Pending Home Sales Showing Improvement

Recent data finds that pending home sales are holding steady over the past couple of months, while indicating that market conditions have improved considerably since the height of the recession.

According to the National Association of Realtors, its pending home sales index increased to 96.6 in December, marking a 1 percent improvement over November's figures. The December figures marked a 10.9 percent year-over-year improvement, indicating that while the market remains shaky, it has gained considerable momentum in the aftermath of the recession.

NAR also noted that sales had fallen by a 16.4 percent margin - with the market fluctuations due largely to buyers trying to take advantage of the federal homebuyers tax credit that was extended at the end of 2009.

The Northeast and western regions of the country have seen the strongest sales growth, with a respective 14.9 and 18.6 percent growth rate.

FHA Loans: Waiting Will Cost You Big Time

The FHA is making proposals to change mortgage insurance premiums, FICO (credit score) and down payment combinations and seller concessions. The changes will be posted in the Federal Register next month and after a comment period would become effective early summer.

With these rule changes, an FHA loan could cost you 10% more to close. That's $25,000 on a $250,000 loan.

3.5% Down Payments and seller concessions of up to 6% will soon be a thing of the past for many. Mortgage insurance premiums will also increase by 1/2 point.

Here is a quick summary of the changes:

• Increase upfront Mortgage Insurance Premium (MIP) to 2.25% – up 0.5%
• Decrease seller concessions from a maximum of 6% to a maximum of 3%
• Change FICO score/down payment combinations to as low as a 3.5% for a FICO Score above 580 and up to 10% for a FICO Score below 580.

So, with a FICO score below 580, the amount of out-of-pocket money to close an FHA loan would increase by about $25,000 on a $250,000 mortgage ($1,250 MIP, $7,500 increase in seller’s concession, $16,250 increase in down payment). This would be added to the current total cost, an increase of 10%. A FICO score above 580 could still add about $8,750 or 3.5%.

The FHA is taking these actions to reduce troubled mortgages in the future. They will also be making changes to reduce fraud.

These actions will allow them to add to their reserves against bad loans. As a home buyer, these changes will increase your overall costs to borrow tremendously.

Stay tuned, we'll keep you updated on these FHA Loan changes as they become effective.

Credit Counseling: Finding Help

If you need help getting out of debt, here's a couple of suggestions as to how to find help:

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Repeat Home Buyers Need to Act Fast

We've written about this subject a couple of times before, but it bears repeating now. Repeat home buyers need to act fast to capitalize on the expanded tax credit.

This past November, Congress elected to expand the home buyer tax credit to repeat buyers after seeing the success the temporary financial incentive had on the housing market and overall economy. As a result, current homeowners who will have lived in their home for 5 consecutive years out of the last 8 may now be eligible to receive a $6,500 tax credit.

To qualify for the tax credit, the repeat buyer must have signed a binding contract by April 30, 2010 and close on the home by June 30, 2010. Tax credit eligibility is subject to income limits, $125,000 for single buyers and $225,000 for couples. In addition, the sale price of the home being purchased can not exceed $800,000.

Of course, there is no requirement that existing homeowners must have sold their home to be eligible for the $6,500 tax credit. However, existing homeowners who want to benefit from this incentive to move quickly, particularly those who prefer to first sell their current home before purchasing a new one, need to move quickly. In normal situations, it takes around 3 months or longer to sell a home, and these are not normal times. So acting now is critical, if you hope to secure a buyer for your existing home before purchasing your new home and still fall under the time frame allowed by the expanded tax credit.

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Common Mistakes That Affect Your Credit Score

Find out how many points your credit score will drop if you make one of these common mistakes.

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