Dean's Blog

The U.S. House of Representatives voted today to extend the first-time home buyer’s tax credit for those who were under contract by April 30, 2010.

Currently, those contracts must close by tomorrow, June 30, 2010, in order for the buyers to be eligible for the tax credit. However, many transactions are taking longer to close, especially those home taken back by the lender or being sold as a short sale.

The new measure would allow buyers to close as late as September 30, 2010 and still be eligible for the tax credit.

So, even though the House voted to extend the tax credit, the Senate must still vote on the extension for the measure to move forward.

Money Magazine recently published an article trying to answer the question: Time to Push the Button on a Condo Purchase? The article pointed out two major issues with buying a condo:

• Volatility
• Financing

Volatility – Historically, condo prices will rise and fall faster and farther than single-family residences. So, naturally, we’re seeing condo prices fall very dramatically. The article points out that while single-family house prices are down 55%, 43% and 41% in Las Vegas, Miami and San Diego, condo prices are down 66%, 63% and 45%, respectively. Further pushing down pricing is the lack of financing, which lowers demand for these units. Even condos here in Mount Vernon and Anacortes are seeing drops in prices when compared to just a few years ago.

Financing – As a professional mortgage advisor, what I know all to well is that financing for condos is significantly more difficult to obtain today than it was just two years ago. First, most private mortgage insurance companies are refusing to insure purchases. That means that in order to get a conventional loan, you have to invest at least at 20% down payment. Second, even if the condo had previously been approved by HUD for FHA financing, all those prior approvals have been thrown out, and the condo association has to start over to gain new FHA approval.

Let’s be clear – financing options ARE available. The challenge is that the builder or condo association needs to start over and submit documents to get a new approval in order to be eligible for financing. FHA and VA maintain their own lists of approved condos, and if the condo isn’t on the list, the lender will not be able to provide financing.

Before making a decision on buying a condo, talk to your local Realtor about price volatility, and speak with your local professional mortgage advisor about available financing options.

By law, you can take advantage of your free credit report once a year from each of the three major credit bureaus (Equifax, Experian and TransUnion).

To get your free credit report, go to www.AnnualCreditReport.com and select one of the bureaus. If you select a different report once every four months, twelve months will have gone by, and you can start over with the first credit bureau again. It’s a great way to monitor your credit all year long.

Now, they will not provide your credit scores for free. You can purchase the scores if you wish. However, these scores are based on a consumer scoring model, and it’s different then the scoring model they provide for the mortgage industry – the consumer scores are usually higher. Additionally, even if you did purchase your score, we cannot use that report for a loan submission because the scoring models differ. Nonetheless, you may want to purchase one bureau’s scores for about $8 if you’re interested.

There are several websites claiming to give you your credit report for free, but they actually make you sign up for a credit monitoring service for a monthly fee. www.AnnualCreditReport.com is the only website where you can take advantage of your free credit report once a year.

Rural Housing, which authorizes up to 100% financing on home purchases in non-metropolitan areas, is getting closer to having more funds available for home purchases.

This program became wildly popular last year as it was one of only two remaining programs that provided 100% financing for home purchases – the other program is VA which is for military employees. Both programs have the added advantage of having no monthly mortgage insurance.

However, with only limited funds authorized by Congress, all the money was quickly tapped out by April 2010, and new monies are not usually reauthorized until the end of each year.

Bills are circulating around Washington, D.C. to provide new funds for this program, and there must be some pretty high expectations that these bills will be passed - Rural Housing just issued a notice stating they were going to re-start issuing conditional approvals on loan packages.

Since lenders are reimbursed by these congressional funds, most lenders are waiting to close on these loans until the money is made available so they don’t have to tap into their own reserves.

Rural Housing is not a home financing program for everybody. The two most significant restrictions are geographic and income:

• The house must be located outside a metropolitan area – usually where the population is less than 20,000 (in Skagit, Island and Whatcom Counties, all areas are eligible except for Mount Vernon and Bellingham)
• The combined household income must be below a particular threshold

Also, one of the bills is restructuring the Rural Housing program so it becomes self-funding. This would be accomplished by increasing the current funding fee from 2.0% to 3.5%. The funding fee is charged to the borrower, but it’s rolled into the loan amount at closing.

Contact your local, professional mortgage advisor for more information on the Rural Housing Guaranteed program.