The Home Buyer Tax Credit Extension Has Not Been Passed Into Law (Yet)

As its June 30, 2010 closing deadline approaches, the federal home buyer tax credit is back in the news.

Unfortunately, the headlines are misleading.

Contrary to what you may have read (or heard), the federal home buyer tax credit has not been extended past June 30, 2010. At least not yet. And here's why there's confusion.

Look at these headlines from earlier this week:

• Senate Extends Date On Home-Buying Tax Credit (Philadelphia Inquirer)
• U.S. Senate Approves Extension Of Home Buyer Tax Credit (NASDAQ)
• Senate Approves Home Tax Credit Extension (Reuters)

Now, nothing above is factually incorrect, but each neglects a key piece of the country's law-making process -- it takes more than the Senate to pass a law. For a bill to become a law, it must pass the Senate and the House of Representatives and then it must be ratified by the President.

To date, we've only cleared just one of those 3 steps.

This means that the federal home buyer tax credit has not been formally extended. As of now, it's still in discussion.  Ultimately, though, if the extension does pass, it's expected to extend the closing date deadline for Maple Grove home buyers beyond the original June 30, 2010 date into September 2010.

Homeowners must still have been in contract as of April 30, 2010 to claim up to $8,000 in federal tax credits.

Good News For Sellers : Housing Starts Fall To 1-Year Low In May 2010

Single-family housing starts plummeted to a one-year low in May, just 30 days after soaring to a 20-month high.  It's no wonder home builders are confused.

Against a revised April figure, Housing Starts fell 97,000 units in May, a figure representing almost one-fifth of the total market size.

It's the worst showing for Housing Starts since May 2009, a surprise to builders and economists alike.

Furthermore, single-family Building Permits plunged in May, too -- down 10 percent from April. A permit is a certification from local government that authorizes home construction.

Housing permits are a precursor to Housing Starts with 82% of homes starting construction within 60 days of permit-issuance. Fewer permits, therefore, directly reduces the number of new homes coming to market in the coming months.

For home buyers in Minneapolis , this should create a sense of urgency.

Home prices are based on supply and demand and supply appears to be falling about the same time that economists predict a surge in home demand.  It could spell rising home prices and a complete loss of negotiation power with home sellers.

For now, though, home affordability remains high with properties cheap and mortgage rates near all-time lows. If you plan to buy a home later this year, the May 2010 Housing Starts data may be a reason to move up your timeframe a bit.

Loan Application Alert : Conforming, Interest Only Mortgages Guidelines Change Next Week

If you plan to finance your Maple Grove home with a conforming interest only mortgage, get your loan application submitted no later than this Friday, June 18. 

Starting next week, Fannie Mae is clamping down on the popular loan product.

An "interest only" mortgage is exactly what its name implies -- a mortgage for which the monthly payments consist entirely of interest with no principal reduction. Because there's no amortization, payments are less costly on a month-to-month basis.

For example, assuming principal + interest payments at 5 percent, a $250,000 mortgage carries a monthly payment of $1,342.  The payment on a comparable interest only mortgage, however, drops to $1,042.

That's a payment difference of $300 and the size of the cost savings, not surprisingly, is the biggest reason why Fannie Mae is making its changes.

In its official announcement, Fannie Mae says it wants the give the interest only option to "borrowers who are in a position to choose it as a financial management tool" rather than allowing homeowners use it as an affordability tool for their budgets.

Going forward, there are new minimum standards for interest only home loans.

• Applicants must have a 720 credit score or better
• Applicants must have at least 24 months of reserves
• The property type may not be a 2-unit, 3-unit or 4-unit
• The property must be a primary residence, or vacation home

Furthermore, only purchase and rate-and-term refinances are eligible.  Cash out refinances are prohibited.

Interest only home loans aren't for everyone, but if you plan to finance with a Fannie Mae mortgage and interest only is your preference, get your loan application submitted as soon as possible. Starting Monday, approvals will be tougher to come by.

Shopping And Paying Bills Online? Here's Methods To Protect Your Online Financial Identity

In May 2010, Retail Sales at non-store retailers -- a category that includes Amazon and eBay -- topped $29 billion, up 16 percent from May 2009. Clearly, Americans are doing an increasing amount of shopping online.  And we're paying our bills online, too.

But how well are we protecting our identities?

In this 5-minute piece from NBC's The Today Show, you'll learn the basics of online fraud and methods to minimize the likelihood of identity theft.  Furthermore, the tips go beyond the basic "choose a challenging password".  For example, you'll hear about:

• Why you shouldn't pay bills from a coffee shop
• Who might be hiding behind an unprotected public wifi network
• The dangers of storing credit card numbers with an online retailer

And, although, at one point, the interviewee goes over the top with respect to spyware and anti-phishing prevention, the point being made is a good one -- you can't be too careful with your online financials and common sense goes a long way.

What's Ahead For Mortgage Rates This Week : June 14, 2010

Mortgage markets posted four good days last week and one awful one.  Unfortunately for rate shoppers in Wisconsin , that one bad day outweighed the gains of the other four and mortgage rates worsened on the week overall.

Despite re-touching all-time lows on Tuesday and Wednesday, Conforming and FHA mortgage rates moved higher on the week.

There wasn't much domestic data on which for mortgage markets to move so rates took their cues from global economic activity. Strong data from Japan and China, plus an improving outlook from the Eurozone, sparked optimism among Wall Street investors. Cash poured into the stock market and it happened at the expense of bonds -- including the mortgage-backed ones.

It's the primary reasons rates rose and not even the worst Retail Sales report in 8 months could undue the damage.

Often, weak Retail Sales data causes mortgage rates to fall. Last week, however, that wasn't the case. 

This week, there's cause for rates to rise again with Wednesday emerging as a "data day".

First, at 8:30 AM ET, the government releases two key housing statistics and one major gauge for inflation -- Housing Starts, Building Permits and Producer Price Index, respectively.  Strength in any or all three should lead mortgage rates higher.

Then, at 5:45 PM ET, Fed Chairman Ben Bernanke makes a public speech and anytime Bernanke speaks, mortgage rates can move.

Mortgage rates remain unnaturally low and a lot of Americans have taken advantage already. If you're a homeowner and you've wondered whether or not a refinance makes sense, talk to your loan officer straight away. Low rates like this can't last forever so lock one in while you can.