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Are we heading toward another housing bubble?

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According to a recent article on Keeping Current Matters, many experts have weighed in and agree:  we’re not headed for another crisis. The housing crisis of 2006-2008 was caused by poor lending practices which have since been cleaned up, and the financial turmoil present 10 years ago does not factor into today’s real estate market.

While median home prices have been steadily increasing this year, and a good many of the nation’s metropolitan areas experiencing record appreciation, it’s only natural to be concerned about another possible recession a decade after the biggest housing collapse in America’s history. We will most likely experience a shift from the rapid growth and appreciation that we are currently experiencing as the market corrects itself, but it won’t be a “burst”. Locally, we have never experienced a burst and although some buyers were unfortunately encouraged to overpay, our personal belief is that most local homeowners should not be affected by a bigger national shift.

Is it the right time for you to buy? It’s a personal issue we can’t answer for you. Start by thinking about these questions:  Am I comfortable with a mortgage payment? Would I still be okay with the payment if the market did correct in the future? Contact us with any other questions that come up!

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Changes in the Town of Amherst

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The Town of Amherst has recently announced that effective October 30, 2017, homes constructed before 1975 will require an inspection of the sanitary sewer connections, prior to the transfer of title. The inspections will be of sump pump systems, interior floor drains, footing drains, yard drains, roof drains and downspouts, catch basins and parking lot drains. Amherst joins the towns of Cheektowaga and Tonawanda, who have recently initiated similar code amendments. 

If you live in Amherst and are thinking about selling your home, you will be required to have an inspection completed by the Town of Amherst Engineering Department. Possible outcomes might mean the installation or repair of a sump pump, installation of interior floor, yard or roof drains; and other remediation for storm drainage. The hope is to reduce some of the flooding and sewer backups in the system. 

There is also some responsibility if you are planning on purchasing a home in Amherst; you will need to set aside money in escrow, which will be returned to you if corrections are completed within the timeframe set aside in the contract. 

If you have any questions, don't hesitate to contact us. 

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How much can you save with lower FHA Mortgage Insurance Premiums?

For those considering a FHA mortgage, good news has arrived. FHA mortgages currently are structured in a way that buyers incur additional annual mortgage insurance costs for the life of the loan. However, President Obama announced last week that FHA would reduce the annual Mortgage Insurance Premium (MIP) by 50 bps for all mortgages with a case number assigned on or after Monday, January 25, 2015. 

What this means is that if you are applying for your mortgage on or after this date, you will receive the lower MIP. On a loan of $164,050, the monthly mortgage loan payment will be reduced by $68/month due to the lower MIP. This will have significant savings over the course of the loan!

If you have further questions about this change or any financing questions related to your purchase of a home, please contact me here. This is a great time to buy while rates are still historically low!

 

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New Legislation Seeks to Postpone Flood Insurance Rate Increases

In the wake of recent flooding disasters, a nation already reeling from its losses suddenly faces extreme spikes in insurance premiums.

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In response to events like Hurricane Sandy, a law called the Biggert-Waters Flood Insurance Reform Act of 2012 (BW-12) implemented new legislation in effort to decrease the $25 billion deficit of the National Flood Insurance Program. Most notably this began by phasing out subsidized rates for older properties in flood zones.

Before BW-12, program shutdowns were costing up to 40,000 home sales each month in high-risk areas nationwide. While the National Association of Realtors is grateful that this is no longer the case, NAR president Gary Thomas noted that there are still major issues with the legislation: "Unfortunately, implementation of the new rate structures in BW-12 has caused serious confusion and hardship for some property owners. FEMA's continued delays and missed deadlines, in combination with the legally required transition to true-risk rates, has been a recipe for disaster."

These drastic increases in insurance rates threaten the financial stability and future re-sale of the affected citizens' homes. To combat these changes, the bipartisan "Homeowner Flood Insurance Affordability Act" was recently introduced in the Senate. Thomas explains, "The bill takes the crucial first step toward delaying further implementation of some rate increases in the Biggert-Waters Flood Insurance Reform Act of 2012. This will allow the Federal Emergency Management Agency (FEMA) to complete an affordability study that was mandated by BW-12, propose targeted regulations to address any affordability issues found in the study, and give Congress adequate time to review those regulations."

For more information on flood insurance rates affecting property value, click here.

For more information on the Homeowner Flood Insurance Affordability Act, click here.

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How the Government Shutdown Affects the FHA

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Despite the furlough of over 96% of its staff members, the U.S. Department of Housing and Urban Development stated that the Federal Housing Administration will continue to process applications for single family home loans.  This information corrected an earlier statement by the HUD which said that the plan would be to cease working on applications for these government-backed mortgages in the case of a shutdown.

The underwriting and approval process is expected to be significantly slower than usual.  Regardless, the HUD notes the importance of loan processing in the midst of a shutdown.  Just last year 45% of all mortgages used to purchase homes were from loans backed by the FHA as well as the Veteran's Administration and the U.S. Department of Agriculture.  They declare they will remain active "in order to support the health and stability of the U.S. mortgage market."

To view the article that inspired this post, click here.

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Buying with a FHA Mortgage? Prepare to pay extra fees

FHA has been a great option for many buyers for some time now. However, as of April 1 and then June 3, that option is about to get significantly more expensive. The Federal Housing Administration, which is the largest insurer of low downpayment mortgages, announced Wednesday that it will raise premiums by 10 basis points, or 0.1%, on most of the new mortgages it insures. As of April 1 this 0.1% change means you'll pay a little more in monthly payments.

The increase is minimal: On a $100,000 purchase with the minimum 3.5% down, your monthly insurance payment would increase from $98.16/month to $106.01/month. It's only an additional $2826 over the life of the loan.

However, this is where it really makes your decision as a buyer more difficult:

As of June 3, the previous rule of only paying mortgage insurance until you build up 20-22% equity in your home or you reach the 5-year mark changes. As of 6/3, you will pay that insurance premium for the life if the loan. It will be amortized on a sliding scale, but the additional payout is significant. On a $100,000 purchase, that means an additional ~$17,000 in cost to you for a 30-year mortgage.

Buyers that have a downpayment of 10% can avoid insurance premiums on a 15-year mortgage, but if this is the case, they have most likely chosen another financing option .

Additional new policies will make it harder for those with average credit scores to get a mortgage.

Bottom line: Work with a qualified agent to help you find a home before the 4/1/13  and 6/3/13 deadlines if you are going FHA. Otherwise, know your options before searching and placing an offer on a new home.

* Examples provided by Shantelle Porack at Homestead Funding. Contact Shantelle at sporack@homesteadfunding.com

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Are you deducting your mortgage PMI from your taxes?

One of the positives to come out of the fiscal cliff fiasco is the reinstating of the deduction for PMI insurance premium for calendar year 2012 and 2013.

If you, like most people today, put down less than 20% on your house, you were required to purchase Private Mortgage Insurance (PMI) which protects the lender in the event you default on the loan. Although viewed negatively, this feature allows aspiring home buyers -- especially first time buyers -- that don't have the 20% to put down to obtain a mortgage.

However, there is an option starting with loans in 2007, and continuing now through 2013, allowing you to deduct each year's premiums paid on PMI for your principal residence and for a non-rental second home.

There are restrictions that your tax advisor can review and in order to claim, you must itemize your return. However, it could save you money in the long run. Speak to a tax advisor before you file your taxes this year to see if you qualify.

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Rates increase for FHA loans

John Connolly For those approved for or considering an FHA mortgage, you should be aware that the FHA has increased the mortgage insurance premium by 25 basis points for loans with case numbers assigned after 4/18/11. This increase, the third in the last 12 months, will cost the average buyer an extra $30 per month. Existing borrowers are not affected.

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Will I have to pay a 3.8% “sales tax” on my home?

Will I have to pay a 3.8% “sales tax” on my home? One of our clients was recently alarmed to hear on a radio talk show that he would owe an additional 3.8% sales tax on profits from selling his home in connection with the new health-care law.

We can put your mind at ease that most sellers will not have to pay this tax. In truth, only a small percentage of home sellers will.

Sellers with incomes over $200,000/year ($250,000 for a married couple filing joint returns), will be affected by the tax. Even then, the tax won’t apply to the first $250,000 on profits received in the sale of a personal residence. In the case of married couples, you are not taxed on the first $500,000 of profit.

Besides understanding the above limits for hitting the tax bracket, further confusion has arisen around the amount to be taxed. It is ONLY the profit over the $250k or $500k limit made on the home that is taxed -- not the entire sale price. Therefore, if a single person makes $210,000 a year and sells his $300,000 home for a $50,000 profit, the tax is only applied to the $50,000 profit. This would result in a tax of $1,900 -- not the $11,400 if it was applied to the sale price.

It is safe to say, the new 3.8% Medicare surtax won’t affect very many Western New York sellers.

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HUD announcement to make the home-buying process more efficient.

HUD announcement to make the home-buying process more efficient.The US Department of Housing and Urban Development announced last month that it would allow electronically signed documents in transactions involving home loan guarantees by the Federal Housing Administration. This includes signed documents from third parties --- ie: sales contracts.

This agreement will greatly speed up the home buying process while making it easier on buyers, sellers and agents. We proudly welcome HUD into the digital age and look forward to this and future announcements that will enable us to continually serve our clients to the best of our ability.

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