New Rules to Clarify Fees
New regulations from the Department of Housing and Urban Development will require that closing costs be spelled out on a revised and consumer-friendly version of the good-faith estimate form that borrowers are supposed to receive within three days of applying for a mortgage. These rules will take effect Jan. 1, 2010.
Fees are divided into three categories:
* Fees that cannot increase from upfront estimates to closing, including lender or broker’s mortgage origination, processing, and underwriting charges, as well as lender or broker’s “points” based on the interest rate quoted and local transfer taxes.
* Fees that can increase as much as 10 percent from upfront estimates, including services such as appraisals, title insurance, and recording fees from local governments.
* Fees that can increase without limit because the amount is difficult to predict in advance, including home owners insurance, daily interest charges on the loan, and initial deposits by the borrower into an escrow account.
The new HUD-1 form will allow the borrower to easily compare what they were told the settlement fees will be with what they actually are at closing.
Source: The Washington Post Writers Group, Kenneth R. Harney (11/06/2009)
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TIME RUNNING OUT…
TIME RUNNING OUT ON FREDDIE MAC OFFER TO PAY UP TO 3.5 PERCENT OF CLOSING COSTS ON ELIGIBLE HOMESTEPS® HOMES.
McLean, VA – Freddie Mac (NYSE:FRE) today reminded homebuyers they have less than a month left to take advantage of Freddie Mac’s offer to pay up to 3.5 percent of the buyer’s closing costs when they buy a single family HomeSteps® home as their primary residence under HomeSteps “SmartBuy”.
HomeSteps SmartBuy, which began on July 17, 2009, also includes a comprehensive two-year home warranty on HomeSteps homes. HomeSteps is the real estate sales unit of Freddie Mac and markets a nationwide selection of Freddie Mac-owned homes.
To take advantage of the HomeSteps SmartBuy closing cost offer, buyers must submit initial purchase offers on HomeSteps homes by October 30, 2009 and complete the closing by December 31, 2009. “Every home shopper should know there are only 30 days left to save potentially thousands of dollars in transaction costs when they buy a HomeSteps home,” said Chris Bowden, vice president of HomeSteps. “Combined with our offer to provide a comprehensive two-year warranty on unexpected repairs, we believe HomeSteps homes provide a tremendous long-term value in today’s competitive marketplace.” Full Details
Front Gate Properties, We’re selling the BEST Real Estate in Aiken, SC.
HUD Announces Guidance for Use of Tax Credit on FHA Loans
In his speech at the National Association of REALTORS® Housing Summit on May 12, 2009, US Department of Housing and Urban Development (HUD) Secretary Shaun Donovan announced a program that allows borrowers to use the first-time homebuyer tax credit for a down payment or closing costs on a FHA-insured mortgage. The Secretary said “We think the policy is a real win for everyone, ensuring that borrowers can tap into the numerous organizations that are already part of the FHA network to receive this additional benefit.”
The details of the program were announced today in Mortgagee Letter 2009-15. Government entities and instrumentalities of government may provide a second mortgage. Currently, 10 state housing finance agencies offer a product buyers can use that will effectively monetize the tax credit for down payment purposes. These states are Colorado, Delaware, Idaho, Kentucky, Missouri, New Jersey, New Mexico, Ohio, Pennsylvania, and Tennessee. State Associations are encouraged to work with their respective housing finance agency to implement similar programs. The 3.5 percent down payment may also be a gift from a family member, employer or nonprofit, charitable organization.
The original guidance permitted lenders and HUD-approved nonprofits and lenders to offer bridge loans via second lien financing or short term loans. Guidance released today allows lenders to offer the monetized tax credit for down payments in excess of 3.5 percent, closing costs and interest rate buy downs. Mortgage industry leaders have indicated that this type of product may not be immediately available to consumers. Lenders will need some time to develop documentation for what will effectively be personal loans to the home buyer.
Front Gate Properties, We’re selling the BEST Real Estate in Aiken, SC.
HUD: Tax Credit Can Be Used on Closing Costs
FHA-approved lenders received the go-ahead to develop bridge-loan products that enable first-time buyers to use the benefits of the federal tax credit upfront, according to eagerly awaited guidance from the U.S. Department of Housing and Urban Development on so-called home buyer tax credit loans that was released today.
Under the guidance, FHA-approved lenders can develop bridge loans that home buyers can use to help cover their closing costs, buy down their interest rate, or put down more than the minimum 3.5 percent.
The loans can’t be used to cover the minimum 3.5 percent, senior HUD officials told reporters on a conference call Friday morning.
Thus, buyers applying for FHA-backed financing with an FHA-approved lender that offers a bridge-loan program can get a bridge loan to bring down the upfront costs of buying a home significantly but would still have to come up with the minimum 3.5 percent downpayment.
There remain many sources of assistance for buyers needing help with the 3.5 percent downpayment, including many state and local government instrumentalities and nonprofit lenders.
In addition, some state housing finance agencies have developed their own tax credit bridge loan programs, so buyers in states whose HFAs offer such programs can monetize the tax credit upfront to cover all or part of their downpayment. These programs are separate from what HUD announced today.
The first-time homebuyer tax credit was enacted last year–and improved upon earlier this year–to help encourage households to enter the housing market while interest rates are low and affordability is high. The credit is worth up to $8,000 and is available to households that haven’t owned a home in at least three years. The credit does not have to be repaid, and is fully reimbursable, so households can get their credit returned to them in the form of a payment.
Learn more about the credit, including how to apply for it this year even if you’ve already filed your taxes, at REALTOR.org.
Source: Robert Freedman, REALTOR® Magazine Online
Front Gate Properties, We’re selling the BEST Real Estate in Aiken, SC.
