Invitation to the PHX RE Community: Casino Night at Academy Mortgage in Scottsdale
Hello friends and colleagues, I hoping that you will be able to attend our Casino Night Celebration that we are having to mark the grand opening of our Scottsdale office.
Each month the W.P. Carey School of Business at Arizona State University releases reports on the Phoenix housing market. The most recent report indicates that August marks the third consecutive month of median existing-home prices falling. Foreclosures also spiked back up to levels not seen since March of this year. The Phoenix Business Journal also reported on this press release.
The report notes that slow resale activity is not uncommon as the selling season comes to a close. Likewise, it’s also not uncommon for median prices to drop–generally school schedules and holidays allow little to no desire or time for potential homebuyers to go house shopping.
Foreclosure activity, as percentage of the total resale market, varied throughout the Valley such as 56 percent in El Mirage, 31 percent in Scottsdale and 46 percent in Gilbert. Another significant component of the market was the sale of previously
foreclosed property, which accounted for approximately 40 percent of the traditional transactions (4,800 sales). Thus, foreclosure–related activity represented 67 percent of the recorded activity.
In previous housing downturns, consumers responded to the low interest rates and attractive home prices of the housing inventory available to them. ASU’s report notes that while these conditions do currently exist in our present housing market, there are a few significant factors keeping the market from rising back up:
slow economic and job recovery
low consumer confidence
and stricter underwriting policies
While it’s true that the current market is not ideal for sellers, there are many advantages for potential buyers. Interest rates continue to stay low (frequently meeting or breaking records) and housing prices are substantially low, too.
In regards to consumer confidence, it’s important to choose a lending company that you trust and feel comfortable with but that also has the experience necessary to make sure your loan process goes smoothly. Academy Mortgage was recently rated the “#1 Independent Lender” by Corelogic and continues to achieve top-tier rankings for FHA, resales, and builder loans.
Buying your first home is a milestone in most anyone’s life. One of the obstacles that you might face, however, is getting the money together for that all-important down payment. So let’s talk about ways to save or acquire that money.
First, though, think about how much money you will need. If you are looking at an FHA loan, then the minimum down payment required is 3 1/2 percent of the purchase price and with a conventional loan you will be required to have at least (at least!) 5 percent down.
Ways to save up for a down payment
Roth IRA – You might be surprised to learn that you can withdraw money without penalty from your no fee Roth IRA for the purpose of financing a home if you are a first time home buyer. The restrictions are that the money has to be in the IRA account for at least 5 years previous to withdrawing it, and there is a $10,000 limit. If you don’t have a Roth IRA, well, now is always a good time to start one.
Start a “hands off” account – This one is easy – start a savings account, preferably a high-yield one, for your down payment money. Deduct a set amount per paycheck and have it automatically deposited so you don’t ever see the money.
Frugality – Stop going to Starbucks and sell the Escalade! Or at the very least buy coffee instead of the Venti extra shot Soy Chai Latte and downsize to a Scion XB.
Increase your income – Although this option may take awhile to pan out, you can try the following: go for a promotion or raise, ask for overtime if you are an hourly worker, get a second job or start a side business.
Invest – Along with starting your down payment savings account, you can also put some of your money into a Certificate of Deposit (CD). CDs have a higher interest rate than savings accounts, although you have to leave your money in for a specified time like 6 months or a year. You can also try investing in some short term stocks if you feel knowledgeable about that type of investing.
Tax returns and gifts – If you get a tax return each year, that money can go into your down payment savings account. The same is true for cash gifts for a birthday, graduation or anniversary.
Although saving money seems difficult, if you break it up and save over time you can reach your goal. If you follow some or all these suggestions, you should be well on the way to buying your first home.
I’m going to erase this when i’m done, but I’m using it now.
The strangest thing happened today. I was teaching my Agency and the Use of Social Mediaat the Arizona School of Real Estate & Business and as part of the class, I wrote this quick and dirty post to demonstrate how you can write a blog post and have it broadcast to Twitter, facebook and LinkedIn all at the same time.
I had every intention of erasing the post — as you can see above — but while I was driving home I received a notice that this post had been indexed by google.
To be honest, I have no clue why google chose to index this page so quickly when other posts take days before they are indexed. When I received the alert, I had not added any SEO components either on page or off page.
So, I decided to not erase it and add this explanation of why I have such a lame post on my website.
Many believe that there will be an increase in interest rates in 2010. The question that most have isn’t “if”, but “when”. A number of economists and news sources have predicted that a significant increase in FHA interest rates will happen within the next few months, while others suggest that it will not happen until the fall.
What Are Interest Rates Going To Do?
Aside from the general agreement that “they’ll probably go up”, no one seems to know for sure. We are now into the fourth year of the housing crisis and it is hard to see an end. In his recent news article, Trey Bowden said it best:
The questions on most homeowners’ minds are: “When will we see an end to the current housing crisis?” “How much longer will lenders remain skeptical?” “What are interest rates going to do?” “Is the housing market going to show signs of loosening up this year?” “Even with the federal tax credit, is it time to buy a new home?”
How Does The Interest Rate Affect My Loan?
Simply put, the higher the interest rate, the higher your monthly payment will be. Therefore, the amount that you can qualify for to buy a house will be lower.
FHA considers a borrower’s income adequate for a loan if the proposed total mortgage payment does not exceed 31% of gross stable monthly income.
With that being said, consider the following example:
Assume that the average household income is about $50,000 per year (or 4,166.67 per month) and the total amount of your other debt does not affect the 31% FHA housing ratio.
To fall within traditional FHA debt-to-income guidelines (31%), your total monthly payment can not exceed $1,291.67 (4,166.67 * 31%).
For the purposes of this example (using current mortgage insurance premium requirements), we’ll say that you are putting 3.5% down and your total monthly taxes, insurance payments are $150.00.
Under these circumstances the approximate results are:
5.0% FHA Interest Rate = $200,000 purchase price
5.5% FHA Interest Rate = $190,000 purchase price
6.0% FHA Interest Rate = $181,000 purchase price
6.5% FHA Interest Rate = $171,000 purchase price
FHA Interest Rate for Today
In the top, right corner of this site you’ll find the current US average mortgage rates.
You can use this tool to see what are the current interest rates and to see what the recent interest rate trend has been.
If you are planning on buying a home in 2010, I recommend that you frequently visit the site to check on current interest rates.
With all of the recent changes in the mortgage industry and the departure of subprime and other non-traditional mortgage products, the market share of FHA insured loans has swelled to 30% of all purchase mortgages. Politicians, advocacy groups and a sizeable percentage of the American public are afraid that Federal Housing Administration has become “the new subprime”.
HUD leaders have recently announced major initiatives to mitigate risk that include additional oversight of underwriting standards, increasing the required amount of mortgage insurance premiums and reviewing poor-performing, FHA-approved mortgage lenders.
It is important for mortgage and real estate professionals to keep abreast of the material changes to the Federal Housing Administration’s policies. To do so, I recommend that they read the HUD issued FHA Mortgagee Letters as they are released.
HUD issues FHA Mortgagee Letters to inform lenders about operations, policies, procedures, and changes. Between 1989 and 2009, they have issued an average of 42 a year. Last year, HUD issued 53. All of the Mortgagee Letters can be found on HUD’s website.
Here is a short list of some of the most recent relevant FHA Mortgagee Letters:
Mortgagee letters are informational memos issued by HUD for clarification of new and existing HUD policies.
The goals of the Federal Housing Administration are: to improve housing standards and conditions; to provide an adequate home financing system through insurance of mortgage loans and to stabilize the mortgage market.
The FHA “Kiddie Condo” program has become a popular option for many parents with children attending college.
Many parents have a desire to help send their children to college. Some, with the help of a financial planner, estimate the cost of future college tuition years in advance and start saving little by little. Whether this is the case or not, all parents who would like to help send their child to college realize that student housing is potentially a substantial portion of the cost of an college education.
Right now there is good news. Your student housing expense can be dramatically reduced through the utilization of the FHA Kiddie Condo program. The combination of mortgage rates near an all-time low and the large supply of affordable houses has created an opportunity to own for less than it costs to rent.
The FHA “Kiddie Condo Program” is a nickname given to the FHA mortgage guideline that allows for a non-occupant co-signer to qualify for the loan. The actual occupant of the home does not have to have employment, income or assets. However, the occupant’s credit must meet FHA’s qualification standards.
The “program” became popular as a method for parents who were sending their children away to college to buy them a home (or condo) to live in as opposed to paying rent – hence the nickname “kiddie condo”. However, the occupant is not required to actually be a college student.
The benefits of the program included the fact that the home can be purchased as a primary residence for the occupant. As such, the non-occupying parent only has to invest a minimum down payment amount into the property.
Consider the following scenario:
2010
Parent(s) lives in California
Daughter or son lives in Arizona and is attending college
Current rent for a decent 2 bedroom 1 bathroom apartment is around $800
Home built in 2000 with 3 bedrooms and 2 bathrooms is selling for $70,000
FHA “Kiddie Condo” program allows the parent to buy the home with as little at 3.5% down ($2,450)
Seller pays the majority of closing costs
Total monthly PITI payment is less than $575 a month
Child lives in home for 3 years. The downpayment spread over 3 years equates to $68 a month
Now consider the cost savings if the occupying child rents out the extra bedroom for $300 a month. In this scenario, they will be paying a net amount of $350 a month and own the home.
A parent should consider using the FHA “Kiddie Condo” program and taking advantage of the current FHA interest rates and low housing costs when determining how to efficiently help send their child to college.
Are you looking to buy a home after foreclosure and would like to know the FHA foreclosure waiting period? FHA foreclosure guidelines render THREEa magic number.
“Three Is a Magic Number” was one of the original songs from the Schoolhouse Rock! Series that aired on Saturday mornings during the ‘70’s.
The first verse of the song says:
Three is a magic number,
Yes it is, it’s a magic number.
Somewhere in the ancient, mystic trinity
You get three as a magic number.
For the numerous US households that experienced a foreclosure in recent years and want to buy a house again, three is a magic number.
According to realtytrac.com, there were 1,285,873 properties with foreclosure filings in the United States in 2007. The western states of California, Colorado, Arizona and Nevada all posted foreclosure rates among the nation’s top 10 in 2007, and all these states documented more than 1 percent of their households entering some stage of foreclosure during the year.
With a total of 481,392 foreclosure filings on 249,513 properties during the year, California documented the highest number of foreclosure filings and the most properties in some stage of foreclosure in 2007. The state’s 2007 foreclosure rate — 1.9 percent of its households entering some stage of foreclosure during the year — ranked fourth highest among the states.
Nevada posted the nation’s highest state foreclosure rate for 2007, with 3.4 percent of its households entering some stage of foreclosure during the year — more than three times the national average.
It can be logically assumed that the majority of these households did not move far from their foreclosed homes. Many of them are working on maintaining or salvaging their credit history in hopes of again becoming eligible for a mortgage loan despite their foreclosure.
FHA guidelines state that the minimum waiting period is three years for a borrower whose house has been foreclosed or who has given a deed-in-lieu of foreclosure. This is a much shorter waiting period than that which is required by Fannie Mae (5 to 7 years).
During the three years they are waiting, it is imperative that the households re-establish credit. My recommendation – although every credit scenario is different – is that they maintain at least three open credit accounts without late payments. If any of the accounts are revolving (e.g. credit cards), the account balance should be maintained below 33% of the limit in order to maximize the account’s positive impact on the three credit scores.
FHA loans also have a low and flexible down payment requirement which helps overcome another significant barrier to entry to re-homeownership. The current minimum down payment required under FHA guidelines is 3.5% (ok, not exactly three, but close enough). Compare this to the Fannie Mae minimum requirement of 10% for a buyer with a previous foreclosure.
Finally, three is a magic number because IRS guidelines define a first-time homebuyer as any individual (and spouse if married) who has not had present ownership interest in a qualifying principal residence during the previous three-year period. As a result, a household that can use an FHA loan to buy another home three years after foreclosure can typically take advantage of first-time homebuyer programs and incentives such as the existing $8000 first-time homebuyer tax credit that was recently extended to April 30, 2010.
The past and the present and the future … give you three as a magic number.
For the many households that have experienced foreclosure in recent years, FHA’s three-year post-foreclosure waiting period offer a faster route to re-homeownership.
This morning, President Barack Obama signed into law H.R. 3548 bill, The Unemployment Compensation Extension Act that includes the extension, modification and expansion of the first time home buyer tax credit.
President Obama said, “Although it will take time and it will take patience, I am confident that our economy will recover. I am confident that we’re moving in the right direction. And I promise that I won’t rest until America prospers once again.”
At this point, my thought is that regardless of whether you believe that it should have been extended or not, the fact is … it has. As such, if you are a home buyer and you are looking to buy a home in the next year, do it during the extension period and take advantage tax credit.
Lastly, do I think that the home buyer tax credit will be extended again? We’ll have to see, but I personally think that the answer will be NO, it will not be extended. The current political thought is that for economic stimulus to work, it must create a sense of urgency.
Now that it has passed both the Senate and the House, it will be forwarded to President Obama for his signature.
The extension to the homebuyer tax credit is part of H.R. 3548 Unemployment Compensation Extension Act of 2009 and was added through Senate Amendment. 2722.
Throughout my lending career, I have been known for my knowledge, experience, honesty and integrity. I hold my mortgage and accounting experience in high regard. I have been involved in the real estate finance industry since 1996 when I took my first job as a loan office.
Throughout my lending career, I have been known for my knowledge, experience, honesty and integrity. I hold my mortgage and accounting experience in high regard. I have been involved in the real estate finance industry since 1996 when I took my first job as a loan office.
