5 Tips for Home Loan Financing in 2012
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1. Low Mortgage Rates Ensure Affordability
It’s no secret that home loan rates have been hovering at the lowest levels of all time. Most economists have forecasted the trend for low interest rates to continue in 2012 mostly because the Federal Reserve has made a strong commitment to back mortgages aggressively until the housing market rebounds. Many loan companies believe that interest rates will remain at record lows to make home buying more attractive. The other driving factor for low mortgage rates has been a sluggish economy. Typically the interest rates stay low when the U.S.economy struggles.
2. Home Prices Have Fallen
In many areas across the country, house values have reverted back to 2002 and 2003 levels. This presents a significant opportunity for first time home buyers to get into a real estate investment at a bargain price. Most realtors have predicted that 2012 will continue to see some great home buying opportunities because foreclosures, short sales and timid buyers have driven the home prices to an extremely attractive levelin most regions of the United States.
Fox News recommended buying a home because of the opportunities that our economic uncertainty have dictated. The reality is that many potential homebuyers have been waiting in the wings for the dust to settle with the housing crisis. According to the Mortgage Bankers Association, purchase loan applications declined to the lowest pointin 15 years back in August. The lack of home loan applications signals the uncertainty of the housing market but that doesn’t mean that it’s not a great time to purchase a home. If you have the ability to make the proposed mortgage payment without it breaking the bank then it makes sense. According to B of A loan analysts, Jeff Moran, “Many first time home buyers actually reduce their housing expenses because house prices and interest rates are so low.”
3. Tax Deductibility from Mortgage Interest
One of the driving factors for many Americans to become homeowners has been to reap the benefits of deducting the interest on your home loan payment each month. Most homeowners save thousaands of dollars a year by deducting the mortgage interest for their primary residence.
4. Buying a Home with a Small Down-Payment
Many first time home buyers are attracted to FHA home loans because they only require a 3.5% down-payment. This allows new home buyers to save their money for important things like moving, buying furniture and saving for a “rainy day.”
5. Flexible Home Loan Guidelines for New Home Buyers
Jason Vedder, loan officer at VIP Mortgage in Irvine, California, said, “FHA is a great asset for the path to homeownehip in America.” FHA mortgage rates are available today at 4% on fixed terms for 30-years. There are mortgage insurance premiums that are charged to the borrower but it usually pencils out to make sense. Vedder says “Low FHA rates and flexible guidelines also help new home buyers get there foot in door.” FHA allows low credit scores and that makes them one of the last bad credit mortgage options this year.”
Home Affordable Refinance Program Unleashed
By · CommentsAre HARP Loans Avaiable Now?
Yes. Mortgage lenders are currently offering the Home Affordable Refinance programs with the expanded guidelines enabling for loan to value’s beyond 125% with no cap.
- No mortgage delinquency allowed in the most recent 6 month period, with only one delinquency allowed in months 7-12 in any eligible loan.
- The requirements that the original home loan must have met the bankruptcy and foreclosure policies in effect at the time the loan was originated has been removed by FNMA.
- Fainnie Mae is updating the borrower benefit requirement to include a reduction in interest rate or reduction in loan amortization as eligible borrower benefits
HARP Mortgage Resources:
For more information directly from the agencies regarding these newly expanded products please feel free to review the direct updates at the following links:
Getting approved for home financing has become challenging for most Americans so we decided to explore why FHA has become so popular with first time home buyers. The Federal Housing Administration was created by the U.S. government during the Great Depression in an effort to promote home ownership across the country.
Since then more than half of first time home buyers have chosen FHA mortgages for many reasons. Over the last 20 years, FHA has dominated the market for first time home buyer loans.
1. Borrowers only need a 3.5% down-payment to purchase a home compared to 10 to 20% needed for traditional loans from private lenders.
2. FHA mortgage rates are as low as any interest rates in the land helping to ensure that purchase mortgage financing is affordable.
3. There is no penalty for home refinancing or early pay-off.
4. Americans also like FHA because they are lenient with their credit guidelines. Consumers with a range of credit scores can get financing at the same interest rate regardless of their credit. This government program encourages lenders to offer a home loan for bad credit if the borrower can demonstrate significant compensating factors like solid money in savings or the ability to to make a larger down-payment.
5. FHA makes refinancing easy with flexible guidelines that do not require as much equity as private home loan lenders. People can refinance easily with only 3.5% equity because the loan to value guidelines permit refinancing up to 96.5%.
6. FHA even allows you to get cash out and refinance debt up to 85% loan to value.
7. FHA even offers the streamline refinance in case the interest rates fall after a new home buyer gets a mortgage.
We anticipate that FHA will remain popular in 2012 but if HUD continues to raise the mortgage insurance rates we predict their will be a backlash against government financing. Many finance executives believe that private money lenders will roll out some aggressive home loan programs in 2012 and 2013 and that could erode the FHA market-share as well.
Sluggish Housing Continues with Underwater Mortgages
By · CommentsWill the New Home Affordable Refinance Guidelines Help Millions of Struggling Homeowners? Many lenders are concerned that Fannie Mae and Freddie Mac continue to postpone the release of the HARP program that promised to have no loan to value restrictions. The first version of the HARP mortgage extended refinancing to borrowers up to 125% loan to value, but the new and improved HARP loans will have no restrictions. For example if a borrower has a $350,000 mortgage on their home in California that is only appraised for $185,000, the borrower would qualify to refinance into a low fixed rate as long as they meet the HARP requirements. (Qualified home mortgages must be owned by Freddie Mac or Fannie Mae and this option is only for 1st mortgages. Borrowers can not include a 2nd mortgage lien in their refinancing endeavors)
Don’t Wait to Refinance! There is no consistent data indicating that the housing crisis is going away. The housing data company also reported in their report highlighted negative equity indicating that 10.7 million, or 22.1%, of all residential properties with a mortgage were underwater at the end of the 3rd quarter of 2011. This is down a bit from 10.9 million homes in the 2nd quarter. An additional 2.4 million borrowers are below 95% loan to value in the third quarter. Keep in mind that guidelines for FHA mortgages require the minimum loan to value and purchase and refinance loans at 96.5%. Together, negative equity and near-underwater home loans accounted for 27.1% of all residential properties with a mortgage nationally in the 3rd quarter, down from 27.5%in the previous quarter.
With that being said, most people want to own a home in their lifetime so I am asking you this question – - – What are you waiting for? If you have the financial means to come up with the required down-payment and demonstrate enough saving for 3-6 months of housing expenses, then you should pull the trigger on buying a home. Here’s why: Home prices have dropped drastically to 2003 levels and home mortgage interest rates have declined to an all-time low. Therefore it is unlikely that you will ever see home loan financing more affordable in our lifetime.
Get Organized and Layout a Strategy to Finance a Home in 2012
The reality is that as soon as banks can recover from the foreclosure crisis and property values shift towards positive territory, interest rates will climb significantly. The ability to get approved for a fixed rate 30-year mortgage at 4% with only a 3.5% down-payment will disappear and likely not return in our lifetime. Therefore, the sense of urgency to get approved for home purchase loan today is very real and if we recommend striking while the iron is hot. Nobody knows when interest rates will start to climb, but when you consider history it is very possible that rates double in three or four years.
Choose from the Following Home Financing Programs:
- First Time Home Buyer Loans
- Bad Credit Mortgage Insured by the FHA
- No Credit Home Loans
- Conventional Home Mortgages
- Military Financing with VA Loans
- USDA Mortgage up 100% LTV
7 Tips for a First Time Home Buyer Loan
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Getting a pre-approved mortgage is the important qualifying procedure in which the underwriter will review your credit history, income and monthly obligations in an effort to determine your debt to income ratio. It is important to get a home loan approval before making an offer on a house, because sellers will consider your offer to be stronger if you have already been pre-approved by a bank or lender.
You should know that government loans, like the FHA mortgage requires a monthly mortgage insrance payment. When figuring out your budget you need to make sure you are considering the mortgage payment, mortgage insurance payment, property taxes. One significant benefit is that you will be able deduct the interest on your mortgage for tax purposes.
Qualifying for a first time home buyer loan can be challenging but again being prepared and working with the right lender is an important first step.
- Know your credit score before shop mortgage lenders online.
- Save money for the down-payment of the home purchase loan.
- Use a mortgage calculator to determine how much you can afford to spend on a new house.
- Compare conventional and FHA loans for first time home buyers.
- Consider the pros and cons of an ARM versus a fixed rate mortgage.
- Get a mortgage pre-qualification with a letter from a credible lender.
- Make sure there is no pre-payment penalty with home loan you choose.
Homeownership offers many financial benefits but in most cases there will be new costs that you must account for. Before committing to a buying a house you should get a home inspection and make sure that you are emotionally and financially prepared for being a homeowner.
2012 FHA Loan Limits
By · CommentsBack in 2008, in an effort to make up for the lack of bank lending, Congress temporarily increased loan limits. Raising these loan limits lead to lower interest rates, better refinancing opportunities, and allowed people living in high cost areas to avoid higher cost loans that led to the economic downturn. A recent National Association of Home Builders study found that if the limits are allowed to return to 2008 levels, millions of house would have to be financed with home loans that required higher rates and more money for down payments.
FHA mortgage limits will now limit refinance loan activity in addition to first time buyers looking to finance houses with only a 3.5% down-payment in high cost areas. Many struggling homeowners do not have enough equity to qualify for conventional refinancing, so it will be a blow for this pool of borrowers not to have access to FHA refinancing. Many of these borrowers will need mortgage help or modifications if the refinance opportunities are gone. Just how long will lenders and banks be offering mortgage relief? Nobody knows for sure, but if you are being hurt by the lower 2012 FHA loan limits, then we recommend calling and writing your local congressman.
