Many people are now aware that there is an 8000 tax credit available from the US government for first time home buyers. There are also quite a few people that are aware of FHA’s announcement that you can now “monetize” the 8000 tax credit at closing with the help of a lender or another approved organization who will “loan” you the money and get paid back when you get the tax credit from the IRS.
What many people don’t know is that it can be somewhat tricky to find a lender who is actually helping people monetize the tax credit to use at closing.
Notice that I didn’t say impossible — just tricky.
So tricky, in fact — that I am actually not aware of a lender in Arizona who is currently helping people monetize the 8000 tax credit. That doesn’t mean that someone isn’t doing it — just that I am not aware of any.
But there are many people who need help monetizing the 8000 tax credit, so if you are a lender and happen to be reading this — now is your time to shine! Simply drop a comment with your contact information here and we will be sure to spread the word.
And if you are a person who is interested in how to monetize the 8000 tax credit, be sure to check back here to find out who is doing it and can help you!
Friday it was announced that HUD will now allow people to “monetize” their $8000 tax credit rather than have to wait to get the tax credit from the IRS.
This is big news!
Early in May, HUD Secretary Shaun Donovan made a comment when speaking to a National Association of Realtors meeting about how HUD was considering this change to happen. Until Friday, everyone suspected that something was forthcoming, but no one new for sure until Friday when HUD issued their official Mortgagee Letter 2009-15 which outlined the rules of the program.
Being able to “monetize” the tax credit essentially means that you can use the money that you are going to receive for the credit when buying a home here in Arizona. It is expected that as a result of this tax credit, but to 160,000 families will be able to buy homes.
According to Reuters:
The National Association of Home Builders estimates that the $8,000 first-time homebuyer credit will stimulate 160,000 home sales across the United States — 101,000 purchases from first-time buyers and another 59,000 purchases by existing homeowners who sold dwellings to first-time buyers.
For people who are planning on “monetizing” the tax credit, the most popular question about HUD’s guidance is “can I use the tax credit for my down payment?” and the answer to that question is “yes — but you must have your initial 3.5% down payment first. You cannot use the monetization of the tax credit for the 3.5% down payment.”
Another popular question is “how much does it cost to monetize the tax credit?” The answer to this question is best addressed by HUD in their Mortgagee Letter — they hit the topic head on:
Any costs attendant to the purchase of the tax credit are to be nominal and discounting the anticipated credit to cover the costs and expenses of the transaction must be reasonable and disclosed to the homebuyer. In FHA’s view, fees and costs that total more than 2.5% of the anticipated credit are considered excessive. (Example: $6000 to be refunded, with all fees and costs discounted, borrower should receive not less than $5850.00 for sale of tax credit.)
While many people were hoping that the “monetization program” would allow people to use the tax credit for their down payment, it is difficult to say that HUD did a “bad job” thinking this program through. All in all, I give them high marks for doing whatever they can to help as many people as possible in buying a home without putting loan quality at risk because borrowers don’t have enough vested interest in the transaction.
If you have questions about the monetization plan, be sure to speak with a loan officer at a FHA approved lender – and here are a few other resources as well:
Official Mortgagee Letter 2009-15
New Home Buyer 8000 Tax Credit Down Payment: Answers To Questions
Something called the Home Valuation Code of Conduct went into effect on May 1 and the impact of the new HVCC rules are starting to be felt by everyone.
The new HVCC rules mean that the loan officer who is working on your loan no longer orders the appraisal on your home – it is done through the lender who either has an in-house process for appraisal management issues or more often, it is done through something called an Appraisal Management Company.
While this may not seem like a big change to you if you are buying a house – it can possibly be a much bigger change than you might think. Prior to May 1, loan officers, Realtors and appraisers all communicated as needed regarding your home and home financing, and it wasn’t uncommon for everyone to be on the same conference call if needed.
But now that the HVCC rules are in place, the only way the loan officer or Realtor will know who the appraiser is is if by chance the appraiser calls them. Don’t expect that to happen too often, if ever.
One of the biggest things that the new HVCC impacts is the timeframe. Loan officers can request that the appraisals be done by a certain date, but we can’t call an appraiser and say “hey, do you think you can put a rush on this thing?” when needed.
So when talking about an appraisal post-May 1 of this year, remember:
- Loan officers don’t know who the appraiser is
- Loan officers can’t contact the appraiser even if they do know who it is. Realtors can contact the appraiser if they know who it is.
- Loan officers do not know when the appraisal will be done.
Are the new HVCC rules regarding appraisals a good thing or bad? Time will tell.
Here are some thoughts by Peter Thompson, with PTMortgage.com who shares some great insight on the changes and reason why this might not be a good thing!
"This law was passed a year ago, but with opposition from all the real estate industry groups it was an even bet whether it would actually go into effect. There aren’t any real winners with this new law. It will cause problems for everyone from the appraisers themselves to the consumers who are supposed to benefit from this new program."
Peter says, "Every one loses some control with this new program, but for mortgage brokers, who have been under pressure with all sorts of new rules aimed at them, this will be a big obstacle to over come. If you are shopping for a mortgage, either for a purchase or a refinance, one question you need to ask is what type of company are you dealing with and ask how the new appraisal rules will affect you if you move forward with a loan from that company."
Read more of what PeterT has to say on Home Valuation Code of Conduct.
For more information
- Download the Home Valuation Code of Conduct fact sheet
- Download the Home Valuation Code of Conduct
- Read Frequently Asked Questions
- Find contact information for state appraiser licensing and certification boards
When shopping for a mortgage, is it better to call DiTech or to try to find someone local?
It depends.
You could easily mess it up if you don’t be careful — meaning you could use someone that is based in Mellville, New York as your loan officer to buy a house in Queen Creek, Arizona and end up having it be a disaster. Or, just as likely — you could use a local loan officer who isn’t competitive with the larger, national lenders.
There is at least one simple thing that you can do to avoid either of these situations — ask around.
Start by asking your Realtor. Chances are that she knows a small handful of good lenders who live and work locally because she deals with clients who are all in your same situation every day — they need a mortgage and don’t want to make the wrong choice.
After getting a recommendation from our Realtor, interview at least two different loan officers. You might be surprised to learn just how different each loan officer can be — and I am not talking about interest rates. Some loan officers really have no clue and some are stone-cold-experts and know what they are doing. Some are funny, some are boring. Some are easy to work with, some are abrasive. In the end, you really want someone that is easy to work with and can deliver on what they promise – so the first step is to interview at least a couple so you can compare and contrast.
After shopping for a local lender, you may also be well served to speak with a national lender with a loan officer who works somewhere that is probably out of state. When speaking with these loan officers, the best way to find out if they are going to know about helping someone who is buying a house in Arizona is to ask them one question:
How soon can you get my Realtor an LSR?
If they don’t know what you are talking about – that should put an abrupt end to your interview.
An LSR is a document that a lender is required to provide the Realtor in the transaction. It is Arizona specific and is just one of the few “little” things about the Arizona home buying process that is unique to Arizona.
On second thought — maybe a local Arizona loan officer is better.
Just make sure that you ask around first!
Arizona Mortgage Rates are now updated in Real Time!
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 www.PhoenixHousingBlog.com
HomeSmart Real Estate CRobinson@HSmove.com
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Note: This is something that has not yet happened, but may soon happen. I originally posted this information about the 8000 tax credit being used as a down payment on my main site, and thought it was relevant enough to share with everyone as to what may possibly be lurking in the near future. I will be sure to make sure that I keep you updated if this becomes official.
Can you use the 8000 tax credit as a down payment for your home?
Not yet.
But that may change soon.
Yesterday, Secretary of Housing and Urban Development Shaun Donovan gave a prepared speech at the National Association of Realtors Real Estate Summit. He said something that was probably beyond interesting when he mentioned that FHA was currently working on a proposal that may involve people being able to use the 8000 tax credit as a down payment.
An excerpt from that speech regarding FHA’s position on the 8000 tax credit being used as a down payment:
And we are taking action to further help the housing market recover. I’m excited to announce here at NAR that FHA’s policy on the “monetization” of the first-time homebuyer tax credit will soon be published. I know that you’ve been waiting anxiously to hear FHA’s position on the matter. We, like you, believe that this new tax credit is not only a tremendous opportunity for first-time homebuyers, but also an enormous benefit for communities struggling to deal with an oversupply of housing. According to estimates by the National Association of Home Builders, this new tax credit will stimulate 160,000 home sales across the nation – 101,000 of which will be first time buyers who will receive the credit. Another 59,000 existing homeowners will be able to buy another home because a first time buyer purchased their home.We all want to enable FHA consumers to access the tax credit funds when they close on their home loans so that the cash can be used as a downpayment. So FHA will permit trusted FHA-approved lenders and HUD-approved nonprofits, as well as state and local governmental entities to “monetize” the tax credit through short-term bridge loans. We think the policy is a real win for everyone, ensuring that borrowers can tap into the numerous organizations that are already part of the FHA network to receive this additional benefit. FHA will be publishing the details shortly.
Enabling first time homebuyers to use the 8000 tax credit as a down payment would be a big win for the market – it would allow many more people to move into a home who currently may not have enough for a down payment.
We will be sure to keep you posted on developments in this situation as the happen.
(h/t Mark Madsen at MyFHAMortgageBlog for sharing the video about the 8000 tax credit being used as a down payment and the guys at ThinkBigWorkSmall)
Many times I am asked by people “how long does it take to fund a loan once we sign the initial paperwork?” and in today’s mortgage marketplace — more than ever — the answer is: it depends.
The time it takes to fund a loan from start to finish can vary dramatically between lenders. Some lenders are on “normal” turntimes, others are so backed up, it seems as if they may never unbury themselves from the pile of loans they are currently sitting in. There is no correlation between lender size and turn time. Big lenders have slow turn times, small lenders have slow turn times. Big lenders have quick turn times, small lenders have quick turn times.
Which is why it is more important than ever to know what lenders have what turn times.
There is an argument in the mortgage business that has been going on for ages between mortgage bankers and mortgage brokers. Mortgage brokers can send your file to any number of banks and their argument is that they can select the bank with the best price and best service — so being a broker is better. Mortgage bankers argue that because they have in-house underwriting, they have a relationship with the underwriter and thus their model is better.
In my opinion – the best model is to find a loan officer who works for a bank but can broker away files when needed.
And in today’s market – brokering files to lenders with fast turn times is one of the only ways that you may be able to meet your 30 day sales contract/close of escrow without having to file an extension. There is a process to obtain a loan and if you are a first time buyer and would like to know more about the buying process and/or need to be pre-qualified for a loan be sure to contact Justin McHood at 480-374-0303. To take advantage of the $8,000 buyer tax credit in 2009 as a first time buyer, be sure to contact Candace at 480-202-3558.<.p>
Arizona Mortgage Rates are now updated in Real Time!
In a strange, 180 degree turn of events from just a few months ago, I am now seeing multiple offers on just about every house that is under $200k. When I say “multiple offers”, I mean multiple offers! As I am watching clients get frustrated with the entire process, I thought I would mention just a few things that you can do to to make your offer look more attractive to sellers.
There are plenty of things that your Realtor can help you with in order to make your offer to buy a home more attractive, but for the purposes of this post, I thought I would focus on just one of those things that your loan officer can do to help you.
Get Pre-Approved, Not Pre-Qualified
Getting pre-qualified is easy. You pick up the phone, have a conversation with a loan officer and based on whatever you tell him, he will tell you whether or not you are pre-qualified. The catch here is that in order to become pre-qualified, you don’t actually have to prove what you are saying — you just have to say it.
So if you called me, told me that you had perfect credit, made a million dollars a month in W2 income and wanted to finance a $200k house — I would say that you are pre-approved based on what you told me.
But if you came to the office, provided paystubs and tax returns documenting your pay history and I pulled your credit and verified everything – then you are pre-approved.
Pre-qualified = the lender takes your word for it.
Pre-approved = you have proven it to the lender.
Getting pre-approved takes more work on your part, but when you are just one of 5 offers to a seller? Getting pre-approved can make all the difference. There is usually no fee for getting pre-approved and it is a fairly simple process and well worth your time.
Unless of course you don’t mind submitting multiple offers on multiple houses and just hope that one of them sticks.
One of the most popular questions I get from people who are thinking about buying a home is “what are my closing costs going to be?” When I start my answer by saying “it depends…” sometimes I can hear them start to sigh.
But the truth is, closing costs are whatever you want them to be. Sound crazy? Maybe, maybe not. The truth is – when you buy a house, everyone is going to make money. The appraiser is going to make money. The title company is going to make money. The Realtor is going to make money. The inspector is going to make money. And of course, the bank is going to make money.
But the difference about the bank making money is that you actually have a choice as the borrower on how much the bank makes and whether you want to pay now or pay over the life of your loan.
Lender Closing Costs: What If Your Pay Now?
If you elect to pay your lender closing costs at closing, you can reasonably expect to pay between 1 and 2% of your loan amount in lender closing costs. These are usually split between origination fees (typically between .5% and 1%) and processing/underwriting fees (typically about $1,500)
Lender Closing Costs: What If Your Have The Bank Pay?
Having the bank pay your closing costs is simple – and they will be happy to – in exchange for a slightly higher interest rate. Many times, the lender will explain it something like this: your lender fees will be $X and your interest rate will be 5% — or — your lender fees will be $0 and your rate will be %5.5.
Which is a better deal, having the bank pay your closing costs or you paying them yourself?
It depends.
Generally speaking, the longer that you are planning to have the loan, the more sense it will make for you to pay your closing costs and have as low of an interest rate as possible. If you plan on only having the loan for a few years — it will usually make more sense for the bank to pay your closing costs in exchange for a slightly higher rate.
Lender Closing Costs: F-R-E-E
Ok, so now for the big secret. The truth is, there is one other party who may be willing to pay your closing costs… the seller! It is not uncommon for a seller to pay your lender closing costs in exchange for you buying the house. There are a number of different ways to negotiate this, so be sure to work with your Realtor to get great advice here on this one.
Arizona Mortgage Rates are now updated in Real Time!
Earlier this month, details were released about the “Making Home Affordable” program as part of the Emergency Economic Stabilization Act that was passed through congress and signed by President Obama. The 
Making Home Affordable program offers assistance to homeowners across America in one of two ways: the Home Affordable Refinance Program and the Homeowner Affordable Modification Plan.
While the plan is fairly comprehensive and much better than the FHA Secure plan (it was so ineffective that it has been discontinued) or the FHA Hope for Homeowners plan (it never really got off the ground) it is somewhat unclear if the plan will help homeowners here in Arizona who are struggling with their mortgage and owe significantly more on their mortgage than their home is now worth.
Qualification Requirements for the Home Affordable Modification Program Include:
- It applies to owner occupied primary residence only
- Does not apply to loans that have a balance in excess of $729,750
- Loan must be originated prior to January 2009
- Debt to income ratio must be greater than 31% of gross income
- Mortgage payment no longer affordable due to significant change in income or expenses
Home Affordable Modification Program Limitations Include:
- Doesn’t apply to loans that have a balance in excess of $729,750
- Borrowers who are unemployed or have insufficient income levels may not qualify
- Second homes, investment properties or lot loans do not qualify
In short, the Home Affordable Modification Program will help people, but it won’t help everyone. If you think that you may be a candidate for a loan modification under the Home Affordable Modification plan, the first step is to contact your lender, all lenders should be familiar with the plan and be able to give you more information about how you apply for the program.
If your lender is not helpful, you can also contact (free of charge) the Hope Now program to speak with a counselor who is familiar with the program and can help you understand more about your options.
If you are still find it difficult to get help in your situation, we have also provided a list of excellent Arizona loan modification companies/lawyers who can help you. Keep in mind, these people charge a fee for their services and each company has a different fee structure.
Lastly, you can also find more information about the Making Home Affordable loan modification loan program at the official Treasury Department website for the Home Affordable Program.
For as long as I can remember, the Arizona FHA streamline refinance has been a no income, no asset, no credit score loan - meaning, you didn’t fully have to re-qualify for a new loan, you were able to streamline the documentation needed in order to qualify. Recently, many lenders have tightened their guidelines where credit scores are being required on an FHA streamline refinance - where the lender will actually pull a tri-merge credit report and you must have at least a 620 credit score to qualify for the FHA streamline program. This means that many people have recently been turned down for a FHA streamline refinance because they have a low credit score. NO MORE! We now have a lender who will do an FHA streamline with NO CREDIT SCORE REQUIREMENT and only 3 criteria that you need to meet:- You can’t have more than 1 30 day late payment on your mortgage in the last 12 months.
- You must occupy the property as your primary residence.
- Participating in the FHA streamline program must make financial sense - meaning that the benefits of participating in the FHA streamline refinance program must outweigh the costs involved.
