Jun. 22, 2009 - Pitfalls in home buying

Seller keeps downpayment

New York TV consumer reporter, Tappy Phillips, aired the story of a young couple's attempt to purchase a co-op apartment unit. The couple gave a substantial down payment and got a bank commitment. Trouble arose when it was discovered that the land the building sits on is rented and the bank rescinded their commitment. The seller refused to return the couple's down payment and it remains in an escrow account, possibly indefinitely. The money is the couple's life-savings.

In another NYC case that ultimately went to court, the seller of a co-op unit was victorious in keeping the down payment of a buyer who died prior to closing the sale.  Although both situations apply to New York co-ops, they both highlight the importance of using a trusted real estate lawyer for your home purchase, whether it be a co-op, condo, townhouse, single or multiple family regardless of the fact that the State of New Jersey does not make it a requirement. Using a real estate agent provides the buyer and seller with a 3-day window for Attorney Review*  to address any number of issues of concern to you and/or your interest.

* I have no affliation with this firm at this time.  The link is provided for informational purposes only.

Jun. 3, 2009 - Breaking Tax Credit News

Tax Credit Can Be Used on Closing Costs, However...

I first told you about the ability to utilize the first-time buyer tax credit at the closing table in my posting on May 13th.  Since then, there has been confusion to what HUD would actually allow. 

FHA-approved lenders received the go-ahead to develop bridge-loan products that enable first-time buyers to use the benefits of the federal tax credit upfront, according to eagerly awaited guidance from the U.S. Department of Housing and Urban Development on so-called home buyer tax credit loans.

Under the guidance, FHA-approved lenders can develop bridge loans that home buyers can use to help cover their closing costs, buy down their interest rate, or put down more than the minimum 3.5 percent.  The loans can't be used to cover the minimum 3.5 percent.

Thus, buyers applying for FHA-backed financing with an FHA-approved lender that offers a bridge-loan program can get a bridge loan to bring down the upfront costs of buying a home significantly but would still have to come up with the minimum 3.5 percent downpayment.

New Jersey has developed its own tax credit bridge loan program, so buyers in NJ can monetize the tax credit upfront to cover all or part of their downpayment. This program are separate from what HUD announced.

The first-time homebuyer tax credit was enacted last year--and improved upon earlier this year to help encourage households to enter the housing market while interest rates are low and affordability is high. The credit is worth up to $8,000 and is available to households that haven't owned a home in at least three years. The credit does not have to be repaid, and is fully reimbursable, so households can get their credit returned to them in the form of a payment.

Source: NAR, HUD

Jun. 1, 2009 - Mortgage rates spike, now what?

Last week 30 yr rates rose to nearly 5.50%

The average weekly rate for the 30-year fixed rate mortgages that dominates the market rose to 5.45 percent.   Mortgage rates jumped as much as three-quarters of a point Wednesday following a surge in interest rates on benchmark Treasury securities. Check here for today's rates.

Some are saying that the party is over for near historically low rates. Others believe rates will fall again to the 5 percent range. So, for home buyers who didn't lock in lower rates, what do you do now?  Qualifying first time home buyers might consider using the 10% tax credit (up to $8,000) to buy down the rate. Bankrate.com offers some advice for home buyers and homewoners looking to refinance.

Keeping things in perspective; since 1985, the 30-year fixed mortgage rate has averaged 7.84 percent. That's distorted by years of double-digit rates in the 1980s and the early 1990s, but even if you look at more recent times, today's rates still look good. In 2007, the median rate on the 30-year fixed was 6.26 percent. According to Bankrate.com, the average 30-year fixed mortgage rate was 6.20 percent in 2008.

May. 20, 2009 - Housing market driven by first time buyers

Home buyers are leaving the fence

Year to year local home prices fell between 9 and 18 percent between 2008 and 2009.  This reduction in home prices along with low mortgage rates is fueling lower priced sales in the area and resulting in some competitive multiple bids on homes.

Jeffery Otteau, president of the Otteau Evaluation Group, provides statistics on New Jersey real estate trends.  Otteau reported the average price of a Middlesex County home fell from $370,508 in 2008 to $305,297 in 2009, a drop of 18 percent. 

In Union County, the average price in 2008 was $445,685 in 2008, but fell to $384,188 this year, down 14 percent.

In Somerset County, the average price of a home fell from $449,683 in 2008 to $408,337 this year, down 9 percent.

All signs are for those with stable employment, a sufficient down payment and qualifying credit now is an excellent time to purchase your first home.

At the same time, those home owners looking to remain in the same area but move up to a larger home, this too is an excellent time. Does moving up to a larger home make sense?  Ask yourself these questions to find the answer.   (Read more)

May. 19, 2009 - 1st Quarter Home Sales Report

NJAR responds to NAR report

Consumers who are first-time home buyers face a remarkable situation right now with an $8,000 tax credit from the federal government, plus the opportunity to obtain up to a $5,000 cash advance of this credit from the New Jersey Housing and Mortgage Finance Agency to apply toward closing costs and down payment.  Add to this, the fact that mortgage rates are unlikely to remain as low as they are today, the time to act is now.  (Read more)

May. 13, 2009 - More good news for home buyers and sellers

That $8000 credit will be available at closing soon

The Department of Housing and Urban Development's Federal Housing Administration announced Tuesday that first-time buyers may tap a federal tax credit of up to $8,000 for down payments on FHA loans. This will allow eligible home buyers to access the funds immediately at the closing table.

The National Association of Realtors (NAR), which has called for the change, believes this could boost its previous estimate that the tax credit will spark at least 300,000 additional sales. The National Association of Home Builders estimates an additional 160,000 new home sales.  Shaun Donovan, HUD Secrectary said 101,000 first-time buyers will receive the credit. Another 59,000 existing homeowners will be able to buy another home because a first time buyer purchased their home, he added.   Read more

Apr. 18, 2009 - Most mortgage rates down this week

Rates recede

Freddie Mac released the results of its Primary Mortgage Market Survey in which the 30-year fixed-rate mortgage (FRM) averaged 4.82 percent (with 0.60 points) for the week ending April 9, 2009, slightly down from last week when it averaged 4.87 percent (with 0.70 points). Last year at this time, the 30-year FRM averaged 5.88 percent. More

Feb. 13, 2009 - Will the stimulus stimulate new buyers?

Will it motivate buyers currently on the fence?

Here's what Congress is proposing for home buyers, now - Temporary credit for home buyers: The bill increases the size of an existing temporary and refundable first-time home buyer credit to $8,000, up from $7,500. It also removes the requirement under current law that the credit be paid back if the buyer stays in the home for at least three years. And it would extend the credit's expiration date to Dec. 1, 2009, from July 1. Those eligible for this credit must have purchased a home after Jan. 1, 2009, and before Dec. 1, 2009.  The full credit is available to those making $75,000 or less ($150,000 for joint filers).

This is NOT the final language of the bill, but a summary of what congress has agreed upon; subject to a final vote and the signature of President Obama. 

Prior to the current agreement the Senate proposed a tax credit up to $15,000. So my question is would an $8,000 tax credit be enough incentive for you to purchase your first home or move up to a larger/more expensive home? 

For a complete summary of the proposed stimulus package, click here

If you have questions concerning how the stimulus might affect your ability to obtain a mortgage loan, contact your personal mortgage advisor or Matthew Zimmerman from Century 21 Mortgage.  Contact Matthew at: 732.267.8527 or email him at: matthew.zimmerman@mortgagefamily.com  Tell him Mike Adams sent you.

Feb. 10, 2009 - Don't Borrow Trouble®

A Reliable Source of Information

Freddie Mac offers great advice and information to home buyers and refinancing homeowners on how to avoid the pitfalls of predatory lenders.  Freddie Mac's "Don't Borrow Trouble®" campaign exposes eleven common borrowing mistakes. Below are the top five tips.  To learn more, click here

• Say NO to "easy money." If a solicitation is really interesting, get it in writing!
• Shop around. Borrowers should talk to several lenders to find the best loan for which they qualify.
• Understand the loan terms. Borrowers should compare loan terms from different lenders.
• Find out about prepayment penalties. Borrowers should know if the loan offered to them has a prepayment penalty. 
• Make sure documents are correct. Borrowers should never falsify information or sign documents that they know to be false.

Years ago, the State of New Jersey enacted an anti-predatory law,  known as the New Jersey Homeowners Security Act  to protect consumers.    For more of what New Jersey consumers should know about predatory lending go to the Department of Banking and Finance.

Jan. 22, 2009 - Low down payment still possible

FHA backed mortgages available to qualified buyers

The Federal Housing Authority still offers low down payment mortgages available to qualified buyers. Effective January 1st FHA downpayments increased from 3 to 3.5%. Further, FHA loans still offer many more advantages to consumers than the initial low down payment. Specifically, individuals with lower than excellent credit have found that these loans remain quite attractive.  Those with credit scores 500 or below are required to make a 10% downpayment. And guidelines require that buyers spend no more than 31% of their gross income on mortgage payments.

In a secial report yesterday, CNN/Money published an article, The lowdown on getting a low down payment loan.  For how to get a FHA insured mortgage click: Here

Dec. 14, 2008 - Value can be found at Carriage Homes

Price, rates and house condition rules

There are several Carriage Homes at Quailbrook  townhomes actively listed in our local Multi[ple Listing Service (MLS).  Within this group, I believe some unique values present themselves to qualified buyers.  Whether you are looking for a freshly updated 2 bedroom ranch or a very competatively priced 2 story home all with fireplace and one car garage...there are several priced below $300,000.

Along with mortgage rates as low as they have been for the past four years, now might be the time, especially for first time home owners, to act.

Read why The New York Times recently  published an article titled,  "It May Be Time to Think About Buying a House"

Dec. 2, 2008 - And now for a little good real estate news

Programs are available to help buyers

The Star-Ledger's Sam Ali reported on the various federal, state and private assistance programs that can help buyers to qualify for mortgages and get into homes. Despite all of the negative news, mortgage money is out there and it's available from strong lenders. These programs can work for buyers without stellar credit or 20% of the purchase price. Read the article on NJ.com

In addition to these programs, last Tuesday's infusion of $600 billion to support the mortgage securities market drastically lowered mortgage rates. Steve Kappre, a NJ loan officer and Blogger provides an idea of where local mortage rates are now. Of course your personal financial situation will determine what rate you might qualify for. You can get a free custom rate quote online from Century21 Mortgage* or call Matthew Zimmerman at: 732.267.8527

If your mortgage is above 6% current rates might cause you to look at refinancing your home loan.

For general information regarding mortgage rates, visit Bankrate.com

*Century21 Mortgagte is an affliate of Century21 OurTown Reaty

Nov. 25, 2008 - Record 1-day drop in mortgage rates

Buyers on the fence might get rewards

Reuters reports  that rates on U.S. 30-year mortgages posted a record drop of 1-1/8 percentage point to 4-7/8 percent on Tuesday, after the Federal Reserve said it would implement a $600 billion plan to support the mortgage securities market.   

This could be the perfect time frame to buy or refinance your home.

Nov. 25, 2008 - The shrinking jumbo mortgage

Time draws short for higher limits

Loans that can be purchased and guaranteed by Fannie and Freddie, called conforming loans, are cheaper than loans that cannot. Loans that exceed the conforming-loan limit are called jumbo loans.

Begining Jan. 1, 2009 the biggest loan on a single-family home that can be purchased by Fannie Mae and Freddie Mac falls to $625,500 from $729,750 in certain high-cost areas including Somerset and Middlesex counties, here in New Jersey.

In July, Congress made the law permanent but changed the formula starting in 2009 to 115 percent of each area's median home price, with a floor set by the government and a ceiling equal to 150 percent of the floor. The Federal Housing Finance Agency said the floor would remain at $417,000 for 2009, which pegged the ceiling at $625,500.

According to Bankrate.com, time is of the essence because it takes a few weeks not only to process a loan from application to closing, but to sell it on the secondary market after closing. At this late date, it's better to skip the middleman and apply directly with a lender instead of through a mortgage broker.

  State                               County                               2008 Maximum            2009 Maximum

New Jersey	Atlantic	$453,750	$417,000
New Jersey	Bergen	$729,750	$625,500
New Jersey	Burlington	$420,000	$417,000
New Jersey	Camden	$420,000	$417,000
New Jersey	Cape May	$487,500	$417,000
New Jersey	Essex	$729,750	$625,500
New Jersey	Gloucester	$420,000	$417,000
New Jersey	Hudson	$729,750	$625,500
New Jersey	Hunterdon	$729,750	$625,500
New Jersey	Mercer	$440,000	$417,000
New Jersey	Middlesex	$729,750	$625,500
New Jersey	Monmouth	$729,750	$625,500
New Jersey	Morris	$729,750	$625,500
New Jersey	Ocean	$729,750	$625,500
New Jersey	Passaic	$729,750	$625,500
New Jersey	Salem	$420,000	$417,000
New Jersey	Somerset	$729,750	$625,500
New Jersey	Sussex	$729,750	$625,500
New Jersey	Union	$729,750	$625,500

Nov. 12, 2008 - Obama and housing expectations

A top priority for the new prez-elect

President-elect Barak Obama will face high expectations to stem the housing and credit crunch facing American homeowners and prosepctive buyers. According to the unofficial FHA and Mortgage Guide, these are expectations of the incoming Obama administration:

• 90 Day Moratorium on Foreclosures - It appears to coincide with what banks such as Citibank announced yesterday.  California’s goverrnor, Arnaold Schwarzenegger, has already proposed an identical moratorium with a 90 day delay as well. 
• Refinance Existing Mortgages Through FHA and Fannie & Freddie - The Bush administration has already begun it's plan to assist nearly 3 million homeowners prevent foreclosure.  Critics are already saying that the Federal Housing Finance Agency program would not do enough to prevent "unnecessary foreclosures."  Although the Hope For Homeowners program has been off to a sluggish start, Obama points out that making mortgage modifications will be necessary to stimulate this economy.
• A New Presidency and Many Changes - The next year brings many changes our ways- some which are highly anticipated and some which people have people anxiously standing by to hear. We’ve already caught a glimpse of next years 2009 FHA Loan Limits, as well as the increase in down payment requirements to 3.5%. As of right now though, it seems modifying existing mortgages will be the key focus for both the FHA and president-elect Obama in the near future.

For more on this topic click here

Nov. 9, 2008 - Survey Shows Rise in First-Time Buyers

2008 NAR Profile of Home Buyers

1. The number of first-time buyers rose 5% from 2006. Lawrence Yun, NAR chief economist said, “Although modest, this is a meaningful gain for the 12-month period ending at the close of June, and more recent independent data show a stronger uptrend in first-time buyers who are helping to reduce excess inventory.”
2. The median age of first-time buyers went down a year from 31 to 30 years over 12 months.
3. The median first-time buyer income was $60,600.
4. The national average price of the first-time buyer purchase was $165,000.
5. First-time buyers plan to stay in the home for 10 years, up from 7 years in 2007.
6. The median downpayment by first-time buyers was 4%, up from 2% in 2007.
7. Zero down purchases fell from 45% in 2007 to 34% in the current survey.
8. First-time buyers that made a down payment, 69% used savings, 26% received a gift (usually from parents), 7% received a loan from a relative or friend, and 16% tapped into a 401(k) fund, stocks or bonds.
9. First-time buyers chose a fixed-rate mortgage 92% of the time.
10. Home buyers used a variety of resources in searching for a home: 87 percent used the Internet, 85 percent used a real estate agent, 62 percent yard signs, 48 percent attended open houses and 47 percent looked at print or newspaper ads.

Source: National Association of Realtors

Oct. 26, 2008 - Positive signs on the horizon?

Mortgage rates drop

Reported by Rismedia, mortgage rates reversed course in a big way this week, with the average 30-year fixed mortgage rate dropping from 6.74 percent to 6.32 percent. One week after posting the biggest one week increase since April 1987, mortgage rates staged the largest one week decline since May 1995. Tentative signs that the credit freeze is beginning to thaw, as evidenced by a drop in 1-month and 3-month LIBOR of over 100 basis points in the past week, sparked the reversal in mortgage rates.

Bankrate Mortgage Analysis and Rates

Century 21 Mortgage Information

Wells Fargo Mortgage Information

Oct. 21, 2008 - What home buyers should do now

Surefire ways to make it happen

Clearly many buyers, even with excellent credit, are unwilling to commit to purchasing a home in our current economic environment.  It has been more than one year (November 14, 2007) since I posted a "get back to basics" entry for first time home buyers. With the recent Wall Street market collapse and the global credit crunch, it might be a good to revisit just what those basics are.

Here are a few tips for prospective home buyers:

Clean up your finances Now more than ever, your credit history will determine if you qualify for a mortgage, the loan terms and mortgage rates. You could be offered a smaller loan or charged a higher rate if a lender is concerned you might not be able to repay. Consider paying down debt, especially high-interest debt such as credit cards that might flag you as a riskier borrower. For more on this read my posting, "Your credit history" 

Keep it separate Set up a separate account for your down-payment funds, so the money doesn't get intermingled with other savings and so you can keep track of how much you save. This would probably be a taxable account at a bank, credit union or brokerage firm. Once high interest debt is repaid, bank those payments.

Aim for 20 percent down I know this is easier said than done. But, aim to save 20 percent or more of the purchase price. The risk of putting down too little: If the home falls in value and you sell at a loss, you'll owe more to the lender than you receive from the buyer. In addition, many mortgages require buyers who put down less than 20 percent to get private mortgage insurance, which can add $80 to $100 to your monthly bill. And the less you put down, the higher your loan balance and therefore your monthly payment will be.

Consider a FHA home mortgage  If a higher down payment is not possible, a Federal Housing Administration FHA mortgage loan might be an alternative.  FHA loans offer a loan guarantee for mortgage companies.  The FHA is not actually lending money to you, the buyer.  The FHA simply guarantees the lender in case you, the borrower, default on your mortgage payments.  You can pay as little as a 3% of the purchase price of your home for your down payment, and finance your closing costs with your mortgage loan.

Get extra help Few first-time buyers pony up the entire down payment on their own. Nearly 23 percent of first down payments come as gifts from relatives and friends, according to a recent survey by the National Association of Realtors.

If your credit is damaged, seek professional help to improve your credit score.  When you are ready to take the first leap into home ownership, contact a mortgage advisor and get pre-approved, not just prequalified. For more information, go to Century21 Mortgage.  Consult your personal financial planner regarding any specific questions that you might have.

Disclosure - Century 21 Our Town Realty is affiliated with Century 21 Mortgage

Oct. 16, 2008 - Help for the first time buyer

H.R. 3221: Housing and Economic Recovery Act of 2008

The president signed into law a tax credit up to $7500. In order to benefit from the tax credit for first time home buyers, that was signed into law on July 30th, there are certain things that you must do to qualify.  Here is a short checklist that may help you to qualify for this government benefit: 

• This must be your first home (or you must be an individual who has not owned a principal residence in 3 years)
• To qualify for the full credit, you must earn under $75,000 per year (single) or a joint income less than $150,000 per year.  Incomes over $150,000 may qualify for a partial tax credit.
• You must have bought and closed on the home before July 1, 2009.
• The property must be located within the United States.

What is most important to understand is this credit really is an interest-free loan that must be repaid over 15 years or sooner, if the house is sold. Blogger and Kansas real estate agent, Ron Mowery, provides a very good overview of what this law provides.  You can also find more information at NHAB.

Oct. 1, 2008 - Find your FICO score-free

Equifax offers free report

It has become more important than ever to know your FICO score as well as checking your credit reports with the three major agencies: Equifax, Experian and TransUnion. 

According to the site, Equifax is offering a free FICO report to the first 10,000 applicants*.  FICO scores are used by lenders to make fast credit risk decisions of how likely consumers will pay their credit obligations.  Generally the higher the score, the less risk the person represents. 

With the tightening credit market, borrowers will likely need a score of 700 and above for a home mortgage loan.  The lender will make the final decision considering additional factors such as your employment history, salary and debt-to income ratio. 

Again, the offer is free, without obligation.  However, you may opt for upgrades for various monthly fees.  I obtained mine, choosing to accept only the free offer.  Regardless, no credit card is required.  Get your free FICO score here.

Go to https://www.annualcreditreport.com to get your free credit report.  You may choose to receive all three annual reports together or apply for each separately at 4-month intervals.  The later option will allow you to monitor your credit for unusual activity over the course of the year.

* Per the site, 10,000 applicants have been reached and the free offer is no longer available -10/4.