As I mentioned the other day,  the new housing stimulus package is allowing a $7,500 tax credit for first time homebuyers.  So what exactly is this you ask?  Anyone who has been reluctant to purchase a home in these so called “bad” real estate conditions should keep in mind these dates: April 9, 2008 through June 30, 2009.

These important dates mark the eligibility time span for the home-purchase tax credit created by the new housing bill. If you have not owned a house during the past three years and can go to closing before the end of next June, you may be eligible for up to a $7,500 credit against your federal taxes for 2008 or 2009 ($3,750 if you file taxes as a single person).

Here’s a quick overview of the credit in its final form:

· The basic idea: To jump-start housing sales and clear out unsold real estate inventories, Congress is offering tax credits to pull in new buyers. Within the designated time period, buy any house — new, old, any location or condition, any price range — and the IRS will cut up to $7,500 off your tax bill for either this year or next. For example, if you’re an eligible buyer this year and you owe the IRS $4,000 on your total 2008 income tax bill, your $7,500 tax credit could wipe out everything you owe plus get you a $3,500 refund. The new tax credit is what the government calls “refundable”: If your tax bill is less than the credit amount, you get the difference back from the Treasury.

· Eligibility rules: Do you own a home? If so, you’re not eligible for the credit. Did you sell your home more than three years ago and now rent? You are eligible. You’re also eligible if you have never owned a home. Close on a house before June 30, and you can claim a credit of up to 10 percent of the purchase price of the property, up to $7,500. If your adjusted gross income exceeds $150,000 ($75,000 if you’re single), the credit maximum begins to phase down. You cannot claim the credit if you are a nonresident alien, financed the property using a state or local housing agency’s tax-exempt bond mortgage, or do not plan to use the house as your principal residence. Buyers who use the District’s first-time-buyer credit program cannot double-dip and use the new federal credit, too.

· Payback: Unlike some other tax credits, this one requires beneficiaries to repay the credit. Starting in the second tax year after purchase and continuing for up to 15 years, taxpayers are expected to make pro rata repayments to the government on their federal filings. Over a 15-year payback period for the full $7,500 credit, the cost would be $500 a year. If you sell the house before the end of the repayment period and you have no gain on the sale, you won’t be expected to pay the credit back from the proceeds. If you have a net gain, the “recapture” cannot exceed the amount of your gain. In other words, the federal government is taking on all or much of the risk that the value of your new house won’t increase over time.

At its core, the new tax credit functions very much like an interest-free loan for up to $7,500. You pay only the principal back over time.

How do you claim the credit? If you pass the eligibility tests, simply request the credit on your tax return for either 2008 or 2009. Even if you buy in 2009, you can take the credit against your 2008 taxes by filing an amended return. The association has launched an educational Web site, www.federalhousingtaxcredit.com, with additional information for consumers

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Owning a home in Northern Virginia or Washington DC has been part of the American Dream. However, nowadays it’s becoming harder to live that dream. With the mortgage crisis, higher minimum credit scores, larger down payments, and mortgage insurance premiums (PMI) are becoming more common. Fewer home buyers are qualifying for mortgages and the up front costs of home ownership has steadily increased.

There are still programs out there for first-time home buyers that offer discounted interest rates and are more lenient on underwriting standards. The Federal Housing Administration (FHA) has a good program and it’s backed on income-verification and debt thresholds. There are also first-time home buyer credits out there. For instance, one program in Washington DC states: Taxpayers who have not recently owned a home in the District may be eligible for a one-time tax credit of up to $5,000 of the amount of the purchase price against federal income tax. In Virginia, the Home Stride program helps out first-time home buyers. Home Stride is a loan program available to first-time home buyers using a Virginia Housing Development Authority (VHDA) loan product for their first trust mortgage. Home Stride allows eligible buyers to borrow up to the lesser of 10% of the sales price or $25,000 to pay down payment and closing costs. Payments and interest are deferred for the first 3 years of the loan. After this deferment period, the interest rate of the loan is 5% for the remaining 27 years of the loan. The loan has no pre-payment penalties and can be paid in full at any time.

If you are a first time home buyer, it is recommended that you consult with a real estate agent. Buyers are generally not aware of FHA and VHDA loan programs. Who knows, these programs may help you get into the home of your dreams.

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The big news today has been the collapse of the 5th largest investment bank, Bear Stearns. Their stock plummeted last week and into this morning trading. To avoid bankruptcy, JP Morgan Chase and the Federal Reserve bailed them out…When they structured the deal over the last two days they were worth an estimated $236 Million, Friday they were estimated to be worth $3.5 Billion. So you can see the gigantic swing…Ouch!

In other news, today has actually been a good open for the mortgage market. I strongly believe that we will start to have more activity in the DC Metro area marketplace. The news in the Capital Markets on the other hand is not good; but new FHA (Federal Housing Administration) limits increasing is phenomenal news!

The conventional conforming limit has also changed with the stimulus package to $729,750 in our general MD/DC/VA area. The target pricing date of the new Fannie Mae / Freddie Mac limits are estimated to go into effect by April 1st, 2008 ~ No it’s not an April Fools joke! Now don’t get me wrong- I think this is going to create more options to take advantage of the new “Jumbo Conforming” for folks that have a large down payment and good credit…the rate is more than a full 1% better, however, there are many more restrictions on this program vs. the new FHA loan product.

For example, the minimum credit score you need for Jumbo Conforming is a 660 / If you finance more than 80% on one loan you need a 700 score. The down payment required is going to be at a minimum 15%. The reason it’s not that great is due to the “declining market” area restriction (which is basically everywhere except for some parts of MD and some parts of DC, call to inquire), So you have to reduce the Maximum allowable LTV / CLTV (Loan to Value / Combined Loan to Value) by 5%. If you are an investor trying to take advantage / or buying a second home you better think twice-the required down payment is going to be 40 - 45% into the deal! Again, “Ouch!”

In a nutshell, it’s going to be great with someone that has 20% down, good credit and buying a primary home. If this is you, you’re in great shape!

***Now the FHA loans BY FAR are going to have a greater impact for buyers in Northern Virginia and Washington DC. FHA loans will assist buyers who don’t have a lot of cash to put into the deal. It’s going to bring in a large pool of people in the coming months! You don’t have to be a first time home buyer either.

Some attractive highlights with the new FHA mortgage are as follows:

* Lower credit scores typically allowed
* There is NO “declining” market policy that they follow
* Down payment is lower than a normal conventional type loan ~ FHA only requires 3% into the transaction…
* Gift Funds are allowed, even for entire down payments!
* You can have a parent on the loan as a “non occupying” co-borrower (they don’t live in the property) to pool assets together to help with debt ratios and the overall picture
* 6% seller subsidy (seller concessions) is allowed.
* ARMs and Fixed products available

Another point to mention is that there still exists the “Nehemiah” product (I can do this type of loan and have done many in the past). Basically this is a product that assists the buyer with the 3% down payment. It comes from the seller as a seller credit. There was a motion to strike this down; however, this was unsuccessful and therefore is still available and active. So don’t think that if you don’t have the 3% down that you’re out of luck…It is St. Patty’s Day remember…get it from the seller.

Any questions? Call your lender of choice- me!

Dave Anzueto | Vice President | 703-883-9587 | Apply online www.davidloans.com

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Finally! The long awaited loan limits from the Federal Housing Administration has arrived! The new FHA limit for the Northern Virginia and Washington DC Metro area is now $729,750. This is HUGE! With the credit markets continuing to tighten and second mortgage lenders scaling back, we will now have a vehicle for those borrower’s who don’t have 10%-15%-20% down…plus the rates are better than conventional mortgages!

My eyes opened even wider last night when we learned that the new Fannie Mae/Freddie Mac ‘jumbo-conforming’ for the DC Metro real estate region was going to mirror the new FHA limit. You got it, the new temporary Fannie/Freddie second tier loan limit in the DC region is now $729,750! This number was completely out of left field, and against everything we had heard from our contacts at Fannie Mae…but who are we to argue!? Here are the guidelines that you need to know:

·Financing for owner occupied, second home and investment properties available

· Minimum down payment requirement (owner occupied) for the new “jumbo conforming” is going to be 15% (note: the guidelines state 10%, but since we are in a “declining market area” our max financing is cut by 5%)

· Credit score requirement is 700 for over 80% LTV and 660 for under 80% LTV

· Max seller concessions is 3%

Rates will be slightly higher than conforming under this new jumbo-conforming limit, but lower than current jumbo. Only three loan types will be available, 30 year fixed, 15 year fixed, and 5/1 ARM…they will be available on:

30 Year Fixed (avail 4/1/08)

5 Year Fixed (avail 4/1/08)

5/1 ARM (avail 5/1/08)

As this information is released to the public I certainly think that this will generate some excitement. If rates cooperate, thousands of buyers could really take advantage of these new offerings. While useful for some borrowers, the higher conforming limits pale in comparison to how FHA is currently structured. As it sits currently (which is subject to change), FHA is going to be far more beneficial for us than Fanniem Mae/Freddie Mac…here’s why:

1. Even with a loan amount of $729,750, borrowers still only need a minimum of a 3% down payment (FHA does not have a ‘declining market policy’)

2. Mortgage insurance payments are lower with FHA (because of the credit crisis second mortgages are become nearly extinct at higher loan-to-values)

3. Rates are significantly more attractive with FHA

4. No credit score requirement

All in all, this is all very promising, although rates have continued to go up this week, I am still very confident that the movement higher is temporary. Should you have ANY questions about these changes for the Northern Virginia or DC Metro real estate areas, I’m more than happy to answer them. I’ll post any new guideline changes that may come about, but as you may recall the current FHA guideline only requires a 3% down payment, but in many cases with a Nehemiah-type program, the down payment can come from the seller. You can look up the new FHA loan amounts in other regions of the country here.

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

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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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