Loudoun County Real Estate Statistics and News

Underwater Mortgages - An Interview on Nightly Business Report

A  story that has been getting alot of media attention lately is the impact on homeowners of owing more on there homes than the home is worth.  Usually referred to as being "underwater", this financial situation is becoming a serious problem throughout the country. 

It has led directly to the explosion of short sales and voluntary foreclosures and indirectly to the drop in consumer sentiment and a pull back in the American consumer's appetite for spending.  

I was lucky enough to interviewed by Stephanie Dhue of Nightly Business Report yesterday and the segment ran yesterday on PBS nationwide.  It is the second segment in this video.

Here are several stories regarding underwater mortgages.

The report from Deutsche Bank thatunderwater mortgages will hit 48%.  This was quoted in the NBR report.

An in depth report on the effect of underwater mortgages and foreclosures by CoreLogic.

Report that currently 1 out of every 4 mortgages in America is underwater.

203k Loan Program for Renovation of Homes

Mike Pfeffer of Fidelty and Trust Mortgage recently gave me some insight into a loan program that could be a perfect fit for some of the homebuyers here in Loudoun County.  The program comes from section 203(k) of the FHA Insurance Program and is a Renovation Loan.  Here is Mike's explanation of the program and his contact information in case you have any other questions.

The section 203(k) program is a little known piece of the FHA insurance program that was designed to allow borrowers to purchase or refinance and rehabilitate a property with one loan closing.  The funds for renovations are fully dispersed at closing but often held in escrow (depending on the scope of work) and released as work is completed.  This managed escrow dispersal helps ensure the timeliness and quality of the chosen contractors work.  Renovation Loans are a great vehicle for borrowers to finance renovations and spread the cost out over 30 years, especially in a world in which home equity loans are increasingly difficult to obtain.

For borrowers - this is a common sense means to finance repairs/upgrades that can make your existing home look and feel like new, or put your personal touch on prospective purchases.

Renovation or rehabilitation loans are not well known but play an important role in the revitalization of neighborhoods.  These loans have maximum loan limits based upon geography but will soon increase substantially (for example the newly released loan limit for the Washington, DC, metropolitan area is $729,750, up from $362,790).  These new limits have not yet become fully accepted but they will shortly, and may only be available through the end of 2008.  Since these new limits are temporary in nature, now is the time to research this option.

You can contact Mike directly at 703.967.0709 or email him at [email protected]

Capital Market Turmoil Finally Hits Virginia Homebuyer Loan Programs

The Virginia Housing Development Authority has finally been affected by the prolonged turmoil in the capital markets.  Due to liquidity issues in the marketplace the VHDA has been unable to secure financing and will therefore have to cutback or eliminate altogether several of their Single Family Homeownership Loan Programs.  Here is the complete list of changes and the effective dates sent out in the newsletter by VAR.

How To Save 30 Percent on Title Insurance When Buying A Home or Refinancing

All home buyers have fees to pay associated with the purchase of property of which Title Insurance is a part. And it's expensive. Based on a $450,000 property (the median sales price of a home in Ashburn, Virginia), the cost is around $2,000 (about $1300 for the lender's policy and $700 for the owner's policy).

Would you like to keep some of that $2,000 in your pocket? You may be able to if you can get the re-issue rate on the owner's policy, which is 30 percent less than the regular cost.

In order to get the re-issue rate, the Owner's Title Insurance policy that the current owner has can not have been issued more than 10 years ago. If seller doesn't have an Owner's Title Insurance policy or if it's more than 10 years old, you're out of luck.

To make sure that you don't lose out on the savings, write it into the purchase offer. If you're in Northern Virginia and using the "Regional Sales Contract"*, you can add the appropriate verbage in "Other Terms" (paragraph 34). If you're curious as to the proper verbage to use, check with your agent or real estate attorney.

If using a real estate agent, your agent should have already checked if the sellers bought the house less than 10 years ago and if so, addressed this with you prior to submitting your offer. If they haven't mentioned it, bring it up.

A few minutes worth of work. A few hundred dollars saved. Not a bad hourly rate!

Note - You also get the reissue rate if you're refinancing so don't forget to double check on this with your settlement agent prior to closing on your refi.

*The "Regional Sales Contract" is widely used by real estate agents in Northern Virginia. Your specific agent and/or area may use different forms.

Great Loan Opportunity for First Time Buyers in Loudoun County

Beth Perry of Suntrust Mortgage has brought to our attention a great new loan for first time home buyers in Loudoun County.  Here is her description of the loan and its details:

Loudoun County has just released a New "First-Time Homebuyer" program to help increase Home Sales in the area as well as make housing affordable to buyers.  In partnership with Virginia Housing, the County is offering a 1% reduction to their current fixed rate. With this reduction it brings their current 30 year fixed rate as low as 5.375%. 

They offer 100% financing with No Mortgage Insurance or Second Trust  which adds to the homeowners monthly savings.  With the current market changes it allows 100% financing to buyers with a middle credit score of 660 and as low as 620 with 5% down and a maximum Loan Amount of $417,000.

It really opens up the door for first time buyers!  In the past First-Time Homebuyers were limited to Condo's and lower-priced Townhomes. Now they can even consider a Single Family Home!  This is a limited time offer for these funds until the 30th of June.

For more information or to get in on this program, here is Beth's contact information:

Office # 703-464-4346

Cell #703-408-7346

[email protected]

Or you can always respond here and we can answer any questions you might have.

Update On New Law Regarding Private Mortgage Insurance (PMI)

President Bush officialy signed into law a bill making mortgage insurance premiums tax deductible. But the law may not directly effect you...

As reported by the Chicago Tribune, the new tax legislation makes premiums fully deductible for borrowers who take out a new mortgage-insurance contract in 2007, provided they have $100,000 or less of adjusted gross income ($50,000 if married and filing separate returns). The deduction phases out for borrowers with incomes between $100,000 and $109,000.

The deduction applies to insurance on mortgages taken out to buy homes and on refinancings, provided the new loan isn't for more than the amount of mortgage debt being refinanced. To claim the deduction, borrowers must file an itemized tax return. Unless the law is extended, the tax break will expire at the end of 2007.

Here's my question...since the law will only benefit a few consumers who buy homes this year, is this just an attempt to temporarily help the slumping housing market and should be viewed as mostly symbolic?

Will Private Mortgage Insurance (PMI) Soon Be Tax Deductible and Better Than A Piggy-Back Mortgage?

A post on Mortgage New Daily entitled "PMI Deduction Buried In The Closing Acts Of Congress" reports that Congress may have passed a bill ammending Section 6050H of the Internal Revenue Code. If this is so and the bill is signed by the President, PMI will be treated as interest and will become tax deductible.

Many consumers have avoided PMI by obtaining a piggy-back mortgage or "2nd trust" for the remaining financing amount over 80% LTV. The interest on the piggy-back mortgage is tax deductible and one of the reasons why the option is so popular.

In speaking with a lender today, if the bill becomes law, it was explained to me that,

• financing less than $400K and going with an 80%+ LTV loan and PMI may be the best option for you.
• financing more than $400K and getting a piggy-back mortgage without PMI may be the best option for you.

Though it hasn't officially been passed, there's plenty of discussion going on within the industry already. And we're sure to see plenty of debate between lenders and mortgage insurance companies on which is better.

We'll have to see what happens next month when it's put before the President to sign.

Check with an experienced and reputable lender and tax professional for clarification and to see which loan program is best suited for you.