Jude's Real Estate Rumblings

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Mortgage Tip

Last week, we sent out details of the new $7500 tax credit for first-time home buyers.  Following are some other important changes that are included in the new Housing and Economic Recovery Act that was signed into law last week.

 

Additional standard tax deduction for property taxes for people who do not itemize deductions on their tax returns

 

For tax years beginning in 2008, there is an additional standard tax deduction for real property taxes of $500 for individuals and $1,000 for joint returns.  There is no change for people who itemize their deductions.

 

FHA Changes

 

-- The borrower’s cash investment has been increased from 3% to 3.5% of the appraised value of the property.

 

-- The buyer can borrow the 3.5%, as well as the closing costs, from a relative.  If a lien is placed on the property for the money the buyer is borrowing from their relative, the lien has to be subordinate to the FHA mortgage.  There is no requirement to place a lien on the property, though – the loan from the relative can be unsecured.

 
-- The money for the loan or the down payment cannot come from anyone with a financial interest in the transaction - real estate agents, mortgage broker, sellers, builder, title, appraiser, etc. 
 
-- Seller-funded gift programs, such as The Nehemiah Program, which allow the seller to pay for the buyer's down payment, are not allowed after October 1, 2008.  If the lender approves the loan before October 1, and the loan closes after that date, then the seller-funded down payment program can still be used.  IMPORTANT NOTE: After this law went into effect, a new bill (H.R. 6694) was introduced in the House that would eliminate the prohibition of seller- funded gift programs.  In other words, if the new bill is approved by Congress and signed into law, programs such as Nehemiah will still be allowed.
 
-- The mortgage insurance premium changes that went into effect on July 14 have been suspended between October 1, 2008 and September 30, 2009.  Beginning October 1, 2008, the up-front MI premium and the monthly MI premium will be the same as they have been for years.  The up-front MI premium will be 1.5% of the loan amount and the annual MI premium will be 0.5% of the loan amount.  (To calculate the monthly MI premium, divide that number by 12.)
 
-- This last item is not new, but many people are not aware that a relative can give a gift to a buyer if they are using FHA financing.  The relative who is giving the gift is allowed to borrow the money in order to give it to the buyer.  They do not have to prove that the money has been in their bank account for 60 days, and it does not have to come from income they earned.  The only requirement is that the buyer does not have to pay the money back (the relative must sign a gift letter).

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0 comments • Jude Sandvall, ABR, CNE, SFR 720-255-1021 • August 07 2008 11:01AM

Vestas floats growth plans in Brighton

An article from The Denver Post, reports that this week, the Brighton City Council approved a resolution to negotiate the sale of a 112-acre, city-owned parcel to Vestas.  If built in Brighton, Vestas has told city officials that a new plant could employ 650.  Tom Clark, executive vice president of the Metro Denver Economic Development Corp. said, "This is not yet a deal.  It's part of the process a company goes through when they want to acquire raw land.  This is a step in the right direction but it's by no means a done deal."  Also, Vestas is reportedly negotiating with the Regional Transportation District to buy a 65-acre parcel next to the city of Brighton land.
http://www.denverpost.com/business/ci_9989094


0 comments • Jude Sandvall, ABR, CNE, SFR 720-255-1021 • August 01 2008 01:39PM

Apartment project work starts near DU

An article from the Rocky Mountain News, reports that in a joint venture with Chicago-based Harrison Real Estate Capital, Denver-based MacKenzie House has started construction on the $60 million-plus Asbury Green apartment community near the University of Denver.  According to Don MacKenzie, chairman of MacKenzie House, the 171-unit, four-story development will be the first Leadership in Energy and Environmental Design, or LEED-certified, apartment building in Denver.  MacKenzie is targeting Asbury Green to upperclassmen and graduate students at DU.
http://www.rockymountainnews.com/news/2008/jul/23/apartment-project-work-starts-near-du/


0 comments • Jude Sandvall, ABR, CNE, SFR 720-255-1021 • August 01 2008 01:36PM

Mortgage Tip

We are often asked if borrowers have to include all of their income on a loan application.  Except in the case of a loan where there are maximum income limits (such as CHFA, CHAC, Affordable Housing, etc.), the answer is no.  It is always best to submit a loan to underwriting with the least amount of income necessary for the approval because everything that is included on the application must be documented. 
 
A good example of how this would work is if a borrower has $50,000 base income and $30,000 commission income.  If the borrower can qualify for the loan with just base income and that's all we enter on the application, then all we have to document is base income.  That can be done with just a paystub.  However, if we included the commission income on the application, we would also need to provide the last two years of tax returns to prove the stability and continuity of the commission income.  That slows down both the documentation collection process and the underwriting process.  An easy loan has turned into a more difficult loan.
 
The same is true for assets.  If a borrower only needs to have $5,000 in the bank to get an approval, but has $400,000 in ten different accounts, all we would include on the application is one account that has at least $5,000 in it.  Again, it simplifies the loan process and results in faster turn times.


0 comments • Jude Sandvall, ABR, CNE, SFR 720-255-1021 • August 01 2008 01:31PM

Parade Of Homes Goes 'Green' In Lakewood

A story from cbs4denver.com, reports that for the first time, the Parade of Homes is in Lakewood this year.  Not only is it considered to be the largest walking tour of luxury custom homes in the United States, this year the homes are green.  Vicki Pelletier with the Home Builders Association said, "There going to see a lot of different things this year, a lot of energy efficient products they can incorporate in their home, a lot of decorating ideas that they can incorporate.  They are going to be able to see a different side of Lakewood you don't typically see."  The homes are all certified Built Green with features like solar panels, carpet made from post-consumer recycled materials, hardwood floors made out of reclaimed whiskey barrels, as well as kitchen cabinets made out of reclaimed beetle-kill pine wood from Colorado.  The Built Green Colorado program encourages homebuilders across the state to build homes that are not only energy efficient, but use less water and preserve natural resources.
http://cbs4denver.com/green/parade.of.homes.2.777482.html


0 comments • Jude Sandvall, ABR, CNE, SFR 720-255-1021 • August 01 2008 01:29PM

Critic says latest housing help bill won't help enough

A story from 9news.com, reports that the housing bill Congress passed is said to be the most important housing legislation in years.  However, local critics say it could come at a steep price.  According to Zach Urban, administrator of Colorado's foreclosure hotline, the housing rescue bill is one of the largest housing bills the United States has ever seen, but few homeowners will qualify.  Urban said, "Your mortgage payment must be greater than your gross monthly income.  You also have to have had this mortgage originated prior to January 1, 2008."  He added that homeowners also need to keep in mind that just because Congress has passed this bill, it doesn't mean it's passed with the lending institutions.  "The offer has been put on the table and now lenders have to say 'yay' or 'nay' to their voluntary participation." Urban said.
http://www.9news.com/money/article.aspx?storyid=96643&catid=344


0 comments • Jude Sandvall, ABR, CNE, SFR 720-255-1021 • August 01 2008 12:40PM

Mortgage Tip

The housing bill was signed into law on Wednesday and we've got the details.  It's 694 pages long and most of it will not affect us directly, but there are a number of things in the act that will have a direct affect on you and your buyers.
 
The biggest immediate impact will result from the new tax credit that is available for first-time home buyers.  First-time home buyers who have purchased a primary residence on or after April 9, 2008 and before July 1, 2009 will get up to a $7500 tax credit when they file their income taxes.  It has to be paid back over the next 15 years, but there will be no interest accruing.  It's basically a $7500 interest-free loan.  That should have a very big impact on fence-sitters and new prospects.
 
Here are the details:
 
-- It only applies to first-time home buyers, who are defined as people (including their spouses) who have not held title to a property in the 3 years preceding the purchase date. 
 
-- The tax credit is a maximum of $7500, which is credited to the buyer when they file their tax return.  Depending on their income, the credit may be less.  The credit starts getting phased out when the buyer's modified adjusted gross income exceeds $75,000 ($150,000 if filing a joint return).  They should consult an accountant on this issue.
 
-- They owe the money back over the next 15 years in equal installments, provided they still own the house.  There is no interest on the credit, so if they get the full $7500 credit and keep the house for 15 years, they would owe an extra $500 each of those 15 years on their taxes.
 
-- If they sell the house before the end of the year in which they purchased it, then they do not get the credit.
 
-- If they sell the house after they get the credit, but before the 15 year re-payment period is up, they owe the rest of the credit back to the IRS, but only to the extent that they show a profit on the property.  For example, if they buy a house for 100K and sell it for 105K, they only owe 5K - not the entire $7500. 
 
-- This is only for primary residences.
 
-- The buyer cannot buy the property from a relative and get the credit.
 
-- If the property ceases to be their primary residence (or the primary residence of their spouse) before all the money is paid back to the IRS, they owe the IRS for the outstanding balance in that tax year.
 
-- If the buyer dies before the credit is paid back, their estate does not owe the money back to the IRS.
 
-- If someone buys a property next year before July 1, 2009, they can treat it as if they bought it on December 31, 2008 and claim the credit on their 2008 tax return.
 
-- The effective dates for the purchase are on or after April 9, 2008 and before July 1, 2009.  This is not a permanent tax credit.
 
-- This does not apply to non-resident aliens.  Resident aliens (green card holders) can get the credit.
 
-- This applies to all houses, not just houses that are in foreclosure, bank owned, or HUD homes.

1 comment • Jude Sandvall, ABR, CNE, SFR 720-255-1021 • August 01 2008 12:29PM

Daily Rate Lock Advisory

 
 



Friday's bond market has opened down slightly following the release of this morning's economic news that had mixed results but leaned more towards unfavorable to bonds. The stock markets are also in negative ground with the Dow down 74 points and the Nasdaq down 30 points. The bond market is currently down 3/32, which will likely have little impact on this morning's mortgage rates. However, if bonds fall any further we likely will see mortgage rates revise higher later today.

The Labor Department gave us this morning's big news with the release of July's Employment figures. They said that the unemployment rate moved higher by 0.2% to a four year high of 5.7%. Analysts were expecting an increase but only to 5.6%. This was the part of the report that was favorable to bonds.

The negative portion came in the number of payrolls added or lost during the month. Analysts were expecting to see a loss of 75,000 jobs last month, but today's report showe d a loss of 51,000 payrolls. It also revised June's loss upward by 11,000 jobs. However, this was the seventh consecutive monthly decline in payrolls, which indicates that the employment sector remains soft. Generally speaking, that is good news for bonds even though its not as good as we had hoped for.

Today's second release was the Institute for Supply Management's (ISM) Manufacturing Index for July. It showed a stronger than expected reading of 50.0. Analysts were expecting to see a larger decline to a reading of 49.2. This means that more surveyed manufacturers felt business had improved during the month than was expected. That is also considered to be a negative for bonds, but was not enough to create much concern in the market.

Next week brings us a handful of relevant economic reports for the markets to digest, beginning with July's Personal Income and Outlays early Monday morning. This report is considered to be moderate-to-high in import ance and can influence bond trading and mortgage rates. However, I would not expect to see a significant move in rates solely as a result of this report.

The rest of the week includes data on manufacturing and worker productivity along with another Federal Open Market Committee (FOMC) meeting. Look for more details on this meeting and next week's events in Sunday's weekly preview.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Float if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

©Mortgage Commentary 2008
www.judesandvall.com
www.judesandvallloans.com
3 comments • Jude Sandvall, ABR, CNE, SFR 720-255-1021 • August 01 2008 12:23PM