Great News for FHA Borrowers

FHA Loans Just Became More Affordable

In a statement today, the Department of Housing and Urban Development announced that the annual mortgage insurance premium on FHA loans will drop by 25 basis points which is equal to .25% savings to any FHA borrower.  This will help ease the effect of the rising interest rates and give a little more buying power or more room in the monthly housing expense.  (The cut applies to new mortgages with a closing or disbursement date on or after Jan. 27, 2017).


“Dropping mortgage insurance premiums today will mean a whole lot more responsible borrowers are suddenly eligible to purchase a home through FHA,” William Brown, president of the National Association of Realtors, said in a statement.

The FHA said that it projects that its new premium rates will save new FHA-insured homeowners an average of $500 in 2017 alone.

So what is an FHA Loan anyways?

An FHA loan is a mortgage insured by the Federal Housing Administration. Borrowers with FHA loans pay for mortgage insurance through a Mortgage Insurance Premium (MIP), a self-sufficient insurance fund that protects the lender from a loss if the borrower defaults on the loan.  FHA loans are attractive to buyers because they require a low down payment, lower rates and more flexible guidelines.  

Please reach out to me for more information on current FHA Home Loan Rates or to find a loan program that is right for you.

Sincerely,

Chris

Mortgage interest deduction on the chopping block: My Thoughts

Watch this MSN report: "Heads up, homeowners: Mortgage interest deduction on Trump's chopping block" and see my thoughts below:

The concept of mortgage interest deduction sounds sexy, the harsh reality is that you are paying $1 to save 33 cents. That is a net loss of 67 cents. Granted you get the value of a roof over your head, but that simply minimizes the cost of the roof over your head. Keep in mind as the report mentions, there is a small percentage of people that get to take advantage of the mortgage interest deduction. For people who need more money in their pocket the most (a greater percentage of the population) this will have no change to their tax return. I say, let’s get rid of it!

Mortgage Mistakes

I came across a good article today:  5 Newbie Mortgage Mistakes (and How Much Each Could Cost You)

In the article they touch on two mistakes I would like to comment on, "Falling for Marketing Gimmicks" and "Not Knowing How to Eyeball the Paperwork."

The article discusses getting a Loan Estimate (LE) from a lender before choosing them. However, the lender will not issue a LE unless the borrower makes formal application and that includes having a property address.  You will not get a LE when you are looking to get pre-approved.  However, in most cases the mortgage company will provide a closing cost worksheet to give the borrower an idea of anticipated expenses.  

Do not make your decision off of the closing cost worksheet.  The lender is not held to those fees and often unscrupulous lenders will have more fees on the LE than they did on the closing cost worksheet. 

-Chris

Tips That Could Make or Break Buying or Selling A Condo

There is more to successfully selling a condo than updates, perfect pricing & taking good pictures.
In fact, it starts long before you put it on the market.  If you didn't research your condominiums home owner association before you purchased, and/or weren't actively involved during your ownership, you could have a very difficult time selling.  I have seen it happen too many times; a seller has a willing & qualified buyer, they have agreed to a price, and are ready to move forward with the sale.  Then, to the dismay of both parties, they find out that the home owners' association doesn't "qualify" for the loan.  So what does that mean?  Most loan programs have strict standards to meet when it comes to the purchase of a condominium.  (Especially the popular loan programs through Fannie Mae, Freddie Mac & FHA loans).

Potential reasons why a loan might be denied due to the HOA:

• The home owners' association doesn't have enough reserves (money set aside from HOA dues to cover maintenance or repair costs) 
• Too many investors in the complex.  The lender must consider the fact that renters may not take care of the property properly because they have no ownership interest.  Also, there is the potential for low reserve funds.  While homeowners don't necessarily want to see HOA fees go up, investors especially don't.  To an investor, $50/month on 10 properties = an extra $500/month.  The problem?  If there are not enough fees collected, the reserves could be depleted pretty quickly.

To avoid potential problems when selling, there are 2 major things to consider:

1. Use a realtor to help you research the HOA before you buy.  Your real estate agent can get information from the condo association.  Red flags: 
• If fees are low or aren't going up with inflation.  This could mean there may not be enough in reserves.  (Even if you never intend to sell, if a maintenance project comes up that the reserves can't cover, you may be expected to pay a special assessment.  This could be thousands of dollars). 
• Too much debt, and a lot of delinquent home owners 
• Inadequate insurance
• Pending lawsuits
• Special assessments
2.  Become active in your association from day 1
• Become either a board member or an active member who attends meetings, and/or volunteer for a committee
• The HOA can set limits on those who invest, conduct reserve studies, decide on HOA fees, etc
• Be informed of upcoming projects and/or make suggestions
• Get to know your board members and other owners

Cornerstone Mortgage does offer loans for warrantable (eligible for Fannie Mae, Freddie Mac or FHA) & non-warrantable condos.  But remember, if you purchase a non-warrantable condo, it may be difficult to sell in the long run.

Your realtor and lender are valuable resources, so use us!  Feel free to contact me at any time with questions.

Sincerely,

Chris Scheer

Your Residential Lending Team

MHDC Press Release

MISSOURI HOUSING DEVELOPMENT COMMISSION

Strength, Dignity, Quality of Life

3435 Broadway, Kansas City, MO 64111

Kathryn Watts, Government Affairs, 816-759-6824; e-mail kwatts@mhdc.com

MHDC is the state's housing finance agency. The Commission is dedicated to strengthening communities and the lives of Missourians through the financing, development and preservation of affordable housing. MHDC was created by the General Assembly in 1969 and since that time it has invested $5 billion for the development of affordable rental housing and mortgages for first-time homebuyers in Missouri. MHDC functions much like a bank, providing financing directly to borrowers, developers or through a network of private lending institutions. MHDC is one of only three state housing agencies in the nation to receive an issuer credit rating of AA+ from Standard & Poor’s.

News Release/News Advisory/Request for Coverage – 01/16/09

MHDC Rolls Out Innovative New Program For First-Time Homebuyers

Starting January 14th, 2009, Missouri Housing Development Commission (MHDC) will have a new product to enable first-time homebuyers to take advantage of the $7,500 federal first-time homebuyer tax credit. This program is the first of its kind in the nation.

The federal first-time homebuyer tax credit was created by Congress this summer to encourage new homebuyers to purchase homes and thereby stimulate housing markets. However, the federal tax credit has been largely ineffective. One of the primary reasons the federal credit hasn’t worked is that the homebuyer doesn’t receive the money until he receives his federal income tax refund – which may be several months after the home is purchased.

With over 30 years experience funding mortgages for first-time homebuyers, MHDC knows that the biggest barrier faced by first-time homebuyers is acquiring money for down payment and closing costs. As a result, MHDC created a program that allows homebuyers to receive the value of the tax credit at the time of closing.

How the Federal First-Time Homebuyer Tax Credit Works:

• First-time homebuyers receive a tax credit worth 10% of their home purchase, up to $7,500. The credit is claimed on the homebuyer’s federal tax return. The credit is refundable, which means that the homebuyer receives a refund for the amount of the credit minus any federal tax liability. The credit is essentially an interest-free loan from the federal government and must be repaid through an increase in federal income taxes over a period of 15 years.

How the MHDC Tax Credit Advance Loan Program Works:

• MHDC makes a second mortgage to the homebuyer at the time of closing worth up to 6% of the home purchase price or a maximum of $6,750, which is used to cover down payment and closing costs. The tax credit advance loan is paired with MHDC financing for the first mortgage in the form of a safe 30 year, fixed rate mortgage. The homebuyer then files for the federal tax credit and uses the credit refund to pay off the MHDC tax credit advance loan. If the tax credit advance loan is paid off by the designated deadline, the homeowner pays no interest other than a modest servicing fee. If the tax credit advance loan is not paid by the deadline, principal and interest payments to repay the loan over 10 years begin automatically.

All MHDC first-time homebuyer loans are made through a statewide network of certified

lenders, and serviced by U.S. Bank. The MHDC loan programs are available for households with incomes up to $85,500. Interested first-time homebuyers can find a list of participating lenders and other information about the program on the MHDC website (www.mhdc.com).

MISSOURI HOUSING DEVELOPMENT COMMISSION

Strength, Dignity, Quality of Life

3435 Broadway, Kansas City, MO 64111

Kathryn Watts, Government Affairs, 816-759-6824; e-mail kwatts@mhdc.com

MHDC is the state's housing finance agency. The Commission is dedicated to strengthening communities and the lives of Missourians through the financing, development and preservation of affordable housing. MHDC was created by the General Assembly in 1969 and since that time it has invested $5 billion for the development of affordable rental housing and mortgages for first-time homebuyers in Missouri. MHDC functions much like a bank, providing financing directly to borrowers, developers or through a network of private lending institutions. MHDC is one of only three state housing agencies in the nation to receive an issuer credit rating of AA+ from Standard & Poor’s.

The federal tax credit and the MHDC tax credit advance loan program are both currently set to expire June 30, 2009.

###

NOTE TO EDITORS: Media representative questions can be directed to Kathryn Watts,

Government Affairs Liaison, at 816-759-6824 or kwatts@mhdc.com. All other inquiries should be directed to Gregory Spurgeon, Single Family Homeownership Administrator, at 816-759-7228 or gspurgeon@mhdc.com. If you would like to receive this release by e-mail in rich-text format, please email kwatts@mhdc.com and provide us with the appropriate e-mail address.

Miracles Never Cease!

Back by popular demand, at least in my mind! I will be returning to the airwaves on Tuesday, August 12, 2008 on the mighty mox; that is KMOX for all of you who are not hip to the lingo of St. Louis and our toasted ravioli, hwy farty far, and pork steaks.

At 10:20 in the morning, please tune your radio to 1120 on your am dial or go to www.kmox.com to listen live over the internet. I will be on the air with Dave Simons of Merrill Lynch discussing the new legislation that was signed by the President on July 30, 2008.

Thanks for your support! By the way, if you know anyone who is looking to purchase or refinance please send me their information and I will be happy to keep you posted on how things go!

As always, for questions or comments please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.

The Housing Act

On July 30, 2008, President Bush signed into law the “Housing Assistance Tax Act of 2008” (the Housing Act). It includes a $15.1 billion package of housing tax incentives.

Here are the highlights of the bill for homeowners and first time home buyers.

Property Tax Deductions for Non-Itemizers

The Housing Act created a new, temporary property tax deduction for non-itemizers (i.e., for taxpayers who claim the standard deduction rather than itemizing their deductions).

Highlights include:

· The provision creates a new standard deduction for state and local real property taxes paid by non-itemizers. Since most homeowners who are paying on a mortgage have enough deductions (e.g., mortgage interest and property taxes) to justify itemizing them on their return, this new provision chiefly benefits homeowners who have paid off their homes.

· The deduction is currently only available for tax years that begin in 2008.

· The amount of deduction will be as much as $500 for single filers and $1,000 for joint filers. Since this is a deduction and not a credit (i.e., a dollar-for-dollar reduction in tax liability) the actual tax benefit will not be all that substantial. For example, it only proves a maximum of $100 to a couple in the ten percent tax bracket and $150 to a couple in the fifteen percent bracket (and only $50 and $75, respectively, to singles in those brackets). Granted, in this economy every little bit helps.

Credit for First-Time Homebuyers

The single largest provision in the Housing Act is a measure allowing taxpayers buying their first home to take a tax credit of up to $7,500 of the purchase price. Qualified homebuyers can subtract the credit amount from their federal income tax when they buy a home and even get a refund if the credit exceeds their tax. However, they are then required to pay the credit back over fifteen years. The result is that the credit resembles an interest-free loan that must be repaid to the government.

Here are the details of the new credit:

· The home must be located in the United States and must be the taxpayer's principal residence. The taxpayer (and the taxpayer's spouse if married) must not have owned another principal residence in the United States in the three-year period before purchasing the new home. Accordingly, the home does not literally have to be the taxpayer's first home ever purchased in the United States.

· The home must be purchased between April 9, 2008 and June 30, 2009. Purchases from certain related persons and acquisitions by gift or inheritance do not qualify. A home constructed by the taxpayer does qualify if the taxpayer moves in between April 9, 2008 and June 30, 2009.

· There is also a special rule that allows taxpayers who purchase a qualifying principal residence in the first six months of 2009 to treat the purchase as if made on December 31, 2008. This allows the credit to be claimed on the taxpayer’s 2008 taxes rather than waiting to claim it on the taxpayer’s 2009 taxes.

· The credit is equal to ten percent of the price paid for the home, up to a maximum of $7,500. The $7,500 maximum credit applies both to individuals and married couples filing a joint return. A married individual filing separately can only claim a maximum credit of $3,750.

· The credit is phased out for individual taxpayers with modified adjusted gross income (AGI) between $75,000 and $95,000 ($150,000 and $170,000 for joint filers) for the year of purchase. Taxpayers with modified AGI over $95,000 ($170,000 for joint filers) can't claim the credit at all.

· The credit is refundable, which means that households with incomes too low to owe any income tax can still benefit as the excess credit available after applying to any income taxes will be refunded to the taxpayer.

· In the second year after purchase (note that the payback doesn’t immediately start in the subsequent tax year), taxpayers who took the credit must start paying back the credit in equal interest-free installments over fifteen years. For example, suppose a first-time homebuyer purchases a home for $100,000 in December 2008 and claims the maximum credit of $7,500 on his 2008 tax return. He would then be required to pay back $500 (one-fifteenth of the credit) on his tax return for 2010 and for each subsequent return for the following fourteen years, finishing in 2024.

· If the taxpayer sells the home (or the home ceases to be the principal residence of the taxpayer or the taxpayer's spouse) before the complete repayment of the credit, any remaining credit is due on the tax return for the year in which the home is sold (or ceases to be the principal residence). If the home was sold at a loss to an unrelated person, repayment of the remaining credit is forgiven to the extent of the loss.

· No credit is allowed if certain conditions exist: the taxpayer was ever entitled to a District of Columbia homebuyer credit, the home purchase was financed through tax-exempt mortgage revenue bonds, the taxpayer is a nonresident alien, or the taxpayer disposes of the residence (or it ceases to be a principal residence) in the same year as it was purchased.

For a chart of the tax credit information, click here:

http://www.realtor.org/GAPublic.nsf/files/chart_homebuyer_tax_credit_.pdf/$FILE/chart_homebuyer_tax_credit_.pdf

For the Mortgage Bankers of Americas' comments on the bill click here:

http://image.exct.net/lib/ff3611707560/d/1/MBAA_Housing_Bill_Summary_072508_Final.pdf

The majority of the information for this piece was provided by Bryan Shaw of Hoffman Clark LLC.

www.hoffmanclark.com

For Questions or Comments, please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.

New MHDC

Here we go! It is actually going to happen! The new rates for the 2008B are as follows:

CAL for Government loans 6.9%

NON CAL for Government loans 6.45%

CAL for Conventional loans 7.3%

NON CAL for Conventional loans 6.85%

The window for reservations will open at 8 am on Monday August 4th. As soon as you have a confirmed reservation you may close loans. All loans in this bond issue will be sold to the new master servicer US Bank. Training with the master servicer will start on Tuesday August 5th in Columbia and on Wednesday August 6th in St. Louis. I will go over the changes to the program in depth at the training but I will state the changes briefly in this email.

Rates

As you can see we will have 4 rates instead of 2 due to the conventional market. Only Fannie Mae's My Community Mortgage or Freddie Macs Home Possible programs can be used with this bond issue. There will be no charge of 1.25% for LLP and adverse market fee in this issue only. However, there will have to be a $175 servicing fee charged to the borrower for the all CAL loans.

Down payment Assistance

As you can see I have changed the acronym from CAP to CAL. This stands for Cash Assistance Loan and will help differentiate between the two programs. The assistance will still be 3% of the loan amount but it will be in the form of a soft second mortgage that will be forgiven over a 5 year period. The loan will actually diminish 1/60 per month over the 5 year period. The borrower will then be given a 1099 every year for the amount that was forgiven that year and will have to claim that as income on the federal tax return. If the borrower sells or refinances the loan in the first five years the remainder of the amount will have to be paid back. We have been discussing the just-enacted housing stimulus bill with FHA staff and they told us today that the just-enacted housing bill does not impose a 100% CLTV cap on FHA loans. It imposes a 100% LTV cap on the FHA-insured first mortgage and requires the FHA mortgage insurance premium to be counted toward the LTV ratio for purposes of the 100% cap. HUD will continue to allow second liens from state housing agencies that result in CLTVs that exceed 100%.

For Questions or comments, please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.

Latest Update on MHDC issue

The 2008A bond issue is being priced today and tomorrow, so we should open for reservation on Monday February 11, 2008. The rates will not be determined until later this week. I will send another email out later this week stating the new rates. This bond issue is 50 million dollars and only 5 million will be for NON CAP loans but we do have the flexibility to do all CAP loans in this issue. I will warn you that the rate will not be very attractive due to the current market conditions.


If you are a first time homebuyer or know anyone who is this is a great chance to get help on your downpayment and closing costs. For more information on MHDC go to www.mhdc.com.

For comments or questions please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.

You Can't Wait!

Guess What? You Can’t Afford to Wait!

If you had a crystal ball and could see what direction interest rates and house prices where going you wouldn’t be reading this blog. Now that you have had a chance to think about that and agree with me on that premise, let’s move on to the bigger issue which is “You Can’t Afford to Wait!”

If interest rates go up while you are reading this blog you will lose money! Why you ask? Because you could have locked into an interest rate for a period of time and by waiting you may have missed that opportunity.

What are you waiting for? When are you going to:

Purchase your first home?

Purchase your next home?

Invest in real estate?

Refinance your home?

Get a home equity loan to improve your home or pay off bills?

Do anything?

If rates go down while you are reading this you will lose money. Why you ask? Because now you will get greedy and wait for them to go down further. By the time you figure out they are at their lowest point they will be on the way back up again. Remember, pigs get fat, hogs get slaughtered.

If you don’t make an offer on that house you like, someone else will. Maybe not today, but sooner or later someone will purchase that house. The sooner you do it, the sooner you get a chance to lock into building equity and creating wealth. I subscribe to the theory that there is a house out there for everyone and sometimes you want to buy the wrong house. But that is why you should have a good buyer’s agent representing you. They will make sure that you buy at the right price for this time and that the house is the right house for you at this time.

If you are thinking about buying investment property, what are you waiting for? The next 12-18 months will be the best time to purchase single family investment property here in the United States for at least the next 20 years. Every day that you wait to start you are passing up the chance to build your real estate fortune!

If you wait to get that home equity loan it might not be available to you when you want. The loan programs that were available in March 2007 have changed. Credit score minimums have changed, loan to value limits have changed. House prices may have fallen your area limiting how much you can borrow. Waiting will cost you $$$$$$$$$$$$$$.

For comments on this or other postings please contact Chris Scheer at cscheer@cornerstonestl.com or 314.223.9824.

New Money Available

The Missouri Housing Development Commission opened the registration window for First Time Home Buyers on Thursday with its fifth bond issue of the year. (http://www.mhdc.com/homes/firstplaceloans/index.htm ) What does this mean for you? If you have not owned a home for the last 3 years and if you earn less than the required amount per family, you can receive a below market interest rate and take advantage of a 3% grant towards down payment or closing costs.

Years ago when there was little hope for people to purchase a home without a down payment, this programs was the great hope provider. For the past 4 years this program had lost appeal with all of the 100% financing available. With what has happened in the mortgage industry this year, the down payment assistance program will be the best way for low to moderate income earners to achieve the dream of home ownership. HUD is looking at eliminating the Ameridream program (www.ameridream.org) and others that allow a charity to provide down payment assistance to borrowers obtaining FHA insured loans; http://sev.prnewswire.com/real-estate/20071002/DC0378002102007-1.html which will eliminate even more potential opportunities for buyers to get into homes. Thus, the MHDC program as well as other State assistance programs will become the vehicle of choice again for assisting buyers with down payments and closing costs.

As the State of Missouri continues to streamline the process to make it easier for lenders to get loans registered and as they continue to provide training and recognition for the individual loan officers I can see this as the answer to many people’s hopes and dreams.

For more information on this program or to register with Cornerstone Mortgage, a MHDC Top Ten Lender; please contact Chris Scheer at cscheer@cornerstonestl.com or call 314.223.9824.