UPDATE: 01/19/2010 – Things just got a little tighter in the FHA arena. Check out this post from mortgage professional Dan Green for the details on new downpayment and MIP requirements:

Even in today’s tighter credit markets, there are programs available that assist home-buyers in obtaining mortgages with low down payment requirements. FHA loans are issued by lenders, but insured by the FHA. There are unique advantages and benefits that are only available with FHA (the following is quoted):

• Easier to Qualify – Because FHA insures your mortgage, lenders are more willing to give loans with lower qualifying requirements so its easier for you to qualify.
• Less than Perfect Credit - Even if you have had credit problems, such as bankruptcy, its easier for you to qualify for an FHA loan than a conventional loan.
• Low Downpayment - We have a low 3% downpayment, and that money can come from a family member, employer or charitable organization. Other loans don’t allow this.
• Costs Less – Many times, FHA loans have competitive interest rates because the loans are insured by the Federal Government. Always compare an FHA loan with other loan types.
• Help You Keep Your Home – The FHA has been around since 1934 and will continue to be here to protect you when the others walk away. Should you encounter hard-times after buying your home, FHA has many options to help keep you in your home and avoid foreclosure.

There are limits to the amount that can be borrowed under this program and they vary by county. There is a chart to the right that allows you to see for your county, what the current limits are. If you have further questions drop me an email or use one of the buttons to the right to get in touch. Thoughts and comments are always appreciated.

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Data comparisons* are made for the current 12 week period vs the previous 12 weeks.

Homes Under Contract, 12 vs 12. We have seen a bit of a slowdown in homes going under contract. This is typical of the seasonal nature of real estate. This is the first down month after 7 consecutive months on the uptick. Homes Sold went from 12 to 10 or a decrease of 16.7%. Again, this is not unusual give the time of year.

Continuing the trend started last month, Homes For Sale decreased 3.6% from 552 to 532. With fewer homes on the market, we should begin to see some stabilization in pricing.

Median Price for Homes Sold in October 09 is down 1.2% from $197,519to $195,071– an insignificant change. The median for Homes Under Contract however, dropped from $204,705 to $181,352– a decrease of 11.4%. Median List Price remained flat: $189,975 vs $189,288.

Condos and Townhomes in Naperville, IL

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*(Source -Terradatum/MRED, LLC). Numbers shown are based condo/townhome data. Contact me for further individual breakdowns. Other data  and charts from Altos Research. Information is also available by zipcode. It can be requested in the chart to the right or by clicking here. It will be emailed to you shortly.

On Monday evening, the Senate cloture vote of 85-2 moved the legislation one step closer to a full vote and a potential signing by the President later this week or weekend. HR3548 contains a trio of measures that extend unemployment benefits, extends and expands the housing tax credit, and thirdly allows for recovery of previously paid taxes for companies losing money in 2008 and 2009.

As of Weds evening both Houses had passed versions of the bill that contained similar provisions:

The details of the housing tax credit provisions look like this:

1. The $8,000 credit for first time buyers would extend to to the end of June 2010 for contracts signed by the end of April 2010.
2. For existing home owners who have been in there homes for five or more years, the credit would be $6,500.
3. There are also measures to help the government catch those who attempt to cheat.

The next step is a vote on the bill by the full Senate and then the House. From what I have been reading, little opposition is expected in the House so the bill could be on the President’s desk as early as this weekend. Stay tuned for further updates.

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• Senate Acts to Expand Housing Credit (nytimes.com)
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First of all, the credit has not been extended yet despite all the rumors floating around. Here is the latest information from Washington as well as a projected timeline for further action from www.FixHousingFirst.com.

The Status – From www.TheHill.com “…Under the agreement struck by Sens. Chris Dodd (D-Conn.) and Johnny Isakson (R-Ga.), the credit will last until the end of April and can be applied to homes worth up to $800,000. Dodd and Isakson said that as many as 70 percent of Americans will be eligible for it.

The home credit’s backers, which include Senate Majority Leader Harry Reid (D-Nev.), have said that it can help the economy recover and has already led to the jump in home sales seen around the country in recent months.

Isakson called the provision a “once-in-a-lifetime” credit that can “bring the housing market back to some sense of vitality and values.”

Though the previous provision could only be used by individuals making up to $75,000 and couples making up to $150,000, the extended credit can be used by individuals with incomes of up to $125,000 and couples of up to $225,000.

The deal also provides a new $6,500 credit to homebuyers looking to move out of their current homes into more expensive ones….”

The Timeline: From an email from www. FixHousingFirst.com comes this projected schedule:

As you may know, last night the Senate reached a deal on extending and expanding the home buyer tax credit, and they plan on attaching it to the unemployment insurance bill. You can see a copy of the bill here. The tax credit provisions begin on p. 14.

Near as we can tell at this moment, the process from here will go like this:

1. There will be a cloture vote at 5 pm on Monday in the Senate on the new Baucus substitute. If it succeeds, it takes 30 hours to “ripen,” i.e., before the bill can be brought to the floor.
2. Thirty hours later it’s Tuesday night. There will likely then be a cloture vote on the full unemployment insurance bill, as amended.
3. Thirty hours after that, it’s Thursday morning, when the Senate will vote on final passage of the bill.
4. The House could take up the bill as early as Thursday afternoon or Friday.  They likely will just accept the Senate bill and vote on that.  If their bill differs from the Senate bill, then the whole thing has to back through Conference. That’s unlikely at this point – and undesirable.
5. The plan/hope is to have the bill on the President’s desk as soon as next weekend.

Obviously, this is all subject to change without notice. This is the Congress, after all.

You can see from the above that it is important to keep weighing in throughout the week – and sending this link to your network of friends, colleagues, family, neighbors, customers, employees, suppliers and urging them to do the same.  The amount of emails being sent through the Fix Housing First site has been fantastic – keep it up!”

Summary: So hang in there, be patient, something is coming in the near future. What the final product will be after both Houses get done with it, no one can predict. Keep checking back or subscribe to the RSS feed for updated information as it occurs. peace.

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Rep Judy Biggert’s Press Release (copy below)

______________________________________________________________________________________

10/29/09 Update:  CNN is reporting that a tentative agreement has been reached on extending the tax credit for first time home buyers and adding a provision to help some current homeowners. The full release can be found by clicking the link above. As news happens it will be updated here.

———————————————————————————————————————————————-

How effective has the $8,000 1st time home buyer’s tax credit been? According to the National Association of Realtors, (NAR), in Illinois, the  home buyer tax credit has brought in an additional 9,100 buyers into the market and 73,200 1st time buyers by year’s end. That is a huge impact! I recently wrote to the folks in Washington trying to get their stance on possibly extending the credit. Below is the text from an email response I received from Senator Richard J. Durbin.

Please, if you are interested in contacting Congress yourself, visit this site http://www.fixhousingfirst.com. You will have the opportunity to send an email voicing your support to this country’s leadership.  Stay tuned and check back, I will be posting additional information as the deadline nears.

Keep in mind, this credit helps the majority of homeowners, even if indirectly. When someone buys for the first time, the seller is usually buying, often up in the market. That seller then too, may be moving up. Think chain reaction of a good kind.

_______________________________________________________________________________

October 8, 2009

Mr. Anthony Lazzari

Dear Mr. Lazzari:

Thank you for sharing your support for increasing access to the first-time homebuyer’s tax credit, which expires on November 30, 2009.  I appreciate hearing from you.

I voted for the first-time homebuyer’s tax credit, which was included in the American Recovery and Reinvestment Act (ARRA) and signed into law on February 17, 2009 (PL 111-5).  This $8,000 tax credit has successfully encouraged many individuals and families to purchase a first home.

We are working our way out of one of the worst financial crises in a generation. The meltdown in the credit markets affected all segments of the economy.  The housing market was hit particularly hard and many view troubles in the housing market as a root cause of the current economic conditions.  The current homebuyer’s credit has helped stabilize the housing market.

Proponents of extending the homebuyer’s tax credit have argued that the credit has encouraged people to buy in an uncertain market.  The credit has helped many segments of the market: realtors, homebuilders, and homebuyers.  Although the economy is recovering slowly, there are concerns that if the credit is not extended the market will freeze again.  Some also argue that it should be expanded to other buyers.

Two bills have been introduced that extend or expand the homebuyer’s tax credit. S. 1678 would extend the first-time homebuyer’s tax credit through May 31, 2010, at the current rate of $8,000.S. 1230, the Home Buyer Tax Credit Act of 2009, would replace the current tax credit for first-time homebuyers with a one-time credit for all homebuyers equal to 10% of the purchase price of a principal residence, up to $15,000. This tax credit would be in effect for one year after the enactment of the bill.

These bills have been referred to the Senate Finance Committee.  While I am not a member of this committee, I will keep your thoughts in mind as Congress considers legislation to encourage home purchases.

Thank you again for sharing your views with me.  Please feel free to stay in touch.

Sincerely,

Richard J. Durbin

United States Senator

RJD/dr

_______________________________________________________________________________

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Window closing on Federal Income Tax credit

According to current regulations, eligible homeowners who want to take advantage of the up to $8,000 federal tax credit must close their transactions by November 30, 2009. That is about 70 days from now. Or is it……..?

Let’s recognize a few realities in looking at this. First, it is going to take 45 to 60 days in today’s environment to get from contract through loan approval to closing. Second, November 30 is a Monday, after the Thanksgiving weekend – (Think there will be a glut of closings scheduled for that day?) so we can back up the target date to, at the latest, November 25, dropping the holiday and extended weekend. But really, how productive is Thanksgiving week really? So where does that take us?

I am advising my clients that they should be targeting a close date no later than Friday November 20, 2009 if they have a realistic expectation of closing in time to take advantage of the credit. With a 60 day process window from contract to close – decisions need to be made by the end of Labor Day week 2009! If you are active in the buying cycle now, make sure you plan properly. If you need assistance, contact your agent or contact me.

(thanks to Tim McDonald and Dan Green for their discussions on this topic at RE BarCamp)

THE ILLINOIS HOME START LOAN PROGRAM FOR FIRST TIME HOME BUYERS

Naperville area first time home buyers, the State of Illinois has come up with a program to allow you to use the Federal Tax Credit monies as a zero interest loan to cover a portion of your down payment. A couple of caveats:  the program (as we interpret the just published guidelines) only applies to single family homes, and, you must use one of the Illinois Housing Development Authority (IHDA) approved lenders.

The following information was taken from an IHDA brochure. A chart detailing Home Start Program Requirements may be found here.

———–

The Illinois Home Start Loan Program helps to make home ownership affordable for home buyers wishing to purchase their first home. The Program offers two loans: the Home Start 30 Year Fixed Rate Loan and an optional Home Start Tax Credit Advance Loan. The Illinois Home Start Loan Program is offered by the Illinois Housing Development Authority (IHDA) on behalf of the State of Illinois and is available through IHDA lending partners across the state.

30 Year Fixed Rate Loan

What you get:

• 30 year loan
• Fixed interest rate
• Loan insured by the Federal Housing Administration (FHA)
• Option to use in conjunction with the Home Start Tax Credit Advance Loan Program.

Qualifications:

• First time home buyer (except Veterans and active duty service personnel)
• Minimum credit score of 660
• Must be able to contribute 1% of the purchase price from their own savings, or $1,000, whichever is greater.
• Eligible properties must be existing one-unit, single family properties.
• Must complete home buyer education ***

Restrictions:

• Income and purchase price limits apply ***
• Property must be occupied as the home buyer’s primary residence within 60 days of closing. Home buyer must maintain occupancy for the life of the loan.
• May not be used with a Mortgage Credit Certificate (mcc)

Tax Credit Advance Loan

How it works:

The Illinois Home Start Tax Credit Advance Loan allows first time home buyers who plan to take advantage of the $8,000 federal stimulus tax credit access to the refund to use for the down payment on their new home. IHDA will make a 0% interest loan for up to 3.5% of the purchase price with a maximum loan amount of $6,000. If the Tax Credit Advance Loan is repaid in full by June 30, 2010, only the first mortgage remains. Otherwise the Tax Credit Advance Loan will become a second position ten year amortizing loan at 0.5% above the interest rate on the Illinois Home Start 30 year loan.

Qualifications:

• Must qualify and secure a Home Start 30 Year Fixed Rate Loan
• First time home buyer (except Veterans and active duty service personnel)
• Must complete home buyer education ***

Restrictions:

• Must be used with the 30 Year Fixed Rate Loan
• Home purchase and mortgage loan must close on or before November 30, 2009
• May not be combined with other grant sources funded by the Illinois Affordable Housing Trust Fund or federal HOME funds
• Income restrictions apply ***

Fee:

A $300 processing fee will be charged for each loan at closing. If the loan is repaid in full by June 30, 2010, $100 of that fee will be refunded to the home buyer.

How to apply: Contact an IHDA partner lender to apply ***

PLEASE NOTE: Participation in the Home Start Tax Credit Advance Loan program is entirely optional. Home buyers can opt for just the Home Start 30 Year Fixed Rate Loan. However, participation in JUST the tax credit advance program is not permitted

*** For more details, visit: www.ihda.org

The following paragraph is excerpted from an Illinois Association of Realtors bulletin published June 2, 2009. It addresses what is being done in light of the lack public funded programs in Illinois. FHA approved lenders may come off the sidelines in the near future but for now, they are still examining and evaluating the program.

FHA’s rules allow state housing finance agencies and certain nonprofits to ‘monetize’ the tax credit (depending on the amount of the mortgage). While a short-term bridge loan to monetize the tax credit is not a product immediately available from FHA lenders in Illinois, the IAR is currently working with the Illinois Housing Development Authority to determine the feasibility of developing such a program that can be used in conjunction with an FHA mortgage loan. The tax credit applies to qualifying home purchases made by first-time homebuyers on or after Jan. 1, 2009 and before Dec. 1, 2009. For more details on the tax credit see www.realtor.org. Read theMortgagee Letter 2009-15 regarding the monetization program released by HUD last week.

There are conditions and details that need to be more clearly understood and the question of whether or not mortgage lenders will go along with the program remains to be seen. As of now, here are some of the condtions that apply:

• The tax credit advance, when combined with the FHA-insured first mortgage may not result in cash back to the borrower.
• The second lien may not exceed the total amount needed for the down payment, closing costs, and prepaid expenses.
• Secondary financing may be “soft” (silent) or require a monthly repayment.
• If payments are required, they must be included within the qualifying ratios and, when combined with the first mortgage, cannot exceed the borrower’s reasonable ability to pay.
• Payments must be deferred for at least 36 months to not be included in the qualifying ratios.
• If the tax credit advance loan has a short term for repayment, it must also provide that if the borrower fails to repay by the designated deadline, principal and interest payments begin automatically or the loan converts to a “soft” second.
• The secondary financing may not require a balloon payment before ten years.

This is huge for qualified first time homebuyers. And it has the potential to be a great stimulus for the housing industry and economy. If you would like to discuss or explore this in greater detail, talk to you local real estate or mortgage professional or give me a call.