Deep within man dwell those slumbering powers; powers that would astonish him, that he never dreamed of possessing; forces that would revolutionize his life if aroused and put into action.
~ Orison Swett Marden
Thursday, February 21, 2008
Food For Thought...
Deep within man dwell those slumbering powers; powers that would astonish him, that he never dreamed of possessing; forces that would revolutionize his life if aroused and put into action.
~ Orison Swett Marden
Wednesday, February 20, 2008
A 100% Financing Message to First Time Home Buyers
Seller Concessions, FHA & CalHFA:
A 100% Financing Message to First Time Home Buyers
A couple of years ago you could get declined for a discover card but you could qualify for a home loan. Think for a moment about the logic because I am not exaggerating. There were hundreds of thousands of people that got into loans that they were not qualified to handle, thus developing the onslaught of foreclosures and Short Sales that have come to pass. The rules of the game have changed and the difference now is that people will have to qualify and in some cases over qualify for financing. Lenders and consumers both have taken massive losses and new policy and laws have been set into motion to make sure that we never end up in a similar situation
There are numerous reasons to learn more about 100% financing besides that fact that about 90% of it completely disappeared. For instance, you could be a first time home buyer or know someone who is looking, that could benefit from this knowledge. You could be a realtor who needs to be kept up to date with the few remaining 100% programs so you can let your clientele know about them or, you could be a mortgage lender who wants to learn more about available products so you can serve your clients in a more effective manner.
What ever your situation, I want to share some extremely valuable information that could keep you and the people you know, from wasting a ton of time and loosing a large amount of money.
100% financing in California is available through government sponsored programs. The two most common programs are called CalHFA and FHA. This article will dominantly focus on the CalHFA and FHA because they apply to the largest demographic. There are also other programs for educators and employees who work for a school district and receive salaries and if you are a U.S. Vet then the VA is a great option as well.
(For information about VA or PERS please go to the Mortgage News Network at http://mortgagenewsnetwork.blogspot.com/ )
For First Time Home Buyers, CalHFA offers down payment assistance programs which provide a helping hand of 3% of the sales price. This has to be paid back when you sell or refinance your home and is extremely beneficial because if there is a lack of funds to close, the 3% helps to absorb the closing costs and you don’t have to pay those absorbed out of pocket expenses. There are different down payment assistance programs and the parameters differ upon which of them you qualify for.
Seller concessions are also important because they will absorb other closing costs as well. Seller concessions are common (especially in a buyers market) and CalHFA allows seller concessions designed as follows:
- 3% of you are borrowing 90% of the property value or more.
- 6% if you are borrowing 90% of the property value or less
Add the Seller Concession to the Down Payment Assistance and you are looking at some major help to get into your home.
FHA allows 6% Seller Concession and there are similar down payment assistance programs available (similar to that of CalHFA).
Neither CalHFA nor FHA loans are subject to the California declining market decrease of 5% because CalHFA is its own entity (separate from mainstream housing lending) and FHA loans are federally insured.
I highly suggest that if you are a First Time Home Buyer then you look at these opportunities and get a professional to pre-approve you, NOT pre-qualify you. The difference is a pre-qualification is a verbal go ahead and means nothing to a lender. A pre-Approval is a green light to go and get a house because under the approved information that you have submitted, you will be able to proceed into negotiations. A pre-approval is also a green light for an appraiser, a realtor, as well as buyers and sellers.
Experienced real estate agents who know that they are doing will have you get
pre-approved before they take you out to look at homes. This gives you a clear picture of how much money you can spend and it gives your realtor a chance to do some research on the available inventory of homes so they can show you exactly what fits your needs.
For future information, there are many discussion boards, blogs, news sites, magazines and other sources of information. My intent is to educate you so that you know that there are still opportunities out there and they are available to those who are willing to qualify for them.
For future and archived articles go to: Mortgage News Network http://mortgagenewsnetwork.blogspot.com/
~Joe Littell
A 100% Financing Message to First Time Home Buyers
A couple of years ago you could get declined for a discover card but you could qualify for a home loan. Think for a moment about the logic because I am not exaggerating. There were hundreds of thousands of people that got into loans that they were not qualified to handle, thus developing the onslaught of foreclosures and Short Sales that have come to pass. The rules of the game have changed and the difference now is that people will have to qualify and in some cases over qualify for financing. Lenders and consumers both have taken massive losses and new policy and laws have been set into motion to make sure that we never end up in a similar situation
There are numerous reasons to learn more about 100% financing besides that fact that about 90% of it completely disappeared. For instance, you could be a first time home buyer or know someone who is looking, that could benefit from this knowledge. You could be a realtor who needs to be kept up to date with the few remaining 100% programs so you can let your clientele know about them or, you could be a mortgage lender who wants to learn more about available products so you can serve your clients in a more effective manner.
What ever your situation, I want to share some extremely valuable information that could keep you and the people you know, from wasting a ton of time and loosing a large amount of money.
100% financing in California is available through government sponsored programs. The two most common programs are called CalHFA and FHA. This article will dominantly focus on the CalHFA and FHA because they apply to the largest demographic. There are also other programs for educators and employees who work for a school district and receive salaries and if you are a U.S. Vet then the VA is a great option as well.
(For information about VA or PERS please go to the Mortgage News Network at http://mortgagenewsnetwork.blogspot.com/ )
For First Time Home Buyers, CalHFA offers down payment assistance programs which provide a helping hand of 3% of the sales price. This has to be paid back when you sell or refinance your home and is extremely beneficial because if there is a lack of funds to close, the 3% helps to absorb the closing costs and you don’t have to pay those absorbed out of pocket expenses. There are different down payment assistance programs and the parameters differ upon which of them you qualify for.
Seller concessions are also important because they will absorb other closing costs as well. Seller concessions are common (especially in a buyers market) and CalHFA allows seller concessions designed as follows:
- 3% of you are borrowing 90% of the property value or more.
- 6% if you are borrowing 90% of the property value or less
Add the Seller Concession to the Down Payment Assistance and you are looking at some major help to get into your home.
FHA allows 6% Seller Concession and there are similar down payment assistance programs available (similar to that of CalHFA).
Neither CalHFA nor FHA loans are subject to the California declining market decrease of 5% because CalHFA is its own entity (separate from mainstream housing lending) and FHA loans are federally insured.
I highly suggest that if you are a First Time Home Buyer then you look at these opportunities and get a professional to pre-approve you, NOT pre-qualify you. The difference is a pre-qualification is a verbal go ahead and means nothing to a lender. A pre-Approval is a green light to go and get a house because under the approved information that you have submitted, you will be able to proceed into negotiations. A pre-approval is also a green light for an appraiser, a realtor, as well as buyers and sellers.
Experienced real estate agents who know that they are doing will have you get
pre-approved before they take you out to look at homes. This gives you a clear picture of how much money you can spend and it gives your realtor a chance to do some research on the available inventory of homes so they can show you exactly what fits your needs.
For future information, there are many discussion boards, blogs, news sites, magazines and other sources of information. My intent is to educate you so that you know that there are still opportunities out there and they are available to those who are willing to qualify for them.
For future and archived articles go to: Mortgage News Network http://mortgagenewsnetwork.blogspot.com/
~Joe Littell
Congress Extends MI Tax Deductibility Law!!!
Congress extends MI tax deductibility law!
Congress has just extended the MI tax deductibility law. Once the President signs the bill, borrower-paid MI premiums will be tax-deductible through the year 2010. Because it’s still new, the law has raised many questions.
Below are answers to commonly asked questions regarding the new law. We will continue to post updated information as regulators sort out the details. Borrowers should consult their tax advisors regarding MI tax deductibility. See disclaimer note below.
FAQs
Does the bill apply to MGIC mortgage insurance?
Yes, borrower-paid MI provided by MGIC qualifies for the deduction. This includes our Monthly, One-Time MI 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 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 up to one other residence selected by the borrower for purposes of the deduction for qualified residence interest. 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.
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 are 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: MGIC 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.
Congress has just extended the MI tax deductibility law. Once the President signs the bill, borrower-paid MI premiums will be tax-deductible through the year 2010. Because it’s still new, the law has raised many questions.
Below are answers to commonly asked questions regarding the new law. We will continue to post updated information as regulators sort out the details. Borrowers should consult their tax advisors regarding MI tax deductibility. See disclaimer note below.
FAQs
Does the bill apply to MGIC mortgage insurance?
Yes, borrower-paid MI provided by MGIC qualifies for the deduction. This includes our Monthly, One-Time MI 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 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 up to one other residence selected by the borrower for purposes of the deduction for qualified residence interest. 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.
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 are 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: MGIC 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.
Tuesday, February 19, 2008
(Stimulus Bill, Mtg Ins, and FHA) Market Snapshot and Key Update
Good morning,
The stimulus bill has passed but lenders don’t have the changes in place to offer the higher loan amounts to agency approved customers. Apparently HUD has 30 days to come up with the posted numbers for our area after changing their systems, documentation, etc. Then the lenders will update theirs. This process could take a little longer than we all thought. 30 days? 60 days? The jumbo loans, or newly conforming loans or whatever you want to call them are going to be submitted in separate pools and we are not sure if the pricing will be worse for these types of loans. For now we have to wait and see and know that good news is coming.
NOTE* If you didn’t see the “Ignore the Headlines” article in the February 25th issue of Time Magazine, you may want to take a look. Famed money manager Peter Lynch explains that the inevitable rise in interest rates may extinguish a borrower’s advantage to get into more house, for a lower rate. It might be a good article to have on hand for indecisive borrowers. A half point worsening to rate on a $220k home could mean $20k+ less that one would qualify for with the same payment. It’s a little more complicated if one is selling their home but if you are buying or refinancing there may be no better time.
As far as Mortgage insurance goes; the word on the streets is that MGIC is going to update some of their guidelines on March 3rd. In a recent Washington Post article from February 16th, Kenneth Harney he mentions changes that will include: 680 min ficos for homebuyers with less that 5% down (same applies to less than 10% down in declining markets) – no more cash out refis on investment properties – reduced doc programs will require a 660 fico and have to show 50% of their income coming from self-employment sources. This all comes after MGIC estimated they would lose over a billion in the 4th quarter. Keep in mind that FHA products will come into play a lot more now that the MI companies are struggling with lower ficos and higher LTV’s.
In other words there is more tightening coming in for riskier loans. Consumers have to qualify under much more stringent processes due to the avalanche of foreclosures and delinquent loans. Sub Prime is still existent but the rates and payments are inflated and the terms in general are short. FHA is the new Alt-A and there are a few ways to structure these loans. 100% financing is still available at beautiful rates but that is through CalHFA and you must fit the parameters. Pretty much all financing is subject to risk based pricing.
The great news is that money is cheap, there is a ton of inventory and the loan limits for GSE (Fannie and Freddie) loans are increasing… it just remains to be seen how much.
The stimulus bill has passed but lenders don’t have the changes in place to offer the higher loan amounts to agency approved customers. Apparently HUD has 30 days to come up with the posted numbers for our area after changing their systems, documentation, etc. Then the lenders will update theirs. This process could take a little longer than we all thought. 30 days? 60 days? The jumbo loans, or newly conforming loans or whatever you want to call them are going to be submitted in separate pools and we are not sure if the pricing will be worse for these types of loans. For now we have to wait and see and know that good news is coming.
NOTE* If you didn’t see the “Ignore the Headlines” article in the February 25th issue of Time Magazine, you may want to take a look. Famed money manager Peter Lynch explains that the inevitable rise in interest rates may extinguish a borrower’s advantage to get into more house, for a lower rate. It might be a good article to have on hand for indecisive borrowers. A half point worsening to rate on a $220k home could mean $20k+ less that one would qualify for with the same payment. It’s a little more complicated if one is selling their home but if you are buying or refinancing there may be no better time.
As far as Mortgage insurance goes; the word on the streets is that MGIC is going to update some of their guidelines on March 3rd. In a recent Washington Post article from February 16th, Kenneth Harney he mentions changes that will include: 680 min ficos for homebuyers with less that 5% down (same applies to less than 10% down in declining markets) – no more cash out refis on investment properties – reduced doc programs will require a 660 fico and have to show 50% of their income coming from self-employment sources. This all comes after MGIC estimated they would lose over a billion in the 4th quarter. Keep in mind that FHA products will come into play a lot more now that the MI companies are struggling with lower ficos and higher LTV’s.
In other words there is more tightening coming in for riskier loans. Consumers have to qualify under much more stringent processes due to the avalanche of foreclosures and delinquent loans. Sub Prime is still existent but the rates and payments are inflated and the terms in general are short. FHA is the new Alt-A and there are a few ways to structure these loans. 100% financing is still available at beautiful rates but that is through CalHFA and you must fit the parameters. Pretty much all financing is subject to risk based pricing.
The great news is that money is cheap, there is a ton of inventory and the loan limits for GSE (Fannie and Freddie) loans are increasing… it just remains to be seen how much.
I’ll keep you posted as developments evolve.
Final Thought on taking action…
I will act now. I will act now. I will act now. Henceforth, I will repeat these words each hour, each day, everyday, until the words become as much a habit as my breathing, and the action which follows becomes as instinctive as the blinking of my eyelids. With these words I can condition my mind to perform every action necessary for my success. I will act now. I will repeat these words again and again and again. I will walk where failures fear to walk. I will work when failures seek rest. I will act now for now is all I have. Tomorrow is the day reserved for the labor of the lazy. I am not lazy. Tomorrow is the day when the failure will succeed. I am not a failure. I will act now. Success will not wait. If I delay, success will become wed to another and lost to me forever. This is the time. This is the place. I am the person.
~Og Mandino 2/19/08
Final Thought on taking action…
I will act now. I will act now. I will act now. Henceforth, I will repeat these words each hour, each day, everyday, until the words become as much a habit as my breathing, and the action which follows becomes as instinctive as the blinking of my eyelids. With these words I can condition my mind to perform every action necessary for my success. I will act now. I will repeat these words again and again and again. I will walk where failures fear to walk. I will work when failures seek rest. I will act now for now is all I have. Tomorrow is the day reserved for the labor of the lazy. I am not lazy. Tomorrow is the day when the failure will succeed. I am not a failure. I will act now. Success will not wait. If I delay, success will become wed to another and lost to me forever. This is the time. This is the place. I am the person.
~Og Mandino 2/19/08
Thursday, February 14, 2008
2/14/2008 Quick Question...
How much of the devastation caused by the “Housing Bubble and Unethical Lending" practices would have never reached these levels if there were open discussions and proactive education aimed at consumers and professionals for the sole purpose of their protection their well being?
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