$8,000 fast cash for first-time homebuyers

HUD plans to tweak $8,000 tax credit rules so first-time homebuyers can get instant down-payment assistance.

NEW YORK (CNNMoney.com) -- Home prices are cheap. Affordability is at a record high. And the market is littered with distressed properties looking for a buyer.
But there is one big obstacle for many first-time house hunters looking to take advantage of the market: cash for down payments. The typical first-time buyer has only saved enough to cover 4% of the purchase price, according to the National Association of Realtors.
As part of the stimulus package, Congress created a refundable first-time homebuyers tax credit in hopes of helping on-the-fence buyers to take the home-purchase plunge. But buyers couldn't collect the $8,000 credit until tax time, rather than at closing time - when it's needed.
Now the U.S. Department of Housing and Urban Development is planning to change that. The agency is working on a plan that will allow Federal Housing Authority-approved lenders to provide buyers with the tax credit cash up front.
"We all want to enable FHA consumers to access the tax credit funds when they close on their home loans so that the cash can be used as a down payment," said Shaun Donovan, HUD secretary, in a speech last Tuesday before the National Association of Realtors.
States first
Donovan did not reveal many details, but the plan could be modeled after programs in Colorado, Missouri, New Jersey, Pennsylvania, Tennessee and Washington. To quickly infuse cash into their housing markets, these states created "bridge loans" that allow buyers to borrow against the $8,000 credit and then repay it with their tax refunds.
The first state to launch such a plan was Missouri, which rolled out its Missouri Housing Development Commission Tax Credit Advance Loan program on January 14 - a month before Congress approved the stimulus package. Since then, Missouri has approved applications by more than 300 borrowers and closed on 128 of them.
Lamar Cherry and his wife, Chrishanna, used the program to augment their down payment when they bought their home in Kansas City.
The couple purchased a four-bedroom, three-bath split-level home for $150,000, putting about 6% down. Much of that $9,000 came from the loan program, which they tapped so they wouldn't have to drain their reserves.
"We had money saved up that we were going to use for the down payment," said Cherry. "Now we can use some of that to buy some things we need for the house."
At closing, the Cherrys, like all buyers in the program, signed for their first mortgage, plus a second mortgage issued by the state. The second note is good for 6% of the price of the home, up to $6,750; there is a $350 set-up fee, but no interest is charged if the debt is repaid by June 2010.
In Missouri, borrowers can only access $6,750 of the $8,000 credit for down payments. "We wanted them to have a cushion below that $8,000 in case other tax liabilities show up," said Greg Spurgeon, the single-family homeownership administrator for the Missouri Housing Development Commission.
If borrowers don't pay off the note, it becomes a 10-year fixed-rate mortgage with an interest rate one-half percentage point above that of their first mortgages. For example, borrowers paying 6% on their first mortgages would be charged 6.5% on the second.
So far, Spurgeon said, a significant proportion of participating homebuyers have repaid their loans. He expects most of the others to do the same before the deadline.
Cherry has claimed the federal tax credit on his 2008 taxes, but he hasn't gotten his refund yet. He definitely intends to repay the loan before the 2010 deadline because, he said, not doing so would add about $75 a month to his house payments.

4 Home Staging Tips To Attract Buyers

“What are some of the things buyers look for in a new home? Many times they look for things they don't have in their current home, like a 'showcase' bedroom. What is a showcase bedroom? It's a bedroom that looks like it came right out of a major magazine. More than that, it's a room where buyers can imagine themselves living in the home. Here are four tips for creating a showcase bedroom:
1. The furniture needs to be clean. Furniture should pass the 'white glove' test, and mirrors and windows should be spot free.
2. The bed linens should be fresh and luxurious to the eye. Maybe just a new duvet cover with matching pillow shams propped up will do the trick. You can also add some contrast with a smaller pillow in the center.
3. The color choices should be neutral and should match. Try to match the bedding colors with something else in the room like the paint trim or a small rug on the floor.
4. Remove any exercise equipment and de-clutter the closets. People often move because they want MORE space. In general, you can remove anything that does not need to be in the master bedroom. Where do you put all the items you took from the closet? Try using plastic storage containers that will slide under the bed and out of site. If there is left over space in your closets they will think that all their clothes and other items will fit!
The bedroom is a personal space for the buyer. Creating a great bedroom isn't just about the furniture, but it's about turning an ordinary bedroom into a place that will comfort a buyer to escape from the rest of the world. So spend a little time and energy to really look at the bedroom from a buyer's eye and your house will sell faster.”

Pending home sales jump 3.2%

Buyers defy expectations with an increase in sales contracts signed during March.

NEW YORK (CNNMoney.com) -- Is the housing meltdown ending?
Pending home sales rose in March for the second consecutive month and are up year over year. The Pending Home Sales Index from the National Association of Realtors showed a 3.2% gain to 84.6 from February, when it was 82. The index stands 1.6% higher than a year ago.
The consensus forecast of industry experts polled by Briefing.com had predicted no increase in the index.
0:00 /2:45No help for homeowners
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It may still take a while before the market gains enough momentum to firmly state that the downturn has been reversed, according to Lawrence Yun, NAR's chief economist. And, the upturn may have been boosted by the first-time homebuyers tax credit, a temporary measure that will lapse in December.
"We need several months of sustained growth to demonstrate a recovery in housing, which is necessary for the overall economy to turn around," said Yun. "This increase could be the leading edge of first-time buyers responding to very favorable affordability conditions and an $8,000 tax credit, which increases buying power even more in areas where special programs allow buyers to use it as a down payment."
The index is understood to be a forward indicator of home sales trends since it measures contracts signed, not completed sales. The up-tick may indicate that home prices have fallen low enough for buyers to get off the fence.
Feeling for the bottom
Yun is not calling a bottom yet, however, because the index is still at a relatively low level. Instead, he's looking toward the summer selling season to determine what direction the market will take. Plus, he would like the number of homes on the market to drop to a more normal level of six to seven months of supply.
"If inventory goes down - it's at just under 10 months now - to below eight months, that would mean we're on the way to a sustainable recovery," Yun said.
Anecdotal evidence indicates that trend may be happening. Realtors and other industry insiders are seeing rising open house attendance and multiple bids on some particularly desirable properties. Plus, pricing has become sharper, according to Sherry Chris, the CEO of Better Homes and Gardens Real Estate.
"Overpricing seems to be ending," she said. "Properties are coming onto the market and selling quickly."
And buyers are feeling a little more urgency, she added. In many markets, buyers have not felt any pressure to make an offer. "They said to themselves, 'I don't have to act immediately. It will still be on the market two weeks from now,'" she said.
Today, buyers are more likely to bid because they perceive the market as at or near its bottom. An April Gallup Poll reported that 71% of Americans thought it was a good time to buy a house.
They don't, however, believe there will be price increases soon; three of four buyers think prices will stabilize or even decline in their areas over the next 12 months, according to Gallup.
Pat Newport, a real estate analyst for IHS Global Insight, is putting less emphasis on pending home sales than he once did for his housing market analyses. There has been a disconnect lately, he said, between the number of properties going into contract (pending home sales) and the number that actually close (existing home sales).
He speculates that this is because buyers are making offers and signing contracts but, because of financing problems, many deals are falling through.
Regional differences
The South saw the largest gain of any region, with pending home sales jumping 8.5%. Pending sales are 7.7% higher there compared with a year ago.
The Midwest gained 3.9% from February and 1.7% year-over-year. Northeast sales fell 5.7% and are off 24.1% compared with March 2008. The West dropped 1% for the month but are up 8.2% year-over-year.
Low home prices continued to help to drive sales, although NAR's affordability index actually fell 2.3% from February, when it hit a historic high. This index is based on family income, home prices and mortgage rates.
"Compared to a year ago, the typical family can pay much less in mortgage costs for the same home, or buy a better home without necessarily increasing their monthly payment," said NAR President Charles McMillan, in a prepared statement. "For buyers who've been on the sidelines and have good jobs, the market has never looked more favorable.