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Seattle 1st Time Home Buyers Given $8,000 For A Down Payment?

TheMortgageReel Team — Sun, 03 May 2009 20:31:25 +0000

Putting instant value into an $8,000 tax credit

By Kenneth R. Harney

Syndicated Columnist

WASHINGTON – For the housing market, it’s the equivalent of financial alchemy, and it’s hot: Turning the $8,000 federal home-purchase tax credit, which normally isn’t spendable until after you’ve gotten your refund, into immediate, hard cash today, available for your down payment and closing costs.

Congress’ stimulus-bill tax credit for 2009 is generating efforts nationwide, including in Washington state, to find ways to “monetize” it – providing money upfront to buyers who need dollars for down payments right now, not next year after they file their federal returns and get refunds.

The credit is only available to qualified taxpayers who have not owned a house during the previous three years, and who close by Nov. 30, among other requirements. Buyers can amend their 2008 returns to claim the credit or claim it on returns for 2009.

In recent weeks, at least 10 states, including Washington, say they’ve come up with ways to work this monetary magic. They have created innovative bridge-loan programs that advance credit-eligible purchasers the cash they need for their closings.

Generally the advances take the form of second mortgages – with or without interest charges – that become due and payable whenever purchasers receive their credits in the form of refunds from the IRS.

In Missouri, which was the first state to create such a program, buyers can get a no-cost “tax-credit advance” of up to 6 percent of the home price. The advance is actually an interest-free second lien that is repayable no later than June 2010, once the buyers have received their $8,000 tax credit.

If buyers can’t meet that repayment deadline, the advance morphs into a traditional second mortgage with a 10-year payback term and a fixed interest rate one-half a percentage point higher than their first mortgage rate.

The underlying first loans are all fixed-rate 30-year mortgages issued by private lenders participating with the tax-exempt bond programs of the Missouri Housing Development Commission.

Colorado kicked off a similar program, known as “JumpStart,” April 14. The other states – Washington, Delaware, New Jersey, Tennessee, Idaho, Ohio, Pennsylvania and New Mexico – have come out with their own versions, some with modest interest charges on the second mortgage from the beginning.

In Washington, where the state Housing Finance Commission already runs a tax credit bridge-loan program for buyers using its mortgages, state Treasurer James McIntire wants to make it much bigger.

He has been pushing for creation of a “public-private” down-payment program that could reach far larger numbers of consumers than is possible under the housing commission’s current funding constraints.

McIntire has proposed depositing $25 million of state funds into interest-earning accounts at an FDIC-insured bank. The bank would then provide revolving lines of credit to the state housing commission to greatly expand its down payment bridge-loan efforts.

In a novel arrangement, the Washington Association of Realtors has pledged $400,000 as a backstop for McIntire’s plan to cover any unexpected losses on the credit monetization transactions. The Legislature has authorized the program in its new budget.

Bill Riley, the incoming president of the association, says research by his group has shown that fully half of all would-be first-time buyers in the state “cannot save enough money for the down payment and closing costs” – effectively locking them out of both the $8,000 credit and current low mortgage rates and house prices even when their monthly incomes qualify them to purchase a home.

McIntire is also trying to convince the Obama administration to allow the state to tap into bridge-loan-assisted homebuyers’ amended 2008 tax returns and be directly assigned all or a portion of the tax credit refunds.

Under current IRS rules, according to McIntire, tax-refund checks are sent only to the taxpayer’s address.

To ensure prompt repayment of bridge loans, the state would like to have refunds mailed to the housing finance commission in cases where repayment of a bridge loan is due.

In letters to Treasury Secretary Timothy Geithner and IRS Commissioner Douglas Shulman, McIntire argued that credit-monetization programs run by states are crucial to the success of the federal effort to stimulate first-time home purchases in 2009.

But the states need quick, direct access to federal tax-credit dollars to pay back down payment bridge loans, thereby allowing them to loan out more money before the Nov. 30 expiration of the federal credit.

Charles McMillan, president of the National Association of Realtors, sent a similar request to Shulman. An IRS spokesman said officials “are reviewing” the issue.

Bottom line: Keep your eye on what’s happening in your area. A no-cost advance tied to the $8,000 credit just might get you the down payment and closing cash you need.

Kenneth R. Harney: kenharney@earthlink.net

Copyright © 2009 The Seattle Times Company

Post from: The Mortgage Reel - Seattle Real Estate Preferred Correspondent Lender

Seattle 1st Time Home Buyers Given $8,000 For A Down Payment?

Reverse Mortgage Information

TheMortgageReel Team — Fri, 20 Mar 2009 22:58:04 +0000

Features of a Reverse Mortgage

You must be at least 62 years old and own a home.

You must still pay property taxes and insurance, and keep the home well maintained. If you are unable to pay your property taxes and insurance, then a special set-aside from your reverse mortgage can be created.

The amount of funds you are eligible to receive depends on your age (or age of the youngest borrower in the case of couples), the value of the home, the interest rate and the upfront costs. With the HECM product, the county lending limit is a factor. With all products, the older you are, the more proceeds you are eligible to receive.

Repayment of the loan is not required until you (or the last surviving spouse) permanently leave the home as a primary residence. For the HECM program, you can live up to 12 consecutive months outside the home, but this may vary for other products.

All reverse mortgages have a “non-recourse” feature, which means that the total amount owed can never exceed the appraised value of the home. If the amount owed exceeds the home’s appraised value, then the lender or the federal government (in the case of the HECM product) will absorb that loss.

Repayment of the loan occurs when you (or last surviving spouse) permanently vacate the home. You or your heirs (estate) then must facilitate the pay back of the loan using either private funds or selling the home. After the loan is repaid, all leftover proceeds from the sale of the home go to you or the estate.

You ALWAYS retain title (ownership) to the home. The lender never, at any point, owns the home, even after you (or last surviving spouse) permanently vacate the property.

Loan fees can be financed, or paid out of the available loan proceeds. This means you incur very little out-of-pocket expense to get a reverse mortgage. In most cases, you only have to pay for the appraisal, which costs roughly $350 depending on your market.

The loan balance (amount owed) grows each time you access funds from your line of credit or receive a monthly payment. In addition, the lender is charging you interest on the outstanding loan balance as well as a monthly servicing fee.

Steps to apply for a Revere Mortgage

Awareness

Homeowner learns about reverse mortgages from a news article, advertisement, word-of mouth, etc.

Upfront Education

Homeowner contacts a reverse mortgage lender or the National Reverse Mortgage Lenders Association to learn more about reverse mortgages.

Counseling

Homeowner seeks counseling from a local HUD-approved counseling agency, or a national counseling agency, such as AARP (800-209-8085), National Foundation for Credit Counseling (866-698-6322), or Money Management International (877-908-2227). Counseling is required for all reverse mortgages and may be conducted face-to-face or by telephone.

By law, a counselor must review (i) options, other than a reverse mortgage, that are available to the prospective borrower, including housing, social services, health and financial alternatives; (ii) other home equity conversion options that are or may become available to the prospective borrower, such as property tax deferral programs; (iii) the financial implications of entering into a reverse mortgage; and, (iv) the tax consequences affecting the prospective borrower’s eligibility under state or federal programs and the impact on the estate or his or her heirs.

Application/Disclosure

Homeowner fills out a loan application and selects a payment plan, whether fixed monthly payments, lump sum payment, line of credit, or a combination of these. Lender discloses to homeowner the estimated total cost of the loan, as required by the federal Truth in Lending Act. Homeowner provides lender with required information, including verification of Social Security number, copy of deed to home, information on any existing mortgage(s), and counseling certificate.

Underwriting

After receiving all pertinent information and data, lender finalizes loan parameters with homeowner (i.e., determining payment option, frequency of loan interest rate adjustments) and submits loan package for final approval. It can take anywhere from 4-8 weeks (sometimes sooner, sometimes longer) to underwrite a loan package.

Closing

If the loan package is approved, closing (signing) of loan is scheduled. Interest rates are calculated. Closing papers and final figures are prepared. Closing costs are normally financed as part of the loan. Lender or title company has homeowner sign loan papers.

Disbursement

Homeowner has three business days after signing papers in which to cancel the loan. Upon expiration of this period, the loan funds are disbursed. Homeowner accesses the funds in the form of the payment option selected. Any existing debt on the home is paid off. A new lien is placed on the home. The homeowner may use the loan proceeds for any purpose. The loan “servicer” manages the account and is responsible for disbursing monthly payments to the homeowner (if this option is chosen), advancing line of credit funds upon request, collecting any repayments on the line of credit, and sending periodic statements.

Repayment

Homeowner doesn’t make any monthly mortgage payments during the life of the loan. The loan is repaid when the homeowner ceases to occupy the home as a principal residence. The loan may be repaid by the homeowner or the heirs/estate, with or without a sale of the home. The repayment obligation can’t exceed the home’s value or sales price.

About Reverse Mortgages

A reverse mortgage enables older homeowners (62+) to convert part of the equity in their homes into tax-free income without having to sell the home, give up title, or take on a new monthly mortgage payment. The reverse mortgage is aptly named because the payment stream is “reversed.” Instead of making monthly payments to a lender, as with a regular mortgage, a lender makes payments to you. Below are some common questions asked by consumers about reverse mortgages. How Much Money Can I Get?

The amount of funds you are eligible to receive depends on your age (or the age of the youngest spouse in the case of couples), the appraised home value, interest rates, and in the case of the government program, the lending limit in your area. In general, the older you are and the more valuable your home (and the less you owe on your home), the more money you can get.

Does My Home Qualify?

Eligible property types include single-family homes, 2-4 unit properties, manufactured homes (built after June 1976), condominiums, and townhouses. In general, cooperative housing is ineligible. However, some lenders have developed private programs that lend on co-ops in New York.

What are My Payment Plan Options?
You can choose to receive the money from a reverse mortgage all at once as a lump sum, fixed monthly payments either for a set term or for as long as you live in the home, as a line of credit, or a combination of these. The most popular option – chosen by more than 60 percent of borrowers – is the line of credit, which allows you to draw on the loan proceeds at any time.

My Understanding is that the Unused Balance in the Line of Credit Option Has a Growth Feature. Does that Mean I’m Earning Interest?

No, you’re not earning interest like you do with a savings account. The growth factor, which is equal to roughly the interest that you’re being charged, takes into consideration that your home has appreciated in value over the past 12 months and that you are one year older.

How Can I Use the Proceeds from a Reverse Mortgage?

The proceeds from a reverse mortgage can be used for anything, whether its to supplement retirement income to cover daily living expenses, repair or modify your home (i.e., widening halls or installing a ramp), pay for health care, pay off existing debts, buy a new car or take a “dream” vacation, cover property taxes, and prevent foreclosure.

How Does the Interest Work on a Reverse Mortgage?

With a reverse mortgage, you are charged interest only on the proceeds that you receive. Most reverse mortgages charge a variable interest rate (although fixed rate products are entering the marketplace) that is tied to an index, such as the 1-Yr. Treasury Bill or the London Interbank Offered Rate (LIBOR), plus a margin that typically adds an additional one to three percentage points onto the rate you’re charged. Interest is not paid out of your available loan proceeds, but instead compounds over the life of the loan until repayment occurs.

Are There Any Special Requirements to Get a Reverse Mortgage?

As long as you own a home, are at least 62, and have enough equity in your home, you can get a reverse mortgage. There are no special income or medical requirements.

What If I Have An Existing Mortgage?

You may qualify for a reverse mortgage even if you still owe money on an existing mortgage. However, the reverse mortgage must be in a first lien position, so any existing indebtedness must be paid off. You can pay off the existing mortgage with a reverse mortgage, money from your savings, or assistance from a family member or friend.

For example, let’s say you owe $100,000 on an existing mortgage. Based on your age, home value, and interest rates, you qualify for $125,000 under the reverse mortgage program. Under this scenario, you will be able to pay off ALL the existing mortgage and still have $25,000 left over to use as you wish.

If, however, you only qualify for $85,000, then you would need to come up with $15,000 from your own savings to get the reverse mortgage. Even then, all the money from the reverse mortgage will have been used to pay off the existing mortgage. On the other hand, you won’t have a monthly mortgage payment anymore.

If you find yourself in a deficit situation where you don’t have enough money to pay off the existing mortgage, you may use funds from a grant or gift from a family member or friend to cover the gap, but you cannot incur a new debt obligation (i.e., loan).

What Is the Service Fee Set-Aside?

Under the FHA HECM program, you are charged a monthly servicing fee that ranges from $30-$35 to manage your account once the loan closes. The SFSA is an estimate of what the total servicing fees will be over the life of the loan, by multplying your life expectancy (converted from years into months) multiplied by either $30 or $35.

Although it’s not considered a closing cost, the SFSA can equal several thousand dollars, which is deducted from your available loan proceeds. You do not have access to that money, nor do you earn interest.

Will I Lose My Government Assistance If I Get a Reverse Mortgage?

A reverse mortgage does not affect regular Social Security or Medicare benefits. However, if you are on Medicaid, any reverse mortgage proceeds that you receive must be used immediately. Funds that you retain would count as an asset and could impact Medicaid eligibility. For example, if you receive $4,000 in a lump sum for home repairs and spend it all the same calendar month, everything is fine. Any residual funds remaining in your bank account the following month would count as an asset. If the total liquid resources (including other bank funds and savings bonds) exceed $2,000 for an individual or $3,000 for a couple, you would be ineligible for Medicaid.

Why Do I Need to Get Counseling?

Counseling is one of the most important consumer protections built into the program. It requires an independent third-party to make sure you understand the program, and review alternative options, before you apply for a reverse mortgage.

You can seek counseling from a local HUD-approved counseling agency, or a national counseling agency, such as AARP (800-209-8085), National Foundation for Credit Counseling (866-698-6322), and Money Management International (877-908-2227). Counseling is required for all reverse mortgages and may be conducted face-to-face or by telephone.

When Do I Pay Back My Loan?

No monthly payments are due on a reverse mortgage while it is outstanding. The loan is repaid when you cease to occupy your home as a principal residence, whether you (the last remaining spouse, in cases of couples) pass away, sell the home, or permanently move out. The amount owed can never exceed the value of your home. Furthermore, if the home is sold and the sales proceeds exceed the amount owed on the reverse mortgage, the excess money goes to you or your estate.

Under What Circumstances Should I Not Consider a Reverse Mortgage?

Because of the upfront costs associated with a reverse mortgage, if you intend to leave your home within 2-3 years, there may be other less expensive options to consider, such as home equity loans, no-interest loans or grants that may be offered by your county government or a local non-profit to repair your home, or a tax deferral program, if you’re having problems paying your property taxes. Also, if you want to leave your home to your children, then you should consider other options, because in many cases, the home is sold to pay back a reverse mortgage.

information from National Reverse Mortgage Lenders Association (nrmla)

Post from: The Mortgage Reel - Seattle Real Estate Preferred Correspondent Lender

Reverse Mortgage Information

Private Mortgage Insurance Facts For Seattle Buyers & Owners

TheMortgageReel Team — Wed, 25 Feb 2009 21:05:59 +0000

The home buying process may seem complicated, but if you take
things step-by-step and use private mortgage insurance (PrivateMI),
you will soon be holding the keys to your own home.

PrivateMI helps you buy a home sooner and with less money toward
the down payment. For many qualified borrowers, as little as 3
percent or less of the home’s value is all that is needed to
secure a loan, compared to the traditional 20 percent usually
required.

With the high price of homes in many markets across the country,
that 20 percent down payment is nearly impossible for most
first-time home buyers. Making homeownership a reality sooner—as
much as ten years sooner for most borrowers—is one reason why
PrivateMI is today’s smart choice.

Affordable

In many cases, PrivateMI is more affordable than other mortgage
finance options. With PrivateMI, the home buyer can put down
less than 20% to purchase a home, saving money that can be used
for other purposes such as
furniture, home improvements or a child’s college tuition.

Predictable

With some 80–10–10 financing, the homeowner’s monthly costs go
up when interest rates rise — but PrivateMI premiums are fixed
and predictable, regardless of rising interest rates. And a loan
with PrivateMI doesn’t saddle a
borrower with a large balloon payment.

Cancellation

PrivateMI is there only as long as it’s needed. A loan with
PrivateMI has a host of advantages over other financing options,
but that doesn’t mean you’ll always need it — and it can usually
be canceled when the homeowner acquires 20% equity in the home.
In fact, 90 percent of borrowers cancel their PrivateMI within
60 months.

Tax Deductible

PrivateMI premiums are now tax deductible for many borrowers who
purchase or refinance a home. Many families can enjoy the
stability of PrivateMI’s predictable monthly premium and deduct
those premiums when they file their
taxes. Families with a household income of $100,000 or less
will be able to deduct the full premium cost of PrivateMI, while
families earning up to $109,000 can qualify for a reduced
deduction.

For more information click

here.

Post from: The Mortgage Reel - Seattle Real Estate Preferred Correspondent Lender

Private Mortgage Insurance Facts For Seattle Buyers & Owners

Seattle Real Estate Mortgage Rates Today February 6, 2009

TheMortgageReel Team — Sat, 07 Feb 2009 01:25:47 +0000

Post from: The Mortgage Reel - Seattle Real Estate Preferred Correspondent Lender

Seattle Real Estate Mortgage Rates Today February 6, 2009

Seattle Real Estate Mortgage Rates Today, January 30, 2009

TheMortgageReel Team — Fri, 30 Jan 2009 21:11:49 +0000

Post from: The Mortgage Reel - Seattle Real Estate Preferred Correspondent Lender

Seattle Real Estate Mortgage Rates Today, January 30, 2009

Seattle Home Show February 14 – 22, 2009

TheMortgageReel Team — Tue, 27 Jan 2009 22:35:53 +0000

Seattle Mortgage Reel wants to help spread the word for the Seattle Home Show taking place on February 14-22. As the nation’s longest running and largest consumer home show, the Seattle Home Show offers Northwest residents a “one stop shopping” experience in home products and services. Show attendees are looking for a wide range of home improvements from the smallest kitchen gadget to a complete home package to build on their lot. Attracted by our informative and wide reaching marketing campaign, visitors come from the Puget Sound area, across Washington State and as far away as Alaska, Oregon, Idaho and Montana.

Taking advantage of the huge, 300,000-square-foot show space in the Qwest Field Event Center, the Seattle Home Show offers “Idea Street™,” a community of furnished and landscaped model homes. These homes are toured by thousands of show visitors each day who see the latest in home appliances, building and design techniques and the most current trends in decorating.

www.seattlehomeshow.com

Seattle Home Show Hours:

Saturdays: 10:00 am to 8:30 pm
Sundays: 10:00 am to 6:00 pm
Monday-Thursday: 10:00 am to 7:30 pm
Friday: 10:00 am to 8:30 pm