First Time Homebuyer Education Blog

In such a volatile market as we’re in right now, on a day when conventional interest rates went up .125%, The California Housing Finance Agency in an unprecedented announcement reduced interest rates across the board.

Rate Reductions are as follows:

30 Year Fixed

• Moderate Income Areas Reduced .125% to 6.75%
• Low Income Areas Reduced .25% to 6.5%

35 Year interest only PLUS

• Loan Amounts of $450,000 or Less Reduced .125% to 7%
• Loan Amounts in excess of $450,000 Reduced .25% to 7.375%

40 Year Fixed Mortgage

• Reduced .125% to 7%

Extra Credit Teacher Program

• Reduced .25% to 6.25%
• ECTP Down Payment Assitance – 5.25% (interest waived after 3 years)

With the CalHFA Community Stabilization Home Loan Program standing at 5.5% for a 30 Year fixed rate with ZERO down payment required (100% One loan financing with reduced mortgage insurance), CalHFA remains as one of the few remaining reliable and always available first time home buyer programs that allow over 90% loan to value.

Depending on your qualification, CalHFA has loan programs that allow for 0%, 1% & 2% down payment making this a very realistic alternative to the 3.5% down payment requirement (as of October 1st)

For additional information about these CalHFA loan programs feel free to contact me at ScottS@BroadviewMortgageCorp.com or you may call me on my cell phone anytime at 714-336-8286.

Nehemiah, Ameridream, HART and other private charities that offer seller assisted down payment grants score a win with the introduction of H.R. 6694.

This proposal counters the legislation passed last week that puts an October 1st, 2008 cutoff for seller assisted down payment assistance programs under title II of the National Housing Act (H.R. 3221)

H.R. 6694 calls the authorization of risk based mortgage insurance premiums for certain mortgagors that meet Fico requirements of 620 and above.

I believe this bill will move quickly through the process and be the saving grace of these valuable charities. This is responsible legislation and necessary to continue to stimulate the U.S. Housing market in a responsible way.

For more information, to take action against the ending of Nehemiah and programs like it and to follow the progress of this new legislation you can go to Nehemiah’s website here.

On Wednesday the House voted 272-152 to pass legislation that will offer up to $300 billion in assistance to troubled homeowners and offer government support for Fannie Mae and Freddie Mac.

This is a a 700 page bill that includes many moving parts. President Bush has been long threatening to veto this bill as package and asked that it be revised. It appears that this current version is not going to face any challenges when the President sees it shortly.

Helping At-Risk Borrowers

The part of this bill that is good news for challenged homeowners looking at adjusting interest rates and negative equity involved FHA insuring up to $300 Billion in new 30 year fixed rate mortgages for at-risk borrowers living in owner-occupied homes.

In a nut shell, here are the proposed terms outlined:

• The existing lender must agree to “write down” the balance of the existing loan to 90% of the homes’ current appraised value.
• Lenders must agree to also pay upfront fees to the FHA equal to 3% of the home’s appraised value.
• Borrowers must agree to pay an annual premium to the FHA equal to 1.5% of thier new loan balance.
• Borrowers must agree to share with the government any profit they realize from selling or refinancing.

Helping Hand Holds Comes At A Price

Ok, so is this a cure-all or a “bail out”? It certainly does not seem that way to me. For borrowers that qualify for this program, it will still come at a large cost. For instance, if your home is now worth $250,000 – you must pay $3,750 a year to FHA? Even if they break it up over 12 months that adds $312.50

Add the equity share if you sell or refinance and it starts to get a little less friendly. I saw this in the early 2000′s when folks were just starting to see huge equity increases. One specific case was a county provided silent second mortgage used to purchase the home. It included an equity share clause similar to this one.

The “share” of equity for this particular loan was over $17,000!

Take into consideration also that although prices will continue to drop if left to follow it’s natural course of market correction, it is likely that homes are very close to the bottom in many areas around the U.S. If you “commit” to a loan that is 90% of current appraised value at the “bottom” of the market…..That equity share could mean big bucks!

Historically, Real Estate doubles in value every 10 years. I’m sure this will be the case with many homes in many areas at the significantly deflated prices resulting from this unique collapse of the secondary and credit markets.

It will be interesting to see what happens and how many homeowners it helps…..And don’t let me seemingly pessimistic and cautious reservation about this bill fool you….I see a rainbow!

The Rainbow – The Answer to Short Sales and Loan Modifications

I believe that the passing of this bill is going to help MANY, MANY home owners currently having challenges with their payments, and here’s why.

• This bill is going to force banks to start considering principle reduction as a method of preventing foreclosure.
• This bill puts the responsibility back on the banks to keep people in their homes.
• A Bank participating in this program is forced to pay big fees – 3% of the appraised value

Let me explain. If the banks are already being forced to consider principle reduction (reduce amount of loan to reflect current home values”, why would they pay FHA an additional 3% instead of simply modifying the note themselves?

3% does not seem like a lot of money until you multiply it by tens of thousands of loans. It makes sense to me that if the banks hand is forced, they will accept that principle reduction is a vehicle that will keep their clients (home owners, investors) happy – and they will begin to look for ways to save money….say….3%

What I don’t know is how valuable the Government Mortgage Insurance will be to these banks. As with all legislation, what looks good on paper does not always mean there’s a practical application in a free market society. We will see.

Either way you cut it, i think it will help many home owners stay in their homes. I think it will force banks to do the “right” thing and do what it takes to keep folks in their homes. I believe that it will begin to restore confidence in foreign and domestic investors and bring liquidity back to mortgage backed securities.

There you have it….that’s my .02 – I guess it’s just wait and see time now.

July 23rd 2008 – JUST RELEASED!

This conventional first mortgage loan program features a below market, 30-year, fixed interest rate, fully amortized loan reserved for REO properties of participating financial institutions. It has a maximum LTV limit of 100% and may be used with CalHFA™s CHDAP and Fannie Mae eligible Community Seconds ® programs (which are designated on CalHFA™s AHPP list as œCalHFA MBS Program Eligible) for a total CLTV of 103%……See all of the guidelines and details here

This is GREAT News for first time home buyers! As this market begins to correct itself and new underwriting and credit guidelines are being established, Fannie mae announced on May 16th, 2008 that it is replacing it’s Declining Markets Policy with a new Down Payment Policy.

The Declining Markets Policy basically said that if a property was located in a “declining market”, the maximum LTV/CLTV would be reduced by 5%. In a nutshell, if you previously would have qualified for a FLEX 100 or MyCommunity 100 – meaning 100% financing, you now have to come up with a 5% down payment.

The National Down Payment Policy states that there is a minimum down payment of 3% required for all loans approved through DU and 5% required for manually underwritten loans. This is consistent with what have long been FHA guidelines in regards to down payment requirements.

The elimination of FLEX 100 and MCM 100 is not the end of the world. The FLEX 97 and MCM 97 are both very aggressive programs for first time home buyers and home buyers purchasing a primary residence that may own other properties.

Down Payment Assistance Programs are allowed to cover the 3% down payment requirement and/or closing costs making this an incredible opportunity for home buyers.

For information about the Flex 97 and MCM 97 or information about Special Programs Specifically for California Teachers and Employees, contact me today!

I can be reached any time at:

Cell / Text: 714-336-8286
Email: Scott@MyPorchLightScott.com
AOL / Yahoo IM: PorchLightScott
MSN IM: PorchLightScott@hotmail.com

I can also be found at LinkedIn, Facebook, Twitter, FriendFeed, Plaxo and MySpace

Available Home Purchase Programs for Teachers and School Employees in California

The Extra Credit Teacher Home Buying Program is available through CalHFA to Teachers that work in Title 1 or High Priority Schools. This is a great program but it has it’s limitations.

• The first is that you must work in a “High Priority” school. The definition of this is that the API ranking must fall between 1-5.
• You must be a first time home buyer and not owned a home in the past 3 years and do not currently own any other properties.
• There are income limits that you can not exceed as a household

CalSTRS is a much broader Home Loan Program that does not have these restrictions. Here is a quick summary of the features of these programs:

• Conforming/Non Conforming loan programs allow for Purchase, Rate and Term Refinance and Cash Out Refinance options
• 95/5 – Zero Down Home Purchase Program. No first time home buyer requirement, No income restrictions, No School restrictions
• 80/17% – 3% Down Payment Home Purchase Program. If you contribut to CalSTRS it simply does not make sense to look at an FHA loan if you only have 3% down.

It is amazing to me that more teachers and school employees do not know that these programs are available to them. In addition to using Fannie Mae guidelines to qualify for these programs, the interest rates are among the lowest available in the market today!

There is also a free float down feature that allows you to reduce the interest rate one time for free if the rates drop during the process of buying your home.

For more information about these programs, you can contact me anytime.

Cell/Text: 714-336-8286
AOL/Yahoo/MSN IM: PorchLightScott
Email: Scott@MyPorchLight.com

There was recently an Article in the Sacramento Bee  that summarized  very well some of my experiences in this market.   As Bank Owned Foreclosures  are on the rise.   I am seeing some banks offer these properties at “unbelievable” prices causing a  rush of offers to pull this home off the market in a matter of days.

Here is what the Bee reports:  

Buying Bank Owned REO property is not unlike a purchase that you would make from a home owner except for one major difference.   These homes are often sold “as-is with no warranties”.

I have written about buying Bank Owned REO properties -  Here is the post if you have not read it yet.

Bank Owned REO homes are a great opportunity for First Time Home Buyers.   As prices come down and homes in California become more affordable – I am busy every day  helping New Home Owners make offers on  these REO Homes.

For more information about how to search for these homes and the MANY Down Payment Assistance Programs available in the State of California – Take a look at this incredible resource!  

If you have any additional questions feel free to contact me anytime:

Cell/Text: 714-336-8286

AOL/Yahoo/MSN IM:   PorchLightScott

Email:   Scott@MyPorchLight.com

Short Sales or short pays  continue to be the number one most confusing subject in today’s real estate market for new home buyers and home sellers.

Let me try to put a better perspective on this process and maybe help both buyers and sellers so that you can better understand the process and have a better chance buying and selling a short pay / short sale home.

Knowing your options will put you in control of your situation.   Armed with this knowledge both buyers and sellers will have a better understanding of the process, the expectations of the bank and the patience you need to have to get through one of these transactions.   When done correctly, as short sale will be a Win/Win/Win for seller, bank and buyer.

What a Seller Needs to Know about short sales is the bank is  much less likely  to kick you out of your home if you communicate with them.    Bottom line is there are many options available to sellers of  homes.   I know these are difficult times, it is for many people right now.  

There are many  experienced Realtors ®  that can help you get through this  as easy as possible and with as little stress as possible….and, unfortunately  these situations are new for many  people, including  Realtors.   There is a learning curve that we are all experiencing right now to help home owners through these difficult times.

If you are in a hardship and can not make your complete payments – talk to the bank/lender.   It is important that you understand that there is a process and procedure and nobody wants to take your home from you.   Banks are businesses and they have  procedures for these situations.

Take a look at this simple, easy to understand web page from Washington Mutual.   These options are available through  many lenders and banks.

Let’s take a closer look at the four most common options from Washington Mutual’s site.

Repayment Plan

If your mortgage payments are past-due, we may be able spread out the past-due amount over several months. Each month you will pay your regular monthly payment amount plus a portion of the amount you are behind until your mortgage loan is deemed current.

With a repayment plan you can:

• Repay the amount you are behind over time
• Postpone foreclosure proceedings
• Protect your home

It is Important that you Understand what is happening on the other side of a short sale or short pay when you are considering making an offer on a home in this situation.  

Read This First - And then come back and finish this article.  

Ok, welcome back.   I want to give you a perspective on buying short sales and short pays that will give you more control of the transaction.   Short Sales and Short pays are becoming more and more common in this real estate market and my best guess is that over 70% of what you are finding when you search for homes are either short pay / short sales or foreclosure / REO homes.

The seller and seller’s real estate agent are an important part of the short sale process.   The number one thing i hear from “agents” is that the bank foreclosed on the home without notice.   I understand that there are some banks/lenders that are not cooperative and difficult to work with and I also believe that many times that is a self induced “difficulty” due to a lack of understanding of the process.

Much of the difficulty of the Short Sale / Short Pay process can be avoided with a simple matter of perspective by both home buyers and the Realtors ® that represent home buyers.

You can make the process easier by understanding it.   Your Realtor should be able to communicate with the seller’s agent to determine whether or not they are communicating with the bank/lender.  

Here is a “Perfect World” example of how to make an offer on a short sale / short pay and buy your new home.

• The seller’s real estate agent has educated the home seller on all of their options.   The seller is communicating with the bank and has ensured that the bank will not foreclose on the home during the process.   The seller’s agent has already prepared and reviewed the seller’s hardship package and is confident that the seller is a good candidate to ask for a short pay from the bank.
• Your Realtor ® has researched the comparable sales  in the area and has recommended a fair offer price that the bank should be willing to accept.   You should typically offer between 10% and 15% below current market value to accomodate for any further reduction in values over this (3 month) process.
• Once the offer has been accepted by the seller, open title and escrow and order an appraisal.   You know that the bank will order an appraisal or BPO before even considering your offer.   Submitting an appraisal with the purchase offer and financing approval to the bank/lender you will make the negotiator’s job easier.
• Your Realtor ® and the sellers agent are communicating and have a solid game plan on how to get you into this home.   They work together to give you the best chance of buying and give the  current home owner  the best chance of selling their property to result in a Win/Win/Win for all parties involved.

Be willing to make an investment of $350 if you really want this home.   Pay for an appraisal.   It is the single most pivotal component of your offer to purchase this home for less than what is owed on it.   An appraisal is an opportunity to get an independent third party report on the actual market value of the property.   Once you have the appraisal, you will know if your offer is too high or too low and you can change it accordingly before submitting the package to the bank.  

The Bank/Lender would prefer not to foreclose on a property unless they have determined that it is thier only option.   I have seen banks postpone the foreclosure process for up to a year if some arrangement is made to make partial payments on the loan during this process.   It is very expensive for a bank to forelcose.

Doing your homework will save you money.   By making a fair offer to buy the home, you increase your chances of having the bank pay for closing costs.   Many banks/lenders will pay up to 3% of the sales price toward your closing costs if your offer is fair.   Make sure your Realtor ®  also verifies that the current home owner has made arrangements with the bank to prevent the home from going into foreclosure during the offer process.

Getting a good deal on a Short Sale / Short Pay is a matter of you being able to buy the home of your dreams and have a payment that you can comfortably afford.   There are no magic deals out there, you can not buy a home at a HUGE discount unless you are an all cash buyer and the home needs a lot of work.  

What they don’t tell you is that the homes on TV that they buy, fix up, and sell for huge profits are cash purchases.   Cash is king in Real Estate and there are incredible deals out there for investors.   Investors do not buy short sales / short pays – they buy bank owned homes in poor condition that do not qualify for bank financing.

Now that you know the secret to buying a short sale / short pay home – be patient and find the home of your dreams.   Buying a short sale or short pay is a long term commitment.   Do your homework.   Make sure your Realtor ® does thier homework and most importantly – Enjoy the Process!  

This is an incredible opportunity for home buyers.   If you are armed with a good team going into this market – you will surely be the proud owner of a new home!

Many cities, counties and federal government programs exist to provide down payment and closing cost assitance for new home buyers.  

Down Payment Assistance Programs allow home buyers to borrow money for the down payment which results in lower payments, more purchasing power, reduced or eliminated mortgage insurance and may also be used to cover closing costs.

This is a quick overview of the most common types of Down Payment Assistance Programs and what the most common  features of these programs  are:

• Must be a first time home buyer – have not owned a home in past 3 years
• Must meet income limitations – these limits range from 80%   to 120%  of the Area Median Income
• Silent Second – No monthly payments during qualifying period
• Low or no interest rates
• May be forgiven at end of term (usually 30 to 45 years) – converts to grant
• Repayment is based on low, simple interest rate
• Must be paid back if you rent, sell or take cash out of a refinance
• Must be owner occupied
• Requires home ownership counceling or community service
• Can require minimum of $1,000 up to 3% down payment from buyer
• Have geographic restrictions based on coverage of program
• Subject to approval by providing agency – family must “have a need” for program to qualify

Common Down Payment Assistance Programs are:

• Down Payment Assistance
• Down Payment Gifts/Grants
• Mortgage Credit Certificates
• Down Payment and Closing Cost Assistance

Consult your Realtor about DPA programs available to you in the area you wish to buy in.   Many times programs will allow you to “stack” Down Payment Assistance programs to a maximum of 100% Loan to Value.

To search homes in your County that may qualify for Down Payment Assistance –  Use this  Free  Membership to  Listingbook.   This is a free service that allows you to search the same MLS system that Realtors use to list properties for sale.