FHA VA Blog

One would say with all the media attention that you should be able to put an offer on a house in Denver for far less then the list price. Afterall, they say the market is soft and there are a glutton of foreclosures out there. I wanted to give you a quick snapshot of what is really going on in the housing industry here in the metro area.

For example did you know there are public websites that show you data on trends of what houses are listed for versus what they sold for?

Here are a few examples:

20040 Mitchell Cir Denver~ Listed for: $135,000 and sold for: $155,000

7157 Huron St Denver~ Listed for $105,000 and sold for $131,500

6971 Saulsbury St Arvada~ Listed for $135,000 and sold for $175,000

7179 S Kline St Littleton~ listed for $200,000 and sold for $250,000

So there is Denver, Littleton, and Arvada as examples. This is even happening in Aurora as well guys. So what I am getting at is don't completely think when going to make your offer that you can write it for whatever you want and the seller will cave in to sell to you. This is good signs that our market is stronger then you expect from what you might hear on the news. Keep in mind that these examples are bank owned homes, so you can imagine that they needed some work. Now think how an individual selling their own home with pride of ownership will be sitting if they want to sell at a reasonable price right now??

Also, if you have friends buying they may be able to tell you as many of my agent friends have. It is tough to get an offer accepted because the competition is fierce right now.

My advice is to be ready! Meaning have all your financial ducks in a row with a pre-approval not a pre-qualification. Make sure you are ready to write your offer and not hesitate or think through it too long, unless you don't care too much if you miss out on that specific house. While all this is going on, you can still get the sellers to pay closing costs, but if this continues to strengthen you will have less luck with the sellers willingness to pay closing costs for you.

Happy house hunting~

Ray

You may be thinking to yourself there is no way to give yourself a pay raise when you buy your home. What if you could buy your first home in Denver using a mortgage credit certificate that would allow you to adjust your W4 and take home more money every paycheck? What if that money directly allowed you to buy a home that were 20% more expensive than what you could qualify for without the mortgage credit certificate?

It is all true and not a sham! There is a program out from the City and County of Denver for qualified first time buyers to take advantage of a mortgage credit certificate. This certificate gives you the legal right to adjust your W4 filing with the I.R.S and take home 20% of the mortgage interest you would otherwise deduct from your taxes. So it becomes direct benefit to your finances when you buy, not later.

HOW does it work?

Let's say you bought a $175,000 home at 5.25% for a 30 year mortgage. We know you would pay roughly $9,187 in annual mortgage interest ($175,000 @ 5.25% = $9,187). Now take 20% of that $1837 for your annual mortgage credit certificate. From there you take the $1837 divided by 12 months and get a credit for $153 per month that you can have added back to your pay after you buy!

So, if your home payment (interest, taxes, mortgage insurance) on a $175,000 home were $1,027, then you would only have to qualify for $874 per month and in essence you could choose to qualify for more home, if you chose!

To learn more visit http://www.milehigh.com/housing/for-sale/mcc-program and you will see my number as an approved lender (the list is very short of approved lenders by the city and county)~

Call with questions~

Ray

303.779.0591 ext. 101

You may have heard or start to hear, that mortgage rates have gone up. In fact on new loans I am doing, I have seen anywhere from a .5-.75% increase in rates since May 21st.

So what is the reason for all of this you ask? Even though the fed is buying mortgage backed securities, they are being offset by the supply of mortgage backed securities hitting the market. The reason for this new supply is the result of all the mortgages that have closed as a result of the lower rates. Those mortgages have now been securitized and are being sold on the open market as mortgage backed securities. This new supply is offsetting the purchasing power of the fed and just may lead us to higher rates. As you can imagine there are still loads of mortgages that will be securitized and sold as mortgage backed securities. This could offset anything the fed can do in purchasing more mortgage backed securities.

My advice, if you were waiting for lower rates to refinance, you may miss the boat as the anchor seems to have been pulled.

I have been asked this question by many friends lately. I keep coming back with the same answer. Not because I am in the business, but because I do believe it is a great time to be a first time buyer.

You have to look at where things are at. Yes, the economy is not in the greatest shape. However, in Denver we have a more diversified workforce which means many people are in safe job positions. If there have been layoffs, they have been limited by the reorganization that has happened within companies, by figuring strategic ways to keep more people employed.

First, the real estate side of things. I am consistently seeing clients whoa re refinancing their homes, find that their value is higher then they expected. It is bucking the trend of what the media is putting out there. As an example, recently we got an appraisal back for a client who lives in Arvada. There is a section in an appraisal on your home that mentions the stability of the neighborhood. Through a few methods, including average time for homes to sell. Another is the valuation as increasing, stable, or declining. His home showed houses selling around his home in less then 90 days. Also, the valuation was showing as increasing in value. So the real estate economy in the majority of Denver is stronger then the media leads on to be.

Second, mortgage rates! These are at all time lows. We are in fact seeing rate in the 4.5-4.75% range consistently right now. What that means to you in buying your first home is that if you bought the same home today , but last summer when rates were closer to 6.5%, your payment would be $200 0r more cheaper for that same home per month. On the other side of that, if you wanted the same mortgage payment, it would allow you to buy a home that is $20-$30K higher in purchase price.

Third, There is a first time buyer tax credit available when you buy a home and close on it before December 1st of this year. This tax credit is up to $8,000 for single or joint filers. Or $4,000 each for those married and filing separately. If you reside in the home the next three years, the tax credit is your to keep. The tax credit is added to your federal tax return. So as an example if you were going to get a $500 federal return, you would get an $8500 return if you qualified for the full amount. The $8000 is derived by 10% of your purchase price. So as long as you buy a place over $80,000 you are eligible for the full amount. There are income limits as well, but click on the link I put in to read the I.R.S FAQs.

So if you wrap all of those together into is now a good time to buy, here is what you have. One of the stronger real estate economies in the nation, comparatively speaking. Low interest rates. A first time buyer tax credit. When you factor all of those into that real estate markets go in cycles, and we are heading towards better days in Denver's real estate market. So if you can still buy cheap, with low rates, and get $8000 free money to do so, ask yourself the question: Is now a good time to buy?

And if you need down payment assistance, check out CHFA ro CHAC for more information.

Let me know if you have any questions about this blog rwilliams@summit-mortgage.com~ Ray

Have you been trying to figure out a way to get the necessary money saved for a home? We know the first time buyer tax credit is available to qualified first time buyers, but what do you do in the meantime if you don't have the money upfront?

First, we should understand what a first time buyer is. It is someone who hasn't owned a home in the last three years. So even if you owned but it was over three years ago since you sold the home, you may be eligible.

The great thing about the down payment assistance in Colorado is that it is used through CHFA. Check out the link there to learn more about this program.

In a nutshell you can get a 0% loan for the necessary amount of your required downpayment (up to $6,000). This is yours interest free until July 2010, when it converts to an 8% interest rate and a 120 month term. Now you aren't required to pay it back when you get your tax credit, but you will then make payments if you don't. So some folks may not pay it back knowing they can use the tax credit to improve their house, reduce credit card debt, or to save for future needs. Just as an example if I decided to keep the money and not pay CHFA back next year I would pay on $6,000 , 8%, 120 months it would be about $72 a month I would pay back. Otherwise, I would pay it back when I get my tax credit and owe no interest for borrowing it.

There is also another option for downpayment assistance through CHFA and if you want to learn more click on the link above. CHFA is a great community based organization and can help the American Dream come true.

CHFA requires you to work with a CHFA approved lender, so if you are interested in learning more about CHFA let me know as Summit is an approved CHFA lender~

Ray

I was in a meeting last week and training today to be part of the lending force who will be able to offer the mortgage certificate to folks buying in the city and county of Denver.

The way it works is you will receive a credit based on a percentage of the mortgage interest you will pay in a given year. We all know when we buy a house that the mortgage interest is tax deductible. However, this credit allows you to adjust your W4 and increase your take home pay.

For Example, if you buy a $200,000 home at 5% interest rate you will pay $10,000 in mortgage interest over a year (thus tax deductible for your family). With the mortgage credit you will have $166 additional dollars per month in your paycheck while you own the home. This also is factored into your ability when you qualify for the house to offset your debt ratios. That is right it helps you when you qualify to buy the house as well as in your paycheck. You can use an FHA, VA or even conventional mortgage when you do this as well.

For more information give me a call to learn more or shoot me an email.

Ray, Branch Manager, Summit Mortgage Denver

rwilliams@summit-mortgage.com

303-779-0591 ext 101

As many of us know by now, the mortgage industry has seen high volumes of new applications due to record low rates. I received a call from a client a few Fridays ago who was having trouble with his lender he was trying to work with. It turns out this lender had been working on his refinance for 6 weeks. My client was told over and over his loan was almost approved, and to remain patient.

As a result of this misinformation he almost had a late pay report on his credit. After losing his patience he found us on google and called up. He and I talked and I explained to him that all the excuses and reasoning he had been told was incorrect and an attempt to buy time.

So the client came in two weeks ago and we got his loan into our system. I explained to him how a streamline works and the processes and time lines by which we would be working. After starting on the file we found that other FHA lender had assigned his case number (this is a number that identifies your loan to HUD, kind of like a social security number for your FHA loan). My client then asked the other lender to release the case number to us, again and again. Only to leave me having to call this lender's boss to finally get it done. Once we had that we submitted his loan to underwriting and within 3 days his loan was approved for closing. Now we are scheduled to close his loan on the 17th and will have taken us 13 calendar days once we got that case number into our names. He will get the rate he was expecting, but with a far superior straight forward service from us.

If you are refinancing and fill like you are getting the run around and not quite sure why it is taking so long to get answers, returned calls, or your loan closed let us know. We pride ourselves on making service to you as our first focus. And in these busy times I can say experience matters.

Ray

In the last few months we have constantly seen the grind of conventional mortgage insurance companies tightening their belts. Awhile back we saw the elimination of mortgage insurance for investment properties, which led to the 20% down payment requirement for investment properties. Then we have seen conventional loan programs require you have a 680 to put down 3%, then 5% down.

Now we have just seen 5 of the mortgage insurance companies left require you have a 700 or better credit score to be eligible for mortgage insurance, and with that you will have to put 10% down. So as it stands I would expect that soon we will see mortgage insurance on primary residences come to a crawl as well.

This will put us back to the model of 20% down on conventional loans. Or with great credit you may be able to get a first mortgage at 80% and a second at 10% with a 10% down payment (which gets you around mortgage insurance). And if you don't have it, then you will be left with 3.5% down and going F.H.A or VA on your home loan. Not that , that is too bad of an option as we are still seeing 5% rates for F.H.A and VA loans today.

I don't feel this will be a permanent position for primary home loans, but for quite a while until the mortgage insurance companies stop bleeding money from foreclosure claims.

Many have wondered what the breakdown of the stimulus will be. One glaring question most asked to me is "Ray, what will the new first time buyer tax credit be?"

While not all of the details have been released, what I can find so far is limited. Not even the I.R.S website has anything on it. The I.R.S website does have this information for the individual "Making work pay":

When and how will people get the $400 to $800 “Making Work Pay” tax credit? Taxpayers will not get a separate, special check mailed to them like last year’s economic stimulus payment.

For many taxpayers, the additional credit will automatically start showing up in their paychecks this spring. For people who receive a paycheck, the credit will typically be handled by their employers through automated withholding changes. For some other people, the credit can be claimed when they file their 2009 tax return next year.

More details about the “Making Work Pay” credit will be available soon, including an updated version of the withholding tables contained in Publication 15, (Circular E), Employer’s Tax Guide.

From there I was able to locate some information on the first time home buyer credit. It was scaled back from $15,000 down to $8,000, or 10% of the value of the home. Buyer's are eligible who buy from the beginning of the year until the end of November. As before there is a pair off in incomes earned for $75,000 to $150,000 (for married couples). The one interesting twist is that it appears if you live in it for 3 years, the credit is forgiven.

Obviously the tax credit details haven't been fully released, but watch for more to come.

Ray

I was sitting here on my couch and a few minutes ago Alan Gionet from CBS News came on and did a spot on "Is it time to refinance". He interviewed Anita Padilla, and a few homeowners about this topic.

Alan, deduced you should think about how long you plan on being in your home, and are the fees being rolled into your loan. Now while Alan would never have enough time to truly delve into this subject. He doesn't have the knowledge either. Afterall, he is just a journalist doing a story. And we all know the media focusing the majority of their time doing stories to scare us.

Anita, who worked on the task force for Colorado's legislation brought up a couple good points. She mentioned that while the low rates being advertised may sound good, you may be better off with a slightly higher rate where the lender credits you the costs for the lending and title fees. This is called a true no closing cost loan. These fees aren't added to your balance, nor do you bring them to the closing table. It is covered by the yield paid by the bank to the lender.

She didn't however, disseminate that assets, income, and appraised value is important for a conventional refinance. While an FHA or VA streamline refinance don't require asset, income or even appraisals (so equity is irrelevant).

I can tell you after having personally done a news story with Heidi Hemmet on Fox a few years back. They do edit the interviews to what they want us the consumer to hear. My story with Heidi was about the opportunities within buying a foreclosed home.

So while Anita said it makes sense to refinance if you lower your rate by .5%, this all depends on the fees. If you have to roll in your fees and start your term over, it may or may not make sense.

One homeowner they talked to said even as low as rates are he wouldn't refinance because he is getting closer to paying the house off. Well If you spend 30 minutes with the right mortgage person, you may find you could be 10 years into your loan , and it could make sense to refinance. Why? Because if you are 10 years into a 30 year mortgage and refinance into a 15 year mortgage. You will actually shave 5 years off your loan, and quite possibly end up with the same payment (due to having a lower amount financed in the new 15 year mortgage).

If you are wondering if it makes sense, just ask. I just told someone the other day it didn't make sense because she was already at 5.25% and was curious how 4.5% would look for her. It was there (the rate) if she wanted to pay 3% discount and $2500 additional fees. Would it make sense for her? NO! But we all have different situations and for the large majority it does make sense, but do your research~

Ray

So by now you all have heard that mortgage rates have dipped to new all time lows. As you can see it has been 29 days since I last blogged. A little because of the holidays, but lately because I have been busy taking calls from my family of clients and referrals on new clients.

Quickly, the reason rates have dipped is because the government started buying Mortgage backed securities (MBS), the first business day of this year. These are mortgages in short. They have been doing this to ease the liquidity problems of the banks. By purchasing the MBS off the banks hands , they assume it will free up the banks to lend more money and help businesses, and consumers.

Right now, if you have an FHA mortgage that you have been paying on time for the last 12 months (or if you bought or refinanced less then 12 months ago, on-time since you took out the new loan), then you are eligible for an FHA streamline refinance. This is a non-requalifying refinance offered by HUD and means no credit check, no income or employment verification , and no asset statements. So even if like one of my recent clients you are upside down on your home (but have an FHA or VA loan) you can do the streamline refinance to lower your rate! HOW? because we don't get your home appraised for the FHA or VA (version) of the streamline refinance. This is an awesome feature FHA and VA offer for their clients.

Why would you do the refinance? If you have 5.75% or higher I can show you how to save about $100,000 in interest in your loan. Even if you have had the loan for 5 years, it still makes sense to do it.

Another recent client of mine who is single had a bit of debt (You can't take out equity to pay off debt on a streamline refinance), as it is non-requalifiyng and there is no appraisal to reference. Anyway, we spent about 30-45 minutes over coffee to discuss her financial picture and how the refinance could propel her financially. Given a few variables of the refinance are a skipped payment and an escrow refund, I was able to show her how to become debt free (minus home) in 12 months.

I was digging around online for FHA rates and even on bankrate.com you only find 1 lender in Denver advertising for FHA loans. Although I don't know who they are or their FHA experience levels. That is because lenders have gone out of business left and right. Others frankly don't have extensive FHA experience.

Even with what I found online I can safely say we offer the lowest FHA rates in Denver. Being as I also run my branch I can assure you that you will get great service, care for your loan, honest advice, and low rates and competitive fees.

If you would like a few references let me know , I am sure many of my past clients would field a call to let you know how well we took care of them. Not too mention I actively monitor their loans to make sure that as I mentioned above, when I can save them $100,000 in interest I make the call and we go forward. But only when it benefits them. In this time that you are making potentially the last decision on your home to refinance at these rates, invest 30 minutes with me so I can educate you on many aspects and angles of the process and help you understand how to maximize your refinance for your overall financial picture.

It can definitely be overwhelming but let me guide you through the maze. Feel free to email with questions or call to apply.

Your mortgage guy~

Ray

 rwilliams@summit-mortgage.com,  303-779-0591 ext 101 and mention my blog, and don't forget to ask what the NO CLOSING COST OPTION really means.

The million dollar question after the rate cut today (Tuesday) was, "Ray, what will happen to mortgage rates?"

What you have to understand is that we are already at 50 year lows for mortgage rates. So to see rates continue to drop would equate to new lows in mortgage rates. Beyond our government saying they are going to buy mortgage backed securities, there are other entities that buy them as well. Pimco, the largest purchaser of bonds, is a big player. The chinese investors are a big purchaser of them as well.

First, I would read : One journalist's opinion about what this means. He actually figured out what us in the industry have always known. FED RATE CUTS DON'T EQUAL LOWER MORTGAGE RATES. Today, however, they also mentioned they were going to buy up more mortgage backed securities. That could lead to lower rates.

If I were refinancing (as I actually am), here is what I would look at. If you ask a lender about refinancing, ask them what the fees are for the market rate. But don't underestimate the power of asking them about the no cost option. I mean the true no cost option! This is where your lending AND title fees are absorbed by the lender. Let's take this deeper. If, you get the lowest rate (say 5%) on your $200,000 mortgage, your principal and interest will be $1,073~ However, add to that lending fees of 1% origination, processing, underwriting, credit report, doc prep and that totals $3,500 and don't forget title fees of about $1,300 as well. This totals $4,800 you will either add to your current loan or bring to the closing table.

OR: you take the true no closing cost option at say 5.5% with a principal and interest ($200K) at $1,135 (or $62 more per month). Now with that you actually have either a loan balance that is $4,800 lower or that much more in the bank after closing. Now only you can answer the question of is the lowest rate more important, or is the lowest cost loan more important?

Bear in mind, your tax bracket effects this equation, the time before you plan on selling or refinancing again also factors in the equation. So what I am getting at is the fact that the $62 savings is at a cost of $4,800. Which means you lent yourself $4,800 at a return of $62 per month. If you take simple math, it will take you 77 months to repay yourself $62 per month to make up that $4,800 you paid to get the lower rate. Will you have the house in 6.5 years, or the same loan? I didn't even factor in the mortgage interest portion (remember this is tax deductible, so lower rates equal less tax deduction).

Now, after my tangent. If you are thinking rates are going to get lower, know that in just my 6 years of monitoring the driving forces of rates, I have never been able to do no cost refinances at a lower rate then 5.5% for fixed rates. So, will they get lower? Don't get caught in the cold listening to the journalists (remember they are journalists!).

Ray~

This idea is similar to the November 26th announcement from the Federal Reserve where they indicated the intent to purchase up to $500 billion in mortgage-backed securities from Fannie Mae, Freddie Mac and Ginnie Mae. In addition they would buy another $100 billion in direct debt issued by those firms. The November news caused bond prices to spike higher and forced mortgage rates lower. Just like any commodity, whenever tremendous buying interest exists, prices rise. Mortgage rates fell almost 1/2% in rate following the announcement. However, the following week market forces continued and rates spiked a bit higher from the recent lows.

It is important to remember that there are no details to the Treasury plan as of yet. The Federal Government does not directly dictate home loan rates. Rates are determined by price movements of Mortgage Backed Securities (MBS), which compete for investor funds in the open market. The Treasury can buy mortgage bonds on the open market but remember that they are not the only entity buying and selling these instruments.

The Treasury is in a very tough position in trying to manipulate home loan rates. Creating a new Federal mortgage program could be very risky. How would rates be set, who would qualify, and can the funds be used for purchases and refinances are just some of the questions being asked. The other critical concern is implementing such a program without destroying the current mortgage securities market. Doing so could have the unintended consequence of causing additional economic turmoil.

Rates are not going to 4.5% with the wave of a wand by Hank Paulson or Ben Bernanke. As a matter of fact, the massive borrowing to fund the TARP program has a negative effect on rates. At this time, the announcement still leaves a lot of uncertainty. What we do know is that rates are at historic lows and house prices have moderated setting up a great scenario for people who need to refinance or are looking to buy a home. Waiting for rates to fall to 4.5% may leave people sorely disappointed.

I am seeing signs of the market running right now on low 5% range rates for FHA mortgages. If you are buying a home give a call~

Ray

The latest news is that the treasury is going to buy up agency debt, and mortgage bonds responded positively. What we saw off of that news was an initial push positive, then a retraction.

Recently 30 year fixed rates have been in the ranges of 5.5%-6% at this current time. If you have a VA or FHA mortgage this means, you may be eligible for a streamline refinance. This refinance is a non-requalifying refinance. That means, no appraisal, no income or employment verification, no asset verification. Overall, none of the pain you may have felt when you took out your mortgage last time. You will also skip a payment and receive a refund on your current escrow account balance.

So should you refinance? You want to look at a combination of things to determine if you should. How long do you plan on living in the home? Do you plan on converting this home into a rental later? What is your current rate? How much lower can you get your rate and thus your payment? What will it cost (or add to your current loan amount)? How long have you had your current mortgage? Has the person you are talking with understand the impacts of a refinance and has analyzed the financial impact on your family?

If you are sitting at 6.5% on your current mortgage or higher, you may want to consider the refinance, if done right. Call or email for more details, and to go over the positive and negatives of refinancing your current mortgage. And make sure to ask what a true no cost refinance is, with whoever you are talking too. Ray

rwilliams@summit-mortgage.com

Below you will read the article posted on HUD's website about the new FHA portion of the housing bill. This bill could allow you to qualify for a refinance where you may not have been able to before. What this can do for you is to help keep your family keep your home. You may be surprised at the clients we have already been able to help into FHA Secure loans. Don't delay in calling in. We are hear to listen and help. Apply today! Call Ray 303.779.0591 x101

HUD CONTINUES TO PROVIDE IMMEDIATE HELP TO HOMEOWNERS IN COLORADO
HUD Secretary to troubled homeowners: Don’t wait to seek relief: Visit HUD.gov