In March 2008, HUD temporarily raised FHA loan limits around the country. Effective January 1, 2009, FHA loan limits revert.
FHA home loans are mortgages made by private lenders and insured by the federal government.
Historically, FHA home loans have been "easier" for which to qualify than their conforming mortgage counterparts and, therefore, tend to be associated with borrowers of tarnished credit quality.
Today, that's the not the case.
The FHA home loan underwriting process can be as tough -- or tougher -- than a conforming mortgage underwrite. There is extra documentation required and the home appraisal process is often more thorough.
Where FHA home loans shine is in their limited downpayment requirements.
To purchase a home with a FHA-insured mortgage requires a 3 percent downpayment as of today; in January, it moves to 3.5 percent. Versus the typical conforming mortgage requirement of 5 percent or more, FHA serves as somewhat of a home affordability product for Americans. In addition, FHA allows larger "cash out" refinances than Fannie Mae or Freddie Mac.
The 2009 FHA loan limits (in most areas of the country) are:
- 1-unit : $271,050
- 2-unit : $347,000
- 3-unit : $419,400
- 4-unit : $521,250
Note that the loan limits don't apply to all areas of the country equally. Higher-cost regions feature higher loan limits, based on typical home values. Homes in Los Angeles County, for example, can be FHA-insured up to $625,500 in 2009, and there are exceptions made for Alaska and Hawaii.
The official FHA announcement published all of the counties with access to higher loan limits, spread across two spreadsheets. The first spreadsheet lists each county at the $625,500 maximum; the second list is everyone else.
If your home county is on neither list, use the "base" numbers above.
Vacuum cleaners are meant clean our homes, but in addition to picking up dirt, dust and mites, most vacuum cleaners also spread harmful bacteria.
As revealed in this this 4-minute video from NBC's Today Show, E. Coli, salmonella and other virus-causing entities are commonly found on vacuum cleaner under-bristles and, in some cases, bacteria can be 100 times more concentrated than on a public toilet seat.
The video goes on to give some general rules to limit indoor germ exposure -- some more practical than others. The rules include:
- Avoid wearing shoes indoors
- Wash your hands after playing on the carpets and rugs
- Don't stop vacuuming
And, of course, having the right hardware can help, too.
If it's time to replace that old vacuum, start your search online with a discount store like GoVacuum.com. Most online sites will have a wider selection than your local hardware store and shipping is usually free.
To help demystify the mortgage process, the federal government is giving the much-maligned Good Faith Estimate document a makeover. Effective January 1, 2010, the current, 2-page form will be replaced by a new, easier-to-understand version, spanning 3 pages.
The biggest strength of the new Good Faith Estimate is that it uses everyday English to explain how the mortgage works. For example, in one section titled "Loan Summary", the Good Faith Estimate specifically answers:
- What is your interest rate?
- Can your interest rate rise?
- Does your loan have a prepayment penalty?
Using today's disclosures, the answers are spread across 3 separate forms.
In addition, the new-look Good Faith Estimate identifies what charges are legally allowed change at the time of settlement, and how a mortgage applicant can opt for higher fees in exchange for a lower mortgage rate, and vice versa.
These educational elements are lacking from the current model.
But for all of its clarity, the Good Faith Estimate doesn't address the issue of suitability. As in, is this the right loan for the right borrower? The new Good Faith Estimate won't prevent homeowners from choosing "bad loans" -- it will only educate them about the loan's facts.
For suitable advice -- as always -- talk with a trusted mortgage professional who will both listen to your needs and help you make plans for them. Getting the "best terms" on an unsuitable loan can be far worse that getting great terms on a loan that fits.
Foreclosure is a hot topic among the press lately. It's hard to turn on the television or open up a newspaper without seeing a story about it.
But what's most interesting about foreclosures is that they appear to be concentrated in just a few parts of the country.
According to the foreclosure-tracking service RealtyTrac, 4 states accounted for more than half of nation's foreclosures last month.
And those 4 states -- California, Florida, Arizona, and Nevada -- share some very similar characteristics including:
- Their respective popularity with retirees and real estate investors
- Their large home value increases earlier this decade
In looking at the rest of the country's foreclosure data, the remaining 46 states combined accounted for just 48.8 percent of October's foreclosures.
That's 1.06% per state on average.
Now, this isn't meant to diminish the impact of foreclosures on the economy -- quite the opposite. Foreclosures harm to the national housing market because most mortgage lenders are national. But, we highlight statistics like this to show that the foreclosure "problem" isn't so bad in most parts of the country, relative.
Furthermore, mortgage lenders are intervening to slow the flow of defaults nationwide. Following the lead of JP Morgan and Bank of America, CitiMortgage announced a sweeping plan this week to help homeowners avoid default and stay in their homes.
In a way, for as good as this news is for homeowners, it's equally bad news for home buyers. As the number of foreclosures decrease in any given market, it reduces the inventory of homes for sale. Lower supply levels often lead to higher sale prices and less room to negotiate.
And this may be what the banks are trying to accomplish.
If the amount of air that leaked from a typical home's gaps and cracks was measured, it would equal the amount of air that leaves through an open window.
This is why so many Home & Garden experts recommend a recaulking of your home prior to the Winter -- a solid caulk job can reduce a home's Winter energy bill by 20 percent.
In this 2-minute video from Home Depot, learn how you can to identify leaky windows, and then how to fix them using caulk, putty knives and a host of other tools. Or, if DIY is not your style, find a competent contractor online.
The project is small so the costs should be low.
On the first Friday of every month, the Bureau of Labor Statistics releases its Non-Farm Payrolls report.
More commonly, it's called the "jobs report" and the October's data is trending with the rest of 2008.
After shedding another 240,000 jobs last month, the economy has now put 1.2 million Americans out of work this year and unemployment rates have climbed to 14-year highs.
As a strange twist, though, today's weak jobs data may lead to a positive turn for the economy and for housing in 2009.
In the wake of the jobs report, members of Congress are already calling for both tax cuts and direct stimulus to reverse the course of the economy. Both of these actions would put money back into U.S. citizens' household budgets, spurring consumer spending nationwide.
Because consumer spending accounts for 70 percent of the economy, this would be expected to push the economy forward at a time when it natural forces are slowing it down.
In addition, markets are betting that the Federal Reserve will cut the Fed Funds Rate below its current 1.000 percent level. This, too, would spur spending because the Fed Funds Rate is directly tied to consumer credit card rates and business credit lines.
Expectations for stimulus are one reason why mortgage rates have not risen today as high as they otherwise would have if this were a "normal" market.
Mortgage rates are slightly elevated as we head into the weekend, but don't be surprised if there's a late-afternoon push that brings them lower. For active home buyers, this could help home affordability as we cruise towards the holiday season.
(Image courtesy: USA Today)
The interest rate against which adjustable-rate mortgages change is falling -- evidence that the global banking system is starting to stabilize.
This is good news for U.S. housing markets.
On any adjustable-rate mortgage, the initial "starter rate" remains fixed for some period of time, and then adjusts according to some pre-determined rules.
For a conforming mortgage, an ARM will typically adjust once per year, based on this formula:
(Adjusted Rate) = (Variable) + (Constant)
Where the variable is often assigned to 12-month LIBOR, and the constant is often fixed at 2.250 percent.
LIBOR is the equation's variable. Therefore, it's of paramount import to holders of ARMs. LIBOR is the rate at which banks lend money to each other. The 12-month LIBOR, therefore, is the borrowing rate for a 1-year, interbank loan.
So, to take the formula and apply to an real live mortgage, a homeowner's adjusted mortgage rate would be equal to whatever the 12-month LIBOR is at the time of adjustment, plus another 2.250 percent.
Looking at the chart, note LIBOR spiked in September. It's a direct correlation to the September 15 failure of Lehman Brothers. That bank shutdown started a wave of "who's going to be next?" anxiety on Wall Street but as global governments stepped up support for banks, LIBOR predictably fell.
For homeowners with adjusting mortgages, this is terrific news.
However, mortgage markets have rallied a bit this week, created an interesting opportunity for some ARM-holders. Depending on credit scores and the amount of home equity, mortgage rates on a new loan may be lower that the soon-to-be-adjusted mortgage rate of the old one.
In other words, getting a new loan may be smarter than letting your current mortgage change. Contact your mortgage lender to see which plan fits you best.
Washington Report: Tax Credit for Homebuyers
It's impossible to say how the election results will affect the economy and the housing market, but there is little doubt that there will be an effort to put together another stimulus package.
The National Association of Realtors already is pushing a plan that would give a tax credit to all buyers of houses nationwide -- not just first time purchasers -- and would make the credit non-repayable. Housing trade groups are also pushing for more direct assistance for real estate.
Visit Realty Times to learn more and stay updated over the next couple weeks.
Market News
Investor Report: Best Opportunities Ahead
Once a year, the Urban Land Institute asks more than 600 of the country's largest real estate investors and developers one key question: Where are the best opportunities in real estate for the year ahead? Full Article
Smaller Homeowner Bailout Already in Place
Don't wait for home owner bailout provisions to trickle down from the $700 billion "Emergency Economic Stabilization Act of 2008," recently rushed through Congress. When it comes to help, the $200 billion "Housing and Economic Recovery Act of 2008" can provide more immediate relief. Full Article
Affordability Options For First-Time Buyers
First-time home buyers who want affordable homes may want to take a hard look at fixer-uppers, smaller homes and cheaper commutes to work to save on the costs of buying and owning a home.
Market Trends: November Focus - Near South Side
The Near South Side is located just South of the downtown central business district. It contains some of the most well-known structures in Chicago - Soldier Field, the Eastern half of McCormick Place, the Museum Campus, and Northerly Island. As part of the 2016 Olympic bid, the Olympic Village is planned to be located partly on the Near South Side.
The median price for condominiums on the Near South Side increased 24% from October 2007 to October 2008.
The median price of new construction condominiums increases an impressive 68% to $867,000 over the same time period.
The number of homes sold in October 2007 vs. October 2008 was comparable, as was Average Days on Market. This is a promising sign in such a difficult market.
Source: Statistics based on MLSNI market data available through October 31, 2008.
Please email Lynn Reidl if you would like to know more about similar trends in your own neighborhood.
Copyright 2008 by Real Living, Inc and Real Living Helios Realty. All rights reserved.
The Federal Reserve confirmed what most of us already knew -- getting qualified for a "prime mortgage" is increasingly more difficult.
In a quartely survey of 84 banks, 75 percent of respondant banks tightened mortgage guidelines over the last 3 months for the most qualified of home loan applicants.
"Prime" is a vague term when it comes to mortgages, but, historically, a prime borrower is one that can document:
- A well-documented credit history
- Very high credit scores
- Very low debt-to-incomes
Historically, banks bent over backwards to lend money to this class of borrower. Today, they're thinking twice.
The chart's steep ascent reinforces that members of all tax brackets face consequences from the current credit market turmoil. And, although some corners of credit looked poised to recover -- interbank lending, for one -- the mortgage market is yet unaffected and should be among the last to thaw.
All prospective home buyers should prepare for the likelihood that mortgage guidelines continue to toughen before they start to ease. Mortgage applicants on the cusp of being approved today will almost certainly be turned down for a mortgage in 2009.
Owning real estate can require a tremendous amount of advance planning and, sometimes, looking at the past is the best way to prepare for what's coming ahead.
According to the Federal Reserve's survey, what's coming ahead is more mortgage application scrutiny.
More than a handful would-be home buyers stayed on the sidelines this year, waiting for Election Day to pass.
The prevailing thought was that once the new President-Elect was identified, credit markets will systemically unfreeze and housing markets will return to normal.
If history is a guide, this is an unlikely scenario.
Election Day doesn't figure to alter markets any more in 2008 than it did after the four previous presidential elections.
If anything, post-Election Day market reaction has been muted:
- 1992 : Dow closes down 0.9 percent the day after Election Day
- 1996 : Dow closes up 1.6 percent the day after Election Day
- 2000 : Dow closes down 0.4 percent the day after Election Day
- 2004 : Dow closes up 1.0 percent the day after Election Day
But just because the stock market has a history of idling on the day after the election doesn't mean that mortgage rates will rest easy this week. The likely outcome is the opposite, actually.
If investors believe the President-elect will successfully stimulate the economy, stock markets would likely rally, causing mortgage bonds to sell off and mortgage rates to rise.
Higher mortgage rates means higher monthly payments on a home.
Or, if investors think the winning candidate will fail to revive the economy, money would flock to government bonds as a place of safety. This dollar flow would occur at the expense of the mortgage market, causing rates to rise in this scenario, too. Again, higher home payments.
Of course, it's as difficult to predict post-Election market conditions as it is to predict the election itself but one thing is for certain -- rates may rise and fall before the week is out, but credit guidelines will remain extra-tight. Getting approved for a mortgage won't be any easier -- no matter which party wins the Presidential Election.
Source
Will the election drive the Dow?
Eamon Javers
Politico
http://news.yahoo.com/s/politico/20081022/pl_politico/14826
