VA Appraisal Rule Change
The VA rules changed last year. The appraisal assignment is not considered received until the ratified contract is received by the appraiser. The processing time also changed and that is now fourteen days from the date of receipt for delivery. Please plan accordingly.
Sweeping Changes in Mortgage Financing for 2010
You probably already know that eligibility for the first-time home buyer tax credit expires soon. (Buyers should be under contract by the end of April and close by the end of June to potentially qualify.) But you may not know about these other changes that have already happened or that are coming down the pike this year, all of which could seriously affect the financing for your clients' sales and purchases:
Conventional Financing
Freddie Mac has announced that it will cease accepting interest-only mortgages in September 2010. The market for interest-only loans had mostly dried up in recent years, but options for those products will become even scarcer as the year progresses.
FHA Financing
FHA loans are now subject to the same HVCC regulations on appraisals as conventional loans; agents are advised to provide adequate appraisal contingencies to allow for potential HVCC-related appraisal delays.
All condo developments must now be reapproved for FHA financing every two years. Existing condo developments must be re-approved this year even if previously approved by FHA, and fast "spot approvals" for individual condo units no longer exist; the entire development must be approved at once, and the condo association must provide complete budget and other required information. This will introduce significant delays with FHA financing on for many condos; agents are advised to work with their buyers' lenders to check on the FHA approval status of a particular condo building before submitting an offer so that realistic timeframes can be negotiated.
The Up-Front Mortgage Insurance Premium (UFMIP) on FHA loans will be increasing from 1.75 percent to 2.25 percent starting April 5th, 2010; this change will increase a typical borrower's monthly payment by approximately $3 per $100,000 of the loan. FHA has indicated that it hopes to eventually lower the UFMIP back down to 2 percent and also to increase the FHA monthly MI premium slightly, but cannot move forward with those changes without Congressional approval.
The minimum down payment for FHA loans to borrowers with low (<580) FICO scores is increasing from 3.5 percent of sales price to 10 percent of sales price; FHA has not announced a specific timetable for this change other than that it will occur "in the summer" of 2010.
The maximum interested party contribution (including seller and/or agent concessions) for FHA loans will be decreased from 6 percent of sales price to 3 percent of sales price. This change (also not scheduled for a specific time other than "in the summer" of 2010) will have particular impact on new home sales, where builders often provide considerable closing cost assistance to buyers.
USDA Financing
USDA expects to run out of funds for its Guaranteed Rural Housing (GRH) program in late April 2010. Most lenders have stopped accepting applications for USDA GRH loans (one of the few options left that allows 100 percent financing) until such time as USDA announces new funding.
VHDA Financing
VHDA loans in northern Virginia are now available on properties up to $450,000 in sales price, for families with incomes as high as $112,950.
Want more details? These topics plus other aspects of transactions including settlement, appraisal, and insurance issues are discussed at the monthly meetings of the NVAR Real Estate Finance & Settlement Forum, and overviews of recent and upcoming changes are given at our Quarterly Update meetings (the next one is June 9).
NAR Creates Flyer Using the First-Time Home Buyer Tax Credit with FHA Loans
NAR has received many inquiries from our members regarding how first-time homebuyers can use the tax credit with Federal Housing Administration (FHA) loans. NAR created a flyer to help members understand how the tax credit can be used in their respective state. The flyer identifies how to use the tax credit in one of the 11 states where housing finance agencies offer a product that monetizes the tax credit for FHA loans. It also provides some guidance for all other states where such programs do not currently exist.
NAR's FHA and the First Time Homebuyer Tax Credit Flyer
In Depth: 2009 First-Time Home Buyer Tax Credit
VHDA Launches Homebuyer Tax Credit Plus Loan Program
The Virginia Housing Development Authority has designed a new loan program - Homebuyer Tax Credit plus, to help prospective homebuyers meet the challenge of down payment assistance.
"In addition to providing a first mortgage with an affordable 30-year fixed rate, our Homebuyer Tax Credit plus loan program offers a built-in second mortgage that allows borrowers to receive up to five percent of the home's sales price, which can help cover down payment and closing costs", said VHDA Executive Director Susan F. Dewey.
The second mortgage offers no payments and 0% interest during the first year. This feature gives borrowers the flexibility to choose from three payment plans for the second mortgage.
Homebuyer Tax Credit plus Program Details
Time Limit: Loan must close no later than November 30, 2009.
Minimum Credit Score: Minimum of 620
Required Borrowers Funds: Borrowers must have a minimum of 1% of the sales price verified as their own funds to be contributed toward the transaction or have available as reserves.
In order to qualify for any VHDA loan product, including Homebuyer Tax Credit plus, individuals must take a free VHDA homeownership education class. For more information about VHDA's Tax Credit Plus loan program please visit www.vhda.com.