Category Archives: home mortgage

How do I Get a Home Mortgage Today?

Posted on May 13, 2012 by admin

A home mortgage, also called a home loan, is a loan to pay a house, condo, apartment or other property. A home mortgage is very different from other types of loans because it is secured (the house is collateral or an asset that the lender can take if you do not pay). It is also a unique loan because you pay it back over a long period of time (sometimes as long as 30 years) and because it has a lower interest rate than most other types of debt (the interest is also tax deductible). Getting a home mortgage is typically essential to buying a house since few people can afford to pay cash for a home. A home loan can also be considered to be “good debt,” since you are using the money borrowed to buy an asset that (ideally) will go up over time. While getting a home loan can be essential and a smart financial move, many people are not sure how to go about getting a home loan. The First Step to Getting a Home Loan The first step to getting a home loan is to make sure you are ready to qualify for one. This means checking your credit to make sure you have a decent or good credit score. If you don’t, you might not qualify for a loan or, if you do, the interest rate might be very high. You will also need to have been at your job for at least a year (or two years if you are self employed) and you will need to make enough money to easily afford the mortgage payments along with payments for all of your other debt (mortgage lenders have a specific “debt-to-income” guideline, which means they will not let you money if your total debt payments exceed a certain percent of your income). Finally, you will need to have some cash set aside, since most mortgage lenders will not allow you to get a home loan unless you can pay for at least 20 percent of the cost of the property you are buying. This means if you are buying a house worth $100,000, you’d need to have $20,000 and the bank would lend you $80,000. Pre-Approval If you believe you are ready to qualify for a home loan based on your income, credit and cash savings, it is time to get pre-approved for a loan. This means you get a lender to look at your information and to decide how much they are willing to lend. You should do this before you start house hunting to make sure you are looking at homes in your price range. A pre-approval is not a guarantee of a loan, but it is a good indicator that the lender will provide you with a mortgage for the amount you have been preapproved for as long as an in-depth review of your finances shows you to be as qualified as the preapproval process did. You can get a preapproval from a number of different lenders. Banks and credit unions both offer mortgage loans. You can also work with a professional called a mortgage broker who helps you to find a loan, but there is a fee to do that. The Home Loan Once you have found a home and made an offer (contingent on getting financing), you will go through the process of officially getting your loan. Here, a more detailed look will be taken at your finances. The bank will also take a look at the home you are buying to make sure that it is a safe investment for them to give you a mortgage. The key to this part of the process is that the bank is going to want to do an appraisal on the home. This gives them an idea of what the home is actually worth- which may not be the same as what you paid. The bank will have a certified appraiser look at your property and at comparable properties to see what the property is worth. This will determine how much the bank will lend to you, as they will lend only 80 percent of the appraised value. If the home appraises for less than you are going to pay, you will have to come up with the additional cash. Settlement Once the bank has appraised the home and reviewed your credit information to determine you are able to qualify, you will be approved for the home mortgage. The last step is settlement. At settlement, you’ll pay the closing costs (the cost for the appraisal, the home loan origination fee and any other costs), and you will sign the official mortgage paperwork. You will be given details about your costs and payments. The money will be distributed to the seller and you will have your home loan. Continue reading →

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New Home Sales Drop 7.1% in March

Posted on April 24, 2012 by admin

This morning the Department of Commerce released the numbers for new home sales in March.  The consensus is: the economy is still struggling to pick up.  With an annualized number of 328,000, March saw a decrease of over 7% in new home sales from those in February.  This comes at a bad time for sales since spring and summer are the seasons that provide the largest increase in sales in the real estate market.  The sales for homes in February were originally reported at 313,000, but were adjusted up to 353,000.  Without the adjustment the March numbers would have shown an increase instead of a decline. With mortgage rates remaining at near all-time lows there is no reason that the housing market should not be moving much more rapidly than it is.  The only explanation is that consumers are still worried about the future of the economy, so they are hesitant to make the commitment to purchase a house.  Another factor could include the fact that there have been unseasonably mild temperatures throughout the past winter, and many more people decided to purchase their homes earlier in the year. In order to see the economy start to move back in the right direction, home sales need to post a steady incline, rather than the volatility seen over the past several months.  This incline was seen at the end of 2011, however renewed worries, many of which were driven by an increase in fuel costs, have pushed the numbers back down.  Many professionals agree that in order to have a strong and healthy economy, the new home sales numbers need to reach an annualized 700,000.  Currently the U.S. is around half of that goal. Investors and economists pay close attention to the home sales in order to determine the overall direction of the economy.  When there are orders for new homes, construction activity increases, providing jobs.  This spurs on many manufacturing companies to produce the supplies, and many retailers will see increased business from people furnishing their new homes.  If home sales remain stagnant or drop, all of these industries will be hurt. The U.S. Bureau of Census, Department of Commerce, and Department of Housing and Urban Development all work together in order to bring the new home sales report.  This report is issued toward the end of every month, with the numbers from the previous month being revised at that time.  The report can be misleading with the number of homes being sold, and the reader should keep in mind they are annualized numbers, not the numbers for one month.  This report also only includes sales of new homes; it does not include sales of existing homes. Continue reading →

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Tax Advantages of Home Ownership – More than the Mortgage

Posted on April 17, 2012 by admin

From the time that our nation was founded, owning your own home has been considered the American Dream. Congress has given taxpayers several different tax credits and deductions that have effectively combined to make home ownership one of the most tax-advantaged investments in America. The tax breaks available to homeowners include the following: Home mortgage interest deduction – Every year, homeowners who have mortgages on their homes receive a Form 1098 that breaks down the amount of deductible interest that they paid on their home loans and equity lines of credit for the year. This amount is reportable on Schedule A of the 1040, and many homeowners are able to itemize their deductions because of this expense. The only limitation is that interest is only deductible for the first million dollars’ worth of home loans. Real estate tax deduction – This expense must be paid by all homeowners, regardless of whether or not they have a mortgage on their property. Most homeowners can now look up their property taxes online at their state or county treasurer’s website. This expense is also reportable on Schedule A as an itemized deduction. Tax credits – Congress has authorized various types of tax credits over the years, such as the Home Buyers Tax Credit, which gave taxpayers a whopping $8,000 tax credit for those who purchased their first home. The Energy Saver’s Tax Credit also allowed homeowners to take a tax credit for certain types of energy-efficient upgrades to their homes. Unfortunately, most of these credits have expired at this point. Tax-free capital gain on sale of home – This is perhaps the largest tax break afforded to homeowners. It is, in fact, one of the largest tax breaks given to individuals in the tax code, and effectively renders the price appreciation of your home as a tax-free benefit in most cases. Homeowners who file as Single or Head of Household are not required to report the first $250,000 of gain on the sale of their home. Married couples filing jointly can exempt twice that amount. This exemption is an expansion on previous legislation that allowed homeowners aged 55 or above to claim a one-time exclusion of $125,000 on the sale of their homes as long as certain conditions were met. But most of those restrictions have become obsolete. Homeowners of any age can now exclude all gains on any sale of their primary residence up to the aforementioned limits. Furthermore, this exclusion can be used multiple times, as long as it isn’t used more than once every two years. Homeowners must also have used the house they are claiming the exclusion for as their primary residence for at least two of the previous five years before the sale date. This is just a general breakdown of the tax advantages that are available to homeowners and is by no means comprehensive and should not be taken as tax advice. For more information on the tax rules of home ownership, visit the IRS website at www.irs.gov or consult your real estate agent or financial adviser. Continue reading →

Posted in Credit Report, home loan, home mortgage, home mortgage costs, home ownership, Loans and lending, Mortgage, real estate, tax advice, tax credits, taxes, taxpayers | Tagged , , , , , , , , , | Leave a comment

Tools for Selling Your Home without a Real Estate Broker

Posted on April 14, 2012 by admin

Over the past 10 to 15 years, the residential real estate market has become more complicated. Seller must deal with things like disclosure Fair Housing Laws and even environmental issues. Many home sellers would rather list the home with full-service brokers to avoid all the hassles. According to the National Association of Realtors (NAR), in 1997 13 percent of sellers sold their own homes. As reported in the  NAR’s  Profile of Home Buyers and Sellers 2011,  by 2003 and 2004, the percentage of  For Sale By Owner (FSBO)  increased slightly to  14% of home sales  consisted of  FSBO  transactions. By 2011, FSBOs made up just 10% of home sales transactions. The NAR report reveals that the typical FSBO occurred in rural locations and large cities. In addition, sellers tend to be single male or females with lower median incomes. Mobile home sales made up a large portion of FSBOs.  FSBOs sellers rely heavily on the Web and yard signs for marketing their properties. Regardless of your profile as a home seller, following are some resources that can help ease along your FSBO transactions when selling your home: Listing Services Listing service like ForSaleByOwner.com and FSBO.com can help make the selling process less frustrating and help you guide you along the process. These firms specialize in providing Internet advertising services for owners who choose to sell their own properties. The companies are not licensed real estate brokers, or members of any multiple listing services. The service they offer includes: ·      List your home in your local Multiple Listing Service (MLS) and Realtor.com ·      Offer services to advertise property ·      Banner advertisements ·      Option to work with a flat fee real estate broker ·      Provides information on other service providers – legal, mortgages or movers ·      General information, sample, contracts and links to other information related to the real estate industry. These sites also have their own proprietary listings and cater to buyers. Other Resources Robert Irvin, author of For Sale by Owner: A Complete Guide , said in his book that it does not take a Ph.D. to figure out the correct price for your home. The NAR Profile of Home Buyers and Sellers 2011 revealed that FSBOs tend to get 100 percent of their asking price. Free real estate sites like Trulia   and Zillow   make this aspect of FSBO easy to find pricing information. ForSaleByOwner.com has offers access to an Internet-based appraisal service. Working with a buyer’s agent can also help ease the FSBO process. Homeowners who elect to go the FSBO route enhances the chance of attracting ready, willing and able buyers and receiving top dollar for their home. You will need to negotiate a commission of around three percent, which saves half of the commission cost paid to a real estate broker. In a buyer’s market and a slow economy, FSBO becomes a more difficult process. However, home sellers who have the time and temperament can save thousands of dollars by electing to sell without the services of a real estate agent. Continue reading →

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Have You Found All Your 2011 Tax Credits or Tax Deductions?

Posted on April 3, 2012 by admin

The Internal Revenue Code allows taxpayers two main methods of reducing the amount of income tax that they pay each year. One is through deductions and the other is with credits. Each type of tax reduction is somewhat different in nature, but all items in each of the two categories have the same general effect on your tax return. However, one type of reduction has the potential to lower your tax bill a great deal more than the other. Tax Deductions As the name implies, a tax deduction is simply an amount based on a qualifying expense paid by the taxpayer during the year that is deducted, or subtracted from the taxpayer’s gross income. For example, a taxpayer with $30,000 of income who has a $2,000 deduction will only have to pay tax on $28,000 of income. There are three main types of tax deductions. The first is known as “above-the-line” deductions that are listed in part II on page 1 of the 1040. These deductions include qualified moving expenses, student loan interest, the cost of health insurance premiums and one-half of any self-employment taxes paid by self-employed filers and many others. They are also known as deductions for adjusted gross income, because after they have been subtracted, the remaining amount of income is referred to as adjusted gross income, because the gross income has been “adjusted” by the above-the-line deductions. Once the adjusted gross income has been computed, then the taxpayer is allowed to take either the Standard Deduction or else itemize deductions, depending upon which is larger. The Standard Deduction is a deduction automatically accorded to all taxpayers. The dollar amount varies according to filing status (i.e. the amount for marrieds filing jointly is always twice the amount given to single filers) and is indexed for inflation each year. This deduction is taken by all taxpayers whose total itemized deductions are less than the standard deduction for their filing status. Below-the-line deductions are also known as itemized deductions. If this group of deductions collectively exceeds the taxpayer’s standard deduction, then the taxpayer can (and certainly should) claim them instead. Itemized deductions are reported on Schedule A of the 1040 and include items such as home mortgage interest, real estate taxes, personal property taxes and charitable contributions. This is the last group of deductions that are reported on the tax return. Tax Credits Tax credits differ fundamentally from deductions in that they are not subtracted from the taxpayer’s taxable income. They are rather used to directly reduce the amount of actual tax owed on a dollar-for-dollar basis. For example, if the taxpayer in the example above who earned $30,000 had a $2,000 tax credit instead of a deduction, then assume that his or her tax bill comes out to $2,000. The $2,000 credit would effectively wipe this amount out and the taxpayer would have a tax bill of $0. Therefore this person would get back any and all amounts that were withheld for federal tax during the year. As a general financial rule of thumb, tax credits have approximately three times the financial impact of deductions. This is because deductions only reduce the amount of money that the taxpayer must report as income, while credits directly hit the bottom line on the tax return. There are two types of tax credits. Nonrefundable credits are those whose excess amounts are simply lost. If the taxpayer’s tax bill in the above example was only $1,000, then the tax bill would be gone but a thousand dollars of the credit will go unused. Refundable tax credits will refund the difference to the taxpayer in cash. Therefore, if the $2,000 credit in the above example is refundable, then the taxpayer will get an additional thousand dollars on top of any withholding that is refunded. The major refundable tax credits include the Earned Income Credit and the Additional Child Tax Credit. Most other credits are nonrefundable. For more information on tax credits, visit the IRS website at www.irs.gov or consult your tax or financial adviser. Continue reading →

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Should You Prepay Your Mortgage?

Posted on March 6, 2012 by admin

Ever since the Mayflower arrived on the eastern shore of North America, Americans have pursued the dream of home ownership. But the mortgage that comes with home ownership in the modern era has become the source of a great deal of debate. While mortgages allow the vast majority of Americans to own their own homes, they have also become a millstone around the neck of many who end up purchasing more home than they can afford. Paying off your mortgage sounds like a great idea at first, but it may not always be the best move for you financially. There are many issues to consider in this equation and expert opinion varies widely on this subject. Some of the factors that can influence whether or not you should prepay your mortgage include: Tax Savings – If you are able to itemize deductions on your income tax return because of the mortgage interest that you are paying, then this takes a bite out of your total home ownership cost. In order to see just how much you are really saving from your interest, you can prepare your tax return both with and without declaring the interest and see what the difference is. In some cases, the difference will be quite substantial, because those who are able to itemize their deductions can then take a number of deductions that may not have added up to enough to itemize without their mortgage interest, such as charitable contributions, personal property tax and unreimbursed medical expenses. Therefore the difference can at times add up to considerably more than the amount that your mortgage interest exceeds the standard deduction. However, you may also discover that your interest is not making nearly as much of a difference as you think; those who will not be able to deduct their home mortgage interest are deprived of one of the key advantages of home ownership. Investment Return – If the rate of interest on your mortgage is relatively low, then you may want to consider focusing on long-term investments that pay higher returns over time. Most financial planners will tell you not to pay off your mortgage at the expense of saving for retirement, because if your mortgage rate is 5% and you are averaging a 10% return on investment in your IRA and company retirement plan, then you are probably smarter to keep your mortgage and play the spread than to pay it off. Of course, the zero net gain in the stock market from 2000 – 2010 further complicates this picture along with the abysmally low rates offered by fixed income instruments. Risk Tolerance – Proponents of mortgage prepayment use the above argument to justify doing exactly the opposite because of market uncertainty. After all, if your mortgage rate is 5% and you pay it off, then you have earned a 5% guaranteed rate of return. Furthermore, your house will remain paid off regardless of what the markets do in the future, and your monthly income will go considerably further without a mortgage payment. The Subprime Mortgage Meltdown of 2008 has also left thousands of homeowners upside-down on their mortgages, thus further complicating the picture. But there is ultimately no absolute right or wrong answer to the question of whether or not you should pay off your mortgage early. The factors listed above will differ substantially from one person to another, thus making what is right for one wrong for another. A careful examination of your entire financial picture is necessary before deciding what to do here, and those who are not financially sophisticated would be wise to consult a financial planner on this matter. Continue reading →

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Philadelphia Area Mortgage Rates Survey Week of December 26, 2011

Posted on January 7, 2012 by admin

According to a recent Primerates.com survey conducted on December 26, 2011 of Philadelphia area mortgage rates offered by the area banks & credit unions, rates for 30-year fixed -rate conforming loans in the Philadelphia metro area for well-qualified borrowers ranged from 3.75% at Wilmington Bank ( www.wsfsbank.com ) to 4.25% at Citibank ( www.citibank.com ).  The majority of the lending institutions remain in the low 4% with just a half a percent spread between these lowest and highest offers. Shopping for a home mortgage is not like shopping for a new computer.  Finding the best deal online may prove to be one of the worst deals.  Instead, those companies with a brick and mortar building are usually the way to go.  There are online only establishments that advertise much lower rates, but often it comes with the cost of greater frustration, higher fees, and a lack of service.  The mortgage industry is not federally regulated.  This means that scam artists are much more prevalent than in the stock market and investment industries simply because it is easier for them to get by with low-ball dealings.  Many of these “scam” artists perform services or acts that are perfectly legal, but they hide the facts, rush through paperwork, and perform the classic “bait and switch.”  Instead, deal with a trustworthy company; if someone is offering rates, closing fees, or other services that seem too good to be true, they most likely are too good to be true.  It is not worth the risk on a several hundred thousand dollar commitment. Top Atlanta Area Banks and Credit Unions As of 30-year Fixed 15-year Fixed 5/1 ARM Wilmington Bank 12/26/11 3.75% 3.13% 2.75% Wells Fargo 12/26/11 3.88% 3.25% 2.25% Sovereign Bank 12/23/11 3.99% 3.25% NA Bank of America 12/23/11 4.00% 3.38% 2.75% TD Bank 12/26/11 4.08% 3.27% 2.74% PNC Bank 12/26/11 4.13% 3.25% NA Citizens Banks 12/26/11 4.13% 3.38% 2.75% Beneficial Mutual 12/26/11 4.13% 3.38% NA Citibank 12/26/11 4.25% 3.50% NA   Listed rates from banks, thrifts and credit union were listed on their websites on the date indicated for conforming loans with 0 points.  Data is believed accurate at time of collection, can change without notice, and will vary based on an individual’s credit history.  Contact a specific institution for current rates. Continue reading →

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Deed in Lieu of Foreclosure – An Alternative to Foreclosure

Posted on November 17, 2011 by admin

Deed in Lieu of Foreclosure A deed in lieu of foreclosure is a foreclosure alternative wherein you agree to relinquish your home and all rights to it in exchange for your mortgage lender agreeing to absolve you of all liability for the outstanding mortgage payments.  In other words, you give up the house and your mortgage balance is forgiven.  Deed in lieu of foreclosure can be a better option for homeowners than an actual foreclosure for many reasons, and it is also advantageous to the lender as well. Benefits of Deed in Lieu of Foreclosure One of the biggest benefits of deed in lieu of foreclosure is also the most obvious benefit: the home is not foreclosed on.  This means that the bank does not need to spend money on legal expenses, posting notice of the foreclosure, or other costs associated with foreclosing on a house.  A homeowner also does not have to deal with published notices of his homes foreclosure in the newspaper or posted at the home, all of which can be a traumatic and sometimes embarrassing process. Other benefits of a deed in lieu of foreclosure include: The opportunity to avoid a deficiency judgment .  Homeowners may become liable in certain cases for any outstanding balance due on the mortgage that the bank is not able to recover by selling the home.  This occurs when a bank seeks a “deficiency judgment” and the court orders the homeowner to pay this money even though the home is gone.  With a deed in lieu of foreclosure, the homeowner can negotiate to get the lender to agree not to pursue a deficiency judgment. Less damage to your credit.   While both foreclosure and deed in lieu of foreclosure are going to show up on your credit report and they are going to bring down your credit score, a deed in lieu of foreclosure is generally viewed as less damaging because you at least took action to deal with your problem. You do not have to find a buyer for the home, as you would in a short sale.   Sometimes, when the real estate market is especially bad, it can be impossible even to find a buyer for a short sale of a home.  A deed in lieu of foreclosure absolves the homeowner of that responsibility. There may also be other benefits, depending on your lender and what programs are in place.  For instance, the FHA created a program called ‘Cash for Keys’ where up to $2000 in compensation may be paid to homeowners who turn over their keys in a deed in lieu of foreclosure arrangement. Meeting the Requirements In order to qualify for a deed in lieu of foreclosure, you must meet certain requirements that vary from lender to lender.  Typically, you will need to be behind on your payments and unable to make your payments.  Often, it is also a requirement that the home must have been on the market for at least 90 days before the deed in lieu of foreclosure option is available.  Finally, HUD stipulates that a deed in lieu of foreclosure transaction must be completed within 90 days from the process was initiated. For more information on how to meet the requirements of deed in lieu of foreclosure or of how a deed in lieu of foreclosure can help you, you should speak with your lender. Continue reading →

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