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If you plan to finance your Philadelphia home with a conforming interest only mortgage, this 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.

Historically, this makes a lot of sense. Prior to the “Great Depression” of the 1930’s almost all loans were interest only loans, and when the end of the mortgage term came, many people lost their homes when they didn’t have the resources to obtain new financing. That was what led to the creation of the full amortizing mortgage which completely paid off the principal when all the payments had been made.

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, then think about the consequences as well as the benefits of this loan.

Starting sometime later this year, the monthly cost to carry an FHA-insured mortgage is expected to rise.

In a near-unanimous vote, the House of Representatives gave the FHA power to raise the monthly mortgage insurance premiums it charges to its borrowers.

Currently, monthly mortgage insurance premiums are 0.55% of the unpaid loan balance, divided by 12.  The recently approved Federal Housing Administration Reform Act provides for an increase in monthly premium of up to 1.55 percent, among other details of the bill.

Despite the ability to charge 1.55 percent, FHA officials say an increase to 0.90 percent would be sufficient to self-insure its loans.

In everyday terms, assuming a $200,000 mortgage, the math to a homeowner looks as follows:

• Current Premium (0.55%) : $91.67 monthly mortgage insurance premium
• Expected Increase (0.90%) : $150.00 monthly mortgage insurance premium
• Maximum Increase (1.55%) : $258.33 monthly mortgage insurance premium

A increase in monthly mortgage insurance premiums will reduce home affordability for buyers in Mount Holly and strain household budgets.

The news isn’t all terrible, however.

Because higher monthly insurance premiums are expected to pad the FHA coffers sufficiently, the FHA has said it plans to reduce its upfront mortgage insurance premium paid at closing from 2.25 percent down to 1.000 percent.

On the same $200,000 mortgage, a move like that would reduces closing costs by $2,500.

The bill awaits companion legislation in Senate and final approval into law, but considering the House’s lopsided vote Thursday, it could happen rather quickly.  If you’re planning to buy or refinance a home using an FHA mortgage, you may find that waiting to take the next step could be a costly one, long-term. As always, its much better to buy real estate and wait then it is to wait and buy real estate.

The FHA insured close to a quarter of all mortgages made in the first three months of 2010.

Because of strife in Greece, Spain and North Korea, conforming mortgage rates are back to all-time lows. They’re at levels not seen in 50 years.  For homeowners that missed the Refi Boom of November 2009, it’s a second chance.

In this well-presented, 3-minute video from NBC’s The Today Show, you’ll get tips getting low rates and choosing the best time to lock in.

Some of the topics covered include:

• Why were the experts wrong about rates moving higher this summer?
• How much money can you save with a 1 point drop in your interest rate?
• Should you buy a bigger home now that rates have fallen?

The advice in the piece is matter-of-fact and centered.  There is no cheerleading and the message is honest. Mortgage rates are low and they likely won’t stay that way.  If you’ve been thinking about a refinance, talk to your loan officer as soon as possible.

From one pot to a lush garden, we all have plants for which to care in our lives. But are they getting the right amount of water?  Too little water and the plant dies. Too much water and root rot sets in.

In general, plants want 1 inch of water per week but Mother Nature doesn’t always provide. It’s up to us to make up the difference.

In this short video from ExpertVillage, Doug Smiddy shows us how to make sure our plants get the right amount of water they need to survive. He answers questions including:

• How do you know if your plants need water right now?
• What is best time of day to water outdoor plants?
• What is the proper way to water a plant?

The video runs a little bit over 2 minutes and is stocked with helpful tips. If you care for any plants in your life, it’s a must-watch video.

According to foreclosure-tracking firm RealtyTrac.com, bank repossessions reached record levels for the second straight month in May, topping 93,000 properties nationwide.

As compared to May 2009, all 50 states now show an increase in annual REO activity.

Data like that won’t surprise today’s active home buyers in Philadelphia.  Foreclosed homes are prevalent, available and accounted for one-third of all home resales made in April.

Furthermore, total foreclosure actions — the sum of REO, default notices, and foreclosure auctions in May — topped 300,000 for the 15th straight month.

Foreclosures remain a huge influence on the housing market.

However, two interesting trends emerged in the data:

1. 9 of the top 10 metro areas for foreclosure posted annual activity decreases
2. Each of the top 4 states for Foreclosures per Household posted annual activity decreases

We can infer, therefore, that foreclosure activity may be in permanent decline in the areas hardest hit through 2007, 2008, and 2009.  In 2010, the data shows, foreclosures are waning.

This is reason for optimism — especially as FHA delinquencies slow nationwide. As fewer homeowners go delinquent, the pace of foreclosures will slow further and that should help boost home values on every block in the country.

To complement your research, talk to our real estate sales people about the foreclosure market and what opportunities may exist.   Competition for bank-owned homes can be fierce at times, but there’s plenty of “deals” out there, and since we represent large national lenders like Freddie Mac and Fannie Mae we can help you research properties that are currently on the market and navigate the process of purchasing an REO property easily.

Finding a good deal on an REO property can be easy. You just have to know where to look.

The Pending Home Sales Index shot higher in April as low mortgage rates and a soon-to-expire federal tax credit spurred home buying in Philadelphia and across the county.

A “pending home sale” is a home that’s under contract to sell but not yet closed.

Region-by-region, April’s pending home sales varied versus March’s data:

• Northeast Region: +29.5%
• Midwest Region : +4.1%
• South Region : -0.6% (after a +15.9% posting in March)
• West Region : +7.5%

On an annual basis, the Pending Home Sales Index is higher by 22 percent.

April marks the third straight month that pending home sales are up and today’s buyers should take note. This is because, according to the National Association of Realtors®, 80% of homes under contract close within 60 days.

In other words, May and June’s existing home sales data should be similarly strong, causing the South Philly real estate market to gently shift in favor of sellers.  In fact, already, we’re seeing home resales touch multi-year highs while new home supplies fall to multi-year lows.

All of it tends to push home prices higher while simultaneously reducing buyer negotiation leverage. That, coupled with the high probability of higher mortgage rates ahead, means that finding “deals” will get tougher for the average home buyer.

In looking at the housing market data, it appears that the best month in which to have bought a home this year was February.  The next best time may be right now. It certainly seems as if the financial benefits of owning a home are now outweighing the concerns consumers have had. With the historically low mortgage rates, buyers may find themselves regretting their lack of action if they don’t move now on buying a home. We may be back to the old real estate saying “its better to buy real estate and wait than it is to wait and buy real estate.”

Talk to your real estate agent if you’re planning to buy a home this year.  It may be sensible to move up your time frame a few months.

A new loan quality initiative from Fannie Mae is making it harder for Philadelphia home buyers and refinancing homeowners everywhere to close on a mortgage.

Beginning June 1, 2010, with all new applications, Fannie Mae wants lenders to verify that borrowers have not taken on new debt during the underwriting phase of the mortgage.

If new debts are found, the mortgage is subject to a re-underwrite and a possible turndown.

For Fannie Mae, the goal is to reduce the number of loans that go bad because of new, non-disclosed debt. Lenders have the freedom to verify in whatever manner they wish, but in most cases, the verification process will amount to a credit re-pull made just prior to closing.

The underwriters will be looking for 3 things in particular — even after your loan is approved.

First, your updated credit report will show your current credit card bills and minimum monthly payments.  Those numbers will replace your original numbers made at the time of application.  If the debts exceed a certain threshold, your loan will be denied.

Second, underwriters will be looking at your updated credit score. If your FICO has dropped below minimum lending standards, your loan will be denied. Or, you may be subject to a new loan-level pricing adjustment.

Loan level pricing adjustments are mandatory loan fee based on your credit score.

And, lastly, underwriters will be looking at your credit report’s Credit Inquiry section. The goal is to see if you’ve been applying for credit elsewhere. Underwriters can use this information at their discretion.

Fannie Mae’s Loan Quality Initiative is just one more way that the government-backed group is trying to improve its loan pools. Unfortunately, it’ll mean more turndowns for mortgage applicants.

Therefore, take extra care of your credit between the time of application and the time of closing. Don’t buy new cars, don’t buy new appliances, and — most definitely — don’t open new credit cards.  Be extra safe with your credit because a mortgage application that’s supposedly cleared-to-close can be revoked at the eleventh hour.

When in doubt, talk to your loan officer about what may or may not trigger the Loan Quality Initiative.  Your loan approval is at stake.

After moving into a new home in Palmyra , you should immediately replace its deadbolt locks.  It’s not just the home’s former residents that have the key, after all, but so might a relative, a friend, a neighbor, a dog-walker, and others.

You may call a locksmith for the job, but you can save some money if you can do-it-yourself. 

In this detailed, 2-minute video, you’ll learn how to remove and replace a deadbolt lock using nothing but a Phillips screwdriver and a deadbolt from a hardware store.  It’s a simple project that requires little mechanical skill.

And one that can make your new home more safe.

The Consumer Confidence Index is rising, a potentially double-edged sword for residents of Philadelphia and for Americans, in general.

According to The Conference Board, economic confidence is as high as it’s been since August 2007 — 4 months before the start of the recession.  Americans are optimistic again.

Confidence matters to the economy because as confidence increases, in theory, consumer spending follows.  Consumer spending accounts for 70 percent of the U.S. economy.

It’s why Wall Street is responsive to confidence data.

When consumer confidence is rising, households start to make big-ticket purchases they may have otherwise put off indefinitely.  Maybe it’s a replacing old appliances; or, trading in an old automobiles; or, splurging on a vacation.

Rising confidence can also spur real estate sales.

When confidence is rising, a growing family that chose to “make do” in their 3-bedroom, 1.5-bathroom starter home may opt to move-up to a 4-bedroom, 3-bath instead at a slightly higher monthly carrying cost.  And there are families in every city in every state making those same decisions.

As a result, the housing market gets a boost — especially in the mid-to-upper price ranges. Values rise on higher demand for homes.

The downside is that growing confidence tends to push conforming and FHA mortgage rates up.  This is because an expanding economy draws investment dollars away from bonds and into stocks — including mortgage bonds. 

The reduced demand for mortgage-backed bonds leads bond prices to fall and mortgage rates to rise.  Sometimes by a little, sometimes by lot.

So, if you’re buying a home or thinking of a refinance, rising confidence in the economy may be a signal to act sooner rather than later.  Talk to your real estate agent and/or your loan officer about next steps and get your plan in place.

Moving from one home to another can be overwhelming, but moving to a new city or town can be especially stressful. Consider these suggestions to make your move hassle-free.

Keep track of the little expenses. Budget for gas money and even pit stops you might make along the way. Factor in new utility setup fees and review the mover contract carefully to be sure your estimate is accurate. Small costs can add up to a major blow when they’re unexpected. It’s best to have a list of incurred expenses on hand to know what you’re dealing with.

Choose carefully. If you’re hiring movers,  shop around for the best deal – which might not always be the cheapest Relocation.com cautions against signing with the least expensive movers; costs tend to pop-up on move-in day, or worse, you might get scammed. Also, be sure to investigate what kind of insurance your movers provide. Depending on how much you’re moving, you may want to opt for a full-value replacement protection plan. Federal law requires limited liability insurance to be included with your regular move-in costs, but it only averages out to insuring $.60 per pound (varies from state to state), so big ticket items like your flat=screen TV will barely be covered. The full-value option declares that any goods lost, damaged or destroyed during the move will be replaced or repaired, or you can opt for a cash settlement. The cost depends on the moving company, so be sure to discuss your options thoroughly with the company you choose.

Be observant. Review the inventory checklist you receive from the movers and make sure every item is accounted for – every extra item that was not included in the original estimate could cost you more money. Worse? Once that happens, the initial estimate agreement is void, and the price can skyrocket. Do a final walkthrough in your empty home to ensure nothing is left behind to avoid having to ship it to your new abode.

And finally, treat your movers with respect. Check beforehand with the company and, if it’s OK, have some beverages and treats on hand to thank them for their hard work. Your kindness will be appreciated during stressful situations.