Oakland,CA: Bay Area home sales have dropped since December, but sales are still higher in early 2011 than they were during the same period in 2010, a real estate information service said.

Existing home sales track the number of Single family Homes, Town Homes, Condo’s and Co Ops. Each Month the National Association of Realtors receives data on existing-home sales from local associations/boards and multiple listing services (MLS) nationwide. In January 2011 the NAR reported sales increasing from the previous year for three consecutive months. Existing-home sales in the West rose 7.9 percent to an annual level of 1.37 million in January and are 7.0 percent above January 2010. Distressed homes were 37 percent of the market share.

Lawrence Yun, NAR chief economist, said the improvement is good but could be better. “The uptrend in home sales is consistent with improvements in the economy and jobs, which are helping boost consumer confidence,” Yun said. “The extremely favorable housing affordability conditions are a big factor, but buyers have been constrained by unnecessarily tight credit. As a result, there are abnormally high levels of all-cash purchases, along with rising investor activity.”

All-cash sales rose to 32 percent in January from 29 percent in December and 26 percent in January 2010. All-cash purchases are at the highest level since NAR started measuring these purchases monthly in October 2008, when they accounted for 15 percent of the market. The average of all-cash deals was 20 percent in 2009, rising to 28 percent last year.

“Increases in all-cash transactions, the investor market share and distressed home sales all go hand-in-hand. With tight credit standards, it’s not surprising to see so much activity where cash is king and investors are taking advantage of conditions to purchase undervalued homes,” Yun said.

Now this is good news for the economy but what does this news mean to the first time buyer using financing with high loan to values such as FHA or VA? Well first of all it means it will be harder to get an accepted offer as all cash closes quicker and is not reliant on an appraisal so be prepared to be rejected by all cash offers.

This is not all bad new however; you just need to see this news for what it is. A lot of investors are buying these properties to flip. A lot of these properties that are on the market have a lot of major damage, neglect, vandalism, etc. These properties may never qualify for any kind of conventional, FHA and definitely not VA financing. These investors plan on renovating and renting or more likely selling these properties. So in a few months these properties will be back in the market, at a little higher price, yes, however at least they will be move-in ready for you!

We have seen a lot of home buyers using conventional and FHA financing get really frustrated with all cash offers in areas like Alameda, Berkeley, Oakland, and San Francisco because there are quite a few cash offers. It is very frustrating but, keep in mind the right property will be there for you when the time is right!

To Apply Online with the Werdmuller Group Visit http://www.garrick.biz/applyNow.html.

That’s right! On April 18th 2011 FHA Monthly Mortgage Insurance Premiums go up for the first time since the changes in effect as of Oct 4th. The change is .25 basis points to the Monthly Mortgage Insurance Premium. The 25 basis point rise was proposed last week as part of the Obama administration’s report to Congress on reforming the nation’s housing finance system, and was detailed in President Obama’s fiscal year 2012 budget.

FHA Commissioner David Stevens says the increase will help strengthen the agencies depleted reserves. “This quarter point increase in the annual MIP is a responsible step towards meeting the congressionally mandated two percent reserve threshold, while allowing FHA to remain the most cost effective mortgage insurance option for borrowers with lower incomes and lower down payments.”
He also states the cost to the borrower will be about $30 a month. This is true if the property you are buying is around $160,000. The truth is it will raise payments by $20.83 per every hundred thousand. No this is not a huge increase however it is another increase in borrower closing costs making it more expensive and challenging to get a home loan.

Links
http://www.whitehouse.gov/omb/budget/Overview/

http://the-buzzz.com/2010/08/20/mortgage-insurance-premiums-for-fha-financing-go-up-oct-4th/

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In October, the FHA set a minimum FICO score of 500 for borrowers who want an FHA-insured loan — the first time a minimum was set. It also introduced a new minimum down payment of 10 percent for borrowers with FICO scores below 580. (Those above 580 still pay a minimum 3.5 percent.)

In addition, new rules that went into effect this month adjust the two types of mortgage insurance paid by consumers for loans insured by the F.H.A.

One change raises the annual insurance premium, paid monthly, setting it at 0.85 percent to 0.9 percent of the loan balance, depending on the down payment or equity owned. The other change lowers the one-time upfront insurance premium that borrowers must pay to 1 percent of the loan balance.

The upfront premium is paid in a lump sum at closing either from borrower funds, or it can be added to the loan balance. The monthly premium is paid over the life of the loan in addition to the interest and principal.

Here is an example provided by HUD of how the changes would affect your payment:
“A borrower puts 3.5 percent down on a $154,000 house with a 30-year fixed-rate mortgage at 5 percent (such a consumer typically earns a gross annual income of $54,000, according to the agency) and who finances the upfront premium into the loan. You would see monthly mortgage payments, including taxes, interest and the two insurance premiums, rise to $1,238 from $1,205. The example is based on median data, including property taxes put at about 2.5 percent of home value. That increase includes the drop in the upfront mortgage insurance, to $1,486 from $3,344 — but also includes the rise in the monthly insurance premium, to $111 from $68.”

Last August, President Obama signed into law a bill authorizing the FHA to increase premiums to shore up its insurance funds; the agency had been authorized to raise the annual premium to as much as 1.55 percent, however HUD has not yet implemented this maximum.

FHA borrowers can stop paying the monthly mortgage insurance premium either after five years or when their loan-to-value ratio reaches 78 percent.

It’s more important than ever to have a competent lending team on your side FHA or not. If you are looking to purchase in the Bay Area with FHA financing know that the Werdmuller Group has 43 years’ experience and is here to help you navigate through the transaction.

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Hud sent this message out Monday,

“Notice on Foreclosure Moratorium Activity:

This is a summation of the information conveyed in the two industry calls of December 1 and 2, 2010. These calls served as communication to industry partners of HUD’s requirements regarding interest curtailment due to the recent foreclosure moratorium activity. A mortgagee letter will be forthcoming publishing HUD’s requirements. However, these requirements are not introducing new policy, rather they will re-emphasize existing policy guidelines previously published on foreclosure moratoriums.

The Department has been advised that due to a recent change in state laws or state mandated moratoriums, some foreclosures had to be cancelled or stopped and rescheduled to complete all of the new legislative requirements. HUD will bear the cost of any delays in the foreclosure process when the servicer had to comply with moratoriums that were beyond their control, and where the servicers were not cited for non-compliance. A ninety (90) day extension is provided to mortgagees where the initial legal action to commence foreclosure has been cancelled to comply with a new state legislation. Where the mortgagee experiences a delay that is beyond its control, because the mortgagee is prohibited from initiating foreclosure due to state law or federal bankruptcy, the mortgagee will be in compliance if foreclosure is commenced within 90 days of the expiration of the prohibition.

Below is a link to the FAQ’s that may answer some of your questions on extensions of time.

http://www.hud.gov/offices/hsg/sfh/nsc/faqextns.cfm”

It will be interesting to see where this takes us next year.

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As a loan originator, I am constantly telling buyers and real estate agents that there is more to an FHA transaction than a conventional transaction and the lenders will look at the details of the file much closer.

What does this mean exactly? Well the application is longer and has a separate set of disclosures required by HUD. There seem to be twice as many conditions to get closing docs out and there could be a lot of surprises, especially when it comes to property conditions.

To offer an example, my team just experienced first-hand how the interpretation of the condition of the property can make for a hectic transaction. First of all, there was a pest report done on the home that had a few issues, none of which were section one items that would (normally) be required to be fixed prior to the close of escrow. There was however, a railing that needed to be built on the deck and some grout that needed replacing- which were issues noted by the appraiser.

Now, we expected to have the new railing reinspected and approved by the appraiser… which we did…. great!

As we cruised along to closing, unexpectedly the underwriter became very concerned about that grout….. so here came several new conditions…that grout had to be replaced and the deck had to be re inspected from underneath with regards to termite infestation… work had to be cleared by a professional contractor (or the termite company)…in workmanlike manner… yes, those were the exact words…

I have also seen recently appraisers and/or underwriters wanting water damage inspected, additional grout issues, debris removal, rubber caulking replaced, and cover plates installed. The challenge of these issues is they are at the discrepancy of the underwriter and/or appraiser. My Account Executive even told me other underwriters would not have conditioned for these minor repairs. There is no black and white answer as to what will be in question.

Our best advice is what I advised my clients to do in the beginning and submit an addendum stating the buyer waive their right to a pest inspection especially considering there was nothing wrong with the property outside of what we would consider minor issues. I suggested this to the real estate agent and she was sure with her 20 years’ experience there was nothing on the inspection. Note to self: go with your gut! The right (or wrong?) underwriter might think the home will crumble the day after we close escrow!

It’s more important than ever to have a competent lending team on your side FHA or not. If you are looking to purchase in the Bay Area with FHA financing know that the Werdmuller Group has 43 years’ experience and is here to help you navigate through the transaction.

Here is a link to HUD’s Appraisal and Property Requirements:

http://www.hud.gov/offices/hsg/sfh/ref/chap1.cfm

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