“Under the new policy, $1.5 billion that had been reserved for the bank bailout will be rerouted to five states that have seen housing prices drop more than 20% since 2006: Nevada, California, Michigan, Florida and Arizona.

The money will go toward homeowners who have lost their jobs, owe more than their houses are worth or cannot afford to make monthly payments.”

The new program is designed to help the people who have suffered from the mortgage crisis rather than give more to banks that have already recieved bailouts. Hopefully this will prove more successful than the Making Home Affordable mortgage modification program (many were excited, few have been able to get coherent answers from any bank…)

See Also:

Non-Conforming Bank Loans

• Beginning in the spring, borrowers will be charged an upfront fee of 2.25 percent for mortgage insurance, instead of 1.75 percent.
• The FHA will ask Congress for permission to raise the about they charge annually for mortgage insurance.
• FHA mortgage applicants with credit scores below 580 will be required to make a down payment of at least 10% of the home’s purchase price. Previously, most borrowers were allowed to make down payments as low as 3.5%
• Sellers may only make closing cost “concessions” of 3% instead of 6%.

The new FHA regulations will make buying a home more difficult for some borrowers. But, they are still able to offer the most lenient terms available in the recession housing market.

photo credit: TheTruthAbout…

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FHA Basics

The Calgary Herald reports:

“All borrowers will have to demonstrate that they could make the payments on a five-year, fixed-rate mortgage — even if they end up choosing a mortgage such as a variable-rate mortgage, that would result in a smaller payment.

And anyone who wants a government-insured mortgage to buy a home in which they will not live will have to come up with a minimum down payment of 20 per cent, up from five per cent.”

Wow, those are some tough new rules! The American-based FHA is expected to tighten their mortgage requirements as well. If the changes are this stringent, you can bet that a lot more borrowers will be looking for creative financing solutions. photo credit: ★Debs★

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FHA Loans

The San Francisco Chronicle reports:

“CAR’s offer is essentially like insurance for people who get laid off. It applies to first-time home buyers who open escrow starting today and close before Dec. 31. They must use a California Realtor in the transaction, not be self-employed and be younger than 70. If qualifying people are downsized, they may receive up to $1,500 a month for up to six months to help make mortgage payments.”

It’s certainly an interesting idea. However, people who worry about job security may not want to commit to a mortgage right now – even with such an incentive.

Technically, this deal should work with seller financing purchases, assuming that a Realtor is involved.

photo credit: TheTruthAbout…

See Also:

Seller Financing Guide

He explains:

“Real estate investors are using creative financing principles like never before to purchase real estate. However, those who attempt to use private or hard-money lenders are finding those avenues to be costly options in the current financial climate. “Conventional financing and private money sources are difficult for investors to access in this market,” Carleton affirms. “I encourage the government to provide incentives for investors to not only rehab foreclosed property but, more importantly, for lenders to develop financing programs tailored toward investors’ needs. Under current market conditions, creative financing is the single most effective means of funding any real estate transaction. But, the government needs to work toward giving investors a myriad of tools to use in putting together real estate deals.“

If investors like Sheets have their way, perhaps Congress will pass the current $15,000 tax credit proposed by House Republicans. Although the $7,500 credit is appealing to first-time buyers, many believe that a $15,000 housing credit for any purchaser would be an effective way to jump-start the economy.

See Also:

Revival of the $15,000 Home Buyer Tax Credit?

Bloomberg News reports:

“The Federal Reserve said March 18 it will purchase up to an additional $750 billion of mortgage-backed securities from Fannie Mae, Freddie Mac and Ginnie Mae to support home lending. The Fed is trying to lower rates by reducing the supply of outstanding mortgage bonds, boosting their price and lowering yields. That would allow banks to reduce the rates on new mortgages and still sell mortgage securities at a profit.

“The move by the Fed was especially aggressive,” said Donald Rissmiller, chief economist at New York-based Strategas Research Partners.”

Those who can qualify for the tough standards now set by banks will benefit from extremely low rates on these fixed loans. If you’re looking for creative financing ideas (other than FHA loans), your rate will probably be quite a bit higher than the 4.85%. However, you should benefit as seller financers and others try to compete in the market.

See Also:

FHA Mortgage Guide

Originally, the idea was to give anyone a $15,000 tax credit for purchasing an owner-occupied residence. However, that plan was replaced by the current law which awards a tax credit of up to $7,500 for first-time home buyers only.

The attempt to revive the $15,000 tax credit is being carried out by House Republicans.

The Washington Post reports:

“Under the proposal, borrowers refinancing their mortgage would be eligible for $5,000 to help cover closing costs or to reduce their principal balance. The plan also revives a $15,000 home buyer tax credit proposal that Republicans pushed last year. This time, the proposal would require the borrower to have at least a 5 percent down payment. Both programs would expire in July 2010.”

So, that’s 5k to help you get into a house and an extra $15,000 at tax time. Although the minority party may not have a good chance of putting this bill through, it would be a helpful boost to potential homeowners, including those looking for creative financing solutions.

Can you imagine how useful this law could be for borrowers looking to purchase one of those $30,000 condos in Vegas? What a deal!

See Also:

Creative Re-Financing: Obama’s New Foreclosure Plan

Buying a Home on a Credit Card

Here’s how it’s being done:

1. Potential buyers find a property that fits their budget and credit card limit. Believe it or not, quality one bedroom condos in gated communities around Vegas can be had for under 30k. We’re talking granite counter tops and fireplaces.

2. The buyer takes out a cash advance using a high-limit credit card. Using the above example, a buyer might want to put $10,000 and take out a $20,000 cash advance. They make sure that the cash advance has low initial fees and a low for-life interest rate (i.e. many cards are now offering cash advance interest rates at 6%).

3. The buyer makes a cash offer on the property with a low bid because desperate sellers want the financing security cash offers bring.

4. After closing on the deal, the buyer will pay back the cash advance much sooner than a 30-year mortgage. However, because the purchase price was so low to begin with, the monthly payments are similar to rent in the area.

Note that this creative financing strategy can be risky and I’m not advocating that everyone should whip out their cards on a whim. If you miss a monthly payment (even by a couple days), your credit card interest rate could skyrocket 3x or more.

However, buying low-cost homes on a credit card is a legitimate creative financing technique that a growing number of buyers are using in areas like Vegas.

See Also:

Seller Financing

FHA Loans

Mercury News reports:

“The Federal Reserve threw more than a trillion dollars at the gridlocked credit and housing markets Wednesday, sending a key interest rate down by a historic amount. Mortgage rates, already low, were expected to drop well below 5 percent in response. Mortgage brokers were elated. Economists said the move could buoy the California housing market by encouraging purchases and refinance activity, possibly hastening recovery from one of its worst slumps ever.”

While most borrowers seeking creative financing won’t get the lowest rates, there are some ways to take advantage of sub-5% rates without taking out a traditional loan.

Rates on low-downpayment FHA loans should fall along with traditional bank loans. You may also be able to convince property owners offering seller financing to lower their interest to a more competitive rate.

RTT News reports:

“Fannie Mae has halted mortgage guarantees in condo buildings where fewer than 70% of the units have been sold compared to the earlier 51% benchmark. Additionally, loans for sales in buildings where 15% of current owners are delinquent on association fees or where more than 10% of units are owned by a single-entity will be more harder to come by for developers and aspiring condo owners, WSJ said. “

What this means is that Fannie Mae won’t buy a lot of condo mortgages where developers are struggling to sell the units. Lenders can still choose to make the loan, but because the mortgage won’t be guaranteed by Fannie Mae, borrowers are likely to have a hard time finding a willing bank and getting competitive rates.

See Also:

Non-Conforming Bank Loans

FHA Mortgages