Rent vs. Own
Did you know that the concentration of renters in a neighborhood can impact property values? Generally, a low concentration of renters and a higher percentage of owners is best for rising values.
Mortgage
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VA Loan – Risk Assessment
In case some of you were not able to make it to the online web discussion – here is one of the biggest items we targeted on. VA loan and Risk Assessments:
Last Week’s Questions & Answers: 12/20/2011
Q: Did you know that there have been updates in DU to the Credit Risk Assessment for VA Loan casefiles?
A: During the weekend of Dec. 17, 2011, there were updates to DU for VA loan casefiles and evaluating
credit risk assessment. You may see loans impacted as follows:
- Overall improved credit characteristics for loan
casefiles may receive an Approve recommendation- A change in the underwriting recommendation for some
loan casefiles. For example, some loan casefiles that previously received an Approve recommendation may now receive a Refer recommendation, particularly ones with back-end debt-to-income ratios over 45%.- Reduced Approve recommendation rates. The overall
reduction may vary by customer depending on the credit characteristics of the VA loan casefiles submitted to DU.VA Loan casefiles created on or after the weekend of Dec 17, will be evaluated using the new credit risk assessment. In addition, VA loan casefiles created prior to Dec 17, and resubmitted to DU for any reason (i.e. change in appraised value) on or after the weekend of Dec 17, will be evaluated using the new credit risk assessment if there are any changes to any key credit characteristics of the loan casefile (e.g. LTV).
When we run to find out if a home buyer for a VA Loan will qualify we run it through an automated underwriting system. This will give us specific criteria and tolerances for our loan approvals.
Should you have any questions please contact me.
FHA Mortgage – Gift Funds – Bothell, Mill Creek, Lynnwood WA
Gift funds still allowed for Home Buyers seeking to become a home owner, with home prices that are compared to 2000-2003 prices, and with today’s low interest rates, often times you can get into a home lower than what your rent payments are.
Gift funds can come from family members and all that is needed is 3.5% for your down payment, so if you were to purchase a home for as little as 150,000.00 then you will only need: 5,250.00 as a gift down payment.
There are other ways that you can accomplish this down payment if you choose to not receive a gift from your family, you can take a loan on your 401k up to 10,000.00 when you are a First Time Home Buyer.
When you are ready to go out and begin the home search make sure you have your finances, credit, and employment all worked out, by this I mean get pre-approved before you take the step to go out and look for your home. You must know what your payment and debt to income ratios will be, as well as what you can truly afford.
Buying a home can be easy when you have the right steps done in the right order, believe me, make sure you know what you can truly afford before you go out looking for a home.
Who can qualify for a FHA Home loan, just about anyone, you do not have to be a first time home buyer! If you have owned a home before that is fine, you can have one FHA loan at a time, is the main guideline, however some exceptions have been seen before.
So to quickly summarize you can still purchase a home Zero Down* if you do receive a Gift! Should you seek more information and want to know what you qualify for go to the top right side of the website, click “Apply Now” and put David Haley as the loan officer and I will be glad to help you get started to owning your new home!
FHA – Increase in Mortgage Insurance – No April Fools Joke!
April 1st of 2012 will not be a good April Fool’s joke – once again FHA has been looking at their overall solvency concerns and has deteremined they need to pass along the added costs to the new borrowers.
The UFMIP will be increased from 1 percent to 1.75 percent of the base loan amount. This increase applies regardless of the amortization term or LTV ratio. FHA will continue to permit financing of this charge into the mortgage. This change is effective for case numbers assigned on or after April 1, 2012. Example: Loan Amount = 100,000.00 new Upfront Mortgage Insurance Premium is 1.75% = 1,750.00 being financed into new loan.
The Temporary Payroll Tax Cut Continuation Act of 2011 requires FHA to increase the annual MIP it collects by 0.10 percent. This change is effective for case numbers assigned on or after April 1, 2012. FHA is also exercising its statutory authority to add an additional 0.25 percent to mortgages exceeding $625,500. This change is effective for case numbers assigned on or after June 1, 2012. UPDATE: Here is the HUD LINK
So for quick examples and here is the easiest equation. Take your loan amount 100,000.00 time new Monthly Mortgage Insurance Cost of 1.25% = 1,250.00 then divide this number by 12 to give you the Monthly Mtg Ins Premium Cost = 104.17 per month vs. the old MI factor of 1.15% = 1,150.00 / 12 = 95.83 per month.
Now these are all numbers based on if you are only putting the 3.5% minimum investment down for this type of loan.
Taken together, these premium changes will enable FHA to increase revenues at a time that is critical to the ongoing stability of its Mutual Mortgage Insurance (MMI) Fund, contributing more than $1 billion to the Fund, based on current volume projections through Fiscal Year 2013.
Should you have any questions please give contact me.
MI basics: tax-deductible MI
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MI Tax Deductibility passed as part of the American Taxpayer Relief Act of 2012.
Borrower-paid MI premiums are tax-deductible through the year 2013. Borrowers should consult their tax advisors regarding MI tax deductibility. See disclaimer note below.
FAQs
Does the bill apply to mortgage insurance?
Yes, borrower-paid MI provided by qualifies for the deduction. This includes the Monthly, Single and Split Premium plans. There are varied opinions on the deductibility of lender-paid MI as the IRS has not yet clarified the deductibility. It is recommended that borrowers consult their tax advisors regarding the amount that is deductible.
What types of mortgage loans qualify for the MI tax deduction?
Loans used for “acquisition indebtedness” — that is, money borrowed to buy, build or substantially improve a residence — are eligible, as long as the debt is secured by the same residence.
This includes purchase loans and refinance loans, up to the original acquisition indebtedness. (Money borrowed against the equity in a home or when refinancing a home for any reason other than to buy, build or substantially improve a residence is called “equity indebtedness.”)
When refinancing a piggyback loan originally used to acquire a property, is the original loan amount considered the sum of the two mortgages or only the primary mortgage amount without the second lien included?
The original acquisition indebtedness is considered to be the sum of the two mortgages.
Is deductibility applicable for all loan types?
There is no differentiation among loan types.
What types of properties are eligible for tax deductibility?
The deduction applies to “qualified residences,” as defined in the Internal Revenue Code. Generally, that includes the borrower’s primary residence and a non-rental second home. As with mortgage interest, borrowers can deduct mortgage insurance premiums paid on both their primary residence and one other qualified residence each year. Investor loans are not eligible.
Who qualifies for this itemized deduction?
Households with adjusted gross incomes of $100,000 or less will be able to deduct 100% of their MI premiums. The deduction is reduced by 10% for each additional $1,000 of adjusted gross household income, phasing out after $109,000. (Details below.)
Married individuals filing separate returns who have adjusted gross incomes of $50,000 or less will be able to deduct 50% of their MI premiums. The deduction is reduced by 5% for each additional $500 of adjusted gross income, phasing out after $54,500. (Details below.)
The deduction is not restricted to first-time homebuyers.
| Adjusted Gross Income Limits | |||
| Single OR Married, Filing Jointly |
Allowable MI Premium Deduction |
Married, Filing Separately |
Allowable MI Premium Deduction |
|
$0 – $100,000 |
100% |
$0 – $50,000 |
50% |
|
$100,000.01 – $101,000 |
90% |
$50,000.01 – $50,500 |
45% |
|
$101,000.01 – $102,000 |
80% |
$50,500.01 – $51,000 |
40% |
|
$102,000.01 – $103,000 |
70% |
$51,000.01 – $51,500 |
35% |
|
$103,000.01 – $104,000 |
60% |
$51,500.01 – $52,000 |
30% |
|
$104,000.01 – $105,000 |
50% |
$52,000.01 – $52,500 |
25% |
|
$105,000.01 – $106,000 |
40% |
$52,500.01 – $53,000 |
20% |
|
$106,000.01 – $107,000 |
30% |
$53,000.01 – $53,500 |
15% |
|
$107,000.01 – $108,000 |
20% |
$53,500.01 – $54,000 |
10% |
|
$108,000.01 – $109,000 |
10% |
$54,000.01 – $54,500 |
5% |
Is adjusted gross income calculated before or after deductions?
Adjusted gross income is calculated before itemized deductions, including the MI deduction.
How does the MI tax deduction work?
Borrowers who itemize deductions are able to reduce their overall taxable income in the same manner as mortgage interest.
Are borrower-paid, single premiums, which are paid up front in a lump sum, eligible for the deduction?
Yes, borrower-paid, single-premiums are eligible for the deduction under the new law. Borrowers should consult with a professional tax advisor to determine the amount of the MI premium eligible for the tax deduction.
If the single premium is financed, are both the mortgage insurance premium and the interest tax deductible?
We believe that if the loan is for acquisition indebtedness, both the interest attributable to the entire loan balance as well as the allocated portion of the mortgage insurance premium is tax deductible.
How would a premium refund issued during the tax year affect eligibility and the amount of the MI deduction?
Borrowers are only permitted to deduct that portion of their MI premium attributable to a tax year. If the MI is dropped, and a refund is paid, the amount refunded would reduce the amount of MI premium that could be attributable to that tax year and be deducted.
Note: David Haley and / or www.DavidHaleyMortgage.com cannot provide tax advice. Taxpayers should consult their tax advisor to ascertain if they are eligible to take this deduction. The answers to these questions are based on an interpretation of the language of the statute, the Joint Committee on Taxation’s Technical Explanation of the statutory language, and present law. The Internal Revenue Service (“IRS”) will issue guidance interpreting the new provision, and could reach different conclusions for some of the issues raised
Mortgage Insurance, Not a Tax Deduction?
Going forward Mortgage Insurance will no longer be able to be a line item deduction after 12/31/2011. As a Mortgage Insurance Company has reminded us: United Guaranty MI company. “MI tax deductibility is scheduled to lapse at midnight, December 31, 2011, now’s the time to expedite them to retain this benefit for your borrowers who qualify! MI tax deductibility will also lapse for FHA and VA loans, which were extended under the same law as private MI.”
As we found out last week, g-fees for new agency loans will be going up to pay for the two-month payroll tax cut.Under the “unintended consequences” banner analysts were quick to point out that, given the increase is scheduled for ten years, Fannie Mae and Freddie Mac are not going away any time soon unless the government comes up with the money elsewhere. F&F will not absorb this increase, nor will lenders; it will, of course, be passed on to borrowers. (The bill also will raise the annual insurance premium borrowers pay on FHA loans by one-tenth of a percent.) The increased g-fee, which makes it difficult for Congress to work on efforts to shut down Fannie and Freddie, based on current rates and a $200,000 loan, will cost the agency borrower about $11 per month. “These institutions, which have been so costly to Americans and are so necessary to the housing recovery, should not be the piggy bank for future arbitrary tax policy,” Dave Stevens (MBA) said. Due to their government ownership, investors still view their (and FHA/VA) MBS’s as safer investments than those offered by private firms. The law allows FHFA to phase in the fee over two years.
So, if you were lucky enough to close your home loan before 12/30/2011 Congratulations!
*As always seek a qualified CPA who can further assist you.* This is not to be construed as tax advice, informational purposes only!
We are hoping that the House of Representatives will continue to extend this tax credit to home buyers, as this is a benefit when you purchase a home and have less than 20% down payment. Make sure you contact your local Representative, Congressman, Senator, or local delgate. We need to extend this tax credit / deduction! As this will only help our real estate markets
Should you have any questions please contact me.
Home Building Expected to Rise in 2015
With 2015 well underway, the National Association of Home Builders is looking forward at the coming year. Strong employment, low interest rates, and the greater availability of mortgage loans are making for a very good outlook for the real estate world, as pent-up demand continues to be released across the country.
Though the Millennial generation continues to be hampered by poor wage growth and crippling student debt, this generation is starting to reach the low 30’s. More and more of this key demographic are getting ready to get comfortable and invest in real estate, which should fuel the housing market in the coming years.
With this in mind, NAHB is expecting a rise in homebuilding for 2015. Their forecast shows single-family home production rising 26% to 804,000 units. In terms of multifamily projects, the anticipation is 358,000 building starts, representing a 2% increase over 2014. Sales of new homes for single families is expected to reach 564,000, a 29.3% gain over last year, while residential remodeling is expected to rise by 3%.
Mortgage Rates Improve, Awaiting Fed Policy Announcement
Mortgage rates have been following their recent trend of minor changes as of Tuesday, with different lenders moving in different directions but remaining more or less unchanged. However, more lenders were seeing improvements on Tuesday.
This improvement can be attributed to the economic data released on Tuesday morning. The Durable Goods report was weaker than anticipated, and weak economic data has a tendency to be beneficial to bond markets and detrimental to stocks. Meanwhile, with Wednesday bringing the Fed’s policy announcement, we can expect further unified developments in the mortgage loan market. The Fed always has a strong impact on trading levels, and there is a lot of potential for great volatility in the coming days.
February Off to a Volatile Start
As February kicked off, mortgage rates moved upwards more quickly than they have so far in 2015. However, rates are remaining among the best seen in the past twenty-one months. The upfront costs associated with them may be higher.
This volatile activity can be attributed to the broader global financial market. A big part of this comes in the form of tension in the Greek market. The ECB is cutting Greece off, effective 2/11, due to the uncertainty surrounding the country’s austerity program. It now falls upon Greece to decide whether to exit the Eurozone or make serious changes. Depending on what Greek officials decide upon, we could see some dramatic moves in terms of bonds, stocks, and mortgage rates in the coming weeks.
February of 2015 is a Bad Month for Mortgage Rates
Following the recent jobs report, and with the turmoil in Europe showing no signs of subsiding, February has quickly turned into a bad month for mortgage rates. As of the 17th, rates have risen at the fastest day-over-day pace since November 8th of 2013, making this the worst month for mortgage rates since May of 2013.
It’s hard to say what we might look forward to as the month comes to a close. Rates could just as easily turn around as they could get a lot worse. Much of this rides on whether or not Europe turns a corner. Many people anticipate that Europe will continue to slide until the central bank engages in a US-style quantitative easing, which some are expecting to happen sooner rather than later. Unfortunately, every increase in rates here brings on the risk of a long-term rise, so floating is not generally a good option for people without long term time horizons.
