Mortgage rates lower today on weak growth data…
July 31, 2008
Data released today indicates that the US economy experienced negative growth in the final quarter of 2007 and underperformed last quarter relative to expectations. On this news, the Dow is down nearly 100 points and the yield on the 10 Year Treasury has dipped under 4.00%. Not surprisingly, mortgage rates have improved. “No-point” 30 year fixed rate pricing is now near 6.5%, down from just shy of 6.7% earlier in the week.
The new $7500 tax credit for first time buyers can be used to help raise down payment funds. Here’s how:
FHA financing now requires a minimum down payment of 3.5%. On a $350k purchase that is $12,250. But FHA guidelines allow a buyer to borrow money from family for down payment. This means that a first time buyer could borrow the down payment, then make a purchase, then use the tax credit to pay back all or a portion of the borrowed funds.
Anyone interested in this strategy needs to keep in mind that the tax credit is required to be paid back over the following 15 years, so it is not free money. But it is interest-free and that is not too bad.
New Housing Bill Signed into Law
July 30, 2008
Today President Bush signed the new housing bill into to law. Here are some key provisions:
The Treasury can offer Fannie Mae and Freddie Mac an unlimited line of credit or buy stock in the companies. This assistance may become necessary in light of potential future losses due to falling home values and mounting foreclosures. There is some hope however, that having this support available will encourage investment in the companies and thus help them remain adequately capitalized without government funds. (We will have to see what happens.)
$625,000 will become the new maximum loan amount for conventional and FHA financing. This is down from the temporary maximum of $729,000 which was put in place during the spring by the Federal Economic Stimulus Package and is due to expire at year’s end. Actual loan limits will vary by location, as they do now, and will be capped at 115% of median sales price. Around the lake (Placer and El Dorado Counties) the new limits will likely be in the $530k range. In Truckee, (Nevada County) they will probably be around $515k.
For some homeowners at risk of foreclosure, the FHA will insure new 30 year loans. Of course, there are a number of conditions the must be met. First and foremost, the lender must write-down the loan balance to 90% of the home’s current value. Also, the owner must pay the FHA 1.5% of the loan balance annually and will be required to give the government a portion of any appreciation earned in the future.
For first time buyers, the bill creates a tax credit equal to 10% of sales price or $7500, whichever is less. This amount is required to be paid back over the following 15 years, making it more of an interest-free loan than a normal credit. Buyers with incomes above $75k for individuals and $150k for couples will receive a smaller credit or none at all. Purchases from April 9, 2008 to July 1, 2009 are eligible for the credit.
Seller funded down payment assistance will no longer be permitted with FHA loans effective October 1st. This will shut down programs such as Nehemiah and AmeriDream.
The minimum downpayment requirement for FHA loans will change from 3% to 3.5%.
Of the articles I have read about this new bill, the most useful was this one from the Times website by Ron Lieber. Here’s the link:
Photos from the Buttes
July 29, 2008
Heading Towards Mt. Elwell
Arne Above Long Lake
Rocky, Fun Riding in the Sierra Buttes
July 29, 2008
Rocky aptly describes the current state of markets financial (mostly down), mortgage (rates mostly up) and real estate (prices down, sales up or down depending on location).
It is also a good description of mountain biking in the sierra buttes / lakes basin. This last Sunday, I went with 3 friends (Jeremy, Emily, and Arne) to ride a loop near Mt. Elwell, a prominent peak above Long Lake. None of us had experience riding in this specific area, but we figured that we could piece something together.
We did and it made for quite a day. The riding was amazingly scenic and often amazingly challenging. We made a few wrong turns, which contributed to riding that was more difficult (and sometimes worse) than necessary, but we still had a great time and will be back for more…with prior knowledge, which should be helpful.
Anyone interested in riding in this zone should check out the Sierra Buttes Trail Stewardship website and the maps to their “epics.” Here’s a link. http://www.sierratrails.org/web/pages/events.html
