My mortgage guy tells me it’s a great time to get a refinance done for your house if you would like to reduce your interest rate or need to get money out for repairs, kid’s schools, etc. You will need to be prepared to qualify with a full documented loan as there are no longer loans that are no documents or stated income loans. This will affect those who have their own businesses more than anyone else as the income can be reduced tremendously by write-offs on taxes.
You will also want to make sure you improve your interest rate by at least a point if you are strictly doing a rate/term refinance and that you intend to occupy the property for at least another five years. This should allow enough time to go by so you can make up the additional cost of a refinance. The longer you stay in the property the more you will save in interest over time.
If you don’t know whether it makes sense or not, contact a lender and ask them to walk you through the numbers. It is certainly worth talking to somebody to make sure if it’s right for you or not.
Recently the head of the Federal Housing Administration went before congress with some recommended changes for qualifications to get a FHA loan as well as some guideline changes. While nothing will happen until congress votes on these changes, it is believed across the industry that some, if not all, of these changes will happen in some form or fashion. Since we cannot do anything but abide by the new changes, most people just want to know how it might affect them.
For sellers, it looks like the amount you can contribute will be reduced from 6% down to 3%. This means that buyers will have to cover more of their down payment and closing costs in the future and won’t be able to rely totally on seller concessions. It also looks like buyers might have to have up to 5% to put down on the home, which is 1.5% higher than is currently required. There are also some changes in the mortgage insurance and that will most likely raise MI both on the front end and monthly but I have been told that the monthly will be reasonable; we will see.
There are some other provisions that will affect the lenders as well so it will be very important going forward to have a lender that is FHA approved under the new guidelines. As always, if you need some additional information, please give me a call and I would be more than happy to answer any questions you might have or send you to someone who can. In the mean time, we will all have to wait and see what the final results on FHA will be.
It’s been said many times over the past couple of years that the mortgage rates are at “historic lows” and then they go back up a little bit and you hear they are still really low. While some people seem to perpetually “chase the rate” and hope to get it at an all time low, sometimes it’s just good to get a better payment and deal while you can.
Last week mortgage rates fell again to one of these almost to the all time lows and people were clamoring to see how much they could save on their payment. I talked to one of my lender friends and he told me one thing to always keep in mind when someone asks about saving money; are you looking to save money overall or just monthly? What people need to remember is it costs money to close even a refinance loan and those that tell you it is at no cost most of the time means it’s at no money out of pocket to you. The money comes out of the equity in your property and that will cost you at the time of sale.
Since there are so many first time home owners looking to purchase a home right now due to the advantages of the tax credit and low interest rates, I thought I would let you know the basic information you will need to have in order to qualify for a loan. This is what the lender will look at to determine if you can be qualified. The more accurate the information you give them the very first time you talk to them the better they can determine if you can be pre-approved for a loan.
You will need the following:
- A two year work or college history
- A two year address history
- Copies of W-2’s for the past 2 years
- If self employed, copies of the last 2 years tax returns
- Copy of your drivers license
- Copy of last 2 months bank statements (all of them and all the pages)
- Copy of the last statement on retirement accounts (all pages)
- Copy of divorce decree if this will affect or impact your financial situation
- Copy of child support documents if you pay or receive child support
- Be prepared to either write a check for your appraisal or have a credit card ready
- Credit will be pulled so you will need to provide a social security number and birth date
- If applicable, proof of discharged bankruptcy
- If applicable, deferred student loans (must be 12 months or more) or show where another person pays the student loans
There may be a few other things but this is the most basic items you should be prepared to provide information on or documentation for. If you need to be pre-approved for a loan, I call me and I can point you to some good lenders in the area.
You don’t have enough or any down payment money.
You don’t think you will qualify for a loan.
You want to wait until rates get to the bottom.
You’re not sure what the economy is going to do.
You don’t know whether you will have a job or not.
In other words, there are some very real scary things that may be keeping you from buying a house right now. There is also a great saying that came out of President Roosevelt in regard to The Great Depression; “the only thing we have to fear is fear itself”.
The only way to overcome the fear is to get good information and good knowledge on the subjects in question. The way to do that is to seek out council from experts in the fields you’re worried or scared about.
Find out from you mortgage lender if there are programs out there where you don’t have to have a down payment. (There are!)
See if you can qualify for a loan and if you can’t, find out what you need to do in order to qualify down the road.
Talk to your lender about “timing rates” and see what they have to say.
Listen to experts and find answers on the economy and where it looks to be going. Note: not just the gloom and doom guys in the national media.
Talk to your boss or supervisor about the possibility of keep your job long term. They may be able to tell you for sure but knowing you are thinking about buying a house, they should be able to make you comfortable, or not, about buying right now.
Get the information and move according to what you access about your situation. It can be done but it is up to you to do the work and ask the questions.
Have you heard about the latest tax credit for first time homeowners? If you purchase a home between April 9, 2008 and June 30, 2009, you may be eligible for a tax credit. You will need to check with your accountant or tax preparer to find out if you qualify for this credit or not. Like all such tax issues, this will depend on a number of factors.
But before you jump up and down with delight, you need to know that this credit is more like an interest free, fifteen year loan. In other words, you have to pay it back over time (15 years). You will be able to claim the lesser of $7,500 or 10% of the price of your home. Basically, any home over the selling price of $75,000 can claim $7,500 and a purchase price under $75,000 will be eligible to claim up to 10% of the purchase price.
There are nuances about when you have to start paying the credit back, what happens if you sell your home before you get the credit paid back in full and what if you sell your home at a loss? These are all things you will need to go over with a tax preparer.
If you have used another government program like THDA to buy a home during this time frame, you cannot qualify for this tax credit. A family or person can use only one type of assistance to get into a home. Just like THDA, there is an income cap that must be met for qualifiers. For this tax credit, if you’re single, the credit is not available if you earn more than $75,000 per year, or $150,000 for joint filers. It is unavailable completely if you earn $95,000 individually or $170,000 jointly.
The government is attempting to boost the housing market and get the economy started with this tax credit. However, be very careful and make sure you qualify for it before you start making plans to buy because if you don’t qualify, it could be a tax nightmare. Again, check with the person or company that does your taxes and make sure this is a good move for you to make.
