The World of Mortgage Blog - According to Kimberly and Cathy

Fun Facts about the Real Estate/Mortgage Market

In 2011 investors purchased 1.23 Million homes.  This is up 64% from 2010.

• Investment purchases made up 27% of all the activity in 2011
  • ½ were cash purchases. 
  • ½ were distressed homes
• In a recent survey by Transunion, a troubled homeowner is more likely to let their house payment slip BEFORE they are late on their auto loan or credit cards! Yikes!
  • 9.5% of the troubled homeowners were late on their auto loans and 17.3% were late on their credit cards
  • 40% of them were late on their mortgage.
• In January, more short sales were closed than foreclosures.  This means the banks are agreeing to more deals – good sign!
  • Short sales accounted for 24% of sales
  • Foreclosures accounted for 20% of sales
• The average loan closed in March has a FICO score of 749, and LTV of 77% and a debt-to-income of 35%. – that’s a nice loan. J
  • The average loan denied was a FICO of 699, 85% LTV and a DTI of 43% - this is surprising. 

 

Rates Have Dropped For WSHFC Loans

Washington State Housing and Finance Commission have lowered it's rates....

Effective March 2, 2012, for new reservations only:
 

House Key State Bond:

4.00% with 2 points

4.25% with 1 point

4.50% with 0 points

(Inclusive of Origination point) 

(this is a .25% drop in rate from the previous issue)
 

New Home For You:

3.75% with 2 points

4.00% with 1 point

4.25% with 0 points

(Inclusive of Origination point)

Mortgage Year End Wrap!

Some facts of interest pertaining to mortgage: 

1)       Washington State Housing Finance Commission did sign a new contract with a bank servicer.  Evergreen continues to offer and close on State Bond Down Payment Loans.

2)       Don’t forget the benefits of using the MCC Mortgage Credit Certificate Program.  This give the buyer 20% of the interest they paid on their mortgage back to them at tax time.

3)       FHA 90-day Flipping Rule was only extended till 12/31/2011.  To date, we haven’t received confirmation from FHA that they will extend in to the 2012 year.  This means that if you have an FHA offer, the seller has to be in title of the home for 90 days BEFORE the contact is written up.  We’ll keep you informed of changes.

4)       Investment Purchased are picking up – approximately 35% of the sales.  Couple of reminders:  Buyer must put at least 20% down payment, coming from their OWN money (no gift funds allowed).  Seller can only pay a maximum of 2% toward buyer closing costs.  Buyer must have 6 months reserves on their properties after closing.  If buyer doesn’t have experience with being a landlord, then the buyer must qualify with the full house payment of the rental purchase.

Wishing you prosperity in the 2012 Year!

Tax Credit for First Time Home Buyers

We received a ton of emails from our realtors this past week on how the MCC First Time Buyer Tax Credit Program Works. Many buyers are looking for that extra benefit to purchase, aside from interest rates at record low 4% range. MCC is a program offered through the Washington State Housing Finance Commission (WSHFC). Individual loan officers must be licensed to offer the program, and many haven’t taken the required courses because the loans do require a little more work.

Many of you are aware of WSHFC (nick named State Bond) which offer an assortment of down payment assistance to first time buyers. The MCC program stands for Mortgage Credit Certificate. It gives the buyer a DIRECT TAX credit of 20% of the interest they paid on their mortgage toward a credit of what they owe the IRS.

Example:

Let’s say they finance $200,000 at 4.25%. That’s a standard deduction of $9000 of interest paid for the year on schedule A of the tax return.

Under this MCC program the borrower gets 20% of that $9000 as a tax credit ($1800). This would, of course, be a direct credit against their tax bill. The remaining 80% of the interest deduction/payment goes on the Schedule A.

The true benefit to the borrower: The tax credit is a more direct dollar benefit than a tax deduction reducing a borrower’s taxable income.

Here are the basic details:

€ Must be a first time buyer (if they haven’t owned a home in the past three years they are considered a first time buyer.) If they buy in a ‘targeted area” – as outlined by State Bond - they can also not be qualified as a first time home buyer.

€ Max Sales Price of $475 King and $395K in Pierce County

€ Income Limits based on household size: $97K for 3 people in King, $90K for 3 people in Pierce

€ State Bond will charge the buyer a $695 non-refundable fee on their HUD 1 to originate loan

€ Program can be used with Conventional, FHA, VA

****YOU CAN NOT use the MCC program with the State Bond Down Payment Assist Program. Buyer must have their own funds for down.

New MCC Tax Program can save your buyer approx $200 per month in payments

The Mortgage Credit Certificate (MCC) Tax Credit can save your buyer up to $200 each month in tax savings.

 

This program allows qualified first time home buyers to get a 20% tax credit of the interest expense on the home loan.  This is a n annual dollar for dollar savings back to your buyer.

 

Example:

$240,000 Loan Amount with a 5% rate, means the buyer will pay $12,000 in interest for their loan.  The 20% tax credit would give the buyer $2400 on their federal income tax return.  This would be equal to a $200 reduction in their monthly house payment. 

 

BUYER QUALIFCATIONS

1. Must be a first-time home buyer

2. Must complete a Housing Commission sponsored homebuyer education course

3. Income limits of $80,000 for 1 and 2 person family, and $90,000 for 3+ family size

4. Must occupy the property as your primary residence

 Call us for details.

 

New Down Payment Assistance Funds!!

State Bond just came out with a new City of Seattle $50,000 for down payment assistance funds...call or email us for information!

Here are some talking points to share with potential buyers...

Fannie Mae Home Path – Special offer:  Fannie Mae will pay 3.5% of the buyer’s allowable closing costs through June 30, 2011.  There are over 162,000 homes for sale by Fannie Mae in the US.  This amounts to 15 Billion dollars of real estate and $900 Million Dollars of Realtor commissions.  Many of these homes are offering the realtor a bonus for selling home.  

Mortgage Insurance Companies are starting to ease underwriting guidelines, which will ultimately result in more buyers qualifying for homes.  A couple of changes for the better are:  45% debt-to-income ratio (used to be 41%), lowering credit score requirements, and the ability for the buyer to lower their monthly housing payment with multiple MI options - One being that the buyer can pay upfront MI and have NO monthly MI premium.  For example:  on a $250,000 purchase price, the buyer can save $193 each month by paying upfront MI.  This would allow the buyer to purchase an additional $37,000 in home price.  On a side note, condo requirements are easier, such as no Pre-sale requirements with 70% owner occupied.

Info to Share!

This past 1/15/10, FHA gave a temporary allowance for sellers to flip their property within a 90-day period (with certain requirements - email us if you want a copy of the rules). This allowance is set to expire on February 1, 2011. We anticipate that FHA will extend the time frame, but wanted you to be aware of this pending date.

Where are rates headed? The Bond Ratings firm, Moody put out a report stating that if the US doesn't start taking a stand to reduce the debt, the US may end up with a downgraded rating. This would significantly effect investors from wanting to invest in our economy or in our Treasury Bonds (which effect interest rates). This is something that would be evaluated over the next two years, but would make Investors think twice about their direction.

 

Mortgage Rates on the Rise

 

 

Good Morning – as mortgage interest rates begin to increase we get a lot of questions about what drives the market. We thought we’d do a concise (and overly simplified) set of factors that are impacting interest rate movement in today’s market.

SOME Factors that make Mortgage Rates rise

Unemployment claims decrease (good news for the economy)

Increases in the Stock Market (investors pull money from the bond market and into the stock market)

Any good economic news (investors pull money from the safety of the bond market for better returns in the stock market)

Fears of inflation (banks want to rise rates on inflation fears)

Fears of budget deficits (current efforts of QE2, and the voting on the tax bill and the $1.1 Trillion Omnibus Bill are having an impact)

 

SOME Factors that make Mortgage Rates drop

Bad news about the debt crisis in Europe (investors flock to the relative "safety" of our bonds)

Bad news in the stock market (investors flock to the bond market)

In November ’08 the Fed’s were able to lower rates by the purchasing of Mortgage Backed Securities. (This similar FED action of QE2 effort isn’t having the same impact this time)

High unemployment numbers – as compared to the previous reports (again, bad news in the economy = good news for interest rates)

Mortgage rates took about 6 MONTHS to fall from 5% rate down to the lows at approximately 4%...in the recent 6 WEEKS they have given back all this gain.

 

Use this information to help get your buyers off the fence.

 

This 1% difference in interest rate on a $200,000 loan equates to $119/month payment difference or $22,000 difference in price.

Bond Market Update

****Bond Market Update*******

While the economic data hasn’t been the best, it’s important to stress that the market is better than projected. First, the Initial Jobless Claims number fell to 450K people versus the expectations of 460K, the lowest number in two months.  Additionally, there was a decrease of 402,000 from the prior week of Emergency Unemployment Compensation.  Improved employment will restore America’s fears and bring profit to the stock market, but will put a strain on the bond market. A strong bond market keeps interest rates low.  Improvements will also put less stress on the Fed to keep interest rates low.  Here is another indicator to be watching:  China is our number one purchaser of America’s Bonds, holding $846B.  Some American businesses are feeling China has an unfair competitive advantage because they keep their currency artificially low to increase their exports.  These businesses want our government to place a tariff on all goods brought into the US.  This is both good and bad.  China keeps their currency weak against our Dollar by buying massive amounts of our Bonds…The very same bonds that keep our interest rates low. 

In summary, interest rates are amazing at 4.375% 30 year fixed.  Let your clients know that these rates will most likely increase over the next few months.