Author Archive
$8,000 Tax Credit As Down Payment? Almost…
Posted by Kevin Kueneke | Leave A Comment »
Last week, HUD announced that the new $8,000 first-time home buyer tax credit could be used towards the down payment of the purchase of a primary residence. The way that it would have worked is that a third party would front the tax credit money to the buyer. The buyer would sign some sort of promissory note with the third party promising to pay back the fronted credit amount when they file their taxes next year (or this year if they have not filed 2008 yet). The seller would pay a fee on the buyer’s behalf, as a seller concession, to the third party.
I had heard about this potential arrangement months ago, but did not want to advertise the idea until all of the details were known. Unfortunately, the cat was let of the bag so I began to discuss this idea with my business referral partners. And then…
HUD has rescinded this decision and has in fact pulled the Mortgagee Letter (how they announce things) from the HUD website. The following is an excerpt from a blog post on ActiveRain by Jeff Belonger explaining “why” in more detail:
“In regards to FHA loans, a borrower can only obtain monies for their down payment of 3.5% by the following :
- Their own funds
- up to 100% of a gift from a relative/family member
- From the Federal, state, and local governmental agencies and nonprofit instrumentalities of government
- FHA approved non-profits
- monies from their employer in a form of employee contribution
- monies from secured borrowed funds… IE. borrowing equity from your home to buy another home or borrowing against your car that is free and clear or borrowing from your 401-k, etc, etc
Here is the major confusion that was put out yesterday, in the body of the mortgagee letter, ML 09-15, at the bottom, it stated :
The Tax Credit: Short-Term Loan:
Entities that can offer the tax credit advance with short-term loans:
- Federal, state, and local governmental agencies and nonprofit instrumentalities of government, FHA-approved nonprofits, and FHA-approved mortgagees may provide short-term or “bridge loans” secured only by the anticipated tax credit due the homebuyer as collateral.
The confusion: It states “as collateral” and not as a secured lien against the home, but as a secured loan against the collateral. Which in this case would be the $8,000 tax credit.
Because of this, HUD does not allow for monies to be borrowed or given to in any form that I did not mention above, to be used for the down payment. The reality of it all, basically everything that was stated in the mortgagee letter, that has been revoked for now, is old school FHA. When it comes to FHA loans/FHA mortgages, you could get monies for your down payment from the items that mentioned above, which is mentioned in the mortgagee letter. Well, was mentioned… One caveat to all of this is that HUD was going to allow for lenders to secure a short term loan or bridge loan against the $8,000 to be used to purchase a home. But again, that can’t be used for the actual down payment, because it goes against the basic FHA guidelines of down payment monies of 3.5%. Now, unless HUD changed this, it does not clearly state this in the mortgagee letter, even though that letter is no longer valid.”
So for now, buyers must find their down payment the same way they have always had to. Regardless of whether the tax credit can be used as the down payment, it is still a fantastic benefit for first time home buyers especially when combined with the added tax deductions of mortgage interest and property taxes (thereby lowering taxable income).
Rates are low. Prices are reasonable. $8,000 tax credit. Now is a great time to buy real estate.
Questions? Please feel free to email me: Kevin@MyCWMtg.com
Related Posts: Buyers, CW Mortgage, Financial news, Home Loans, Mortgage News, San Diego
Southern California Drought…Water That Is
Posted by Kevin Kueneke | Leave A Comment »
I was fixing a broken sprinkler this morning that I had recently run over, as I frequently do (it’s on the edge of the driveway) when a meter reader from the Olivenhain Municipal Water District (OMWD) pulled up. It was about 8:05am and I had the sprinklers running to make sure that I had truly fixed the problem.
He said that a Level 1 Drought Watch had been declared and asked if I would refrain from irrigating the lawn between the hours of 8am and 6 pm. He was very polite and understood that the full details of the drought declaration are slightly unclear. He thanked me for my cooperation and I of course immediately shut off the sprinklers.
He further explained that right now, the OMWD employees are merely reminding everyone of the issue and offering suggestions, or voluntary restrictions, to help. However, the OMWD governing board is having a meeting in July to determine what permanent steps will need to be taken, including stepping up their level of enforcement (that means fines).
Sometimes I read the literature that comes with my water bill, most of the time I do not. Did you know that the OMWD passed the Drought Response Conservation Ordinance last July? I didn’t.
This ordinance establishes four levels of response to the state of California’s current drought conditions and also lists the restrictions, voluntary and mandatory, associated with each drought level. Per the OMWD website, the voluntary restrictions for the Level 1 Drought are as follows:
- Stop washing down paved surfaces, including but not limited to sidewalks, driveways, parking lots, tennis courts, or patios, except when it is necessary to alleviate safety or sanitation hazards.
- Stop water waste resulting from inefficient landscape irrigation, such as runoff, low head drainage, or overspray, etc. Similarly, stop water flows onto non-targeted areas, such as adjacent property, non-irrigated areas, hardscapes, roadways, or structures.
- Irrigate residential and commercial landscape before 8 a.m. and after 6 p.m. only.
- Use a hand-held hose equipped with a positive shut-off nozzle or bucket to water landscaped areas, including trees and shrubs located on residential and commercial properties that are not irrigated by a landscape irrigation system.
- Irrigate nursery and commercial grower’s products before 10 a.m. and after 6 p.m. only. Watering is permitted at any time with a hand-held hose equipped with a positive shut-off nozzle, a bucket, or when a drip/micro-irrigation system/equipment is used. Irrigation of nursery propagation beds is permitted at any time. Watering of livestock is permitted at any time.
- Repair all water leaks within five (5) days of notification by the Olivenhain Municipal Water District unless other arrangements are made with the General Manager.
Level 2 Drought includes limiting lawn irrigation to three days per week in the summer, and only one day in the winter; Level 3 is two days in the summer; and Level 4 is no lawn/garden irrigation at all! Sounds like it is time for more southern Californians, real estate owners and renters alike, to adopt Colorado’s xeriscaping idea. I know that i will consider it.
Any questions? Please feel free to email me: Kevin@MyCWMtg.com
Related Posts: Encinitas, Homeowners, San Diego, Windermere
FHA, FNMA, and FHLMC Loan Limits In San Diego Returned To $697,500!
Posted by Kevin Kueneke | Leave A Comment »
Well, it looks like the “new and improved” stimulus bill will have an immediate effect on mortgages. Fannie Mae (FNMA), Freddie Mac (FHLMC), and the Federal Housing Administration (FHA) have announced that they are reinstating last year’s high balance conforming loan limits.
For 2008, FNMA and FHLMC, as well as FHA, would insure loan amounts up to $697,500 in San Diego. Any loan greater than that number was considered a Jumbo loan. Unfortunately, that loan limit dropped to $546,250 effective for loans closing on or after January 1, 2009. That meant that anyone looking to buy or refinance San Diego real estate could pay an interest rate as much as 2% higher than if borrowing the true conforming loan amount of $417,000.
However, the recently passed H.R. 1, also known as the American Recovery and Reinvestment Act, restores the higher limit of $697,500. In some areas, such as Los Angeles and Orange Counties, the restored loan limit is $729,750 up from $625,500 earlier this year.
These higher loan limits are often referred to as Conforming Plus or High Balance Conforming loans. FHA loans that exceed $417,000 in San Diego County may be referred to as FHA Jumbo loans.
This is great news for those borrowers that are looking to purchase or refinance in today’s low interest rate environment. Conventional buyer’s can now purchase a $775,000 home with only a 10% down payment.
Questions? Please feel free to email me today.
Related Posts: Buyers, CW Mortgage, Financial news, Home Loans, Homeowners, Interest Rates, Mortgage News, Real Estate News
Great News! Fannie Mae To Allow Up To 10 Financed Properties Again!
Posted by Kevin Kueneke | Currently 2 Comments »
One of the biggest hurdles many solvent investors have had these days is Fannie Mae’s (FNMA) limitation on the number of one- to four-unit financed properties. This limit dropped to four properties over the last year or so, which has hamstrung many investors looking to add to their real estate portfolio.
However, according to FNMA Announcement 09-02, borrowers may now have up to ten financed properties without having to pay the higher rates of private or hard-money resources. In the current lower price and low rate environment, this increased limit is an extremely beneficial change.
For those looking to purchase more properties, this new limit also comes with some new guidelines:
- Minimum credit score is 720
- The borrower(s) cannot have had a bankruptcy or foreclosure in the past seven years
- There can be no mortgage delinquencies (30-days or greater) within the past 12 months on any mortgage loan
- Maximum loan to value is 75% for purchase of a 1 unit second home or investment property
- Maximum loan to value is 70% for purchase of a 2-4 unit investment property
- Full income documentation is required including most recent two-year’s IRS 1040’s
- Refinances are allowed on a no cash-out basis and with a loan to value limit of 70%.
FNMA’s announcement also outlined new reserve requirements:
“When the borrower will own one to four financed properties (including the subject property) the reserve requirements are:
- two months of reserves on the subject property if it is a second home
- six months reserves on the subject property if it is an investment property, and
- two months reserves on each other financed second home or investment property.
When the borrower will own five to ten financed properties (including the subject property) the reserve requirements are:
- two months reserves on the subject property if it is a second home
- six months reserves on the subject property if it is an investment property, and
- six months reserves on each other financed second home or investment property.“
Keep in mind, that a month’s reserve encompasses the total housing expense including principal and interest, property taxes, property insurance, HOA’s, Mello Roos, etc., not just the loan payment.
Now, six months reserves for up to ten properties might seem a little steep, but this is an important step in the continuing effort to rebuild a solid home-ownership base. You want to buy a bunch of property? Then you better be able to show that you can afford to do so. Sounds fair to me.
If you would like to discuss this topic further, please email me at Kevin@MyCWMtg.com
Related Posts: Buyers, CW Mortgage, Financial news, Home Loans, Homeowners, Interest Rates, Mortgage News, Real Estate News
New Conforming Loan Limits Announced For 2009
Posted by Kevin Kueneke | Currently 2 Comments »
After months of speculation, we finally know what the new 2009 high balance conforming loan limits are for San Diego and other “high cost” areas. The Federal Housing Finance Agency (FHFA) said that the $697,500 number we enjoyed for part of 2008 is dropping to $546,250 in San Diego.
Some areas such as Los Angeles-Orange Counties, San Francisco, San Jose, and Santa Cruz are having their 2009 numbers set at the new maximum of $625,500.
According to FHFA’s press release, the 2009 loan limits were calculated using 115% of median house prices as determined by the Federal Housing Administration (FHA) whereas the 2008 loan limits were calculated using 125% of median house prices.
So what does this mean? It means that anyone currently in escrow in San Diego with plans to borrow more than $546,250 needs to do everything they can to get their loan closed before 12/31/2008 or face significantly higher interest rates. There is almost a 2% interest rate difference between loans less than $697,500 and loans greater than $697,500 (also known as true jumbo loans) because conforming loans are guaranteed by the government (FNMA and FHLMC). Guidelines are also more strict for true jumbo loans than for conforming and high balance conforming loans.
As expected, the Federal Housing Administration (FHA) announced that FHA Jumbo limits will match the high balance conforming limits. The Department of Veteran’s Affairs (VA) said that VA Jumbo loans with zero-down payments will be allowed up to the high balance conforming loan limits through the end of 2011. This is good news for FHA and VA buyers as they will still be allowed to take advantage of these programs for higher priced properties.
Any questions or comments? Please email me at Kevin@MyCWMtg.com
Related Posts: Buyers, CW Mortgage, Education, Financial news, Home Loans, Homeowners, Interest Rates, Mortgage News
