THE SAVAGE TRUTH ON MONEY by Terry Savage on Creators.com

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THE SAVAGE TRUTH ON MONEY

Good News for Those Trying to Buy, Keep House

While mortgage foreclosures continue to rise along with the growing unemployment rate, there are a few small rays of hope for homeowners in trouble — and those looking to buy a home.

Tax credit expansion. Last week, Congress approved the extension of the current $8,000 First-Time Homebuyer Tax Credit. Instead of expiring Nov. 30, it will be available for purchase contracts signed by April 30 (with closings by June 30).

The FTHB credit is still $8,000, but the income limits to qualify for the program have been increased to $125,000 for each borrower.

Congress also added a tax credit opportunity for existing homeowners who buy a new home. They will now be granted a $6,500 credit toward their next home purchase, if they have lived in their current home for at least five years. In other words, speculators need not apply.

These credits apply directly against income taxes owed, and may actually create a refund for some homebuyers. Or, the $8,000 credit can be used to lower the mortgage payment over the course of the first year or two for first-time home buyers — a solution for those less disciplined with their cash.

Fannie Mae HomePath. Fannie Mae, which was a private company until the government was forced to nationalize it and make good on its implicit mortgage guarantee, is now trying to figure out what to do with all the foreclosed homes it owns.

In the third quarter of 2009, there were 937,840 nationwide foreclosures, and Fannie Mae now owns a large number of properties that it is listing for sale at discounted prices, and with attractive financing.

Now Fannie Mae is offering them for sale to the general public with a down payment of only 3 percent, no appraisal and no required mortgage insurance. Buyers may qualify with less than perfect credit, and this deal is available to both owner-occupiers and investors. The minimum 3 percent down payment can be funded by personal savings, a gift, a grant or a loan from a nonprofit organization, state or local government, or employer.

Fannie Mae HomePath property listings can be viewed at www.homepath.com. Buyers are required to use a real estate agent when making an offer, and only approved lenders can provide financing (a lender search may also be done through the HomePath Web site).

Fannie Mae Deed for Lease. There is new hope for those who are actually foreclosed out of their Fannie Mae-backed mortgage. At least they may not be forced out of the home. Fannie Mae has created a new "Deed for Lease" program. Although the owner loses title to the home, if he or she can prove they have an ability to pay "market rent," they will be allowed to stay in the home for 12 months.

That may be some small consolation to those facing eviction — and it's possible that the rental term could be extended in the future. This program has a slightly smaller impact on the individual's credit score than a straight foreclosure and eviction.

VA loan opportunities. There is a special VA home loan program available to our nation's more than 23 million honorably discharged veterans, and it is one of the best deals around. These VA loans come with low rates and as much as 100 percent financing!

To qualify, the vet must have at a credit score of at least 620. (Spouse's income may be used to qualify.) The maximum loan amount is $417,000 — and there are no age restrictions. Current rates are under 5.5 percent. Frequently, the seller pays all of the closing costs.

The VA will help veterans with refinancing as well as purchase. For vets who have lost equity because of declining market values, or face subprime mortgage adjustments, the VA introduced a cash-out refinance up to 100 percent late in 2008. For veterans who have loans with above-market rates, the VA also offers a "streamline" refinance, which requires minimal financial documentation, although it does require an appraisal and a credit score of 620.

My mortgage consultant for these examples is Daniel Chookaszian at American Street Mortgage company, (312) 376-3760, or dchooks@americanstreet.com, who is a specialist in VA and FHA loans. He is also a chaplain to veterans in area nursing homes. You can also search for HUD-approved lenders in your state and county at www.HUD.gov.

Homeownership — with a realistic approach to costs — is still the centerpiece of the American dream. These programs are designed to restart that dream.

And that's The Savage Truth.

Terry Savage is a registered investment adviser and is on the board of the Chicago Mercantile Exchange. She appears weekly on WMAQ-Channel 5's 4:30 p.m. newscast, and can be reached at www.terrysavage.com. She is the author of the new book, "The New Savage Number: How Much Money Do You Really Need to Retire?" To find out more about Terry Savage and read her past columns, visit the Creators Syndicate Web page at www.creators.com.

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