Sound Mortgage Planning Blog

Alright, I am obviously human and bound to make a mistake here and there. As long as I recognize this, I am continuing to grow and learn.

I mistakenly stated that FHA was going to require 3.5% for a down-payment effective October 1st, 2008. This was incorrect. It should have read that the 3.5% down-payment would be in effect January 1st, 2009.

This means that a borrower using FHA financing need only 3.0% for a down-payment until the new down-payment change effective January 1st, 2009.

I do apologize for any confusion there may have been.

P.S. Don't forget to...

On October 10th, 2008, the President signed Public Law 110-389, the Veteran's Benefit Improvement act of 2008.

Highlights include:

• Extension of VA ARMs--extends the guaranty of ARMs through September 20, 2012

MOST IMPORTANT, after many years of being behind the times:

• Enhancement of regular refinancing loans, effective immediately, the max guaranty amount for regular refinance loans is the same as purchase loans. That means loan amounts of up to $417,000 for a refinance.
• Refinance loans are now available up to 100% of the appraised value of a home (previously 90%)

These enhancements are for rate and term refinancing AND cash-out refinancing!

Call me today to take advantage of the new VA benefit enhancement!

Shawn Anderson-(360) 402-0308

Once again PC Bank has received a five star rating from Bauer Financial Inc! Click on the Stars to read the report!

BauerFinancial has been reporting on and analyzing the performance of U.S. banks and credit unions since 1983.

No institution pays for its rating, nor can they elude it!

BauerFinancial Recommends All Five-Star and Four-Star Institutions "Because peace of mind matters"

PC Bank has been recommended for 22 consecutive months!

In an effort to keep you updated on the most recent changes to our industry, here is a brief highlight some of the most recent changes:

Changes upfront Mortgage Insurance Premium for all FHA case numbers issued after 10/1/08 and requires First Time Home Buyers to take a HUD Approved Pre-Purchase class to get a reduced up front premium PRIOR to signing a purchase agreement.

Follow the provided link to a list of the HUD Approved Housing Counseling Agencies for First Time Home Buyers. NOTE: Even if the First Time Home Buyer attends a group session or homebuyer education class that covers the topics required by HUD, they do not meet the level of one-on-one counseling needed to receive the reduced mortgage insurance premium.

Changes the minimum down payment to 3.5% not including borrower's portion of closing costs. This is set to change effective October 1st, but with loans already in process, will be effective with FHA case numbers issued January 1, 2009.

Closing costs may not be used to help meet the minimum 3.5% downpayment requirement. Closing costs are not considered in the mortgage amount/downpayment calculation for purchase money mortgages.

For purchase money mortgages, the LTV is 96.5 percent.

When combined with the FHA first mortgage, government subordinate liens are not limited to 100 percent. The CLTV can exceed 100 percent of the appraised value.

Sellers are still permitted to provide financing concessions up to 6 percent of the sales price.

As your trusted loan advisor I am always available to you should you have questions regarding any loan program or financing alternatives.

Make it a great day!

Shawn Anderson

Here is  a brief overview of the new tax credit for First Time Home Buyers:

• The tax credit is for people buying their first home
• To qualify for the full $7,500, individuals must earn less than $75,000 annually, while couples may earn up to $150,000.
• Individual buyers with income of up to $95,000 and couples with income up to $170,000 are eligible for a partial credit.
• First Time Home Buyers represented about 20% of the market for new homes in 2007.
• The industry has had success with tax credits in the past. In 1975, Congress passed a $2,000 credit for home buyers (about $8,200 in today’s dollars).
• Buyers flocked to the market and cleared out a then-record inventory of homes.

How it Works

• Buyers who have not owned a home in the past three years can take a tax credit worth 10% of a home’s sale price, up to $7,500, whichever is smaller.
• The credit is good for homes closed on or after April 9, 2008 and before July 1, 2009, and can be taken on taxes filed during 2008 or 2009.
• Unlike tax deductions, which only offset taxes by lowering taxable income, the tax credit is a straight dollar-for-dollar deduction of your tax bill. So a buyer who would ordinarily pay $8,000 in taxes would pay just $500.
• It’s also “refundable,” which means if a buyer’s taxes are less than $7,500, the government will send them a check for the difference. For example, if a couple’s income generates a tax bill of $5,000, the government will refund all of that plus $2,500.
• Buyers must start paying back the loan within two years, at a rate of no more than $500 a year for 15 years. When the home is sold, any outstanding balance will be repaid from the profit; if it’s sold at a loss and the difference will be forgiven.

Caveats

• This does not provide the first-time borrower with cash up front.
• The borrower applies to get the credit after the fact.
• This results in a delay before the first-time buyer gets the financial advantage.
• It may have the appearance of being free money. It’s not.
• This is a loan from the IRS.
• It's important to understand that while this is a tax credit upfront, it will be a tax obligation down the road.

*Please know that I am not a tax advisor or tax consultant. Please contact your professional tax advisor or consultant if you have questions about the ‘tax credit’.

Resources: CNNMoney.com-Les Christie "Beware the $7,500 'tax credit' 08/18/2008, The Providence Journal-Some questions, answers on tax credit for homebuyers-Michelle Singletary, The Washington Post 08/18/2008.