If you haven’t refinanced yet, don’t wait much longer

Changes to Fannie Mae guidelines may make it more difficult.

On December 12, 2009, Fannie Mae will roll out its latest version of Desktop underwriter – and with it new guidelines that may make it more difficult to get a mortgage. Many people have been waiting to refinance but now is the time to act,

Some of the upcoming changes are:

• Maximum debt to income ratios will now be 45.00%


• There will now be minimum credit scores, regardless of compensating factors


• Increased requirements for borrowers with previous bankruptcies, foreclosures, and deeds-in-lieu of Foreclosure.


• Value of certain assets (e.g. stocks, bonds, mutual funds, retirement accounts, etc.) will be capped at 50% - 70% of actual value


• Greater Loan to Value (LTV) restrictions for 2-unit properties along with greater reserve requirements.


• Many more

While the housing market has shown signs of improvement, foreclosure and delinquencies are still at all-time highs. Fannie Mae is implementing these changes to make sure loans that are made going forward are a higher credit quality than they were in the past. This can significantly impact your ability to refinance and save money.

If you are thinking of refinancing your mortgage, please call me today to see if it is a smart move for you. Time is running out!

Congress Extends/Expands Home Buyer Tax Credit

Congress has approved a bill that will not only extend the First Time Home Buyer Tax Credit but will also expand the credit to allow current home owners to receive a tax credit if they purchase a home. The housing market has shown signs of improving over the past several months in large part as a result of the tax credit for first time buyers. Over the past several months, first time home buyers have accounted for up to half of all sales.

First Time Home Buyers
There is no change for first time home buyers. They will receive a credit of 10% of the contract sales price up to a maximum of $8,000. The sales contract must be executed on or before April 30, 2010 and the sale must close on or before June 30, 2010. Both of these dates must be met – so, a sale that closes by June 30, 2010 with a contract date of May 15, 2010 is not eligible for this credit. Also, for the tax credit, a first time home buyers is someone who has not had ownership interest in a primary residence for the past 3 years. Click here for more specific information on the tax credit.

Existing Homeowners
The tax credit for existing homeowners works the same as for first time home buyers but it is limited to $6,500. An existing homeowner must have lived in their property for at least 5 consecutive years out of the past 8 years prior to the purchase of the new home. Also, only sales after November 6, 2009 are eligible for the tax credit for existing homeowners.

Income Limits
Income limits are the same for both first time home buyers and move up buyers. Buyers with a modified adjusted gross income (MAGI) of $125,000 ($225,000 for married couples) or less will get the full tax credit. The credit is phased out for MAGI between $125,000 and $145,000 ($225,000 and $245,000 for married couples) and is eliminated above $145,000 ($245,000 for married couples). To determine your MAGI, check IRS Form 5405.

Military/Service Rules
For qualified service members who serve a period of official extended duty (more than 50 miles from home for a period of 90 days or more) will have a 1 year extension – contract sale of April 30, 2011 and closing date of June 30, 2011. Also, qualified service members who sell or move from a tax credit home within three years of the initial purchase due to official extended duty are exempt from the recapture rule. Qualified service members include a member of the uniformed services of the US Military, an employee of the intelligence community, or a member of the Foreign Service of the US.

Home Seller Incentives – Buydowns Make New Home More Affordable

Sellers are looking at all sorts of incentives to make their properties stand out from the competition. In this buyers’ market sellers are desperate to sell and will try a lot of incentives – many of which may make getting financing for buyers more difficult (e.g. decorating allowances, cash-back offers, etc.)

Buydowns, sometimes known as temporary buydowns, offer a great incentive to the buyers and can make their purchase of your home more affordable than other homes. A buydown offers the home buyer a lower interest rate and mortgage payment at the beginning of their mortgage – this can help buyers who are moving from an apartment to their first home or even move up buyers.

There are several types of buydowns but the most common is the 2-1-0 Buydown. For the first year of the mortgage the interest rate is “bought down” by 2% and in the second year the interest rate is “bought down” 1%. For the remainder of the mortgage the buyers will be paying the regular interest rate, or note rate.

For example, if the interest rate for a 30 year fixed mortgage is 5.0%, the buyers will pay 3.0% interest for the first year, 4.0% interest for the second year, and 5.0% for the remainder of the mortgage. The cost for a 2-1-0 buydown is typically about 2.5% - 2.75% of the mortgage amount (2.5 – 2.75 points) which the seller would pay as an incentive to the buyers to purchase their home.

If you are selling your home, speak with your lender and Realtor about offering this as an incentive to prospective buyers. If you are buying a home, keep this in mind as you make an offer and negotiate your purchase. A buydown can be a win-win situation for the buyers and sellers.

For more specifics on how buydowns work, please see “What is a Buydown?”

---