Market News 7.31.08

Loan Products

Each day the lenders are getting more restrictions on what they are offering:

PMI products are now being approved after the purchasers credit is checked. The rate for PMI is directed by the credit report - the higher the report the lower the rate. Please check with your lender on the requirements for your buyers. You could have a situation where the buyer was approved for a loan but NOT the PMI!

The 80% loan to value mortgage is the benchmark for the bank - the old 80-10-10 or 80-20 loans to avoid PMI will NOT be available.

Tax Credit for 1st Time Buyers

This is for first time home buyers who purchase a primary residence between 4.9.08 and 7.1.09. They will be eligible for a tax credit of $7,500 or 10% of the purchase price, whichever is less. A tax credit is a dollar for dollar reduction in your tax bill, which makes it more valuable than a deduction. This provision has many caveats:
1. You must pay it back as it is really an interest-free loan. Homebuyers who claim the credit will be required to pay it back over 15 years, starting in the second year after the home is purchased. If you sell your house before the 15 years has elapsed, you will to repay the entire balance, unless you sell at a loss.
2. If you income exceeds certain thresholds, you're ineligible for the credit. The tax credit phases out for single taxpayers with adjusted gross income of $75,000 to $95,000. Form married couples who file jointly, the phase-out is $150,000 to $170,000. Check this out with your accountant or CPA.

Changes for Reverse Mortgages

A reverse mortgage is a loan against home equity that doesn't have to be repaid until you move, sell your home or die. To qualify, you must be 62, or older. If the home is owned jointly, both owners must be at least 62.

Fees: Most borrowers pay hefty up-front fees for a reverse mortgage, which reduces the amount of money available to borrow. The housing bill limits origination fees for federally insured reverse mortgages to 2% for up to $200,000 of a home's value, plus 1% for the amount that exceeds $200,000, up to a maximum of $6,000. There are addition limits for loan amounts and some restrictions on locations. The maximum home value is now $625,500 - which are offered in high cost areas. Check out the additional details with your lender.

Also -

Here are a few details of the Housing and Economic Recovery Act of 2008 signed into law today by President Bush:

Higher permanent loan limits for conventional conforming and FHA will become effective Jan. 1, 2009; the Act calls for limits to increase to a maximum amount of $625,500, depending on the metropolitan area.

FHA floor limits will remain the same at $271,050.

A moratorium on risk-based pricing for FHA loans will go into effect Oct. 1, 2008

Seller-funded Down Payment Assistance Programs with FHA loans will be terminated Oct. 1, 2008.

Condo processing for FHA loans will be streamlined.

Minimum cash investment for FHA loans will increase to 3.5%.

FHA reverse mortgages (HECM): changes include higher loan limits, availability with purchase transactions, and a modification to the origination fee.

Condo processing for FHA loans will be streamlined.

The VA guaranty will increase.

Information provided by:
Lesa Lindsay
Vice President
Mortgage Account Executive
Crescent State Bank