by Dru Bloomfield on September 5, 2009
With the demise of creative financing, FHA loans are in vogue again, and in some cases are even being used by buyers who have the 20% down for a conventional loan. I found it pretty interesting to read the following two articles.
FHA on track for busiest year as it backs 23% of mortgages
With less than a month to go in the 2009 fiscal year, the FHA is on pace for its busiest year.
From Oct. 1 through mid-August, applications for FHA single-family-home mortgages were up 50%, to 2.52 million, from the same period a year earlier.
FHA Likely to be the Next Shoe to Drop
The FHA is a big reason that home prices haven’t fallen even further. The FHA’s aggressive lending programs have continued throughout the housing downturn, causing its market share of the mortgage industry to grow from 2% in 2005 to 23% today. The FHA is an even larger percentage of the new home mortgage industry, with nearly 25% market share, according to HUD.
The FHA insurance fund, however, is likely running dry. According to a report from mortgage finance experts (click here to read the report), the FHA will not meet its minimum requirement as of its fiscal year-end, which is only 27 days from now.
It’s curious to see that the FHA program may actually have a few issues which need to be addressed.
Any lenders care to weigh in on what you hearing about FHA loans?
by Dru Bloomfield on August 9, 2009
It’s been quite awhile since I had a Sunday off, and I spent part of the day getting caught up on my blog reading. I thought I’d share a few highlights from other real estate bloggers that I read. Lots of changes and helpful reminders, for both buyers and sellers.
Home Loans
Noted blogger and active lender, Dan Green has provided a very complete and concise review of the federal government’s shutdown of the third largest FHA lender.
Local lender, Justin McHood recommends having a home mortgage back up plan, just in case.
Kelly Koehler, Tucson Realtor, describes yet another change that has occurred in the world of real estate financing. The process is designed to better protect the consumer, and Kelly shares “you’re supposed to get disclosures earlier, not pay any big fees until you have time to review them, and if your costs and/or interest rate make a big swing, you’re supposed to get an updated disclosure.”
Home Buyers
David Lorti, a Chandler-based real estate agent, wrote the blog post that’s been floating around in my head this week. With less than four month before the purchase deadline, and a competitive real estate market, buyers who want to take advantage of this credit need to act now.
Rod Rebello, a Tempe Realtor, took the time to explain how the earnest deposit works and several of the buyer contingencies that are standard in the Arizona real estate contract.
Teresa Boardman, Realtor (plus an amazing photographer) reminds buyers that negotiation is give-and-take. True, whether you are buying real estate in her St. Paul market, or any other location in the world.
Home Owners
Kristal Kraft in Denver discusses the in’s and out’s of loan modification, where “the lender agrees to work with the homeowner in order to make the mortgage payments “doable” so the homeowner can avoid foreclosure.”
I put this post together last month and have been keeping it updated with the latest legislative negotiations. Comments have been coming in that show the frustration and insights that others have with this new law.
Scottsdale schools start back tomorrow morning, and although it’s still pretty warm, we are are all looking forward to what has traditionally been our second busiest real estate season of the year. Besides knowing what the real estate market is doing in your specific area, it’s really important to know the overall real estate environment, too. Hope you found this info helpful.
by Dru Bloomfield on January 15, 2009
photo credit: Dru Bloomfield – At Home in Scottsdale
Many times you will find a condo that’s been listed in the MLS system that indicates that it qualifies for FHA financing. However, not all condos that have this designation in the MLS have actually gone through the approval process, so it’s worth the extra step to verify through the U.S. Department of Housing and Development web site.
My understanding is that it takes at least 3-4 months for the approval process to be completed, but that occasionally spot approvals can be given.
Here’s the current list of FHA approved Scottsdale condo communities, as of today:
- Casabell Condominiums
- Casitas Chaparral Condominiums
- Club Scottsdale Condominiums
- Discovery at Tatum Place I & II
- El Chaparral Villas Condo
- Hallcraft Villas Scottsdale
- La Contessa Condominiums
- Las Hadas Villas Condominiums
- Los Coronados Amended
- Marble Condominiums
- Mira Vista Condominiums
- Monterra Scottsdale Residences
- Optima Camelview Village Condo
- Condominiums
- Park Scottsdale Townhouse I & II
- Parkview Villas of Scottsdale
- Rancho Antigua
- Sarkis Manor Condominiums
- Scottsdale Casitas Condominium
- Scottsdale Parkway Condominium
- Scottsdale Shadows Regime III & IV
- Scottsdale Somerset Condo
- Scottsdale
- Villas
- Summerfield Units 1-5 Condos
- The Center Court Condominiums
- The Plaza Residences
- Villa Estados Condominiums
- Condominiums
- Walden Place III
For a few more details on the approval criteria, you can read Your Condo Needs to be FHA Approved or FHA Spot Approvals.
by Dru Bloomfield on December 1, 2008
Image via Wikipedia
The First Time Home Buyer Tax Credit has been around for a couple of months, but I’ve not really written about it:
Paul Wakefield, with Security Mortgage, emailed me his weekly update this morning, with the details and an example, so I decided it was time to share:
A reminder about the HR 3221 First Time Home Buyer Tax Credit.
This is a $7,500 TAX CREDIT, not a deduction. First-time home buyers or someone who has not owned a home for the past three years are eligible.
They must purchase a home between April 9th, 2008 and before July 1st of 2009. So, if the property is purchased prior to December 31st of this year, the buyer could potentially receive their credit in the next couple of months, provided they file their 2008 taxes right away.
The main features are:
- Income Limits: $75,000 for a single tax payer/ $150,000 for a married couple.
- Repayment: A home buyer claiming a $7,500 credit would repay the credit $500 per year. The home owner does not have to begin making repayments on the credit until 2 years after the credit is claimed. If the home owner sells the home, then the remaining credit amount would be due from the profit of the home sale. So, it really a 0% interest loan.
- Tax credit is refundable. For example: If a qualified home buyer expected, notwithstanding the tax credit, a federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit, the taxpayer would owe the IRS $1,000 on April 15th, 2009. Suppose now, that the taxpayer qualified for the $7,500 credit. As a result, the taxpayer would receive a check for $6,500 ($7,500 – the $1,000 owed).
Keep in mind that the FHA does require a 3% down payment. After the first of the year, the minimum down payment increases half a percent to 3.5% of the purchase price. The down payment can be a gift from family, if the buyer does not have the funds.
As a side note, the FHA Maximum Mortgage Limits in Maricopa County will be lowered to $271,050, from the current maximum of $346,250, as of the first of the year.
I have a client who just closed on her first home last month, and one of the incentives for purchasing now, rather than waiting, was this tax credit. She was able to make her down payment, and know that she would be getting a tax credit back in several months, that would replenish the funds she used for her down payment.
Here are two more resources for buyers interested in using the First Time Home Buyer Tax Credit to buy a home:
First-time homebuyer tax credit chart
Frequently asked questions about the first-time homebuyer tax credit
by Dru Bloomfield on October 11, 2008
How do you think buyers are paying for their single family homes in Scottsdale this year?
Cash? Conventional financing? FHA loans? Down payment assistance programs? Seller carry?
I mistakenly assumed that we were seeing an increase in the number of buyers paying cash this year.
(Click on the chart for a larger view.)
In actuality, conventional financing has been and continues to be the primary means that home buyers are using to purchase homes in our city. Cash is consistently the second source of payment.
The other changes that you are seeing are not surprising. The number of homes purchased with FHA loans are increasing. Down payment assistance programs are declining (and have gone away).
Other payment choices used were so minimal, I did not graph, although I have included them in the chart below.
| Scottsdale |
1Q2008 |
2Q2008 |
3Q2008 |
| Total SFH Sales |
679 |
904 |
805 |
| |
|
|
|
| Cash |
25% |
26% |
20% |
| Conventional |
62% |
59% |
60% |
| FHA |
0% |
4% |
12% |
| Bond/IDA |
11% |
10% |
6% |
| Carryback |
0% |
1% |
1% |
| Exchange |
0% |
0% |
0% |
| VA |
0% |
1% |
1% |
| Rent/Lease |
0% |
0% |
0% |
| SBA |
0% |
0% |
0% |
| Wrap |
0% |
0% |
0% |
I know these percentages are quite different than in many other areas of the Phoenix Metropolitan area. For instance, in the first quarter of this year, 11% of the homes purchased in the metro area used FHA financing, and I would suggest that the number is even higher now.
We are going to see changes in how homes are paid for. In years, past, FHA fell out of favor as lenders created many other financing options. With a down payment requirement of only 3.5%, and most conventional programs now requiring 10-20% down, FHA is a very viable option for first-time home buyers in Scottsdale. Scottsdale home prices have decreased, and many more now qualify for FHA financing, which currently has a ceiling of $346,250, but is expected to decrease at the beginning of the year.
We shall see if the number of cash buyers increases this fall. It’s just too early to tell. I’ll update this chart at the end of the year. It will be interesting to see how this financial chaos will impact financing options. Stay tuned.
