to Fannie Mae & Freddie Mac (under FHFA authority as of last Sept), instead of HUD/FHA.

This latest initiative though, should serve to make a significant difference in the mortgage refinance efforts of those homeowners in an “underwater” mortgage situation, and it is one that this author can certainly embrace and, yes, get excited about. I had intended to start this article with the following oft-repeated terms, but found 125% financing much more appealing:

“When push comes to shove”; “When the rubber meets the road”; “When the going gets tough…” You know the rest!

According to Secretary Donovan, “…The president’s Making Home Affordable plan is already helping far more families than any previous foreclosure initiative and with today’s announcement we will extend its reach even further.” With that objective, it would seem to this author that homeowners in all parts of the country can look forward to more positive results in their refinancing efforts.

Javeton-

Notes:

Portions of this article are based on information obtained from the Making Homes Available Web site at http://www.makinghomesaffordable.gov/.Information also available on HUD’s Web site

Running Business

If the government can’t run why is it that business always run to the government for a bailout when it runs into financial trouble…like a recession?
FHA-insured mortgages… Government-run for over 75 years! Not too shabby, huh?