Archive for Mortgage

19 Feb 2013
Mortgage

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.

Share
| No comments | Tags: , , ,
22 Jan 2013
Mortgage

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.

Share
| One comment | Tags: , , ,
04 Dec 2012
Mortgage

Will the Fiscal Cliff End the Mortgage Interest Deduction?

Will the Fiscal Cliff End the Mortgage Interest Deduction?  One of the items in the tax code up for alteration in attempts to avoid falling off the fiscal cliff is the mortgage interest deduction.  The mortgage interest deduction gives a homeowner the ability to write down the interest they pay on their owner occupied mortgage against their active income in order to decrease the taxes they pay.

If the Mortgage Interest Deduction changes, is it still worth buying my first home?  The suggested changes to the mortgage interest deduction are not to take them away completely, but rather limit them.  Such as lowering the allowable deductable mortgage amount from $1,000,000 down to $500,000.  So unless you’re a first time home buyer with the ability to take on a $500,000 mortgage, this change WOULD NOT affect you.

But I’ve heard that they may TAKE AWAY the ability to write off mortgage interest at all on some homes?  This is true.  The suggestion is to remove the ability to deduct the mortgage interest on SECOND AND VACATION HOMES, but not primary residences.  So again, this doesn’t stand to affect first time home buyers.

So how does this affect me?  The suggested changes affect the first time home buyer demographic in the sense that not everyone understands the proposed changes.  So even though they don’t stand to be affected, many first time home buyers are waiting to buy until the final decision is made.  This in turn could be cooling down the market in your area.  If this is the case, it could actually HELP YOU get a better deal, as your competition is temporarily reduced.

How can I get more information about the First Time Home Buyer process?  Don’t make a final decision without collecting more information first.  If you’d like to get educated about down payment assistance progams in Washington State, or about the first time home buyer process in general, go to our Calendar/Reservations page and sign up for one of our FREE workshops.

Share
| No comments | Tags:
09 Oct 2012
Mortgage

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 3.75%, and are in a 20% tax bracket.

Year #1…Total interest paid = $10,040.95
Annual property taxes = $2,750
Mortgage insurance paid = $3,375.24
Total paid in = $16,166.19
Annual tax savings = $3,233.24 or $269.44/mo

Annual refund with MCC = $5,819.83 or $484.99/mo

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/Down Payment Assistance workshop.

Share
| No comments | Tags: , ,
19 Jun 2012
Mortgage

How Much Do I Have to Put Down on My First House?

Do I have to put 20% down in order to purchase a home?  Twenty percent down is typically the amount needed in order to avoid mortgage insurance.  However, it’s possible to put down as little as 3%, or even 0% when using down payment assistance programs.

How much do I have to put down to get the best loan?  The loan program that is right for you will not only depend on down payment requirements, but also property type, credit rating, debt-to-income, etc.  The loan program that works best for you, may not be the same as the person buying the house across the street.

But if I want to avoid mortgage insurance, it’s better to wait and save 20% down right?  This depends on how long it would take you to save up 20%.  One of the many other variables you have to consider are interest rates.  If it would only take you 12 months to save 20% it may be worth it to wait.  But if it would take you 5 years, it might be better to buy now and take advantage of all time historically low interest rates.

Choosing your down payment amount is an important decision, and involves many variables.  If you’re considering buying your first home or condo in the Greater Seattle area, go to our Calendar/Reservations page and sign up for one of our FREE First Time Home Buyer workshops.  Don’t proceed without getting educated FIRST!

Share
| No comments | Tags: , ,
« Older Entries   Recent Entries »