Blogs WRE City Group

Waiting to Buy May Cost You

Posted on August 4, 2010
 Still waiting for prices to drop a few more bucks before you buy? There is no doubt you may save on the purchase price by waiting. But will it really save you money in the end? Possibly Not. 
Let's take one example at look at the numbers. There is a home that is currently listed for $150,000. The current interest rate for an FHA 30-year, fixed rate mortgage is 4.250%. You are approved FHA and can buy the home now but you would like to see the price drop another $10,000.00 so you wait. 
 
Ø $150,000 price with the minimum 3.5% down payment with an FHA rate of 4.25% equals a principal, interest and monthly mortgage insurance payment of $796.85. (APR 5.349%)
You wait a couple of months and the price drops $10,000 so you decide to move forward with an offer. Your patience paid off. Unfortunately, interest rates have increased. Now rates can increase at a rapid pace (the saying goes "rates move down on the escalator, but UP on the elevator"). For this example, let's just say they went up a modest 1% to 5.25%. 
 
Ø $140,000 price with a minimum 3.5% down payment with an FHA rate of 5.25% equals a principal, interest and monthly mortgage insurance payment of $824.57 (APR 6.335%)
In the end, waiting to save $10,000 on the price will cost you $27.72 a month or $332.64 a year or a total of $9,979 over 30 years. You didn't save $10,000, it cost you $10,000. 
 
Ø If rates were to increase to 1.5% more than now, the yearly increase in payment would be $852.00!
Work with professional and educated Realtors and Lenders to find out if buying now is best for your situation. For some, waiting is a must and there is nothing you can do about it. But for many, waiting may just end up costing you more in the long run. Remember, interest rates are volatile. We have seen historic lows and have gotten used to seeing them "low". This won't last forever. When rates go up, home prices tend to follow.
 
Call me at 509.232.7725 or email me at dgeibel@cascademortgagewa.com if you have questions regarding rates or programs.

Home Buyer Tax Credit Closing Date Extended to Sept 30th

Posted on July 1, 2010

Better late than never - as the saying goes!  Yesterday, at the end of the day, the Senate passed H.R. 5623 Homebuyer Assistance and Improvement Act.  This bill allows those buyers that qualify for the FTHB Tax Credit and entered into a binding contract by April 30, 2010, to extend the closing of their loan until September 30, 2010.

H.R. 5623 would extend the homebuyer tax credit of up to $8,000 for the purchase of a principal residence before October 1, 2010.  The current benefits apply to cover buyers who enter into contracts before April 30 and close by June 30.  This bill would extend the closing date to September 30, 2010.

The bill would provide any homebuyer who entered into a contract on a home by April 30, 2010, but have been unable to go to closing within the required 60 days; the provision would extend the closing date for an additional 90 days.  This provision is estimated to cost $140 million

The bill would enhance information sharing to prevent prisoners from claiming the Homebuyer tax credit.

The bill would apply a bad check penalty to electronic checks.  Under current law, taxpayers who submit a bad check or money order to the IRS must pay a penalty of 2% of the amount of the check or money order.  If the amount is less than $1,250, the penalty is the lesser of $25 or the amount of the check.  Effective after the date of enactment, the provision would apply the penalty to all commercially acceptable instruments of payment.

This bill would modify Travel Promotion Act of 2009.  This provision would extend the authority of the Department of Homeland Security to implement fees related to the recently-enacted Travel Promotion Act for one year, through fiscal year 2011. This provision would reduce the deficit by $95 million over 11 years.

Please email me at dgeibel@cascademortgagewa.com with any questions.

Monday Morning Update

Posted on June 28, 2010

What a great weekend.  The weather finally realized it was Summer and brought us perfect conditions for Hoopfest and Ironman!  There was a ton of news from Washington last week.  We have been recovering from the deepest financial crisis since the Great Depression. The government, led by the Fed, has been firing on all cylinders ever since. In my opinion, they started a bit late and that became part of the problem as we were convinced the markets could survive what was then termed a "sub-prime crisis." Well, it became much more than that. Since this late start, the Fed has been doing just about everything besides washing America’s dishes.   From day one, this has been a crisis of confidence. The public and the markets must be convinced that the economy will recover. We must not think or speak negative thoughts. It may take some time, but employment will grow and as employment grows, Americans will purchase houses and cars. Then our worry will be when will the Fed raise rates and how will we pay for all the money we have spent. Meanwhile, today we have an unprecedented opportunity to take advantage of bargains courtesy of the Federal Reserve Board.

 Last Week in Review - What happens in Washington doesn't stay in Washington! And there was a lot happening in Washington this past week, between the Fed’s two-day meeting and actions in Congress. So how will all of these happenings impact you…and home loan rates, which are near all-time lows? Read on for details.

Last week, the Fed decided to keep the Fed Funds Rate at 0.25%, and also reiterated in its Policy Statement that economic conditions warrant keeping the Fed Funds Rate low for an “extended period”. First, what is the Fed Funds Rate? It is the lending rate banks charge each other for the use of overnight funds, and it is used as a base rate that many other lending rates are based on, for consumer and business loans.

And second, why is the “extended period” language significant? The Fed has to time very carefully any action – or even hints of action – on raising the Fed Funds Rate, which they have held at the lowest levels in history for the last year and a half. If the Fed raises the Fed Funds Rate too soon, it could slow economic activity and cause a "double dip" recession. However, if the Fed waits too long to raise the Fed Funds Rate, inflation could result.

Congress was just as busy as the Fed last week. On Thursday, the Financial Reform Bill was finally reconciled between the House and Senate. The final draft includes a Consumer Financial Protection Agency, which will have the authority to police banks for mortgage lending and credit-card abuses. The bill will move to the President for his signature once both houses of Congress approve the final version.

However, Congress did not pass the extension of the Home Buyer Tax Credit. Note: This extension was only going to be for people who were under contract by the initial April 30th deadline, extending their June 30th closing deadline to September 30th. The extension was part of the larger Jobs Bill, which included State aid and an extension of unemployment benefits for people out of work more than six months – and would have added $33B to the deficit. Meanwhile, the National Association of Realtors is saying that up to 30% of homes that went under contract by the April 30th deadline of the Homebuyer Tax Credit will likely not close by the current June 30th deadline.

There was other housing news last week, as both New Home Sales and Existing Home Sales were well below expectations. While a decline in sales was expected after people were racing to qualify for the April 30th Tax Credit deadline, the numbers are still a bit of a disappointment.

However – home prices remain affordable, and home loan rates are far from disappointing at the moment...last week they reached all time low levels! If you or anyone you know would like to learn more about this exceptional opportunity, please don’t hesitate to call or email. Or forward this newsletter on to anyone you think may benefit and I’d be happy to consult with them free of charge.

Interest Rates -Rates fell to their lowest levels since Freddie Mac started tracking them in 1971. Freddie Mac announced that for the week ending June 24, 30-year fixed rates averaged 4.69%, down from 4.75% the previous week. The average for 15-year fixed fell to 4.13%.

Forecast for the Week -There will be plenty happening this week, ahead of the Independence Day holiday. The week may start with a bang, as Monday’s Personal Income and Personal Spending Reports arrive, giving us a look at the Core Personal Consumption Expenditure (PCE) Index as well...which just happens to be the Fed's favorite gauge of inflation. Rest assured the Fed will be watching this report very closely. Any hint that inflation is heating up could definitely impact the Fed’s decision on rates and the “extended period” language at future Fed meetings.

Thursday brings another Initial Jobless Claims Report. Initial Jobless Claims came in at 457,000 last week and Continuing Claims at 4.55 Million. In addition, an additional 4.73M people are claiming EUC (Emergency Unemployment Compensation) benefits. The continuing high level of unemployment claims is disturbing, but things will improve. Remember, job losses come in the thousands as companies endure sweeping layoffs, but individuals are hired back one at a time. And remember – since the Jobs Bill has not been passed, more people will start to drop off extended unemployment benefits – and rejoin the workforce as formally unemployed.

And there could be some real fireworks on Friday, as the Labor Department releases the Jobs Report for June. Last month’s Jobs Report showed 431,000 jobs created in May. While on the surface this seems positive, the number was below expectations and also was primarily made up of temporary census workers…who will once again join the ranks of the unemployed when the 2010 Census has been completed. The Unemployment Rate did drop from 9.9% to 9.7%, but overall May’s Jobs Report was disappointing.

Extension to Close for First Time Home Buyer Tax Credit Fails

Posted on June 25, 2010

A bill that would have extended unemployment benefits, as well as extended the closing date for the first time homebuyer tax credit to September 30th, and extended a variety of other tax credits, failed to get enough votes yesterday. 

The amendment to extend the closing date for the tax credit was attached to a much larger Jobs Bill that would add an estimated $35B to our already burgeoning deficit.  The Jobs Bill also would have extended unemployment benefits for people out of work more than six months.

The White House said that the President will continue to try and move the Bill through Congress.  Hopefully the extension can be passed as a stand-alone measure or attached to a less controversial bill.

For now, those that qualify for the First Time/Repeat Buyer Tax Credit must close their loans by June 30, 2010.

Please feel free to email me at dgeibel@cascademortgagewa.com or call me at 509-232-7725 with any questions.

Congress Considers Tax-Credit Extension for Some Home Buyers

Posted on June 10, 2010

Congress is considering an extension for would-be home buyers who are racing to close home sales in order to receive a federal tax credit.

The real-estate industry has warned that tens of thousands of buyers who rushed to buy homes to qualify might not close before the deadline imposed by Congress, meaning they could miss out on receiving credits worth thousands of dollars without action from Congress.

Congress last fall extended an $8,000 tax credit for first-time home buyers and added a smaller $6,500 credit for current homeowners who were buying a primary residence. To qualify for the credit, buyers had to sign purchase contracts by April 30 and must close on the transaction by June 30.

But there are so many transactions in the pipeline that the companies responsible for handling the sales, including mortgage lenders, appraisers and title insurers and real-estate brokers, say the last-minute home-buying rush in April has created bottlenecks.

On Thursday, Senate Majority Leader Harry Reid (D., Nev.) said he would back a measure to extend the June 30 closing date to Sept. 30 for buyers who had met the April contract deadline.

The National Association of Realtors estimates that between 55,000 and 75,000 home buyers who are under contract won't be able to close in time to claim the tax credit. The trade group is lobbying

One particular worry is that short sales, where a lender allows a home to sell for less than the amount owed, won't receive requisite approvals in time to meet the closing deadline. Unlike normal sales where only two parties�the buyer and the seller�negotiate the price, short sales are more time-consuming affairs because they require note-holders to agree on price.

Some of the delay reflects new rules related to disclosure and appraisal requirements enacted to correct the excesses of the bubble years. The new regulations have prompted lenders to take extra caution at every step, stretching closing timelines.

It is unclear how many sales would fall through for those who miss out on the tax credit. Buyers could be hard-pressed to void sales contracts unless they have made their closing contingent on receiving the tax credit or are willing to forgo any deposits.
Source:  Wall Street Journal

New Fannie Mae Rules Require Two Credit Reports

Posted on May 28, 2010
If you are thinking about applying for a home loan this year, here is some important news: Beginning June 1, your lender is likely to order a second full credit screening immediately before closing. The last-minute credit report will be designed to find out whether you've obtained, or even shopped for, new debt between the date of your loan application and the closing.
 
If you've made applications for credit of any type, for furnishings and appliances for the new house, a car, landscaping, a home equity line, a new credit card, the closing could be put on hold pending additional research by the lender. If you've taken out new loans that are sizable enough to affect the debt-to-income ratio calculations used in your original loan approval, the deal could fall through. The added debt load could render you ineligible for the loan because you suddenly appear unable to handle the payments without a strain on your household budget.

 
Fannie's "loan quality initiative" will require lenders not only to pull two credit reports for each transaction but to perform additional verifications of borrower occupancy plans for the property, Social Security numbers and Individual Taxpayer Identification Numbers, among other changes.

More Blog Entries
USDA to Approve Loans-Will Lenders Follow Suit? - Posted on May 27, 2010
USDA Reversed Course - No Commitments - Posted on May 25, 2010
FHA - How Can They Help You? - Posted on May 11, 2010
USDA will Continue to Issue Commitments - Posted on May 11, 2010
Why Can't I Have The Lowest Advertised Rate? - Posted on April 26, 2010
USDA Financing in Jeopardy! - Posted on March 12, 2010
Monday Morning Update - Posted on February 1, 2010
HUD Announces Policy Changes - Posted on January 20, 2010
Foreclosures are Down for Spokane County - Posted on January 19, 2010
Temporary Waiver of HUD's 90-day Flipping Policy - Posted on January 19, 2010
RESPA - Impact on Consumers - Posted on January 15, 2010
Monday Morning Update - Posted on December 7, 2009
Jobs Report: Not Good for Rates - Posted on December 4, 2009
FHA Changes are Coming! - Posted on December 3, 2009
Monday Morning Update - Posted on November 30, 2009
Update to FTHB Tax Credit - Posted on November 24, 2009
Are you Paying Too Much in Property Tax - Posted on November 24, 2009
Conforming Loan Limits for 2010 - Posted on November 24, 2009
Monday Morning Update - Posted on November 23, 2009
Credit Scoring 101 - Posted on November 19, 2009
 
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