FHA Loan Limits for 2009

These are FHA's new loan limits for 2009. Click on the grid directly above for the new limits in the state of RI.

Here is the link https://entp.hud.gov/idapp/html/hicostlook.cfm to HUD'S site to check the limits of the other 49 states and counties.

FHA loan limits have changed as a result of the American Recovery and Reinvestment Act
(ARRA) signed into law February 17, 2009. These limits are effective for those loans for
which credit is approved in calendar year 2009 and will remain in effect until December 31,
2009.
Under ARRA, the revised FHA loan limits for 2009 will be set at the higher of the loan limits
established for 2008 under the Economic Stimulus Act of 2008 (ESA) or those established for
2009 under the Housing and Economic Recovery Act of 2008 (HERA)

THIS IS FROM HUD'S WEBSITE

HUD will increase FHA loan limits up to $729,750 in high-cost metropolitan areas such as New York, Los Angeles, San Francisco and Washington, D.C. There are 73 counties in the U.S. that will now be eligible for the highest loan limit of $729,750. Previously, FHA's loan limits in these high-cost areas were capped at $625,500. The change in loan limits is applicable to all FHA-insured mortgage loans originated until December 31, 2009.
Increasing loan limits will help FHA continue to provide needed stability to housing markets across the country. As conventional sources of mortgage credit have contracted, FHA has been filling the void. From September to December 2008, FHA facilitated $97 billion of much-needed mortgage activity in the housing market, $35 billion of which was through FHA's refinancing products. By focusing on 30-year fixed rate mortgages, FHA helps homeowners avoid and escape the risks associated exotic subprime mortgage products, which have resulted in rising default and foreclosure rates.

Homeowner Affordability and Stability Plan

Part of the Stimulus Plan has been designed to help homeowners who are current on their mortgage and those in default. Today I will address those whom have not fallen behind and would like to refinance to a lower rate (if available) but are unable to do so primarily due to lower home values. This applies to homes securitized by Fannie Mae and Freddie Mac .

In a typical refinance of a single family home, owner occupied, where the borrower is just looking to lower their rate and monthly payment and there is no cash paid to the borrower at the closing. This is referred to as "rate and term. Limited cash out (under $1,000) is also allowable. You must still have sufficient equity in the property for either loan. The Fannie Mae guidelines state that you can borrow up to 95% of the value of the home. Maximum cash-out exceeding $1,000 is 85%. However, if the property is located in an area determined to have declining values, the maximum LTV is lowered by 5%, to 90% and 80% respectively. Most areas of the country are experiencing declining values and many borrower's who purchased in the last 4-5 years do not have enough equity in their property to meet the minimum 90% LTV threshold.

The new plan states eligible loans (including any refinancing costs) can be as high as 105% of the current appraised value of the home. Lets say your home is worth $200,000 but you owe $210,000 or less, you may be able to qualify to borrow up to the $210,000. While this may help some homeowners, many will still be left out as homes in many areas have declined 20-30% in value. This will primarily help those who purchased the home in the last year or so and those who have adjustable rate mortgages which are set to adjust higher.

Send me an email and I will provide you with a question and answer form which details the plan further by addressing first and second mortgages, eligibility, multi-family homes and more.

$8,000 Tax Credit for First time Homebuyers

The new stimulus package recently passed includes an tax credit for first time home buyers. The credit is 10% of the purchase price but is capped at $8,000. The great thing about this bill is the fact you will not have to pay back the $8,000!
To be considered a first time buyer, you must be someone who hasn't owned a principal residence (meaning you lived in the home full time) for at least 3 years. So if you have only owned a second/vacation home or investment property for the last 3 years you would still qualify.
However, should you purchase a principle residence in 2009 you will have to keep the home for at least 3 years or you will be required to return the tax credit.

The previous plan included homes purchased in 2008 and 2009. This bill eliminates homes purchased in 2008 and now only applies to homes purchased between December 31, 2008 and December 1, 2009. If you purchased a home in 2009 and have already filed a 2008 return for the previous tax credit of $7500, you should file an amendment for the balance of $500.

There are also income limits or restrictions. Single persons need a modified adjusted gross income of no more than $75,000 and married couples no more than $150,000. If you look at line 37 at the bottom of the first page of your 1040 tax return you will see a line that states adjusted gross income. This is the figure that will be utilized.

Finally, even if you do not have a lot of taxable income you are not omitted from the tax credit and may still be eligible.

There is also a section in the Stimulus Plan addressing homeowners who are currently in trouble making their mortgage payment AND, it also addresses homeowners who may feel they will have trouble in the future do to loss of income and thus have high debt to income ratios. I will address this in my next post.

Stop Listening to Suze Ormon

This post does not specifically deal with the mortgage industry but I think can be applied to mortgage advice. It deals with investment advice and since a home is probably the largest investment most of us will ever make I decided to write about something I saw on the MSN homepage.

About a year or so ago I was telling my wife about Suze Ormon who I had seen on TV claiming to be a financial expert. She had appeared on a number of TV shows, including her own.
I personally found her advice to be seriously lacking any substantive information. It was along the lines of "Buy Low and Sell High". In my opinion her advice was extremely rudimentary and was filled with a lot of psycho-babble. In other words, "where's the beef"?" I was surprised to see her gain more and more notoriety over the next year. If there is one thing I can give Suze Ormon credit for, it's her ability to self promote.

Evidently someone else agrees with my wife and I as they have taken the time to address her on MSN's home page. Here's the link to the article.
http://articles.moneycentral.msn.com/RetirementandWills/CreateaPlan/CreateaPlanDyn.aspx?cp-documentid=17714458&GT1=33013

Sometimes when we see some personality on a popular show, such as Oprah or Larry King, we might tend to assume that somehow that personality has attained some degree of hard earned credibility. However, even the producers of Oprah and Oprah herself make faulty judgements. As an example, author James Frey, who appeared on Oprah and who she touted in her book club, appeared again later and had to admit he made up material in his book of memoirs.

We all need to be careful from whom we obtain our advice and be of mindful of media hype.
Click on the link above and decide for yourself whether or not Suze Ormon is someone to whom you should entrust your financial well being.

In August of 2008, after my meager IRA portfolio lost 20% and declined to an even more meager amount, I called my advisor at Bank of America and told him I wanted to move the money currently in Mutual Funds into cash, like bonds or T-bills. The Dow had dropped from about 13,000 and was trading near 10,500. The advisor tried to convince me that this was the wrong move, that the market would rebound. I stuck to my guns and he did as I requested. Today as I write this, the DOW is at about 7400. I would have lost another 20-30% had I listened to him. After the change my balance has actually gone up a little. At least I did not lose anymore.
Just because someone claims to be knowledgeable and/or an expert does not make it so.
Bernard Madoff's victims can vouch for that fact.
No one cares or will care about your money as much as you do. Do some research on your own before you make any decision that could affect your savings or investments.

Ok, so how does this apply to buying a home or getting a mortgage. Well, we've all seen the TV ads offering some ridiculously low rate, followed by the inevitable fine print so small it's not even readable. Or there is a voice over at end where the guy is talking so fast you thought you were at an auction. Naturally once you actually look into it you find out it's the old bait and switch. Or perhaps you've read an ad in the local paper that states "bad credit is no problem!". If you've called around and someone is quoting a ridiculously low rate, you should at least be suspicious.
Before you take any action I recommend the first step should be to talk to friends and family members who have owned a home and ask them about their experiences.
When speaking to a loan officer ask for references from past customers and ascertain if they were satisfied with his services.
Also, if you are utilizing a Realtor (and you should be if buying a home) ask for a recommendation or referral. They will have worked with many loan officers and are not going to suggest someone that they do not trust or think highly of as it directly affects their livelihood and their reputation.

A little due diligence will go a long way. Don't blindly accept or believe everything you see or read in the media.

Removing Bad Credit From Your Credit Report

One question that pops up every once in a while is " How long does it take to have bad credit removed from my credit report?"

Just because there is an adverse account still showing up on your credit history does not necessarily mean it affects your credit scores. Even after your have resolved these bad accounts they may still be showing up on your credit history for a period of time.

I am not professing to be a credit repair specialist. I am merely relating my experience as a loan officer in dealing with underwriters and credit issues with homeowners trying to be approved for a mortgage.

First you must understand that, other than bankruptcy's or foreclsoures, FIRST you have to pay off or resolve the issue before it will ever be removed.
Most consumer debts such as credit cards, auto repo's, and phone bills (which is one we see a lot) take 7 years to be removed. Over time most of these will appear as "chargeoff's" on your credit report.
I hate it when I see several small accounts like phone bills or small balances on credit cards in default because it can seriously affect credit scores. These debts will eventually be placed with collection agencies.

Bankruptcy's and foreclosures typically take 10 years. Depending on the type of bankruptcy it may or may not have to be paid before it will be removed. When dealing with bankruptcys it's best to consult an attorney who specializes in that field.

It's possible that judgements and tax liens can stay forever. If you have one of these you will have to have it resolved which usually means paying it.
Make you sure it is recorded at your local court house once you do resolve it so that it will show up as "satisfied" on your credit report.

If you find there are items on your credit report that are incorrect you will need to dispute these items.
Here are links to the three credit reporting agencies:

Transunion: www.annualcreditreport.transunion.com/tu/dispute/order.jsp?package=DisputeDisclosure

Experian: https://www.experian.com/consumer/cac/InvalidateSession.do?code=CDI

Equifax: http://www.equifax.com/online-credit-dispute/

In another post I will address how to improve your credit scores.