100% Financing Going Away?

With the continuation of lending restrictions being tightened FANNIE MAE  (Federal National Mortgage Association- the guys that buy a lot of the mortgages and set most of the lending guidelines) has once again made it a little more difficult for some to grasp the goal of home ownership this time around. 

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Their goal is not to be a jerk but to help fix the mess that we are in… I hope.  They are in the process of judging markets accross the United States and deciding if they are considered Declining or NOT.  Just for your information,  Loudoun and Fairfax have been flagged as DECLININGYikes.  Well, lets be honest, we all knew this. 

Fannie Mae does not buy loans over the conforming limit being $417,000.  This does not mean that they will not provide financing for homes in a declining market.  It only means that they will not provide ONE HUNDRED PERCENT for homes in a declining market.  Most lenders will now require 5% down. 

*GOOD NEWS*  There are still some 100% programs out there.  Some lenders will finance them, some will not.  And I am not talking about Shady Loans, though some may be.  I can refer you to some great lenders in the area who shouldn’t go belly up tomorrow.

Some buyers may also want to consider FHA loans which have tight restrictions but will allow 3% down and will work with rough credit. 

For more information about this issue which we have yet to see play out check out this Fannie Mae site HERE.

Lets pray that this will help in the long run, but I fear that the issue isn’t as much current buyers put previous buyers with bad loans. 

SORRY–  Forgive mis-spellings or typos.  Let me know if you find any.

DO YOU THINK THIS WILL HELP OR HURT?

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Considering RENT TO OWN (LEASE OPTION) ?!%??

Homes sometimes will rent before they will sell.  For those who are willing to take the RISK of renting out their home, this can be a good option.  For many who now need to get out of their home quickly there is another option.  LEASE TO BUY or sometimes called RENT TO OWN. 

 This option allows an interested party the option of renting your home while they are able to get their financing in order.  The interested party may need time to clean up their credit or gather enough money to afford a down payment.  BEFORE you anoint this new found idea as the light at the end of the tunnel it is a vital that you consider both sides of the equation. 

 1.  The tenant may decide they do not want to purchase by the end of the lease term.  This could leave you with an extra mortgage payment if you have moved on and a major problem if the value of the home has decreased.  I HAVE SEEN THIS HAPPEN.

 2.  The tenant never fixes the financial issue and cannot even pay the rent.  Before you start believing that this is an easy fix, you should check your states laws on EVICTION.  It could be a lot harder to evict a tenant than you think. 

 3.  If the market has declined…. and the home is not worth what you originally agreed too the bank will not give the tenant a loan worth its current value.  This means that if you had waited and possibly sold it a year ago you would have made more money. 

If you are a buyer…. I would strongly encourage you to make the original contract with the seller/ landlord contingent upon having a future appraisal done.  If it has gone up in value then the price stays the same as originally set.  If you feel it has gone down then the price should reset. 

4.  MANY TIMES…..  I have seen buyers after renting for a while ready to move after finding all the quirks with the home which they will find any where they purchase. 

If at all possible, you stand your best chance of this being successful to have a CONTRACTUAL AGREEMENT even if you know the person whom you are working with.  Or should I say, ESPECIALLY if you know the person you are working with.  Your REALTOR should be able to assist you with this. 

First Time Buyers Goverment HELP!

uncle-sam.jpgAs you may have heard, there are not a lot of NO down payment programs left for home buyers.  This really stinks for a lot of well qualified buyers who will never default on a mortgage payment.   However, with the issues that the mortgage industry has had lately this is a risk that many lenders are no longer willing to take. 

When a loan is over 80% of the homes value a lender will charge what is called MORTGAGE INSURANCE.  This sounds good until you realize that you are not buying it for yourself but for the lender since they are inheriting the risk that you will not make your payment.   Well, most of us have outsmarted the system by getting a loan for 80% of the homes value and another for 20%.  Well, we thought we did something great but now we are seeing less of even these programs available.  

The good news is that Uncle Sam has bailed us out, or is trying.  For the next 3 years Mortgage Insurance will be FULLY tax deductible making it much more attractive and allowing many buyers to purchase a home.  A few things that you need to know about Mortgage Insurance if you want to write it off….

    1.  It is full tax deductible for those making less than $100,000 a year.

    2.  It is partially deductible for those who make $100,000 – $109,000.

    3.   Mortgage insurance is not only safe and predictable, but it’s also cancelable and packed with features        borrowers    want today, including Genworth’s optional and FREE Involuntary Unemployment Insurance and  pre/post purchase counseling assistance.   

This information is deemed realiable, however you should speak with your tax advisor to verify it.