Archive for the 'Money and Mortgages' Category
Housing Market to Improve in 2012
January 31st, 2012 categories: Buyers, Money and Mortgages
Housing Market to Improve in 2012 as Banks Loosen Credit Standards.
Capital Economics expects housing to improve this year, according to a report released last Tuesday. One of the reasons: loosening credit. The analytics firm notes the average credit score required to get a mortgage loan is 700. While this is higher thans scores required before the crisis, it is the same with requirements one year ago.
Additionally, a Fed Senior Loan Officer Survey found credit requirments in the 4th quarter were consistent witht he past 3 quarters. However, other market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability.
Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings.
Banks are also loosening loan-to-value ratios (LTV), which Capital Economics indicates “the clearest sign yet of an improvement in mortgage credit conditions.” In contrast to a low of 74% reached in mid-2010, banks are now lending at 82% LTV.
While conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements. In fact, Capital Economics points out that in November, 8% of contract cancellations were the result of a potential buyer not qualifying for a loan.
Additionally, Capital Economics says, “any improvement in credit conditions won’t be significant enough to generation actual house price gains.” and potential ramifications from the euro-zone pose a threat to future credit availability.
So if you or anyone you know is on the fence about buying a home, I urge you to get back in the game now, before loan standards tighten up again. Feel free to call or email me for a free consultation. If you like this and other articles, please like Kathy Villa Real Estate. We look forward to connecting with you!
Article Source: DSnews.com
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Having New Mortgage in 2012 Benefits Potential and Current Homeowners
January 26th, 2012 categories: Buyers, Money and Mortgages
There are some good reasons to get a new mortgage in 2012! Besides continued low mortgage rates expected throughout the new year, Bankrate.com lists the following reasons:
- Some potential homebuyers may be discouraged by recent reports of a damaged housing market. However, a lack of applications and activity does not mean buying a home is a bad idea, says the news report, as shrunken house prices and low mortgage rates will continue to provide buyers high affordability.
- Some benefits of owning a home include not having to pay rent to a landlord while making a personal investment. Homeowners also receive federal income tax deductions, which makes a difference over time.
- Current homeowners may decide to refinance to get a better rate, says the report. Homeowners may also benefit from locking in low rates by changing to a fixed interest rate versus an adjustable rate that is subject to change within the market. Be aware that homeowner’s equity and a decent credit score are required for refinancing.
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Six Must-Haves for Mortgage Approval
January 19th, 2012 categories: Buyers, Money and Mortgages
Interest rates are at historical lows! Low interest rates increase affordability, making it easier for buyers to qualify. Yet stories of buyers waiting months to get loan approval, and home purchase transactions not closing on time due to lender’s strict underwriting, are all too common.
Some buyers are turned down for illogical reasons. For example, if you have investments- even if they’re performing well, an underwriter might deny the mortgage because your portfolio doesn’t fall into the underwriter’s risk assessment model.
One couple was turned down because the husband had worked at his current job for less than a year. Even though he was making more money at the new job than he was before! These buyers were well-qualified. The wife worked several years for one employer and was able to qualify for the loan on her own. So the transaction closed, although two months late.
Generally, it’s more difficult to qualify now than it was a year ago. Most conventional lenders require a 20-25 percent down payment. For the lowest interest rates, your credit scores need to be in the 700 range. You need to have verifiable income and cash reserves in addition to your down payment and closing costs.
You could run into underwriting problems if you’re self-employed, as W-2 income is much easier to verify. Other hurdles are lapses in employment and owning a lot of property. Some lenders won’t lend to buyers who have more than three or four residential properties.
If you’re buying a new home before selling your current home, you’ll need to have 30 percent equity in your current home. This needs to be verified by the lender’s appraiser. Also, the lender will want to see a copy of the cashed check from the tenant for the first month’s rent to verify rental income if needed to qualify.
HOME BUYING TIP: As soon as you’re serious about buying a home, find the best mortgage broker or loan agent that can assist you. Don’t make your selection based on interest rates alone. A good track record counts for a lot. I can refer you a great mortgage broker if you need. -Just ask!
Closing the deal should be your primary goal. If you have to pay 0.25 percent more to assure your transaction closes on time and that you’re not turned down at the last minute, it’s worth it.
Be honest with your loan professional about anything in your financial picture that might impact loan qualification. A good loan agent or broker will be able to assess your financial situation and anticipate what you’ll need to do to satisfy the underwriter.
Be aware that appraisal issues can impact your loan approval. For example, if a previous owner added square footage without a building permit, the additional square footage probably won’t be included as livable square feet.
If the appraisal comes in for less than the purchase price, the lender might not lend you enough to close the deal. Include an appraisal contingency in your contract.
There are more jumbo financing options available now. Adjustable-rate mortgages that are fixed for 10 years and then revert to an adjustable have a starting rate about 0.25% less than a 30-year fixed jumbo. A five-year fixed starts about 0.5% to 0.75% lower, but is riskier.
Bottom line: Because of the risk factor, the lender may want you to have a large cash reserve. Your retirement accounts counts toward this.
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Down Payment – Bigger is Better
September 6th, 2011 categories: Buyers, Money and Mortgages
A larger down payment can lead to a quicker mortgage loan approval and better rates.
With tightened lending standards, a larger down payment has become more important. In addition to faster loan approval at better rates, putting more down means you could qualify for a larger home equity loan or line of credit. But a home buyer should be careful not to deplete their savings in an effort to make a larger down payment. There needs to be enough savings left to cover financial emergencies.
If you’re finding it tough to save enough for a down payment, you have some options: Set up an automatic savings program or sell things you aren’t using like a boat, motorcycle or extra car. Selling collectibles and other assets you don’t want or need can raise some quick cash; other assets such as stocks or savings bonds are good too. Also, be sure to check with your real estate agent and state government for any down payment programs they may have available.
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Five Reasons to Buy a Home Now
August 16th, 2011 categories: Buyers, Money and Mortgages
Here are 5 great reasons why it makes sense to buy a home now instead of renting:
- You’re steadily building equity as you make house payments. Unlike renting, you will own the property outright if you stay over the long term.
- Interest paid on your mortgage as well as property taxes you pay are deductible from annual income taxes.
- Ownership gives you more control. If you want to start a garden or remodel, it’s your decision. If you’re renting, you have to get approval of your landlord before making changes. While rent payments are subject to increases, your monthly payments remain constant if you have a fixed rate mortgage.
- Buying a home gives you a sense of pride in where you live and allows you to establish roots more easily than renting.
- Low interest rates, motivated sellers, and an ample supply of homes on the market make NOW a great time to buy a home!
If you or anyone you know is in the market to buy or sell their home now, feel free to call or email me for a free consultation. We look forward to serving your real estate needs!
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8 Tips for Last Minute Tax Filing
April 11th, 2011 categories: Money and Mortgages
I was reading this article and thought it would be very helpful at this time to share with you all. With April 15th coming right around the corner, here are eight great tips if you are filing last-minute:
1. File for an Extension. You don’t have to to pull a coffee-induced all nighter to get your taxes in order for the IRS this week. Just fill out IRS Form 4868 and submit it on paper or by e-filing. It’s easy, and the IRS grants extensions automatically. Note that an extension of time to file is not an extension of time to pay.
2. Don’t Let Lack of Money Keep You From Filing. If you’ve been holding off on filing because you can’t pay everything all at once, consider applying for an installment agreement, which will let you pay your taxes over time. It costs $105 to set up the plan, but that price is lowered to $52 if you let the IRS withdraw your funds electronically. For more info, check out IRS Form 9465
3. Verify Your Bank Info Before You Submit. Filing your taxes electronically is incredibly convenient- and allows the IRS to directly deposit your refund into your bank account, giving you access to the money sooner. That said, be very careful when you submit your routing and account numbers. You don’t want your money to get lost on its way to you!
4. Double Check Social Security Numbers. If you’re filing in a hurry, you’re more likely to make mistakes. Before you mail in your return, make sure that all of your personal information is correct. Incorrect info can be a red flag for auditors. If you have any dependents, putting down their social security numbers incorrectly can make you eneligible for certain tax credits.
5. Don’t Forget to Sign Your Return. An unsigned return is invalid, so make sure to sign yours if you’re filing on paper. If someone else prepared your return, then both you and the preparer should sign.
6. Post Office Plan of Attack. If you’re submitting by mail, your taxes must be postmarked by April 18th. (It’s usually April 15th, but this year it was pushed back to recognize Emancipation Day.) Some post offices have late hours on tax day just for this reason- but not all do, so check with your local post office now so you’re prepared. Even so, lines will be very long at post offices with extended hours, so get your taxes out immediately rather than waiting until the last minute.
7. Go With Certified Mail. That way, you’ll have a record that your tax return was received. With certified mail, you’ll receive a receipt stamped with the date of mailing and a tracking number so you can verify online. If you really want to be sure, go with return receipt service, which will give you a copy of the signature of the person who received your package, viewable online or by mail.
8. You Can Submit Via Messenger Services Like FedEx and UPS. If you decide to go with FedEx instead of a regular post office, (maybe the lines are shorter), that’s okay. Although the IRS provides customers with a post office box address- and carriers like FedEx don’t deliver to P.O. boxes- just ask the person behind the counter. They should be able to provide you with an alternate address in your region.
If you find these and other tips I provide helpful, make sure to like us on Facebook. I look forward to connecting with you!
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First-Time Home Buyers
February 15th, 2011 categories: Buyers, Money and Mortgages
First-time buyers planning to make the shift from renter to homeowner this year should begin preparations as early as possible. Prior to starting the home-buying process, potential buyers should make sure they are ready to buy a home where they will live for 3-5 years or longer, since it can take that long to build equity in a home and recoup investment costs.
The first step a home buyer should take in the home-buying process is to check their credit score.Lenders base mortgage qualification on a variety of factors, including income and assets, the borrower’s debt-to-income ratio, pattern of savings, and job stability. However, the most important factor is the credit score. Lenders tie the interest rate the borrower pays to the credit score, so borrowers with a credit score of 720 and sometimes 740 and above are the only ones who will pay the lowest mortgage rates. Borrowers with a credit score below 620 may not qualify for a mortgage at all until they can improve their score.
A lender tells the borrower how much they can borrow, but each potential homeowner should create a simple budget for themselves with income and spending to determine how much they are willing to spend on housing payments. Financial experts recommend that homeowners spend a maximum of about 30% of their gross monthly income on principal, interest, homeowners insurance, and taxes. Included in the budget should be approximately 1% of the home price for condo or homeowner association fees and maintenance costs.
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10 Tips to Rebuilding after a Bankruptcy
June 22nd, 2010 categories: Money and Mortgages
As a rule of thumb, bankruptcy is the least desirable option available to you when your finances have gotten out of control. However, if your finanacial situation has been going downhill for an extended period of time, your credit standing is probably so bad that filing for bankruptcy really won’t do much to make it worse, with one exception: A bankruptcy remains on your credit report for 10 long years. With this in mind, creditors will know that once you file bankruptcy, you cannot do so again for seven years.
If you or someone you know want to start rebuilding your financial life after bankruptcy, here are 10 Tips courtesy of consumer credit experts Approval Guard.
1. Plan your credit recovery. Take it slow and easy, do it right and don’t exceed what you can afford.
2. Learn more about how credit works through the Internet, counseling services or a service. Do it right and know what you’re doing.
3. If your credit report contains inaccuracies about debt that was discharged through your bankruptcy, contact the creditor or the credit bureaus to request a correction.
4. If you didn’t have enough savings to survive a setback, get serious about savings for an emergency fund. In the current economy you need at least 12-16 months.
5. If your problem was overspending, create a written budget and stick to it.
6. If your problem was related to medical bills, seek out a solution for insurance.
7. To re-establish a strong credit profile, you need a good history of payments from credit cards and installment debt such as autos, student loans or a home loan.
8. The rebuilding process requires you to use credit responsibly. Use only a small portion (30% or less) of your available credit line and ensure you make a payment every month.
9. When you start to re-establish your credit, consider a “secure” credit card. Such cards are usually backed by your savings account or money you place in escrow to cover 100% of your credit line in case you don’t pay your payment.
10. You may be able to apply for a home loan in as little as two years after the discharge of your bankruptcy, however, expect to pay higher fees and interest rates.
When you are ready to rebuild, make sure you understand credit and how to use it responsibly. Feel free to email me for further information and please forward these tips to family and friends to keep them in the know as well.
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Top 5 Ways to Use a Tax Refund
May 20th, 2010 categories: Money and Mortgages
Thousands of Americans are receiving income tax refunds from the U.S. government, with the IRS reporting an average refund of $2,940 this year. In the current economy, consumers can make strategic choices to make sure that refund pays off for them.
My clients often ask me about financial matters, including advice on smart ways to manage income tax returns. According to Freedom Tax Relief (www.freedomtaxrelief.com), many tax refund recipients might be thinking of creative ways to spend that cash as the economy starts to recover. But before getting carried away, they suggest thinking more long term.
Freedom Tax Relief suggests the following as the top ways to wisely spend an income tax refund:
1. Pay down credit card and other high-interest debts (including payday loans). Few investments can top the rate of return for eliminating debt. Paying off credit card debt at typical interest rates effectively makes an investment that returns 20% or more per year. The only caveat: Be certain you change your mindset as well. If you pay off debts, only to charge up the credit cards or sign for a new car loan a few months later, you have ultimately gained nothing. If credit card debt is your problem, cut up or freeze your credit cards to ensure you do not re-create the same problem you have left behind. Use a debit card for future purchases that require a card.
Ready to pay down your debt? List and pay secured debts first (mortgage, car). Mortgage payments should take absolute priority. Then list unsecured debts (credit cards, loans) in order of highest interest rates. Make minimum payments on all but the highest-rate card. Use every cent of available income to make large payments on the card with the highest rate. When that card is paid off, apply the big payment plus the old minimum payment on the next-highest rate card until it is paid off. Continue until all debt is eliminated.
2. Create an emergency fund. The Great Recession has pointed out the importance of an emergency fund. Those who do not yet have enough readily accessible money set aside to cover several month’s worth of expenses should consider a tax refund a prime opportunity to create a fund that ultimately includes 6-9 month’s living expenses. These amounts are not necessarily equal to salary. Instead, they should include only what the household would spend if it were in dire straits. House these savings in a money market fund or rolling CDs so that the money earns interest and cannot easily be spent- but can be accessed in an emergency.
3. Make sure you have adequate insurance. Everyone should have health, auto, and home or renters insurance. If dependents rely on breadwinner’s income, look into life insurance. Consider an umbrella policy to protect from additional liability. And if the household could not survive without an income, purchase disability coverage. This is a huge savings step- one trip to the emergency room or one minor accident can easily end up costing thousands or tens of thousands of dollars out of pocket.
4. Fund the future. Contribute to retirement savings, whether an individual or Roth IRA, 401(K) or other plan.
5. Invest in the home. Homeowners might consider using refunds to cover major or minor maintenance to make sure no bigger (and more expensive) problems arise down the road. In addition, these capital improvements can create additional equity in a home.
No matter how big or small the amount, and despite the temptation to celebrate and splurge, make your choice on what to do with any refund carefully, experts say. Take time to make sure your money works for you and helps build wealth.
For more information please email me and feel free to share this with anyone you believe will benefit from these tips. Also, don’t forget to become a fan of Kathy Villa Real Estate on Facebook by following the link on the left. I look forwarding to connecting with you!
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10 Tips for Downsizing Boomers
April 21st, 2010 categories: Money and Mortgages
1. Grab The Homebuyer Tax Credit
If you’re ready to move soon, there’s a $6500 tax credit for folks who have lived in their old home for 5 out of 8 years prior to closing on a new house. To qualify, you must have a binding contract to buy before May 1, 2010 and close before July 1, 2010. Watch out- there are income limits and other restrictions.
2. Consider A Short-Distance Move
While Sunny and exotic climates might beckon, research suggests that short-distance moves make retirees happier. Maintaining ties to your community- Church and friends and maybe family- will lead to a sense of well-being and security. Consider too the convenience of shopping, doctors, cultural venues and public transit, as well as recreation.
3. Investigate Taxes for Retirees
If you’re considering moving to a new state or city, compare local and state income tax rates, and whether some or all of your pension and Social Security will be excluded from taxable income. Also look into special homestead real estate tax exemptions for seniors. Don’t overlook car and boat taxes.
4. Consider Renting- For Now
Why own when in most of the best markets in the country right now, annual rents are 3% to 5% of purchase prices? If you’d planned to buy all-cash, opt instead to put your funds into 30-year triple-A rated muni bonds, yielding 4.4%. The income they generate will amply cover your rent in many markets- save any surplus bond income. This makes even more sense if you’re trying out a new location where you might want to buy later.
5. Look For Universal Design
If you do buy, look for a home built along universal design principles- wide doorways, flush thresholds, walk-in showers. That will allow you to age gracefully at home. It also will be a help if you’re younger and say, break your leg skiing. A lower level master bedroom and a lower-level bath are key.
6. Consider Multi-Generational Living
Multi-generational living arrangements have social as well as financial benefits. If you might be taking in a parent or a boomerang child at some point, look for a house with an “in-law suite” -a separate bedroom and bath and if possible, a kitchenette, too. Some privacy helps keep family peace.
7. Look for Security and High-Tech Features
Technology can make a retirement home more livable, increase resale value and make it easier for you to travel the world or safer to live alone. A home security system is a favored add-on. In a condo or gated community, look for convenient intercoms to announce visitors and even emergency call buttons.
8. Aim For Low-Maintenance
Folks 55 and up surveyed by the MetLife Mature Market Institute last year wanted help with gardening and a lot of other services, such as major and minor home repair, home-delivered meals, housekeeping and even laundry. You may enjoy these chores now, but check that services are available should you be unable to do it all.
9. Go Green, Senior Style
Consider saving energy (and drudgery) with remote control window blinds. Look for more conventional green features too, such as energy-efficient heating and cooling, solar hot water, or a new Energy Star refrigerator- or install them when you move in. These will pay off in lower utility bills later.
10. Consider Freeing Up Equity
The Center for Retirement Research at Boston College estimates that if boomers are ready to tap into their housing wealth with reverse mortgages, the percent whose retirements are “at risk” drops from 61% to a still high 51%. But reverse mortgages carry many fees. Consider buying cheaper housing now and investing the excess equity or using it to buy an immeidate deferred annuity.
If you or someone you know is looking to downsize and needs help with real estate needs, feel free to call or email me. Also, don’t forget to join others and become a fan of Kathy Villa Real Estate. We look forward to connecting with you!
courtesy of forbes.com
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