Yet another up and down week for us, yet I still strongly believe that rates will fall back well into the 5’s in the near future. The issue that has been plaguing us for a few weeks is that US debt just isn’t popular right now, and thus, there has been billions of dollars “jumping ship,” which is driving rates up. Rates will rise until they get to the point that they’re once again a ‘good deal’ (I believe that we’re at that point) at which time buyers will come back into the market…that will draw rates back down. It’s quite possible that the spring market will coincide nicely with rates falling. As always, time will tell.

We’ve gotten some news from Fannie Mae in regards to the ‘new conforming loan limits.’ Apparently it has been determined that the real estate in Northern Virginia and Washington DC area’s median home price is $474,000 (more than expected), if we add 25% to that, we have a new conforming loan size of $592,500. That’s the good news, the not-so good news is that instead of just raising the max conforming loan amount, they are simply creating a second tier for loan sizes between the current $417,000, and the new $592,500. This second tier will have slightly higher rates than current conforming rates, but will apparently be lower than current jumbo mortgages. We haven’t gotten any new news on the latest FHA loan limits, but I think that once again FHA will prove to also be a great option for borrowers lacking a substantial down payment.

Todd Murdock | Senior Mortgage Advisor | HomeFirst Mortgage Corp | 703.549.3400

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President Bush and Congress have agreed to raise the conforming loan limit until the end of the year as part of the $160 billion Economic Stimulus Package. The increase in loan limits could also tighten lending standards for borrowers by increasing down payment amounts or credit history screening. The details will be interesting to see once they are released. Fannie and Freddie will now be able to guarantee loans of up to 125 percent of the median home price of each region. According to the Stanford Group of the National Association of Realtors, the estimated conforming loan limit for the Washington DC real estate region will increase from $417,000 to $547,500. For the official amount, the Department of Housing and Urban Development (HUD) will have 30 days in which to publish the median price of each region after President Bush signs the stimulus package.

The new conforming loan amounts will help struggling home owners refinance their jumbo loans into a safer, conventional mortgage with more favorable interest rates. This will also make housing much more affordable in higher-cost areas like Northern Virginia and the DC Metro area, and give first time home buyers looking for a 2 bedroom condo in North Arlington or townhouse in Fairfax VA a little more cash flow!

Estimated conforming loan limit increases by region:

Source- National Association of Realtors, Stanford Group

***Update - since this article was written, the Conforming loan limit in the Washington DC region has increased more than expected to $729,750!… read more

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If you’re one of those people doing their home search right now, then you have probably heard that the housing market will continue to downward spiral. Of course this means opportunities for buyers. However, waiting for the market to bottom out (which no one can predict) may not be the best idea. Here are the top 5 reasons to buy right now and the top 5 reasons you may want to hold off.

Some markets in Northern Virginia have not hit their bottom yet, but they are not too far off. The Arlington, VA market hasn’t been affected as much as most areas in the DC Metro region. The pace of sales has slowed down, but the prices have held firm or in a few cases gone up. If you’re waiting for the Northern Virginia real estate market to hit absolute bottom, this puts you at risk in missing it and getting caught up in the market on the upswing. Plus, for some first time home buyers, owning a home just makes more sense from an economic and financial standpoint.

Homes that are situated in a great school district like Fairfax County and Loudoun County, are often not affected as much when the market goes south. The times that they depreciate, these neighborhoods are usually the fastest to recover.

Sometimes buyers get so caught up in the sales price that they miss out on a good deal. You have to ask yourself if it’s worth it to wait a few weeks to see if the home goes down $10K-$20K. It’s a gamble you’re going to have to take. Or is it? For those first time home buyers, look at your mortgage payment when you’re debating whether to pay an extra $10K for a home. Assuming a buyer pays $300,000 rather than $310,000 on a 5.7%, 30-year loan with $30,000 down, they’d be paying $1,575 a month rather than $1,634. Not so bad is it?

Now of course there are those people who bought their home a few years back and if they were to sell their home now, they would end up losing out. These people are encouraged to stay with their home and not think about buying, unless of course you can afford it.

5 REASONS TO BUY

1. Prices in the neighborhood you are interested in are relatively stable. Either they are holding their own or increasing, or the pace of decline is slowing significantly. If you have to move and don’t like apartments, the small penalty you pay for missing the bottom may not mean much.

2. You plan to stay in the home for more than five years. If you can stick it out that long before selling, economists say you’ll probably ride out any downturn and come out ahead on price

3. Your rent rivals a mortgage payment. If you can afford to buy, it can give you one bonus that renting can’t: mortgage-interest deduction on your taxes.

4. You’ve found the right house in the right area for you. The schools are great. You love the area and know it would be hard to find another house like the one you have your eye on. In a better market, you would most likely have much more competition for that home.

5. You’ve built equity in your house and are moving to a place where homes are cheaper. In your new market, your money will go a lot further.

5 REASONS TO HOLD YOUR HORSES

1. You’ve lived in your house less than two years. Chances are you haven’t had enough time to accumulate equity in your home. Indeed, you may have negative equity, if you live in many areas such as California, Florida, Arizona or Nevada.

2. Your job security is uncertain. If your company or business is in distress, it’s probably better to stay put until the smoke clears.

3. You don’t plan to stay in your next house at least five years. While it’s not important to buy at the exact bottom of the market, it is important to stay long enough to ride it out completely.

4. You don’t have good credit or a decent down payment. Do you have a job and income you can document? As a result of the subprime lending crisis, lenders are much more careful about whom they’re giving their money to.

5. You have an existing home to sell in a neighborhood where prices are dropping precipitously or where the number of foreclosures is spiking. In this climate, you’re probably better off waiting out the storm.

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Woohoo!! The Fed cut rates by a .500% yesterday!!

But how does that affect those of you looking to refinance your mortgage in Northern Virginia, Washington DC or Maryland? Or purchase using LOW rates? At the moment, not that much- sorry :=(.

Let’s make sure that we’re on the same page here, and I’d like to start with explaining the Fed real quick…when the Fed is cutting rates, those cuts do not directly correlate to lower mortgage rates. For instance, mortgage rates didn’t go down by .50% yesterday because the Fed cut rates by .50%. What the Fed is in actuality cutting, is the rate that they lend money to banks.

For DC Metro area homeowners with a HELOC (Home Equity Line of Credit) I am happy to say that there is immediate gratification! You will have a lower rate/payment because what the Fed rate is tied directly to is the Prime Rate. The Prime Rate is tied to your HELOC rate, and thus what your payment is based on. The Prime Rate is always 3.0% over the Fed rate, so since the Fed cut another .50% yesterday (and .750% last week) to 3.0%, the Prime Rate is now 6.0%. In fact, immediately following the Fed announcement yesterday mortgage rates actually went up slightly. Having said that, it is true that historically the lower the Fed Rate the lower mortgage rates, but that is not guaranteed, but in this current cycle should be assumed, and that’s what we want to watch.

It’s sure to be a volatile-bumpy ride, as we saw last week with the most dramatic 36 hour swing in mortgage rates that we’ve seen in recent memory. But, if you’re stomach can handle it I am increasingly confident that you will see 30 year fixed rates at or below 5% again.

(Let’s just hope I’m right)

Todd Murdock | Senior Mortgage Advisor | HomeFirst Mortgage Corp | 703.549.3400

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Congress and the White House have come up with an economic stimulus package that would put $150 billion into the hands of consumers and businesses while seeking to reawaken the market for large mortgages.

One important provision temporarily raises the dollar limit on mortgages that can be bought or guaranteed by government-sponsored mortgage giants Fannie Mae and Freddie Mac. The current limit of $417,000 would rise above $600,000 and perhaps as high as $730,000 in the most expensive areas, congressional leaders said. The primary focus of the package is $100 billion in tax credits for an estimated 117 million families this spring. Most individuals who pay income taxes would get $600; working couples would receive $1,200. Workers who make at least $3,000 but don’t pay income taxes would get checks of $300 to $600. People in both groups would get $300 credits for each of their children.Top Democrats said they intend to send a bill to President Bush by Feb 15. If that happens, rebate checks or electronic transfers would probably arrive between May and July.

Businesses would be able to deduct an additional 50% of the cost of certain investments in 2008. In addition, small businesses would be able to write off more expenses from their taxes: $250,000, up from $125,000.

The checks would be gradually phased out for wealthier taxpayers. Couples with income of more than $174,000 would get nothing, unless they have children.In shaping the deal, leaders of both parties were forced to give ground. Democrats wanted new spending on food stamps and unemployment benefits, but didn’t get it. Republicans held their noses and agreed to $28 billion in credits for 35 million families who don’t pay income taxes. They also gave in to the cap that stops wealthier people from getting checks. Bush administration officials had earlier floated a plan to give $800 rebates to all income-tax payers.

The Internal Revenue Service expects to begin mailing out checks and making electronic transfers by May.

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As part of the Stimulus Bill that has passed the House, and will most likely get signed into law in the next few days, conforming loan limits for the next 12 months (most likely starting in February) will be raised up to $729,750! The new limits will be based on the area’s median home price, plus 25% or 50%. Since this language is yet to pass we can only speculate, but ‘people in the know’ seem to think that it will give us a max conforming limit of $625,000 for the DC Metro area, including real estate in Northern Virginia, Washington DC and Southern Maryland. The measure would also permit the Federal Housing Administration (FHA) to indefinitely insure loans up to that same level. Currently, FHA loans may not exceed $362,250.

The Bill helps us immensely with spurring buyers back in the market, and letting home owners in trouble refinance. As you’re probably aware, the current conforming Fannie Mae and Freddie Mac limit is capped at $417,000. Anything above that amount is considered a Jumbo loan and comes with a significantly higher interest rate. Northern Virginia and DC real estate has priced many first time home buyers out of the market in recent years. Once this new limit takes hold, buyers will be able to finance more expensive homes with a lower interest rate.

“In high-cost states, many home buyers with good credit could save $3,000 - $5,000 each year by not being forced into the current jumbo mortgage market”, said NAR president Richard Gaylord. “Currently, only families in lower cost areas are able to qualify for these types of affordable loans. Such a move would stimulate home sales and help stem the rise in foreclosures, reducing the number of foreclosure by as much as 210,000, and increase economic activity by $44 billion. What’s more, this will come at NO cost to taxpayers– it’s a policy change that could really boost the economy,” Gaylord says.

Other NAR projections show that raising the loan limit will reduce the supply of homes on the market by 1 - 1.5 months, and increase home prices by 2 to 3 percent. As many as 500,000 jumbo loans will refinance into lower interest rates according to the analysis.

If mortgage interest rates stay at the level they are now (or lower), the DC Metro area will have a VERY active Spring/Summer market!

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