Many people in Tucson AZ purchase homes (specifically their first home) using a VA (Veterans Administration) home loan. A VA home loan allows first time buyers/ veterans to purchase a home for as little as $1 down.(also known as the $1 move-in special) This means first time buyers in Tucson AZ can have ALL their closing costs rolled into their loan, and essentially make a home purchase with that $1 getting whatever additional earnest money that was needed for closing back. Only with a VA loan can this occur. Also VA loans are relatively easy to qualify for compared to the limited options currently available to buyers today. So how do VA home loans work in Tucson Arizona (AZ)?

It comes up all the time, a builder will say “50k off of a certain home”. You as a buyer already have a pre-approval from a lender you are completely satisfied with, and are ready to use you just need to find the right home. You walk into the builder and the home they have is perfect you love the 50k incentive to make the purchase and then while writing up the contract the builder says “oh ya, by the way that incentive (50k off the home) is only if you use our (the builders) “preferred lender”. (a lot of times it is the builders own direct mortgage company ie: for Meritage Homes its Meritage Mortgage Company.) So now what do you as the buyer?

If you’re a first time homebuyer in Tucson AZ what programs are available for your home purchase? Well for the most part you will have several options available. Due to the re-workings of how FHA loans are made, no longer can you as a borrower obtain a down payment from the seller which had become very common for the past several years. There is one program that is available so that you as a buyer in Tucson AZ can obtain 100% financing. This program is available only to first time buyers and only for properties purchased within Pima County. This Pima County bond will essentially allow you as a first time buyer to get 100% financing, and in some cases a little more to help pay for the other loan costs associated with buying a home. So what other options/programs can first time buyers still get?

If you’re a first-time homebuyer or a buyer in need of 100% financing after October 1, 2008, your options are slim. The federal government has revised the minimum down payment requirements for FHA insured mortgages. Buyers are now required to make their own 3.5% down payment, and buyers can no longer obtain the down payment money from the seller or any assistance programs like Ameridream or Nehemiah. So, what are your options as a buyer?

• If you or your spouse was in the military, a VA loan is still a 100% loan option. Nothing has changed with VA loans.

The House failed to pass the $700 billion bailout bill intended to ease the credit markets. When news first broke, the DOW went into freefall and dropped as much as 705 points instantly and then rebounded a little. The bill will need to be rewritten and voted upon again. I’m not sure why, after all this weekend’s press about there being a “plan,” that there’s now no plan at this point. If this isn’t fixed, and the Treasury isn’t allowed to purchase all the mortgage-backed securities as the market had assumed would occur, there will be no relief for the credit markets. According to CNBC and everything I read and watch, the credit markets in the United States are in a very hazardous state. This credit freeze may be the linchpin that sets the overall economy into a serious recession or worse.

The current financial (banking) situation is a mess. This is no secret, and for the past 2 years, it has been expected that banks were going to have issues with all the mortgages they had given out from 2000 to the present. Over the past week, it has shown up in the marketplace in a big way. The DOW has risen 400 points and fallen 300 points in a single market day. Several financial corporations have gone under or were about to go under: Lehman Brothers, Washington Mutual, and Merrill Lynch just this past week. AIG, one of the largest insurers in the world, was on the verge of bankruptcy before the Fed loaned them $85 billion. AIG wrote insurance policies for investors to hedge their bets on all the mortgage securities that have been falling in value due to record defaults.

You hear and see it all the time, “My house appraised for…” or “Just appraised for…” or “Reduced $50k under appraisal.” But what significance does that have? To me, very little. The public gets hung up on appraisals all the time, but the problem is that home appraisals are subjective. The same home can be appraised for a very wide range of values. I have seen some homes appraised for $200k and then re-appraised (sometimes by the same appraiser the same week) for $220k. How could this be? Appraisals are, simply put, one person’s OPINION of what a certain home is worth on a certain date. They have no bearing on what the marketplace will pay. Say your home is appraised for $450k and you list the home at $450k. After six months, the best offer you have received was for $395k. The appraisal was wrong! Your home was, in fact, only worth $395k — NOT $450k.

On July 14th, the FHA (Federal Housing Administration) changed their guidelines for the cost of mortgage insurance. Prior to July 14th, borrowers using FHA financing paid a monthly mortgage insurance factor of .50% and an up front mortgage insurance premium of 1.50% for any 30 year financing. It did not make a difference if you had NO credit score or an 850 credit score. Money down or no money down, all loans had the same monthly and up front mortgage insurance.

Hot off the press! IndyMac Bank has just been ordered to shut its doors due to the bank’s failure today. As everyone has known for a while, the recent real estate downturn has seriously hurt banks that lent money out for mortgages that have gone bad. IndyMac is now a victim of this vicious cycle. This is from Yahoo Finance:

“The FDIC said the estimated cost of the California-based bank’s failure to its insurance fund is between $4 billion and $8 billion. The regulator said it will operate IndyMac to maximize the value of the firm for future sale.

For whatever reason, FHA loans are getting harder and harder to obtain. An FHA loan is simple to understand. The federal government determines the criteria that borrowers must meet, and as long as the borrower qualifies, the government will guarantee the lender against losses if that particular borrower defaults on the loan. If the borrower stops making payments and the lender needs to foreclose on the property, the federal government will step in and pay the lender for all losses on that loan. It’s the highest mortgage guarantee a lender can receive because the federal government itself is backing the loan. However, in the past few weeks, I have been hearing rumblings from lenders that banks are not accepting FHA loans in the same number that they have for the past few decades. WHY? I have no idea, but it is happening. Could these banks be worried that the federal government may not be good for all these loans if they go bad? That is the only reason I can think of. Why else would a bank make it harder than it has to be to get an FHA loan? See, the FHA does not lend any money. It just sets the guidelines that the banks and borrowers have to abide by to get the FHA loan. It’s up to the banks to accept FHA loans. Why would banks start imposing more than the minimum for these loans to occur when they have the federal government’s guarantee that they are insured against all losses on those FHA homes?