As a reminder, Fannie Mae is rolling out new lending guidelines Tuesday, September 1, 2009. 

Starting next week, being approved for a home loan could be much more difficult.

The new rules mark the first major underwriting update since April of this year.  The changes are mostly geared at fraud prevention.

Among the updates:

1. Stock options are no longer eligible for “reserves”
2. Relocating families can’t use the “trailing” spouse’s projected income
3. “Tip” income must be documented and verified
4. Lenders must call employers to verify employment
5. Lenders must verify tax transcripts against IRS records

But there are other changes, too.  As examples:

1. Owners and buyers of 2-unit homes are subject to new minimum FICOs with larger downpayment and equity requirements.
2. Only 70% of stock, bond and mutual values may be used as reserves
3. Only 60% of retirement assets may be used as reserves

Consider this post to be your advance warning. Not everyone that qualifies for a mortgage on Monday, August 31 will qualify on Tuesday, September 1. 

Therefore, if you have a pending need for a mortgage — for either a purchase or a refinance — it’s probably best to talk with a lender as soon as possible.  The deadline is based on the date of application — not the date of closing.

Read the complete Fannie Mae announcement online.

It’s no wonder that builder confidence is soaring — their inventory of homes for sale is depleting at a furious pace.

For the 4th straight month, New Home Sales gained, posting the best numbers since last September’s meltdown and handily beating economist expectations.

The available supply of homes is down to 7.5 months nationwide.

It’s further evidence that the housing market may have bottomed at some point this past spring.

To be sure, the strong housing data is, in part, a reaction to three outside factors:

1. Low mortgage rates
2. An expiring government tax credit
3. Hefty builder incentives

But, buyers are buyers and the clearing out of outstanding inventory provides terrific support for home prices.  It also gives them reason to rise. 

Coupled with the blowout Existing Home Sales numbers from July, therefore, this months’ New Homes Sale report may be a signal that the Buyers’ Market is ending and the Sellers’ Market is beginning.

If you’re planning to buy a home this year or next, it may be time to get a move on. Wait too long, and prices may be up.

18 of 20 markets tracked by the Case-Shiller Index showed rising home values in June.  It’s the 5th consecutive month with strong numbers and the best showing for the benchmark housing index since home values began deflating in 2006. 

Some would argue it’s a sign that housing has finally bottomed out. Even Case-Shiller representatives acknowledge that home prices are “on an upswing”.

Despite the Case-Shiller Index’s popularity with economists and the press, though, it’s falls short of being a perfect housing indicator.  As examples:

1. Its data is reported with a 2-month lag
2. Its sample set includes just 20 U.S. cities
3. Real estate isn’t a “national” market — it’s local

Nevertheless, flaws aside, Case-Shiller is still important.  It helps identify broader trends in housing and many people believe the housing is the keystone of the economy right now.

This is why June’s Case-Shiller Index gives cause for hope.  The nascent housing recovery has a long road ahead but June’s Case-Shiller data shows that we’re heading in the right direction.

The housing market continues to surprise.  Last week, the latest good news came in the form of the monthly Existing Home Sales report.

An “existing home” is a home sold by an existing owner as opposed to a developer.  It’s non-new construction property.

The data on Existing Home Sales was noteworthy for its trends:

1. Sales volume rose over four straight months for the first time in 5 years
2. Sales volume rose year-to-year for the first time in 4 years
3. Median home prices fell for the first time since April

Furthermore, first-time home buyers and buyers of “distressed” homes accounted for nearly one-third of the market activity each.

But, before we declare a bottom in housing, it’s important that we remember the First Rule of Real Estate — All Real Estate Is Local.

The Existing Home Sales report is not neighborhood-specific.  It lumps cities like San Diego and Saint Paul into a giant sample set and fails to account for regional differences in real estate, let alone neighborhood ones.

This is the primary reason why on-the-ground real estate agents are better sources for a market pulse versus a report from a national trade group.  The national group can’t know the happenings of every street and every home in a market.

That said, however, the national data isn’t completely useless. 

Looking at the long-term patterns in the Existing Home Sales report, we can infer that ample supplies, low mortgage rates and tax credits are spurring home sales in a lot of U.S. markets.

Eventually, this will lead home prices higher.

If you plan to use the First-Time Home Buyer Tax Credit program, time is running out.  The program expires November 30, 2009 and closing on a home can take up to 60 days.

That leaves you 6 weeks from today to find a home and go under contract.

The First-Time Homebuyer Tax Credit program was passed as part of the 2009 economic stimulus plan. It credits up to $8,000 in tax payments to qualified buyers.

The qualification criteria are as follows:

• Buyer may not have owned a “main home” in the past 36 months
• The home may not be purchased from a parent, spouse, or child
• Adjusted gross income for the household must be below $95,000 for single tax filers and $170,000 for joint tax filers

Furthermore, not everyone who’s qualified will get the full $8,000. The credit can’t exceed 10 percent of a home’s purchase price, for example, and households with income approaching program limits get lesser benefits, too.

Meanwhile, an interesting note about the First-Time Home Buyer Tax Credit is that it’s a true a tax credit and not a deduction.  A person claiming the $8,000 credit whose “normal” tax liability is $5,000 would get a $3,000 refund from the IRS on April 15, 2010.

Review the program’s criteria at your leisure, but don’t wait until October to start looking for homes. If you can’t close by November 30, 2009 for any reason whatsoever, you won’t qualify for the tax credit. 

Better to be ahead of the deadline than chasing it.

Single-family Housing Starts rose for the 4th straight month in July, another sign that the battered housing market may be making its comeback.”Housing starts” are new homes on which construction has recently started. 

Not surprising, in a related story, homebuilder confidence moved to a 12-month high.

Ironically, an increase in newly-built homes could actually slow a nationwide housing rebound because values are driven by supply and demand. More in-the-pipeline supply means that buyer demand has to stay strong or else prices will eventually fall.

So far this year, though, demand has kept pace. 

Over the past 6 months, the combination of low mortgage rates, aggressive home valuations, and federal and state tax credits has kept buyer activity up and home values on the rise.

Foreclosure-tracker RealtyTrac reports that the number of foreclosures nationwide rose 7 percent on a month-to-month basis last month.

However, 3 states dominated the foreclosure list, tallying more foreclosures between them than the rest of the country combined.

• California : 30.0 percent
• Florida : 15.7 percent
• Arizona : 5.4 percent

On a per-household basis, the states ranked 2, 3 and 4. Only Nevada’s foreclosure rate was higher.

Now, we point out these statistics for two reasons. 

The first is to remind you that foreclosures can be highly local.  For all of the foreclosure-related stories that run in the papers and on TV, defaults make a much larger impact on home values in some areas versus others.

And, second — foreclosures can represent a terrific buying opportunity.  Not every foreclosed home is in pristine condition, but there is a plethora of affordable housing out there, suitable for first-time buyer, move-up buyers and investors, too.

Furthermore, as banks get better at disposing of foreclosed homes, the process of buying one isn’t as challenging as it was, say, 12 months ago. 

As part of its research, RealtyTrac.com catalogues a lot of foreclosed homes and lists them online.  However, you may find it better to start your search with a local real estate agent that knows the foreclosure market.

So long as buying foreclosures is a high-touch process — and it is a high-touch process — you may want to have a human face and agent to guide you through it.

The complete RealtyTrac report is available online.

The Federal Open Market Committee voted to leave the Fed Funds Rate within its target range of 0.000-0.250 percent.

It also reiterated plans to support the mortgage market to the tune of $1.5 trillion.

In its press release, the FOMC noted that the U.S. economy is ”leveling off” and that financial markets continue to improve.

The change in verbiage is the rosiest from the Fed since the start of the recession and it may signal that the downturn’s end is near.

That said, the Fed highlighted lingering economic soft spots that could still impact a recovery through the end of 2009 and into 2010.

1. Ongoing job losses
2. Reduced “housing wealth”
3. Tight credit conditions

Furthermore, rising energy costs remain a threat to inflation.

Also in its statement, the Fed confirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period” and to honor its $1.25 trillion commitment to the mortgage bond market.

Market reaction to the Fed’s press release is muted.  With no real change in message and a basic confirmation of what most investors already knew, Wall Street sees no reason to panic.  Mortgage rates are unchanged.

The FOMC’s next scheduled meeting is September 22-23, 2009.

As the unofficial end of summer, Labor Day weekend is popular vacation time for American families. 

And this year, with home sales on the rise and mortgage rates relatively low, early-September figures to be a popular closing date, too.

These points may appear unrelated, but there is an important connection between them. 

Like workers in every other industry, employees of the mortgage, title, and real estate industries are just as likely to be taking time off on and around Labor Day.  

For buyers with pending contracts, therefore, the closer that early-September closing date gets, the fewer industry folks that will be working to help close on your new house.

The same goes for households in the middle of a refinance.

With less than 4 weeks until Labor Day, you can take steps today to prepare for other people’s time off.  Here’s a few of them:

1. Notify your lender of any planned vacation time between now and your scheduled closing.
2. Purchase a homeowners insurance policy and prepay the first year, effective your closing date. Send proof of payment to your lender.
3. Have Power of Attorney forms lender-approved and signed by all parties, if applicable.
4. Deposit gift monies and/or retirement fund withdrawals into an acceptable bank account, if applicable.
5. Schedule your final walk-through far enough in advance to resolve any issues that may arise
6. Have your funds ready for closing at least 1 day early.

And, perhaps most important, fulfill your mortgage lender’s requests for additional supporting documentation within 24 hours of notice.  This includes requests for updated paystubs, bank statements, and tax returns.

The best reason to handle these tasks in advance is that, by the time Labor Day is around the corner, basic mortgage approval tasks will already take longer to complete — from clearing conditions to sending a wire.  Reduced staff means slower response times. 

Stay ahead of the curve and help save yourself from potential headaches down the road.  And, if possible, avoid closing on the Friday before Labor Day and the Tuesday after. 

On these days, staffs are the most lean of all.

The number of homes under contract to sell rose in June for the fifth straight month.

It’s the Pending Home Sales Index’s longest winning streak since 2003 and another piece of evidence that the housing market may be rebounding.

• The supply of new homes is falling
• The supply of existing homes is falling
• The Case-Shiller Index showed home value increases in many of its markets

Separately, the data is interesting. All together, it paints the portrait of a recovery.

That said, we can’t forget that the Pending Home Sales Index is somewhat unique versus other real estate reports.  Whereas data on existing and new home sales measures closed transactions, the Pending Home Sales Index only measures intent to buy.

Just because a home goes under contract, in other words, doesn’t mean that it actually will sell. 

Purchase transactions can fall apart for a multitude of reasons including, but not limited to, buyer-seller disputes, failed home inspections, and an inability to secure mortgage financing.  The Pending Home Sales Index doesn’t account for these types of issues.

In general, though, as the number of homes under contract increases, Existing Home Sales increase, too — usually on a 2-month lag.  Home sale data should remain strong through early-Fall, at least.

For active home buyers, be conscious of the fact that that more home sales plus falling home supplies leads to higher home values.  If you’re looking for a bargain, the longer you wait, the less likely you may be to find it.

Where does the money go?

If you’re like most U.S. consumers, more than half of it goes to housing and transportation costs.

According to the government’s most recent Consumer Expenditure Survey, spending patterns are little changed from years prior. 

More money is spent on entertainment and less money is spent on dining out.  Beyond that, the figures are somewhat static.

Meanwhile, using on the survey’s industry-by-industry breakdown, we can see how monthly housing payments and daily commuting costs impact a household’s budget.

For the budget-conscious, going out less often and bargain-shopping can help pad the bottom line, but not as much as living in a less expensive home or moving closer to work.

Even a refinance into lower rates can make a difference.