Entries posted under "Buying a Home"

Without the incentive of a several thousand dollar tax credit, would-be buyers may be wondering if they missed their window to purchase a home. Won't they have to pay much more for a property now? Not necessarily.

What Was The First Time Home Buyer Tax Credit?

In an effort to stimulate a severely weakened housing market, the US Government enacted a temporary tax credit available to first time homebuyers.  This was later expanded to offer the benefit to repeat homebuyers who had owned their home for five or more years. Eligibility was based on the purchase price of the property (which was required to be used as a primary residence), the income of the borrowers, and previous home ownership. The tax credit was equal to 10% of the purchase price of the property, up to $8000 for first time homebuyers, and up to $6500 for repeat buyers. The tax credit expired on April 30, 2010, meaning that to qualify for the program buyers must have had a home under contract by that date, and have closed on the home by June 30, 2010. An exception was put in place for members of the military who were on extended duty outside of the US for at least 90 days between January 1, 2009 and May 2, 2010. These individuals may qualify for a one year extension. (Consult with a tax advisor and real estate professional for details on this exemption.)

What should prospective buyers do now that the homebuyer tax credit has expired?

Many house hunters felt the pressure of the April 30th deadline and once it passed questioned whether their chance to get a great deal on a new home had also passed. Before getting discouraged, it is important to consider all of the other factors that can work in a buyer's favor. Some of these include:

Depreciated Real Estate Markets - If home prices have fallen in the area where you are thinking of buying, you might be able to save a great deal of money by buying while prices are low. No one can say for sure when real estate values will be at the low point, or when they will start to rise again, but your real estate professional can help you make a decision about when to buy that you feel comfortable with.

Properties In Foreclosure or Short Sale - Unfortunately, sometimes homeowners find themselves in a position where they no longer can afford their monthly mortgage payments. This results in foreclosures and bank owned properties on the market, as well as short sales, where the bank agrees to take less than the amount owed as repayment for a mortgage loan, and the buyers are able to sell the home at a discount and avoid foreclosure. These homes are generally priced well below market value and can be a great deal for a new buyer.

Seller Paid Closing Costs - In an competitive buyers' market where there are many more homes for sale than people looking to purchase real estate, some sellers pull out all the stops to set their property apart. One way they can do this is to offer to pay a portion of the closing costs, which can amount to several thousand dollars in savings for the buyer. Many mortgage programs allow seller paid closing costs up to a certain percentage of the loan amount. The expiration of the homebuyer tax credit further strengthens your negotiating position as there are likely even fewer buyers on the market now. Check with a mortgage lender for specific requirements.

100% Mortgage Financing Options - Save on your upfront costs by taking out a no money down mortgage to buy your home. There are still 100% loan options available for those who qualify including VA loans and USDA rural housing loans. FHA mortgages require as little as 3.5% down.

Low Mortgage Rates - Don't overlook the great deal you get when you finance your home with a mortgage at a low interest rate. If mortgage rates were to increase 3% over where they are currently, it would result in a homeowner paying more than $140,000 in additional interest over a 30-year loan term on a $200,000 loan amount. That is enough to purchase another home in many areas.

There are still incredible real estate bargains to be had in much of the country. If you dream of buying a new home, don't give up simply based on the expiration of the homebuyer tax credit. Best of luck in your search!

About the Author
Anna Platz has worked in the mortgage industry for 8 years, most recently for a large national mortgage lender.  She is currently a marketing consultant at Wilmington SEO and Marketing, Inc., a national search engine optimization and marketing firm based in Wilmington, North Carolina. WSEO specializes in real estate and mortgage seo services providing excellent seo results for large and small companies.

INFOTRAK provides local mortgage guides to help you to compare home loans and rates in your local market.
 
Please go to www.infotrak.com/search-local-rates.html for the latest rates in your area.

You can also calculate your monthly payments with our user-friendly mortgage calculators.  Go to www.infotrak.com/mortgage-calculators.html

With mortgage rates still close to their historic lows and the selling price of homes down as much as 50% in some areas, now is a great time to consider moving to a larger, newer or nicer home.  But how do you know if you will be able to afford the mortgage payments? 

First, you’ll need to calculate what the monthly payments will be.  Your mortgage payment will likely include the principal of your loan, interest on the loan, property taxes and homeowner’s insurance (the total of which is often referred to as “PITI” – Principtal + Interest + Taxes + Insurance).   

You will also need to know what the prevailing mortgage loan interest rates are in your area.  Go to a site such as www.infotrak.com/search-local-rates.html for current fixed and adjustable mortgage rates.

You can then use a mortgage payment calculator, such as the one at http://www.infotrak.com/index.cfm?event=Calculator&url=http://partners.leadfusion.com/tools/inds/home02/tool.fcs?toolpage=initial, to estimate your monthly payments. 

Generally, lenders look at various ratios to see if you can afford a home.  The housing ratio is the total monthly PITI payment divided by your monthly gross income.  Your total monthly payment should be no more than roughly 33% of your monthly gross income. 

Another ratio that lenders may look at is your debt ratio. Your debt ratio is the total of your PITI payment, plus the monthly payment of any other outstanding loans that you have (such as car payments, credit card payments, student loans, child support/alimony payments, etc.) divided by your monthly gross income.  As a rule of thumb, you don’t want your debt ratio to be more than 41%. 

Another way to estimate the size of the home loan that you can afford would be to use a calculator such as the one at http://www.infotrak.com/index.cfm?event=Calculator&url=http://partners.leadfusion.com/tools/inds/home01/tool.fcs?toolpage=initial. 

Calculating what you can afford before you start shopping for a new home is a wise decision.  No one wants to fall in love with a home only to find out that they can’t afford it.  So make the process as stress-free as possible and know what you can afford going in. 

By Deborah Higgins, INFOTRAK National Data Services

If you are planning to get a mortgage loan anytime soon, you should make sure that you understand new rules imposed this year on mortgage lenders and other settlement service providers that are designed to protect you. 

Effective January 1, 2010, changes were made to the Real Estate Settlement Procedures Act (RESPA) to further assist consumers to compare offers from different mortgage lenders. These changes require mortgage lenders to provide a new standardized three-page Good Faith Estimate (GFE) providing an estimate of settlement charges based on the loan’s term, initial interest rate and monthly amount owed. 

Changes to the RESPA law regulates which charges can and cannot be modified at the time of the loan settlement.  Origination charges cannot deviate from the initial estimate. 

Some services, such as government recording, can increase up to 10% at closing.  Third party services from providers selected by the borrower (such as homeowner’s insurance) are not regulated.

Any violations of the RESPA law should be reported to the HUD Office of RESPA.

Here’s some background on settlement charges.

RESPA was first passed in 1974.  Its purpose is to help consumers to better understand their choices for loan settlement services and fees and to eliminate kickbacks and referral fees that would unnecessarily increase these costs.  In order to achieve these purposes, RESPA requires that a mortgage lender give borrowers certain information at specified times during the borrowing process.  This information includes: 

1)     A Good Faith Estimate of settlement costs.  This document lists the fees that the borrower will likely pay at the closing.  Also, if a lender requires that the borrower use a particular settlement provider, this requirement must be disclosed in the GFE. 

2)     A Mortgage Servicing Disclosure Statement.  This statement discloses whether or not the mortgage lender intends to service the loan or transfer it to another lender.