John Beckett's Real Estate Blog

Even though the first-time homebuyer tax credit ended April 30, there are still many ways the government provides help and incentives to get first-timers into the housing market. With all mortgages, the interest rate you get will depend on your credit score and market rates at the time you buy.

1. FHA-insured loans
The Federal Housing Administration doesn’t make loans, it insures them. You buy the insurance and the government sets the rules and repays your lender’s investment in case you default.

The rules:

• Down payments are as low as 3.5% (example, for a $230,000 home, you’d pay $8,050 in cash).
• Your FICO credit score  must be 580 or above.
• Find more information at HUD.gov or read “FHA loans get dramatically costlier.”

The good:

The requirements are pretty easy, so newbies can qualify.

• If you haven’t yet built a strong credit score – and don’t have a record of late payments, missed payments or a foreclosure – you can use “nontraditional” credit sources, such as cell phone or other utility bills, rent payments or medical bills, to qualify.
• The FHA limits extra charges (“points” and fees) for things such as title insurance and settlement and escrow fees. These can add up, otherwise.
• You can use gifts — from family, for example — or a local government loan or grant for your down payment. (With conventional loans, it has to be all your own money.) You could conceivably pay nothing for the down payment.
• You don’t need the big bank reserves that conventional loans require.

The wrinkles:

• You have to buy mortgage insurance. C’mon, you didn’t really expect all this for free, did you? And you’ll need a chunk o’ change upfront to close the purchase.
• Funky properties are out. On this, the government can be fussy. The property has to be in “turn-key” shape with no major repairs needed so you can move right in. Even chipping paint can sour a deal. But the times are with you: In markets where sellers far outnumber buyers – which is most markets these days – sellers may be happy to make the repairs in order to sell the place.
• If the property has been expanded or has an addition, the FHA wants to see local government permits for the work.

2. FHA 203K loan
This type of FHA loan lets you purchase and repair a fixer-upper or foreclosure property. We’re not talking spa bathrooms and a haute-cuisine kitchen. The loan is for replacing or repairing basic home systems such as the roof, furnace, plumbing, wiring and floors.

The rules

• The buyer finds three licensed contractors who submit bids for repairs.
• The lender examines the bids and rules out any that don’t meet program guidelines.
• The buyer hires one of the approved contractors.
• Repairs are done in phases. After each phase, a lender’s inspector examines and approves or rejects the work.

The benefits:

• Uncle Sam insures your mortgage, and loans you money for authorized repairs. For example, a lender may offer you — based on the appraised value of the property you’re buying — a mortgage of $100,000 plus a $50,000 loan for repairs.
• You repay both loans with a single monthly payment.

The wrinkles:

• The rules are strict to protect buyers.
• Repairs must all be done before you can take possession.

3. City, county and state grants and loans
Every state has a housing finance agency. These disperse federal, state and local money and oversee programs to help make housing affordable.

The benefits:

• Many agencies have first-time-buyer assistance programs — grants or loans.
• The amounts vary greatly from state to state, running from as little as $2,500 to as much as $150,000. They are mainly targeted at low- to moderate-income individuals and can sometimes have restrictions on where you purchase. These loans can be used to subsidize the loan you are obtaining from your lender and give you more purchasing power.

The wrinkles:

• You have to get in quick because these programs are not well-funded. It’s first-come, first-served, and when they run out of money they don’t have any more to lend.
• City, county and state programs may target certain low- to moderate-income neighborhoods for improvement, limiting your purchase to these areas.
• Some programs are offered only to low-income buyers.

Other options
4. VA loans. If you’re a veteran, you might qualify for a VA Guaranteed Home Loan from the Department of Veterans Affairs, with no down payment — although you must buy mortgage insurance.

5. Navy Federal Credit Union. The Navy Federal Credit Union is offering no-down-payment mortgages of up to $650,000 for qualified members. Department of Defense military and civilian personnel and their families can join the credit union.

6. Conventional loans
Private lenders, including credit unions, banks and mortgage brokers, vary in their fees and services. It pays to shop around. Keep in mind:

• If your down payment is less than 20% of the property’s cost, you’ll need to buy private mortgage insurance.
• You won’t need to buy mortgage insurance if you put 20% or more down.

Need help deciding if you should get a conventional loan? Read: “Which mortgage is right for you?“

Don’t hesitate to ask for help

Before you go home shopping, you can get free housing counseling from a nonprofit agency approved by the Department of Housing and Urban Development call 1-800-569-4287. Studies show that a borrower who obtains housing counseling prior to purchasing is less likely to be foreclosed on.

Read at: http://realestate.msn.com/article.aspx?cp-documentid=24119778

The focus of the U.S. real-estate market lately has been the number of foreclosures and people trying to purchase cheap housing. But Brian Wesbury, chief economist at First Trust Advisors, says that if Americans don’t start focusing on building new houses, the market will have a much bigger problem on its hands. “We need one and a half million houses per year just to keep up with population growth,” Wesbury said in an interview with Steve Forbes. “And then if you throw in, you know, fires and tear-downs and just worn-out properties, we need 1.6 million or more per year. Right now, we’re down to about six and a half, seven months’ inventory whether you look at new homes or existing homes.” Privately owned housing starts in December 2009 were at a seasonally adjusted annual rate of 557,000, according to the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4% less than where it was in November, which had 580,000 housing starts. Housing completion numbers also contribute to this dire picture, with privately owned housing completions reaching a seasonally adjusted annualized rate of 768,000 in December 2009. That was down 11.2% from the 865,000 completions in November and down 25.3% from the 1.03 million completions in December 2008. Some people might shrug these statistics off, considering the number of foreclosures on the market. “Yes there’s foreclosures coming into the market, but we’re only starting right now,” Wesbury says. “… We’re starting one-third of the houses we need just to keep up with population growth, and that can’t last.” There were 315,716 properties last month with foreclosure filings, according to RealtyTrac. These filings include default notices, scheduled auctions and bank repossessions. Though last month’s filings were 15% more than a year ago, they were 10% less than in December. Jason Thomas, chief investment officer for Aspiriant, a California wealth-management firm, says he doesn’t see the foreclosure situation getting better until the labor market picks up. “So many people are getting to a point where they just can’t hold on anymore, and we may see another wave of that if we don’t see a pretty robust turnaround in the labor market,” he says. The unemployment rate is currently 9.7%, down from 10% at the end of 2009, according to the Bureau of Labor Statistics. Thesis Fund Management portfolio manager Stephen Roseman says the likelihood of a housing shortage is slim to none. “You need to have an accurate housing turnover number, and right now we have anything but that,” he says. There is some demand, though, from companies that are scooping up whole floors or housing developments because they have the cash on hand, Roseman says. And for those people who can get a mortgage, homes are very affordable. The median price for U.S. existing single-family homes in metropolitan areas was $173,200 in 2009, according to the National Association of Realtors, compared with $198,100 in 2008. Mortgage rates are also very low. For instance, both JPMorgan Chase and Wells Fargo are offering 30-year fixed mortgages at 5%, and some can be found for a hair less. “A mortgage is not difficult to get if you have the right income stream,” says Margaret Starner, senior vice president for the financial services firm Raymond James. But even if you can get a mortgage, maintaining the income to pay for that mortgage isn’t easy. “There’s a lot of potential problems that can come out if unemployment continues to drag; people deplete their savings and their credit card,” says Michael Ervolini, head of behavioral finance at Cabot Research. “It appears to be more of an income issue than a housing issue that we’re going to be looking at for the next couple of years.”

Story from: http://realestate.msn.com/article.aspx?cp-documentid=23505825