There is lots of news to report since my last newsletter. The biggest
piece of information is the passage of the American Recovery and
Reinvestment Act of 2009. The national consensus is that housing got us
into this mess and only housing can get us out. Below I have outlined
some of the important elements of this new legislation. As I did last
issues, I have highlighted positive news is in GREEN and negative bits in RED. (Look at all that GREEN!!!!!)
1- $8,000 Federal Tax Credit to First Time Home Buyers! This
bill has increased the first-time home buyer credit from $7,500 to
$8,000. It also removed any payback requirement as long as you don't
sell the home within 3 years of the purchase date. To qualify,
homebuyers must have purchased a home after Jan. 1, 2009, and before
Dec. 1, 2009, to be eligible for the $8,000 credit. First time home
buyer is anybody who has not owned a home within the last 3 years.
There are some income limits, so email me for more details and with any
questions.
2- $10,000 State Tax Credit For Purchase of Newly Built Homes.
This differs from the Federal Tax Credit because it only applies to
newly constructed homes and there is no "first time buyer" restriction.
Also, this credit starts on March 1st and last until March 1st of 2010.
There is a 2 year occupancy requirement and the tax credit is spread
across 3 years- $3,333 per year.
3- Conforming Loan Limit Raised.
To qualify for the best rates and terms on a loan, borrowers need to be
within the "conforming loan limit" otherwise they are classified as
"jumbo" which carries higher rates. This new loan limit has been raised
to $729,750, up from $625,500 in many areas of California. For San
Diego, it looks like our conforming loan limit is going to be capped at
$697,500 for the County. As of now, the limit is good through the end
of 2009 but more changes might be coming.
4- Lender Rates and Timelines.
Lenders are flooded with loan applications and refinances so their
processing timelines have slowed. Be prepared for this! What does this
mean for you? Pre-qualifications don't hold much value these
days...sellers and their agents want to see somebody that has formal
loan approval. Spend the extra effort and wait time for this- it will
strengthen your buying position. Also, lenders have so much business in
their pipeline they haven't had to stay as competitive on rates as they
could be. Keep an eye on rate changes these next few weeks, now that
Washington has put their plan into place and hopefully removed some
uncertainty from the marketplace.
5- Want to Refinance but don't have the equity? One
component of the Homeowner Affordability & Stability Plan is
assistance for homeowners that want/need to refinance their existing
loan but don't have the required equity in the property to do so. This
piece is essential to helping those homeowners who are still working,
have paid their mortgage on time and want to stay in their home.
Through no fault of their own, housing prices have dropped and they
have no option to refinance. For example:
Let's
say a buyer purchased a home in 2005 for $500,000, put 20% down payment
and has a 30 year fixed mortgage at 6.5%. Now the home is worth
$400,000, rates are at 5% and the owner wants to refinance. In the past
this hasn't been an option since the owner has no equity in the
property (they owe $400,000 and it is worth $400,000). With this new
bill, there will now be options for this owner to refinance despite not
having the equity most lenders require (20% equity).
6- Purchasing Timelines. My
buyers that are searching for a home right now are experiencing a
longer timeline than expected to find the right home. Why is this? In
most areas, many of the homes for sale involve a bank -whether a
foreclosure or a short sale. This creates lots of competition, slows
down the process and forces buyers to pursue multiple homes before they
have a shot at one. If you are looking to buy in 3-6 months, you should
have already been in my car viewing properties!
7- San Diego Ranks 2nd on National Survey.
The Pew Research Center conducted a national survey asking people what
would be there top metropolitan destination if they had to live
somewhere other than their current city. San Diego came in second,
behind Denver and their 300+ days of sunshine every year.
8- 31% Debt to Income Ratio Target.
The Homeowner Stability Initiative is a program designed to reduce
homeowners' monthly debt to income ratio to 31%. You don't have to be
delinquent to participate in this program. Many owners in California
spend much more than 40% of their monthly take-home income on housing.
This program allows the lender to reduce this mark to 38 percent of the
owner's monthly income. Next, the initiative would match further
reductions in interest payments (split between the government and
lender) to bring that ratio down to 31 percent. Lenders will also be
able to bring down monthly payments by reducing the principal owed on
the mortgage, with Treasury sharing in the costs.
9- Investors can now finance up to 10 properties!
Previously there was a limit of 4 properties that a private investor
could finance at one time. Now "high quality" investors (720+ Fico,
25-30% downpayment) can finance up to 10 investment properties!
