Pasadena CA Real Estate

There are multiple announcements about how home buyers can now use the $8,000 tax credit to use as the down payment on their home purchase. Let no one say that I'm a "party pooper", but somehow, I can not get excited by this announcement.

Why?  Well... let's take a look at the announcement made by HUD (US Department of Housing and Urban Development) first:

DONOVAN ANNOUNCES RECOVERY ACT'S HOMEBUYER TAX CREDIT CAN IMMEDIATELY HELP THOUSANDS OF FIRST-TIME HOMEBUYERS TO BUY A HOME
FHA plan will stimulate new home sales and help stabilize housing market

WASHINGTON - Speaking to the National Association of Home Builders Spring Board of Directors Meeting, U.S. Housing and Urban Development Secretary Shaun Donovan today announced that the Federal Housing Administration (FHA) will allow homebuyers to apply the Obama Administration's new $8,000 first-time homebuyer tax credit toward the purchase costs of a FHA-insured home. Donovan said that today's action will help stabilize the nation's housing market by stimulating home sales across the country.

The American Recovery and Reinvestment Act of 2009 offers homebuyers a tax credit of up to $8,000 for purchasing their first home. Families can only access this credit after filing their tax returns with the IRS. Today's announcement details FHA's rules allowing state Housing Finance Agencies and certain non-profits to "monetize" up to the full amount of the tax credit (depending on the amount of the mortgage) so that borrowers can immediately apply the funds toward their down payments. Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs, which can help achieve a lower interest rate. To read the FHA's new mortgagee letter, visit HUD's website.

"We believe this is a real win for everyone," said Donovan. "Today, the Obama Administration is taking another important step toward accelerating the recovery of the nation's housing market. Families will now be able to apply their anticipated tax credit toward their home purchase right away. At the same time we are putting safeguards in place to ensure that consumers will be protected from unscrupulous lenders. What we're doing today will not only help these families to purchase their first home but will present an enormous benefit for communities struggling to deal with an oversupply of housing."

First of all, let's get this straight.  You will only qualify for the full $8,000 if your adjusted gross income is not over $75,000 if you are single or $150,000 for joint filers.  If you are make anywhere between $75,000 and $95,000, this tax credit begins to phase out.  And, if you are fortunate enough to make over $95,000 or $170,000 for joint filers, you will not qualify for any tax credit!

Second, the tax credit is only 10% of purchase price UP TO $8,000.

Third, let's face this... this loan will be considered as DPA or better known in the lending industry, Down Payment Assistance.  Any type of down payment assistance has to be accounted for in the borrower's Debt to Income Ratio.  If you are an FHA buyer and already are trying to qualify for 96.5% of the value of a home and now you will have yet another DPA on top of that, the chances are no bank will ever approve you for the mortgage.

Fourth, this essentially is a short term, bridge loan.  I do not see HUD stating anywhere that this loan is going to be free.  Short term bridge loans are usually expensive.  Would you, as a first time home buyer, be willing to pay 8% to 10% interest on this money?

Five, how long do you think it will take the government to approve you for this loan?  Do you think that they'll be able to make the 7 to 10 day loan contingencies that we're seeing on our contracts now?  I doubt it!

And, finally, how much will the banks charge to set up this loan, to print loan docs or any other expenses associated with processing tihs loan?

Sounds like a lot of fairy dust to me.  What do you think?

READ MORE:  Pasadena's Real Estate Market Activity:  Back to Basics

Pasadena Real Estate Guide

Read 5 home buyer tips for getting more home for your $.

9 Stupid Things Buyers do to Mess Up their Home Purchase

Multiple Offers on Pasadena Homes?

State of the Pasadena Housing Market by Chief C.A.R. Economist

If you are an LAUSD (Los Angeles Unified School District) employee, you may qualify for a special home loan through CalSTERS.  This special home loan program is open to over 700,000 CalSTRS members including LAUSD employees and college educators.

To assist in purchasing your Pasadena home, CalSTRS offers an 80/17 loan program.  Here is what it looks like:

• You need to have a 3% down payment.  2% of the down payment can be gift money, but not from selling property.
• 1st home loan (mortgage) will be 80% of the purchase price.
• 2nd home loan (mortgage) will be for 17% of the purchase price.  BUT, payments on the 2nd mortgage are deferred for 5 years!
• There is no Mortgage Insurance
• There is no Pre-Payment penalty.

This special home loan is available for single family homes and Fannie Mae approved condos only.

So if you are thinking of buying your Pasadena home and work for LAUSD, don't forge to check into this CalSTERS loan.

Read More:  Pasadena City Guide

                  South Pasadena City Guide

                  San Gabriel City Guide

                  San Marino City Guide

What a great opportunity!

I just got off the phone with my personal mortgage consultant - Mondie Pic'l at Wells Fargo.  Today, Pasadena mortgage rates have hit the lowest that we'd seen in quite some time.  I have asked her to lock the mortgage rate for me and will be refinancing my home. 

The opportunities are tremendous TODAY to refinance your existing loan or to lock in a mortgage rate on your Pasadena home purchase.  We're seeing rates as low as 5.75% with NO points for a 30 year fixed loan.

If you'd like to reach Mondie to discuss your mortgage options, please call her at 909-912-1847.

Don't miss this one!

Looking for more information about Pasadena California - see Pasadena City Guide.

by Brian Brady

The economy is really sick:

Today's CPI report signals deflation, or a prolonged price slide, may become another hazard facing Federal Reserve Chairman Ben S. Bernanke and President-elect Barack Obama. Deflation could worsen the economic downturn by making debts harder to pay off and countering the impact of Fed interest-rate cuts.

''The economy's really just in horrific shape,'' said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities in New York. Fed officials will ''take rates as low as they have to'' to avoid ''a deflation-type scenario, which now all of a sudden is very possible.''

LaVorgna predicts the Fed will cut its main rate to 0.5 percent from its current 1 percent when it meets on Dec. 16.

Fed Vice Chairman Donald Kohn said today that while the risk of deflation is ''still small,'' policy makers must be ''aggressive'' in fighting the danger. The economy ''is declining right now'' and will record a couple of quarters of contraction, he said in answering questions after a speech in Washington.

Fed policy makers last month forecast the U.S. economy will contract through the middle of 2009, with some officials prepared to cut interest rates further in response, according to a record of the group's meeting.

If the Fed's thinking of cutting rates further, why aren't mortgage rates going down?  I think it's because the Fed has done all it can do.  Future rate cuts are like that eighth scotch.  Drinking that eighth scotch isn't going to make you feel any better than the seven prior.  It just might make you feel worse.

I advised folks, right after the election, to lock loans with rates under 6% if they were closing within 30 days.  Today, I'm suggesting that you lock any loan that is closing this year.  Today, a 45-day lock for a 6.0% rate would costs 1.25%.  While you may see rates drop below 6% , in the next 45 days, the risk of them moving higher is greater.

Take 6% and run.

• By: Brian Brady
• America's #1 Mortgage Broker

We analyze Pasadena mortgage rates by examining the mortgage-backed securities market and its reaction to economic data and events.  Today, the Federal Reserve cut the Fed Funds rate to an historical low of 1%:

The Fed funds rate target is now 1%, the lowest level in more than four years. In announcing its decision, the Federal Open Market Committee cited a drop in spending by consumers and businesses, and predicted that consumption may slow further due to tighter lending standards.

"The pace of economic activity appears to have slowed markedly," the FOMC said in a statement, "owing importantly to a decline in consumer expenditures."

Why's the economy in the tank?  You just aren't spending enough money, Joe the Plumber.  Of course, you can't borrow any either so you're hesitant about spending.   Hence, the Fed cut in rate.  Normally, a Fed cut should be followed by a RISE in mortgage rates but it looks like the mortgage-backed securities market anticipated the cut a week ago. 

Let's take a look the crystal ball (market chart):

See what's happening here?  Two weeks ago, we had a six day BIG drop, which caused rates to rise from 5.875% to 6.5%.  That drop was followed by a 5 day rally, which brought rates back down to 5.875%.  Then, we had a six day BIG drop, driving Pasadena mortgage rates back up to 6.5% (today)...

...and I think the market overreacted which means I think we'll see lower mortgage rates into the beginning of November.

This is the kind of volatility we've come to expect.  Pasadena mortgage rates should drop to 6.25%, pause, then drop again to the 6% level or below.  No guarantees but November closings should get a peek at 6% or better rates soon.