If you buy a home through HomePath, in addition to a great buy, there are some great incentives such as:

• No appraisal needed
• No PMI (Private Mortgage Insurance)
• As little as 3% down on primary residences and 5% down on second homes and investment properties
• Credit scores as low as 660
• 3.5% incentive to be used towards closing costs and/or new Whirlpool appliances.  (incentive applies only to owner occupied properties)

This program is only available through June 30, 2010 so you would have to sign a contract and close by then to be eligible.  For more information and to search for available properties, click on the HomePath link above, or visit www.HomePath.com.

Before we can make any assumptions, we have to look at how far we’ve really fallen.  According to the S&P/Case-Shiller Home Price Index, the popular measurement that tracks changes in the value of residential real estate in 20 metropolitan regions, prices have fallen 32.6% peak to trough, between 2006 and the third quarter of 2009.  Obviously some areas such as Florida, Arizona, Nevada, and California were hit harder, so it will take even longer to recoup the values once seen there.

But going forward, expect appreciation to be S-L-O-W but steady.  Predictions for the first half of 2010 are flat, with a 2.5% increase from July 2010 to August 2011.  From there, expect the normal 3% annual appreciation from there.  And I can’t imagine we’ll see anything more than that for a while.

With this in mind, let’s look at what happens to the value of a $200,000 house purchased at the top of the market in July 2006.  By the time the housing market hits bottom, according to Case-Shiller, that property was worth only $134,800, a decline of 32.6%.  Using the above estimates for appreciation, the value of this house won’t get back to the $200,000 until (gasp) July 2022!  That’s right, 12.5 years until it gets back to where it was.

Like the stock market at the turn of the century, the housing bubble has a lot of people underwater with yet another asset.

This move does not affect the Fed’s main policy tool, the Federal Funds rate, which remains at -.25%. The fed funds rate is the rate one bank charges another for an overnight loan.  This is the rate that influences business and consumer interest rates. The Fed reiterated the fed funds rate would remain near zero for “an extended period”, which means at least a few more months.

Although the mainstream media has had a field day with “the sky is falling” scenarios, mortgage rates will not and cannot go up anytime soon.  One just need to look at the unemployment numbers and tight credit supply to realize that the housing market isn’t rebounding anytime soon.  Without a housing turnaround, the economy can’t rebound as quickly as the government hopes.  Expect rates to remain low for the remainder of 2010 and I wouldn’t be surprised if they remain low into 2011 as well.

The Worker, Homeownership, and Business Assistance Act of 2009 has extended the tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence. The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.

For sales occurring after November 6, 2009, the Act establishes income limits of $125,000 for single taxpayers and $225,000 for married couples filing joint returns.

The income limits for sales occurring on or after January 1, 2009 and on or before November 6, 2009, are $75,000 for single taxpayers and $150,000 for married taxpayers filing joint returns.

Existing Homeowners

The Worker, Homeownership, and Business Assistance Act of 2009 has established a tax credit of up to $6,500 for qualified move-up/repeat home buyers (existing home owners) purchasing a principal residence after November 6, 2009 and on or before April 30, 2010 (or purchased by June 30, 2010 with a binding sales contract signed by April 30, 2010).

For more information, visit the National Association of Home Builder’s website.

The tightening has been taking place since last year, with the focus being on equity and credit scores, completely ignoring those who may have less than 20% equity or a credit score below 680.  But new guidelines are focusing on who has been responsible enough to keep up with payments, rather than just sticking to a “set” formula.  The focus has been on those who couldn’t keep up, so it’s good to finally see relief for those of us who have making payments on time and doing whatever we have to to keep our heads above water. 

So far, only Fannie Mae has released their new guidelines so your loan must be a Fannie Mae serviced loan (contact your current lender or visit http://www.fanniemae.com/homeaffordable to find out if your loan is a Fannie loan) Some of the most important changes include:

• No PMI required on a refinance if you previously didn’t have PMI.  In other words, if your home’s value has dropped (most likely the case) and you go to refi and you now have less than 20% equity, then you won’t be required to have PMI.
• Ability to refinance a loan with an existing second mortgage where the total LTV (loan to value) is up to 105% of the value.  (Previously this was 95%)
• Relaxed credit score requirements for scores below 680.

As you can see, they are really working hard to help everyone, not just those on the brink of foreclosure.  And I believe many more changes are coming for responsible homeowners, including lower rates.  Stay tuned…