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Almost everyone I talk with these days is … as I am … backwards on their home loan-to-value ratios. Many of us bought our homes in the early 2000′s and then even refinanced them or added home equity loans somewhere in the 2005-2007 days, bringing our total home loan indebtedness to a number that is now out-of-whack with today’s home prices. These values were reasonable at the time, but, of course, with the falling real estate values, it’s become impossible to refinance the house to take advantage of today’s incredible home loan rates.

As various programs have come about that are/were designed to help struggling homeowners, most of these programs were really aimed at folks that had already fallen behind in their payments, or anticipated doing so in the near future. President Obama’s Loan Modification program has thus far fallen woefully short in performance, as had earlier programs that were to allow struggling homeowners the ability to refinance their home if their loan:value ratio was as high as 125%. Very few lenders chose to participate in that program; and likewise few are dropping payments or writing off loan amounts to bring payments down to the 38% of gross income goal.

According to HUD, starting on September 7th, this newest program is aimed at homeowners that currently do not have FHA home loans. The new FHA Short Refinance option will provide FHA loans for folks that are current on their existing mortgage and whose lenders agree to write off at least 10% of their existing unpaid balance.

According to the recent HUD press release:

“The FHA Short Refinance option is targeted to help people who owe more on their mortgage than their home is worth – or ‘underwater’ – because their local markets saw large declines in home values.”

I’m excited to see this program — hey, it may work for me! However, I also know that, in my case Bank of America would have to agree to write off a significant part of my mortgage to bring the value of the loan down to today’s market value. That’s going to be a challenge. My lender-advisor chimed it to say:

“While FHA announced this a few days ago, it will take a couple of weeks for the lenders to decide if they are going to do these loans or not. My guess is that when these loans come available the borrower will have to go through their current lender to get the refinance done.  This is because……  Even if FHA is willing to do the loans no lenders are willing to go to that high of a loan to value ratio.  We will have to watch and see where this loan program goes.  I will let you know when I hear more.”

She’s usually right on the money …..

Click here to read the full HUD press release yourself.

Matt Person of The Legacy Group in Puyallup stepped up this morning with a compelling reason for Buyers to get off the fence and submit any FHA applications before the end of March. Since the business of selling houses is dependent on the ability of our clients to obtain financing — whether a Buyer or a Seller — Matt’s information is helpful.

Thanks, Matt! This is useful and I can understand this one!

4 Reasons Why Those Who Wait to Buy a Home Will Pay Thousands More This Spring!

Waiting a few extra days or weeks to purchase a home this spring could cost buyers thousands of extra dollars as the office of Housing and Urban Development (HUD) implements several changes for loans guaranteed by the Federal Housing Authority (FHA).

These FHA changes make it even more important to act now to save big.

Here are a four reasons why:

1.    Coming just weeks before the April 30 deadline for the Home Buyer Tax Credit and just days after the March 31 expiration of the Federal Reserve Board’s mortgage backed securities purchase program (which has kept home loan rates artificially low for over a year)

2.    On April 5th, the cost of required up-front mortgage insurance for loans guaranteed by the FHA will increase from 1.75% to 2.25%.

3.    For a borrower purchasing a $200,000 home with a $7,000 down payment, the up-front mortgage insurance will increase by $965. Up-front mortgage insurance is typically financed in the final loan amount so the impact to a monthly payment will be minimal but overall, the increase is still borne by the borrower both upfront and monthly.

4.    Later this spring, the amount of money that a seller can return to the buyer from their sale proceeds will be reduced from 6% to 3%. The reduction in these “seller concessions” can increase the amount of cash a buyer will be required to pay at closing by $6,000 for a home purchase of $200,000.

There is only one way to avoid being affected by all of these costly changes that lie ahead – submit all FHA mortgage applications by the last week of March.

I know Matt would be delighted to be of assistance to you in your home financing needs. And, it goes almost without saying (gotta say it though) … I’d also be delighted to be your advocate in your home purchase and/or sale. Or … if you just have a question, well, give me a call and we’ll figure it out!