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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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As 2009 draws to a close, I have seen mortgage rates stay historically low and some McLean mortgage insiders forecast that they will stay low for the near term. The terrible economy has a lot to do with it… job insecurity, weak demand, and an unwillingness to enter into a 30 year relationship when rumors are easy to believe.

The truth is that if you have the job stability and some cash, then this is an amazing opportunity to buy a home.That is if you can find one that is worth buying since the supply of homes for sale is low… in Northern Virginia that is.

Today’s Home Buyers need a 5 to 10 year time horizon

So what are the rates that I see in Northern Virginia? Let’s take a look without naming names… but with 720+ FICO scores.

10% Down Payment, 30 year fixed, Sales Price up to $722,000 and the recent rate was 4.75% with 1.25 points.

5% Down Payment, 30 year fixed, Sales Price up to $438,900 and the recent rate was 4.875% with no points.

3.5% Down Payment, 30 year fixed FHA, max loan of $729,500 and the recent rate was4.875% with no points.

7-Year Conforming Jumbo ARM and the recent rate was 3.99% with no points.

15-Year Fixed had a recent rate of 4.25.

And loans up to the $1.5 million amount at rates of 5.625%!

If you currently have an adjustable rate loan tied to the LIBOR Rate, then take a look at the current 0.97% rate at BankRate.com .

I list these rates for information only and should be considered examples of mortgage rates available in Northern Virginia in December 2009. Also these are for new purchases and not for refinances which are typically slightly higher. Also, I am a licensed real estate agent and do not provide mortgages and have no affiliated business arrangements with any mortgage providers.

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This great chart came to my attention from a post Justin McHood wrote at “The Phoenix Real Estate Guy.com” and I felt it was important to share. Consumers have a resposibility to manage their credit and can get a copy of their report either through a service like Equifax or free through AnnualCreditReport.com. Requesting a report to review will not negatively impact your score, but if you apply for a new BuyMore-Card then it can be a ding. Get it?

In a recent post of mine, I mentioned how important having a 720 or better score is when trying to get a mortgage, and how a real estate client had one error repeated three times impacting his FICO Score. Once cleared his score jumped 40 points!

So let’s be careful out there during the Holiday Season in Northern Virginia and not run our cards up to the max because that will damage your score 20+ points… even if you did it by accident. There are plenty of stories out there to keep you up at night. Keep it real because you need to keep your credit reputation as good as possible in today’s world. And remember that is important to examine your ratio of available credit to used credit… an important FICO Score variable.

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So if that encouraged you to look into refinancing your home, please remember that Virginia residents who refinance with the same lender (read more) qualify for a recordation tax exemption. Compare rates but understand that this may save you some serious cash over those other lenders competing for your business.

I decided to regurgitate this post since rates have been up and down all year long, and some of you may be thinking about refinancing. There are plenty of mortgage people out there, but remember that I know some too that I am happy to refer!

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So I decided to invite him to tell the story… enjoy!

by: Sweth Chandramouli, an Alexandria, VA mortgage broker, blogger and yet another former retired high-tech guy now with Ethical Homes.com

Conforming loan limits in the metro DC area may be changing significantly in coming months, potentially dropping by nearly half by the end of the year.

The Housing and Economic Recovery Act of 2008 (HERA) increased the conforming mortgage loan limit to $417k, and also created “high-balance” conforming loans in high cost areas, which would have rates that were slightly worse than “regular” conforming loans but still better than traditional “jumbo” mortgages. The high-balance limits were based on median sales prices in those high-cost areas, and for the metro DC area, the limit for 2009 was set at $625,500. In February 2009, Congress passed the American Recovery and Reinvestment Act of 2009 (ARRA, aka the economic stimulus bill of 2009), which temporarily increased the limit for high-cost areas such as DC to $729,750.

The ARRA limits expire on 12/1/09, however, at which point the limit for the DC area will drop back down to the HERA limit of $625,500. (12/1/09 is also the deadline for first-time home buyers to take advantage of the $8000 tax credit, so first-time buyers who need loans in the $626k-$729k range should be especially motivated to close their purchases by December 1st.)

That change will affect many people in the DC area, but far more widespread will be the change that will probably occur on January 1, 2010. HERA resets the conforming and high-balance limits each January according to a specific formula; that formula does not allow the basic conforming limit to decrease from year to year, but it does allow the high-balance limit to decrease or vanish entirely, and based on current calculations, that’s exactly what will happen in most parts of the U.S., including the metro DC area–on January 1st, barring any new stimulus bills passed by Congress between now and then, any loan in the DC area above $417k will probably be treated as a “jumbo” loan with significantly higher rates and tighter qualifying requirements.

We’re going to be monitoring this situation closely, and have contacts at Fannie Mae, Freddie Mac, and in Congress who are trying to get more information on whether there are in fact any plans to enact another temporary stimulus bill that would increase the limit for 2010, but for now, borrowers should assume that the high-balance loan limit in the DC area will drop to $625,500 on 12/1/09, and go away entirely on 1/1/10.

For the detail-oriented people out there:

• HERA sets the high-balance limit at the lesser of 115% of the median MSA sales price (as published by FHFA each October) or $625,500, which means that all MSAs w/ median sales prices above $544k are capped at $625,500, and all MSAs w/ median sales prices below $363k are not considered high-cost and are capped at the regular conforming limit (currently $417k). In October 2008, FHFA’s published median MSA sales price for the DC MSA was more than $544k, so the limit for 2009 was $625,500.
• The exact FHFA numbers for 2010 won’t be published until October 2009. NAR does publish very similar statistics, however, and based on NAR’s numbers for the last quarter, as well as FHFA’s own HPI numbers, most MSAs (including DC) will have median sales prices below $363k, which is why we are assuming that high-balance loans will effectively be eliminated as of 1/1/2010.
• The exact history of high-balance conforming limits in the last few years is actually more even more complicated. In Feb 2008, Congress passed the Economic Stimulus Act of 2008, which raised the conforming limit to $729,750 in the highest-cost areas, but which expired on 1/1/2009. Also, Fannie Mae, Freddie Mac, and the lenders that work with them took some time to implement the changes in ARRA 2009, during which time the practical limit was still the HERA limit of $625,500. So the high-balance limits in the highest-cost areas such as DC were $729,750 from 2/2008-1/2009, $625,500 from 1/2009-2/2009, then legally $729,750 but still practically $625,500 from 2/2009-4/2009, and then $729,750 from 4/2009 to the present. Expect a similar series of confusing changes in late 2009 and early 2010, especially if new legislation is passed to change the limits yet again.

So after you have surfed through umpteen home-search web sites late one night, contacting a reputable lender and completing a basic loan application will get the ball rolling! I know some.

Have you been paying you bills on time?

It’s a hard-and-fast rule…

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In the Option-ARM mortgage, the borrower can decide how much she will pay each month. For example, the true Principal and Interest payment is $1,500 per month but the borrower decides to pay only $1,300 per month.

That extra $200 per month then gets added to the principal due. It adds $2,400 annually to the mortgage balance, which isn’t much when house prices are going up 10% per year.

But when the market is declining then this is a recipe for disaster. None of my clients used these mortgages and the Option-ARM product is no longer available.

OPTION-ARM’s are the single most toxic element in the existing mortgage crisis that continues to unfold across the country.

And they have tainted the reputation of traditional ARM’s… so please keep reading.

ARM is an Adjustable Rate Mortgage:

• The Interest Rate changes on a planned schedule.
• The interest rate is calculated using a specific published Index, such as U.S. Treasury or the LIBOR , that is published in The Wall Street Journal.
• On the scheduled Change Date, the Note Holder calculates a new interest rate for the mortgage by adding a specific percentage to the published Index.

The language in the Adjustable Rate Rider will read something like this:

The “Index” is the average of interbank offered rates for one-year U.S. dollar denominated deposits in the London market (“LIBOR”), as published in The Wall Street Journal. The most recent Index figure available as of the date 45 days before each Change Date is called the “Current Index”.

Before each Change Date, the Note Holder will calculate my new interest rate by adding — Two and One / Quarter – percentage points ( 2.2500%) to the Current Index. The Note Holder will then round the result of this addition to the nearest one-eighth of one percentage point (0.125%)… this rounded amount will be my new interest rate until the next Change Date.

You may not know this, but the current 1-year LIBOR rate as of 9/5/2009 is 1.27% according to The Wall Street Journal and BankRate.com.

If your 1-year, LIBOR based ARM adjusted today, using the example above, then your new mortgage rate would be 3.625%.

Here is a graph showing the history of the 1-year LIBOR Index:

• Mortgage Interest Rates:

Rates have dropped in the past couple of weeks, and I was seeing the FHA rate at 5% with 1 point on July 21. Rates and points go up and down depending on consumer demand so having a “float-down” option is an especially good idea. Keep in mind that rates change daily. In my book, it is essential that you have a pre-approval letter from a mortgage company before you head out the door house hunting.

• The first-time home buyer tax credit:

The qualification cap for an individual is $75,000 in annual income. The qualification cap for married/ joint filers is $150,000 combined annual income. In my book, you need to “close” by the end of November. Yes, they say December 1st in the government fine print but, if there is a delay caused by a technical difficulty, car accident, or some other unexpected issue then you are out-of-luck, baby cakes!

• The current market:

Buyers in our area are much more motivated especially for homes that are in decent condition. Stories of multiple offers on a new listing or escalation clauses included with offers are getting to be common. In June, one of my clients was out-bid on two properties. In my book, take your search seriously and when you see a home you like then put in a well prepared offer… because if it appeals to your picky standards then someone else probably likes it too!

Having a buying strategy makes the process much more effective and enjoyable. That is why I sit down with clients to review the process, closing costs and mortgage options right from the start. To me it is a natural sequence that yields the desired results of finding the right house and actually buying it.

Down, set, hike!

The idea behind the new guidelines is to protect consumers from last minute “junk-fees” that can materialize at closing. Junk-fees are a common complaint heard by regulators. The protections require lenders to provide consumers with more accurate truth-in-lending estimates, and give consumers a seven day cooling-off period to digest the information or any future changes… so they can pull the plug if necessary.

1. Requires lenders to give applicants the initial disclosures of mortgage costs (truth-in-lending statements) within three business days of loan application.
2. Applicants then have a required seven-day waiting period to review loan documents before closing (so no more last-minute mortgage deals).
3. Lenders may only collect reasonable credit-check fees at loan application.
4. Requires lenders to provide a copy of the appraisal to the applicant three business days before closing.
5. Closings will then depend on the applicant getting the appraisal, except if the applicant waives that requirement.
6. If the applicant has not locked-in a rate and rates go up more than 0.125%, then the lender is required to provide a corrected version of the estimate to the applicant. A new seven day waiting period begins before a closing takes place.

These changes may greatly impact the ability to close a loan or real estate transaction because the additional time periods or contingencies can change the closing date.

Real estate contracts bind buyers and sellers and typically have contingency periods covering many things including financing. With a real estate contract, buyers place money at risk, known as an Earnest Money Deposit, to assure the sellers that they aren’t going to default on the contract. Buyers in Northern Virginia may remove the financing contingency which puts the EMD at further risk, but I foresee future problems when the buyer has removed the financing contingency but the lender does not deliver the appraisal on-time.

When I meet with clients, I always mention that one of my roles as their agent is to help manage the transaction making sure that all parties have the paperwork that they need to complete the transaction. Yes, these new Federal Reserve guidelines are going to force mortgage lenders to be more resposible… but they will create another layer of phone calls and paperwork to ensure the sale is closing on the date specified in the ratified contract.

Next week is the mid-year NAR conference in Washington D.C., and you should expect the usual cast of characters to address the one-million member association. Washington D.C. cats like Fed Chairman Bernanke, or President Obama… oh yes, El Presidente will make an appearance (scheduled at the last minute) at the lavish extravaganza being held at four D.C. hotels.

The real estate business is an essential part of the U.S. economy. And low mortgage rates have played a vital role in motivating consumers to buy homes, refinance existing mortgages, and a key example of a morning ray of sunshine on the horizon. This is a fact that has not escaped the White House.

If rates start to creep up then they will quickly squash the parade of home sales, and lead to a cascading economic crisis that no one wants to dream about.

President Obama has given hope to the consumers of the U.S.A. — not to buy new TV’s and other worthless junk people bought to impress people they didn’t even know, but to invest in a proven long-term investment that can be enjoyed  while using it.

Yes, that is a home made in America.