USDA no-down-payment financing for people looking to buy homes in the Birmingham area will continue to be available after September 30th, despite earlier reports from the Agency that the popular loan program would wind down permanently at the end of the month.
How long will USDA financing remain in effect? Not even the government—which administers the program—is saying.
The loan program will “continue for some period,” according to Rich Davis, acting Administrator for USDA’s Rural Housing Service.
Many Buyers were concerned that loss of the program would reduce their chances of being able to buy a home in places in Shelby Co. including Chelsea and Calera, areas the government considers rural, and therefore eligible for USDA financing.
In the meantime, a new 100% conventional loan program has been introduced, and which would be a back-up for some Buyers who had wanted to purchase with USDA financing.
If you’re thinking of buying a home, figuring out what loan is best for your particular situation—whether it’s USDA or something else—can get confusing.
Your best bet is to contact a Lender knowledgeable in the many loan programs that are available in the Birmingham and Shelby Co. area before you buy.
If you’re thinking of buying a home in several areas near Birmingham using 100% loan financing through the U.S. Department of Agriculture, you’ll have to go a different route.
Effective October 1st, homes in Chelsea, Calera, Moody and Pleasant Grove—areas that have been eligible for USDA’s no-down-payment funding—will no longer qualify.
Current loans that are already in USDA’s processing system as of October 1st will be honored.
The removal of these areas comes as a result of a decision that these communities are no longer considered rural.
USDA’s loan program has been very popular…Colleen and I have helped many first time Buyers over the years with purchasing a home using this financing.
This does not necessarily mean that you’re out of options if you’re trying to get a 100% financed loan for a home in these areas.
A new 100% conventional loan program has just been announced that may be a suitable alternative.
Offered by several area Lenders, the new loan program is currently available at a fixed rate of 4.75% to Buyers who qualify, and has reduced mortgage insurance. And, unlike USDA loans, this new loan is not restricted by area.
Here are a few Lenders in the area you can contact for more information:
First Federal Mortgage
Home Mortgage of America, Inc.
With two days left to spare, the government has decided not to allow a change to take effect that would have meant the removal of Calera as one of the communities eligible for no-down-payment home mortgage financing.
Congress has passed a resolution that preserves the areas where homes are eligible for USDA loans. The bill must be signed by the President before becoming law, but that is expected to happen shortly.
USDA loans are popular with many Buyers because they can be an affordable way of purchasing a home. The loans are available for properties in specific geographical areas designated by the government.
The decision by Congress means that the home we currently have listed in Calera will continue to be eligible for USDA’s no-down-payment financing:
If you want to buy a home in Birmingham’s Chelsea or Calera area using USDA no-down-payment financing, you may be wise to buy sooner, rather than later.
March 27th is the deadline by which earlier reports indicated that USDA would be dropping those areas from its list of eligibility.
But Gloria Jackson, a Lender with First Federal Mortgage in Birmingham who has spoken with USDA, says exactly what will happen by the end of the month remains unclear:
You can reach Gloria by calling 205-965-2167. Click here for her website and e-mail link…
Good news if you’re looking to buy a home in several areas close to Birmingham…
The U.S. Dep’t. of Agriculture has just announced that a previously planned October 1st change which would have meant the end of federal mortgage funding for two areas in Shelby Co. has been put on hold until late March of 2013.
More than 90 communities nationwide—including Pleasant Grove in Jefferson Co. and areas in Walker and St. Clair counties—had been targeted to lose their eligibility, effective October 1st. Yesterday, however, Dallas Tonsager, USDA’s Under Secretary for Rural Development, issued a notice saying the changes would not take effect next week.
USDA loans are popular with many Buyers because they do not require down payments. They are available, however, only in areas USDA specifically designates.
As it stands now, the changes will take effect March 27, 2013 … unless USDA or Congress takes action in the meantime.
Short sales—long dreaded by many Buyers and Sellers alike for taking so long to conclude—may just actually become shorter, after all.
The Federal Housing Finance Agency has just announced new rules designed to speed up the Short Sale process. In the Birmingham area, getting your home sold in a Short Sale can sometimes take 90 days or longer … but that time could wind up dropping in some cases.
Under the new guidelines, which take effect November 1st, if you own a home with a mortgage backed by either Fannie Mae or Freddie Mac, you’ll be able to sell your home in a Short Sale even if you are current on your payments, as long as you can prove a hardship.
The process of getting a Short Sale approved will be further streamlined, since, in some cases, mortgage servicers will no longer be required to gain additional approval from Fannie Mae or Freddie Mac.
Both entities will waive the right to pursue a deficiency judgement against borrowers who have sufficient income or assets if the borrower agrees to make a financial contribution or signs a promissory note.
If you have a second loan, the new rules authorize Fannie Mae and Freddie Mac to offer up to $6,000 to the second lien holder. This may help speed up getting a Short Sale through, too, since—in the past—the process has sometimes been bogged down by second lien holders negotiating for higher settlements.
In addition, borrowers who serve in the U.S. military and who are being relocated will automatically be eligible for Short Sale approval, even if they are current on their mortgages.
The changes, backed by the National Association of Realtors, are expected to make Short Sales a more viable option for many home owners who otherwise might have faced defaulting on their loans and being Foreclosed.
If you’re thinking of buying a home in Shelby County’s Calera or Chelsea area and are planning on financing your purchase with a no-down-payment USDA loan, you better get moving with your purchase, because time may be about to run out.
As of October first, the USDA is expected to update the areas that qualify for its loans. For Shelby Co., this means that Calera—which has long been a popular spot for home Buyers using USDA financing—will be dropped from the eligibility list. Chelsea is also set to be dropped.
In Walker Co., Jasper will be dropped from USDA loan eligibility, as will Moody and Pell City in St. Clair Co., and Pleasant Grove in Jefferson Co.
In all, more than 90 communities will be removed from the list of qualifying areas.
The change in qualifying areas is not a 100% sure thing. At least one U.S. Congressman—Republican Jeff Fortenberry of Nebraska—is pushing to get Congress to order a one year extension of USDA’s existing eligibility zones. Others pushing USDA to grant an extension include the National Association of Realtors, the National Association of Home Builders and the Mortgage Bankers Association.
Why does USDA plan to change the zones? The answer lies partly with the 2010 Census. An existing grandfathering clause allowed any community considered ‘rural’ in 1990 to continue to be eligible for USDA funding until the 2010 Census, as long as it has a population below 25,000 and met other critera. That clause, which was first enacted in 1990 and extended in 2000, is now set to expire.
So, unless Congress takes action, many communities that currently qualify for USDA financing will lose their eligibility—and for many of those areas, USDA loans are the only source of federal housing funding.
From time to time, people ask us, “How’s business?”
If you look around and ask various Agents throughout the Birmingham area how their business is going, you’re likely to get varied answers. One Agent we spoke with recently has struggled much of the year. Other Agents we know have been doing much better. Colleen and I have had an extremely busy year, for which we’re grateful.
The fact is that—regardless of the economy in general and what’s reported in the news media—homes still sell. That’s because people’s lives change. New jobs, a change in family size or wanting to be closer to a particular area can be among the reasons.
I’ve heard people thinking of selling their home say, “I’ll wait until the economy improves.” To be sure, values are still down considerably, compared to previous years.
But that can also be like saying, “I’m going to buy a new car when the models get better.”
Here in the Birmingham and Shelby Co. area, the number of homes for sale in many communities is down considerably, compared to previous months. In Shelby County’s Alabaster and vicinity, the Birmingham MLS shows 220 homes for sale at present. This continues to be among the lowest numbers we’ve seen.
This drop in inventory is having an effect. Homes for sale that we consider excellent deals don’t stay on the market long. Buyers are out there, and pounce as soon as the excellent deals appear.
I’ve heard some home owners trying to sell without luck lamenting the lack of Buyers. It’s really not that Buyers are scarce. It’s just that they’re finding better deals elsewhere; the homes they wind up buying are in nicer condition, have more features, or are priced more attractively (or maybe all three).
A home needs to have pizazz to sell in the current market, and must be priced to grab a Buyer’s attention.
Homes lacking these attributes typically take much longer to sell (we’ve seen homes remain on market over a year before getting an Offer).
When it comes to getting your home sold, there are definitely success stories in the Birmingham area. Colleen and I recently listed a home in Alabaster that got two Offers and went Under Contract 13 days after going on the market. The Seller was motivated, priced his home so that Buyers had to notice, and has done a lot of fixing up to make his home look nice. The payoff to his work is that his home is set to sell, so he can move.
The drop in inventory being seen in some areas around Birmingham is starting to put a bit of a squeeze on Buyers. The Buyer who sees a really good deal on a home for sale in this area now realizes that there’s a chance to be taken by waiting: Someone else might swoop in and grab the home in the meantime.
If you’re looking to buy a home in the area, our advice is to think about what’s important in a home to you, as well as area, and to contact us (205-356-5412). If you’re planning to get a loan, another critical step to take early in the process is to get in touch with a Lender. Here is a link to some area Lenders we recommend contacting.
Remember that the world of home mortgages can be confusing, because there are so many different kinds of loans and differences in fees, down payments and other charges. A good Lender will be able to sort this out for you to help to simplify your decision.
Getting quotes from other Lenders to compare is a good idea, too; just be sure to understand that comparing different loans effectively means looking at all the overall costs, and not just a single fee that might be higher with one loan. You might also ask about “locking” in your interest rate (which involves being assured of getting the same rate if you wind up buying a little later).
By following these steps, you’ll be on the road to being part of the home sales success stories we’re seeing throughout much of the Shelby Co. and Birmingham area.
It’s no wonder that folks who rely on the news media to know about our world often wind up confused, or sometimes, downright misled.
With the possible exception of politics (no, I’m not going there), I see few better examples of consumers getting misleading information than in real estate.
I have to hand a blue ribbon for disappointment to Marketplace, a program by American Public Media which recently produced a report about the difficulty of getting a home mortgage.
Reporter Gigi Douban in effect focused her magnifying glass on one part of the real estate industry and left folks with the impression that it’s just flat hard to get a home loan. Period.
“Now it’s nearly impossible to get a loan,” the show’s anchor said, leading into Douban’s report.
“There are plenty of folks who want to buy a house, but there aren’t that many who can,” Douban said.
I have no issue with anything anyone interviewed in the report said.
Woodfin talked about the fact that more of the Buyers approaching him for a loan than in the past wind up not being able to qualify. That’s true. We all know that mortgage requirements have gotten tighter, something that, in my opinion, needed to happen.
The fact is that getting a loan is difficult. For some people.
The timing of this story seemed particularly ironic. On May 14th–the same day Marketplace aired Douban’s report–BBVA Compass announced that it’s expanding its–get this–mortgage operations, and–guess where–in Birmingham, as well as in Tempe, Arizona.
“Even in Alabama, it’s hard to get a home loan,” the headline reads on the Marketplace website.
“Even in Alabama.” Hmmm. Is our state supposed to have always been easy street for getting a home loan? “Well, shoot, Maybel, it’s not lookin’ good for us here in Tupelo, so let’s just head past Pete’s barbecue joint and cross the state line into Alabama. Anybody can get a loan there…”
In a news release, BBVA Compass cited the rapid growth of its mortgage business as the reason for the expansion. They’re hiring 60 more people to handle loans.
The bank said 270 people will be involved in mortgage operations in Birmingham. Pretty impressive numbers, if you ask me. It certainly suggests that BBVA Compass must have some reason to feel confident that they’ll be helping more people buy homes in the coming years, and, specifically, by writing loans.
Why else would they spend the money?
If the Marketplace report had provided a more balanced perspective, it would have mentioned that there are quite a few sales happening in the Birmingham and Shelby Co. real estate market.
Some in the business even feel the industry is turning around.
April home sales within the Birmingham and Shelby Co. area are up more than 10% compared to a year ago.
The fact is that if you have good credit–no, not absolutely through-the-roof sterling credit, but just good credit–you can get a loan. Sure, some Buyers are paying cash, but don’t kid yourself; a lot of those sales are being financed.
It’s the people in less than sound financial condition, who are late or have missed payments, or who have judgements against them who likely face mortgage rejection.
With more homes selling, it’s only logical to realize that mortgages are not nearly as impossible to obtain as the media tells us they are.
The problem is that folks don’t always hear what the market is really like.
And then, after glancing at the sticker, reality sets in.
Looking was fun, but the sticker reminds that—before you can actually own that new car—you’re going to have to play the “show me the money” game.
Having your funding secured for the purchase of a new home is just as important. After all, if you don’t have the money needed to make buying a home a reality, what’s the point of looking?
Having enough money on hand to pay cash for a home is great, but let’s face it … not everyone can do this.
The alternative, then, is to get a loan.
Unfortunately, a number of people looking to buy a home in the Birmingham area wind up starting the loan process the wrong way, which goes like this:
- Buyer decides to buy a home
- Buyer starts the home search, driving neighborhoods, looking at homes
- Buyer finds the perfect home (“I want it!”)
- Buyer starts envisioning the new home as theirs (“Living here will be great!”)
- Deciding to move ahead with purchase, Buyer asks Lender for a loan
- Lender looks over Buyer’s information and says, “sorry, can’t help”
- Entire process comes to screeching halt
The scenario above is a classic invitation to major Buyer disappointment.
It doesn’t have to happen this way.
Colleen and I feel strongly that the first–and most important–steps in the home buying process are to contact us as your Agents and then speak with a Lender.
By finding out how much money you can borrow before you start looking, your search will be easier, as well as more targeted to properties that fit within your price range. If there are parts of your financial background that need work, a Lender can be a good resource for charting a course for you to follow so you can be approved.
If you’re thinking of buying a home, a good Lender will answer all of your questions and make you feel comfortable with the entire process of obtaining financing. Since buying a home is the biggest purchase many people make, if you don’t have this feeling of comfort, our advice is simple: Find another Lender.
Buyers lacking some time of financial qualification may be in for a surprise, given a reality we see all the time in the Shelby Co. and Birmingham real estate market:
Sellers want some assurance that a prospective
Buyer can actually obtain needed funding.
“Show me the money.”
If you try submitting an Offer without including either a loan pre-qualification or verification of funds (if paying cash), many Sellers simply won’t deal with you.
We know of several good Lenders in the Birmingham area with a thorough knowledge of the mortgage profession, different loans, costs and how they work. These Lenders have a strong commitment to providing good service.
Fortunately, most of our Clients purchased their home the right way, having contacted us first and then following our advice on consulting with Lenders before we started helping them with their search.
As a result, they are now happy homeowners.