Home Sweet Home, Insider-Tips on Minnesota real estate.

Renters Lose Edge on Homeowners

The relative cost of owning versus renting is swinging back in favor of homeownership in some U.S. markets, buoyed by several quarters of sharp declines in home prices.

At the height of the housing boom, as home prices surged, demand for rentals started to rise as the gap between owning and renting widened significantly. Even after the housing market soured, apartment demand grew as former homeowners became renters, allowing landlords to push healthy rent increases.

By NICK TIMIRAOS Wall Street Journal

Valuable links for home buying:

Below are some links regarding information:

FHA 203K program highlight sheet link

 

 

First Time Buyer Tax Credit highlight sheet link

 

 

First time buyer tax credit Questions and answers link

 

 

Best Assets-HUD homes for sale-

 

2008 Home Buying Guide:

 

What's In the Foreclosure Prevention Plan

The Obama administration yesterday released its long-awaited plan to stem foreclosures. It's organized into three categories:

1) Help for homeoners making their payments but at risk of default and foreclosure. Homeowners with a Fannie Mae or Freddie Mac loan would be eligible to refinance as long as their mortgage doesn't exceed 105 percent of the home's current market value. Currently owners need to have at least 20 percent equity. Potential impact: 4-5 million households.

2) Help for homeowners already in default and in need of loan modification. For lenders that voluntarily agree to lower a borrower's payment so that it makes up no more than 38 percent of the borrower's income, the government would share the cost of lowering the mortgage burden to 31 percent of income. Incentives to lenders to participate include a $1,000 payment. Borrowers can receive up to $1,000 as an incentive to stay current on their new mortgage. Still in the works is a proposed provision that would allow bankruptcy judges to require loan modification (known as a cramdown) as part of a household's restructuring. That provision requires legislation by Congress. Estimated potential impact: 3-4 million households.

3) Doubled resources to Fannie Mae and Freddie Mac. To encourage investors to buy the secondary market companies' mortgage-backed securities, the government explicitly backstops them to up to $400 billion, twice the current amount.

The plan does not provide help to investors or to homeowners who are in trouble with a second home, nor does it apply to homeowners whose mortgage is part of a private-label mortgage security that is not backed by Fannie Mae or Freddie Mac.

"The administration's proposed plan, combined with provisions like the $8,000 first-time home buyer tax credit in the just-enacted American Recovery and Reinvestment Act, will help minimize foreclosures, shrink housing inventory, stabilize home values, and move the country closer to an economic recovery," says NAR President Charles McMillan.

Source: REALTOR® Magazine Online

Home buying tax credit information

American Recovery and Reinvestment Act (ARRA). There is important news for future homebuyers included in this legislation: an $8,000 home buyer tax credit (also known as a housing tax credit) available to first time buyers!

Here are some important details of the home buyer tax credit included in the ARRA:

1. This tax credit is only available to first time buyers. The law defines a first-time buyer as someone who has not owned, or been included on title to, a property in the last three years. All home buyers who will be on title need to be first time buyers (for married couples BOTH spouses must qualify as first-time buyers).

2. Both resident and non-resident aliens who are not U.S. citizens can qualify for this tax credit.

3. The house must be purchased between January 1, 2009 and December 1, 2009.

4. The tax credit is actually calculated as 10% of the purchase price of the home, up to a maximum of $8,000.00. To qualify for the full $8,000 – the property price must exceed $80,000.00

5. There are income limits on this tax credit. First-time buyers with gross annual income of $75,000 or less will qualify for the full benefit. The credit is scaled (reduced) for gross individual

Foreclosure Prevention Plan

The plan would draw $50 billion from existing financial bailout money, as well as $25 billion from government-backed entities like Fannie Mae and Freddie Mac.

Part of the program would instruct Fannie and Freddie to automatically approve refinancing at current rates. That change is expected to give 4-5 million people an immediate reduction in their mortgage payments, according to a senior administration official. 

Another component would provide government incentives to modify at-risk mortgages to drive down payments. Lenders would be asked to reduce monthly payments to 38 percent of the borrower's income, and then the government would split the cost of reducing that to 31 percent.

FOX News' Wendell Goler and The Associated Press contributed to this report. 

5 Tips for Homebuyers Seeking a Mortgage

Here’s a warning for potential borrowers: Nervous lenders have tough new rules and are paperwork crazy.

"Borrowers are going to have to prove they are the borrower they say they are," says Keith Gumbinger, vice president of HSH Associates, a mortgage-industry publisher in Pompton Plains, N.J.

Gumbinger says homebuyers should consider these things before they apply for a loan.

1. Down payments are critical. Borrowers should expect to put down at least 10 percent for a “conforming loan” – a mortgage that Fannie Mae and Freddie Mac will purchase.

2. Credit scores count. A 720 on the 850-point FICO rating scale will get a borrower access to the best rates. Rich Bira, branch manager of FCM Direct Lender in Chicago, says: "A score between 720 and 739 gets 0.125 percent added to the rate, a score between 700 and 719 gets 0.375 percent added to the rate, and a score between 680 and 699 gets 0.5 percent added to the rate.”

3. Consider VA and FHA. Borrowers without down payments or with less than stellar credit scores should consider these government-insured loans offered through the Federal Housing Administration of the Veterans Administration.

4. Unearth the records. Before applying, borrowers should organize tax, banking and other records that prove income, savings and debts. They should also expect to be patient about what may seem to be endless requests for information.

5. Get rid of debts. Limiting debts, including what borrowers expect to pay for the mortgage, to less than 43 percent of gross income is important

Housing Fix's Challenge: Making Modified Loans Attractive

The Obama administration's housing plan, set to be rolled out Wednesday, will have to reckon with a little-understood fact underlying current efforts to slow foreclosures: More than half of mortgage modifications have left borrowers with the same or higher loan payments.

While modifications are designed to keep owners in their houses, by the time they are worked out, borrowers often are well behind on their loans. Lenders often add these past-due amounts -- which can include principal, interest, taxes and insurance -- driving monthly payments higher. At the same time, lenders have been reluctant to reduce principal even for borrowers who owe far more than their homes are worth.

Higher loan payments may make sense in limited cases, but they increase the likelihood of the modification failing, critics say. "If you restructure a loan so that people pay the same or pay more, it's probably not going to work," said Iowa Attorney General Tom Miller.

Thirty-eight percent of recent loan modifications resulted in increased payments for borrowers, according to an analysis by Alan M. White, a professor at Valparaiso University School of Law in Indiana, while 13% resulted in no change to payments. The study looked at more than 23,000 modifications between Dec. 26, 2008, and Jan. 25, 2009, involving subprime mortgages and Alt-A loans that were packaged into securities.

Mortgage servicers try to structure payments so they are affordable to borrowers, said Jay Brinkmann, chief economist of the Mortgage Bankers Association. Where payments rise as a result of modifications, he says, the increases are often modest.

There are some signs mortgage companies are becoming more aggressive when helping troubled borrowers. Twelve percent of recent loan modifications included some forgiveness of principal, interest and fees, according to Prof. White, compared with 10% in November and 2% between July 2007 and June 2008.

For complete article by Ruth Simon of the Wall Street Journal click here

Distressed Homeowners Get New Options in Plan

WASHINGTON -- President Barack Obama's plan to aid troubled homeowners, set to be unveiled Wednesday, will include efforts to cut monthly mortgage payments, allow more borrowers to refinance their loans and give bankruptcy judges greater power to modify mortgages, according to people familiar with the proposal.

The array of options fills in some of the blanks left by Treasury Secretary Timothy Geithner last week when he unveiled the Obama administration's overhaul of the $700 billion financial-system bailout plan, which he said included an as-yet-to-be-outlined new approach to housing. Many economists say addressing the cycle of foreclosures and falling home prices is one key to ending the financial crisis.

At the heart of the plan is an effort to make loans more affordable by providing a government subsidy to help mortgage companies modify certain troubled loans. The administration is expected to kick in $50 billion out of the bailout fund to help mortgage companies with the costs of such an effort.

For complete article by Deborah Solomon in the Wall Street Journal click here.

Homebuyers tax credit

Tax credit to $8,000, from $7,500, and drops the repayment feature for buyers who hold on to their property for at least three years.
 
The legislation also extends the effective date of the credit to December 1 from June 30, and extends eligibility to borrowers who buy their home with the help of state or local financial assistance that comes from the proceeds of tax-exempt mortgage revenue bonds.  The credit remains open only to first-time buyers (those who haven't owned in at least three years) and some income eligibility restrictions apply, but those are unchanged from the existing program.
 
Other provisions reportedly in the bill that could help housing markets and communities include:
 
* FHA and conforming loan limits. Specifics have not been released but reports indicate that the 2008 limits have been reinstated for 2009 except in those communities where the 2009 limits are higher. Additional increases in individual communities may also be available at the discretion of the secretary of the U.S. Department of Housing and Urban Development.
 
* Foreclosure mitigation and neighborhood stabilization. Funding for states and localities to be used for neighborhood stabilization activities for the redevelopment of abandoned and foreclosed homes are authorized. Some news reports put the funding level at $2 billion.
 
* Rental assistance. Up to $1.5 billion to provide short-term rental assistance and other aid for families during the economic crisis.
 
* Low-income housing grants. Allow states to trade in a portion of their 2009 low-income housing tax credits for Treasury grants to finance the construction or acquisition and rehabilitation of low-income housing, including those with or without tax credit allocations
 
* Tax-exempt housing bonds. Tax-exempt interest earned on specified state and local bonds issued during 2009 and 2010 will not be subject to the Alternative Minimum Tax (AMT). In addition, financial institutions will have greater capacity to purchase tax-exempt state and local bonds
 

Energy efficient housing. Grants for energy retrofits for federally assisted housing (Section 8), funding for energy efficiency and conservation block grants to states, and increases in the residential tax credit through 2010 for certain energy efficient upgrades.

 

Source: NAR, AP, Washington Post, New York Times, Bloomberg, and The Wall Street Journal

Again Extend Foreclosure Freeze

By JOHN KELL Wall Street Journal

Fannie Mae and Freddie Mac once again suspended foreclosure sales of occupied properties, this time through March 6, to give loan servicers more time to help financially strapped borrowers avoid foreclosures.

The new moves are the latest steps to aid the housing market by the mortgage giants since they were seized by the government in September. They follow commitments earlier Friday from J.P. Morgan Chase & Co., Citigroup Inc. and Bank of America Corp. for weeks-long moratoriums on foreclosures.

Freddie Mac said its extension was for single-family and 2-4 unit properties and doesn't apply to vacant properties. Fannie Mae said the extension was offered as the government works on a financial stability plan slated to include billions of dollars aimed at keeping people in their homes.

In November, both companies first suspended foreclosure sales until the end of the year and announced extensions of the program twice in January, with the latest suspension planned through Feb. 28.

Lawmakers in a congressional hearing Wednesday asked the executives of several of the nation's largest banks to institute a moratorium on foreclosures until the details of a revamped government bailout effort are announced.

President Barack Obama is scheduled to outline his plan to stem foreclosures next week.