On July 26 the Senate passed the housing bill aimed at reviving the nation’s housing market.  President Bush is expected to sign it soon. The two primary objectives of the bill are to ensure the smooth functioning of Fannie Mae and Freddie Mac, and to assist homeowners at risk of foreclosure. Here is a simple breakdown of the elements of the bill that will impact most folks who are not facing foreclosure:

The Fannie Mae, Freddie Mac and FHA conforming loan limit will be permanently increased to 115% of the median area home price from $417,000. More details will be available in the coming days as to how they will define the median area home price, but the Washington DC metro area will see a limit higher than $417,000.  You may recall this was temporarily raised in the stimulus package earlier this year.

A first-time homebuyer tax credit of $7,500 for anyone closing between April 9, 2008 and July 1, 2009 goes into effect. A first-time homebuyer is defined as anyone who has not owned a home in the past three years. The credit is reduced gradually for single filers with an adjusted gross income over $75,000 and joint filers with adjusted gross income over $150,000. The refund is actually an interest-free loan that must be paid back over 15 years in equal installments.  Logistics of this have yet to be worked out.

For 2008, the bill provides an additional $500 single filer deduction for folks who do not itemize their taxes, $1,000 for joint filers.

How much will this really help the housing market?  That remains to be seen.  The permanent increase in the conforming loan limit is the most useful for our market in the long run.

Do you think this bill will improve the housing market?  Post a comment for us to read…

Credit for this blog is given to GCAAR.  www.gcaar.com

Fannie Mae will no longer require borrowers to put up an extra 5% down payment when purchasing homes in areas deemed “declining markets.” Fannie Mae had been hearing concerns from REALTORS® and others for months that the policy was bad for housing because it discouraged consumers from buying in markets hardest-hit by foreclosures. NAR met several times this spring with Fannie Mae officials and sent letters reflecting members’ unease with the policy. Under the policy change, borrowers can get loans up to 95% loan-to-value, even in markets in which prices have been falling. Prior to the change, borrowers could only get loans up to 90% to give lenders a 5-percentage-point cushion to protect against possible price declines in the future.

The new policy takes effect June 1, and Freddie Mac has said it will also scrap this policy

Finally – something with teeth!

As part of the economic stimulus package passed into law this past month, Fannie Mae, Freddie Mac, and the FHA have increased their conforming loan limited to $729,750 in the DC Metro area starting April 1!

Though pricing has yet to come out, this change should make buying in the DC Metro area much more affordable. Talk to your individual lender about how this impacts your qualification. FHA loans have not been viable for years because the caps were too low and the loan to cumbersome. The FHA limit is permanent, but the Fannie Mae and Freddie mac limit expires at the end of 2008.

Do you think a change like this will make you more or less likely to buy this spring and summer? Feel free to post a comment on our blog.

The sales statistics clearly show a buyers market with transactional volume down. Do you wonder where these stats come from? Check out the sales figures from the Greater Capital Area Association of Realtors.

Last week the Senate and the House agreed to an Economic Stimulus package and are sending it to the President for signatures immediately. Part of the stimulus package includes an increase in the Fannie Mae and Freddie Mac loan limits which are currently at 417K.

What this means is it will now likely be cheaper to get a mortgage for homes up to about 700K. The exact workings of this program have not been finalized, but this should stimulate markets like DC where most of the homes are above $417,000.

What should you do? Watch the news, speak with your lender, and consider refinancing if your loan is above 417K. If you’re in the market to buy, this should significantly help affordability this spring.

If you’re one of the lucky ones to receive a rebate check, here are 10 tips for homebuyers during these tough economic times – and how to use your rebate check to maximize your home buying opportunities:

1. Spend the money on a quality home inspection – most inspections run $250-$550. You want to make sure you’re not buying someone else’s problems!
2. Buy down your interest rate and make the home even more affordable! In some cases you can use a few hundred dollars (depending on the loan amount) to discount your interest rate.
3. Valuation of property in today’s market is extremely important. Use your rebate check to buy an extra appraisal – to make sure your contract price is not overly inflated.
4. Is your rent rising faster than you can calculate? Use some of that rebate to break your lease and buy sooner. Many sellers will even help you pay the fee associated with breaking your lease to get you to move on their home!
5. The difference between a short term adjustable rate mortgage and a 30 year fixed mortgage can be only a few hundred dollars. Use your rebate money to give you an extra cushion for the first few months until you get used to your new monthly mortgage payment.
6. Carrying a small balance on your Macys card you just haven’t paid off? Even small balances on cards can impact your credit score – which increases your monthly payment. Pay off those small balances now!
7. Buy a home warranty when you settle on your new home. For about $500 you can buy a 1 year home warranty which will protect most of the systems in your home.
8. Buy a one year termite warranty. Termites are aggressive – and can damage your home’s structure quickly. If the home currently does not have termites, the one year termite warranty is only about $50.
9. Now that you’ve bought a home – use your rebate money to sit down with an estate planning attorney to make sure your will is updated and your assets are protected.
10. About $500 will buy you a complete financial analysis from a certified financial planner. Now that you’re a homeowner, it is time to make sure the rest of your financial house is in order. Speak with a professional – let them create a plan for you.

Fannie Mae and Freddie Mac say “No more 100 percent financing products on our backs in declining market areas!”

Many lenders, including Fannie Mae and Freddie Mac, are implementing declining markets policies. This is in response to the current turmoil in the housing market. Some parts of the DC metro area are affected, but many are not — particularly neighborhoods inside the beltway. These new guidelines mean the maximum amount you borrow may be reduced by 5%.

If you’re looking for a home, consult with your lender to see if you’re affected. Your lender can tell you whether the property you are interested in is affected by these new policies.

Rob Riggins
Washington Home Mortgage