With the announcement today that the Federal Reserve would buy $100 billion in debt from Fannie Mae, Freddie Mac and the Federal Home Loan Banks the Dow and Nasdaq took an upswing and interest rates dropped to the lowest we’ve seen in a while!!! Conforming conventional loans were as low as 5.250% and FHA were 5.50%. Remember: right now you can do FHA loans with only 3% down (but there are loan limits…call for more information). After January 1st, 2009 FHA will require 3.5% down.
Another piece of good news was that Freddie Mac said it is eliminating upfront fees charged to lender for fixed-rate purchase loans for “super conforming” mortgages above the $417,000 conforming loan limit. Because Fannie and Freddie are competitors, it’s very common for one to follow the other’s lead on fees. Also, Freddie Mac said it’s eliminating or reducing delivery fees on “super conforming” mortgages in the range of $417k to $625,500 that it purchases after January 2nd, 2009.
Hopefully, this could definitely influence a loosening of our credit markets. I just experienced my first “sale-fail” in the jumbo market (above $417,000 in the Portland, OR marketplace) due to an inability to secure financing. The property would have easily appraised and the borrower was more than qualified. The rules on the jumbo financing scene have been changing frequently and we got caught in the “cross-hairs”. I equate this failed transaction with traversing a high mountain pass in wintertime. It’s all about timing! At one moment, you are nimbly navigating through the snow flakes and the next second you’re inextricably buried in the snowfall. Only a day later, other drivers are motoring on dry pavement.
Credit markets loosen, people are more confident and less stressed about acquiring mortgage loans, the housing market starts to move again and I do believe that will strongly affect other aspects of our suffering economy….or at least it’s one “giant step”!!!
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In our current economic market, foreclosures are on the rise. As a result the REO market in quite active.
For those of you who don’t know, REO is “Real Estate Owned” and is an expression used in the Real Estate industry to describe a property owned by a bank as a result of a foreclosure on one of it’s loans.
Couple of important things to remember on REO’s:
· Most REO properties are sold “as is”
· The seller, of course, has not lived in the property so they will not make any representations about its condition or provide warranties against defects.
· REO sellers are not likely to accept changes to the purchase contract once the original agreement has been reached.
· REO sellers have separate purchase contracts that all parties must sign in addition to the standard sale agreement and they typically determine the title company and that, unfortunately, is not negotiable.
If you would like to receive a list of pre-foreclosure and foreclosed properties, please let me know and I’ll add you to my list….jj
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A new $7,500 tax credit for first time home buyers
First time buyers will find some welcome news in recently enacted federal housing legislation: you can get a $7,500 tax credit. Congress intends for the credit to make housing more affordable. But tell your customers to hurry – the credit is only available for purchases before July 1, 2009.
Here’s how the tax credit works
- There are income limits: $75,000 for single purchasers, $150,000 for couples.
- The credit is not made to the buyer in the form of a check.
- Instead, the credit is an itemized deduction on federal tax returns (your buyers should consult with their tax advisor).
- It effectively reduces the purchase price by $7,500.
- The credit is limited to first time buyers.
- The credit must be repaid (at no interest) at the rate of $500 per year for 15 years.
- However, if the home is sold, the seller will not repay more of the credit than they realized in profit.
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The newly approved tax credit for first-time buyers is like having a 15 year, interest-free loan. The down payment and closing costs may actually be less than the credit the buyer receives.The Housing and Economic Recovery Act of 2008 includes a tax credit for qualified purchases between April 8, 2008 and June 30, 2009. The credit is 10% of the purchase price not to exceed $7,500.To be eligible for the credit, the taxpayer’s adjusted gross income cannot exceed $75,000 if they file their tax as a single person or $150,000 if they are married filing jointly. Adjusted gross income is total annual income reduced by things like qualified retirement contributions, alimony, moving expenses, and a few others. The taxpayer and spouse, if married, must not have had an ownership interest in a principal residence during the three years prior to the purchase of the home in which the credit is being claimed.The tax credit is repayable over a 15 year period at zero interest. Each year 6.7% of the tax credit is repaid until it is repaid or the home is sold whichever comes first. The first payment isn’t due until two years after the home is purchased. If the home is sold prior to repaying the tax credit, the balance of the unpaid credit is due in that tax year.A buyer purchasing a $200,000 home with a FHA mortgage would require a 3.5% down payment or $7,000. The buyer would also be responsible for their closing costs. The $7,500 tax credit effective at filing that year’s income tax return would recover the $7,000 down payment plus $500 of the closing costs paid by the buyer. Obviously, they have to have the money for the down payment at the time of closing and won’t get the tax credit until they file their tax return the next year.
| Tax Credit Example |
| Adjusted Gross Income |
<$150,000 |
| Purchase Price |
$200,000 |
| Tax Credit – 10% of Purchase Price |
$20,000 |
| Maximum Tax Credit |
$7,500 |
| Annual Repayment |
$500 |
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SINCE JANUARY 2000, THE AVERAGE RETURNS FOR THE FOLLOWING MARKET INDICES HAVE BEEN:
DJIA: +0.894%
NASDAQ: -4.894%
S&P 500: -0.799%
S&P/CASE-SHILLER HOME PRICE INDEX: +7.964%
JUST FYI
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Janeese Jackson
Bill Norris
