SPECIAL MARKET REPORT

April 1 will not just be April Fool’s day but it will also mark the beginning of more expensive housing for new home buyers.  New home buyers will NOW only have few more days to take advantage of the cheaper housing programs set up by the government designed to assist people in fulfilling their AMERICAN DREAM of purchasing their OWN home.

Effective April 1, 2013, FHA or Federal Housing Administration will raise its annual Mortgage Insurance Premium by 10 basis points or 0.1% - on most of the mortgage it insures.  For example, a borrower has a $200,000 FHA mortgage, pays about $2,500 per year or $208 a month for mortgage insurance, after the increase, the borrower would have to pay $2,700 a year or $225 per month in mortgage insurance.

FHA will also increase the premiums on jumbo mortgages ($625,000 or more) by 5 basis points or .05% up to the maximum allowed annual mortgage insurance premium.

The premium increase does not include some streamline refinance transactions.

FHA will also once again require borrowers to continue paying the annual Mortgage Insurance Premiums for the remaining balance of their loan.  In 2001, FHA has cancelled the required MIP once the principal has reached 78% payment of the original principal balance.  However, FHA remains responsible for insuring 100% of the outstanding loan balance until the loan is fully paid.  

FHA is also set to propose an increase in down payment for loans above $625,000.  The agency will require a minimum down payment from the old 3.5 to 5 percent. 

MORTGAGE INTEREST RATES

Mortgage interest rates have hit historical lows during the country’s economic crisis and have remained so until the first few months of the year 2013, but experts believe that this may change SOON! National Association of Realtors economist Lawrence Yun predicts the rates will reach 4% during the summer and 4.5% by 2014’s first half as the US economy continues to improve. 

HURRY! If you are thinking about buying a home with FHA financing then YOU need to MOVE quickly or YOU will PAY higher down payment and an increase in monthly payment over the terms of the loan.

MORTGAGE OPTIONS

Some mortgage companies offer flexibility in mortgage rates.  You can lock a rate without submitting a property address.  This will give you more time to search for the perfect home while locking in that best rate possible.  The lock in rate is valid for 60 days.  Take note that experts predicted that interest rates are about increase.  So it’s best to lock down the current low interest rates! (You can contact me for details)

3% DOWN PAYMENT CONVENTIONAL LOAN PROGRAM

Another mortgage company is offering conventional 3% down payment program.  Mortgage insurance is less than FHA, however if the borrower wants to enjoy lower pricing then he/she must have at least a 680 credit score.  Here are the highlights of 3% Down Payment Conventional Loan Program:

·         Minimum credit score of 680 or better (Mortgage Insurance Requirement)

·         DU “Approve/Eligible”

·         Conforming Fixed Rate loan only

·         One Unit Primary Residence, includes PUD and Condo

·         3% contribution from borrowers own funds required

·         Max seller contribution = 3%

·         Gift allowed for closing costs, prepaids, only after borrower has made 3% contribution

·         Full appraisal required – no drive by, no AVM

·         Multi-family homes are not eligible for the 3% down payment conventional loan program.

HUD 184 UPDATE

On March 8, 2013, the Housing and Urban Development (HUD) released a memorandum about the suspension of Section 184 Indian Housing Loan Guarantee Program effective March 28, 2013 due to lack of availability of fund resources.  Section 184 program is a home loan product offered by HUD specifically catered to native Americans and Alaska Natives.  The program allows consumers to take on a loan with low down payment of at least 1.25% for loans under $50,000) at competitive interest rates, while cancelling the monthly mortgage insurance (no MIP).  Due to the suspension of HUD 184, former eligible borrowers and lenders will now need to look for other financing option which is going to be more expensive.

From a selling perspective, these changes can greatly impact the buyers that can afford to purchase the home and it can impact the selling price.

NOW is the best time to close that deal! Starting April 1, 2013, purchasing a new home will be more expensive! Have a chat with me if you’re planning to buy or sell your home, and I assure you I will save your hard earned money and your valuable time.

Tax Credits for Energy Efficient Home Improvements

The increasing energy prices and the growing concern about the effects of climate change are factors why home owners are opting for a well designed, energy efficient home.  An energy efficient home reduces energy bills and helps clean the environment. Additional plus side of having an energy efficient home is the tax credits applied on energy efficient home improvements.  The tax credits are deducted from your tax bill and if your credit is larger than your tax due, you can get a refund. On the other hand, deductions are deducted from your income, so there's less income to tax.

Renewable energy source tax credits for wind, solar and geothermal improvements are available through 2016.

Replacing windows, doors and skylights will give you a 10% credit up to $200 on windows and $500 for doors and skylights on the cost of materials only. Installation excluded.  

Insulation will give you 10% credit up to $500 on the cost of the materials only. Installation excluded. 

Tax credit for non-solar water heaters is a $300. Qualifying waters can include gas, oil, propane and electric heat pumps.  Using normal water heaters can add up to 25% of the energy used in your home.

Solar energy systems, small wind turbines and geothermal heat pumps get you a tax credit of 30 percent off the cost of the system, including installation, with no ceiling on the amount of the tax credit. (Source: www.realtytimes.com)

It's not difficult to cut on energy costs in your home. By making minor changes in your home, you can make significant savings.  Over time, those savings will add up while being environment friendly.  Not to mention, the government rewards on the energy 

efficent improvements done to your home.

For more information on how to make your home more energy efficient

http://www.akenergyefficiency.org/energy_assessment.

If you want to know more about rebates and tax credits you can benefit from, you can visit http://www.energysavvy.com/rebates/ and http://energy.gov/savings?rebate_eligibility=0&rebate_savings_for=0&rebate_provider=0&rebate_state=7879

What Home Buyers Want

Price and proximity to work are top considerations for 1st time home buyers, while trade-up buyers tends to be concerned on the design and the neighborhood, based on "Characteristics of Home Buyers", an analysis of the recently released 2011 American Housing Survey (AHS).  The survey is the most comprehensive national housing survey in the United States.

According to the survey, "38% of the 1st time home buyers said that price is their primary reason for selecting a particular home.  While 30% said that proximity to work was the most frequently cited reason for choosing a specific neighborhood", said David Crowe, National Association of Home Builders (NAHB) chief economist.

On the other hand, Crowe said that, "The majority of trade-up buyers (36 percent) cited the design of the home as the primary reason for selecting a particular house, with 28 percent citing the looks and design of the community as the reason for choosing a specific neighborhood". (Source:www.nahb.org) 

Another point in the survey was, most (55%) home buyers prefer to purchase a new home rather than an existing home.  The reason behind for that preference is that new homes give home buyers options on how their new homes would look like based on their tastes and preferences.

Also the latest trend in home buying is to choose a home with energy efficient features that would permanently lower utility bills rather than buy an existing home without these features with only 2-3%  price difference.

The Characteristics of Home Buyers report is available on

http://www.realtor.org/sites/default/files/reports/2011/profile-of-home-buyers-and-sellers-2011-highlights.pdf 

Join the bandwagon, opt for brand new energy efficient home in centralized location! Save time and energy, choose a home that's close to your office while saving on energy cost (both on gas expenses and utility bills)! Contact me for more information.

Reasons Why You Should Refinance Your Mortgage Before 1st of April

If you're having thoughts of refinancing then NOW is the perfect time to apply for one! Improving housing market condition, increase in Premium Mortgage Insurance and potential mortgage rate increase are some of the factors why it would be more expensive to refinance your mortgage in the future.

1st Reason - Changes in Mortgage Insurance Premiums (MIP)

Effectve April 1, 2013, FHA will raise its annual Mortgage Insurance Premiums or MIP by 0.10% on all forward mortgages.  

The agency will once again require borrowers to continue paying the annual Mortgage Insurance Premiums for the remaining balance of their loan.  In 2001, FHA has cancelled the required Mortgage Insurance Premiums or MIP once the principal has reached 78% of the original principal balance. However, FHA remains responsible for insuring 100% of the outstanding loan balance until the loan is fully paid.  Due to billions of dollars revenue loss, the automatic cancellation policy will no longer apply.

2nd Reason - Potential Mortgage Rate Increase

Mortgage Professionals say that refinancers and home buyers who have not taken advantage of the historically low rates shouldn't waste time! 

Mortgage interest rates have hit historical lows during the country's economic crisis and have remained so until the first few months of year 2013, but experts believe that this may change SOON!  National Association of Realtors economist Lawrence Yun predicts the rates will reach 4% during the summer and 4.5 by 2014's first half as the US economy continues to improve.

3rd Reason - Benefits of Refinancing Before Filing of Tax Deadline

One benefit of refinancing during tax season is that you can prepare the same documents for your taxes and your refinancing application.  

If you wait after April 15th, it will take about 4 to 6 weeks to get an IRS verification that you have filed your taxes because other people will also be filing their taxes on the due date.  

Home owners that refinance could see hundreds of dollars in savings each month.  They will have more disposable income to pay bills, more money to spend in shops and restaurants in their communities, or more money to save for their children's college tuition or new car.  Since there's a need to fill the jobs that will support the demand, there will be more employment opportunities that will contribute to the growh of the US economy. 

    If you are looking to list or sell your home, whether it is a condo, single family, or mutlifamily   
    home now is the time to go on the market with record low inventory levels and fewer buyer 
    concessions being offered.  It is a sellers market!!   

FHA Mortgages Are About To Get More Expensive

Federal Housing Administration will raise its annual Mortgage Insurance Premium by 10 basis points or 0.1%  on most of the mortgage it insures.  To understand it easier, let's say a borrower opting for a 30-year, fixed rate mortgage who pays 5% or more down payment will pay an annual insurance premium of 1.3% of their outstanding loan balance. While a borrower who paid less than 5% down will pay a premium of 1.35%.

FHA will also increase the premiums on jumbo mortgages ($625,000 or more) by 5 basis points or 0.05% up to the maximum allowed annual mortgage insurance premium. 

The premium increases does not include some streamline refinance transactions.

FHA will once again require borrowers to continue paying the annual Mortgage  Insurance Premiums for the remaining balance of their loan.  In 2001, FHA has cancelled the required MIP once the principal has reached 78% of the original principal balance. However, FHA remains responsible for insuring 100% of the outstanding loan balance until the loan is fully paid. FHA estimated loss of billions of dollars in premium revenue because of the automatic cancellation policy.

FHA will also propose an increase in down payment for loans above $625,500. The agency will require a minimum down payment from 3.5 to 5 percent.  

By reinstating the old procedure of collecting premiums based on the unpaid principal balance will permit FHA to keep a significant portion of the forfeited revenue due to the automatic cancellation policy. Raising the premiums for borrowers with jumbo loans will encourage the private investors to participate in the housing finance market.

According to FHA, the changes Will further contribute to the efforts made throughout the Obama Administration’s tenure to improve risk management at FHA and protect the Mutual Mortgage Insurance Fund.  Because of these commitments, the changes made at FHA over the past four years have already added more than $20 billion in value to the  Mutual Mortgage Insurance Fund or MMI Fund. (Source:www.fha.gov)

In addition to the increase in Mortgage Insurance Premium and down payment for jumbo loans, there will be qualifying limits for each type of loan. See table below:

New Loan Limits 2013	Single-Family	Duplex	Tri-plex	Four-plex
FHA
Anchorage/Mat-su	$355,350	$454,900	$549,850	$683,350
Kenai Peninsula	$271,050	$347,000	$419,425	$521,250
HUD 184
Anchorage/Mat-su	$405,353	$518,936	$627,247	$779,525
Kenai Peninsula	$307,900	$394,176	$476,447	$592,116
Conventional
Alaska	$625,500	$800,775	$967,950	$1,202,925

*FHA Loan Limits Source: https://entp.hud.gov/idapp/html/hicost1.cfm

*HUD 184 Loan Limits Source: http://portal.hud.gov/hudportal/documents/huddoc?id=sect184maxloanlimits.pdf

* Conventional Loan Limits Source: https://www.fanniemae.com/content/announcement/ll1211.pdf;jsessionid=C1554E487D821CDEBCB135A9529EB64B.cportal-cl04

The National Association of Realtors (NAR) believes that the reinstatement of loan limits will help make mortgages more affordable and accessible to middle-class potential home buyers. NAR predicts that the new loan limits provision will help home buyers with incomes below $100,000.

For more information about the new rules of FHA, please refer to 

http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2013/HUDNo.13-010.  Or if you have any questions, you may contact me.

Current Housing Turning Into Seller's Market

Total existing home sales (including single-family, condos and co-ops)  in the month of December increased by 12.8% at 4.94 million this year compared to last year's 4.38 million-unit level.  See data below:

         Source: National Association of Realtors

According to NAR chief economist, Lawrence Yun said, "Record low mortgage interest rates clearly are helping many home buyers, but tight inventory and restrictive mortgage underwriting standards are limiting sales." he said.  "The number of potential buyers who stayed on the sidelines accumulated during the recession, but they started entering the market early last year as their financial ability and confidence steadily grew, along with home prices.  Likely job creation and household formation will continue to fuel that growth. Both sales and prices will again be higher in 2013."

The total housing inventory at the end of December fell 8.5% to 1.82 million existing homes available for sale.  Although the limited inventory, overall sales are still expected to increase.  The biggest effect of limited inventory is that the home prices tend to increase.  However, considering all the factors, home ownership is still affordable.

The inventory is expected to have a seasonal rise in spring.  But clearly, a seller's market may be developing.

MORTGAGE RATES

Although the current mortgage interest rates are at historically low with rates slightly above 3.5% for 30-year fixed rate.  It is expected to increase as the year progresses but it should remain under 4%.

For Alaska current mortgage interest rates, refer to http://www.ahfc.us/buy/resources/current-rates/.

The housing is showing plenty signs to recovery - from increase in existing home home sales to decrease in mortgage interest rates.  According to Jed Kolko, Trulia chief economist, housing market will return to "normal" in 2-3 years time as long as the market shows the same improvement.  For questions on housing, please don't hesitate to contact me or you can visit my website - http://www.jamesteamrealestate.com.

Using Down Payment Gift Money

It's very common nowadays for a first-time home buyers to receive down payment gift money.  Parents are usually the generous ones that will give their children gift money to help them start the home buying process.

The process of accepting a gift for your home down payment is not that difficult, just follow these simple rules, and the underwriter handling your case will surely grant you the loan.

1. Request for a  "Down payment Gift Letter" form from your lender 
The gift letter must be short and simple letter containing the following:

• The relationship between the home buyer and the person giving the gift.
• The amount of the gift.
• The address of the home being purchased.
• A statement that the money is a gift and not a loan that must be paid back.

Instead of downloading a sample from the Internet, request the down payment gift letter from your lender.  You'll never know what the sources might put in the letter from an Internet Download.

2. Prepare documentation
Underwriters will look for where the money came from and where it went.  In short, they want to see the proof that the money came from your parent's account and went directly into yours.

Be ready to provide the paper trail of the money coming out of their account and a proof that it was deposited to your account.  Make sure that it's the exact amount being declared in your "down payment gift letter".

Any discrepancies in the documentation will likely disqualify your use of "gift funds" entirely.

Additionally, if you will use Conventional financing, you will need to invest at least 5% of the purchase price from your own funds unless your total down payment is 20% or more.  If the down is 20% or more, then it can be called as a gift.  On the other hand, FHA does not require any cash from the buyer if down payment gift money is being used.

Most home buyers' have a difficult time coming up with the cash for a home down payment.  By using the cash gift to make a down payment for a mortgage, will give you an advantage in qualifying for a mortgage and get lower interest rate.  If you are lucky enough to receive that kind of help, just make sure you follow the correct guidelines mentioned in this article. For any questions, please don't hesitate to contact me.