Wow just the name alone is intimidatingly long. I am not going to recite all 789 pages of it to you, but there are a few points that I would like to point out as they very time sensitive. First of which is the new minimum down payment for FHA. It is going to go from a minimum cash from buyer of 3% to 3.5%. Now that may not seem like a big deal to some of you, but to the number of first time buyers that were having a hard time raising the 3%, thier task just got harder. Add to that the new Up Front Mortgage Insurance Premium of 3% (up from the 1.25% it currently is if you have good credit), and it now becomes a much more expensive loan.This could all take effect as of 10/1/2008. So if you are sitting on the fence looking for a home and plan on financing that home with an FHA loan, you might want to get on the stick.

The next part I want to talk about is the new conforming loan limit. The temporary maximum loan limit set back in March for San Diego was $697,500 which was far better then the $417,000 that was the previous limit is now going to be once again reduced. The new Maximum loan limit should be $625,500 (the new national maximum conforming loan limit). In some parts of the state it will be lower, but that is where we should be in San Diego. This part of the bill will take effect as of January 1, 2009. This is just one more reason you might want to pull the trigger on that home purchase sooner rather than later.

and finally, I would like to talk about the tax credit. This will allow first time home buyers the ability to get a check (or credit) from thier federal tax return of up to $7,500.00 if they purchase a home by Dec. of 2009. But more importantly, it is going to be retroactive back to April of 2007. Now this will not help with down payment, but it will help with the unforeseen costs that come with the purchase of a new home. This is not free money, but it is interest free. You will make equal payments of $500.00 per year (paid back in your tax returns) for the following 15 years. Also, if you are forced to sell the home for some reason and realize a gain on the home of less that $1,000.00, the unpaid portion of the credit is forgiven! That is pretty cool right?

There is a whole lot more to the bill that I will be writing about later, but I thought these three parts could be amongst the most pertinent for the time.

Yes this morning the Fed did cut the “Fed Funds” rate another .75% right after a historic move of a rate cut on Sat. of .25%, but 30 year fixed rate mortgages went up .25% to .375% in rate depending on the lender. How is that possible you may wonder? Well it works like this. The Fed Rate cut lowers rates on short term money. The kind of short term credit that large companies will utilize to produce more goods and in turn take on more workers to make those goods while the money is cheap. The theory then is that more people will be working and making money that they will turn right around and put back into the economy as they themselves buy goods and services. Sounds like a great idea right? Right? Well let’s look at it from the home loan side of things. The above referenced actions also produce a nasty side affect to the mortgage industry, that is “Inflation”. Inflation is the natural enemy to mortgage bonds that are sold to free up liquidity for the lending institutions so they have more money to lend to you and I for home loans. But these are long term investments for the investors both foreign and domestic that purchase them. So when inflation gets out of control, it starts to deteriorate the profit for these investment vehicles. This in turn causes investors to turn around and dump their mortgage bond investments to invest back into the stock market, and when mortgage bonds are down, then the rates go up. Long story short; the Fed lowering rates more often than not will cause home loan rates to go up.  

Welcome to Rob McNelis’s Blog! This blog will provide you with valuable information, tips, and general insight into the real estate market in Santee. Visit my website at http://RobMcNelis.topproducerwebsite.com.