Passage of the new housing bill being pushed through Congress has stalled because of one senator’s insistence on adding an energy bill he came up with to the package. The bill, targetted for submission to the White House before July 4th, will have to wait until after the holiday. And homeowners, home buyers, and other players in the housing market will have to wait and see what shakes out.

One provision involves the creation of an $8,000 tax credit for first-time home buyers. Credits are good–better than deductions, because they offset your tax obligation dollar-for-dollar and put real money in your pocket. If this provision survives and makes it into the bill, first timers could enjoy unprecedented opportunity to achieve “homeowner” status. This would also be a boon to sellers in distressed markets. By making it easier to buy a home, the credit could stimulate the housing market as well as improve the financial health (and thus decrease the default risk) of new borrowers.

So take a look at your local housing market. Check out mortgage prequalification calculators. Find a real estate agent and a lender you trust. If a housing bill passes with that credit, your housing market may swarm with bargain-hunting first-timers. Why not do some homework ahead of time, be able to make a stronger (preapproved) offer, and get the jump on your competition?

You see these schemes all the time — promoted by financial planners, savings institutions, and yes, lenders. It can feel like if you aren’t on some plan to pay off your mortgage early you’re missing the boat or being financially irresponsible.

Some motives are plain. These people actually charge you to set up an “early repayment plan — in one case $3,500 for a line of credit and some software. So they naturally want you to believe that paying off your mortgage early is a good thing and that only they can help you accomplish this. Just tell these sales guys you’ll pass, thanks very much.

The next group of perhaps well-meaning “advisors” is simply very conservative with investing and the type of risk involved. But there is risk involved with every investment decision. Most economists will tell you that a company or a household is actually healthier financially when they are carrying a reasonable amount of debt and when the funds are used for investing in assets (like maybe a house? mutual funds? college?) that grow and pay off later. By putting everything into your home and leaving no extra for investing you have “all your eggs in one basket,” and as we have seen recently that’s not always safe or prudent. Keep in mind also that unless you have no other debt you are probably better off paying debt that doesn’t offer any tax advantages and carries higher interest rates.

The final group of those egging you on to pay off your loan early are lenders. They have two reasons for this. First, the more equity you accrue in your home the safer the loan is for the lender. Think a “cushion of equity” is going to protect you from foreclosure if you lose your job? NO, it makes it easier for the institution to recover its investment by foreclosing and therefore LESS likely that it will be willing to work things out with you. Safer for the bank, less safe for you.

Additionally, once you put your money into paying down your mortgage early–whether it’s making an extra payment each year, making payments every 2 weeks, paying a few extra dollars each month, or any other scheme–you no longer have instant access to that money. Guess what? If you need it, your bank will charge you to get your money back out of the home, in the form of fees for a home equity loan or line of credit.

So how do you accomplish the goal of paying off your mortgage early? Simply by taking whatever extra you are planning to throw at the principal balance but putting it into an investment account instead. There are planty of safe, conservative investment vehicles available for risk-averse or older homeowners. Younger ones can afford to go for higher risk / return strategies. Talk to an investment advisor about a plan that incorporates your goals and your comfort zone. With this plan, you have access to the extra funds without paying, your lender has less leverage should you experience financial difficulties, and when you are ready to pay off the whole shebang you can do it with the funds you have invested.

Lease options may become all the rage this year. While the potential pitfalls of this alternative method of selling a home kept it from ever becoming popular, its time may have come. Why? Let’s look at market conditions right now. We have the following:

· Mortgage lenders requiring larger down payments.

· Soft real estate markets in much of the country.

· Almost 9% of homeowners behind on their mortgage payments or in default.

· Risk-based pricing in conventional mortgage lending, meaning those with lower credit scores, smaller down payments, or buying certain types of property (like condos or manufactured housing) pay a premium for loans.

· The unavailability of loan products such as stated income financing.

All of these factors make it harder for buyers to purchase homes no matter how badly they want to take advantage of today’s lower prices. And that keeps sellers, real estate agents, and lenders out in the cold as well — a no-win situation for all. Here are the most common reasons lease options weren’t done too often in the past, and why you might want to consider one now if trying to sell your home:

· Real estate agents didn’t like lease options because the full commission isn’t paid until the transaction closes, and that can take several years. Well, these days any commission beats no commission — you’ll probably find an agent willing to work with you to close on a lease option sale. And unless you are very comfortable with real estate investing and contracts you will want some help — an agent or real estate attorney can help you close the deal.

· If property values continue to decrease, the tenants will probably decline to exercise the option. Or you may not complete the transaction if the rental agreement isn’t honored or if the tenants’ credit or other problems derail the purchase. Angry tenants who lose their deposits may damage the property. However, at least for now you get a tenant willing to pay more than the market rate and you may sell your home in the end as well. Again, a good real estate agent can help you vet your purchasers and increase your chance of a successful transaction.

· In the past, with easy financing terms available, buyers saw no reason to wait before buying a home — making the lease option unnecessary. Today, would-be homeowners may well have to improve their credit scores, pay off debt, save a down payment, or find a way to prove their income before they can get a home loan. A lease option allows them to lock in today’s lower prices while they do this, ensuring they won’t be priced out of the market if real estate markets get stronger. Being willing to accept a lease option increases your pool of potential buyers.

· In the past, housing prices rose so quickly in some parts of the country that sellers were unwilling to agree to a transaction that seemingly gave all the advantages to the buyer — locking in a lower price, taking so much time before closing, and ultimately having the right to walk away should markets soften. Today, many desperate sellers would be more than willing to accept a lease option if it gets their property sold — it beats being forced into foreclosure.

So if you have a home you need to sell and aren’t having any luck, offer a lease option to bring in buyers. And by enlisting the help of reputable and experienced real estate professionals to handle the contact, escrow, and property management, you can be a lot more confident in completing the sale of your property.

It should have been great. One of those human-interest, touchy-feely, warm fuzzy stories that takes the edge off all the human misery that opens a normal news broadcast. It’s a tear-jerker: hard-working Americans economizing, working overtime, and dreaming of the day they can buy their family a home. FHA was created to help these mostly worthy families accomplish just that, and it worked for decades. People could use an FHA loan to buy a modestly-priced home with about 3% down instead of the conventional 20% – the major obstacle for most first-timers. But this tale from the Wall Street Journal is no tear-jerker.

Some homebuyers apparently found 3% too much to save, and community groups decided that these people deserved help with that final hurdle. And many of them were in fact “deserving.” So the community groups created “down payment assistance” programs designed to either lend or give certain qualifying home loan applicants that last few percent so they could get their homes. Even home sellers and lenders got into the act — “helping” borrowers with their down payments in order to get the property sold and the loan approved.

The problem is that these well-intentioned actions really changed the risk profile of the borrowers – recent data compiled by HUD demonstrates that borrowers who have nothing of their own invested in their homes are far more likely to walk away from their mortgages than those with similar socio-economic profiles who put even 2 or 3 percent into their house purchase. These guys either weren’t qualified to become homeowners in the first place or were less inclined to continue to make their payments if it wasn’t going to cost them to walk away. So they walked and let the lender foreclose. And their neighborhoods suffered. And FHA got stuck with the tab. For the first time since the agency’s inception it’s insurance premiums will be insufficient to cover its losses.

So those looking for down payment assistance may have to look harder, and it may soon be gone altogether for the purposes of FHA lending. And taxpayers, get ready: Kentucky Senator Jim Bunning warns, “As soon as we finish this bailout for banks and borrowers, the next taxpayer bailout will be of the FHA.”

Are you living in Florida and facing foreclosure? According to WWSB ABC 7 Florida foreclosures, were up about 6% last month. United way started up a hotline to help some people save their homes. United Way 2-1-1 of Manasota is a 24-7 hotline that connects callers with Suncoast groups offering assistance. More and more people are needing help so to accommodate this growth, 2-1-1 is expanding its reach.

For more on this:
2-1-1
United Way Announces $3.4 Million Investment in Community
New 2-1-1 number to assist all residents
2-1-1- arrives in Dunn County