Joe Long - Purchase Perfect

As a professional lender I am constantly searching for new sources of information I can use to educate my clients. I have gone through numerous packets of information and assembled information from more sources than I care to quote. As a first time buyer you have the right to have all of your questions answered, and to feel comfortable with the home buying process.

All of my informative packets and flyers are now obsolete. Your First Home is an educational book for first time home buyers that is thoughtful, detailed and says all of the things I've been trying to say in a very accessible way.

I highly recommend this informative book to any First Time Home Buyer that may be considering buying a home. It will not only address your concerns, but it will instill in you the confidence you require to move forward with the purchase of Your first home.

The book is available from your real estate agent and covers everything from costs of closing, to financing options, to equity appreciation and beyond. I want to give a special "Thank You" to Guy Lofts, The Real Estate Guy for showing me this incredibly valuable resource for my clients.

If you are considering buying a home and want more information go to www.realestateguy.com to request a copy of the book. You'll be glad you did!

There was recently a leak from somewhere in the treasury reporting the treasury may be working on a plan to push mortgage rates as low as 4.5%.

This means a mortgage in Madison, WI or anywhere in the United States would be offered at a historically low interest rate. The goal of the program is of course to stimulate buyers, to bring them "off the fence" if you will.

There is a ton of "buzz" about this, rumors, a lot of misinformation, and consumers need to know a few things.

First, the Treasury has not pledged to institute this program. They may create this program, and if they do, there is not a timeline for it yet. Second, even in the article the program was quoted as a First Time Home Buyers purchase product ONLY. This means that though rates, which are set by market conditions, not the treasury, could follow for refinances, there is no indication of such as of yet.

Soooo...here we are. It sounds good, everyone wants it, but please do not let a rumor, that has not been oficially credited or discredited, make your decision! I've locked consumers at incredibly low interest rates this week, and a few of those people are "waiting" for the 4.5% rates.

Last week, when rates dropped significantly it was as a result of the Treasury announcing a program to buy mortgage backed securities(mbs). The result was a large increase in consumer confidence, and the announcement had results as intended.

As of writing this blog the treasury has still not released any verbiage on exactly how or when this program would be implemented, investors are still in the dark. We can learn then from these Treasury actions, that this market is so volatile that simply getting on the news and announcing a direction can cause large market movements in this economy.

If you are a consumer, and you are holding off on locking that rate because you could 4.5%, you at least need to know it is not likely to happen. You are taking a risk, you are gambling. The program as it sits right now is for First Time Home Buyers.

If you are looking at a refinance, consult with your loan officer. See if you can put in a longer lock on your loan if you feel the rates will come down that low. Rates are incredible right now, and you could miss your opportunity. There are 19 reasons to refinance, now is the time!

Finally, I want to emphasize something Jeff Belonger has been emphasizing forever. Your mortgage is not about you rate, it is about your payment. If the $50 or $100 is going to make or break you you have more problems than your interest rate.

Don't miss your chance waiting for something that may never come. If rates do get to 4.5%, you'll be saving a whole 1% and may want to refi again! I'll leave you with this, before the story broke late last week, what did you think about your 5.5% opportunity?

I am almost out of space for this one, however, depending on interest I may schedule another seminar shortly after. This is a hot source of business right now, if your phone isn't "ringing off the hook" right now you can't afford not to know how to negotiate with banks and go after pre-foreclosure listings.

Below is a detailed explanation of a 2-1 rate buydown for a 30 year fixed mortgage, and how it can be advantageous for a builder/broker to offer this program to a potential buyer.

Basically, a 2-1 buydown means the note rate on the loan is "bought" down, 2% for the first year, 1% for the second year and for years 3-30 the loan "caps," at it's fully indexed market rate. This loan is particularly appealing to those borrowers skeptical of the current mortgage market.

Taking a loan significantly lower than the current market rate in effect opens a 3 year window with which the borrower has time to refinance should the rates come back down. If rates do not drop, or if they go up the buyer has the peace of mind of knowing he/she has the lowest available interest rate at that time.

This loan would appeal to a prospective buyer who may have just taken a new position, relocated or graduated from College. The buyer may have a guaranteed wage increase within two years, making this 2-1 buydown very attractive as he/she can buy the home he/she wants now, and make the fully indexed payments later.

This mortgage should not be confused for an Adjustable Rate Mortgage, it is simply a 30 year fixed with graduated payment for the first two years. The borrower is qualified at the fully indexed rate, and the rate can never go above the market rate set at lock in.

The cost can be paid any number of ways. The seller can offer the buydown as a buyer incentive, it can be paid by a DPAP or gift, or it can be paid by the lender. The difference in payments is staggering, especially on larger loans.

I am including an example below of the savings a borrower will realize on a $300,000 mortgage at a note rate of 6.5%.

In this example the total cost of the buydown to the lender, borrower, or seller would be $6,827.64. This cost can be split between the lender and seller as well.

In contrast, for simplicity's sake let's say the seller offered a $6,827.64 reduction in costs as an incentive to the buyer. For the Seller's bottom line there is no difference between the price reduction and the buydown, but a 30 year fixed mortgage of $293,172.36 at a market rate of 6.5% leaves the buyer with a payment of $1,853.05/mo.

For a buyer that is not concerned with the rate, or the initial payment on the home, the cheaper sales price yields a larger savings over the 30 year period ($15,534.00). However, most homeowners refinance their home at least once, most every 3-5 years, and you are this homeowner, you would never realize the reduction in sales price cost wise like you would the buydown.

Clearly we are talking about two different borrowers here. One is skeptical of the market or new to the housing market, the other is an experienced borrower who may choose not to refinance. In these two cases, different loan options will yield different results for the two buyers, however knowing these options and being able to take advantage of your options means you are an empowered buyer!.

We're fortunate here in Dane County to have several State and local agencies providing Down Payment Assistance to eligible First Time Home Buyers that qualify. Affordable housing and Dane County are not always synonymous terms, so many of these agencies have been created to try and bridge that gap, to make rental housing and home ownership affordable for those families making less that the county median income here in Dane County.

One of the most important programs here in Dane County is offered to eligible first time home buyers in the form of a deferred payment loan in the amount of $9,000. Dane County Housing Authority (DCHA), provides their HOME loan to eligible applicants with annual income under 80% of county median income. With the median home price in Dane County hovering around $190,000, this loan is enough to provide the 3% down payment required by most First Time Home Buyer programs and to cover that first time buyers closing costs.

The loan is required to be paid back upon non-owner occupancy, cash out refinance or upon future sale. DCHA also requires the home buyer has 1% of their own funds into the transaction. This could be in the form of earnest money, prepaid homeowners insurance, an inspection paid for by the borrower, or the borrower can pay closing costs or make a 1% down payment.

The loan is available for purchase of a duplex, condo or single family home. To be eligible you must be a first time home buyer and be working with a loan program that qualifies for DCHA HOME funds.

I have used the program several times with great results. Many deserving homeowners, who may be ready for home ownership but may not be able to save for the down payment and closing costs, have found DCHA to be their helping hand. The administrators of the program are HUD certified housing counselors, and a home buyers education course is required for the program.

Since 2000, DCHA has provided 142 down payment/closing cost loans to first time buyer households at or below 80 percent County Median Income (CMI). In addition, approximately 2000 households(roughly 250 annually) have completed the DCHA First Time Home Buyer courses since 2000. DCHA hosts and coordinates 16 pre-purchase course annually and was a founding member of the Homebuyers Roundtable of Dane County.

If you are a Real Estate Professional looking for more information regarding DCHA click here. If you are a home buyer and you want to know if you qualify for HOME funds for down payment assistance please contact me to take a quick mortgage application and discover what your options are.