Real Estate Market

Who Qualifies for the Extended Credit?

• First-time home buyers who purchase homes between November 7, 2009 and April 30, 2010 
• Current homeowners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight.

To qualify as a "first-time home buyer" the purchase or his/her spouse may not have owned a residence during the three years prior to the purchase.

The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more.  However, if the property is sold during the three-year period, the credit will be recouped on the sale.

Source:  www.Realtor.org

First time home buyers are looking at a market that shows no mercy, is highly competitive and does not reflect the conditions of a so-called "depressed real estate market." It is not easy to find a good house at the entry level without having to compete with other buyers, but with persistence, good preparation and the help of a professional local Realtor your chances of becoming a homeowner are better. Above all, be realistic, your very first house is not your "Dream House" but getting on the homeownership wagon will eventually get you there.

Did You Really Think This Was a Bargain?

Many home buyers have decided to jump off the fence and buy their very first house; perhaps it was the drop on interest rates to historical lows, or maybe the number of perceived bargains offered by the banks and a high inventory of homes for sale, or the $8,000 offered as a tax incentive from the government. When all these factors are put together, you will think It's heaven and you will have the time of your life choosing the best possible home at the best possible price with an incredible low interest rate for the next 30 years... or is it?

This is not the true picture of what we are seeing today. It appears that the REO's or bank owned properties that flooded the market before and kept the inventory high due to their inability to dispose of those properties, have finally figure out how to sell them... by under pricing them! This strategy has been paying off for them very nicely. Buyers trying to outbid each other will push the price to the highest point the market can bear.

Are You Kidding?  Your Offer IS  Denied!

An underpriced REO home goes on the market and attracts a good number of home buyers who think that they finally found their dream home, or ideal investment. They quickly realize that they are not the only ones out looking at homes for sale. Here in the Henderson and Las Vegas Market, we are seeing sometimes 30-40 offers presented within days.

How can a home buyer compete and win this bidding war? By understanding how offers are viewed by the seller and being prepared to meet those requirements as much as possible. If you can pay all cash, there will be no financing contingencies or appraisals to wait for, and the escrow can close within days, but if that is not possible, follow these steps to strengthen your position and get your offer accepted;

1. Do a complete loan application and bring every piece of paper requested by the lender

2. Have the bank issue a complete pre-approval letter, signed by a real person

3.Offer to pay more than the asking price if you can

4. Put a large down payment if possible, this will help when your offer is compared to others

5. Be prepared to take the house on an "as-is" condition and spell that out in the contract

6. Reduce theinspection contingency from 17 to about 5-7 days only

7. Reduce the close of escrow to less than 30 days if possible

Realize that the sellers don't care who buys their house, all they look for is to get the maximum amount of money they can, in the quickest amount of time with the least amount of inconvenience. They don't want to do any work, or wait too long to close the escrow or pay for anything extra.

Is THIS  All You Can Afford?

Now that you finally decided to jump off the fence and get into the housing market and become a homeowner, you need to give this idea some time and dedication, as we get closer to the end of the $8,000 tax credit window of November 30 2009, there will be far more competition and you will need all the help you can get. Work closely with your chosen Realtor, don't go at it alone and be prepared to go see a house within minutes and possibly right an offer on the spot.

This market offers you a great opportunity to make the purchase of a lifetime... but others are also aware of these positive conditions and you will meet them when they compete with you... just when YOU think YOU found YOUR dream home. Happy House Hunting! 

Thank you to Jeff Belonger -- The FHAExpert.com for the valuable information in this Blog!

FHA loans have been more wisely used in recent months as the choice of mortgages. What I hate hearing is that they have taken the spot of the subprime loans. This is not true by any part of the imagination. This statement is from those that are inexperienced in both the mortgage and the real estate industries. The realization has been that 30% of the subprime mortgages in the last 5 years previous to the last 2 years should have been FHA mortgages, not subprime. A recent survey has stated that FHA loans could be more than 60% of all loans originated for the 2nd quarter of 2009.

To compound this, so many said just because you had a conventional loan, you had the better loan. This was not always true when putting 3 percent down or even 5 percent down. In most cases, you were told this, because that particular lender was not FHA approved. Now?  Even with 10% down and credit scores less than 700, FHA loans in many cases, will be the best mortgage for you. 

So you could argue the fact that this is just my opinion, that FHA mortgages in many cases would be better for you. True, even though I have over 16 years of experience as a loan officer in the mortgage industry. But numbers don't lie. Let me show you..... and in this scenario,

The example below is based on a $300,000 purchase price with 5% down. One reason why conventional rates are a little higher in this scenario as in FHA rates is because Fannie Mae and Freddie Mac have added penalties per se. If you are putting down less than 30% and your credit score is less than 720, certain fee penalties would apply to you, which would increase your rate.  The FICO (credit score) that I am going to use is 679, which is above the average credit score and I will still show in this example that FHA loans are cheaper, even with 5% down.   

*** And keep in mind, some lenders have penalties on FHA mortgages with credit scores under 660 now.  We don't. And many lenders can't do FHA loans under 620. I can still do them down to 600. Just beware of those promising you FHA loans under 600, they don't close as much as promised. ***

Disclaimer :  These rates are examples, but the spread shown in the example is real. To compare this scenario apples to apples, the fees are the same and with 1.75 points. In this scenario, there are no lender fees. The conventional rate also includes the penalty for the 679 credit score. 

Okay, Jeff, you used 4 total examples. I am confused. A better than average loan officer will use all 4 comparisons, to show you the bang for your buck.  I will explain each one below. 

Conventional vs FHA - Your monthly savings is $170.36, favoring the FHA loan. Some of you might be saying that you will be adding $4,897.00 onto your principal balance if you did the FHA mortgage because of the FHA one-time mortgage insurance premium. This is correct and I don't want to confuse you with more numbers and charts. But here is a quick breakdown. If you kept your house for 5 years, which most people sell in a 6 year period, you would have saved $11,115.00 in payments in 5 years. This is a difference of $6,218.00 that you have saved!!!   And one other thing that is very small, but still makes a difference. 

Conventional Financed MI vs FHA - On the conventional loan, you can get a huge discount by adding the mortgage insurance onto your loan amount. Now your FHA monthly savings is only $37.83 a month, but you are now adding $4,560 to your total loan amount on the conventional loan. That comes out to an additional $76 a month over a 5 year period, if you wanted to pay down your mortgage to the same as the FHA loan. So now your total monthly savings is $113.83.  Yes, you do get a larger tax write off on the mortgage insurance being financed, but with the lower rate on the FHA loan, you also subtract more off the principal quicker. 

Conventional Lender Paid MI (LPMI) vs FHA - On the conventional loan, you are paying a higher rate, which part of it pays for your monthly mortgage insurance. Your monthly savings on the FHA loan is only $74.44. In 5 years, you saved $4,466. But you added $4,897 onto the FHA loan, which means that in 5 years, you came out $431 better on the conventional loan in 5 years. But hold the presses...  You get a higher tax write off, because you added more money onto your FHA loan and you are slightly reducing your principal because you have a interest rate that is 1.25% lower than that of the conventional loan.

The end result on the 3rd comparison? You will still come out ahead on the FHA loan. But let's take it a step further.  Take your savings of $74.44 a month and add it back into your payments monthly for 5 years. Guess what, my principal balance in 5 years on the FHA mortgage is $5,199 lower than that conventional mortgage. 

Again, a very good loan officer should understand these comparisons and be able to show them to you, if you need to see the numbers to help make your decision. I have heard many borrowers in the past say that their loan officer did these comparisons and suggest the conventional loan. Rut row... I didn't fudge these numbers. ... just a FYI. 

Another Footnote : You will be subtracting a few more dollars per month from your principal because your interest rate is lower, which would offset the interest that you would write off on the higher rate. Just something else to remember, but consult your tax consultant or CPA.  

For more updated information on Conventional PMI (private mortgage insurance) - Please read this detailed blog by Robert Rauf. The new world of PMI - update (FHA loans save the day)

For more FHA loans vs conventional loans comparisons :

• FHA loans vs Conventional loans - A true numbers comparison with 5% down - Using a 710 credit score

• FHA loans vs Conventional loans - A real comparison with 5% down - Using a 659 credit score

• FHA Loans vs Conventional Loans - 20% down - A Rude Reality Check - Would you believe that FHA loans could be cheaper even with 20% down?  Come see why and how.

FHA Loans vs Conventional Loans - 5% - 4 comparisons that you need to know - Comparing a FHA loan against 3 types of conventional loans with different types of monthly mortgage insurance. Guess who won while still using a 679 credit score.....