FHA Home Loan Program Poised to Take Off

FHA-insured home mortgages — marginalized or squeezed out of the market during the subprime loan boom years — are poised to roar back. And if Congress passes a compromise version of FHA reform legislation, maximum loan limits for FHA could rise immediately to $417,000 — or even a lot higher. Last month the House overwhelmingly approved a reform bill that would cut minimum downpayments to zero, and increase loan limits in high cost areas of California well beyond $500,000. Under the House-passed bill, FHA could insure mortgages as high as 125 percent of the median home price in a market area, or 175 percent of the conforming loan limit for Fannie Mae and Freddie Mac — currently $417,000. In addition, the HUD Secretary could raise limits by another $100,000 if local conditions required such a move.

In effect, southern California, where FHA loan applications have been almost nonexistent in recent years, could conceivably see a new wave of jumbo FHA mortgages in the $700,000 range and beyond.

Meanwhile, the Senate Banking committee last Wednesday reported out its version of an FHA reform bill, but with much tighter loan limits - $417,000 maximum - and a 1.5 percent minimum cash downpayment, down from the current 3 percent minimum. The full Senate is expected to approve the Banking committee’s bill soon, sending the FHA issue to a House-Senate conference committee to work out the differences.

What’s likely to emerge in the final bill sent to the president in the coming weeks? At the very minimum, Congress is now almost certain to make FHA competitive again in high-cost markets. A $417,000 limit for California would still be well below the state’s median home price in the mid-$500,000s. But it would provide potentially tens of thousands of home buyers an attractive, consumer-friendly alternative to what they’ve got now.

The huge gap between the House and Senate loan ceilings will need to be bridged in the upcoming conference. There may also be pressure to raise Fannie’s and Freddie’s limits during Senate floor debate or through a separate bill — opening the door to at least a temporary “jumbo” program for FHA, Fannie and Freddie.

There are some potential minefields facing conferees however: The House version of the bill contains a proposal from Financial Services committee chairman Barney Frank (D-Mass.) to tap into FHA premium revenues to help finance a new National Housing Trust Fund for affordable housing activities. Separate legislation from chairman Frank would also tap into revenues of Fannie and Freddie. The Bush administration opposes siphoning off FHA resources for the Fund, and the Senate did not include the concept in its bill.

Another sticky issue: The Senate bill prohibits “downpayment assistance” for FHA loans involving “anyone party to the transaction.” That would presumably cut off dozens of nonprofit groups around the country that now provide such assistance. The House bill imposes some restrictions on downpayment assistance providers, but does not ban them.

The House bill authorizes FHA loan terms up to 40 years, but the Senate bill is silent on that issue. The Senate bill allows FHA to use “risk based pricing” on all loans where borrowers make less than a 3 percent downpayment — a provision favored by the Bush Administration. The Senate bill has no language on the subject, but some Republicans are strongly opposed to allowing FHA to directly compete with private mortgage insurance firms for borrowers who present varying levels of default risk.

Written by Kenneth R. Harney

Homeownership Is Good For You

Buying a home has gotten tougher in recent years, and finding affordable housing is an even greater endeavor, but the struggle is worth the effort. The National Housing Conference’s Center For Housing Policy and Enterprise Community Partners, two housing advocacy groups, say more than just a roof over your head, homeownership with solid neighborhoods in the mix can enhance the lives of families and their children and improve their futures.

A group of reports, “Vital Links: Housing’s Contributions to the Nation’s Health and Education Objectives,” makes the case for affordable housing by revealing its benefits.

In short, the reports say, homeownership is good for you in a number of ways, including:

Affordable housing is good for your health because it frees up family resources for nutritious food and health care expenditures. Families paying a large share of their income for housing are left with insufficient funds to meet other essential needs, including nutritious food and health care.

Residential stability provided by affordable housing reduces stress and related adverse health conditions. Homeless children are more vulnerable to mental health problems, developmental delays and depression than children who are housed. Frequent moves, living in doubled-up housing, eviction and foreclosure are also related to elevated stress levels, depression and hopelessness.

Homeownership also contributes to health improvements by fostering self-esteem, better physical and mental health, lower blood pressure and lower levels of depression and alcohol abuse.

Green building and transit-oriented development strategies can lower exposure to pollutants by improving the energy efficiency of homes and reducing reliance on personal vehicles. Forty percent of the nation’s energy use is consumed in households and private transportation.

Some affordable housing strategies help families move to communities with stronger school systems and more education-supported environments. While frequent moves appear to have a negative impact on educational achievement, moves to better school systems (or to communities that offer stronger support for education) may have an independent positive impact on educational achievement.

Children who experience homelessness face numerous educational barriers, including difficulties accessing preschool and Head Start programs, as well as after school care and obtaining personal records necessary for enrollment. Homeless children are more likely than their low-income peers to drop out of school, repeat a grade, perform poorly on tests and in the classroom and suffer from learning disabilities and behavior problems.

Children of homeowners do better in school, up to 9 percent better in math scores, 7 percent better in reading achievement and 1 to 3 percent lower in behavioral problems, than those who live in rented homes. Children of homeowners also stay in school longer and have higher high school graduation rates than similarly aged children living in rented homes, the studies reveal.

Written by Broderick Perkins

Questions You Should Ask About Property Taxes

Property taxes are a major expense, one which often totals thousands of dollars per year. But property taxes are not the same for like properties or for every owner. Property taxes provide much of the revenue used to fund local and state governments. As property values go up, property tax collections also rise which means additional dollars are available for more public services — and perhaps even for tax refunds. Alternatively, if property values decline, then government programs tend to be squeezed or there is pressure to raise income and sales taxes to make up for short-falls.

How much you pay for property taxes depends on the value of your home and also local tax policies. In the usual case, a property value is established by government assessors. Once a value is set the tax rate is then applied. For instance, if the rate is $1.50 for each $100 in value, then a home worth $100,000 would have an annual tax bill of $1,500 or $125 per month.

The road from the tax assessment to a bill for property taxes is rarely straight, however. There are often complications, so it pays to ask questions:

What value is used to assess taxes? You might think that a home’s current market worth would be used to establish a value for tax purposes, but that’s not always the case. In many areas under circuit breaker programs annual tax increases are limited so the tax can be less than current market values might allow. Another approach is to apply the tax rate to a portion of the assessed value and not the full worth of the property.
What are the current owners paying? Is their tax bill consistent with neighboring homes of equal size and condition? If different, why?
How will property taxes impact your ability to borrow? Lenders use a number of measures to qualify borrowers and one of the most important is the percent of gross monthly income spent for mortgage principal, interest, property taxes, and insurance — what loan officers call PITI. Low property tax bills can make it easier to qualify for a loan.
Has the tax bill been appealed or is it being appealed? Values by tax assessors can be contested if owners think estimates are too high — perhaps because the valuation did not consider certain factors, the math was wrong, or an incorrect schedule was applied. Local assessment offices can tell you how to appeal and in many areas there are services which will do the fighting for you.
Are you or the current owners entitled to an exemption? Local rules vary extensively, but those over 65, veterans, individuals with limited incomes, and others may be entitled to a full or partial exemption. If, for example, the current owner has an exemption which will not apply to you, then current tax costs may be effectively understated.
Can property taxes be deferred? To ease cashflow burdens for retirees, it may be possible to have property taxes accrue as a lien against a home. Owners in such situations need not pay some or all of their property taxes: instead, when the home is sold, taxes are taken from the sale proceeds. One jurisdiction, Montgomery County, MD, actually allows qualified owners of all ages to defer property tax payments under this system.
What are the income tax benefits of property tax payments? In the usual case, property taxes are deductible from federal and state income taxes. For details, speak with a tax professional.
Will the sale of a property trigger a different tax bill? A sale may suggest a new and higher value to assessors, past exemptions may not apply, and circuit breakers may be re-started or even turned off.
How often are assessments made? In some areas physical assessments are only made every two or three years. This means that property taxes may be based on values which are out of date, something that can be important in communities where property values are rapidly changing, either up or down.If all of this seems fairly complex, it is. The local tax assessment office can tell you how the system works while real estate brokers can provide general information. In the end, of course, there are always taxes to pay, the only question is how much.
Written by Realty Times Staff

Resources for First Time Home Buyers

If you are considering entering the market to [tag]purchase a home[/tag] for the first time, you need to understand that there are some very helpful resources available to [tag]first time home buyers today[/tag]. Through this article, you will be provided with an overview of the resources that are available to first time home buyers.

As with so many things in this day and age, the Internet and World Wide Web is a tremendous resource for first time home buyers. There are a number of different specific resources that you can take advantage of on the Net today if you are part of the group of first time home buyers looking for assistance in the task of finding that perfect residence.

First of all, on the Net there are some wonderful directory services that provide you with detailed information about homes that are for sale in a particular market. An ever growing number of first time home buyers are relying on these types of directory services to help them in identifying properties that might suit their needs and meet their goals. These directories can help a person screen out those properties that really do not meet their needs.

The Net can also be a great tool for first time home buyers who are looking for brokers or agents to aid and assist them. In this day and age, most [tag]real estate brokers[/tag] and agents maintain websites that can provide you with helpful and vital information about the services that one or another of these professionals can provide.

There are also solid resources available to first time home buyers in the brick and mortar world as well. Of course, agents and brokers are time tested and reliable resources for first time home buyers — as well as people who’ve more experience in shopping for the perfect home.

In addition, local chambers of commerce in many communities now provide useful and valuable resources to first time home buyers. These organizations can be particularly helpful to first time home buyers who are looking for properties in communities in which they have not lived previously, in cities or towns that are new to them.

By using these various resources, first time home buyers can be better assured of being able to successful find the residences that they are looking for at this time. By utilizing these resources, first time home buyers are better able to find reliable and reputable assistance in finding the perfect home.

Written By Richard Landuyt