Making It Harder In Hard Times

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“I’m from the government and I am here to help you” is a tongue in cheek saying that is older than I am. The truth is the government is putting new rules in place that you may need to be aware of or comply with in the future.

Buyers of homes who obtain FHA loans will see the costs of their loans increase and therefore, their purchasing power will decrease.

What the government giveth in first-time homebuyer tax credits, it now takes back with the other hand. The upfront mortgage insurance premium will rise from 1 1/2 percent to 2 1/2 percent. That means on a $100,000 loan, the buyer will need an additional $500 in upfront money. Seller concessions to help the buyer will be reduced from 6 percent to 3 percent.

For a young buyer without credit or for those with less than perfect credit, the minimum down payment will rise from 3.5 percent to 10 percent, making homes out of reach for many and perhaps slowing the sales of homes even further.

In addition, FHA is looking to raise their monthly fee from the current .55 percent cap. The end result is that buyers could see a rise in their monthly payment of $50 to $100. This increase in rates is theorized to make the FHA balance sheet healthy again which will hopefully ensure their long-term viability.

There is a new type of non-traditional mortgage loan available for higher net-worth buyers. This is an asset-based loan where other assets (such as stocks or bonds) are used to collateralize the loan instead of the actual home.

The rates in early 2010 have been hovering between 2.5 percent and 4.5 percent, which is lower than the typical conventional mortgage rate.

There are benefits to these types of loans, but also drawbacks. In the event the assets backing the loan decline in value to less than the loan amount, the borrower would be compelled to make up the difference.

A new rule put into effect by the United States Environmental Protection Agency falls under the heading of lead-safe remodeling.

This rule takes effect April 22, 2010. If you have a home that was built prior to 1978 there is a fair chance that the paint in the home contains lead.

If you intend to remodel the home and disturb the existing paint, you are required to use an EPA contractor that is certified by the agency in lead-safe practices.

For more information, you may go to www.realtor.org and search for “lead paint renovation.”

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