• Borrowers with credit scores of 500-579 must make a 10% downpayment and the downpayment cannot be a gift or provided by a downpayment assistance program such as those offered by Redding and Shasta County.
• Borrowers with credit scores between 580 and 599 must tender a 5% downpayment under the same conditions as above.
• Borrowers with credit scores of 600 or better can make a downpayment as low as 3.5% and gift funds are acceptable.

In all cases, Wells Fargo is limiting closing cost credits to the borrower from the property seller to 3%. In the past, seller contributions up to 6% were allowed.

An FHA loan is a government insured loan. The loans are processed and funded by FHA approved lenders. If the borrower defaults on the loan, the government steps in, makes the lender whole, then resells the property after foreclosure.

Historically, this program has not cost taxpayers a dime. However, the decline in home prices, the struggling economy and the marked increase usage of the FHA loan program has resulted in red ink. HUD, which oversees this loan program, recently modified the mortgage insurance requirements to increase revenues to cover losses. Today, borrowers can expect to pay more in upfront fees and monthly payments of mortgage insurance premiums to keep FHA solvent.

For additional details, contact Mike Whitman at Wells Fargo in Redding at 226-2646.

bradgreps@yahoo.com

530-224-6767 or 530-941-7492

BRAD GARBUTT

REALTOR/BROKER ASSOCIATE

REAL LIVING REAL ESTATE PROFESIONALS

CORNER OF COURT AND PLACER IN REDDING

NEARLY 30 YEARS LOCAL REAL ESTATE SALES EXPERIENCE

The two primary changes involve the upfront fee collected from the borrower (being reduced) and the mortgage insurance premium (MIP) tacked on to the payment (being increased).  The MIP is going up from 0.5-0.55% to 0.85-0.9% depending on the size of the downpayment. The upfront insurance premium is dropping from 2.25% to 1%. This fee is either paid in one lump sum at closing or rolled into the loan and paid over the life of the loan.

On the surface this does not sound too bad but in the real world this will cost the borrower dearly over the long run. Here’s an example provided by FHA and detailed in a recent article in THE NEW YORK TIMES. A borrower puts 3.5% downpayment on a purchase price of $154,000 (the median home price today) and finances the upfront mortgage insurance fee into the loan. The mortgage payment, including principal, interest, taxes, homeowner’s insurance and both mortgage insurance premiums goes up from $1,205/month to $1,238/month. The increase includes the drop of the upfront MIP from $3,344 to $1,486 but the monthly increase in the MIP from $68 to $111.

All FHA loans require mortgage insurance while conventional loans have a sliding scale for insurance rates if the borrower tenders less than 20% downpayment. The FHA MIP can be eliminated after 5 years if the loan-to-value ratio drops below 78%. This can be accomplished by paying down the principal, appreciation of the property value, or a combination of the two.

FHA has for the first time set a minimum credit score threshold of 500. Those with credit scores between 500 and 580 must tender a 10% downpayment. However, practically speaking, most lenders will require higher credit scores to assure they can get the loans insured by FHA. The financial meltdown has created a vast new realm of buyers that heretofore would have never considered an FHA loan due to the hefty mortgage insurance premiums. Company executives, teachers, and people with six-figure incomes are now applying for FHA loans!

The desire to leverage real estate purchases with a minimal  downpayment is alive and well, despite the added cost for the opportunity to do so.

bradgreps@yahoo.com

530-224-6767 or 530-941-7492

BRAD GARBUTT

REALTOR/BROKER ASSOCIATE

REAL LIVING REAL ESTATE PROFESSIONALS

CORNER OF COURT AND PLACER IN REDDING

MORE THAN 25 YEARS LOCAL REAL ESTATE EXPERIENCE

 Here are some important details:

• Must have a  660 credit score or better
• Existing loan must be at least 6 months old
• No thirty-day late payments in past 12 months
• Lender will call wage earner’s employer for verbal verification of employment
• Self employed borrowers must provide copy of business license or prove existence of business
• All “other” income must be documented
• Borrower must have appropriate debt-to-income ratios

In some cases no appraisal is required- the original appraised value is used. Currently, interest rates are below 4.5% for borrowers with good credit. If you are paying 6% or more on your existing FHA loan, taking advantage of today’s rate could result in 25% of interest savings. A $200,000 loan at 6% interest is roughly $1,200/ month for principal and interest, not including taxes, insurance or mortgage insurance. At 4.5%, the payment would be $1,013. If the loan refinance fees were about $2,500, you would break even in about 14 months, then save about $183/month thereafter. 

For more particulars regarding an FHA refinance, contact Wayne Barni of Choice Funding at 530-224-6707.

530-224-6767 or 530-941-7492

BRAD GARBUTT

REALTOR/BROKER ASSOCIATE

REAL LIVING REAL ESTATE PROFESSIONALS

CORNER OF COURT AND PLACER IN REDDING

MORE THAN 25 YEARS LOCAL REAL ESTATE EXPERIENCE

• The loan to be refinanced can not be an FHA loan
• The homeowner must be current on their mortgage payments
• Must have a credit score of 500 or higher
• Must be the borrowers primary residence
• Existing lender must agree to write off at least 10% of the loan balance  bringing the total loan-to-value ratio to no greater than 115% of fair market value

The first step for borrowers wishing to take advantage of this program would be to contact their existing lender(s) and see if they are willing to write off at least 10% of the unpaid principal balance. If so, contact a local FHA lender for more information.

bradgreps@yahoo.com

530-224-6767 or 530-941-7492

BRAD GARBUTT

REALTOR/BROKER ASSOCIATE

REAL LIVING REAL ESTATE PROFESSIONALS

CORNER OF COURT AND PLACER IN REDDING

MORE THAN 25 YEARS LOCAL SALES EXPERIENCE

FHA sees this new program as a win-win for borrowers who get to keep their home and FHA protects their insurance fund from unnecessary losses. Here are some additional details:

• A borrower considered “facing imminent default” is one that is current on payments or less than 30 days late but has experienced a significant reduction in income or some other hardship that will prevent making future payments in a timely fashion
• Allows for a forbearance agreement to be created that allows the loan servicer to postpone, reduce or suspend payments due on a loan for a specific amount of time
• Allows qualified borrowers to reduce their payments permanently through an interest rate reduction or loan reamortization to an affordable level by using a portion of their insurance with a loan modification. Principal deferred becomes an interest free subordinate loan which is repaid once the first loan is paid off

The hardship must be documented by the borrower to the loan servicers satisfaction. The cause of hardship may include one or more of the following:

• Unemployment, reduced job hours, reduced pay, or a decline in business for self-employed would all be considered as reasons for loan modification. A scheduled temporary shutdown of the employer would not be reason enough to qualify for a loan modification
• Death in the family, permanent or short term disability or serious illness qualify as hardships

The loan servicer makes the final decision. If you know someone struggling to make house payments, ask them if they have an FHA loan. If so, direct them to HUD’s website or contact me for further information.

bradgreps@yahoo.com

530-224-6767 or 530-941-7492

BRAD GARBUTT

REALTOR/BROKER ASSOCIATE

REAL LIVING REAL ESTATE PROFESSIONALS

CORNER OF COURT AND PLACER IN REDDING

MORE THAN A QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE

First-time buyers and investors have been snapping up these properties soon after they hit the market. In some cases, bidding wars pushed the final selling price above the asking price! Buyers are attracted to these properties like flies to you know what believing they are capitalizing on someone’s loss. Low down or no down payment loans such as FHA and USDA have been used to leverage buyer’s limited cash resources to facilitate a purchase. Out-of-area buyers that largely fueled the run-up in real estate prices during the boom are all but gone. Today’s market is dominated by local Shasta County residents taking advantage of low prices and interest rates.

I wonder though if we have hit a saturation point looking at this significant uptick in available REO inventory. Speculation that banks are sitting on more than a million foreclosed homes could explain this increase. Perhaps banks are lowering the flood gates allowing more foreclosed inventory to hit the market. Banks must closely monitor the impact of listing REO’s for sale as a flood of distressed priced homes in one geographic area will only undermine values of other homes which these same banks hold loans on in these neighborhoods.

Shasta County’s higher than average unemployment rate only exacerbates the problem. Lenders aren’t approving loans for all but the most creditworthy borrowers. Additionally, prospective buyers must have stable and verifiable income to be granted loan approval. There’s talk of upping down payment requirements for the very popular FHA loan program from 3.5% to 5%. Credit score thresholds have been raised a couple of times this year by Fannie Mae to the point those with credit scores below 650 may not qualify for any loan.  A local mortgage broker told me this will have a major impact locally where, according to him, the avearge credit scores of borrowers he sees is just over 600.

Indications are 2010 will be another challenging year for all who work in the housing sector. Real estate agents, lenders, appraisers, escrow officers, home inspectors and contractors need to plan for another rough year as our nation nurses the hangover caused by lax oversight of the lending industry.

Many parts of California and the nation are reporting increases in home prices. Don’t expect that to happen here in the Redding/ Shasta County area until foreclosure activity subsides and REO listing inventory decreases to double-digit levels. I predict this will not happen here until 2011-at the earliest!

bradgreps@yahoo.com

530-224-6767 or 530-941-7492

BRAD GARBUTT

RELTOR/BROKER ASSOCIATE

REAL ESTATE PROFESSIONALS REAL LIVING

CORNER OF COURT AND PLACER IN REDDING

QUARTER CENTURY LOCAL SALES EXPERIENCE

• Downpayment can be a gift from a family member
• 2nd mortgage has a 15 year term at 8.25%
• Seller may contribute up to 6% of purchase price for closing costs
• Both first and second are fixed-rate loans
• No prepayment penalty on either loan
• Maximum loan amount is $417,000
• Maximum income for Shasta County residents is $66,840
• Loan for primary residence only
• Loan can be used for FHA approved condos, manufactured housing and single family homes
• Not limited to first-time buyers
• Buyers OK 2 years after bankruptcy or 3 years after foreclosure
• Buyers must take online homebuyer education course

Credit scores play a role so not everyone will qualify. Buyers should have credit scores at or above 620. Some lenders will raise the bar further to 640. Borrowers may be able to make some adjustments to their credit score by following the advice of a good loan officer.

For more details, give me a call or drop me an email. Wayne can be reached at 530-224-6707.

bradgreps@yahoo.com

530-224-6767 or 530-941-7492

BRAD GARBUTT

REALTOR/BROKER ASSOCIATE

REAL ESTATE PROFESSIONALS GMAC

CORNER OF COURT AND PLACER IN REDDING

QUARTER CENTURY LOCAL SALES EXPERIENCE

Jim-Liptak-CAR President

The California Association of Realtors recently published a guide aimed at informing buyers of the variety of financing options available today. Jim Liptak, President of the California Association of Realtors, wants interested home buyers to check out this new guide. The guide also helps prospective home buyers conduct a rent vs. buy analysis, details state and federal tax credits, and downpayment assistance programs.

The following link will take you to a pdf of the guide: http://www.car.org/tools/smart/clients/Financing_Programs_Guide_v21.pdfur

Be sure to contact your local real estate professional for information regarding other loan programs in use in this area. For example, Redding, Anderson, Shasta Lake and Shasta County all have downpayment assistance programs. Some are out of money and others have allocated their available funds. Some of these programs are hoping to replenish their funds later this year or early next year.

USDA loans are popular for buyers purchasing outside the city limits of Redding. This is one of the only 100% loan programs available besides eligible veterans using a VA loan. FHA loans are also quite popular today because of the low downpayment requirements and more liberal credit and underwriting standards.

Time is running out to take advantage of the federal tax credit which expires in November. Buyers hoping to take advantage of this program need to buy a home this month to allow time for escrow to close before the loan program expires. There is talk that the tax credit program may be extended and possibly expanded but nothing has been passed yet. Check back for updates.

Contact me if I can be of assistance:

bradgreps@yahoo.com

530-224-6767 or 530-941-7492

BRAD GARBUTT

REALTOR/BROKER ASSOCIATE

REAL ESTATE PROFESSIONALS GMAC

CORNER OF COURT AND PLACER IN REDDING

QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE

January 2009 saw the Redding average at $138. The average sales price began the year at $244,803 compared to July 2009 of $230,553. Anderson and Shasta Lake City home prices average $157,763 or $112/square foot, down from $164,644 and $117/square foot in January 2009. One reason the averages are lower for Anderson and Shasta Lake has to do with sample size. Smaller numbers of units sold lead to more variations.

At the peak of the market, the average home price in Redding hovered around $300,000. One could get a rough idea of their home’s value by multiplying their square footage by 200. Some homes are selling for half that today! What appears to be bad news for home sellers is good news for home buyers. Combine depressed prices with low interest rates and you have a window of opportunity for first-time buyers and investors.

Investors are finding that buying rentals in the current market makes sense. Low prices and interest rates make these properties pencil out assuming a reasonable downpayment of 25-30%. Rents have not fallenwith home prices. Investors can purchase a home in good condition around $200,000 and break even after paying interest, taxes and insurance on their mortgage. Rents in Redding for a three bedroom avearage $1,100/month.

First-time buyers are jumping into the market after years of waiting out the market. FHA loans remain popular for those buying their first home. These loans require only 3.5% down and have less stringent underwriting guidelines than conventional loans. The seller can assist buyers utilizing FHA loans with closing costs. This allows buyers to leverage their available cash to buy their first home. Move-up buyers also find FHA loans attractive if they don’t have enough cash to move forward after selling their smaller home.

The number of home sales pending  has nearly doubled since January. Home buyers in Shasta County have gotten the message about low home prices and interest rates and have stepped up and made the plunge into home ownership. I expect an influx of retirees once the recovery takes hold in the larger metro areas of California. Sales of upper end homes remain sluggish in Shasta County with more than 80% of sales occurring below the $300,000 price point.

bradgreps@yahoo.com

530-224-6767 or 530-941-7492

BRAD GARBUTT

REALTOR/BROKER ASSOCIATE

REAL ESTATE PROFESSIONALS GMAC

CORNER OF COURT AND PLACER IN REDDING

QUARTER CENTURY LOCAL SALES EXPERIENCE  

• 82% of sales in California are for homes priced below $500,000
• At the height of the boom, buyers were buying homes priced up to 10x their annual income
• Units sold are up, but dollar volume is down 53% due to price contractions
• Unsold inventory averages 4.6 months for all price ranges
• Unsold inventory for homes over $1,000,000 - 17.2 month supply
• Unsold inventory for homes priced below $300,000 - 2.5 month supply
• Distress sales are lowest in Marin County- 1 in 3
• Distress sales are highest in Solano County- 4 out of 5
• 22% of homes sold today at a net loss 
• 94% of home buyers are fluent with web and utilize internet for house hunting
• 9 out of 10 home sellers utilize the services of a real estate agent

Some other interesting points about where the housing market is headed:

• The soaring popularity of the FHA loan program will cause the program to go in the red next year-a first! The Mortgage Insurance Premium (MIP) has, to this point, offset any expense to the government (taxpayers!) to administer the insurance program. FHA loans were barely used during the bubble period 2003-2007.
• Second wave of foreclosures on horizon due to rising unemployment 
• The market bottom is still forming for high end homes

Financially induced economic downturn has resulted in a rapid, unprecedented decline in housing prices statewide. In the past, when home prices rose rapidly in California, they were sticky coming down.  The unparalleled breakdown in our financial systems has resulted in rapid price deflation.

bradgreps@yahoo.com

530-224-6767 or 530-941-7492

BRAD GARBUTT

REALTOR/BROKER ASSOCIATE

REAL ESTATE PROFESSIONALS GMAC

CORNER OF COURT AND PLACER IN REDDING

QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE