I recently met these two guys who are doing some very interesting and innovative video marketing in the mortgage industry.

So HERE is a link to the video that they put out today.

It explains how banks are making money on the mortgage loans transferred from all the banks that the FDIC shut down. In a nutshell…we, the taxpayers, are paying the losses to keep the banks whole, and profitable.

As always, if you are looking for a metro Atlanta refinance, call and we will see what we can do.

As of this writing, there are 2,244 HUD owned properties for sale in Georgia.  And, they are generally all affordable.

A HUD home for sale in Gwinnett County

But you know the great thing about considering buying a HUD home?  If you finance the property with a new FHA loan, then a buyer only needs $100 down payment.  Right.  Just a Benjamin!  Of course, there are closing costs as well.  When making an offer to buy a HUD home, one can always ask HUD to pay some portion of the closing costs, but plan on needing a bit more than just a hundred bucks to get into the home.

The other great thing about HUD homes is that, although some need some repairs to the home, often times HUD will pay for the necessary repairs as well.

They have each of their properties inspected, and if the inspector notes needed repairs, he will also note an estimated dollar amount to complete the repairs.  And that is the amount that HUD will generally escrow for the repairs, so that you, the buyer, move into a very well-kept home by the time you close and are ready to move.

Certainly Georgia USDA Rural Housing loans are also good loans, which require no down payment.  The reason to consider a HUD home with an FHA loan around metro Atlanta is that USDA requires that the property be in a rural area to qualify, as well as limiting the income of the buyer with ceilings.  So, some properties would not qualify for a USDA loan, and some buyers would not either.

Those limitations do not exist with an FHA loan to purchase a HUD home.  So, if you are in the market and want to consider a HUD home, let me know and I will be happy to direct you to a real estate agent who is well-versed in the negotiating and buying process surrounding HUD homes.

“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” – Warren Buffet

We have all heard that quote before, and think we understand it.  But acting on it is an entirely different thing.

I have over the past several months been working with a number of real estate investors picking up just terrific deals on Atlanta real estate.  While the news anchors and commentators generally wring their hands wondering which wave will hit next to push real estate values down further, some sharp investors are buying Atlanta area real estate.

And, they make money as they buy, because they buy right.  And that is the key.  Rents, though down by all accounts, still are enough to cover the note, management fees and to set aside sufficient reserves for repairs and vacancies, right from the start.  And the cash flow, tax benefits and future appreciation are there for the taking for these savvy investors.

Recently I was asked to participate on a podcast, which you can hear right HERE, with a nationally recognized expert on real estate investing, Jason Hartman.

Enjoy the podcast, and if you are interested in picking up an investment property or two, just let me know.  I work with some of the pros in Atlanta who make it turn-key and easy.

Since January, 2009 the Fed has been buying Mortgage Backed Securities – those bonds that determine mortgage rates.  And we have seen a year with the lowest mortgage rates in literally decades as a result.

The goal of the Federal Reserve’s agency MBS program is to provide support to mortgage and housing markets and to foster improved conditions in financial markets more generally. Only fixed-rate agency MBSsecurities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae are eligible assets for the program. The program includes, but is not limited to, 30-year, 20-year and 15-year securities of these issuers.

Since the inception of the program in January 2009, the Fed has spent $1.122 trillion in the agency MBS market, or 89.8 percent of the allocated $1.25 trillion, which is scheduled to run out in March 2010.

So what happens in March, when the Fed stops buying?  Last I heard, the Fed was buying 85% of all MBS.  If that buyer leaves – how high will rates need to go to attract new buyers? That answer will keep you awake at night, if you make your living in the mortgage business.

The question on everyone’s mind is: Will the Fed suddenly announce that they will put more money toward buying MBS, even after March?

I am inclined to think they will, since not doing so would send the housing market into a tailspin again if mortgage rates rose dramatically.

But, the certain thing is if you are in the home buying market, get them off the mark and lock in a rate soon. Anything else is a gamble.

You may recall that back in September ‘08 the federal government essentially nationalized the mortgage buying giants and backing them with $200 billion in guarantees against losses.

Two days ago, on Christmas Eve, they got another federal gift: a removal of the caps to fund losses at Fannie Mae and Freddie Mac.  Now, they are no longer limited to $200 billion each.  They are unlimited.  In exchange, the government gets 80% of the stock in each company paying 10% dividends.

Is this good or bad for the housing industry? Well, it means the government is fully committed to doing all it takes to help the housing market turn and lead us out of recession.  That’s good.  It also indicates that all parties involved expect the losses to exceed the $200b limit and want to prepare for it now rather than wait for a crisis time. That’s bad.

But for now, for the prospective home buyer around Atlanta, the same thing applies: that now is the best time to buy due to the $8000 tax credit, and the low, subsidized mortgage interest rates that, according to the current plan, will rise sharply in April, 2010.

A couple days ago a “Mortgagee Letter” finally came out from HUD clarifying how they would look at Atlanta FHA loan applications where a previous short sale was involved.

If the short sale was simply to take advantage of market conditions and get out of a house that was underwater, in order to purchase a similar or superior property at a reduced price, then the borrower is NOT eligible for an FHA insured loan. My understanding of the definition of that rule is that if the new property is within the same commuting distance as the previous property, then that is considered ineligible for FHA.

Therefore, the argument could be made that if there was a short sale, and then a transfer to the Atlanta market, then a new FHA loan could be made.

Yet that, only if the borrower was current on the mortgage for the previous 12 months prior to the short sale. If the borrower was in default at the time of the short sale, then HUD is viewing that the same as a foreclosure, and the borrower will need to wait 3 years from the date of the sale to qualify for FHA financing.

In summary, then, a short sale is fine to qualify for a new FHA loan so long as the borrower was current on the mortgage and all other installment debt for the previous 12 months, AND, they either relocate to another city or downsize in house.

Any other combination, and it looks like HUD will want any metro Atlanta buyers to wait 3 years to re-qualify for a new FHA loan.

I don’t normally re-post articles – but despite the jarring title, I really liked this article from Marc Roth that appeared in Businessweek Magazine last week.  And, I agree.  Rates are going higher on Atlanta home loans, and precipitously so in the second quarter of 2010 if things remain on their current track.  Enjoy this read:

Well, you may not be stupid or broke. Maybe you already have a house and you don’t want to move. Or maybe you’re a Trappist monk and have forsworn all earthly possessions. Or whatever. But if you want to buy a house, now is the time, and if you don’t act soon, you will regret it. Here’s why: historically low interest rates.

As of today, the average 30-year fixed-rate loan with no points or fees is around 5%. That, as the graph above—which you can find on Mortgage-X.com—shows, is the lowest the rate has been in nearly 40 years.

In fact, rates are so well below historic averages that it should make all current and prospective homeowners take notice of this once-in-a-lifetime opportunity.

And it is exactly that, based on what the graph shows us. Let’s look at the point on the far left.

In 1970 the rate was approximately 7.25%. After hovering there for a couple of years, it began a trend upward, landing near 10% in late 1973. It settled at 8.5% to 9% from 1974 to the end of 1976. After the rise to 10%, that probably seemed O.K. to most home buyers.

But they weren’t happy soon thereafter. From 1977 to 1981, a period of only 60 months, the 30-year fixed rate climbed to 18%. As I mentioned in one of my previous articles, my dad was one of those unluckily stuck needing a loan at that time.

INTEREST RATE LESSONS

And when rates started to decline after that, they took a long time to recede to previous levels. They hit 9% for a brief time in 1986 and bounced around 10% to 11% until 1990. For the next 11 years through 2001, the rates slowly ebbed and flowed downward, ranging from 7% to 9%. We’ve since spent the last nine years, until very recently, at 6% to 7%. So you can see why 5% is so remarkable.

So, what can we learn from the historical trends and numbers?

First, rates have far further to move upward than downward; for more than 30 years, 7% was the low and 18% the high. The norm was 9% in the 1970s, 10% in the mid-1980s through the early 1990s, 7% to 8% for much of the 1990s, and 6% only over the last handful of years.

Second, the last time the long-term trends reversed from low to high, it took more than 20 years (1970 to 1992) for the rate to get back to where it was, and 30 years to actually start trending below the 1970 low.

Finally, the most important lesson is to understand the actual financial impact the rate has on the cost of purchasing and paying off a home.

Every quarter-point change in interest rates is equivalent to approximately $6,000 for every $100,000 borrowed over the course of a 30-year fixed. While different in each region, for the sake of simplicity, let’s assume that the average person is putting $40,000 down and borrowing $200,000 to pay the price of a typical home nationwide. Thus, over the course of the life of the loan, each quarter-point move up in interest rates will cost that buyer $12,000.

LOAN COSTS

Stay with me now. We are at 5%. As you can see by the graph above, as the economy stabilizes, it is reasonable for us to see 30-year fixed rates climb to 6% within the foreseeable future and probably to a range of 7% to 8% when the economy is humming again. If every quarter of a point is worth $12,000 per $200,000 borrowed, then each point is worth almost $50,000.

Let’s put that into perspective. You have a good stable job (yes, unemployment is at 10%, but another way of looking at that figure is that most of us have good stable jobs). You would like to own a $240,000 home. However, even though home prices have steadied, you may be thinking you can get another $5,000 or $10,000 discount if you wait (never mind the $8,500 or $6,500 tax credit due to run out next spring). Or you may be waiting for the news to tell you the economy is “more stable” and it’s safe to get back in the pool. In exchange for what you may think is prudence, you will risk paying $50,000 more per point in interest rate changes between now and the time you decide you are ready to buy. And you are ignoring the fact that according to the Case-Shiller index, home prices in most regions have been trending back up for the last several months.

If you are someone who is looking to buy or upgrade in the $350,000-to-$800,000 home price range, and many people out there are, then you’re borrowing $300,000 to $600,000. At 7%, the $300,000 loan will cost just under $150,000 more over the lifetime, and the $600,000 loan an additional $300,000, if rates move up just 2% before you pull the trigger.

What I’m trying to impress upon everyone is that if you are planning on being a homeowner now and/or in the foreseeable future, or if you are looking to move your family into a bigger home, then pay more attention to the interest rates than the price of the home. If you have a steady job, good credit, and the down payment, then you really are being offered the gift of a lifetime.

1. $8,000 First-time Home Buyer Tax Credit at a GlanceThe $8,000 tax credit is for first-time home buyers only. For the tax credit program, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.
2. The tax credit does not have to be repaid unless the home is sold or ceases to be used as the buyer’s principal residence within three years after the initial purchase.
3. The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.  This applies most often to Atlanta FHA Loans, in my experience.
4. The tax credit applies only to homes priced at $800,000 or less.
5. The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.
6. For homes purchased on or after January 1, 2009 and on or before November 6, 2009, the income limits are $75,000 for single taxpayers and $150,000 for married couples filing jointly.
7. For homes purchased after November 6, 2009 and on or before April 30, 2010, single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

The $6,500 Move-Up / Repeat Home Buyer Tax Credit at a Glance

1. To be eligible to claim the tax credit, buyers must have owned and lived in their previous home for five consecutive years out of the last eight years.
2. The tax credit does not have to be repaid unless the home is sold or ceases to be used as the buyer’s principal residence within three years after the initial purchase.
3. The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $6,500.
4. The tax credit applies only to homes priced at $800,000 or less.
5. The credit is available for homes purchased after November 6, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, the home purchase qualifies provided it is completed by June 30, 2010.
6. Single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

This is a post first put here.  I thought it so important for you to know that I have reposted it.

Reports that FHA may be the next ’sub-prime’ implosion have been swirling for some time now.  The reason is that an FHA loan is simply a mortgage that is insured by HUD against default, to protect the lender, and the reserve insurance funds are dwindling.  And if HUD were to run out of money to insure these loans, then FHA lending would die.

That scenario is unlikely to happen, which was attested to by HUD Secretary Shaun Donovan yesterday before the House Committee on Financial Services.  However, what it does mean is changes, and possibly BIG changes are in the works for FHA lenders.

Nothing has been decided yet, but HUD has floated out there several changes that are likely to be implemented in the coming few months.  An overview of the changes that affect Georgia FHA loans the most are:

• Increased minimum FICO scores for home buyers:  Currently, HUD does not mandate a minimum credit score to qualify for FHA financing.  However, nearly all lenders have instituted their own minimums, ranging from 620 to 660.  HUD has not indicated what the minimum will be; but my guess is to look for it to be in the 620-640 range.
• Seller concessions will be lowered: Currently the sellers can contribute up to 6% of the sales price to pay closing costs, pre-paids and any points to buy down the interest rate.  That will likely be lowered to 3% maximum.  Now, 3% covers the closing costs and pre-paids in the vast majority of circumstances – but this will stop sellers from ’sweetening’ the deal by offering to pay for a permanently lowered interest rate by offering to pay points to buy the rate down – a practice that has been catching on somewhat, and is very attractive to a potential buyer.
• Cash required from the buyer will increase:  This one is unclear at present what form it will take.  Currently an FHA buyer needs to bring a down payment of  at least 3.5% of the purchase price.  There has been talk of raising the minimum required down payment to 5%.  However, it is not clear if this will be the outcome or not.  What is clear, is HUD wants its FHA buyers to have more “skin in the game”.
• MIP Premiums to increase:  Conventional loans with lower down payments are insured by private companies with the PMI payment.  Similarly, FHA loans have an Up Front Mortgage Insurance Premium, which is what replenishes HUD’s insurance pool so that they can insure against default, and of course the monthly MIP payment.  Currently on an FHA purchase HUD collects 1.75% of the loan amount as the Up Front MIP, and .55% of the loan amount annually, as part of the monthly mortgage payment.  Not sure how much, but it looks likely that the Up Front MIP amount will increase.  And from my reading of the Secretary’s comments, the monthly premium amount may remain the same.

Changes are coming fast and furious.  So, on top of all the other reasons you have to buy a home financed with an FHA mortgage now, i.e. historically low mortgage rates, a tax credit for most buyers and historically low housing prices, now you have yet another reason to act now and buy.  FHA financing will become more costly and more difficult to qualify for in the near future.

I have written about this before, but in a mortgage environment with guidelines continuing to tighten, folks looking to purchase their home in outlying areas, somewhat rural areas, owe it to themselves to consider and USDA Rural Housing mortgage loan.

You see, these loans have two distinct advantages that no other loan product can compare with:

• 100% Financing for the home.  That’s right, no down payment is needed.  So, for a Georgia first time home buyer who has amassed a small savings – a few thousand dollars – may be better served to count that as their reserve funds, and finance 100% of the purchase price, at extremely low interest rates.
• No Monthly MI Payments: Right.  That dreaded PMI that protects the lender against default, but the buyer has to pay for, is not there on a USDA loan.  Too good to be true? You got me.  There is what would correspond to MI, and it is equal to 2% of the loan amount, but much like an FHA mortgage, that 2% is added to the loan amount and financed.  So, on a monthly payment basis, it is nearly painless.