ILLINOIS HOME LOANS

FHA: $8,000 Homebuyer Tax Credit

$8,000 Tax Credit

The first time homebuyers tax credit of $8,000 is now approved by HUD for FHA loans. Please read the mortgagee letter, ML 2009-15 as it states that you can't use this tax credit for the required down payment of 3.5%. After the original announcement, the new version of the $8,000 protocal was announced yesterday. Buyers can receive the first time homebuyers tax credit upfront, but not through the IRS as this would be fully illegal.  Too many people are saying that you can get the money directly from the IRS prior to closing. The IRS & HUD both says no way.

The $8,000 can be given to you as a second or a silent second from any Federal, State, or local agencies, and any FHA lender or FHA approved non profit organization. 

The short version of this is that you can use some of the money from the $8,000 Tax Credit as your down payment, but only after the buyer puts down the first 3.5% of that down payment.BUyers still have to come up with 3.5%. With FHA loans a downpayment can still be a gift from a relative, close relation or family member.  It also can come from a nonprofit or government agencies as for the initial downpayment.

Think about using the $8,000 for a 2-1 buydown, asking the seller for the remainder of the closing costs and letting the buyer be responsible for the downpayment. A 2-1 can bring a buyers interest rate into the 3's for a fixed mortgage. Call for details. Gil Mcneil Financial Group 847-829-4249

FHA: $8,000 for Downpayment. When will they or won't they?

HUD Guidance Coming on Tax Credit 'Bridge Loans'

May 27, 2009

The Department of Housing and Urban Development soon will issue guidance enabling FHA-approved lenders to provide short-term "bridge loans" to borrowers who are eligible for a one-time $8,000 first-time homebuyer tax credit. HUD issued a mortgagee letter on May 12 outlining a program that enabled borrowers to use tax credit funds toward downpayment and closing costs. But HUD took the letter off its website a few hours later — after the Office of Management and Budget objected.

Apparently HUD had not consulted with OMB officials on the issue. Meanwhile, HUD has drafted new guidance that is expected to be posted any day now, according to sources. HUD secretary Shaun Donovan told the National Association of Realtors on May 12 that FHA approved-lenders, nonprofit housing groups, as well as state and local government entities would be permitted to "monetize the tax credit through short-term bridge loans."

HUD expects these bridge loans will help more borrowers to become homeowners. The department also wants to prevent lenders from abusing the program by charging FHA first-time homebuyers excessive fees and rates.

FHA : Cash deposits and transfers are a royal PAIN

Avoid large or undocumented deposits into your bank account before or during a loan transaction. Deposit verifications may be obtained all the way through to day of close. 

During the underwriting of mortgages, underwriters look for unusual and/or inconsistently large deposits into bank accounts. This has been a problem of late with first time buyers and those looking to acquire their downpayment from undocumented sources.

Why is this such a menace? FHA requires borrowers to have a statutory investment/ committment into their transaction. This means that the borrower (or close relation) must make a worthwhile investment into the property so as to show a dedicated level of committment. The more we personally invest in something the more we stick it out when things get tough. Much of the default activity we're now experiencing across the county is due to 'easy-in or low-down' loan programs. Those that never had a personal stake are simply walking away when their property value declines.

If a borrower is borrowing their downpayment or obtaining it through another undocumented source, per FHA guidelines the deposit must be fully be investigated.

This process usually results in loan declines and high anxiety for the parties involved. Do the right thing but if there is any question, talk to your loan officer.

Mortgage Rate Observer ( While Mike is out )

10 year bond is increasing in yield which is influencing other long term investments such as 30 fixed mortgage back securities. There is some sell off at this time requiring yields to increase.

We're hovering around 5.25% on 30 year conventional fixed mortgages- fico's above 740. 

Survey: Homeowners Optimistic About Future

Nearly 6 in 10 American homeowners believe their primary residence lost value during the past 12 months per the Zillow First Quarter Homeowner Confidence report.

Zillow states 80% of homes across the country lost value during the past 12 months. Also 18% of homeowners believe their home gained value during that time frame and 22% believe their homes value remained the same.

Those numbers resulted in a Zillow Home Value Misperception Index of 5 - the lowest it has been since Zillow introduced the index in 2008. This is down from 10 in the fourth quarter of 2008. A Misperception Index of zero would mean homeowners' perceptions' were in line with actual values.

About 3/4's of the people surveyed thought their home would not decline in value in the next six months and 27% think their home's value will increase. Nearly half (47% percent) believe their home's value will remain the same.

Per Zillow: "While homeowners are now more realistic when looking backward, they are still pretty starry-eyed when looking forward with three out of four homeowners believing that their own homes' prices will increase or be flat over the next six months.

FHA: $8,000 tax credit may be able to be used for downpayment soon

Home buyers may be able to use the Federal $8,000 first time home buyer tax credit for down payments on FHA loans. This was announced by the U.S. Housing and Urban Development Secretary Shaun Donovan yesterday/Tuesday.

FHA will allow approved lenders and nonprofits, and state and local government agencies to issue short-term bridge loans buyers can use for down payments, per HUD/secretary Donovan. Buyers would repay the loans after getting their tax refunds.

Donovan said FHA would soon release details on the new program.

Last month, the Legislature approved a program to provide the credit as a temporary loan, although that has since run up against an IRS rule barring taxpayers from designating someone else to get their refunds.

May 11, 2009

MORTGAGEE LETTER 2009-15

TO:                 ALL APPROVED MORTGAGEES

SUBJECT:     Using First-Time Homebuyer Tax Credits for the Downpayment  

The American Recovery and Reinvestment Act of 2009 (Recovery Act) provides for as much as an $8000 tax credit to qualified first-time homebuyers.  FHA supports this important Administration initiative to promote homeownership.  This mortgagee letter provides:

·       Basic information on the first-time homebuyer credit obtained from the Internal Revenue Service (IRS) website.  Complete information on how the first time homebuyer tax credit works, including the eligibility requirements for the tax credit, the amount of the tax credit that a first-time homebuyer may be eligible to receive, and how a homebuyer may claim the tax credit is available on the IRS website at http://www.irs.gov/newsroom/article/0,,id=204671,00.html?portlet7. 

·       Guidance on how Federal, state, and local government agencies, nonprofits instrumentalities of government and FHA-approved nonprofits may assist homebuyers that are eligible for the tax credit.

I.  About the First-Time Homebuyer Tax Credit (from the IRS website)

(Please check the IRS website to ensure you have up-to-date information)

Amount of the tax credit:

·       Generally, the credit is the smaller of:

§       $8000 or

§       10% of the purchase price of the home

·       A phase-out of the credit begins when the taxpayer’s modified adjusted income exceeds $75,000 or $150,000 if married filing jointly, and is eliminated completely at $95,000 or $170,000 if married filing jointly.

·       As a “refundable” tax credit, taxes owed by or refunds due to the taxpayer are factored into the calculation.

Claiming the tax credit:

·       Filing form IRS 5405 [available at http://www.irs.gov/pub/irs-pdf/f5405.pdf ], “First-Time Homebuyer Credit” along with filing:

§       The 2008 tax return (if not yet filed)

§       An amended 2008 tax return (if already filed)

§       The 2009 tax return

Eligibility for the tax credit

·       First-time homebuyers, defined by IRS as those not having had any ownership, including that with a spouse if married, during the three-year period ending on the date of purchase.

·       Owner-occupants who purchase a principal residence and close on the mortgage before December 1, 2009.

·       First-time homebuyers must purchase the property from a source unrelated to them, i.e., they cannot purchase the house from a spouse, parent, grandparent, child, or acquire the property by gift or inheritance and obtain the tax credit.

II. FHA Guidance

The Tax Credit:  Secondary Financing:  

Entities that can offer tax credit advances with second liens.

·       Federal, state, and local governmental agencies and nonprofit instrumentalities of government.

·       FHA-approved nonprofits.

Additional information about these entities:

·       Government agencies and instrumentalities of government are described in handbook HUD-4155.1 REV-5, paragraphs 1-13 A and B.

·        FHA-approved nonprofits can be found, per each Homeownership Center jurisdiction, at: http://www.hud.gov/offices/hsg/sfh/np/np_hoc.cfm

How the secondary financing works:

·       The tax credit advance, when combined with the FHA-insured first mortgage may not result in cash back to the borrower.  The second lien may not exceed the total needed for the downpayment, closing costs and prepaid expenses.

·       The tax credit advance must provide that if the borrower does not repay the amount borrowed by the designated deadline, that principal and interest payments begin automatically.

·       If payments on the tax credit advance are required, they must be included in qualifying the borrower and, when combined with the first mortgage, cannot exceed the borrower’s reasonable ability to pay.

·       If payments on the tax credit are deferred, the deferment must be for a minimum of 36 months in order for the payment to not be included in the qualifying ratios.

·       The tax credit advance second mortgage must not provide for a balloon payment before ten years.

The Tax Credit: Short-Term Loan: 

Entities that can offer the tax credit advance with short-term loans:

·       Federal, state, and local governmental agencies and nonprofit instrumentalities of government, FHA-approved nonprofits, and FHA-approved mortgagees may provide short-term or “bridge loans” secured only by the anticipated tax credit due the homebuyer as collateral.

How the short-term tax credit advance loan works:

·       The amount that may be borrowed in this manner may not exceed the anticipated tax credit due the homebuyer based on the computations of form IRS 5405.

·       Fees and charges for the tax credit advance loan are not to exceed a nominal amount necessary for preparing and administering the loan.  

If you have any questions regarding this mortgagee letter, please call FHA’s Resource Center at

1-800-CALL-FHA (1-800-225-5342). Persons with hearing or speech impairments may access this number via TDD/TTY by calling 1-877-TDD-2HUD (1-877-833-2483).

Sincerely,

                                                                        Brian D. Montgomery

Assistant Secretary for Housing-

    Federal Housing Commissioner

I need to make a home loan application - help!

** IMPORTANT **

Please print this article and use it as a checklist, note pad and also to have my contact information always at hand. Write your service provider information below:

Your Realtors Phone:________________________________________

Your Attorney's Phone:______________________________________

Gils Phone:_______(847) 873-7295____Fax: (847) 770-4850_______

In the next few days or weeks you'll be looking at a handful of homes, one will catch your eye and you'll want to be completely prepared to make a strong offer. Most sellers give the highest priority to buyers that have secured a full home loan preapproval certificate versus those that have been "prequalified" over the phone. A full preapproval certificate with asset and income verification is the highest level or preparedness. The application process below is oriented toward a successful full preapproval certification.

Regarding the home loan process: How much of a committment would you ask of someone you were lending $100,000, $200,000, $300,000 or $500,000 to? Most people would not lend that much money to anyone unless the borrower signed over Fort Knox as collateral. Why would anyone expect that a lender to handover that much money with minimul effort and documentation on the part of a borrower? The lending climate has gotten much more serious and anyone telling you different is not being honest. Yes, it's a serious and very detailed process but it doesn't have to be a difficult one. As long as we work together and commit to doing things correctly all the way through to the day of transaction closing!

Commit yourself for the next 30-60 days to being very detail oriented and supplying all the needed paperwork when requested. There is no standard loan package, different underwriters require or want different items. Some underwriters require more paperwork than others, that's the underwriters perogative and they do so to protect their license to underwrite loans. We'll work closely together to make sure your file is correctly submitted for approval.

At the bottom of this letter you'll find an internet link to a basic home loan application for you to complete. Please click on it after you read this letter. Always call if you have any questions. I enjoy helping my customers and look forward to helping you, your friends, co-workers and family. Referrals are always appreciated.

1. PLEASE DO NOT MOVE ANY MONEY AROUND UNTIL YOUR LOAN CLOSES.  If a bank verification shows a recent increase in your accounts an explanation of the increase will be required and may cause delays. No "cash or non-applicant money" should be introduced into any part of the transaction.
2. Postpone ANY LARGE PURCHASES until after your loan closes.  If a re-verification of credit shows you have recently bought a car, or your charge account balances have increased, it could jeopardize your loan approval.
3. Do not quit your job. Notify me immediately in the event there is a job change.
4. Don't take any Cash Advances on your credit card(s) or personal loans.
5. Don't allow any additional inquiries (credit checks) on your credit.
6. Do not open or close any credit or bank accounts.
7. Continue to make ALL of your payments as agreed.
8. Quickly return all documents from the lender or settlement company. Send them to me also for review immediately.
9. Your loan will be underwritten to nationally accepted investor guidelines. The investor is lending a great deal of money, please don't "self-underwrite" your loan. Be prepared to offer all paperwork that is asked of you all the way to the day of close. A lot of money and trust is being conveyed to you- don't take the loan or process for granted. Gathering paperwork is a cheap trade for all this money.
10. Once a contract has been accepted your mortgage rate and terms need to be locked. You must email or call me directly after the accepted contract to discuss where rates have settled on this day. If you don't call, I may lock your terms the day I receive the fully executed contract at then market rates.

For most borrowers the following items are redundant, but I have to mention them because occasionally people neglect the obvious and sabotage themselves: please pay all monthly bills on-time, avoid opening up new charge accounts or increasing debt (NO credit inquiries) until after close of loan, continue building savings and keep income stable. If anything changes with your personal profile or the aforementioned items, please let me know immediately.

Your rate can be locked or it can float, this is your choice. My recommendation will be to lock unless you think rates will be going down. Either way you should let me know as soon as you have an accepted purchase contract. Rates change daily and sometimes twice a day depending on the financial markets.

Be mindful that all mortgage underwriters can choose to conduct quality control measures. This could mean calling to verify your employment or savings. Please note: ALL funds to close must come from verifiable sources- always avoid cash deposits or unexplainable deposits. Due to new fraud avoidance measures industry wide, underwriters are now required to question ANYTHING that seems "out of place". ASSUME THAT EVERYTHING WILL BE CAREFULLY REVIEWED.

Closing funds required over and above any seller credits will need to be paid with a bank cashiers check drawn on a bank account listed on your loan application. Funds from outside sources MUST be reviewed and documented early on by an underwriter***.

Closing cashiers check: You'll want to obtain a cashiers check one business day prior to closing made out to yourself to be endorsed over at closing. Please bring your drivers license(s), checkbook and a second form of ID to closing.

***Are you receiving down payment assistance from an outside source? Please be prepared to document all non-payroll deposits. If the source is a gift from a close relation, you'll need: Gift letter, donors bank statement, copy of the original gift check made out to you, copy of deposit slip going into your account, bank statement to show the deposit was captured to your account and copy of the gift check post deposit front and back from donor showing it went through the bank processing center. Each underwriting entity may differ in their requests, please be prepared to fully document deposits, gifts and downpayments funds. NO cash or loans for closing funds.

Two weeks prior to closing you will want to call your insurance agent if any insurance coverage is needed and pay for a full policy and have them fax the policy to me. You will also want to call the utility, telephone and cable companies, banks, credit card companies, family, friends and postal service (usps.com) to inform them of your new address. Stay flexible in your closing timeline in case something gets delayed. Have a plan B for movers and such.

If you see any issues arising that may hinder the transaction in anyway; property difficiencies or questions, job, savings, vacations, etc.. you must call me immediately to discuss. Help me help you!
 
Once the purchase contract is accepted by the seller we will need to order a property appraisal. Appraisals require payment directly to the appraisal company in advance. The cost of the appraisal will be credited to you at closing. As soon as you put a deposit on the home as part of the offer, you'll need to call the bank and request a copy of the canceled purchase contract deposit check -front and back- as quickly as possible. Most, if not all lenders will want to verify that the deposit funds actually cleared the bank.

Shortly after we start processing your loan, the package will be placed with a designated mortgage underwriter matching your credit requirements. This underwriter may or may not send out their own "paper wasting" compliance disclosure package. This package is standard procedure and is usually generic in nature, which means that the information in it probably won't reflect your terms ( typically a generic loan model and numbers ). Disregard this package as it has no bearing on your loan and is only used to stay regulatory compliant.

After all that nuts and bolts boring stuff what really matters is... The season to enjoy your own home is coming and what a wonderful time to make the transition!!! Please call if you have any questions.

Your referrals are valuable, please keep me in mind to help friends, family and coworkers.

Thank you.

Cordially Yours, Gil Kerbashian
Cellular: (847) 873-7295
Fax: (847) 770-4850

Dr. Rick Thomas:
Gil was thorough and knowledgeable. He was their to answer questions whenever I needed and he never detached from the process. I was very happy with the support and service.

The loan application has a very important list of items at the bottom that I will need to gather in order to issue strong pre-approval. Again, please call if you have any questions. Once you print the application, you can complete it, fax it or we can meet quickly to go over it together and make sure you feel comfortable with the process.

Loan application: www.realestateloans.com/gilsapp.pdf

Closing cost basics: www.realestateloans.com/gfe.pdf 

If you are applying for a purchase and rehab loan (203ks) to obtain money to purchase and fix up the property please click on this link also.

Please feel free to comment below about the service you've received from me. Thank you. Referrals are always appreciated!

FHA : 5 Year Fixed

Currently, some lenders are offering an exceptional value with the FHA 5 year fixed loan program: 4.0% with zero points, 3.625% with one point cost.

Though most borrowers like the perceived security of a 30 year fixed, many don't need that long of a term. Who might this program fit best? First time buyers are the best example. 

Over the years I've seen a pattern of first time buyers only holding on to their mortgage for approximately 5-7 years. This category of buyer has a high probability of becoming a move up buyer within this time frame as their family grows and needs change.

The FHA 5 year fixed is loaded with safety features prescribed by HUD but we're only going to talk about the worst case scenario for the first five to seven years.

Lets say a borrower bought the rate to 3.625% using seller assistance. This buyer would have a payment of 3.625% for 5 years. In the 6th year the rate might go up to a max of 4.625. In the 7th year the rate might go up again to 5.625- thats seven years of fantastic rates. 

But what if the buyer never sold and stayed in the home forever? The maximum the rate could adjust to after the first five years is 1% per month up or down to a total of 5% above the start rate which would equal 8.625%. Still a fabulous rate in the worst case scenario.

Enjoy.

Tardy German, Also Known as a Prompt Mexican Shot or On The Rocks

Tardy German or Prompt Mexican drinks are 1 oz Tequila and 1 oz Jagermeister served in a shot glass or over the rock. Its an afrodisiac.