Mortgage Mess

Will Credit Start to Flow Freely Again?

2009-03-24T07:17:00.000-07:00

The US Treasury announced its plan today to purchase up to $500 Billion worth of existing assets and loans that are in danger of defaulting from banks. The reason they are doing this…to clean up the balance sheet of these banks in the hopes that they will start lending money again. The economy needs credit to begin flowing again, not contracting. Credit lines, credit cards, mortgages, car loans have all been drying up over the past year and it has been damaging this country’s ability to conduct business.

The government will start by committing up to $100 Billion immediately and see how this works. Once this money has been used they will analyze the effects and continue with their plan and use all of the $500 Billion or maybe more if the plan is working. If it is not working?? I guess they will figure something else out.

One thing is for sure…Wall Street definitely liked the announcement. The stock market surged today closing up 497 points! I have learned not to get too excited about the stock market though. Wall Street seems to have a knee jerk reaction to almost everything lately. Remember last month when the Treasury Secretary Timothy Geithner announced the outline of this same program and the market went down 380 points immediately. Isn’t this the same plan? So the market did not like what he said so it dropped like a rock. Now they like what is being said and it goes up 500 points. Nothing has actually happened yet…it is all just promised so far. I think the market should actually move based on actual results not promises. Anyway…

I like the idea and like I have said before the government is making some good moves, but these things will take time to trickle through the system. So if the stock market goes down 500 points tomorrow, don’t say that the plan isn’t working. Give it time.

The recent changes in the market should help interest rates stay low and possibly even make them drop even further so if you had been thinking about buying a home or refinancing you may be pleasantly surprised.

For more info on this plan check out http://finance.yahoo.com/news/Stocks-surge-on-bank-plan-apf-14721874.html

For a refinance or a purchase loan check out http://www.thebriteway.com/.

Happy Tuesday!

Some Positive Signs for the Housing Market

2009-03-20T07:36:00.000-07:00

The FED is planning on buying up to $300 billion of long-term government bonds and an additional $750 billion in mortgage backed securities guaranteed by Freddie Mac and Fannie Mae. This will help ease the credit crunch that has been going on. Some of this money is coming from the $750 billion rescue package passed last year.

The announcement of these purchases had a direct impact on mortgage rates. Rates have dropped about .4% over the past two days. Mortgage applications have been at their highest levels of the year over the past two weeks and with rates dropping again they should be even higher this week. These lower rates will allow more people to qualify for refinance loans and purchase loans which will ultimately help the economy.

This is not a fix all, but it is part of the overall plan to turn the housing market and the economy around. The government has implemented or put into place guidelines for:

1. A first time homebuyer tax credit of $8,000
2. Mortgage Refinances at 105% loan to value
3. Loan Modifications for all homeowners who qualify, not just people who are behind on their mortgage
4. Lowered the Federal Funds rate to 0%
5. Purchased or is purchasing $750 Billion worth of mortgage backed securities

I am sure they are not done yet, but this is definitely a good start. These guidelines will take a little while to trickle through the system, but once they have been implemented and completed the housing market should show sign of a recovery.

If you would like to refinance or purchase a home check out www.thebriteway.com and give us a call.

Happy Friday everyone!

Update on Obama's Housing Fix - Help For You

2009-03-19T07:43:00.000-07:00

This is an update to my first article. On March 4th the government passed a housing bill aimed at reducing the number of foreclosures and helping homeowners reduce their monthly payments.

Banks and servicers are still updating their systems to implement the changes. These companies are also waiting on clarification for some parts of the bill. It may take a few more weeks for these companies to be ready to start taking applications for refinances and modifications. Just be patient.

In the meantime the government has created a website that you can go to : http://makinghomeaffordable.gov/ . This website can help you figure out if you will qualify for the new programs that are being put into place.

Just because the banks are not completely ready to take on this program does not mean that you can’t call them. Many of the banks are taking down names and numbers of the customers that call them. Then once they have the program in place they will return these customer’s calls.

The good news is that the four largest servicers in the country have agreed to participate in the program – Wells Fargo, CitiBank, JP Morgan Chase and Bank of America. This is huge! This means that most of the other banks will likely follow their lead. So help for you could be on the way!

Read an update on CNN Money at - http://money.cnn.com/2009/03/19/news/economy/Obama_foreclosure_plan/index.htm?postversion=2009031909

Check out details of the new program at http://www.treas.gov/initiatives/eesa/

If you need help with a refinance or a purchase check out www.thebriteway.com and give us a call.

Happy Thursday Everyone! Get ready for March Madness!!!! Go Heels!

What Will a $200,000 Home Cost?

2009-03-18T07:41:00.000-07:00

If you are looking at buying a home and wondering what the payment will be there are some websites out there that can help you. Here are a couple:

www.bankrate.com/brm/mortgage-calculator.asp
www.mortgagecalculator.org/

Just plug in the figures and out pops your monthly payment. Just remember that you need to figure in the cost of mortgage insurance, homeowner’s insurance, home owner association dues and taxes. These four things can make your payment much higher that you think.

Lets take and average $200,000 house and figure out what the down payment and the monthly payment will be. We are going to use a 96.5% loan to value FHA mortgage – fixed 30 year - to purchase this home. We have negotiated into our contract that the seller will pay all of the closing costs.

Down Payment = $200,000 * 3.5% = $7,000

Base Loan amount = $200,000 * 96.5% = $193,000
Up Front Mortgage Insurance = $193,000 * 1.75% = $3,377.50
Total Loan Amount = $196,377.50 – with FHA loans the up front mortgage insurance will be added to the base loan amount.

Monthly Payment:
Principle and Interest at 5.5% = $1,115
Monthly Mortgage Insurance = $193,000*.55% = $1,061.50/12 = $88.45
Taxes = $3,000/12 = $250.00
Insurance = $1,200/12 = $100.00
Total Payment = $1,553.45

So your total payment on an average $200,000 home will be $1,553.45. This is something that you want to know before you start looking at homes. For more help with this visit www.thebriteway.com and give us a call.

Happy Wednesday!

Increase Your Tax Return - Tax Tips

2009-03-17T07:33:00.000-07:00

If you purchased a home in 2008 and it was your first home and your primary residence then you may be able to increase your refund by as much as $7,500! If that home you purchased in 2008 was not your first home, but was the first home your owned in the past three years and was your primary residence then you could qualify for $7,500 off your taxes too.

Here is how it works: http://turbotax.intuit.com/support/kb/tax-content/tax-tips/6360.html

1. If you made $75,000 or less as an individual and $150,000 or less as a married couple in 2008 then you can claim 10% of the purchase price of your home or $7,500 whichever is less.

2. So you purchased a $200,000 home in 2008 and you meet the income requirement. You can claim 10% of the purchase price of the home which is $20,000 or $7,500 – whichever is less. So you can claim $7,500.

3. So lets say in 2008 your tax situation is:

Tax Liability = $6,000
Taxes Withheld= -$5,000
Tax Credit= -$7,500
Tax Refund= $6,500

4. The above example shows that even if you only paid $5,000 in taxes during 2008 you can still get back $6,500! So you can have the IRS give you money this year. Go get it!

5. If you do decide to tax this tax refund – it is a loan. You have to pay back this $7,500 over the next 15 years – interest free. Your tax liability will be increased every year by $500. This is a great loan, but still a loan – not free money.

When you do your taxes you will put this credit on line 69 of your form 1040. You will need to complete form 5405 as well. Consult your accountant before completing your taxes!!

The 2009 first time homebuyer tax credit is even better so if you want to look into buying a home check out www.thebriteway.com.

Happy Tuesday everyone!!

You May be Able to Afford a Home Right Now!

2009-03-16T06:50:00.000-07:00

Thinking about buying a home? Right now is a great time because of favorable buyer's market conditions both with home values and rates. When putting an offer in you want to make sure you are getting the best deal you possibly can. Most people are looking to put as little money down as they can and keep their closing costs to a minimum. How do you do that?

If you are going to use an FHA loan for your financing you can get most if not all of your closing costs paid for by the seller. FHA allows 6% seller concessions. This means that you can write into your contract that the seller is to pay up to 6% of your closing costs. Now you may think that there is no way that you would need 6% for your closing costs, but they will add up and having 6% to play with is very helpful.

In today’s market it is very common for the seller to pay up to 6% so if your goal is to bring as little money as possible to the table this will help. If you do an FHA loan and you get all of your closing costs paid for then you will only have to bring 3.5% of the sales price of your home to the close. This means that if you purchased a $200,000 house you would have to bring $7,000 to the close and that is all! Very nice! So if you thought that you could not afford to buy a home right now you may want to rethink this.

Check out http://www.jillshotproperties.com/ if you are looking at buying a home in the Tampa – Lakeland area and need a realtor.

Check out http://www.thebriteway.com/ if you need help with a mortgage – refi or purchase.

Check out this page of HUD’s website - http://www.hud.gov/buying/index.cfm for detailed info regarding purchasing a home. Great Info in here!

Have a great Monday!!

Another Great Reason to Buy a Home $8,000 Reasons Why!

2009-03-12T21:58:00.000-07:00

The US government is giving consumers unprecedented incentives to purchase a home. If you purchase a home before the end of 2009 you may be eligible to receive $8,000 in tax credits!

Here is how it works - First off you must not have owned a home in the past three years. The government will consider you a first time homebuyer if you have never owned a home or have not owned one in the past three years. Once you qualify here then you need to BUY A HOME.

Then you will qualify for the tax credit. Here is how the credit works:

Example:

In 2009 you paid $7,500 in taxes on your W2. When you do your taxes you are due a refund of $2,000. So in 2009 you will have paid a total of $5,500 in taxes to the government. Because you purchased a home in 2009 and you qualified to claim the $8,000 tax credit, you will get back the rest of your $5,500!!! You will not get the full $8,000 because you can only get back as much as you paid in during 2009. So your tax refund will be $7,500 and you will have paid the IRS nothing in 2009! How cool would it be to pay the IRS nothing for once!

Unlike the bill passed in 2008 this $8,000 does not have to be paid back! In 2008 a similar bill was passed to give a first time home buyer tax credit of $7,500, but this money had to be paid back at $500 per year.

The 2009 first time home buyer tax credit of $8,000 does not have to be paid back.

Check out: http://www.realtor.org/government_affairs/gapublic/american_recovery_reinvestment_act_home#taxcredit

for more info regarding this bill.

You could not pick a better time to but a home!!!

For your refinance and purchase needs look up www.thebriteway.com.

Should you Purchase a Home Now?

2009-03-12T06:53:00.000-07:00

Many of you out there are wondering whether now is a good time to buy or not? If you are thinking about buying a home and are not going to do so now, then you are probably thinking that home prices are going to keep going down so why not wait until they have bottomed out.

This stategy may be a good idea, but you could miss out on a great home now. There are excellent deals on homes all over the country right now and if you have the credit and the money to purchase a home today I would highly recommend it. There is no magic formula to be able to time the market perfectly and buy right at the bottom so buying near the bottom is about as good as you can hope for.

The four questions you need to ask yourself before buying a home:

1. Is my credit score a 620 or higher? You could get financing if you are below a 620, but it will be difficult and expensive.

2. Do I have enough money for a down payment, closing costs, furniture(if needed) and repairs(even if there are none needed at the time there will be)? You will need a minimum of 3.5% of the homes value for a down payment and between 2% and 5% for closing costs. You may be able to get the seller to pay for your closing costs - tomorrow's blog!

3. Am I going to live in this home for at least 2 years? If you do not live in the home for at least 2 years you will most likely lose money when you sell because of realtor fees and closing costs.

4. Does this house make sense for my lifesyle? Meaning - Is the house close enough to work, is it big enough, is it too big, am I willing to spend the time to keep it up...A house you own is much more work than an apartment or a rental home. When something breaks you fix it or you have to pay someone else to.

If you can answer yes, yes, yes and yes to these three questions then I would say start looking for your house.

There are a lot of choices out there so I would recommend getting a realtor. You will want some help sifting through the choices and a good realtor can be an invaluable asset in the home purchasing project.

Some helpful links with this article are:
http://www.realtor.org/research/research/ehsdata
http://finance.yahoo.com/how-to-guide/real-estate/12819

Check out www.thebriteway.com when you are ready to look into purchasing or refinancing your home.

Have a great day!

Cost of Doing FHA vs. Conforming

2009-03-11T06:56:00.000-07:00

Their are a couple of differences in cost between an FHA loan and a conforming loan that you need to know about. They both involve mortgage insurance. With an FHA loan you will pay an up front mortgage insurance premium of 1.75% of the loan and a monthly premium of .55%.

With a conforming loan you will not pay up front mortgage insurance and your monthly mortgage insurance will range from .34% up to 1.2% depending on your loan to value and your credit score.

So to explain: If you are doing a $200,000 loan at 97% with a credit score of 725 you would pay: ***assuming 6% interest rate

FHA:

Up front mortgage insurance = $200,000 * 1.75% = $3,500. This amount will not come out of your pocket, it will be added to the loan amount. So if your maximum loan amount is $200,000 you total loan with up front mortgage insurance will be $203,500.

Monthly Mortgage Insurance = .55% *$200,000 = $1,100/12 = $91.67. So you will pay $91.67 in monthly mortgage insurance. This amount will be added to your payment every month. This amount is required for 5 years after which it may be taken off if your loan to value drops below 78%.

Total payment = $1,311.76

Conforming:

Up front mortgage insurance = Nothing.

Monthly mortgage insurance = 1.1% *$200,000 = $2,200/12 = $183.33. So you will pay $183.33 in monthly mortgage insurance. This amount will be added to your payment every month and can be taken off whenever your loan reaches 78% or less. It is at the lenders discretion how long you are required to keep this.

Total payment = $1,383.43

So the FHA loan will give you a better payment, but will have a little higher loan amount. This was a very simple example and would have many other factors in the real world. You would most likely not qualify for a 97% loan on the conforming side and you would have to do an FHA, but this will give you a good idea of what the differences are on the cost side.

Check out http://www.hud.gov/offices/hsg/fhahistory.cfm for more detailed info regarding FHA loans.

Also check out http://www.thebriteway.com/ for your refinance and purchase needs.

Have a great day!

To do an FHA or Not to do an FHA

2009-03-10T07:06:00.000-07:00

Should you use an FHA loan for your next mortgage? This is an important question that has become quite prevalent over the past 12 - 18 months. Because lenders have become more strict with their guidelines the government backed FHA loans have become more popular.

FHA loans allow the customer to borrow a higher loan to value(loan amount/home value) than conventional/conforming loans. FHA will also accept much lower credit scores than conforming loans will allow.

FHA willl allow you to go up to 97.75% for a refinance and up to 96.5% for a purchase with a credit score of 620 or higher. Some companies will allow lower scores, but their are not many left. A conforming loan will allow 95% for a refinance and as high as 97% for a purchse - though it is rare. But the conforming loan will reduce these loan to values by 5% if you are in a declining market. Who is NOT in a declining market?? Also to be able to qualify for mortgage insurance on a conforming loan you must have a credit score over 680, and over 720 to go over 90% loan to value.

To sum up here - if you need a loan to value of over 90% and you have a credit score below 720 then you must go with an FHA loan. If you need a loan to value over 80% and you have a credit score of 680 or lower then you must go with an FHA loan. Before you decide on the FHA loan make sure your loan amunt meets FHA guidelines.

Visit: https://entp.hud.gov/idapp/html/hicostlook.cfm to verify that you are within your county's loan limits.

There are some differences with costs on these two types of loans and I will be going over those tomorrow.

Visit www.thebriteway.com for your mortgage questions and needs.

Have a good day!

Loan Modification

2009-03-09T09:00:00.000-07:00

Is it smart to pay for a loan modification company to help you with your mortgage?

A loan modification company is a company that works directly with mortgage companies to negotiate lower payments and rates for their customers. The normal fee for their services is one mortgage payment. This fee may seem like a lot of money to pay for someone to negotiate with your mortgage company, but it may be worth it.

Can you negotiate with your mortgage company on your own and receive a loan modification? Yes. You have the ability to call your mortgage company and try to negotiate a lower interest rate and payment on your own. It may take you months of calling, waiting on hold, following up and being shuffled around from department to department before you can get anything accomplished.

These loan modification companies have the expertise to negotiate better deal than you can get for yourself and they have the knowledge of who to contact within each mortgage company to make the process smoother. They also have all of the guidelines for each mortgage company to know if you will qualify up front with a simple application you can complete over the phone with them.

So this process may cost you some money up front - if you qualify - but in the end it will save you a lot of time and aggrevation. In the end you may be able to save hundreds of dollars on your monthly mortgage payment. In the end you are paying for a service, but a service that put you in a better financial situation in the end.

Check out these sites:
http://www.loan-deals.com/
http://loanworkout.org/
http://uslossmitigation.com/

These sites can help answer yiour questions.

PLease write back on this blog and I can help you answer questions as well.

Mortgage Bailout

2009-03-06T08:26:00.000-08:00

Will the new Emegency Economic Stabilization Act work? The governemnt has just passed a new act to help American homeowners save their homes and lower their monthly mortgage payments. Their are two sides to this new legislation. Loan Modifications and mortgage refinances.

Loan Modifications:

Here is how the plan works:

Mortgage companies will be reviewing requests from current customers who need to lower their monthly mortgage payments. The goal is to reduce your front end debt ratio to 31%. Your front end ratio is your first mortgage payment(principle, interest, taxes, insurances, mortgage insurance) divided by your gross monthly income.

If your current front end raio is higher than 31% then the mortgage compnay will try a number of things to to reduce your monthly payment until it reached 31%.

1. They will reduce your interset rate to a low as 2%...if your front end ratio is still to high then
2. They will increase the term of your loan up to 40 years...if your front end ration is still to high then
3. They will defer some of the principle on your loan to the end of your mortgage term. This will create a balloon payment at the end of your mortgage term...if the front end ratio is still too high then
4. They can do priciple reduction on your loan. This means they will waive some of the balance on your loan. This principle reduction will not have to be repaid.

Check out these steps in further detail at http://www.treas.gov/initiatives/eesa/. Click on the bullets points under Making Home Affordable.

The other side of this legislation is mortgage refinances:

The people who qualify for this will be:

1. Loans closed before January 1st, 2009
2. Owner occupied properties
3. Loan to value of 105% or lower - the big change is here. Most people only qualify for a better rate if they are at 80% of lower right now.

Both of these programs offer incentives to the mortgage compnies to participate in the program as well as incentived to the homeowners who keep their payments current.

You can read some other articles regarding this reform at http://money.cnn.com/2009/03/04/news/economy/guidelines/index.htm

This program was just passed on March 4th so it may take some time to get up and running with the mortgage companies. Definitely something you want to look into.

Thoughts or additions?

Check out http://www.thebriteway.com/. This compnay can help you navigate your way through refinancing or purchasing a home.