Really. It’s going away. The $8,000 first time home buyer and the $6,500 repeat home tax credits will not longer be available after the end of April. So, set your clocks!

By “Tax Credit Two-Step”, I mean that you must have an accepted contract by April 30th, but you can close as late as June 30th.

If you want an accepted contract by April 30th, you need to start looking right away!! Prices are still historically low, but many people are out in force looking to cash in on this tax credit.

If you want to know more, have a look at this CNN article. As is par for the course for CNN on the real estate news, they are overly pessimistic, talking about huge price drops in Miami, for instance. (They’ve been projecting dire forecasts for a year now, which have not come true.)

But this article is useful in talking about how the tax credit will not be extended. Even the credit’s biggest proponent, Johnny Isakson, R-Ga., says he will not support the extension.

So, if you are thinking about it, now is the time to make it happen. Let’s dance! Contact me at realestate@kenclarkforaz.com

After fears in late January that interest rates for FHA loans were going to start going up, they seem to have leveled off again.

There are still concerns that rates will start heading upward in March. See my earlier post.

Lesson: lock in now while rates are down!

Have a look at the charts, below for rates –at least those that my friend Dan Hlavac over at Met Life is getting.

This is what you can expect for FHA loan: a 30-yr fixed loan at 5.187% APR.

MetLife Rate Update FHA

See this link for what you can expect for a conventional loan: a 30-year fixed for 5.136% APR

MetLife Rate Update Conventional

I think people have been taking this recent tax credit for granted. They think that they have plenty of time to grab a house before the tax credit goes away in June.

Nothing could be further from the truth.

Here is what you need to know:

1) You must have an accepted offer by April 30th and a house closed by June 30th.

It is now a two-step dance, my friends!

2) Expect people to start panic buying in late March. This will mean fewer houses available and that you will need to act very quickly when you see a house that you like.

3) You should work backward from April 30th. If you need to have an accepted offer then:

a. Short sales may be tricky. You may get an accepted offer in time, but you may not close by June 30th.

b. Leave time for the bank to get back to you on your offer –that can take a week or two –if you are offering on a foreclosed property.

c. Start looking in early March. Expect 2-3 weeks of “shopping time.” Get those offers in no later than April 15th.

….in other words, even if prices are going down, interest rates are likely go up later this year and undermine any price drops.

How does that work? (Thanks for asking.) Here’s how.

Prices are going down for now, but interest rates are going up.

This is totally different from last year when prices were still dropping AND interest rates were also dropping.

If you look at this chart you can see that prices were climbing last year, but they are dropping thus far this month. Let’s hope it stays that way before people start scrambling for the $8,000 tax credit! However, don’t expect it to. Prices went up last fall when people were buying in time for the tax credit.

Look very closely for the emerald green 2010 line at the lower left. It is almost hidden because it is laying right on top of the orange 2009 line.

While it looks like prices are going down, just know that prices usually go down the first couple months of the year until folks start really gearing up their searches.

Further, interest rates are expected to go up by March and interest rates make a huge difference in your monthly payments.

For instance, if you buy a $100,000 house at 5.5% interest, your monthly payment (before taxes and insurance) would be $568. The same house at 6% interest would cost $600 per month.

That extra $32 per month is $384 per year or $11,520 over the life of the loan!

Another way to look at it is that in order to have the same payment every month that you had at 5.5% interest, you could only afford a house that costs $95,000 at 6% interest.

So, what does this mean? It means that you want to consider getting in to the market before interest rates go up.

It also means that you probably want to act before both prices and interest rates go up. That is the worst case scenario!

Give me a call. I’m more than happy to help you navigate the market: 602-456-9388.

The Coronado Historic Neighborhood is almost exclusively bungalow style homes with great big porches and lots of cool architectural features.

In the 1960s through the 1990s, neighborhoods like these fell in to disrepair and disfavor, as people looked for massive homes and modern features.

Thankfully, recently, people have started to re-appreciate the front porch. You know, actually talking to your neighbors!

This house is perfect for that, as is the Coronado neighborhood. You can easily imagine cool mornings with a cup of joe (or whatever your poison) and some light reading. That is just the way of the world in Coronado!

Click on the picture for a virtual tour!

The nice part is that you don’t have to live like the 1930s to enjoy this house. Check out the modern kitchen, washer and dryer and bathrooms.

Let me know if you’d like to have a look.

According to more information from the FHA today, loans with case numbers assigned on or after April 5, 2010 will have increased premiums for home loans and refinance transactions.

So, this means you need to have an accepted offer by that date, which means you need to start looking no later than the beginning of March.

The premium is the charge that you pay when you close on your house in order to insure against default. (See yesterday’s post.)

The changes are as follows below:

Upfront premiums

1. Purchase money and full credit qualifying refinances will be 2.25% (It now stands at 1.75%)
2. Streamline refiancing (all types) will. be 2.25%
3. HOPE for Homeowners (delinquent mortgagors) will be 2.00%
4. Home equity conversion will be 2.00%

Annual premiums (what you pay on your monthly bill, also known as PMI) will remain unchanged and are as follows for loans over 15 years:

1. Loan to Value of less than or = to 95% is one half of a percentage point (or 50 BPS).
2. Loan to Value of less than 95% is 55 BPS.

To put in common English: We have some time before the higher premiums kick in so you need to start looking seriously soon. Rates and mortgage insurance premiums are at an almost all time low, but will almost certainly be higher by March.

Source: Dan Hlavac

If you are a first-time home buyer, you may be affected by an increase of fees to secure an FHA-backed loan.

The FHA does not make the loan. It just insures that you, the buyer, won’t default on the loan. With so many defaults recently, they have had to pay out a lot. Like any insurer, if they have to pay out more, you, the customer, have to pay more to get insured.

This is how it works: typically, when you get an FHA-backed loan you only have to pay 3.5% down. But you have to pay up to 1.75% of the loan amount in the form of an insurance premium against default. That amount is about to go up to 2.25% for reasons outlined in this Wall Street Journal article.

But there is more. You may also be limited in the future to how much of the closing costs the seller can pay for you. Currently, the seller can pay up to 6% of the buyer’s closing costs. The FHA may reduce that to 3%, as they believe that the 6% rule encouraged people to pad prices of homes too much.

Also, if you have a credit score of under 580, you are likely going to have to front 10% of the loan, rather than the typical 3.5%.

Finally, there is also talk of increasing the 3.5% down payment to 5% sometime this year.

All of this is because the FHA is backing many loans across the country and is fearful that it needs to do more to prevent

I asked one of my mortgage broker friends, Dan Hlava of Met Life, if this is effective immediately. He tells me that, yes, all of this is true, but that it is not something to be alarmed about for the average buyer. It really depends on your score. “Met Life does not lend under a credit score of 620, so that 10% down part of it does not apply to us.”

As for the premium, the average person with a reasonable credit score is not going to see a higher insurance premium. However, in those instances where your credit score is lower than 600, that is when you are going to see higher costs.

According to Nova Home Loans broker Jeannie Bolger, “This is not going to happen tomorrow. But if the FHA does change the guidelines, it will likely happen sometime over the summer.”

The moral: if you are thinking of buying a home this year, this is another reason to do it sooner rather than later.

Other reasons:

1) Interest rates will probably start going up in March.

2) People will be flooding the market again looking for the $8,000 tax credit.

3) There will not be a flood of new foreclosures entering the market.

Call me if I can help!

NEWS
I’m hearing from my mortgage broker friends that there is a very good possibility that rates will increase in March 2010.

WHY IT IS HAPPENING?
With the Fed buying fewer Mortgage Bonds and wrapping the program up entirely at the end of March, any improvement in rates may be modest at best.

In fact, last week the Fed purchased just $9.3B in Mortgage Backed Securities.  This is down sharply from their recent purchases averaging around $15B, and down from highs of $25 to $30B over the Summer.  Their total purchases are now $1.11 Trillion out of the $1.25T allotted for the program.

This leaves $140B remaining in purchases over the next 12 weeks before the program ends.

WHAT IT MEANS FOR YOU
So, if we have you on a track to get in to a home this year, remember that increased interest rates are more costly than increases in home prices.

If interest rates go from 5% to 6%, that is an increase of $63 per month on a $100,000 home.

Please contact me if you’d like more information. If you have been working on your credit score, or otherwise been getting things lined up for a purchase this year, we may want to take this development in to account and make a plan for you.

Setting aside dire circumstances where you can’t purchase a property, if you have a credit score in the 600s, you can probably purchase a home in today’s market. If you are close to that, there are things you can do to get in the right position.

But, I like to point out now and again the benefits of buying a property over renting. This might be because I waited far too long to purchase a property for myself. I look in awe of clients of mine who are buying in their early 20s. I don’t think they even know what a good thing they are doing for their futures, if they stay conservative about their finances and keep those houses for the long term.

Anyway, I love the calculator at the Money-zine website that helps you calculate what you save by buying a home –not even taking in to account the historically low prices.

Have a look and let me know if you have any questions about this calculator.

Check out this news, below, tracking the enrollment downtown.

After only four years, ASU downtown is up to 11,503 students. They are expecting upwards of 20,000 by 2012.

I am thrilled. Downtown students tend to be serious students and graduate students. These folks, along with faculty and staff, are going to make up the neighborhoods around downtown.

For those of us in Garfield, I think this is great. I think it means that we are going to have a vibrant community of people who are engaged as home owners or land lords. I think it will result if homes being renovated and people being active in the neighborhood.

It is a great time to invest in Garfield as the next campus community.

I’d love to hear your thoughts on it all.

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