Real Estate Investing

Possibly due to the housing relief bill signed into law in Washington, D.C. last week, the phones in real estate offices have begun to ring again.  This will probably be an artificial jump in housing sales, but for now every little bit helps.  One component of the bill will eliminate the down payment assistance programs currently at the disposal of buyers who need help getting into a new home.  According to the Ellis Team of RE/Max,

Buyers who wish to buy with no money down had better hurry, because the new Housing Bill signed recently essentially eliminates down payment assistance from the seller on all FHA loans, and Congress added in the bill a provision that the new minimum down payment  will now be 3.5%, up from the previous 3%.  Financing is getting increasingly harder to get, and underwriting guidelines are changing daily.

As a result, buyers I’ve been working with for some time have found a renewed urgency and are kicking their home search into a higher gear in order to buy prior to October 1, 2008 - when the programs are expected to end.

However, the FHA Loan Advice site doesn’t believe the programs are down for the count,

For both political and practical reasons, many in Congress agree that down payment assistance programs should be continued. Although the portion of the new law banning down payment assistance has not yet taken effect, HR6694, the “FHA Seller-Financed Downpayment Reform and Risk-Based Pricing Authorization Act of 2008” was introduced on July 31. All the non-profit organizations which have been facilitating the program are already out beating the bushes to round up support. If you would like to help, the Nehemiah Corporation has a website set up to help you find out how. You can find it by clicking here.

I’m hoping the members of Congress who are supporting legislation to continue the programs will be successful.

Meanwhile, I found an extraordinary site called Calculated Risk that is being added to my list of *must-reads* if you like reading about investing, finances, and other economic information.

Photo was found here.

Yesterday I talked about exploring the option of a lease-purchaes for my first home when there were no down payment or seller closing cost assistance programs.  Those days may be returning - and more quickly than you think.

Assistance programs are coming to an end on October 1, 2008 thanks to the Housing and Economic Recovery Act of 2008 which was signed into law last week.  Both lenders and Realtors are expecting a spike in home sales as house hunters rush to buy their homes while they can still get help with down payment assistance and seller-paid-closing programs.

Greg Goodman of Countrywide Home Loans recently wrote that some observers believe these programs exploit a loophole in federal housing lending laws by allowing nonprofit organizations to gift mortgage down payments. 

In some ways, these gifts have become a substitute for subprime loans, in that they give builders a way to place first-tine and low-income buyers into homes even when they can’t afford a down payment.

All is not lost for buyers because there are other programs available.  For example, the Tennessee Housing Development Agency still offers grants to buyers when they complete mortgage counseling coursework.

On the other side of the housing bill, the Feds are granting a $7500 tax credit this year.  This seemingly juicy tax break comes with a price, though.  According to AccountingSolver, the money has to be paid back,

The tax credit has to be repaid 2 years after the purchase. At the tax credit of $7500, the resulting average increase in your tax bill for 15 years will be $500.

I voice my agreement with Miranda at Mortgage News,

Um, wow. Maybe first-time homebuyers would be advised to avoid the tax credit after all, and just focus on the interest rate and property tax benefits that are already offered.

Sometimes you should look a gift horse in the mouth.

The message here is if you’re on the fence about buying and you are already approved for a down payment assistance and / or seller assisted closing cost program, then you need to move now to make it happen.  If you delay too long, you may not be able to purchase after October 1st without having your own money saved - and you’ll need from $7000 upwards depending on the price of your home.

With foreclosures up 121 percent since this time last year, the bill riding through Congress may be a huge lifeline for tens of thousands of families.  My friend Mary missed the deadline - January 2005 to January 2007 - by two months.  She bought her home in November 2004 therefore is ineligible for help through this bill. 

According to CNN Money, there are additional requirements if you need mortgage rescue,

[Homeowners] must be spending at least 31% of their gross monthly income on mortgage debt to be eligible for the program.  They can be up to date on their existing mortgage or in default, but either way borrowers must prove that they will not be able to keep paying their existing mortgage - and attest that they are not deliberately defaulting just to obtain lower payments.

This is a solid first step to stabilizing the housing market.  Coupled with a sudden drop in gas prices, perhaps the economy can make a positive turn.  Of course, oil dropped because new home sales were stronger last month than what was predicted … a virtual economic merry-go-round.

With a return of consumer confidence, partly credited to the economic stimulus checks sent by the Feds these last few months, spending is up!  I’m looking for a used table to give as a closing gift to a friend of mine.  Where am I looking? Yard sales.  (MSNBC has provided more tips to find affordable furniture.)

That’s how I’m spending my weekend.  That and watching some Batman movie everyone is talking about!

Enjoy your weekend!