• 30-year fixed-rate mortgages decreased to 5.50 percent from 5.57 percent;
• 15-year fixed-rate mortgages decreased to 4.99 percent from 5.10 percent;
• 1-year ARMs decreased to 6.54 percent from 6.75 percent.

There are essentially four sources for this type of financing, and their terms can vary considerably.

1. State HFA Bridge Loans

As of early June 2009, 10 state Housing Finance Agencies offered tax-credit bridge loans, and more were planning to do so. The easiest way to learn whether one is offered in your state is to get your HFA’s phone number through a Housing Finance Agency list maintained by the National Council of State Housing Agencies (NCSHA). NCSHA also maintains a list of HFAs that already offer the bridge loans. The HFAs with loan programs already in place are Colorado, Delaware, Idaho, Kentucky, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania, and Tennessee.

If your state HFA offers the loans, you should be able to get more information about them on the agency’s Web site. Look for “tax credit advance loan” or some variant of that, or else look for information on the HFA’s regular mortgage program, which should include info on the tax-credit advance loan somewhere. Although each state HFA loan differs, here are some typical characteristics:

• You’ll need to make a minimum downpayment from your own funds, probably around $1,000.
• You’ll have to go through local lenders approved by the HFA to actually originate the loan, since HFAs are not originators.
• In some cases, the loans are interest-free; check with the state HFA to find out.
• The HFAs have set aside a limited amount of funds for the loans, so they tend to be made on a first-come, first-served basis.
• You’ll be expected to use HFA-backed financing for the mortgage on your home purchase. This financing typically comes with a below-market interest rate and usually requires borrowers to meet eligibility criteria. These criteria will vary greatly, but they often require borrowers to be first-timer buyers and meet income-eligibility requirements. For the bridge loans, there’s a good chance the criteria will be similar to what’s required for the tax credit.

Since the bridge loans are made in tandem with your HFA’s financing products, you apply for the loans when you apply with the HFA-approved lender for your mortgage financing. You should be able to find a list of approved lenders on the HFA’s Web site.

2. Local Government or Nonprofit Loans

If your state HFA doesn’t offer the loans, you can ask an HFA staff person to direct you to local nonprofits or state or local government agencies that do. If that person can’t help you, a good place to start a search is with a national nonprofit group called NeighborWorks, which maintains a list of more than 200 local affiliates that provide housing assistance. The loan programs for each of these affiliates differ, so you or your client will need to check with them on their underwriting standards and loan terms—and even on whether they make bridge loans repayable with the tax credit.

3. Local HFAs

Another source, if your state HFA can’t help you, might be the National Association of Local Housing Finance Agencies. Local HFAs are much like state HFAs but with jurisdictions limited to their locality. To learn whether there’s a local HFA in your area, call NALHFA at 202/367-1197.

4. FHA-approved Lenders

If you’re unable to identify a state or local HFA or other governmental agency or nonprofit to assist you, you can tap bridge-loan assistance if you work with a lender approved by the U.S. Department of Housing and Urban Development to originate FHA-backed loans. HUD maintains a database of FHA lenders on its Web site that’s searchable by a number of criteria including city, state, county, and service area.

In a difference with the assistance provided by state and local agencies or nonprofits, the bridge loans provided by private, for-profit FHA-approved lenders must be structured in the form of a personal loan or line of credit collateralized by the tax credit. The bridge loan can’t be structured as a second mortgage.

Also, although FHA allows you to use the bridge loan to cover your closing costs or to buy down your interest rate, you can use it for the down payment only after you’ve covered the 3.5 percent minimum that’s required on any FHA loan. Thus, you’ll have to come up with the 3.5 percent minimum down payment yourself or else tap another source of assistance for it. That can include gifts from family. Seller-funded down-payment programs are not permitted. HUD provides complete details in a May 29 Mortgagee Letter on “Using First-Time Homebuyer Tax Credits” (2009-15) that went to its approved lenders.

Since it’s the HUD-approved lender and not FHA itself that’s making the bridge loan, actual loan terms will vary. At a minimum, though, the bridge loan must meet certain restrictions, most of them imposed to weed out fraud or ensure borrowers aren’t getting in over their heads. These include:

• Loans can’t result in cash back to the borrower.
• The amount can’t exceed what’s needed for the downpayment, closing costs, and prepaid expenses.
• If there’s a monthly repayment, it must be included within the qualifying ratios and, when combined with the first mortgage, can’t exceed the borrower’s reasonable ability to pay.
• Payments must be deferred for at least 36 months to not be included in the qualifying ratios.
• There can be no balloon payment required before 10 years.

Start with the Deepest Assistance First

Since state HFA bridge loans are typically allowed for as much of the downpayment as possible (up to the credit limit of $8,000), your client’s best bet is to start with the state HFA. If it doesn’t have a program in place, learn what you can from it about other state or local programs, including nonprofits. If these sources don’t pan out, your buyer can work with an FHA-approved lender. However, since HUD requires borrowers to put down a minimum of 3.5 percent, they can access bridge-loan assistance only for other upfront expenses such as closing costs, an interest-rate buy-down, or a portion of the downpayment above 3.5 percent.

As always chime in with any thoughts, questions, or concerns...your always welcome. Please feel free to utilize the Property Search Tools or contact me via the website  

atlantahomesoldfast.com

By AMY HOAK

A federal tax credit of up to $8,000 is nudging many Americans into buying a home for the first time, good news for those trying to sell one.

Still, selling a home isn't easy in most markets today. To get the typical first-time buyer to bite and submit an offer, a house has to stand apart from the competition -- and there's a lot of it, including foreclosure homes that are selling at hefty discounts.

One big thing working in favor of the traditional seller: A lived-in, maintained home is easier for buyers to imagine themselves living in than a vacant foreclosure. That has great appeal for someone buying a home for the first time, for practical and financial reasons.

"First-time buyers are skeptical of buying homes that need improvement," says Eric Mangan, a spokesman for ForSaleByOwner.com. "Sellers certainly don't need to remodel the kitchen, but they want to make sure that their homes showcase very well."

Andy Rash

While nearly half of brokers polled for a Coldwell Banker survey last year found that affordability was the No. 1 concern for first-time buyers, fully 81% said move-in conditions were very important to these buyers.

Only 7% said first-time buyers were looking to purchase fixer-upper homes that they could buy on the cheap and renovate.

Those feelings might be even stronger today as lenders generally require larger down payments, unless the mortgage is backed by the Federal Housing Administration. Higher down payments mean buyers have less cash left over for improvements, says Leslee MacKenzie, of Coldwell Banker Hickok & Boardman Realty in Burlington, Vt.

"They're doing what they can to save for the down payment," she says, and that will deplete some of the funds buyers would have for repairs.

While foreclosures that are in severe disrepair can be a huge turnoff for a first-time buyer, some banks will make improvements to their foreclosed properties, fixing them up so that they meet FHA standards and a buyer's needs, says Chuck Whitehead, of Coldwell Banker Associated Brokers in Southern California. These fixed-up, bank-owned homes can be stiff competition for the rest of the for-sale inventory.

Never fear, there are still ways to outshine other homes on the market. Assuming you've priced the home correctly, here are five ways to lure a first-time buyer:

Maintain and stage

A home that has been taken care of throughout the years will offer a stark contrast to a vacant, empty foreclosure.

"If someone is living there, the landscaping is not dead," says Mr. Whitehead. "There is warmth in the home," and that can go a long way in selling a property.

As with any home, a fresh coat of paint, decluttering and the removal of unpleasant odors can go a long way to making a good first impression. But be careful not to over-improve the home; the investment might not be worth the cost.

Offer help with closing costs

And offer early. Whether you put it up front in the marketing material or in the listing, this could be an extra motivator to reel in a buyer.

Generally, there's a good chance buyers will ask for help with closing costs anyway, but it might help to offer it at the beginning, says Heather Joubran, an agent with Re/Max Central Realty in Lake Mary, Fla.

If rising mortgage rates have your buyer spooked, consider paying the points to bring the interest rate down, says Mr. Mangan. But consider a buyer's timeline for staying in the home before deciding if this is the most effective way to help; paying points generally makes sense for those staying in a home for more than a few years.

Offer a home warranty

First-time buyers are often coming from a rental, and they are used to calling a landlord when there's a problem. To help them more easily transition into homeownership, provide them with a warranty that covers major systems, Ms. Joubran suggests.

Offer mortgage protection

In some cases, it might make sense to address buyers' fears by purchasing insurance for them, so they can keep up with their mortgage even after a job loss. Coldwell Banker has such a program through its parent company, Realogy.

The plan will make several months of mortgage payments in the event the buyer becomes unemployed.

"There are people with secure jobs who are still nervous," says Ms. MacKenzie. "This can give them just a little more comfort."

Don't snub low offers

Buyers know prices have fallen, so they're being aggressive in their offers -- sometimes extremely aggressive. But even if they come in with a shocking lowball offer, don't scoff at it. Understand where they're coming from. Try to compromise.

"My rule of thumb is every offer deserves a counteroffer," says Ms. Joubran. "At least counter them back. It gets the conversation going."

If they liked the home enough to make an offer, maybe you can arrive at a mutually acceptable price, she says.

FHA has released more details on whether or not you can use the $8,000 Homebuyer Tax Credit as a down payment.

In a nutshell, borrowers may be allowed to get the $8,000 Tax Credit prior to closing and use it as an additional down payment, buying down an interest rate or other closing costs. However, no investor has found a way to legally allow this to occur…meaning it still cannot be used for a down payment, closing costs or buying down interest rates.

Keep reading for the details.

A Little Background

On May 13, 2009, there were exciting rumors about the possibility of buyers being able to use the $8,000 Tax Credit as a down payment. This all started when Secretary Shaun Donavan addressed the National Association of Realtors in Washington D.C. at the Real Estate Summit.

Unfortunately, HUD promptly retracted this “brilliant” idea of monetizing the $8,000 Tax Credit, and announced that we would see a revised version soon.
 
Update from HUD 

On Friday, HUD released a new HUD Mortgagee Letter that has substantial changes concerning the use of the $8,000 Tax Credit for a down payment. Here’s an excerpt from page 2 of the letter:

Pursuant to 12 U.S.C. 1709(b)(9), the homebuyer’s down-payment required for eligibility for
FHA insurance may not consist of any funds (including funds derived from a sale of the
homebuyer tax credit) provided by the mortgagee, the seller, or any other person or entity that financially benefits from the transaction (or by any third party or entity that is reimbursed, directly or indirectly, by the financially benefiting person or entity). Accordingly, the proceeds of the sale of the tax credit to FHA approved mortgagees, the seller, or any other person or entity that financially benefits from the transaction (or any third party or entity that is reimbursed, directly or indirectly, by the financing benefiting person or entity), may not be used to meet the 3.5% minimum down payment, but may be used as additional down payment, buying down of interest rate, or other closing costs.

For those of you who still want to know more, here are the highlights:

1. The borrower can monetize the tax credit, but it cannot be used towards the minimum 3.5% down payment requirement

2. A company/individual charging for the service (meaning, they are charging a fee for providing a buyer with money to cover the tax credit temporarily) cannot charge more than 2.5% of the loan/credit amount. This would most likely be a company like Nehemiah or some other down payment assistance company.
3. FHA Lenders will have to document the file (and the due diligence) for the tax credit purchase – very carefully. HUD will be watching these closely to make sure the advance of the tax credit was not used for a down payment.
4. IRS Form 5405 must be completed, attached, and retained in the case binder.
5. No cash back to the borrower.

Bottom Line

These changes totally take the wind out of this entire idea because the one major detail is that the borrower may be able to get the $8,000 prior to closing, but cannot use it for any portion of the required 3.5% down payment. It can only be used for additional down payment monies in excess of the minimum 3.5%.  

In addition, there is no legal way for an investor to offer the $8,000 prior to closing to be used as a down payment, for closing costs or to buy down interest rates. Think about it. The IRS is not going to give a buyer their money until they know a house has closed…a closing must occur to get the $8,000 Tax Credit. This means a lender would have to offer a second or even a third mortgage to be used to cover the $8,000 prior to closing. What happens if the buyer does not qualify for the tax credit? How does the lender get repaid? There are a lot of things that HUD still needs to consider.

So I say, what’s the point? Why would any FHA approved lender create the program and details for offering to lend the $8,000 Tax Credit prior to closing if the buyer cannot use it for the down payment?

Above all call me with any questions. I'll be your guide through these ever changing rules and regulations when it come to securing the best financing that suits your needs.

atlantahomesoldfast.com

1. This program is for home purchases, not re-finances.
2. This program is only available on foreclosures. The house must be owned by VA, HUD, Freddie Mac, Fannie Mae, or a non-profit organization.
3. You don't have to be a first time home buyer. This is great news for us buyers that have been excluded from the $8,000 dollar tax credit. However if you are a first time home buyer you can couple these two programs together by making out like a bandit and get the benefit of $22,000 dollars and never have to show anyone a gun!!
4. You must go through 8 hours of home buyer education classes...it doesn't matter if you've owned your home for decades or a first time home buyer. It must be HUD approved and taken in a classroom...which means no online classes.
5. This house must be your primary residence for five in a half years. Of course you can refinance during this time, but if you sell it the $14,000 will be prorated over the time you lived in this home.
6. There are in income limits that vary by county. In addition, the program is only available to certain counties in Georgia.
7. The property sales price must be 15% below fair market value.