A zero down payment mortgage plan is being developed by the Federal Housing Administration (FHA). Its objective is to allow more families to achieve their goal of home ownership.
The proposal is part of the Housing and Urban Development’s (HUD’s) Fiscal Year 2005 budget request. It would eliminate the statutory requirement of a minimum three percent down payment for FHA-insured single-family home mortgages for first-time homebuyers.
Offering FHA mortgages with no down payment will unlock the door to homeownership for hundreds of thousands of families, particularly minorities, said HUD’s Acting Secretary Alphonso Jackson. The president has pledged to create 5.5 million new minority homeowners this decade, and this historic initiative will help meet this goal.
The new mortgage product, that will probably be available this coming fall, will generate about 150,000 new homebuyers in the first year alone, it was estimated by FHA. This initiative would not only address a major hurdle to homeownership and allow many renters to afford a home of their own, it would also help families build wealth and become true stakeholders in their communities, said John Weicher, Federal Housing Commissioner. Also, it would help spur the production of new housing in throughout the country.
It should be noted that there will be a modest surcharge on the FHA insurance premiums for the zero down payment mortgages, but they would be phased down over several years. Some of the closing costs can be incorporated into the loan. The maximum loan size, with some closing costs, will be 103 percent of the selling price, as now proposed. Also, participating families would be required to take pre-purchase housing counseling before being granted a loan.
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Cash-out refi loan have been beneficial
Homeowners who obtained a cash-out mortgage loan over the past three years have generally benefited from that action, according to a new national economic study conducted by economists at the Federal Reserve Bank of New York.
The study concluded that homeowners who extracted cash from their homes by obtaining a refinance loan since 2001 generally were not only smart in doing so, but also made prudent use of the funds they obtained. The many cash-out refi loans produced lower, not higher, household debt, as well as higher personal savings rates and higher family net worths.
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Financing help for low-income home buyers
Fannie Mae, the nation’s largest buyer of existing home mortgage loans, is planning a new program designed to help about 6 million low-income families purchase a home of their own over the next decade. It plans to open a new automated underwriting system for low-income borrowers and those who lack established credit histories. The program will slash mortgage costs and paperwork, it was reported.
Also, the government-sponsored Fannie Mae believes its efforts will boost the minority homeownership rate from 49 percent to 55 percent. The overall national homeownership rate currently is 68 percent.
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A bullish view of future market
The Mortgage Bankers Association is surprisingly bullish in their predictions related to the real estate market over the next couple of years.
This year looks to be an exceptionally strong year, building on gains of the last part of 2003, said Doug Duncan MBA chief economist. This results from continued strength in employment and the housing market. We see the job market getting even stronger. There will be record gains in productivity, resulting in a positive impact on home purchases and mortgage originations.
Despite this level of economic growth, we see interest rates increasing only moderately due to continued expectations of low inflation. Long-term rates should increase by about a half percentage point by the end of this year, and a bit more during year 2005. Coming off our recent lows, these are very modest interest rate increases for the level of economic growth we are expecting.
MBA recently revised it mortgage origination forecast for this year. They now predict that lenders will fund nearly $2 trillion in mortgage loans this year up from $1.6 trillion they previously projected for 2004. That number is still significantly lower than last year’s volume ($3.8 trillion), and does not reflect an improved outlook for the year. The prediction change is the result of fine-tuning of the MBA model, reflecting such factors as the refi market’s sensitivity to rate volatility and industry-wide loan-to-value ratios, Duncan said.
MBA also predicts production will drop to $1.7 trillion in year 2005 and 2006. Purchase loans are expected to remain flat at $1.3 trillion this year and next, but then climb to $1.42 trillion in 2006.
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`Window of Opportunity for mortgage applicants
We have entered another window of opportunity for homeowners who want to refinance their mortgage and prospective home buyers who have been waiting for low mortgage rates before purchasing and financing a home.
At this writing, mortgage interest rates have dipped to the lowest level in the past six months lower than they were a year ago and almost reaching all-time record lows. People are taking advantage of this low-rate period to apply for a mortgage that will financially benefit them for many years to come. Those low rates are stimulating home sales. Walt McDonald, president of the National Association of Realtors commented, Mortgage interest rates have eased even further in recent weeks and will continue to keep home sales at record high levels.
Many people who obtained a new mortgage within the past few years are now considering current loan offerings in a new light. Their situations may have changed. It might now be to their advantage to save significant money each month by switching from a fixed-rate to a variable-rate mortgage. Or they might prefer a fixed-period ARM — a mortgage with a fixed-rate for a specified number of years, then reverting to a variable-rate loan for the remainder of a 30-year term.
Other people want to tap the growing equity in their home, boosted by recent value increases, by refinancing to a larger low-rate mortgage that would generate a lump sum of cash for them. In many cases that cash is used to pay off accumulated bills, including credit card balances that took a big hit during the Christmas season. Still others want to refinance to rid themselves of the monthly charges for mortgage insurance. With rising values, the new mortgage can often be less than 80 percent of the home current market value, thus eliminating the need for insurance.
In other cases, homeowners who didn’t get around to refinancing last year when rates were at their lowest are now taking action. They are not about to miss another opportunity to refinance at an almost record-low interest rate.
A great variety of mortgage plans are now available to borrowers, whether they want to refinance an existing loan or finance the purchase of a home, said Michael Levy, president and CEO of Home Savings Mortgage, a mortgage banking firm based in Oxnard, Calif. A mortgage can be structured to meet almost any personal need. And now, with interest rates so low, it’s an ideal time to apply for a mortgage and lock-in a rate.
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Input re credit scores
Here’s a bit of advice from Strategy Credit Group LLC
It’s risky for a consumer to close their credit card account. Contrary to popular belief, closing an account can actually lower the person’s credit score. Regardless of derogatory mortgage payment history, utilization of revolving debt is still 30 percent of a person’s determined credit score. Adjusting this can sometimes change scores by more than 100 points. Incorrect dates in a credit account can dramatically alter credit scores. Check your personal credit account regularly and insist that errors be corrected. This information was submitted by Strategy Credit Group.
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Luxury home sales climbing
The market for luxury homes is improving, according to a report from Coldwell Banker Real Estate. At this point, analysts are unsure whether low interest rates or an improved stock market and other economic conditions boosted the high-end home sales in recent months.
Even though buyers of these homes often pay cash for their purchases, interest rates may still affect their businesses and prevent them from spending a large sum of money on real estate. Also, it’s difficult to trade up if buyers for those luxury homes are hit hard by high financing costs.
Most experts seem to think rising interest rates will have little effect on the luxury home market. And those wealthy baby boomers are expected to be an increasingly strong buyer segment in coming months.
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Digital cameras for real estate pros
A couple of decades ago, computers became an essential tool for all serious real estate brokers, mortgage lenders-brokers and appraisers. A couple of years ago, digital cameras became the new essential tool.
Real estate professionals use these high-tech cameras to take interior and exterior views of homes they’re marketing, appraising or financing. The photos are used in printing promotional flyers, brochures, inclusion on Website or for appraiser-lender documentation.
I’ve been asked on several occasions by readers of my syndicated real estate column for a recommended digital camera that would be particularly useful by real estate professionals. I am definitely not an expert on these cameras, but I did purchase one for my own use recently. As I used it in different situations, I realized it had features that would be ideal for real estate folk. So I’ll pass along a suggestion.
This camera, a FujiFilm FinePix S5000, has an exceptionally wide ranging optical zoom function (10X), especially useful in taking those wide-angle home interior and exteriors views. It can deliver a high resolution up to six megapixels making it capable of producing high quality photos in property brochures. With this camera, a real estate practitioner can make audio notes to accompany each view taken of a property, making written notes unnecessary. It even takes movies, with sound.
Personally I like this camera because it offers state-of-the-art features, yet is simple to operate — making it practical for non-professional picture-takers, like me.
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Jim Woodard writes a nationally syndicated newspaper column on real estate news and trends, carried in about 230 U.S. newspapers along with freelance features. Reproduction of this report, in part or entirety, is prohibited without the express permission of the author. E-mail: storyjim@aol.com. Web site: www.jimwoodard.net/.