How does the new stimulus package affect your plans to buy a home? The new legislation is definitely a mixed bag for home buyers.
HIGHLIGHTS:
NATIONAL LENDER LICENSING: One of the major highlights is that all mortgage brokers nationally (except for those employed by a nationally chartered bank) must be licensed. Upon initial review, it appears that Colorado’s new licensing requirement actually exceeds the new national lender licensing, so lenders licensed by Colorado have exceeded the new standards. This should go a long way to protect home buyers from unscrupulous lenders. And don’t be surprised to see federal licensing for ALL lenders soon, which will include the federally chartered banks.
FHA RESCUE: This part of the bill is getting a lot of press as homeowners believe this could be the magic solution to their mortgage woes. The truth is that the legislation creates a voluntary program for lenders to write down the loan balance in exchange for an FHA guaranteed loan not to exceed 90% of home’s value. Sounds great for the home owner, but the tricky part will be getting the lender to agree to write off the balance of the loan and pay a 3% FHA loan origination fee. The homeowner needs to qualify as well for the new mortgage and have a debt-to-income ratio above 31% on the original loan.
$7,500 TAX CREDIT: Another item getting a lot of press is the $7,500 first-time home buyer tax credit. This credit is for buyers who have not owned a home in the last three years (or who are buying because of a qualifying event such as a divorce) and is only for a primary residence. The tax credit provides a maximum of $7,500 to be taken as a single line credit for qualifying home buyers. The credit is actually a loan and it will be paid back in the following 15 years (or immediately becomes payable if the property is sold). The credit applies for purchases between April 9, 2008 and July 1, 2009. Be sure to check with your tax advisor before taking this credit.
LARGER FHA LOAN AMOUNTS: Another highlight is the raising of the FHA loan limits for most metropolitan areas. Although lower than the temporary limits established by prior legislation, these changes are anticipated to be more lasting. While they won’t go into effect until January 1, 2009, early indications are that the FHA loan limit will match the conforming loan limit at $417,000, which is great news for consumers with less than perfect credit. Coupled with the bill’s easement of FHA-risk based pricing, which had been slated to go into effect October 1, 2008; this change goes one step further to making FHA a viable financing option for many home buyers.
REDUCED SELLER ASSISTANCE AND HIGHER DOWN PAYMENTS: One downside of the FHA changes for buyers is that down payment assistance programs will no longer be available. While each mortgage company is implementing this change differently, the bottom line for the consumer is that effective for applications after September 1, 2009, the seller will no longer be able to pay the buyer’s closing costs and down payment. The buyer will be required to have 3% of their own funds (or gift funds) into the transaction. This coupled with the raising of the FHA down payment amount from 3% to 3.5% will make it nearly impossible for home buyers to purchase a home without investing some of their own money (or money gifted from family).
CAPITAL GAINS: One other notable item in the new legislation is the change in the capital gains laws – which is not getting the attention it deserves. Instead of only having to had lived in a property for two out of the past five years to avoid the capital gains tax, home owners now only get a prorated deduction based on the number of years they occupied the home for the past five years.
The stimulus package is really just a good sound bite or good press. For the average consumer thinking of buying their first home or trying to keep their existing home, it is a truly a bunch of smoke and mirrors. Congress actually reduced the temporary loan increase, eliminated seller assisted down payments for FHA and increased the minimum down payment for FHA loans (which mostly hurts 1st time home buyers).
HIGHLIGHTS:
NATIONAL LENDER LICENSING: One of the major highlights is that all mortgage brokers nationally (except for those employed by a nationally chartered bank) must be licensed. Upon initial review, it appears that Colorado’s new licensing requirement actually exceeds the new national lender licensing, so lenders licensed by Colorado have exceeded the new standards. This should go a long way to protect home buyers from unscrupulous lenders. And don’t be surprised to see federal licensing for ALL lenders soon, which will include the federally chartered banks.
FHA RESCUE: This part of the bill is getting a lot of press as homeowners believe this could be the magic solution to their mortgage woes. The truth is that the legislation creates a voluntary program for lenders to write down the loan balance in exchange for an FHA guaranteed loan not to exceed 90% of home’s value. Sounds great for the home owner, but the tricky part will be getting the lender to agree to write off the balance of the loan and pay a 3% FHA loan origination fee. The homeowner needs to qualify as well for the new mortgage and have a debt-to-income ratio above 31% on the original loan.
$7,500 TAX CREDIT: Another item getting a lot of press is the $7,500 first-time home buyer tax credit. This credit is for buyers who have not owned a home in the last three years (or who are buying because of a qualifying event such as a divorce) and is only for a primary residence. The tax credit provides a maximum of $7,500 to be taken as a single line credit for qualifying home buyers. The credit is actually a loan and it will be paid back in the following 15 years (or immediately becomes payable if the property is sold). The credit applies for purchases between April 9, 2008 and July 1, 2009. Be sure to check with your tax advisor before taking this credit.
LARGER FHA LOAN AMOUNTS: Another highlight is the raising of the FHA loan limits for most metropolitan areas. Although lower than the temporary limits established by prior legislation, these changes are anticipated to be more lasting. While they won’t go into effect until January 1, 2009, early indications are that the FHA loan limit will match the conforming loan limit at $417,000, which is great news for consumers with less than perfect credit. Coupled with the bill’s easement of FHA-risk based pricing, which had been slated to go into effect October 1, 2008; this change goes one step further to making FHA a viable financing option for many home buyers.
REDUCED SELLER ASSISTANCE AND HIGHER DOWN PAYMENTS: One downside of the FHA changes for buyers is that down payment assistance programs will no longer be available. While each mortgage company is implementing this change differently, the bottom line for the consumer is that effective for applications after September 1, 2009, the seller will no longer be able to pay the buyer’s closing costs and down payment. The buyer will be required to have 3% of their own funds (or gift funds) into the transaction. This coupled with the raising of the FHA down payment amount from 3% to 3.5% will make it nearly impossible for home buyers to purchase a home without investing some of their own money (or money gifted from family).
CAPITAL GAINS: One other notable item in the new legislation is the change in the capital gains laws – which is not getting the attention it deserves. Instead of only having to had lived in a property for two out of the past five years to avoid the capital gains tax, home owners now only get a prorated deduction based on the number of years they occupied the home for the past five years.
The stimulus package is really just a good sound bite or good press. For the average consumer thinking of buying their first home or trying to keep their existing home, it is a truly a bunch of smoke and mirrors. Congress actually reduced the temporary loan increase, eliminated seller assisted down payments for FHA and increased the minimum down payment for FHA loans (which mostly hurts 1st time home buyers).
For additional information on any of these changes, please contact:
Mary Steinmeyer, Certified Mortgage Lender - 720-339-0526
Mountain Crest Mortgage
mary@marysteinmeyer.com
License #MB100017382
Professional Mortgage Lending. . . . Experience the Difference
www.marysteinmeyer.com
License #MB100017382
Professional Mortgage Lending. . . . Experience the Difference
www.marysteinmeyer.com
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