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The Federal Housing Administration (FHA) is allowing homeowners and buyers until October 4 to lock in a low monthly insurance premiums. After October 4, the monthly insurance premiums on FHA loans will increase by over 63%.

What is the point?

You are purchasing a $150,000 home using a $145,500 FHA mortgage before October 4 you would pay an insurance premium of $66.69 per month. If you wait until after October 4, the insurance premium would jump to $111.58. Using this example your monthly payment after October 4 will be $44.89 higher. This will affect your housing and debt ratios.

Good News?

After October 4th the upfront premium will drop from 2.25% to 1% which is typically paid by the seller or rolled into the mortgage. This will benefit those that are looking to refinance their mortgage or those that are only forecasting a three year horizon in their home.

Conclusion

In the short term the increase in monthly premiums will have little impact on the your ability to obtain a new mortgage unless you are extremely tight on your ratios today. I see a greater benefit to those that are reviewing their refinance options.

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The federal tax credit for first-time homebuyers is set to expire November 30, 2009. According to the National Association of Realtors, since its inception earlier this year, the tax credit has brought 1.2 million new buyers into the market nationwide. In Indiana, nearly 60 percent of first-time homebuyers reported they would not have purchased a home without the tax credit.

At this time it seems likely that the U.S. Senate will approve a deal to extend the First-Time Homebuyer Tax Credit, but early optimism the program might be extended for all home buyers is not going to happen. The proposal in the Senate that appears to have the most likelihood of passage would extend the $8,000 credit through March 31. Then its value would drop by $2,000 for each of the subsequent three quarters of 2010. This plan was offered by Senate Majority Leader Harry Reid of Nevada and Senate Finance Committee Chairman Max Baucus, a Montana Democrat

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Copied from the Thomas Register – Bill H.R. 3842

To amend the Internal Revenue Code of 1986 to extend the first-time homebuyer tax credit.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. EXTENSION OF FIRST-TIME HOMEBUYER TAX CREDIT.
(a) In General- Subsection (h) of section 36 of the Internal Revenue Code of 1986 is amended by striking `December 1, 2009′ and inserting `October 1, 2010′.
(b) Extension of Waiver of Recapture- Subparagraph (D) of section 36(f)(4) of such Code is amended–
(1) by striking `December 1, 2009′ and inserting `October 1, 2010′, and
(2) by striking `IN 2009′ in the heading and inserting `AFTER 2008′.
(c) Election To Treat Purchase in Prior Year- Subsection (g) of section 36 of such Code is amended–
(1) by striking `December 1, 2009′ and inserting `January 1, 2010′, and
(2) by adding at the end the following: `In the case of a purchase of a principal residence after December 31, 2009, and before October 1, 2010, a taxpayer may elect to treat such purchase as made on December 31, 2009, for purposes of this section (other than the preceding sentence and subsections (c) and (f)(4)(D)).’.
(d) Coordination With First-Time Homebuyer Credit for District of Columbia- Paragraph (4) of section 1400C(e) of such Code is amended by striking `December 1, 2009′ and inserting `January 1, 2010′.
(e) Effective Date- The amendments made by this section shall apply to residences purchased after November 30, 2009.

There may be hope after all.

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I was reviewing my Alerts last night and stumbled upon this gem( http://thomas.loc.gov/cgi-bin/query/z?c111:H.R.3706🙂 which is a new bill sitting in the House Financial Services Committee. This bill if it continues would require an increase in the downpayment required on FHA loans from the current 3.5% to 5%. I am sure that everyone that does not live under a rock would view this as possibly the worst thing that could be enacted in this current economic environment. A FHA loan is perhaps the only way a first time homebuyer can afford to buy a new home. Lets hope that this bill gets stuck in committee, insert the school house rock music at this point.

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It appears that the deadline for the $8,000 tax credit will be November 30,2009. You must occupy the home on or prior to that date to qualify for the credit. According to an article that ran today in the Washington Post their have been numerous bills but non have obtained any ground. The Obama Administration is mum on their position. The question is what value has it brought to the table and is the price tag to high and results to low to continue with the credit, time will tell. For now if you are on the fence you need to act now. Turn times on lenders are improving but we are only 60 days away and if you are looking at a home that is in a short sale situation that doesnt allow much wiggle room.

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Many people are unaware of a program that is still available to provide 100% financing. The program is commonly known as a rural development program and provides two types of financing. The first is a guarantee program offered to lenders similar to a FHA loan. The second is a direct loan from the USDA. Both programs have income maximums and also have geographic limitations. The website is user freindly and in about 15 minutes you can determine if you will qualify based upon your income and you can also confirm whether or not a property you are looking at will fall within the geographic boundaries. Most local lenders are familar with the program.

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