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| 7/19/2010, 04:20 PM by Sam Jones |
The $8000 first-time home buyer credit (also available to some existing home owners) will speed up home ownership. If anyone is interested in buying into the American dream of having their own home, this credit will sweeten the pot. When buyers know how to apply for the credit, they can take the first step towards that new home.
First-time home buyers (and others) may be eligible for the $8000 credit. Only buyers who use Federal Housing Administration mortgage financing (FHA) can benefit from this program. Home buyers are also expected to put forward at least 3.5% down payment.
If a buyer purchases a home after November 6, 2009, the income limit (to receive the full credit) for single taxpayers is $125,000 MAGI (modified adjustment gross income). The income limit for married taxpayers who file a joint return is $225,000. The credit is gradually reduced as incomes go above these amounts. The credit doesn't extend to incomes of $145,000 (single) and $245,000. (married).
Individuals can file for this credit on their 2009 tax return. Amendments can also be made to a 2008 return. Unpaid taxes, outstanding judgments, or other obligations such as wage garnishments can reduce a credit. Lenders require proof of eligibility for the credit including confirmation from employers.
Since lenders need to be aware of all relevant financial information, they require a completed IRS Form 5405. The IRS recently announced a revised edition of this form. To receive this credit, a borrower must have the required paperwork.
The National Association Of Home Builders predicted that this program would inject new life into the real estate market. The $8000 credit and the current market shed a favorable light on home ownership. For interested parties, the present may be the right time. With the holiday season upon us, the $8000 credit might just be the perfect present.
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| 7/11/2010, 09:09 AM by Sam Jones |
Reverse mortgages are fairly new and appeal to a great many senior citizens. Although they can be a great benefit to many, seniors should check them out thoroughly before obtaining one
For those who do not know what a reverse mortgage is, it is exactly what the name implies. It works in reverse of the regular mortgage. Instead of the mortgage amount going down and the equity going up as you make payments to a traditional mortgage, the equity goes down and the mortgage amount goes up as you draw against your equity for a reverse mortgage.
You must be 62 years old or older to take advantage of a reverse mortgage. You must also live in the property that is to be mortgaged. There are several mistakes to avoid when taking a reverse mortgage.
First, people sometimes do not shop around, believing that there is no difference in companies offering reverse mortgages. Not only are there different companies physically near you, the internet abounds with companies in this business. Many have different rates and different terms. Shop around and pick the company that best suits your financial situation.
Be on the lookout for scams. Sadly, in dealing with senior citizens there are numerous shady characters trying to make the quick buck. Check out the company completely and stay away from those that charge you thousands over the normal costs. Be sure to check with the Better Business Bureau. Find out if there have been any complaints against the company you are interested in.
Realize how much the normal fee will be. Think about 6- 10% origination fee, the amount charged for an appraisal and closing costs that run higher than a traditional loan. Of course, these can be deducted from the loan proceeds, but it is your equity paying for them.
Realize that one of the requirements of the loan is that you have to reside in the property the majority of the time. Should you have to go to a nursing home for extended care and the property is vacant for a period of twelve weeks or more, the loan may be called.
Consider future living expenses. If all the equity is used from your home, then you have no padding should you have heavy medical expenses or living expenses in the future.
Consider these things when looking at a reverse mortgage. It may still be right for you, but educate yourself before acting.
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| 7/11/2010, 09:08 AM by Sam Jones |
The world’s financial systems teetered on the brink of collapse for the last two years. In large part, this is due to the excesses and greed of major financial institutions. Coupled with a dearth of oversight by federal watchdogs, fortunes have vanished and Joe Average daily finds himself struggling to make ends meet. In response to this crisis, Congress recently passed the Restoring American Financial Stability Act of 2010, commonly called the Financial Reform Bill. In November of 2009, Speaker of the House Nancy Pelosi (D-CA) said, “. . . the party is over. Never again will the reckless behavior [of] a few threaten the fiscal stability of our people. . . .” She also said the legislation would “. . . inject transparency and accountability into our financial system.” Will the Financial Reform Bill truly achieve its objectives, or will it cause more problems? What effect will these reforms have on the mortgage industry?
The effect on the Yield Spread Premium (YSP) is central to this discussion. The YSP is the money (or rebate) paid to a mortgage broker for negotiating a higher interest rate on a loan in exchange for lower upfront costs (e.g., origination fees or discount points). There is nothing intrinsically wrong with this practice. For many borrowers it represents the only way they can get a loan. The problem is that many lenders (both institutional and mortgage brokers) take advantage of the borrower by unreasonably increasing their profit margin on a loan.
The Financial Reform Bill adds new disclosure requirements so that the borrower will know in advance the true costs of the loan. Unfortunately, there are inconsistencies in the legislation (i.e., loopholes) that put mortgage brokers at a disadvantage against institutional lenders (e.g., banks). First, the institutional lenders do not have to disclose their YSP. Second, if a lender funds a loan and then sells it after closing, that lender is not required to disclose the YSP. effectively giving them “hidden” profits. Mortgage brokers, however, must make full disclosure in writing, even when they have purchased the loan from an institution. This gives the institutional lender an unfair advantage over the mortgage broker. To reiterate, no fair-minded person is against disclosure requirements so long as there is a level playing field and all lending entities must follow the same rules.
Aside from the fact that institutional lenders can “hide” true costs from a borrower, particularly when they sell the servicing rights to another lender, there is another onus working against mortgage brokers. Since the YSP must be disclosed on the “good faith estimate,” this encourages broader loan shopping. The mortgage brokers will have to invest time (and expense) in deals they will have little chance of closing, because borrowers who have agreed to a deal can effectively walk out of the closing process anywhere along the way if they think they have found a better deal.
Because some mortgage brokers abuse the system, all are being punished (while banking institutions are not particularly affected). Yes, the YSP is a great source of income–by some measures bringing in at least $16,000,000,000 per year. Nevertheless, it is also an avenue for underfunded borrowers (people who can make their monthly mortgage payments, but lack the upfront monies to afford the loan) to buy a home.
The Financial Reform Bill has many positive elements. It increases oversight of the financial and banking industry. It addresses the problem of “too big to fail” (although the largest banks may become even more powerful). It gives shareholders more say in the compensation of company executives. It places a cap on credit card fees and regulates that industry more assiduously. However, its effect on mortgage brokers, particularly as it unevenly regulates disclosure of the Yield Spread Premium regulations, may hurt the consumers it was meant to protect.
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| 7/10/2010, 01:42 PM by Sam Jones |
The process of purchasing a home takes savvy, time and diligence. It is the most important financial investment we make in a lifetime and studies have shown that a consumer takes anywhere from six months to two years to contemplate the purchase.
The complexity and importance of this transaction gives us every reason to go about it more seriously. This means having every tool at your disposal when you are ready to purchase your first home or move up to a new home. Why would anyone not utilize an important tool—especially if that tool is inexpensive and can save them money, time and energy?
This tool is called a “pre-approval.” What is a pre-approval? First, let us tell you what it is not. A pre-approval is not a “pre-qualification.”
A pre-qualification is an opinion, typically offered by a loan officer after he/she talks with the prospective purchaser. This opinion is based upon information usually given to the loan officer verbally. It would not be unusual for the information not to be verified and the opinion might contain this statement—-
“This opinion is subject to the information provided being verified, including income, assets and/or credit.”
Though the loan officer may be well qualified, he/she is just proffering an opinion which is couched on information which may or may not be accurate. Many times prospective home purchasers do not even understand the questions they are being asked to answer.
On the other hand, a pre-approval is a loan commitment. It is a loan approval that is based upon documentation submitted within the application process and underwritten by someone who has underwriting authority. In this case the “pre” merely means that the applicant has not purchased a home as of yet. Therefore, the commitment will be subject to these conditions...
A sales contract on a property;
The appraisal of that property;
Final selection of a loan program and locking in a rate.
These conditions are standard on a pre-approval because the property has not been selected. It should be noted that all loan approvals or commitments will have standard conditions such as a clear title and hazard insurance.
The question is—if you are planning to purchase a home, which process should you go through— pre-approval or pre-qualification? The answer is quite obvious. Let’s say that you would like to sell your home. Would you be more comfortable if the prospective purchaser had an opinion or a commitment? Of course, the answer is a commitment.
As a matter of fact, it would not be unusual for a prospective purchaser to have his/her contract accepted over other bidders because of the existence of such a commitment. In effect you may even obtain the house for a lower price because the seller is more comfortable with your bid. The better price may also happen because you are prepared to go to settlement more quickly with an approval in your hand. If the seller wants a quick closing, you will be prepared.
There are other benefits of a pre-approval. These include making sure you do not waste your time looking in a price range you cannot afford and giving the lender more time to work out problems while you are looking. Why shouldn’t the lender be working while you are looking? A pre-approval actually should stand for a better transaction—more negotiating power with less stress. We think you would agree that these were worthy goals. Thinking about buying a home? Start the process with a visit to your lender!...q
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| 7/10/2010, 01:33 PM by Sam Jones |
We are in a credit crisis in America. If you listen to the media, there is nothing but bad news when you hear about the real estate and financial markets. But with every challenge comes opportunities. For example, the precarious financial markets have caused interest rates on home loans to move to record low levels.
These low rates mean that the majority of homeowners can save significant sums by refinancing their present loans. The problem is, many consumers are getting “shut out” from taking advantage of these lower interest rates. A recent study by Credit Suisse revealed that only 38% of Americans qualified for a refinance.
Why? Because the financial crisis has also brought tighter lending guidelines. Many who purchased homes in the past five years can’t even qualify to refinance these homes. We would like to help you take advantage of these low rates and not get “shut out.” We mentioned tighter qualification guidelines. What does it take to qualify for a mortgage at a lower rate?
Credit. A good credit score is a pre-requisite. During the real estate boom just a few years ago, lenders had programs for anyone of any credit level. Now tighter guidelines are causing those with moderate credit issues to pay more and those with severe credit issues perhaps not to get approved at all. Typical credit scores range from 500 (poor credit) to 800 (great credit). Just a few years ago, someone with a credit score of 680 was considered moderate credit and was not asked to pay more. Now many lenders are charging premiums for this “moderate” credit score. If a homeowner has a credit score below 620, they may not get approved at all and, if they do, the premiums they could have to pay could eliminate most or all of their savings.
Income. Income is also another issue. It makes sense that lenders would verify that you have enough income to make sure you can repay the mortgage. But again, during the real estate boom years many lenders did not even ask for income data or let borrowers qualify at very low adjustable rates even if the loans were likely to adjust upward very quickly. Once again, lender tightening is taking away options for those who do not make enough income to pay for loans. It is a “catch-22” because refinancing at lower rates will help consumers afford their payments and avoid foreclosure.
Debt Levels. Related to the measurement of income is someone’s debt levels. It is important to note that when a lender “qualifies” someone for a loan, that lender must look at all the payments a person is obligated to make, not just the mortgage. Americans have run up a significant amount of debt in the form of credit card, car and other payments during the past several years. And these debts are also helping to prevent qualification for low rates.
Home Value. Finally, another issue may prevent qualification. That is the value of the home. Many lenders have been more restrictive on the amount of the loan they will approve versus the value of the home. The mortgage divided by the value is considered the “loan-to-value” (LTV). During the boom LTVs at 100% (or no money down) were proliferating. Now these programs are scarcer. Therefore, even if you have good credit, adequate income and a small amount of debt, if the home is not worth as much as what you owe, refinancing could be a challenge.
Many American’s are facing these challenges. How do you take advantage of low rates when you have challenges? The first step is to work with a mortgage representative that will help you with more than obtaining a good rate. A representative can also help you with services that will increase your credit score, lower your debt load and even accelerate the repayment of your present mortgage so that you can refinance more quickly. In addition, there are special government programs available which may help you refinance or even get your present loan modified. Your mortgage representative can let you know if you might be eligible for these programs.
How quickly? Results will vary dependent upon your situation. For example, severe credit issues take more time to correct than moderate credit issues. The higher your debt load, the more time it will take to bring it under control. But one thing is for sure, you can’t take advantage of these historically low rates without taking the first step. And who knows how long these record low rates will last. So contact us today and let us help you either obtain a lower rate now or get in position to lower your payments as quickly as possible...
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