FHA, Fannie Mae and Freddie Mac Loan Limits -The bill reinstates last year's 2008 loan limits for FHA, Freddie Mac, and Fannie Mae loans.  These limits were equal to the greater of 125% of the 2008 local area median home price or $271,050 for FHA and $417,000 for Fannie and Freddie, with an overall maximum cap of  $729,750.  For the few areas where the 2009 limits were higher, the higher limits will apply.  In addition, the bill includes language providing the HUD Secretary with the discretion, if warranted, to increase the loan limit for any “sub-area”, i.e.an area smaller than a county. The Secretary's discretion is again limited by the $729,750 cap. These 2009 limits will expire December 31, 2009.

Commercial Real Estate - Commercial real estate is impacted primarily through those provisions of the bill focused on green building and energy efficiency as well as business tax incentives. H.R. 1 provides significant funds for state energy programs, which could be used to support commerical property owners' investment in energy efficiency upgrades while commercial property owners seeking to invest in alternative energy systems for onsite power generation would benefit from the Department of Energy Renewable Energy Loan Guarantees Program.  Of particular benefit to small businesses would be certain provisions of the bill that provide tax relief in the area of bonus depreciation and capital expenditures, as well as the 5-Year carryback of net operating losses for small businesses.

203K FHA Streamline and Standard Programs
Streamline program will allow you to spend up to $30,000 in repairs with a 10% reserve cushion that will be added to the mortgage, maximum loan amount $35,000.

Standard program to be eligible, the property must be a 1-4 unit dwelling that has been completed for at least one year. Homes that have been demolished are eligible if some of the existing foundation remains in place. In addition to typical rehabilitation projects, the 203(k) loan program can be used to convert a one unit property to a two, three, or four family unit.

FED  Fed Funds Rate 0% to .25% & Discount Rate .75%   

We will have to see how much in the up in coming weeks this will play on lowering interest rates. Even though the FED cuts rates it does not mean that interest rates drop automatically. Certain market conditions could have an opposite affect and have interest rates rise! The key is having a knowledgeable Real Estate Company that understands and keeps up at a daily basis what is happening in the financial markets, housing markets and collectively analyzing all this data so that we can have the most informed, best information for our clients. 

We are still waiting for the bottom of the financial markets. Based on data that we are seeing more continued write downs from Investment & Commercial Banks plus what to do with toxic assests. The financial slow down will continue to the end of  2010. We will keep an eye on the markets and quarterly gains and losses and report accordingly. Lending institutions will continue to hold on to their money which means tighter lending restrictions for consumers. Do not listen to the media there is money out there for mortgages. If you have good credit, down payment money and your debt to income ratios (36% Conventional & 41% FHA) are with-in the lending institutions guidelines than you can get the best rates available. They are going back to what qualifing guidlines were 20 years ago.
 
With oil and gold continuing to go up and the decline in the dollar we have to keep an eye on the 10 year note (which is used for mortgages). Investor confidence is the key. The 10 year note has been stagnate for a few months until recently when the yield went dropped to 2.09% from 4%. The current yield is around 3.5%.  The bail out helped Wall Street but we still have not seen mortgage interest rates staying below 5% for a length of time to help Main Street. If rates start coming down this may or may not affect home prices, hopefully this will stabilize the market (depending on the market you are buying). Also we will keep an eye on the Federal Reserve to see if they raise or drop the Fed Fund Rate and the Discount Rate in the future. This will also play a roll in interest rates! 

RULE OF THUMB TO RE-FINANCE: IF YOUR INTEREST RATE ON YOUR MORTGAGE IS 1 PERCENTAGE POINT OR HIGHER THAN CURRENT INTEREST RATES LOOK INTO RE-FINANCING.

IF YOU RE-FINANCE ASK ABOUT A MORTGAGE THAT HAS NO PRE-PAYMENT PENALTY SO YOU CAN RE-FINANCE AGAIN IF RATES DROP FURTHER.

Here again it's crunching numbers: If it costs you $4000.00 to re-finance and your interest rate on your mortgage is 7.25% and interest rates drop to 6.25% the savings on a $400,000 loan is $265.84 a month. It will take you about 15 to 16 months to re-coop the $4000.00 that you paid to re-finance. If you lived in your home for more than 16 months then you will see the $265.84 savings. After you have covered your cost to re-finance use this $265.84 a month and apply it towards your principal. This will help pay your home off faster.

 A few things happen for interest rates to drop or rise.  
The 30 year mortgage interest rate is determined by what the 10-Year Treasury Note what its trading (selling for) in Chicago. If the T-Note goes up in price then interest rates go down. If the T-Note goes down in price interest rates go up. The T-Note has a yield also, when the yield goes up interest rates go up. If the yield goes down so do interest rates.  Fundamentally this is what should happen sometimes it does not.

The main role of the FED is to watch inflation & economic growth. About every six weeks the FED has its meeting and goes over all the economic data to see what direction they should go on cutting or raising rates.

The Fed Fund Rate is the rate that banks charge each other for overnight loans. “Why would one bank borrow cash from another?” you ask. The Fed can require banks to keep a certain percentage of assets in the form of cash on hand or deposited in one of the Federal Reserve banks. From time to time, it will establish a required ratio of reserves to deposits; when this ratio is increased, more cash must be kept in the vault at night, making it more difficult (and expensive) for funds to be acquired. When the reserve requirement is lowered, the money supply is loosened; because less cash has to be kept on hand it becomes easier to acquire capital. 

The Discount Rate is the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank's lending facility.