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first-time homebuyer

Government Mortgage Loan Limits to Remain Unchanged for 2011

Jan 10th, 2011
by Mike.
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The Federal Housing Finance Agency has announced that conforming loan limits in Texas will remain unchanged for 2011. This announcement affects conventional loans underwritten to Fannie Mae and Freddie Mac standards, FHA loans, and VA home loan guarantees. There had been significant speculation that lower loan limits for FHA were in the works as a result of an expiration of temporary increases and lowered home values. Conventional loans in Texas will continue to be available up to $417,000 through September 30, 2011. The $271,050 limit on single family FHA loans will also be extended to September 30th. VA loans do not have a formal loan limit, but instead guarantees 25% of loans made up to $417,000 through September 30th for veterans who have their full entitlement available. Loan limits for 2012 will be announced later in the year.

In 2008, Congress expanded the loan limits on FHA loans in response to the housing crisis. This provision allowed the government to provide more guarantees in higher cost locales which would have been crushed if credit became unavailable. This expansion temporarily allowed guarantees up to 125% of median home prices instead of 115%. Furthermore, the current base loan limits were set during boom housing years and would likely be reduced if the traditional metric were used since housing prices around the country have declined.

Another cause for concern over extending the increased loan limits is the default rate. Statistics released by the Federal Houston Administration indicate that larger FHA backed loans have higher delinquency rates than smaller loans which appear to reinforce the perception that the increased loan amounts have led to more defaults.

Fortunately, much of this debate only affects some of the higher cost areas of the country. Due to affordable housing prices, Texas has historically qualified for FHA’s floor limit and did not necessarily benefit from the expanded loan limits mentioned above.

2011 is Going to be Great!

Jan 7th, 2011
by Mike.
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2010 was tough on many Americans financially – the economy was rough, unemployment was high, and spending was down. The housing market seemed to be a disaster with foreclosures and low sales volumes dominating the news waves.

As bad as last year seemed to be, I would now like to paint a brighter picture for the future and give you seven BIG reasons to be hopeful if you are ready to become a homebuyer in 2011.

1. The Dow Jones industrial average recently exceeded 11,650 for the first time since June 2008. Additionally, technical indicators support the continuation of this trend which began in earnest during July, 2010. Finally, recently published economic indicators such as the Initial Jobless Claims and Chicago Purchasing Managers reports have been supportive of strengthening during the first quarter.

2. Home sales are on the rebound. The National Association of Realtors reported a rise of 3.5% in November; economists had expected an increase of only 2%.

3. Mortgage rates (though higher than the lows of last fall) continue to remain very low and seem to have reversed their early December trend. The sale of mortgage-backed securities showed a significant uptrend during the last week of 2010, causing rates to moderate approximately .25%. FHA rates are particularly attractive at present running .25% below conventional. This further promotes lending to mid-income borrowers of modest value housing. Also, the USDA has re-funded their Rural Housing program allowing for 100% loans in rural areas of Texas and the U.S.

4. New regulations imposed January 1, 2011, on the mortgage industry will continue to increase borrower security and ensure full disclosure of terms and rates.

5. The election of a conservative majority to the House of Representatives will force a new spirit of bipartisanship in political circles. As has been promised by the administration and most of the incoming congress, jobs will be the focus.

6. Tax increases have been avoided. The lame-duck congress passed the tax rate extension thereby maintaining current federal income tax rates which should incentivize employers to add staff in 2011.

7. Lenders and investors are soliciting for mortgage broker/banker business. Account executives from lending sources are very actively promoting the availability of funds for qualified borrowers.

These are seven solid fiscal reasons that Texans and others across the country should be optimistic about the possibility of becoming homeowners in 2011. If you are entertaining the idea of buying a home in the near future, be sure to talk to a local, certified mortgage officer to discuss your options.

Houston Home Loans for Little to No Money Down

Jan 3rd, 2011
by Mike.
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People in the Houston, Texas area looking to purchase a home today will likely find that the financing environment is far different than it was a few years ago at the apex of the housing boom. Through the use of sub-prime and Alt-A loan programs, combo loans and seller-funded grant programs, it was somewhat easy to secure a home loan with little to no down payment. Many homeowners who purchased in those days are finding out how times have changed as they try to refinance a home with little, no, or even negative equity. In today’s economic environment, lenders are looking for more “skin in the game”, but there are still are some programs available that will allow a buyer to obtain a mortgage with little, or even no money down. The following is a brief description of some of those programs:

FHA Loans – FHA loans have speedily become the most popular mortgage vehicle for first-time and move-up home buyers. These loans will allow a borrower to obtain a loan with a minimum 3.5% down payment. This down payment can come from the borrower’s own funds, through a gift from a relative or employer, or through a down payment assistance program. In addition, seller contributions up to 6% of the sales price are still allowed. The Federal Housing Administration has expressed a desire to reduce seller contributions to 3%, but this guideline has not yet been implemented.

VA Loans – Mortgage loans guaranteed by the Veterans Administration are among the most attractive loans on the market today. These loans allow qualified active and retired military the ability to purchase a house with no down payment and more flexible qualifying criteria. In addition, the closing costs associated with VA loans are very reasonable as lender fees are limited and there is no monthly mortgage insurance. An up-front funding fee ranging from 1.25% – 3.3% applies to these loans, and seller contributions up to 4% of the sales price are permitted.

Down Payment Assistance – Down Payment Assistance programs offered by states, including Texas, and local governments such as the City of Houston, and Harris and Montgomery Counties offer down payment assistance to creditworthy first-time homebuyers in low to moderate income households. The amount of assistance can range from $5,000 to $30,000 dependent upon the area and the income level of the borrowers. Minimum credit scores of 640 typically apply and borrowers should have a minimum of $1,000 in order to cover the costs of up-front appraisal, property inspection, and earnest money deposit.

Gift Funds – Gift funds are among the most overlooked tools available to borrowers. In many cases, a parent or grandparent has the capacity, and willingness, to help a borrower with their first home.  This resource can often be tapped to make up the difference between what a borrower has saved, and what is required for a minimum down payment. As long as the gift does not need to be repaid, it can be used to meet the down payment requirements on government loans. Conventional loans generally have more stringent criteria that require a minimum down payment to come from a borrower’s own funds with gift funds comprising any excess over that requirement. Acceptable donors for gift funds include immediate family, a government or charitable organization, an employer or labor union, or a close friend who has a documented interest in the applicant.

Rural Housing Loans – The USDA’s Rural Housing Service offers 100% financing in certain designated rural areas. These areas include cities or town with populations equal to or less than 20,000 people and outside of major metro areas. In Harris County, there are several small communities eligible for this program. Surrounding counties have larger swaths of eligible areas.  You can check here for the USDA’s qualified areas. There is no limit on seller contributions with this program and the 3.5% guarantee fee may be rolled into the loan in excess of the appraised value.

HomePath Loans – These loans are offered on foreclosed properties owned by government mortgage giant Fannie Mae. Qualifying properties are typically recent construction where Fannie Mae has funded any necessary repairs. Under this program, Fannie Mae and participating lenders waive the appraisal requirement and allow owner occupants to buy with just 3% down. This down payment can come from a borrower’s own funds, gift funds, or from a grant. Most importantly, there is no mortgage insurance requirement on these loans which can mean thousands of dollars of savings to a homeowner over the life of a loan. Credit score requirements are normally higher on these loans, so expect to provide a minimum 660 credit score to qualify under this program.

Bond Money/First Time Homebuyer Programs/Mortgage Revenue Bonds – There are several first-time homebuyer programs that are available to borrowers meeting certain low income targets.   They also cover people who fall into certain employment categories such as professional educators, law enforcement, firefighters and emergency medical technicians. These programs, often referred to as “bond money”, offer a low fixed interest rate in addition to grants of up to 5% of the purchase price towards down payment and closing costs. All of these programs have income limitations that are based on family size and property location. Borrowers must typically complete a homebuyer education course and not have had an ownership interest in a home for the past three years. Minimum credit scores for these programs in Texas are currently 620.

My Community & Home Possible Programs – These programs are conventional programs offered by Fannie Mae and Freddie Mac lenders and allow low to moderate income first-time homebuyers to purchase a home with as little as 3% down. Mortgage insurance premiums are reduced under this program and specific employee groups are permitted to use grants to cover required reserves and more liberal debt ratios.

With so many programs available on the market, it is imperative that a qualified Houston mortgage lending professional is consulted to determine which home loan program is best suited for your individual needs as a borrower.

Why You Might End Up Hating Your Dream Home

Aug 4th, 2010
by Mike.
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You’ve found the perfect house:  the floor plan is exactly what you’ve been looking for, the price is right, and the sellers even threw in the flat screen television to get it sold.  So, what’s the problem? Well, unless you do your homework, you might just be that seller in another year or two.

Most buyers weigh the aesthetics of a home far more heavily than other factors which are just as important.  Considerations such as repairs and maintenance, schools, taxes, neighborhood, and commute will not only affect the value of your property over the long term, but will also affect how livable that home is. Instead, home buyers pay far more attention to paint colors and whether the home has hardwood floors and granite counter tops. So, what are some of the “other” factors a buyer should consider?

First, consider the neighborhood. Does it offer the amenities you are looking for? If you have kids, are there other school-age children in the area? Are you near a major traffic artery that could be dangerous for your children and generate “noise pollution” for you? How difficult is your commute? Having a wonderful home, but having to travel an hour in traffic each way, means you have less time to enjoy it. Furthermore, your transportation costs go up. Over the course of a month, that equates to 40 hours you will spend in your car and roughly $250 in gas, and we haven’t even considered additional maintenance costs. Your choice of neighborhood is just as important as the home you choose because your home’s value will rise and fall with the neighborhood.

Buying an older home can bring the benefits of a more affordable price and perhaps some character and distinction not found in today’s newer homes, but is not without its costs. When buying an older home, you should expect to budget for home repairs. Roofs don’t last forever and neither does the air conditioner system. Houston’s humidity creates a classic environment for mold to grow in the smallest crack where water has penetrated. Whether you have had a home inspection or not, there will be items your inspector misses and these are usually not inexpensive repairs. HVAC units can easily cost $5,000 – $10,000 and a new roof can easily run $10,000 or more. Mold remediation…well, let’s just not go there.

When buying a home, you should also consider maintenance costs; the larger the home and the more amenities, the higher those costs. Pools are notoriously costly to repair and maintain, and a large yard can become more of a garden headache than a source of relaxation if you don’t have a green thumb or a deep pocket to pay for weekly maintenance. Inside the home you should remember that a 4,000 square foot house means double the cost of heating, cooling, re-carpeting, and window replacement of a 2,000 square foot house…you get the idea.

Schools are a major driver of home value as buyer demand will always exist for a good school district. You should do research on schools, even if you don’t have school-age children, because it will affect your investment.

Taxes should also be a consideration. Tax rates can vary wildly in the Houston metro area, from a low of perhaps 2% of your home’s value per year to 4%. This is particularly important if you are buying new construction. Your home’s taxable value may be artificially low because the appraisal district still has your home listed as a vacant lot. Next year, when the home is re-assessed, you will experience a much higher tax bill. Even if your mortgage lender established an escrow account for your taxes and insurance, you may have to come up with a big chunk of change to cover any shortage when tax bills are due.

Your goal for your home should be to satisfy as many of your lifestyle needs as possible. You will be hard pressed to find the one that allows you to check everything off the list, but nailing down as many as possible will help insure your home is both a good investment and provides many years of happiness to you and your family.

Thought the Tax Breaks Were Over? Think Again!

May 4th, 2010
by Mike.
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Unfortunately, the First-Time and Repeat Homebuyer Tax Credits expired last week.  However, even though this powerful tax incentive is now over, it doesn’t mean that you are out of luck.  There are undoubtedly many prospective home buyers, like you or someone you know, who simply needed more down payment resources, had to work on a couple of credit issues, or could just not find the right home before the deadline expired.

All is not lost.  One of the most underutilized resources available to most homebuyers in the Houston area is the Mortgage Credit Certificate (MCC).  These programs allow many home buyers to obtain a tax credit every year they own the house and pay interest on their mortgage. Yes, you read that correctly. While the first time and repeat homebuyer tax credit was front-loaded with a value of $8,000 or $6,500, what if you could get a tax credit of up to $2,000 each and every year?   This is far more valuable than the popular homebuyer credit.

For example, let’s say a single person or married couple purchases a home priced at $130,000, puts $5,000 down and thus finances $125,000.  Under the First Time Homebuyer Tax Credit, this borrower would receive a tax credit valued at $8,000 that could be claimed on their 2010, or retroactively on their 2009 tax return.  Instead, we will assume they missed the deadline, and their combined income is less than $76,560 per year ($89,320 if they have children or other dependents). If these borrowers qualified for a Mortgage Credit Certificate, they would receive a tax credit each year they own their home. The annual tax credit would be 30% of the interest paid each year.  Using our example above, the value of these annual tax credits over ten years amounts to $17,159.96.  In addition, most MCC programs are transferable to the new owners if the buyers ever sell their home. Most importantly, there is currently no first-time homebuyer requirement!

If you are interested in finding out more details about these programs and how you might qualify, give us a call at (832) 286-1600 and we will walk you through it!

Facts You Should Know About the First-Time Homebuyer Tax Credit

Dec 3rd, 2009
by Mike.
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tax-credit-extended1

The popular $8,000 First Time Homebuyer Tax Credit has now been extended to April 30, 2010 and expanded to include a $6,500 tax credit for existing homeowners who have been in their current home five years and want to buy a new home.

You will find below some facts about the tax credit that buyers might not have known and should have knowledge of as they embark on their search of their dream home.

  • The income limits have been expanded to $125,000 for single taxpayers and $225,000 for joint filers. The maximum income limits are not based upon gross income, but adjusted gross income, which is your income after deductions for things like IRA contributions, business or capital losses, and deductions for student loan interest paid. Furthermore, taxpayers can still get a partial credit if their income exceeds the limit based upon the IRAs’ Modified Adjusted Gross Income formula.  It is also important to note that, whether you are married or single, the value of the tax credit is the same.   And, spouses who file separately are limited to $4,000 per person.
  • Buyers in low priced housing states should be aware that the tax credit is limited to the lesser of $8,000 or 10% of the purchase price.  For instance, you will receive a $7,000 credit on a $70,000 home; whereas, you will collect a maximum of $8,000 even on a $250,000 home.
  • If a multi-family property, such as a duplex or condominium is purchased, the tax credit is limited to 10% of the value of the unit in which the buyer resides. As an example, if a $150,000 duplex is purchased and each unit is of equal size and value, the tax credit will be limited to $7,500, or 10% of the $75,000 value assigned to one half of the duplex.
  • Buyers who purchase a newly built home should be aware that the effective date is not the date of purchase or the date construction starts, rather, the date the homeowner begins occupying the property. This could complicate matters for buyers purchasing now to take advantage of year-end builder close-outs. However, a subsequent buyer does benefit from the fact that their existing home does not have to be sold in order to qualify for the tax credit.
  • Home buyers should also be aware of the residency requirement. For example, if a buyer ceases to use the home as their primary residence within 36 months, the amount of the tax credit claimed is due and payable in full in that year. Therefore, if you move regularly with your job, or decide to turn the property into a rental, you might think twice about claiming the credit.

The Internal Revenue Service constantly updating its site at http://www.irs.gov/newsroom/article/0,,id=187935,00.html so homebuyers can make educated decisions regarding their home purchase.  It is imperative that all taxpayers should know that the final decision on whether you qualify for the tax credit rests in the hands of the IRS, so be prepared.

Momentum Builds for Extension of First Time Homebuyer Tax Credit

Sep 25th, 2009
by Mike.
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Good article on the popularity of the First Time Homebuyer Tax Credit and the momentum building in Congress to extend the deadline for six months. This would push the deadline back to the end of may, 2010. Far from a sure thing, but good news for those borrowers needing a mortgage who just can’t get closed in time due to an inability to find a home or the time required to get approved for down payment assistance programs.

This might also lead to lifting the suspension on the TDHCA (Texas) 90-day interest free loan program and Mortgage Advantage Program. Stay tuned!

http://money.cnn.com/2009/09/17/real_estate/homebuyer_tax_credit_claims_soaring/index.htm

Advice on Buying a First Home

Aug 20th, 2009
by Mike.
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house and moneyThe residential housing market has always been a bewildering place, especially for those who have never purchased real estate before, and the current lending crisis has only added to the confusion.  Nevertheless, I have found that many first time homebuyers are finding great opportunities now with house prices falling significantly throughout the nation and even in our communities of Houston, The Woodlands, Tomball, Conroe, and Spring.

However, buying a home is still a major commitment, no matter how great of a deal you find. So to avoid regret, here are a few steps I think you’ll find helpful:

  • Work out a Budget. If you currently have a steady job, a decent credit score,  and have some money saved for a down payment, you will have a much easier time applying for and finding an affordable mortgage. Your mortgage lender can assist you with determining what “affordable” exatcly means!
  • Don’t be enticed to borrow more than you can afford. Let me  add “comfortably afford” to that last sentence. It’s always a good idea to leave yourself a cushion for a potential increase in your cost of living, such as food and fuel prices. Also think about what you’ll need for furnishings, any renovation and decoration, and other home-buying expenses. Once again, your mortgage loan officer can assist with determining that last one.
  • Decide what kind of property you need. How many bedrooms are you looking for? Is outside space important to you? Can you handle the maintenence and repairs required of an older home, or do you want a newer one? Make a wish list to help you decide what’s essential and what is just a luxury.
  • Lastly, check with your real estate agent regading trends in your community. In the Houston area, first time home buyers have driven up the prices of entry level homes, so don’t expect to get a deep, deep discount over asking prices.

Houston Housing Market Update – June

Jul 22nd, 2009
by Mike.
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The National Association of Realtors released data on June sales yesterday and the results were mixed for the Houston metro area. While median house prices hit a record high, jumping to $164,500, up from $160,050 12 months earlier, the good news is muted as the volume of sales declined more than 16% over a year earlier. The Woodlands, Tomball, and most of Spring experienced flat to increasing prices while the hardest hit areas included Grimes County, inside Beltway 8 southest of downtown Houston. A decline in the number of sold foreclosures and low mortgage rates helped contribute to the increased prices, however, the expiration of moratoriums on forecloures may result in future housing declines. Homes priced above $500,000 posted the biggest declines in sales volume as sales decreased 20% year-over-year.

As we have stated before, we expect the housing market to remain weak until the later 3rd Quarter or 4th Quarter of 2009 when we expect to see a stabilization. This continues to represent an excellent buying opportunity, particularly for first time home buyers who have access to multiple tax credit and downpayment assistance programs.

If you are interested in seeing pricing trends for the Houston, TX residential real estate market, or price trends for your area, check out the link below:

http://www.chron.com/disp/story.mpl/business/6539800.html

Don’t Make These Mortgage Mistakes

Jul 7th, 2009
by Mike.
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geek boyHome mortgages are a tricky business. It isn’t everyday that you shop for a home, so naturally, I don’t expect you to be an expert with the home mortgage process. However, since a mortgage is such a giant sum of money, I want you to be as prepared as possible. To help you get started, here are some of the bigger mistakes I’ve noticed that homeowners make when applying for a mortgage.

Choosing The Wrong Mortgage. There are many types of mortgages that you can choose from.  They range from fixed-rate mortgages, adjustable-rate mortgages, interest-only mortgages, to balloon mortgages just naming a few. With so many to choose from, it’s easy to make the wrong choice, especially for buyers who aren’t familiar with the advantages and disadvantages of each.

Choosing the wrong home mortgage can be disastrous in some cases. You could find yourself owing the full balance of your home within a few years, or you may find yourself making higher monthly payments when the interest rate goes up. Before you make a final decision about a mortgage, make sure you fully understand the terms, interest rate, and life of the loan. Feel free to ask me as many questions as you need to make sure that you are getting the best loan for you and your situation.

Borrowing With Too Much Debt. Just because a lender approves you for a home mortgage with your current debt load doesn’t mean you should take it. Lenders look at your debt in different ways to determine whether or not to extend a loan to you. Borrowing for a home mortgage when you have too much other debt will put a strain on your finances. When you have too much debt you are at a bigger risk of defaulting on your mortgage, which can lead to foreclosure.

Before taking on a home mortgage, do an internal audit of your current financial situation. Consider all the income and debt you have, and also consider your current employment situation. Ask yourself how much your income increase in the coming years? As a general rule, if your debt is more than 40% of your gross income, you should reconsider purchasing a home until you have decreased the amount of your debt.

Making Too Small A Down Payment. The less you put down on your home mortgage, the more you have to borrow. This ultimately leads to higher monthly payments, and the higher monthly payment may include the cost of Private Mortgage Insurance because your down payment was small.

Fortunately, higher monthly payments can be avoided. Even if you are unable to save up a size-able down payment, it doesn’t mean you have to be put into a financial hold. It is best to save up as much as you can for a down payment and search for a home that is well within your budget and comfort zone.

When it comes to home mortgages, the key is to not bite off more than you can chew. A mortgage is a considerable undertaking, and it’s imperative that you prepare yourself and know what you are getting into.

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