Archive for Mark Middlebrooks

What is the Mortgage Credit Certificate?

What is the Mortgage Credit Certificate?  The Mortgage Credit Certificate (MCC) is a dollar for dollar tax credit for first time home buyers.  The credit relates to the mortgage interest paid on a homeowner’s property over the life of their loan, as long as it remains owner occupied.

How does this differ from the standard interest deduction?  The first 20% of interest you pay on your mortgage will come back to you in a dollar for dollar tax credit.  The remaining 80% of interest paid will still be used to write down your income on your taxes as it normally does with owner occupied properties.

Can you give me an example?  Let’s pretend the Johnsons are first time home buyers and purchase their first home for $275,000.  We’ll also assume they will utilized FHA financing with a down payment of 3.5%, a fixed interest rate of 4.25%, and are in a 20% tax bracket.

Year #1…Total interest paid = $11,387
Annual property taxes = $2,750
Mortgage insurance paid = $3,619
Total paid in = $17,756

Annual tax savings = $3,551.20 or $295.93 per month

Annual refund with MCC = $5,372.80 or $447.73 per month

Does the MCC last for the life of my loan?  The MCC DOES last for the life of your loan as long as you’re occupying the property.  However, keep in mind that as time progresses, though your monthly mortgage payment may stay the same, more of your payment will go towards principle.  Therefore, your tax savings will slowly decrease because you are paying less and less interest every year.

The MCC sounds like a no brainer for first time home buyers!  The MCC is a fantastic program, but there are parameters you have to meet, as well as repercussions if you stop occupying the property.  Don’t make a decision without getting educated first!  If you’d like to learn more about the MCC go to our Calendar/Reservations page and sign up for our FREE First Time Home Buyer.

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What are USDA Loans?

What is a USDA loan anyway?  USDA loans are specifically designed for purchasing homes in rural areas.  Some of the areas in Western Washington that are considered rural by USDA guidelines may surprise you.  In many cases first time home buyers looking for the suburban lifestyle are finding themselves purchasing homes in areas that can utilize USDA financing.

So what are some benefits of using a USDA loan?  Well, USDA’s monthly mortgage insurance is only one third of what FHA’s monthly mortgage insurance premium is.  Also, the interest rate for a 30 year fixed loan is lower with USDA than it is with standard conventional financing.  Another huge benefit for many first time home buyers is that with USDA, you can secure that low rate and the low monthly mortgage insurance with absolutely NO down-payment.  That’s right $0 down, so you can keep more money in your pocket!

What else do I need to know about the USDA loan?  First off, there IS an up-front Mortgage insurance premium that will be added to the loan amount of your 30 year fixed loan.  This up-front mortgage insurance is 15% higher than the FHA’s premium.  The next thing to know is that the monthly mortgage insurance, like FHA, will last for the life of the loan.  An additional major factor to consider is that there is a household income limitation.  Bottom line, there are a lot of different factors to consider.

Don’t make one of the biggest financial decisions of your life without getting educated!  If you would like to gather more information about down payment options or the first time home buying process in general, please go to our Calendar/Reservations page and sign up for one of our FREE First Time Home Buyer workshops.

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Minimum Down Payment Change Ahead

          

What is the minimum required down payment anyway? If you have your financing plan structured with your lender before November 16th 2013, on a conventional loan the minimum is 3% of the purchase price.  That means a $10,500 minimum down-payment for a $350,000 home.  If you don’t have your financing structured with a diligent professional lender before that date, your minimum down payment for a conventional loan will be 5% ($17,500 for that same purchase price).

How do I get my financing plan structured to avoid the minimum going up on me?  In order to ‘lock in’ the possibility of a 3% down-payment you will need to work closely with a lender who will secure something called “DU findings” from Fannie Mae on your behalf.  He/she will do this by gathering all of the pertinent information and documentation, pulling your credit report, and putting your exact scenario into Fannie Mae’s system.  If you have an acceptable scenario for a 3% down-payment before November 16th and make your way into Fannie Mae’s system, you will be able to continue shopping for houses past that date and be ‘locked in’ to the 3% down-payment structure.

Are there any other options for keeping my minimum down payment as low as possible?  The two alternative and most readily available options in keeping your down payment as low as possible will be securing FHA financing, or utilizing a down payment assistance program such as Home Advantage.  Both of which have advantages and disadvantages when compared to the standard conventional financing structure.  To learn more about these programs view: FHA vs. Conventional and Home Advantage DPA.

Don’t make one of the biggest financial decisions of your life without getting educated!  If you would like to gather more information about down payment options or the home buying process in general, please go to our Calendar/Reservations page and sign up for one of our FREE First Time Home Buyer workshops.

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FHA Mortgage Insurance on the Rise

         

Is FHA mortgage insurance going up again?  Yes, FHA mortgage insurance will increase again this coming April.  It will be the FIFTH INCREASE for home buyers within the past 3 years!

Why does it keep increasing?  The Federal Housing Administration has decided that they must increase the premium to help cover any future losses that may arise from home buyers defaulting on their mortgages.  After the boom and bust in the housing market over the last several years FHA realized they may not have adequately accounted for the potential risk exposure.

Will FHA mortgage insurance rates continue to rise?  Let’s take a look at the last 3 years:

- April 5, 2010 increase to FHA mortgage insurance

- October 4, 2010 increase to FHA mortgage insurance

- April 18, 2011 increase to FHA mortgage insurance

- April 9, 2012 increase to FHA mortgage insurance

- April 1, 2013…yet another increase to FHA mortgage insurance rates, making the new premium approximately 2 1/2 times more expensive than in early 2010.  Do you see a trend?

How much affect will this have on first time home buyers?  That depends on purchse price, buyer scenario, etc.  The main thing to remember is that there are alot of other variables besides purchase price and interest rate that first time home buyers need to consider.

Don’t make the biggest decision of your life without getting educated!  If you would to find out more about FHA loans or the first time home buying process in general, please go to our Calendar/Reservations page and sign up for one of our FREE First Time Home Buyer/Down Payment Assistance workshops.

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FHA vs Conventional Financing

         

What’s the difference between FHA and Conventional financing?  Both can be a good fit for first time home buyers, but can vary a bit.  FHA tends to be looser on borrower guidelines, but a bit stricter in regards to the property.  Conventional tends to be the opposite, with typically looser property guidelines and stricter borrower guidelines.

Does either have mortgage insurance?  Both can have mortgage insurance.  FHA mortgage insurance tends to be a bit higher than Conventional and is put in place regardless of the down payment amount.  Conventional mortgage insurance tends to be less expensive, has more flexibility depending on down payment amount, and completely goes away with a down payment of 20% or more.

What are their minimum down payments?  FHA’s minimum down payment is 3.5%, and Conventional’s is 3%.  Because of their low minimums, either may be a good fit for first time home buyers.  However, if you can’t afford either of these down payment amounts, we do offer down payment assistance programs for qualified first time home buyers.

Don’t make the biggest decision of your life without getting educated first!  If you’d like more information on these loan programs or our down payment assistance programs, please go to our Calendar/Reservations page and sign up for one of our FREE First Time Home Buyer/Down Payment Assistance workshops.

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