The FHA’s move to eliminate a prepayment penalty starting next year will relieve borrowers of a financial hit that’s entirely out of their control.
Making monthly rent payments on time may help potential home buyers increase their credit scores. Credit reporting agencies Experian and TransUnion are reportedly starting to incorporate verified rental payment data into credit files that are used to compute consumers; credit scores. So renters who never miss a payment may benefit from their payment history when they apply for a mortgage.
Did you know?
You can purchase a home using a reverse mortgage.
The Home Equity Conversion Program (HECM) for purchase is an innovation that helps seniors use the equity from the sale of their previous house to fund the purchase of their next home.
The HECM for Purchase is a Federal Housing Administration (FHA) insured home loan that allows seniors to use the equity from the sale of a previous residence to buy their next primary home in one transaction. Regardless of how long they live in the home or what happens to their home’s value, they only make one, initial investment (down payment) towards the purchase.
Higher mortgage rates will be “a headwind” for home buyers.
“Job growth continues to be strong in California and that means people feel more comfortable buying a home and mortgage credit has been very, very tight for the average person.
Job growth hasn’t been evenly distributed throughout the state, however. That means employment’s cushioning effect against the Fed taper will be felt differently in different housing markets.
Job growth has been especially strong in the technology sector, which benefits Northern California and certain pockets of Southern California.
As a result, the taper might be felt more intensely in those areas because they don’t have much job growth to offset its effects.
Understanding the basics of the Ability-to-Repay Standards
Discover what new information is required of potential borrowers with regard to new mortgage loan applications now that Ability-to-Repay (ATR) Standards are in effect.
In 2013, federal regulators issued Ability-to-Repay (ATR) Standards intended to ensure that borrowers can comfortably afford a home loan. The ATR Standards go into effect for loan applications received on or after January 10, 2014.
Clients should be aware that the new rules require lenders to collect and verify eight types of financial information from a potential borrower:
- Current income and assets
- Current employment status
- Credit history
- Monthly payment for the mortgage
- Monthly payments on other mortgage loans (second-lien loans made at the same time as the first-lien mortgage)
- Monthly payments for other housing-related expenses, such as property taxes, homeowner’s insurance and homeowner’s association fees
- Amounts paid on all other debts
- Monthly debt payments compared to monthly income, aka debt-to-income ratio
Taking all of this into consideration, the lender must determine that a borrower has sufficient income/assets and a debt-to-income ratio that would enable the borrower to comfortably afford their monthly mortgage payment.
Homeowners Tax Breaks on their House (Part 1)
Tax season can make most of us cringe. But, if you’re a homeowner, make certain you meet with experts to see how you may benefit at tax time by owning a home.
Minimizing your tax liability is always the goal. Start first by getting all your paperwork together. Hopefully you’ve kept good, clean records of everything pertaining to your home. Remodeling projects can often be deducted, so go through your files and search for the paid invoices. However, repairs to restore items to their original state usually aren’t tax deductible.
If you haven’t kept good records, now is the time to start. It’ll pay off in 2015 when it comes time to do your taxes. Here are a few tips to get you ready for tax season this year and beyond.
The largest savings is the mortgage interest deduction. Homeowners love this one because, especially in the early years of a loan, it can save tons of money. The deduction can be claimed on both primary and secondary homes. Two requirements: your home is less than a million dollars and you itemize your tax return.
Find your property tax statement for the end of the year. Your property taxes paid are deductible for a s long as you won the home. This is another tax savings that you’ll be able to record on your Federal form. Property taxes are taken as an itemized expense.
The Right Credit Level for You
You should borrow only enough money to make the purchase you have planned, rather than borrow as much as you can get:
- Decide on your short and long-term financial goals
- Calculate your average monthly income and expenses (including all the bills and debt you’re currently paying)
- Establish a saving and spending plan
How much debt is okay?
Some argue that any debt is too much. Others say that you should have only good debt (for investing) and no bad debt (for spending). In reality though, debt is simply a financial tool that you should use wisely to avoid getting in over your head.
There are several measures you can use to determine whether you’re carrying too much debt. One we rely on is known as the total debt service(TDS) ratio. As a general guideline, no more than 40% of your monthly gross (before deduction/taxes) income should go toward mortgage loan payments and other monthly debt obligations.
Realistically, the amount of credit you can afford depends on your personal situation. If your current employment is not secure, you will probably want to take on less credit than the recommended guidelines. On the other hand, if you have no other obligations, such as a mortgage, and your source of income is reliable, you may want to take on more credit, depending on your goals.
A good credit report gives you financial Muscle!
If you thought you got the last report card of your life when you graduated from school, you might be surprised to find that you’re being graded right now – on how you pay your bills. Just the way a good report card got you into the school or job you wanted, a good credit report can help you get the things you want now – a credit card, a mortgage or other loan, better terms on the money you borrow, an apartment, even a job. Since good credit is such a valuable financial tool, you’ll want to protect yours so that it’s there for you when you need it someday.
A conventional mortgage does have its advantages. The primary one is that with a conventional mortgage you probably won’t have to pay for the mortgage insurance upfront or for the monthly mortgage insurance you would be required to pay with an FHA loan. As of April, 2010 the FHA requires upfront mortgage insurance of 2.25% on the loan amount, regardless of how much you put down. As an example of what this would cost you, if you were applying for a $l00,000 mortgage, you would have to pay an extra $2,250 for the mortgage insurance upfront, plus your down payment and your other closing cost.