Monday, March 15, 2010

WHERE WOULD CHICAGO’S HOUSING MARKET BE WITHOUT HELP FROM UNCLE SAM?

Where would Chicago’s recession-battered housing market be in 2010 without help from Uncle Sam?

When Congress extended the $8,000 federal tax credit for first-time buyers through April 30th of 2010, the incentive gave a huge boost to the housing market nationwide, experts say.

The income limits also were raised to $125,000 for singles and $225,000 for couples to broaden the impact of the tax credit. In order to claim the credit, a home or condominium must be under contract by the end of April and closed by the end of June.

And the new provision also offered a credit of up to $6,500 to existing homeowners who have owned their residence for at least five years. This incentive provided yet another lift for the housing market, experts say.

Through efforts of the Federal Reserve Board, the government also is holding interest rates at near record-low levels, analysts said. As a result, benchmark 30-year fixed mortgage rates of 4.97 percent in early March are “helping to maintain affordable home-purchase conditions,” noted Frank Nothaft, Freddie Mac vice president and chief economist.

The National Association of Realtors reported that monthly principal and interest mortgage payments for a typical family buying a median-priced home of $163,800 were just $709 in January of 2010, the lowest amount since February of 1998.

First-time home buyers who took advantage of the tax credit in the fourth quarter of 2009 purchased a residence in the third most affordable quarter since 1981, NAR reported.

Along with Uncle Sam’s tax credit incentives, home buyers this spring also can qualify for Federal Housing Administration-insured mortgages with low 3.5-percent down payments and attractive interest rates.

The FHA has been helping families buy homes since the Great Depression of 1934. Now, the national homeownership rate in the U.S. is an amazing 66.2 percent.

A rising number of condominium developers today are applying for FHA-insured loan approval for their buildings to help more home shoppers become owners, noted Gail Lissner, vice president of Appraisal Research Counselors.

Although borrowers are attracted by the low FHA down payment requirement, purchasers must also be an owner occupant and have a minimum credit score of 620, noted Perry Farella, a loan officer with Wintrust Mortgage in Chicago.

Loan limits for FHA insured mortgages in the nine-county Chicagoland area currently are: $410,000 for a 1-unit home or condo; $524,850 for a 2-flat; $634,450 for a 3-flat, and $788,450 for a 4-unit building.

There are other perks with FHA financing. Currently, the seller can pay the buyer’s closing costs and the FHA mortgage-insurance premium as part of an allowable concession amounting to 6 percent of the purchase price, Farella said.

The seller concession also can be used to buy-down the interest rate on the FHA mortgage, thus lowering the buyer’s monthly principal and interest payment, he noted.

Additionally the buyer’s down payment can be gifted from relatives and if need be a non-occupying co-borrower is permitted if additional income is needed to qualify for the mortgage.

New FHA guidelines recently went into effect for condo developments, and there are significant advantages for developers obtaining government-insured loan approval for their projects, Farella said.

Under the new federal regulations, FHA condo loans can be closed when the building has reached a 30-percent pre-sales ratio as long as half of the buyers are owner occupants.

For more information on FHA financing, call the Wintrust Mortgage consumer hot line: 773-303-0038, or e-mail pfarella@wintrustmortgage.com.