Finally, conforming loans match California Home prices!

The economic stimulus package proposed by the government today will do something that the real estate industry in California has been fighting for many years. The conforming loan will finally rise from its current $417,000 to a more accommodating $729,000. Without getting into an overly complicated explanation, it simply means that conforming loans will cost the average home buyer less money to borrow than non-conforming or jumbo loans.

Typically, home buyers borrow 80% and come up with 20% as down payment to avoid PMI (private mortgage insurance). In Santa Clara County, where the median home is over $800,000, this means you will not have to come up with the difference between $417,000 and the purchase price. This means if you don’t have equity built up from a previous home, most buyers will borrow up to the limit of the conforming loan and come up with rest as a large down payment or a combination of down payment and a secondary loan. If the home were $800,000, then the 80% of the loan would be $640,000 (as opposed to $417,000), so it makes a big difference for us in California.

Now with the proposed limit increasing to $729,000, many more people will have greater chances of borrowing more money at lower rates. First time home buyers will not have to resort to “funny” loans to try to get into their first homes. Remember, it was all of those “funny” ARM loans that got us into this sub-prime mess in the first place.

Great News!

Steve Mun, Silicon Valley Realtor
www.stevemun.com

Mortgage Forgiveness Debt Relief Act of 2007

With the New Year comes some new laws. In this case, a new law that will help many Americans who are in difficult situations.

When the lender forgives a portion of the debt in a short sales, any of that debt that is forgiven is typically treated by the IRS as taxable income. What did I just say? If you were in a difficult situation and your bank forgave a portion of your loan, that portion which was forgiven would have shown up in your tax return as income! The last thing that a struggling family needs to worry about is this phantom income showing up and increasing your tax bill.

Congress has just passed HR 3648, which will prevent this debt relief from being considered taxable income.

Finally, some good news to help those who may be in a foreclosure situation.

Steve Mun, Silicon Valley Realtor
www.stevemun.com