Stimulus Plans Unlocked Housing, Led To Gains

If you want hear about the housing recovery, talk to an active home buyer in today’s market. You’ll hear that low mortgage rates make homeownership attractive — if only there were more homes to buy. Supplies remain limited and few new homes are coming online.

However, if you want to see the data behind what buyers tell you, consider :

  • Existing home sales are up nearly 10% over one year ago.
  • Home builder report more buyer foot traffic than at any time in the past 5 years.
  • New home construction of 1-unit homes is higher in 4 straight months and higher by 25 percent since June of last year.
  • The Case-Shiller Index reports higher home sale prices in half of its 20 tracked cities as compared to last year.
  • New homes are selling at the fastest pace since April 2010, the last year of that year’s federal home buyer tax credit.

There’s no secret about why housing has recovered. A series of stimulus programs late last decade put the recovery into motion and now, today, low mortgage rates are pushing home affordability to record levels nationwide.

Homeownership is affordable to more U.S. households than at any time in history.

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What is a Point when you get a mortgage?

A point is a fee equal to 1 percent of the loan amount. A 30-year, $150,000 mortgage might have a rate of 7 percent but come with a charge of 1 point, or $1,500.

A lender can charge 1, 2 or more points. There are two kinds of points — discount points and origination points.

Discount points: These are actually prepaid interest on the mortgage loan. The more points you pay, the lower the interest rate on the loan and vice versa. Borrowers typically can pay anywhere from zero to 3 or 4 points, depending on how much they want to lower their rates. This kind of point is tax-deductible.

Origination fee: This is charged by the lender to cover the costs of making the loan. The origination fee is deductible if it was used to obtain the mortgage and not to pay other closing costs. The IRS specifically states that if the fee is for items that would normally be itemized on a settlement statement, such as notary fees, preparation costs and inspection fees, it is not deductible.

How do you decide whether to pay points, and how many? That depends on a number of factors, such as how much money you have available to put down at closing and how long you plan on staying in your house.

Points as prepaid interest reduce the interest rate, an advantage if you plan to stay in your home for a while.

But if you need the lowest possible closing costs, choose the zero-point option on your loan program.

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Is a lower rates worth more points?

According to Bankrate.

It can be tough to decide whether it’s worth it to buy more points to get a lower interest rate. Here are a few questions to make the decision easier:

  • How long do I plan to stay in the house? These days, few people stick around in the same house long enough to pay off their mortgage. If you are planning on moving in a few years or have a family that could be growing, buying points may not make sense.
  • How much will I really save? Even if you do stay in a house long enough to realize savings from paying points, you may not save as much as you think. On a $200,000 mortgage, the difference in the monthly payment between an interest rate of 6.5 percent and 6 percent is only $65.04 a month. If you pay $4,000 for those 2 points (about what a half-point rate cut costs), it will take you about five years to break even (excluding tax benefits). You may decide that money could get a better return elsewhere.
  • How much are you putting down? If the answer is less than 20 percent, you’ll most likely get socked with private mortgage insurance, or PMI, which will likely outweigh the benefit of a slightly lower interest rate.
  • What’s my tax picture? Mortgage points are tax-deductible. Depending on your tax situation, the benefits of points may outweigh the cost.

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Florida Home Values.

The median existing single-family home price in the South rose 1.2 percent to $143,600 in the first quarter of 2012 compared to the first quarter of 2011. Look down to see how your hometown fared.

Florida home values

Mortgage rates | Closing costs | State tax rates

Q1 2011
Q1 2012
Bradenton-Sarasota-Venice 147.1 163.4 11.1
Cape Coral-Fort Myers 91.8 117.6 28.1
Deltona-Daytona Beach-Ormond Beach 110.1 98.4 -10.6
Gainesville 146.3 138.3 -5.5
Jacksonville 127.4 113.8 -10.7
Melbourne-Titusville-Palm Bay 89.5 104.6 16.9
Miami-Fort Lauderdale-Miami Beach 166.0 182.0 9.6
Ocala 75.4 N/A N/A
Orlando 119.7 124.6 4.1
Pensacola-Ferry Pass-Brent 131.2 127.8 -2.6
Tallahassee 133.6 137.4 2.8
Tampa-St. Petersburg-Clearwater 113.6 131.9 16.1

Source: National Association of Realtors, Median Sales Price of Existing Single-Family Homes for Metropolitan Areas.

Home-Rehab-Try an FHA loan.

By Melissa Ezarik

Mortgage financing plans typically provide only permanent financing, with the lender not closing the loan until the condition and value of the property provide adequate loan security, according to the Federal Housing Administration, part of the Department of Housing and Urban Development. When a rehab is involved, the lender typically requires improvements to be complete before a long-term mortgage is made.

So what’s a buyer to do? Some look to the FHA’s 203(k) loan program.

The original program, or standard 203(k), starts with the homebuyer choosing a lender from an FHA list. The lender selects an FHA-approved consultant, who develops a description of needed work to the property. Then an appraiser determines the repaired property’s value.

The work should be completed within six months, and after a final inspection, all parties sign off that the program is complete. In effect since the 1970s, standard 203(k) loans have no limit on the amount of repairs, although the maximum mortgage amount must meet certain loan-to-value ratios and cannot exceed 110 percent of the final (after-improved) value of the property.

Since 2005, buyers have had another option, the streamlined 203(k), which eliminates the need for a consultant. The borrower obtains contractor bids for the repairs, which can total up to $35,000.

A few years back, the subprime lenders with products such as no-doc loans ruled, and buyers didn’t look to programs like the 203(k). Now, conventional lenders have needed to get strict, but the FHA hasn’t changed, other than raising the minimum investment from 3 percent to 3.5 percent.

This program fits a variety of property types. According to HUD, the property can be a one- to four-family dwelling that was completed at least a year earlier. It could be used to convert a one-family dwelling to a two-, three-, or four-family home or vice versa. A 203(k) mortgage may also be originated on some mixed-use residential properties. In addition, homeowners who need to refinance and rehabilitate their own dwelling can look to the 203(k).

A visit to the HUD Web site’s 203(k) page is a good starting point for more information on the program. The resources include a detailed description of eligible properties and improvements. While 203(k) loans can’t be used for luxury items and improvements that do not become a permanent part of the property, items such as painting, room additions and decks are allowed, even if the home doesn’t need any other improvements. Information on maximum mortgage amounts, fees and the application process can also be found at that site or by phone at (800) CALL-FHA.

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Rentals and homownership rates and prices.

By Holden Lewis

Landlords are asking for higher rents, and why not? Fewer rentals are vacant.

The national rental vacancy rate fell to 8.8 percent in the first three months of this year, down from 9.7 percent in the first quarter of 2011, according to the Census’ quarterly housing vacancy survey. The national median asking rent shot up over the same year to $721, compared to $683 a year earlier. That 5.5 percent annual increase in rent is much higher than the overall inflation rate.

Highest rents were in the Northeast, with a median asking rent of $932. The median means that half of the dwellings had a higher monthly rental price. The next-priciest region was the West, with a median asking rental of $855, followed by the South at $660, and the Midwest at $607.

I’ve been reading about the tight rental market in New York City, but apparently things are easing elsewhere in the Northeast. The rental vacancy rate in the northeast rose to 7.8 percent in the first quarter, from 6.8 percent in the first quarter of 2011.

The Census tracks asking prices on homes for sale, too. Prices continued to fall. Nationally, the median asking price was $133,700 in the first quarter of this year, down 7.5 percent from $143,700 a year earlier. Of the four census regions, the South fared worst: an 11.6 percent reduction in the median asking price to $126,000 from $140,600 a year earlier.

Of all the dwellings in the United States — rentals and otherwise — 86.1 percent were occupied in the first quarter of this year. The homeownership rate decreased to 65.4 percent, compared to 66.4 percent a year earlier. This is the lowest homeownership rate since the first quarter of 1997, when it was also 65.4 percent.

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2012 Conforming Mortgage Loan Limit

by Dan Green

What is “loan size limit”? It’s the maximum amount of mortgage that Fannie and Freddie will allow, per their respective home loan guidelines.

2012 conforming loan limits are the same as in from 2011, 2010, 2009, 2008, 2007 and 2006.

Home prices are lower today as compared to 6 years ago, but maximum loan sizes are not; and this makes more homes eligible for Fannie Mae/Freddie Mac financing. For home buyers, this is a good thing because Fannie Mae- and Freddie Mac-backed loans are often the “cheapest” form of financing in terms of monthly mortgage payment.

Loan limits staying steady is good for existing homeowners, too, because, should conforming loan limits ever fall, scores of households would be immediately “loan-sized out” from the refinance market.

This includes HARP mortgage applicants who, in theory, have the most to gain from elevated conforming mortgage loan limits.

The 2012 conforming loan limits vary by property-type. With more “units” per property, conforming loan limits rise. The classification “1-unit home” includes single-family residences of all types — detached homes, row homes, townhomes, condos and co-ops.

  • 1-unit properties : 2012 conforming loan limit of $417,000
  • 2-unit properties : 2012 conforming loan limit of $533,850
  • 3-unit properties : 2012 conforming loan limit of $645,300
  • 4-unit properties : 2012 conforming loan limit of $801,950

Note that these limits are for conforming mortgages only. FHA loan limits — including for the FHA Streamline Refinance — use different scale. The FHA, for example, allows up to $729,750 for a 1-unit property.

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