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New FHA Home Mortgage Guidelines for April 2010

David Stevens who is the Assistant Secretary for Housing – Federal Housing Commissioner had the FHA issue new guidelines on January 21, 2010 to help reshape the government insured home mortgage agency and how it offers low down payment loans to home buyers. It is a little boring or even dry for Washington D.C., but important if you are planning to use this type of financing to purchase a home.

• Impacts loans assigned on April 5, 2010 and beyond
• Upfront mortgage insurance premium of 2.25% (yes, it still can be financed)
• FICO Scores above 580 can put 3.5% down payment
• FICO Scores below 580 must put 10% down payment
• The maximum Seller concessions shall be 3% (that’s a closing cost credit to the Buyer)
• Increase Enforcement of FHA lenders (this has been going on for the last 18 months)

That is it in a nutshell, and if you want to read the HUD Mortgagee Letter 2010-2 or the HUD.GOV gripping press release then enjoy the read!

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Buying a Home with an Older HVAC Unit?

Considering buying a home with a central air conditioning or a heat pump system? Well it is essential that you know that as of January 1, 2010, manufacturers aren’t going to build any new systems using R-22 refrigerant or any new spare parts for those existing systems using R-22. And, virtually all those old HVAC systems use R-22 to work their magic.

Eliminating a Greenhouse Gas at home

The 1992 Montreal Protocol was amended to phase out HCFCs (Hydro chlorofluorocarbons), commonly referred to as a Greenhouse Gas, which have been identified as causing damage to the ozone layer. The refrigerant known as R-22 is HCFC-22. The U.S. EPA implements Title VI of the Clean Air Act, and the 1st of January was an important phase-out date under the amended Montreal Protocol.

This situation came to light recently when a RE/MAX colleague was called out of town and his buyer client’s had a home inspection on a cute little Vienna, Virginia home. The home inspector must have pointed out that the Lennox system was from 1992 (yes, there is a manufacture date on the label) and that it would need replacement when it pooped out.

In the meantime, there are home buyer warranty programs that have coverage for existing R-22 systems in the first year which addressed the buyer’s concerns. This specific R-22 coverage is new, but like all types of insurance they have limits and fine print for pre-existing conditions. It is best for home sellers to provide this coverage (costs about $450 at closing) to the buyer in case service is needed in the first year.

Home Owners should budget now to replace R-22 heat pump systems

If you are a current home owner like me who has an R-22 heat pump system, then it may be time to start budgeting for a replacement heat pump or A/C system. Most systems now meet EPA Energy Star standards and qualifications using a replacement refrigerant like Puron® or SUVA 410A®. New Energy Star units use considerably less electricity and the savings are significant and almost pay for themselves over five years.

Only a licensed HVAC contractor can calculate what type of system you will need to install to properly heat or cool your home. Using the square footage of your home and other factors, they will determine the proper “tonnage” of your compressor unit. Too big and it won’t work properly. Today’s systems are quieter outside and have multi-speed air handlers for better air flow inside.  But remember, gget a few estimates and the highest SEER rating that fits your needs.

Make sure to get a few estimates of replacement systems, and make sure that your system qualifies for the $1,500.00 Energy Star Tax Credit.

The EPA has published consumer guidelines that may be helpful if you are concerned about this issue or are planning to replace your R-22 Air Conditioner or Heat Pump system this year.

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Vienna, Virginia | My Buyer’s Agent Advice of the Week

I had a home buyer Tweet me and ask if I had any words of wisdom to pass along. The funny thing is that I love giving advice, but 140 characters weren’t going to cut it because what I do really can’t be distilled down to a sound bite. It also raised an issue that many socialists have written dissertations on… the desire for a silver bullet or quick fix.

A picture and a paragraph won’t be enough

Buying real estate in Northern Virginia is going to be a complicated task that will require some planning and very hard work:

• You need to figure out how to pay for your home (and adjust if necessary)
• You need to figure out the best location (and adjust if necessary)
• You need to figure out what style of home you want (and adjust if necessary)
• You need to figure out a reasonable sales price (and adjust if necessary)
• You need to do some comparison shopping (and adjust if necessary)

Plus there really are distinct differences between living in Arlington, McLean, Vienna or Oakton, Virginia.

and now for Doug’s words of home buyer wisdom…

Right now, today, I can share some wisdom that is worth passing down and it will require you to do some serious soul searching. Did you ever read “What Color is My Parachute” when you were searching for a job or life purpose? In that book the author has his readers do some serious thinking to help them discover their individual strengths, and then organize and understand the importance of capitalizing on those strengths.

Where do you see yourself in five or ten years? Today you have opportunities to buy into a neighborhood for the long term, rather than starting with a first-timer home and then moving in five years to your “family” home. Today’s long-term mortgage interest rates are low and should be low for a while, and home prices have been knocked down too. I won’t bother you with equations, but as rates go up then your buying power goes down.

Right now, in Fairfax County, Virginia, I am not seeing builders building too many detached homes under $1,000,000. Understanding the basics of supply vs. demand proves that the supply of detached homes under $650,000 will remain unchanged (actually decrease) over the next ten years. And the population forecast is on the upswing too.

So, my buyer’s agent advice or words of a wisdom… this is the time to buy a home with the long-term in mind.

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Real Estate’s New Strategic Focus | April 30, 2010

Revised to include new 5405 instructions

The world of residential real estate in the U.S. is facing an expiration date of historic proportions in 2010 that buyers and sellers need to pay attention to for a variety of reasons. April 30, 2010 is the last day that buyers and sellers can “enter into a binding contract” for a real estate transaction to qualify for the two, limited time, federal tax credits for buyers of residential real estate.

Having a strategic real estate plan in early 2010 is essential for both sellers and buyers of primary residences especially before the ship has sailed… and it will. Hey, I’m just a real estate agent so ask your tax adviser what’s best for your tax situation.

Attention home Sellers, it ain’t just for first-time home Buyers this time!

Way back in November ‘09 when first-time buyers were in a frenzy to close on a home before November 30th, Congress passed The Worker, Homeownership, and Business Assistance Act of 2009 to extend the first-time home buyer tax credit and add a new tax credit for “long-time resident” homeowners. So now the move-up home seller group or downsizing home seller needs a clear strategy for getting a contract on their existing home and then a contract on their new home. These tax credits are for principal or primary home purchases and not intended for investors or people buying second homes.

Home Sellers, if you had planned on moving-up or down this year, then you should realize that buyers this winter have a deadline or extra motivation to snatch-up your home. This is important especially since home inventories are low in many areas (supply vs. demand). And then, once you have that contract in hand,  you can put in a contract on your new home before the April 30th deadline for the “long-term resident” credit if you qualify.

If you are thinking of just waiting until the Traditional Spring Market in 2010, then you really need to think again. Waiting until May to put your home on the market is a strategic error. The motivation of the tax credit can act a little like rocket fuel to qualified buyers to enter into contracts by the April 30 deadline, and I witnessed that phenomenon in the Northern Virginia real estate market last fall as the original deadline approached. This credit is essentially up to $8,000 cash to the first-time home buyer… and that will buy a lot of home furnishings!

I forecast 45% of 2010’s real estate sales are “in escrow” during this period

Here are the important dates as posted on IRS.gov:

• Binding Contract by April 30, 2010
• Must Settle on the Purchase by June 30, 2010

First-Time Homebuyer Credit details:

• Buyer who have not owned a primary residence during the three years up to date of purchase
• No one under 18 years old
• Modified Adjusted Gross Incomes up to $125,000 for single filers (reduced credit $125,000-$145,000)
• MAGI up to $225,000 for joint filers (reduced credit $225,000 – $245,000)
• No credit on homes with a purchase price over $800,000
• Maximum Credit of $8,000 or 10% of Purchase price (smaller of the two)
• Need to file IRS Form 5405
• New instructions as of January 15th, 2010: Revised 1/10 5405 Instructions

Long-time Resident Credit details:

• Must have used the same home as a principal or primary residence for at least five consecutive years of the eight-year period on the date of purchase of a new home as a primary residence.
• Credit up to $6,500
• Modified Adjusted Gross Incomes up to $125,000 for single filers (reduced credit $125,000-$145,000)
• MAGI up to $225,000 for joint filers (reduced credit $225,000 – $245,000)
• Need to file IRS Form 5405
• New instructions as of January 15th, 2010: Revised 1/10 5405 Instructions

Members of the Armed Forces and certain Federal Employees serving outside the U.S.:

• You will have an extra year to qualify for the credit

This information is intended as strategic advice to help give readers an overview of the upcoming 2010 real estate market, and you should always consult a professional tax adviser to discuss your tax situation and if you qualify for this tax credit, and how much you are entitled to receive at your price-point.

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