If you are buying a home in Austin Texas an FHA loan could be the ticket.  There are many misconceptions when it comes to FHA loans.  In a nutshell an FHA loan is a loan which is insured by the Federal Housing Authority, but it is not for low-income families, first-time home buyers, or for inexpensive homes.  An FHA loan could be the option you need to buy Austin Texas real estate.
FHA loan facts:

• There are no income restrictions for FHA loans.
• FHA loans typically have lower interest rates.  Traditional, 30 year fixed mortgages are currently hovering around 4.3%, and FHA loan could be as low as 3.5%.
• FHA loans are for all types of home buyers, not just first time home buyers.
• FHA loan limits can be large, nearing almost $800,000 in value.
• FHA loans can often be transferred to a new home owner when a property is sold.

An FHA loan could be what you need to finance your Austin real estate. Call me today to learn more about buying an Austin home, as well as financing options that might work for you.

Contact Todd Smith today for up to date information about Austin Texas real estate as well as free access to the Austin Texas MLS and all properties currently for sale in the Austin area.

There was a great article recently on The Columbus (Ohio) Dispatch’s website about an 18-year-old named Lindsay Binegar who pulled the trigger on a purchase many people older than her can’t manage.

She bought a house. And paid cash. The lessons from her story are priceless.

I can’t do the article justice, so I recommend reading it when you get a chance, but the gist of it is that Lindsay started earning money for showing pigs beginning when she was 4 years old. She saved and saved her money, planning on using it for college.

When she started looking at schools, however, her parents offered to pay for college if she stayed near home. So she had her college fund now available to invest. Her father, who runs an auction house, suggested she buy a house at auction.

She paid $40,000 cash for a house, according to the Dispatch article. She spent a little more on new paint and carpet and rented it out to an aunt and uncle.

The first big lesson Lindsay showed is that frugality pays off. How many adults would like to be able to save $40,000 in 14 years? The power of compounding interest – earning interest on your interest – over the years, along with Lindsay’s resisting temptation to spend the money, gave her quite a bit to invest.

Which brings us to the second lesson: Once college was paid for, she didn’t take the money out to buy a new car or a new wardrobe, she invested it. Turning it into a rental property and assuming, conservatively, that she can earn $8,000 a year in cash flow (after taxes and maintenance), she could have her original investment back in just five years.

The last big thing to take away from the story is the fact she took advantage of today’s market, buying a house at auction at a low price and only having to add paint and carpet. Paying cash removes any debt obligation. There are plenty of deals to be had in today’s real estate climate, and she found one PLUS bought it the most ideal way.

If you think about it, this is the way our parents and grandparents became homeowners – they saved and saved and didn’t get in over their heads when they purchased a home. It was the smart, responsible way to own a home.

There’s plenty we can learn from the teenager who did the same thing.

To all the teenagers out there graduating from their respective schools, including my youngest son Wyatt who is graduating from high school, I hope you will glean inspiration from this tale and nurture it for your own measure of success!

Nationwide, April sales of existing homes were up 22.8 percent compared to April 2009, and were up 7.6 percent from March of this year. The driving force behind the jump, of course, was the now-expired tax credits. But another reason to buy is still here: historically low interest rates.

Bankrate.com reported on May 24 that the average for a 30-year, fixed-rate mortgage was 4.87 percent, which is the lowest it’s been in the 30 years that Bankrate has been tracking the figure.

Mortgage rates are tied to U.S. Treasury bond yields, which are low right now because of the financial crisis in Europe.

It’s the best time in our generation to buy,” Moody’s chief economist Mark Zandi told CNBC. “It may be the best time in any generation. Mortgage rates are so low and with homes prices down and lots of inventory, you couldn’t pick a better time to buy or re-finance.”

The extremely low rates won’t last forever – some experts expect about a month, as worries over Europe diminish. Most experts are also calling for strong sales figures for May and June as tax-credit purchases close by the June deadline, then a slowdown in sales as the bump from the credits disappears.

There’s no doubt that some folks have been “on the fence” when it comes to buying a house – despite the first-time home buyer tax credits, bargain prices and rock-bottom interest rates.

A recently released report, however, shows that getting off that fence might be the best move. 

According to a national study conducted by the Associated Press, the gap between the cost of monthly rent payments and monthly mortgage payments is at its lowest point in 20 years. Which means, depending on your perspective, it’s never been more expensive to rent or never been less expensive to own a home in the past two decades.

According to the AP article on the study, the difference between median rent and median house payment in the 45 metropolitan areas surveyed was just $256, the lowest since it sat at $264 in 1993.

In metro areas harder hit by foreclosure, it’s even less of a gap. For instance, owning a home in Detroit might only cost $75 more per month than renting a comparable place. And the gap between renting and buying is closer to $200 in cities such as Cleveland, Orlando, Las Vegas and Atlanta.

When you calculate equity build-up and the tax benefits of owning, it makes you wonder why more people don’t get off the fence.

Of course, this buyer’s market won’t last forever. Prices are showing signs of recovery and interest rates are on the rise. Another interesting tidbit from the AP article: Home prices will rise before rents in most markets, meaning the gap will only be this close for so long.

You might have noticed last week that the Federal Reserve raised the discount rate on loans to banks. To the uninitiated, this might seem like a move that will push mortgage interest rates higher. However, it is not.

Yes, mortgage rates crept up a bit after the announcement, but that was largely a knee-jerk reaction to the news by the mortgage-backed securities market. The discount rate is the rate the Fed charges banks to borrow directly from it. The federal funds rate – which is what banks charge each other and is the real driver of mortgage rates – remains unchanged.

This is does not mean interest rates on home loans will not rise. As part of the federal stimulus package, the Fed has been buying mortgage-backed securities, which has helped keep rates down. But the Fed has warned that it is almost done with the program, and the purchases of mortgage-backed securities could end in March. This means rates could start to rise then.

The Mortgage Bankers Association, in fact, predicts that by June, rates could be a half-a-point higher, and a year from now, rates could be a full percentage point above their current levels.

The bottom line is that rates are at or near historic lows, and are probably set to rise in the next 12 months. But not because of the Fed’s largely symbolic move last week.

 

U.S. News & World Report recently published an article that indicated a pretty dramatic change in the way homeowners are now tackling their debt.

According to the article, a study released by Transunion showed that Americans are increasingly more likely to make payments on their credit cards before payments on their mortgages. The data shows that roughly 6.6 percent of borrowers paid credit cards first in the third quarter of 2009, up from just 4.3 percent in the first quarter of 2008.

This is a shift in the historical norm; which has long been slanted toward house payments as a priority ahead of other bills. Credit the housing bust nationwide for the change.

 As homeowners struggle with unemployment and drops in their homes’ value, they have perhaps become reluctant to commit more money into an asset that might not be worth what they owe on it. Whereas keeping up with credit card payments continues to give them access to necessities such as gas, clothing and groceries.

It also probably signifies part of the issue that caused the housing bust. Access to no-money down or low-down payment loans that proliferated the market during the housing boom allowed buyers to get into homeownership without much “skin in the game.”

In the days of 20-percent down payments, homeownership was something you worked for, saved up for and therefore something you were less likely to give up so easily. It’s a lesson that you can bet banks are heeding.

The Department of Housing and Urban Development’s efforts to help borrowers understand what costs they are getting into (see http://blog.fineaustinliving.com/shopping-for-a-mortgage-should-get-easier-in-austin), is just one example of the federal government’s primary target as the U.S. economy comes out of this recession.

Consumer Debt

It’s easy, of course, to blame the housing industry for the financial mess. And there’s no question, home buyers eager jump on the bubble bandwagon of rapidly rising home values took on loans they fundamentally could not afford, adding to the problem.

You probably have your own opinion about the government’s efforts to “modify” some of these loans, making them more affordable to those who carry them. You probably have your own feelings about the government bailing out the banks who made these loans, perhaps knowing that many wouldn’t be paid back.

But you should also be able to see that the government is trying to make sure it doesn’t happen again. The HUD Good Faith Estimate form is an example – the government is saying “protect the borrower” when it makes it harder for banks to hide real costs.

The credit card laws that go into effect in February also put consumer debt in their cross-hairs, aiming to eliminate some of the practices that keep credit card account holders in debt.

For example, card companies can no longer raise your interest rate on current balances if you are less than 60 days late on a payment. Also, after February, companies can’t charge a fee for going over a credit limit, unless the card holder has “opted in” to pay the charge for the convenience of being able to go over his or her limit.

NOTE: It will be important for you to pay attention to all your credit card mail – you might be required by your card company to opt in or opt out of various changes. Some card companies, knowing they can’t raise rates as often or for as many reasons as under the old laws, have raised rates now. You can opt in to the new rates, while you continue paying the old rate on current balances, or you can opt out, effectively canceling your card.

New regulations also call for parental permission for those under 21 to open new credit card accounts, and they also restrict the marketing credit card companies can do on college campuses. Lawmakers apparently understand that card companies want to get their claws into potential debt carriers while they are still young and impressionable.

Are these kinds of measures going to squeeze the credit of some who might not deserve to be squeezed? Perhaps. But it’s clear that the government views Americans’ willingness to go into large debt, or their irresponsibility with it – or both – as part of the financial problem.

And its solution is to take aim at that consumer debt.

Recommended Resources

Settlement Cost Booklet

HUD has published a pretty handy guide for home loan borrowers, titled “Shopping for Your Home Loan: HUD’s Settlement Cost Booklet.” This 49-page booklet explains laws, procedures, costs, etc. associated with home loans. You can download this educational booklet at

http://portal.hud.gov/portal/page/portal/HUD/documents/Settlement%20Booklet%20December%2015%20REVISED.pdf

With the arrival of a new year also came a new way to compare home loans.

On January 1, new rules went into effect, which mandate that all home loan applicants be given a new version of the Department of Housing and Urban Development’s “Good Faith Estimate” form.

The new form is designed to clarify what home loans will actually cost, which should make it easier for borrowers to compare home loans. All lenders must disclose their fees and put them in the same places on the form.

In addition to interest rates, there are other costs associated with loans that should be compared. There are what are typically known as “origination costs,” which are the fees a lender charges, and there are “settlement fees” – such as appraisal fees, title insurance, etc. – that are part of the costs.

The new regulations require that lenders disclose these fees uniformly and then stick to them. For example, if you are quoted a $300 appraisal fee on a Good Faith Estimate form, you cannot be charged more than 10 percent of the price quoted.

The idea, HUD says, is to make it easier for consumers to do an apples-to-apples comparison of different loan products. In fact, on the third page of the three-page form, there is a place to do a side-by-side comparison of up to four different loans and recognize what is the best deal.
Sometimes, borrowers get so caught up in what the interest rate or monthly payment is that they lose track of other costs associated with a loan, and it becomes more expensive than they thought.

HUD’s new efforts to improve transparency and uniformity should help you find the best loan deal more easily.