Government Aid for First-Time Home Buyers

This is one of the more informative articles on first time homebuyer programs that I have found. Source: smartmoney.com

GOVERNMENT-BACKED ASSISTANCE for first-time home buyers is back in vogue.

During the real estate boom, many first-time home buyers ignored government mortgage assistance, favoring instead the subprime, Alt-A and piggyback mortgages offered by private lenders who required little in the way of a credit score or, for that matter, money toward a down payment. But now, thanks to the subprime mortgage meltdown, the easy money is all dried up. Lenders have either significantly tightened their lending standards (see sidebar) or have exited the market altogether.

For first-time home buyers — who typically lack a long credit history or the cash to make a sizable down payment — landing a mortgage with a below-average credit score or with anything under 20% down is now a thing of the past. "We've gone back to the more traditional types of sources for assistance," says Keith Gumbinger, a vice president at HSH Associates, a Pompton Plains, N.J.-based mortgage-information firm."The traditional players are stepping up their roles and that includes the [federal government] and the states."

Now the best recourse for first-time home buyers is to look to government agencies like the Federal Housing Administration (FHA), which offers loans to those with average credit or little money for a down payment, and the U.S. Department of Housing and Urban Development (HUD), which helps out with down payments and closing costs.


Here's a rundown of the federal, state and local assistance available to first-time home buyers.

FHA-Insured Mortgages

Don't have enough cash to make a 20% down payment on a home? That's where FHA mortgages come in. "FHA, by far and away, is the best option for first-time home buyers," says Steve Curnutte, a Nashville, Tenn.-based mortgage broker.

To qualify, prospective buyers need a minimum credit score that falls in the mid- to high-600 range (much lower than the 720 required by most private lenders), says Curnutte. The lower limits come at a slight cost, however. FHA mortgage borrowers must pay an upfront fee of 1.5% of the loan amount, as well as an annual insurance premium of 0.5%. Yet, even with these fees, FHA mortgages will often cost less than a conventional mortgage that requires private mortgage insurance, says Curnutte. With a conventional mortgage, a borrower who makes less than a 20% down payment is normally required to take out private mortgage insurance (PMI). The cost of this insurance varies depending on the type of loan, the size of the down payment and other factors.

FHA mortgages may get even more affordable in the near future. Earlier this month, the House Financial Services Committee passed a bill that, among other things, calls for changes to FHA mortgages. One of the most important, says Gumbinger, is the proposed new risk-based insurance premiums that will be attached to an FHA mortgage. For example, if your down payment is more than the 3% minimum, and you have a good credit profile, the total premium you pay could be less than what's typically required. The Senate is expected to vote on this bill in the next few weeks.

More than 10,000 banks and mortgage companies nationwide sell FHA loans, says Glavin. To find one in your area, visit the FHA web site. Also, just like private mortgages, FHA loans require buyers to show proof of income and other documentation, including a driver's license, bank statement, pay stubs from the last 30 days, and tax returns.

State & Municipal Assistance

First-time home buyers can also look closer to home for assistance.

Under the American Dream Downpayment Initiative (ADDI), for example, each of the 50 states receives funding from the U.S. Department of Housing and Urban Development (HUD) that's specifically tagged for helping first-time home buyers. State and local communities then use this money to provide financial assistance of up to $10,000, or 6% of the home's purchase price (whichever is greater), toward the down payment, closing costs or rehabilitation of the home. To qualify, the buyer's income must not exceed 80% of the area's median income. There are no official credit score or down payment requirements. For now, HUD is only authorized to fund the ADDI program through the end of fiscal 2008, which ends on Sept. 21. Any future funding will be determined by Congress.

In addition, most states, and even some counties, offer their own assistance programs. "There are a number of individualized initiatives for first-time home buyers...intended to address individual circumstances in the states," says Gumbinger. For example, some cities and towns in South Carolina assist homeowners with home repairs while New Mexico offers assistance to those purchasing a home in some rural communities. To find out about these programs, visit HUD's site or contact your state housing finance agency.

Once you choose a mortgage lender, ask if there are any locally-based first-time home buyer programs. "They widely and wildly vary by municipality and region," says Curnutte. Local trade groups may also offer assistance to employees in specific industries. The Chicago Public Schools Teacher Housing Resource Center, for example, offers qualified Chicago school teachers up to $7,500 in home-buyer assistance. While investigating such programs, be sure to ask about any added fees or premiums and weigh them against the terms of your other financing options "Be aware that it's a fractured market," says Curnutte. "If you get $500, [you have to ask] what's my payoff; if my interest rate is higher, then the assistance may not be worth it."

The Latest in Lending Requirements

Compared to conventional (or private) mortgages, government-backed FHA mortgages seem a lot more forgiving these days. As a result of the ongoing credit crunch and the growing number of homeowners defaulting on mortgages, private lenders tightened their lending requirements so severely that only those with the most pristine credit records and money on hand for a sizable down payment can qualify for a decent mortgage. Buyers, who just a year ago needed a minimum credit score of 620, for example, now must hit at least 720, explains Gumbinger. And you can kiss the days of 0% down payments goodbye. To score a conventional mortgage, homeowners now need to put at least 20% down.



Source: HSH Associates, Federal Housing Administration & Steve Curnutte (mortgage broker)
* The mortgage-to-income ratio is the percentage of the home buyer's monthly gross income that goes toward paying monthly mortgage payments.
** The debt-to-income ratio is the percentage of the home buyer's monthly gross income that goes toward paying down debt.

Keep it going...

Wow, stunning how sharp of a drop we have seen. Residential Real Estate has historically seen very gradual incline/ declines. On a side note, Kristina's sister Jessie and her husband Doug just put in an offer on a house. They had to offer $70k over asking price and placed one of 25 offers on the house. Even though foreclosures are high and prices are down, there is still an overwhelming amount of demand.

Digital Art

Thought I would share one of my favorite websites for Digital Arts... www.deviantart.com

You can find some very interesting art to use as your desktop wallpaper, definitely one of my most visited bookmarks, enjoy.

Trapeze Anyone?

The article below was in our latest Santa Monica community newsletter. May be worth a try...


New York Trapeze School will soon be introduced to the sunsets at the Pier.

Trapeze School New York (TSNY) is slated to open here in Santa Monica at the Pier in early to mid-May. This will be their fifth location, with other locations in New York City, Boston and Baltimore.

The School was co-founded in 2001 by Jonathon Conant and his partners Anne and Dave Brown. Jonathon, a native Californian, comes from a varied background that included stunt work, professional dance, and human developmental research. His interest in flying trapeze was piqued upon seeing that, facilitated properly, flying could serve as a powerful tool for people's reevaluation of what they are capable of doing. "We have simple goals here at Trapeze School New York," says Jonathon "Opening people's minds to new possibilities, keeping things safe and having a great time doing it."

The school will be nestled between Pacific Park and the Playland Arcade. The open-air school provides great visibility and allows passersby to watch the trapeze in action. The site once housed the historical Sinbad's building which closed in the early 1970s and was removed from the Pier in the early 1990s. The site has been vacant for over a decade.

Historically the art of trapeze was considered a circus performer act. Now trapeze falls into the category of a recreational sport such as yoga and aerobics. The trapeze provides a super cardio workout facilitating muscle toning and balancing. It's a fun activity to share with family and friends.

"The Santa Monica Pier is an incredibly beautiful place to be. We can not imagine a more wonderful home for this amazing activity" said Jonathon. "In addition to classes that are open to the public, we will have student recitals and professional shows that everyone will enjoy." But catching a great show isn't the best part says Jonathon. "The drama of someone flying for the first time, their triumphs and struggles are endlessly fascinating. Something uplifting you truly don't want to miss."

Flying classes are open to the public. TSNY offer classes for first time to advanced flyers, group classes, workshops, special and corporate events. Ask about bulk class package discounts and birthday parties. For more information, please visit their web site at www.trapezeschool.com.

By Anne Railsback

US Travel Alert - Northern Baja

We have heard some pretty bad stories lately of problems in northern Baja, I just found this travel alert on the US Government webpage. Luckily, we were just down with the family at the casa we rent in Puerto Nuevo without any problems. We did notice that it seemed very sparse with visiting American tourists and we seemed to draw a lot of attention everywhere we went. I don't think we will be going back for a while, we can get our own lobster and Corona's up here until the Mexican government gets their act together. Please read the advisory below and think twice before crossing the border anytime soon...

Travel Alert
U.S. DEPARTMENT OF STATE
Bureau of Consular Affairs

April 14, 2008


This Travel Alert updates information for U.S. citizens on security situations in Mexico that may affect their activities while in that country. This supersedes the Travel Alert for Mexico dated October 24, 2007, and expires on October 15, 2008.

Violence Along The U.S.-Mexico Border
-------------------------------------

Violent criminal activity fueled by a war between criminal organizations struggling for control of the lucrative narcotics trade continues along the U.S.-Mexico border. Attacks are aimed primarily at members of drug trafficking organizations, Mexican police forces, criminal justice officials, and journalists. However, foreign visitors and residents, including Americans, have been among the victims of homicides and kidnappings in the border region. In its effort to combat violence, the government of Mexico has deployed military troops in various parts of the country. U.S. citizens are urged to cooperate with official checkpoints when traveling on Mexican highways.

Recent Mexican army and police force conflicts with heavily-armed narcotics cartels have escalated to levels equivalent to military small-unit combat and have included use of machine guns and fragmentation grenades. Confrontations have taken place in numerous towns and cities in northern Mexico, including Tijuana in the Mexican state of Baja California, and Chihuahua City and Ciudad Juarez in the state of Chihuahua. The situation in northern Mexico remains very fluid; the location and timing of future armed engagements there cannot be predicted.

Armed robberies and carjackings, apparently unconnected to the narcotics-related violence, have increased in Tijuana and Ciudad Juarez. Dozens of U.S. citizens were kidnapped and/or murdered in Tijuana in 2007. Public shootouts have occurred during daylight hours near shopping areas.

Criminals are armed with a wide array of sophisticated weapons. In some cases, assailants have worn full or partial police or military uniforms and have used vehicles that resemble police vehicles.

U.S. citizens are urged to be especially alert to safety and security concerns when visiting the border region. While Mexican citizens overwhelmingly are the victims of these crimes, this uncertain security situation poses risks for U.S. citizens as well. Thousands of U.S. citizens cross the border safely each day, exercising common-sense precautions such as visiting only legitimate business and tourist areas of border towns during daylight hours. It is strongly recommended that travelers avoid areas where prostitution and drug dealing occur.
Criminals have followed and harassed U.S. citizens traveling in their vehicles, particularly in border areas including Nuevo Laredo, Matamoros, and Tijuana. There is no evidence, however, that U.S. citizens are targeted because of their nationality.