Yet refinancing to today’s low, low rates has been all but impossible for many home owners trying to avoid foreclosure.

If you are trying to avoid foreclosure by making your payments more affordable, changes to the Obama administration’s Home Affordable Refinance Program (HARP) could help you stay in your home. The changes coming out by the end of the year are expected to help you refinance even if you owe more than then current market value of your home.

Here’s how the Wall Street Journal describes the original HARP program in their blog.

What is HARP? The Obama administration in 2009 rolled out HARP to refinance borrowers whose loans were backed by Fannie Mae and Freddie Mac and who were current on their payments. The idea was simple: If you were making your payments on time but didn’t have enough equity to refinance, you would be able to lower your rate without having to pay down your mortgage balance or take out mortgage insurance.

Initially, the program was limited to borrowers who owed between 80% and 105% the value of their homes. In mid 2009, the program was opened to borrowers who owed up to 125% the value of their homes.

But some of the  HARP program requirements for lenders and borrowers made it very difficult for home owners to use the program to refinance and try to avoid foreclosure. That’s why the President and his administration are making changes to the program. The details are to be announced mid November.

The changes coming at the end of the year will allow home owners to refinance even if their loan is higher than 125% of the market value of their home. There is one important catch, your home loan must be owned by Fannie Mae or Freddie Mac. If you’re not sure, you can click on these links.

If reducing your monthly mortgage payment by a couple of hundred dollars will help you avoid foreclosure and keep you in your home. This program could be a life saver. In the new rules to be announced soon, lenders will face less risk in refinancing the loans. Home owners will have a streamlined set of requirements:

• Show you’ve made your last six house payments,
• Verify you haven’t missed more than one payment in the last year and
• Prove you have a source of regular income

These changes to the HARP guidelines should be made clear around the middle of November 2011. Expect the banks to have their revised programs in place by the beginning of December. Although the HARP program was set to expire in June 2012, one part of the change is to extend the program through 2013. But don’t wait till then… the program is designed for home owners trying to avoid foreclosure to take advantage of our extremely low interest rates. Who knows when rates will go up, so act as soon as you can!

FIRST THE GOOD NEWS FOR HOME BUYERS

Interest rates are the lowest they have been since the 1950′s!  Home buyers take note: I know of several people who have locked in a spectacular rate of 4.375% for the next thirty years.

Locking in a rate this low makes better financial sense than waiting a few months for a lower purchase price but having higher interest rates. Even if home prices continue to slide a bit lower, as a home buyer you’ll still do better taking advantage of these great rates. But that’s another blog topic.

THE NOT GOOD NEWS–WILL YOU QUALIFY FOR A HOME LOAN?

1.  GOVERNMENT GUIDELINES ARE NOW VERY TIGHT

Background: Today 95% of all home buyers use government insured loans through FHA, Fannie Mae and Freddie Mac’s rigid guidelines. Lenders must follow these guidelines to sell newly made loans on the secondary market. This frees up money for lenders to make new loans. These guidelines continue to get tighter and tighter.

Here’s one example: Lenders are now running a second credit report on buyers 3 days before closing.

TIP: Wait until AFTER closing on your new home to buy a new refrigerator or furniture for that new family room. Buying large items on credit before your home closes could mean the loan (and the house) will not close. Increased borrowing may push your debt ratio out of the government guidelines.

2. CHANGES TO FHA REQUIREMENTS

At this time 25%-35% of home buyers use FHA. And stimulating home ownership stimulates the economy. So would you think that FHA would make it easier for buyers to use FHA loans? Nope.

REDUCTIONS TO SELLER PAID CLOSING COSTS FOR BUYERS: Home buyers will get less help from sellers on closing costs. Sellers have been allowed to help their home buyers by paying up to 6% of buyer closing costs. Early this summer FHA will cut that contribution to 3% of the loan amount. On a $200,000 loan, the additional $6000 a buyer will have to come up with may mean the difference between being a home owner and remaining a renter.

INCREASES TO MORTGAGE INSURANCE PREMIUM (MIP): This is not the “If I die the mortgage is paid off” kind of insurance. It insures the lender for losses if the buyer is unable to make loan payments. (Do you think mortgage insurance companies have seen their claims go up the last few years?) Each month the borrower pays MIP as part of their monthly mortgage payment. MIP for FHA loans has traditionally been .55% of the loan amount paid each month for about 5 years into the loan. There is a bill in Congress now to raise that rate to .9%. This will raise the monthly payment enough to keep many borrowers from qualifying for a loan.

3.  QUALIFYING CONDO FINANCING:

The percent of condo buyers using FHA loans is probably much higher than for detached homes. FHA has scrapped its previous list of approved condo associations (condo buildings it will loan on). Now each condo association must start a new approval process before any more FHA loans can be used.

Learn more about buying a condo here.

A: Anne, I’d tell your client to beware of so-called debt services as advertised on TV!

Here’s why:

Any promise of “Instant” debt relief is likely to be a scam, especially if the service charges an upfront fee of several hundred dollars. No one can make your debt disappear. But there are ways you can lower your monthly payments.

For relief, turn to a nonprofit credit counseling agency certified by the National Foundation for credit Counseling (nfcc.org/firststep/locator.cfn). It will act on your behalf to negotiate with credit card companies to lower or freeze interest rates and set up a manageable payment plan. (Some also offer budget counseling and debt management classes.) And unlike debt services, credit counseling services charge only administrative fees; expect to pay about $50 in set up costs and $25 for monthly maintenance.

Tim Vanderburg Mortgage Banker NW Mortgage Group, Inc. Ofc: 503.682.2880 Toll Free: 800.452.0038 tvanderburg@nwmortgagegroup.com www.Timvanderburg.com

So many people have asked me how the federal $8,000 tax credit works. Basically it’s a once in a lifetime opportunity to buy your first home and get paid by the government.

Here are some highlights.

What is it? It’s a gift from the federal government to all you first time home buyers. It’s goal is  to help stimulate home sales and make first time home buying more affordable.

Who is a first time home buyer? If neither you nor your spouse have owned a residence in the last 3 years you qualify.

What kinds of properties are covered? As long as you buy a primary residence it can be a condo, townhome or detached single family home.

Are there time restrictions? Yes, you must close escrow on this residence before December 1, 2009. Most escrows take 30-60 days, so call me now. Let’s start looking at homes.

How much is the credit? The credit is for 10% of the purchase price up to $8,000.  So most any property you purchase in the Portland area would be for the maximum $8,000 credit.

Suppose I owe less than $8,000 in taxes, then what? The balance of the credit over what you owe in taxes is refunded to you…even if you owe no taxes and the full $8,000 is refunded to you. Sweet deal.

Is there an income limit to qualify? Yes. Buyers who are single can have income up to $75,000 and married people up to $150,000 can receive the maximum credit. If your income is higher you may still receive a portion of the credit.

Does the tax credit need to be repaid? Not if you live in the house for at least 3 years. Should you sell the house or stop living in it before 3 years is up, you’ll need to repay the credit.

Which is better, a tax credit or a tax deduction? The tax credit is better. It is subtracted from your tax owed. A tax deduction is an amount subtracted from your income before your tax is figured.