Bumpy Road Ahead for First-time Buyers

Winter weather pummeled housing across much of the nation last quarter. As spring weather brings a thaw for busier months, the focus is now on whether there is enough inventory to satisfy demanding buyers, particularly first-timers. Low housing supply, tightened credit guidelines, increasing rates and rising prices are all stacking up against first-timers' odds at calling a place their own. No answer on when new Building Permits, which rose 7.5 percent to just over 1 million in March, will be approved for new home construction to meet demand.

Homebuyers in general are reportedly less confident about the market. Following January to February's 10 point drop in the monthly builder sentiment index from the National Association of Home Builders (NAHB), it rose 1 point (from 46 to 47) in March. Readings below 50 indicate that more builders view housing market conditions as poor, rather than good. This reflects builders' inabilities to find lots and labor, according to Kevin Kelly, NAHB Chairman. More than ever, buyers will be requiring the help of skilled real estate professionals to represent them in what could be competitive purchase transactions this season.

Fannie and Freddie on the Chopping Block?
Late last quarter, the Senate Banking Committee said it would introduce a bill to reform the U.S. housing finance system by scaling back and possibly eliminating Fannie Mae (FNMA) and Freddie Mac (FHLMC). The government-backed enterprises oversee the secondary mortgage market. By purchasing home loans from lenders, packaging them up, and selling them to investors as mortgage backed securities, they free up liquidity for lenders to continue financing homes. Both regulate home loan guidelines with the goal of making home ownership more attainable for Americans.

Fannie and Freddie were largely criticized for securitizing bad loans which contributed to the subprime crisis. This story will be watched closely for its impact on housing and potential future housing reforms for many years to come.

Productivity Tip: Manage You, Not Your Time.

We have the same amount of time in a day as Thomas Edison and Albert Einstein. How did they do it. The key is to manage you, not your time.

New Qualified Mortgage Rule Now in Effect

What Does This Mean to You?

You may have heard about a new rule that may impact people looking to purchase or refinance a home.

What is This Rule? 
As of January 10, 2014, lenders are required to more thoroughly assess a borrower's "ability to repay" a loan, so that he or she can receive a "Qualified Mortgage" (QM).

Why was it Enacted? 
The rule is part of the Dodd-Frank Consumer Protection Act, which made banks and mortgage lenders legally liable for determining borrowers' abilities to repay their mortgages. It was enacted to help ensure borrowers get a home loan they can afford to repay, and to help prevent people from going into foreclosure and losing their homes.

What is the Bottom Line?
While new guidelines are now in effect related to loan limits, a borrower's debt-to-income ratio, fees and other items, the good news is that the Consumer Financial Protection Bureau (CFPB) estimates that 95 percent of all mortgages made in 2013 already met the new rule. So there's a good chance the new rule won't impact the majority of borrowers.

If you're thinking of purchasing or refinancing a home this year, or if you know someone who is, I'm here to help. Give me a call or send me an email, and I'm happy to answer any questions you may have.

When FHA Requires Lead-Based Paint Repairs

If you're interested in working with HUD REO properties and buyers who need FHA financing, you may come across appraiser-required conditions to perform lead-based repairs.

The only time lead-based repairs are required for an FHA-financed HUD REO property is when the property was built prior to 1978.

Lead-based paint removal, however, falls under EPA regulations. A contractor or investor may cure the paint issues, but an FHA underwriter will require a copy of the contractor's Certificate of Completion from an EPA or state provided lead-based paint training program. Repairs completed by owner-occupants do not require this training certificate, but do require documentation of the repairs.

And remember, the FHA appraiser's final inspection will only certify the repairs are completed, not that they were performed according to EPA guidelines.

This rule is required by FHA because renovation, repair, and painting activities such as cutting and sanding can disturb lead-based paint, creating hazardous lead dust, which even in small amounts, is enough to poison children and put adults at risk.

Don't forget to let your renovation-minded clients know!

8 Steps To Reduce Property Taxes

As the sluggish economy drags on, county boards everywhere are looking for ways to replace lost income, and re-assessments of residential real estate taxes is just one of those ways. Sometimes it's fair, other times it avoids belt-tightening. If your property taxes have been raised and you feel it's unfair, here is how to prepare to meet your assessor for a review to lower them:

1. Look for reporting mistakes. Examine the assessor's entire property description. Note discrepancies and document them with blueprints, surveys, photos or other inspection reports.

2. Compare neighborhood assessments. Are other homes in your neighborhood assessed similar to yours? Check the web first; some counties post assessments online.

3. Compare current sales. Talk to a local real estate agent (if you need a referral, I'm glad to help) and get a report of comparables sold within the last 6 months. Sold homes count, listings don't.

4. Take pictures. Document where your home needs repair compared to other homes in better shape in your neighborhood.

5. Get a new appraisal. If your home is unusual or hard to "comp" this is the one time it can work in your favor. If you recently refinanced and the value is lower, use that report instead.

6. Get your contract. If your taxes increased soon after you purchased, values probably haven't changed that much. Document with your purchase agreement.

7. Are you exempt? There are many special exemptions: homestead, mortgage, senior citizens, veterans, disabled persons, and even energy-efficiency. Check with your county and check them all.

8. Prepare your case. In writing, briefly and professionally describe why you are entitled to the reduction, followed by documentation of your reasons. Make sure you have any required forms completed and know all deadlines for your appeal.

FHA Credit Policy Change Makes it Easier to Qualify "Economic Events" Recognized as Isolated

 

Effective immediately, policy changes in the way the Federal Housing Administration (FHA) views certain derogatory credit will make it easier for some borrowers to qualify for purchasing a home. Allowances will be made for certain "Economic Events" resulting in poor credit ratings, which previously would cause borrowers to be ineligible.

What do the new rules say? Potential borrowers who experienced a decrease of income by 20 percent or more for at least six months, and that resulted in serious derogatory credit such as a short sale, foreclosure, or bankruptcy, may still be eligible as long as:

1. The loss of employment or income was due to an extenuating circumstance beyond his or her control and can be documented;
2. A satisfactory credit history has been restored for a period of 12 months; and
3. Housing counseling has been completed.

Other changes effective October 15, 2013 include amendments to underwriting guidelines in the area of outstanding, prior judgments and collections, including the exclusion of unresolved medical collections from the underwriting decision.

If you or anyone you know has been previously denied for a home loan based on an isolated credit incident, I may be able to help! And I'm always happy to answer any questions you may have.

After the Shutdown What's in Store for Housing and Home Loan Rates?

The government shutdown has come to an end, but how does the House's last minute deal and the post-shutdown environment impact mortgage rates?

With the debt ceiling stalemate in Washington resolved at least until February 7, 2014, rates could dip in the short term. Home builders stalled by the government shutdown will resume confidence and government-affiliated mortgages such as FHA, VA, USDA and FEMA loans will continue running smoothly.

But over the long term, mortgage rates will rise...

The Federal Reserve is committed to "taper," or reduce its recent purchases of bond buying, which it had started doing to stimulate the economy. As the economy strengthens, tapering will begin. When? Nobody knows for sure, but when it does, rates will rise--and possibly faster than consumers will be able to anticipate.

If you or anyone you know has questions related to the shutdown's impact on home loan rates, or hasn't yet refinanced their Adjustable Rate Mortgage taking advantage of today's historic low fixed mortgage rates, please call or email me today. I may be able to help and I'm always happy to answer questions!