So Close but Yet So Far!

We got so close last week to being able to use the $8000 tax credit for first time homebuyers for the down payment. HUD came out with one of their mortgagee letters stating that short term loans by approved non-profit and government agencies could be used for the down payment and then paid off with the tax credit.
However, within a little over 24 hours HUD pulled the mortgagee letter, something that I dont believe has happened before (or at least is very unusual). At any rate we are back to square one, which is, see if you can get a gift from a relative, employer, or church group. Then if you decide to amend your 2008 tax returns and pay them back out of the goodness of your heart, good for you!
CHFA is still available at this time, although one wonders how long their new program will last. They allow you to use the tax credit and will give you an interest free loan until August 2010. They advise that you pay it off with the tax credit as the interest rate is high and the amortization period (pay back period) short making the payments quite large in some cases.

Time for a cuppa . . .

Why is getting a loan so jolly hard these days?

It seems that everyday word comes down from the investors about one more thing that's going to make life more difficult for a borrower. As if it isn't hard enough already. Guidelines change with out much notice. Some of them make sense, some seem a little too conservative.

The latest is the "walls in" policy now being required for all condominiums whose master policy does not provide this coverage. Furthermore, the lender will collect it as part of the escrow payments so it has to be included as part of the borrower's debt structure.



What does this mean? It is an insurance policy, somewhat similar to a renters policy, that covers the internal rebuilding of a condo or town home if the property were to burn to the ground. Typically the HOA's insurance will rebuild the basic structure, but not finish the inside (drywall, bathrooms, kitchen).



So the down side is that a borrower who is a little tight on the mortgage payment, now has to include the insurance policy too. This could prevent them from qualifying. On the upside, it's smart to have the insurance. Let's face it, if the building was to burn down, it would be tough to come up with the money to finish the interior. So all in all, forewarned is forearmed, and with this knowledge a homebuyer can remain within their purchasing power and not have a nasty shock half way through the transaction.