The Clock is Ticking...

For prospective homebuyers who are on the fence about making a home purchase, the next few months represent a countdown of sorts as
huge tax credits are about to expire. Here are important details for you to know:
Tax Credit for First-Time Homebuyers (FTHBs)
FTHBs (that is, people who have not owned a home within the last three years) may be eligible for the tax credit. The credit for FTHBs is 10%
of the purchase price of the home, with a maximum available credit of $8,000. Single taxpayers and married couples filing a joint return may
qualify for the full tax credit amount.
Tax Credit for Current Homeowners
The tax credit program now gives those who already own a residence some additional reasons to move to a new home. This incentive comes
in the form of a tax credit of up to $6,500 for qualified purchasers who have owned and occupied a primary residence for a period of five
consecutive years during the last eight years. Single taxpayers and married couples filing a joint return may qualify for the full tax credit
amount.
What Are the New Deadlines?
In order to qualify for the credit, all contracts need to be in effect no later than April 30, 2010 and close no later than June 30, 2010. Those in
the military do have some special extensions on the timelines available.
What's So Great About a "Tax Credit"?
The benefit of a tax credit is that it's a dollar-for-dollar benefit, rather than a "tax deduction", or reduction in a tax liability that would only save
you $1,000 to $1,500 when all was said and done. So, if a first-time homebuyer who qualified for the entire benefit were to owe $8,000 in
income taxes and would qualify for a tax credit of $8,000, she would owe nothing.
Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little or no income tax
liability. For example, if a first-time homebuyer is eligible for a tax credit of $8,000 but is liable for $4,000 in income tax, she can still receive a
check for the remaining $4,000!
Higher Income Caps
The amount of income someone can earn and qualify for the full amount of the credit has been increased. Single tax filers who earn up to
$125,000 are eligible for the total credit amount. Those who earn more than this cap can receive a partial credit. However, single filers who
earn $145,000 and above are ineligible. Joint filers who earn up to $225,000 are eligible for the total credit amount. Those who earn more
than this cap can receive a partial credit. However, joint filers who earn $245,000 and above are ineligible.
Maximum Purchase Price
Qualifying buyers may purchase a property with a maximum sales price of $800,000.
It's also important to note another upcoming deadline as the Federal Reserve winds down a program that has been keeping home loan rates
artificially low. The fact is that the lowest rates of 2009 were driven down to their attractive levels because of the Fed's Mortgage Backed
Securities (MBS) purchase program, which the Fed once again emphasized in its January 27, 2010 Rate and Policy Statement will end on
March 31, 2010. As the Fed's program winds down and ends, rates could rise over time since MBS will have less support from the Fed.
If you have any questions regarding the tax credit, pick up the phone and call me. I'm here to help you take advantage of one of the greatest
opportunities homebuyers may ever have.

Rate and Term Refinances are up

Freddie Mac said Thursday that record low numbers of homeowners Cash Out the equity for their home. Most homeowners who are refinancing now are taking advantage of the record low rates and are using Rate and Term refinances. A Rate and Term refinance allows homeowners to lower their interest rate and or terms on their mortgage without taking out any cash. A Cash Out refinance is one where the homeowner uses the equity in their home to pay off debt and or take the cash out for other uses. There are several reasons for the record low numbers including lower home values, tighter lending guidelines, and homeowners who are trying to make more financially sound decisions. Reuters reported on Jan 28, 2010, Freddie Mac Chief Economist Frank Nothaft said that "in aggregate, the lower interest rates translates into about $2 billion in payment savings for these homeowners over the first 12 months of the new loan". They did not report, however, how long the average homeowner extended out the term of their loan by doing this rate and term refinance. Most homeowners believe that the they have to save 1% in interest rate to make a rate and terms refinance worth doing. This is really not true since the rate is only one part of the puzzle.

The best way to look at what you need to save is to first determine how long you plan to be in the home. Then, determine the costs of the refinance. You need to only look at the lender, title/escrow and appraisal/inspections costs. Prepaid taxes and insurances are not a costs, these are your funds. Then figure out what is the monthly savings you are receiving from the refinance. Next figure the number of payments you have left on your current mortgage payments and multiply that by your principle and interest payments. Then figure the total of payments on the new loan. If you are planning to be in your home for long term, then do not close on the new loan if its total payments are greater than your current loans total of payments. If you're not sure how long you are going to be in the home, the best way to find out if the new loan is going to help you is to take the monthly saving on the principal and interest for the old and new loan. Divide that into the costs of the refinance. This number will represent the number of months you will need to be in the home before you start seeing actual savings. Please see the examples below.


Example 1. Current loan balance $150,000. Current rate 6.5% 29 years left. Payments $960.74
Proposed New loan 5.% interest rate 30 year mortgage $2354 in cost for home loan. New Payment $817.87
Savings $142.87 monthly / costs of $2354 = 16.48 months to start having true savings.
Using the total of payments method the new loan with the lower interest and including the costs of the loan the savings in payments would be $49,079.
Since this home owners is planning to be in the home for more that 17 months this would be a smart refinance to do.

Example 2. Current loan balance $398,000, current rate is 6.00% with 28.5 years left, and payments of $2356.23.
Proposed new loan 5.125% interest, 30 year mortgage and $5232 in closing costs. New payment is $2195.55 monthly.
This saves the borrower $160.68 monthly / costs of $5232 = 32.56 months to start having true savings.
If this home owner plans to be in the home for more than 33 months then this loan would a smart refinance to do.
The total of payments savings are $52,612.80

Example 3. Current loan was a 30 year fixed with 20 years left to pay. Current balance is $160,981 rate is 6.25% and payments of $1176.67. Total of payments are $432,601. Borrowers has paid $141,200.40 in payments so far.
Proposed new loan is $164,081 at a 30 year rate of 5.125%. New Payments are $893.40 saving the customer $283.27 monthly. Closing costs were $3100.00
If this home owner just pays the minimum payment on the new loan the total of payments will be $321,623 but the customer has already paid $141,200 in payments. The total cost of this home would be $462,823 adding $30,000 to the total. The customer should not do this refinance unless they have to save the $283. monthly but fully understand the total of cost of this savings.
If the customer was to put the $283.27 in savings back into the new mortgage just pay the old payment amount of $1176.76 the new loan would be paid off in 17.7 years saving the clients 28 months in payments from their current loan or $31,770 in total of payments. It would make sense for the borrower to refinance in this scenario.

It is important to talk to a mortgage professional about all of your options. I recommend talking to your lender on the phone once a year. There are so many different loan programs available that you should explore all of your options. You might be surprised to find you could save money with a better loan.

Fed said the rate will stay low!!

Today the Fed Policy Statement said rates will stay low "for an extended period" and the Feds MBS purchase program will end on March 31st. Bad news for MBS because this gives the green light to stock traders, thus there will be money leaving the bonds moving into stocks. This will help the Carry Trade for a while. MBS are currently trading down over 12 bps. across the board.

The end of the Fed's MBS programs means there in no more government influence in the pricing of mortgage loans. Before the Fed decided the purchase MBS rates were in the low to mid 6's. Expect them to be there shortly. Could be the end of a great ride for super low rates. Lock in your rate as soon as you can. Rate are going up.

No more 90 Day seasoning rule for FHA loans

On January 15th 2010, the Federal Housing Administration (FHA) temporally waived their rule of a 90 day seasoning rule for sellers. Starting February 1st 2010, FHA will allow sellers who have owned properties for less than 90 days to sell these properties to buyers who are using FHA for their financing. Prior to this waiver, FHA required the sellers to own the property 90 days before a buyer could enter into a contract to purchase using FHA financing. In 2009, FHA changed the 90 day policy to allow banked-owned properties to be exempt from the 90 day rule. FHA now feels they can help the future housing market by allowing investors to sell properties before they have owned them 90 days, thus speeding up the time properties are on the market. Here are some of the FHA requirements that we know about currently:



· This waiver is available for one year, from February 1st, 2010, unless extended.

· All transactions must be at arm-length - meaning no identity of interest can exist between buyer and sellers.

· If sales price is 20% or more of the seller's acquisition cost, the lender must provide supporting documentation and/or a 2nd appraisal and order a inspection of the property and provide it to the buyer.

· Waiver is only for forward mortgages, not reverse mortgages.



Stay tuned for actual investors guidelines for this. As with any change to FHA guidelines, individual investors will have their own over lays (rules).

Changes comming for FHA

FHA has always had some of the lowest credit score requirements for mortgage loans. FHA was designed to promote homeownership for Americans who might not have been able to obtain traditional bank financing. Lately, FHA lenders have been increasing the minimum credit scores from no score to 620 for most lenders. There is talk now that FHA is going to start requiring higher credit scores maybe up to 640. FHA will do this because there are higher losses for credit score under 640 and they are being adversely selected for loans with lower credit score. Fannie Mae and Freddie Mac had loans similar to FHA but required higher scores. Over the last few years, Fannie and Freddie have stopped doing similer loans to FHA and have completely stopped doing any cash out loan above 80% loan to value. Until last year, FHA still allowed 95% cash out loans. Now FHA will limit borrowers from taking more than 85% of their property value out as a cash out mortgage. Since FHA was the only source for these types of loans, they were given all these loans and all the losses that came with them. Now FHA is getting in line with Freddie and Fannie and will be requiring higher scores and lower loan to value requirements for cash out loans.

Is this good? I think it is. What this will do is force borrowers to have better credit to have a home loan and also not tap into all of their home equity. Here at NOVA Home Loans we have a staff of credit analysts that will work with our applicants to educated them on how to increase their credit scores so they can be approved for home loans and to understand how to keep good credit scores. This is a free service that NOVA Home Loans provides. Contact me or your NOVA Loan Officer for more information.

Most lenders make their lending decisions on how well the loan will perform in the 1st 12-24 months. If a home loan performs well for the first 24 months, then the likelihood of the loan going bad is very little. Lenders know the biggest reason for home loans not performing is due to loss of employment. NOVA recognizes this and is the only lender that offers the SafeHouse Mortgage Protection Plan to our homeowners. SafeHouse is a program that assists homeowners in making their mortgage payments if they lose their employment. The program will also provide monetary assistance to members who experience a negative event that impacts their ability to pay their mortgage. Please contact me for more details.

These changes will not prevent people from being approved for a home loan. It will force buyers and homeowners to ensure that they are in a stable financial situation before they are provided mortgage financing.

Mortgage rates have come down a little today!

Mortgage rates have come down slightly today from their levels last week. The MBS are trading better today which in return have given us better rates today. Check back tomorrow to see what MBS are duing.

4.55% Pima County Bond Mortgage is Here!!

We are now offering a 4.55% 30 year fixed mortgage for First Time Home Buyers to purchase homes in Pima County. There are no zip code restrictions on where these homes can be purchased. These rates are for FHA and VA loans only. This is a great opportunity for first time home buyers to take advantage of these great low 4.55% fixed rates.

We also offer Down Payment Assistance programs to assist qualified home buyers in taking advantage of up to 4.5% of the Sales Price. The Sales Price Limits for existing homes are $276,334 for a 1 unit homes and $353,752 for a 2 unit homes. For new homes $337,741 for 1 units and $432,363 for 2 units. There are income limits to qualify for these loans. For non-targeted areas in Pima County for a family of 1-2 adults, the income liimits are $69,000 and for 3+ the income limit is $79,675. Targeted areas are parts of Pima County that HUD is trying to increase home ownership in. These income limits are higher to promote home ownership and these income limits are $72,480 and $79,675 for 3+ members.

These loans are underwritten to normal FHA and VA guidelines and the current allotment for these loans is currently $25,000,000 for Pima County. These loans will go fast!!! Contact me or your Loan Officer for more details for this loan program today.