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          Active duty military are not only qualifying for the benefits of a VA Loan to buy a home in Minnesota, they may be qualifying for a special exception to the $8,000 tax credit rules. As we’ve reported before, first time home buyers can qualify for a tax credit by completing a home purchase on or before April 30^th of this year. But, if you are a qualified service member on extended duty you have another full year to buy a home and get the tax credit.  At VALoansMN we generally dislike mumbo jumbo and mortgage talk preferring instead to just talk to ‘the folks’ in plain language. So forgive us for the following formal definitions. We just want you to have a thorough understanding of how this works for you.

Into the Weeds

·         First Time Buyer:  a person who has not owned a principal residence for the three year period prior to the purchase. This means, if you’ve owned a home before but let’s say you’ve been renting or living with family for the last three years, you are a first time home buyer and can qualify for the tax credit.

·         Qualified Service Member:  a member of the uniformed services of the U.S. military, a member of the foreign service of the U.S., or an employee of the intelligence community.

·         Extended Duty:  duty outside the United States for at least 90 days between the first day of this New Year and the first of May, 2010.

Here’s the Deal

        If you meet these three definitions you can buy your home and still get the $8,000 tax credit until 2011.  Just enter into a home buying contract by April 30, 2011 and complete that purchase by the end of June. We also encourage you to look into your VA loan benefits to help with that purchase. A VA loan still allows you to borrow the entire purchase price and it does not come with monthly mortgage insurance payments. No money down, no mortgage insurance payments and an $8,000 tax credit is a very attractive home buying package for Minnesota veterans and active duty military.

Minnesota Veteran’s have earned the right to buy a home with a VA home loan and buy that home with extra benefits which now include a tax credit. My worst nightmare is Veterans missing out on the great home buying opportunity that exists right now. Granted, many people think this is not a good time of year to buy a home but that is not the case. Here’s why; mortgage interest rates are still historically low, housing prices have dropped (and may still be dropping) and a VA (DVA) home loan is assumable.

Minnesota VA home loan interest rates are still very low. At VALoansMN we have 100% financing in the 5% range. I’ve written before about remembering mortgage rates in the high teens and there are some economists who think we might be headed there again. Also, home prices in Minnesota have dropped by 40% to 50% in some areas. Yet one of the most compelling reasons to buy using a Minnesota VA home loan: it is an assumable loan (more on that later). Finally, the President just signed into law a bill that extends the home buyer tax credit. First time buyers, those who have not been on a title for 3 or more years, qualify for up to $8,000 in tax credit. That is not $8,000 subtracted from your income that is $8,000 subtracted from the tax you owe. This means if you owe nothing the Feds will send you a check for $8,000. Under the new bill even move up buyers get a credit of $6,500. There are some qualifying factors so give me a call or drop me a note at www.VALoansMN.com for details.

I mentioned earlier the assumable nature of a VA home loan in Minnesota (and all other states). Let me give an example of how this works. Let’s say you take out a home loan for 100% of the value of a house to make a $200,000 purchase. Let’s say that note rate is 5.5%. Ten years later you decide to sell your home and move up to a nicer home. Let’s also assume that the housing market is not good and there are many homes for sale and only a few buyers (such is the case now). Also we’ve seen inflation kick mortgage rates up to 10%. Making regular payments on your 5.5% mortgage you would have paid off about $35,000 of that $200,000 loan. You still owe about $165,000. You put your house on the market and remember: you have an assumable VA home loan of $165,000. A qualified Minnesota Veteran can assume your 5.5% loan of $165,000 while everyone else in the market is getting loans for 10%. Do you think this makes your house more attractive in the slow market? I do!

Please, if you’ve thought about buying a home and you are a Veteran, give these benefits very serious thought. If you know anyone who might qualify for these benefits call them now. Urge others to take advantage of this great Veteran home buying opportunity. This window may be closing soon and I want as many Minnesota Veterans as possible to benefit from what may be once in a lifetime opportunity.

The best Realtors or lenders are those who do less talking and more listening. Some of my clients at VALoansMN.com tell me of their discouragement while shopping for a house. The Realtor, they say, seemed more interested in showing them houses that she wanted them to buy rather than homes the client might want. In many cases, they say, Realtors are selling house features not necessarily what women might really want. So what is it women want? Is it the beautiful updated kitchen? Is it the open floor plan? In fact, it may be none of these things.

When you begin shopping for a home (and after you’ve called me to be pre-approved for your loan J) talk to your Realtor. Ask her about her experience working with other women. Ask her what women want. This might be very revealing. A Realtor friend of mine thought women wanted above all other features the updated kitchen, the nice family room, the open floor plan. He made assumptions that perhaps it was the school district that drove the deal. Then he discovered something else. He discovered perhaps he had been talking and not listening. He discovered some recent surveys that changed the way he does business with women.

In March of 2009 a Canadian pollster surveyed 1,000 women age 18 and older who have independently purchased a home. I’ll leave it to you to decide whether or not there might be significant differences between Canadian and American women. See how your answers might compare to the poll results.

The TD Canada Trust Women and Home Ownership Poll found the number one factor when choosing a home is cost (98%) followed by neighborhood (97%) then security and safety (96%). The survey, released just a few months ago, found that the surveyed women considered being close to family and work less important than cost, neighborhood or safety. Nowhere in the top of this list of values were features of the house itself.

The least attractive issues of home ownership according to this survey are cost of maintenance, the chore of doing the maintenance, yard work and snow removal.

This leads me to some conclusions I’ve written about before. Mortgage rates are still incredibly low and housing prices have declined in recent years. Since cost is the number one factor driving women to purchase a home it’s understandable why, in my opinion, women are driving the housing market today.

The word “homemaker” may be taking on new meaning. Traditionally, it stood for a woman who spent time in the home raising children, cooking and cleaning. Today it may be coming to mean the person who makes the home possible. Women are becoming a powerful force in housing. Strike that, women are becoming the most powerful force in our economy, period.

Women buy 90% of the food, 55% of consumer electronics and most of the new cars according to consultancy firm Bain & Company. Companies now trying to recover from the recession are focusing their marketing to women. SheSpeaks is a marketing consultant firm and has tripled the number of its clients. SheSpeaks clients reach for women to help them in recession recovery. The firm’s client list includes Citibank and Phillips. In another sign of women's economic power a recent New York Times article suggests women are becoming the majority workforce.

What about housing? According to research from the National Association of Realtors single women buy one-fifth of all homes sold. That’s more than double the number purchased by single men. In an article in USA Today author Noelle Knox says “this is striking, because in 1981, the number of single women and single men home buyers was virtually the same. Since then, the percentage of buyers who are single women has almost doubled, while the percentage of single men buyers slipped by 1 percentage point to 9%”. A Realtor I have worked with says that figure doesn’t expose the whole truth. According to his experience when couples search for homes it is the woman who makes the final decision. His observation is backed by market researcher Marti Barletta. Ms Barletta, in her book Marketing To Women says women make the purchasing decision on 91 per cent of the houses.

The research is further backed by my own experience and the resulting traffic on www.VALoansMN.com where we experience increasing numbers of women Veterans seeking VA Loans to buy homes in Minnesota. I have been asked to present benefits of VA Loans in Minnesota to a group of women Veterans in October in Bloomington, MN. More information on that conference for women Veterans is available soon at www.mdva.state.mn.us.I would be most interested to hear the experiences of other FHA and VA Lenders nationwide. Are you also seeing the surge in women home buyers?

       Gazing into crystal balls is dangerous in this business but it’s hard not to be bullish at this time for a couple reasons. 

1. Interest Rates
2. Housing Prices
3. Free Money

      Interest rates remain near their historic lows. Here in Minnesota and nationwide housing prices have dropped considerably in the last few years. The National Association of Realtors reports housing prices were at all- time highs exactly three years ago this month (July).  At that time the average price of an existing home was just over $230,000. The lowest point for housing prices came in January of this year when the average stood at just under $167,000 according to NAR.  That’s a drop of over 27%. Wow! 

        Interest rates remain at historic lows but for how long is uncertain. Mortgage backed bonds are like any other investment, they are price influenced by supply and demand.  Here’s a fact; as the U.S. government continues deficit spending (selling treasuries and long term bonds to raise capital) bond prices will be negatively impacted.  Bond prices are inversely related to rates. As bond prices move down interest rates will move up. So when you hear about that huge government deficit hear this: government deficit spending puts extreme upward pressure on mortgage rates. We at VALoansMN now have mortgage rates in the 5.5% range for a no-down payment loan. History shows that is a fabulous rate.  When I bought my first home in the late 80’s my mortgage rate was 13%. I thought that was great because I remember our parents paying over 18% for a conventional mortgage just a few years earlier.

       Granted we should all be skeptical having watched the value of our retirement accounts plummet, rising unemployment rates and the general state of the economy but I’m still willing to venture into that dangerous zone of crystal ball gazing. I’ll make this prediction: our current near historic low mortgage rates and low housing prices are not going to last.

     Now about the free money. The government will give first time homebuyers $8,000 to take the plunge. If you've not been on a real estate title for 3 years you are considered to be a first time buyer. Eight thousand dollars for a Minnesota Veteran buying her/his first home can more than cover costs of most purchases. That can buy furniture, paint and other improvements.

     So review the facts as they stand today;

1. Interest rates are still at historic lows
2. Home prices are way down
3. The government will give you the money if your a first time buyer

This may be the perfect time to buy a house. This perfect time is not likely to last.

There are few times in any career when the opportunity arises to be of service beyond the call of duty. This may be one of those rare moments in history for many of us. As we are all painfully aware the mortgage industry has been on the short end of the public relations stick for several years. We have been bombarded daily with news reports of predatory lending of record levels of foreclosures. Our industry was blamed for the numerous defaults that continue to rack the housing market. We could argue the validity of the blame but the sad fact is there are thousands of homeowners who acquired mortgage loans but shouldn’t have. The real cause lies beyond the scope of this short treatise. Many Americans who measured net worth by the equity in their homes now feel financially strapped, worrying about their ability to send kids to college or a secure retirement. So where’s the opportunity that I speak of?

In recent days I have received several calls at our office of VALoansMN from prospective home buyers. Okay, you say, “so what?” These calls came from active duty personnel. The calls were from soldiers in Iraq who long to be stateside and establishing a civilian life, a life without the threat to life they endure daily. I am on the phone with a soldier in Iraq who is seeking my help! The humility that this instills is beyond my ability to describe. No matter where you are, you too may be receiving calls from our military men and women, maybe from the war zone itself. A VA Loan (or any loan that enables their ability to return home) is something these soldiers have earned. In my opinion, they have earned the right to be homeowners, they have earned the right to have us step forward with exemplary service to see that their hopes and dreams are realized. I pass on my recent experience with those currently in service but this reminds me there are many (over 400,000 in Minnesota) who have served in other conflicts ranging from World War II, Korea and Viet Nam who have equally sacrificed for us.

Let us in the mortgage industry recognize this opportunity to help, this opportunity to be of service. Many of us have yellow ribbon stickers on our vehicles or bumper stickers that say “support our troops”. Now is the time to do much more. It is my hope that we will all go beyond the call of our daily duty to see that these soldiers (past and present) are served as they have served us.

Joan Rusco is owner/manager of VALoansMN

www.VALoansMN.com

A client finds the home they want, the Realtor writes the offer, gets an acceptance and off we go to the races. But whoa! There’s a problem. We find that the property won’t appraise for the accepted sales price. The bank won’t lend the amount needed to complete this purchase. What?!! How did this happen? We have a willing seller and a willing buyer and yet the bank is saying ‘No Deal’? We have run into this problem again and again in our Minnesota Real Estate market. Let’s examine what’s going on. Who’s to blame? Is it the home seller? Is it the Realtor? Is it a naïve buyer? Is it a naïve agent? The answer is “yes”, it can be all of the above.

Recently I had a first time Minneapolis home buyer look at a nice 2 bedroom/1 bath Craftsman style house. It was perfect: natural woodwork, updated kitchen and bathroom. The asking price was in the mid $200k range. Before taking the next step in writing the offer the Realtor representing this client checked the mls for recent sales in the neighborhood. He did not like what he found. He asked that I check with my trusted home appraiser. Before visiting the property and incurring a cost to my client the appraiser did a quick desktop search for recent sales. The problem was, said this FHA/VA approved appraiser, there was not a comparable sale over $215k. The buyer’s agent phoned the listing agent and told her my client was interested in the home but even if she were to offer their full asking price the deal would not go through because it wouldn’t appraise at their price. This veteran agent was flabbergasted. She insisted they were very careful about pricing. She indicated they did a thorough analysis of the property and reached what they were sure was a fair market value. She also said for proof she would send the comparable sales used for the pricing. Now, I know that everyone can make mistakes, even the appraiser I had come to trust and use many times before. Soon I learned this was not his mistake. Two days later I received the comparable sales the Realtor had used to price the property. The most recent sale of the 6 properties she had used was 14 months old. The oldest of the set was almost 2 years old.

In another case I received a purchase agreement on a small house in a northern suburb of Minneapolis. This first time buyer was using an FHA loan to make the purchase. I soon received a call from my appraiser saying the house was not worth the price. Again, the buyer’s Realtor in this case (a successful veteran with 20 years in the market) checked with the listing agent. It’s the same story: the agent had priced the property using comparable sales dating back a year. The buyer’s agent was convinced the price was good and he pleaded the case saying the comps were only a year old.

In yet another case where an agent had over-priced the listing we were told in a rather impolite way that “…the property sold just two years ago for more than the current asking price and they got a loan”. Are you kidding? In this market where many neighborhoods are classified as “declining” a Realtor would actually think that a sales price dating back two years is relevant?! Sorry, these so-called comparable sales might as well have taken place on the moon. There are exceptions (aren’t there always) but they are very, very few and far between.

These are not isolated cases. Let me share a simple truth: when pricing (or making an offer on) a property, you must look at the most recent sales data in the neighborhood! Lenders will not cherry-pick to get the highest value as may be the case in these examples. Guidelines set forth by lenders are quite clear on this matter as stated in Fannie Mae’s “Guidance for Lenders and Appraisers”, April 2009:

The appraiser should use comparable sales that have been settled or closed within the past 12 months. However, the appraiser may use older comparable sales if he or she believes that they are appropriate, and selects comparable sales that are the best indicators of value for the subject property. The appraiser must comment on the reasons for using any comparable sales that are more than six months old.

Notice the last three words in the Fannie Mae guidelines: six months old. This means if the Appraiser includes sales data over six months old they have to make the case. And the case had better be solid. Adding to the problem is that the most recent sales may not even be what we would consider “fair market” transactions. They may be foreclosures or short sales. In these cases the lenders want to bail and recoup whatever they can. They are not willing sellers but rather are forced to get properties off their books. These sales can distort market values. But if that’s all there is in a neighborhood then willing home owners may be forced to live with those depressed price.

Realtors and their clients should be very diligent about an offer or sales price. Before spending one dime of a client’s money my appraiser is willing to take a quick look at current comps. In our current market this is more important than ever. What happened one year ago in a neighborhood is more than likely an irrelevant event.

Just a few short years ago it seemed that any home buyer with a pulse could purchase a house with no money down. Those days are now gone. Even the most liberal lenders require at least 3.5 % down payment even then it’s hard for those loans to be qualified for the required mortgage insurance. Many would-be home buyers are left on the sidelines because they don’t have thousands of dollars for the down payments necessary to qualify for mortgage loan insurance. Veterans are in a very sweet spot today. The VA Loan is the only program available that does not, in most cases, require a down payment. We are seeing some down payment requirements in areas where the VA appraiser is classifying the property as in a ‘declining market’. In these cases a 5% down payment requirement is being instituted by lenders.

VA loans are guaranteed. The loans are made by a lender (not the Veteran’s Administration) and are backed by the VA. This means if the borrower defaults the VA protects the lender (bank) against any loss. Credit scores are less important than in conventional mortgage lending. The amount of the guaranty depends on the amount of the loan and whether or not the Veteran has used the program previously (a Veteran can use the program over and over again and we’ll discuss that later). Under current guidelines the Veteran who has not previously used the program may be able to obtain a VA loan for up to $417,000 (if you live in places considered high cost like some counties in California, Hawaii, Alaska and Colorado the limit can exceed three quarters of a million dollars).

How do you get a VA Loan? Visit www.VALoansMN.com

Another attractive aspect of the VA loan is no monthly mortgage insurance payment. In conventional lending if a loan exceeds 80% of the value of the home a borrower is required to pay for insurance to protect the lender. This insurance cost is tacked on to the monthly principal and interest payment. It generally ranges from $40 to nearly $200 per month depending on the amount of the loan and the borrower’s credit history. Many borrowers are able to qualify for a loan with less than 20% down but insurers are unwilling to guaranty the loan. This is a result of the current high rate of foreclosures. Veterans do not have to worry about this change.

Earlier I mentioned that you can use this benefit over and over. Even if you’ve had a VA loan before you may still have “remaining entitlement”. The Department of Veterans Affairs in the booklet Home Loan Guaranty Services states

Veterans can have previously-used entitlement restored to purchase another home with a VA loan if:

· The property purchased with the prior VA loan has been sold and the loan paid in full, or

· A qualified veteran…agrees to assume the VA loan and substitute his or her entitlement for the same amount of entitlement originally used by the veteran seller. The entitlement may also be restored one time only if the veteran has repaid the prior VA loan in full, but has not disposed of the property purchased with a prior VA loan. Remaining entitlement and restoration of entitlement can be requested through the VA Eligibility Center by completing VA Form 26-1880.

We can help you with any questions concerning eligibility, entitlement and other VA loan requirements. Visit www.VALoansMN.com.

Here’s a great quote from an expert on the future of mortgage rates:

If you are considering refinancing or purchasing a home, do it now. Do not try to time the market. Most people that do, won’t catch the bottom. Currently, you can lock in rates on a 30 year fixed below 6%...I assure you this-next year at this time, they will be higher than they are today.

That was posted on the Mortgage News Daily website in February, 2008. Rates are lower now than they were then by almost 1 full per cent! The moral of this story is no one knows where mortgage rates are headed. There are some indications that they may be going up. The Federal Government is spending (borrowing) money as it has never done before. This borrowing puts upward pressure on credit markets and rates. According to a report on Bloomberg.com Federal Reserve Chairman Ben Bernanke’s efforts to bring down borrowing costs to revive the housing market and help the economy are stalling. A former research director and the Federal Reserve says “housing is not going to be the engine to get us out of this recession”. Robert Eisenbeis says “they’ve squeezed a lemon and now they’re trying to squeeze some more, but you can only get so much juice out of a lemon”. It may be the Fed doesn’t see the possibility of lowing rates further as an answer to the housing crises.

For information on obtaining a VA mortgage visit www.VALoansMN.com